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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12(g) OF THE SECURITIES ACT OF 1934
TOTAL FILM GROUP, INC.
(Exact name of Registrant as specified in charter)
DELAWARE 13-3851302
State or other jurisdiction of I.R.S. Employer I.D. No.
incorporation or organization
9107 WILSHIRE BOULEVARD, SUITE 475, BEVERLY HILLS, CA 90210
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (310) 275-8404
Securities to be registered pursuant to Section 12(b) of the Act: None
Securities to be registered pursuant to Section 12(g) of the Act:
Title of each class
COMMON STOCK
PAR VALUE $.001
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TABLE OF CONTENTS
PART I
PAGE
----
Item 1. Description of Business.............................................3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations.................................13
Item 3. Description of Property............................................17
Item 4. Security Ownership of Certain Beneficial Owners and Management.....18
Item 5. Directors, Executive Officers, Promoters and Control Persons.......19
Item 6. Executive Compensation.............................................21
Item 7. Certain Relationships and Related Transactions.....................25
Item 8. Description of Securities..........................................27
PART II
Item 1. Market Price of and Dividends on the Registrant's Common equity
and Other Shareholder Matters.............................28
Item 2. Legal Proceedings..................................................31
Item 3. Changes in and Disagreements with Accountants......................31
Item 4. Recent Sales of Unregistered Securities............................31
Item 5. Indemnification of Directors and Officers..........................34
PART F/S....................................................................35
PART III....................................................................36
FORWARD LOOKING STATEMENTS
This registration statement contains statements that plan for or
anticipate the future. Forward-looking statements include statements about the
future of operations involving the film and advertising industry, statements
about our future business plans and strategies, and most other statements that
are not historical in nature. In this registration statement forward-looking
statements are generally identified by the words "anticipate," "plan,"
"believe," "expect," "estimate," and the like. Although we believe that any
forward-looking statements we make in this registration statement are
reasonable, because forward-looking statements involve future risks and
uncertainties, there are factors that could cause actual results to differ
materially from those expressed or implied. For example, a few of the
uncertainties that could affect the accuracy of forward-looking statements,
include the following:
- Films released by the Company may not be critically or
financially successful.
- Funding for producing films may not be available.
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In light of the significant uncertainties inherent in the
forward-looking statements made in this registration statement, particularly in
view of our early stage of operations, the inclusion of this information should
not be regarded as a representation by us or any other person that our
objectives and plans will be achieved.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY AND ORGANIZATION
Total Film Group, Inc. (the "Company") was incorporated under the laws
of the State of Delaware on August 1, 1995. The Company was originally
incorporated under the name "Executive Marketing, Inc." On February 5, 1997, the
Company changed its name to "Total Film Group, Inc." The Company is also
qualified to do business in the State of California.
In January 1997 the Company entered into an agreement with Total Media
Corporation, a Nevada corporation, to exchange all of the issued and outstanding
shares of such entity for 3,000,000 shares of common stock of the Company. The
Agreement and Plan of Reorganization was closed by the parties on or about
February 4, 1997. As a result of the closing the Company issued 3,000,000
shares, representing approximately 67% of the outstanding stock at closing, to
the shareholders of the Nevada corporation. Mr. Green and his affiliates
received 1,250,000 of such shares. Also as a result of the closing new directors
of the Company were appointed. Messrs. Green, Boyer, and Pacheco were appointed
as new directors. Prior to closing, on January 27, 1997, the Company declared a
stock dividend of one share of common stock of the Company for each two shares
of common stock of the Company outstanding to the shareholders of record as of
the close of business on January 27, 1997. The payment and delivery date for
such dividend was January 31, 1997.
In February 1998, the Company incorporated a wholly owned subsidiary,
Total Design, Inc., a California corporation engaged in providing marketing and
advertising services. Total Design, Inc. changed its name to "Dyer
Communications, Inc." on May 26, 1998. Effective January 1999 the Company
acquired all of the outstanding stock of Michel/Russo, Inc., a California
corporation engaged in marketing and advertising. On March 5, 1999, Dyer
Communications, Inc. changed its name to "Total Creative, Inc." In April 1999
Total Creative, Inc. and the Company acquired all of the interest in Skyrocket,
LLC, a California limited liability company engaged in web development,
e-commerce, and digital advertising. All of the operations of Michel/Russo, Inc.
were transferred to Total Creative, Inc. subsequent to the acquisition effective
January 1999 and the ownership of Michel/Russo, Inc. was assigned to Total
Creative, Inc. in March 2000.
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In February 1999 the Company borrowed $2,000,000 from The Orbiter
Fund, an entity managed by one of the principal shareholders of the Company.
(See "Certain Relationships and Related Transactions.") As additional
consideration for the loan, the Company issued 250,000 three-year warrants to
the fund, exercisable at $2.00 per share. In August 1999 the Company
negotiated an extension of the initial payment of principal in return for
which the Company issued 250,000 shares to the lender. On February 28, 2000,
The Orbiter Fund assigned the note and warrants to Lancer Offshore, Inc. In
September 1999 the Company borrowed an additional $1,800,000 from Lancer
Offshore, Inc., an entity managed by the same principal shareholder of the
Company, and $200,000 from others. (See "Certain Relationships and Related
Transactions.") As additional consideration for the loan, the Company agreed
to issue a total of 250,000 shares pro rata to the lenders. The Company also
paid a consulting fee of $140,000 and agreed to issue warrants to purchase
100,000 shares of common stock. In February 2000 the parties to the loans
agreed to convert the principal amount of the loans into 2,936,667 shares of
common stock and to forgive any interest due. The Company also agreed to pay
a consulting fee of $40,000 and 26,667 shares of common stock. The Company is
in the process of issuing the 250,000 shares in connection with the September
1999 loan, 40,000 of the 100,000 warrants payable under the September 1999
loan, and the shares due in the February 2000 conversion transaction and
consulting arrangement. At March 15, 2000, none of these securities had been
issued.
In September 1999 the Company entered into a consulting agreement
with Capital Research Ltd. In part, the agreement provides that the Company
shall issue as of the date of the agreement, five year warrants initially to
purchase 100,000 shares. Thereafter the Company shall issue five year
warrants to purchase 25,000 shares of common stock starting December 1, 1999,
and each quarter thereafter, so long as the agreement is in effect. The
exercise price of the warrants is to be set at the closing price of the
common stock on the date of the grant. The agreement can be terminated by
either party upon ninety days prior notice. The Company is also obligated to
pay a monthly fee of $3,000, plus a 7% fee and a grant of warrants to
purchase 50,000 shares of common stock for each $1 million raised by such
entity for the Company.
On October 20, 1999, the Company incorporated Total China, Inc., a
Delaware corporation, as a wholly owned subsidiary. This entity was formed to
act as a holding company to acquire 20% of the capital stock of US Business
Network, Inc., a Delaware corporation, which has intellectual property rights to
the business-to-business e-commerce portal, Meet China.com, and is engaged
directly through a subsidiary in promoting imports and exports to and from China
through the Internet and providing ancillary services related thereto. In
November 1999, Total China, Inc. sold 30 units in a private offering. Each unit
consisted of 1.6666 shares of common stock of Total China, Inc. and was sold for
$66,667 per unit. As a part of the same private offering, the Company sold 30
units, with each unit consisting of three-year warrants to purchase 6,667 shares
of the Company's common stock at an exercise price of $3.75 per share. Each
warrant holder was granted registration rights, and a right of first refusal to
purchase a pro rata amount of the assets of Total China, Inc. Investors were
required to purchase both the Total China, Inc. and the Company units in the
offering. Total China, Inc. realized gross proceeds of
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$2,000,000 and the Company realized gross proceeds of $200,000. The proceeds to
the Company were allocated to pay the costs of the offering, and the proceeds to
Total China, Inc. were used to purchase shares of common stock of U.S. Business
Network, Inc., which shares ultimately represented 17.58% of the issued and
outstanding capital stock of such corporation at closing. This reduction in
percentage ownership was a result of an increased valuation of U.S. Business
Network, Inc. As a result of this offering, the Company now owns 50% of the
outstanding stock of Total China, Inc., and, by virtue of irrevocable proxies
from two of the shareholders of Total China, Inc., controls the voting of the
company.
On December 16, 1999, the Company finalized the agreement with U.S.
Business Network, Inc. Because of subsequent financings by U.S. Business
Network, Inc., at February 25, 2000, Total China, Inc. owned approximately 11.9%
of the outstanding stock of such entity. U.S. Business Network, Inc., doing
business as MeetChina.com, is the architect and operator of an e- commerce
portal in China which is officially sponsored and sanctioned by the Chinese
government. U.S. Business Network, Inc. has the option under the agreement to
acquire approximately 5% of the shares purchased by Total China, Inc. at a cash
price of two-thirds of the market value of such shares. Such right is only
exercisable on the 120th day after an initial public offering of capital stock
by U.S. Business Network, Inc. on a designated exchange. Until the stock of U.S.
Business Network, Inc. is listed on a designated exchange, Total China, Inc. has
the right to designate one representative to attend meetings of the board of
directors of U.S. Business Network, Inc.. Total China, Inc. has the right of
first refusal to purchase any shares to be sold or issued by U.S. Business
Network, Inc. at less than the price paid by Total China, Inc. The Company also
has piggy-back registration rights to register its shares in any appropriate
registration statement filed by U.S. Business Network, Inc. with the U.S.
Securities and Exchange Commission after the initial public offering and which
includes shares of the founders of U.S. Business Network, Inc..
The Company's business is divided into two segments: the film
production business and the advertising and marketing business. The film
production segment is engaged in the production, marketing, and distribution of
commercial feature films. The advertising and marketing segment is engaged in
the development of advertising and marketing campaigns to provide Internet
services for a variety of clients and the Company.
THE FILM BUSINESS
The Company's independent film production business is conducted
primarily through the parent, Total Film Group, Inc., and other wholly owned
entities created for specific pictures. Since January 1997 the Company has
produced three films: THE NEW SWISS FAMILY ROBINSON, which aired on January 10,
1999, on ABC's Wonderful World of Disney and was released theatrically abroad;
DIAMONDS, which was released in a limited number movie theaters in December 1999
in order to qualify for Academy Award consideration, and had general domestic
release in February 2000 by Miramax Films; and CHICK FLICK, which was completed
in 1999 and is scheduled for release in late 2000.
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In November 1999 the Company entered into an arrangement with Paramount
Classics, a division of Paramount Picture Corporation, for the marketing and
distribution of four feature films. The Company is in production on two of the
films under this arrangement, MY FIRST MISTER and BRIDE OF THE WIND.
The following is a list of the Company's wholly owned subsidiaries used
in the film business, the jurisdiction of incorporation, and the film associated
with such subsidiary:
<TABLE>
<CAPTION>
Subsidiary Jurisdiction Film
---------- ------------ ----
<S> <C> <C>
Total Films UK Ltd. United Kingdom THE NEW SWISS FAMILY ROBINSON
Alma Production UK Ltd. United Kingdom BRIDE OF THE WIND (aka ALMA)
Sundowning, Inc. Nevada DIAMONDS
1st Mister, Inc. California MY FIRST MISTER
</TABLE>
The Company has also incorporated Total Pictures, Inc., a California
corporation, to act as signatory for transactions with the Writers' Guild. All
future screen plays developed by the Company will be assigned to this entity.
The Company has acquired an option to purchase a film library which, if
purchased, will become part of this entity.
On October 18, 1999, the Company incorporated Total Media, Inc., a
Delaware corporation. On November 2, 1999, the Company incorporated Total
Group.com, Inc., a Delaware corporation. Also on November 2, 1999, the Company
incorporated Total Group, Inc., a Delaware corporation. Each of these entities
is a wholly owned subsidiary of the Company and was formed for future
unidentified projects.
THE UNITED STATES MOTION PICTURE INDUSTRY
The current motion picture industry in the United States includes the
production and theatrical or television screening of feature-length motion
pictures and the subsequent distribution of such pictures in home video and
ancillary markets. The industry is dominated by the major studios -- some of
which have divisions which are promoted as "independent" distributors of motion
pictures -- including Universal Pictures, Warner Brothers (including Turner
Pictures, New Line Cinema and Castle Rock Entertainment), Twentieth Century Fox,
Sony Pictures Entertainment (including Columbia Pictures and Tristar Pictures),
Paramount Pictures, The Walt Disney Company (including Buena Vista, Touchstone
and Miramax) and MGM (including Metro Goldwyn Mayer Pictures, United Artists
Pictures, Orion Pictures and Goldwyn Entertainment Company). These "majors" have
traditionally produced and distributed the majority of theatrical motion
pictures, and made-for-TV movies, released annually in the United States. In
recent years, however, independent motion picture production companies have
played an important role in the production of motion pictures for the worldwide
feature film and made-for-TV markets. There are also a large number of smaller
production companies, such as the Company, and other entities that produce
theatrical motion pictures and made-for-TV movies.
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The "majors" generally own their production studios and have national
or worldwide distribution organizations. Major studios typically release films
with direct production costs generally ranging from approximately $40 million to
$100 million or more, and provide a continual source of motion pictures to the
nation's theatrical exhibitors. The independents, including the Company, do not
own production studios and, with certain exceptions, have more limited
distribution capabilities than the major studios. Independents typically produce
fewer motion pictures at substantially lower average production costs than major
studios. A low budget independent film (generally one more suitable for
television) may cost as little as $3 million. A few independent production
companies specialize in producing mid-range feature films, those costing between
$10 million to $40 million. Production costs consist of acquiring or developing
the screenplay, film studio rental, cinematography, post-production costs and
the compensation of creative and other production personnel. Distribution
expenses, which consist primarily of the costs of advertising and release
prints, are not included in direct production costs and generally financed by
the distribution company.
MOTION PICTURE PRODUCTION AND FINANCING.
The production of a motion picture begins with the screenplay
adaptation of a popular novel or other literary work acquired by the producer or
the development of an original screenplay having its genesis in a story line or
scenario conceived of or acquired by the production company. In the development
phase, the producer typically seeks production financing and tentative
commitments from a director, the principal cast members, and other creative
personnel. A proposed production schedule and budget also are prepared during
this phase.
Upon completing the screenplay and arranging financing commitments,
pre-production of the motion picture begins. In this phase, the producer engages
creative personnel to the extent not previously committed; finalizes the filming
schedule and production budget; obtains insurance and secures completion
guarantees, if necessary or available; establishes filming locations and secures
any necessary studio facilities and stages; and prepares for the start of
principal photography.
Principal photography, the actual filming of the screenplay, may extend
from four to sixteen weeks or longer, depending upon such factors as budget,
location, weather and complications inherent in the screenplay. Following
completion of principal photography, the motion picture is edited. Also,
opticals, dialogue, music and any special effects are added, and voice, effects
and music sound tracks and picture are synchronized during post-production. This
results in the production of the negative from which the release prints of the
motion picture are made.
The major studios generally fund production costs from cash flow from
their motion picture and related activities, licensing fees generated from film
library holdings, and, in some cases, from unrelated businesses. Substantial
overhead costs, consisting largely of salaries and related costs of the
development, production, distribution and marketing staff and physical
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facilities maintained by the major studios, also must be funded.
Independent production companies generally avoid incurring substantial
overhead costs by hiring creative and other production personnel and retaining
the other elements required for pre-production, principal photography and
post-production activities on a project-by-project basis. Unlike the major
studios, the independents also typically finance their production activities
from bank loans, "pre-sales" agreements, equity offerings and joint ventures.
Independents generally attempt to complete their financing of a motion picture
production prior to commencement of principal photography, at which point
substantial production costs begin to be incurred and require payment.
"Pre-sales" are often used by independent film companies to finance all
or a portion of the direct production costs of a motion picture. Pre-sales
consist of license fees paid to the producer by third parties in return for the
right to exhibit the completed motion picture in theaters or to distribute it in
home video, television, international or other ancillary markets. Producers with
distribution capabilities may retain the right to distribute the completed
motion picture either domestically or in one or more foreign markets. Producers
may separately license theatrical, home video, television, foreign and all other
distribution rights among several licensees. The producer may also at times be
able to acquire additional production funds through "gap financing," whereby a
lender loans a portion of the production funds based on a distributor's estimate
of the value of distribution rights. Although "gap financing" is currently
available through a variety of lenders, there can be no assurance such lenders
will continue to make funds available on this basis in the future.
Both major studios and independent film companies often acquire motion
pictures for distribution through a customary industry arrangement known as a
"negative pickup," under which the studio or independent film company agrees to
acquire from an independent production company all rights to a film upon
completion of production. The independent production company normally finances
production of the motion picture pursuant to financing arrangements with banks
or other lenders in which the lender is granted a security interest in the film
and the independent production company's rights under its arrangement with the
studio or independent. When the studio or independent "picks up" the completed
motion picture, it assumes or pays the production financing indebtedness
incurred by the production company in connection with the film. In addition, the
independent production company is paid a production fee and generally is granted
a participation in the net profits of the motion picture.
Both major studios and independent film companies generally incur
various third-party participations or deferrals in connection with the
production and distribution of a motion picture. These participations or
deferrals are contractual rights of actors, directors, screen writers, owners of
rights and other creative and financial contributors entitling them to share in
revenues or net profits (as defined in the respective agreements) from a
particular motion picture. Except for the most sought-after talent,
participation or deferral costs are generally payable after all distribution and
marketing fees and expenses, direct production costs and financing costs are
paid in full.
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MOTION PICTURE DISTRIBUTION.
Motion picture distribution encompasses the distribution of motion
pictures in theaters and in ancillary markets such as home video, pay-per-view,
pay television, broadcast television, foreign and other markets. The distributor
typically acquires rights from the producer to distribute a motion picture in
one or more markets. For its distribution rights, the distributor typically
agrees to advance the producer a certain minimum royalty or guarantee, which is
to be recouped by the distributor out of revenues generated from the
distribution of the motion picture and is generally nonrefundable. The producer
also is entitled to receive a royalty equal to an agreed-upon percentage of all
revenues received from distribution of the motion picture over and above the
royalty advance.
THEATRICAL DISTRIBUTION. The theatrical distribution of a motion
picture involves the manufacture and transportation of release prints, the
promotion of the picture through advertising and publicity campaigns and the
licensing of the motion picture to theatrical exhibitors. The size and success
of the promotional advertising campaign can materially affect the revenues
realized from the theatrical release of a motion picture. The major studios can
spend in excess of $50 million to promote motion pictures, and have average
combined print and advertising costs in excess of $19 million. The costs
incurred in connection with the distribution of a motion picture can vary
significantly, depending on the number of screens on which the motion picture is
to be exhibited and the competition among distributors for theaters during
certain seasons. Similarly, the ability to exhibit motion pictures in the most
popular theaters can affect theatrical revenues.
The distributor and theatrical exhibitor generally enter into an
arrangement providing for the exhibitor's payment to the distributor of a
percentage of the box office receipts for the exhibition period, in some cases
after deduction of the theater's overhead, or a flat negotiated weekly amount.
The distributor's percentage of box office receipts varies widely, depending
upon the success of the motion picture at the box office and other factors.
Distributors carefully monitor the theaters which have licensed the picture for
exhibition to ensure that the exhibitor promptly pays all amounts due the
distributor. Substantial delays in collection are not unusual.
Successful motion pictures may continue to play in theaters for up to
four (4) months or longer following their initial release. Concurrently with
their release in the United States, motion pictures generally are released in
Canada and may also be released in one or more other foreign markets.
HOME VIDEO. The home video distribution business involves the promotion
and sale of videocassettes and DVDs to local, regional and national video
retailers (e.g., video specialty stores, convenience stores, record stores and
other outlets), which then rent or sell such videocassettes and DVDs to
consumers primarily for private viewing.
Major feature films are usually scheduled for release in the home video
market within four to six months after theatrical release to capitalize on the
theatrical advertising and publicity for the
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film. Promotion of new releases is generally undertaken during the nine to
twelve weeks before the release date. Videocassettes or DVDs of feature films
are generally sold to domestic wholesalers at approximately $50 to $60 per unit
and generally are rented by consumers for fees ranging from $1 to $5 per day.
Wholesalers who meet certain sales and performance objectives may earn rebates,
return credits and cooperative advertising allowances. Selected titles,
including certain made-for-video programs, are priced significantly lower to
encourage direct purchase by consumers. Direct sale to consumers is referred to
as the "priced-for-sale" or "sell-thru" market. Typically, owners of films do
not share in video rental income; however, video distributors are beginning to
enter into revenue sharing arrangements with certain retail stores in some
circumstances. Under such arrangements, videocassettes and DVDs are sold at a
reduced price to video rental stores and a percentage of the video rental
revenue is then shared with the owners (or licensors) of the films. Home video
arrangements in international territories are similar to those in domestic
territories except that the wholesale prices may differ.
Overall growth in the domestic home video market has slowed as growth
in the number of new outlets and new VCR homes has moderated. The growth in
outlets designed to specifically serve the rental market has remained
essentially flat for the past several years, while the number of outlets which
offer videocassettes and videodiscs for sale has increased. The sell-thru market
continues to grow with strong sales in the traditional family entertainment
market and a growing number of hit feature films initially released at prices
generally below $30. Furthermore, technological developments which regional
telephone companies and others are developing could make competing delivery
systems economically viable and could affect the home video marketplace.
PAY-PER-VIEW. Pay-per-view television allows cable and satellite
television subscribers to purchase individual programs, including recently
released motion pictures and live sporting, music or other events, on a "per
use" basis. The subscriber fees are typically divided among the program
distributor, the pay-per-view operator and the cable system operator.
PAY TELEVISION. Pay television allows subscribers to view premium
channels such as HBO/Cinemax, Showtime/The Movie Channel and other pay
television networks offered by cable and satellite system operators for a
monthly subscription fee. The pay television networks acquire a substantial
portion of their programming from motion picture distributors. New markets may
develop with the maturation of newly emerging direct broadcast satellite (DBS)
systems and other digital television systems.
BROADCAST AND BASIC CABLE TELEVISION. Broadcast television allows
viewers to receive, without charge, programming broadcast over the air by
affiliates of the major networks (ABC, CBS, NBC and Fox), recently formed
networks (UPN and WB Network), independent television stations and cable and
satellite networks and stations. In certain areas, viewers may receive the same
programming via cable transmission for which subscribers pay a basic cable
television fee. Broadcasters or cable systems operators pay fees to distributors
for the right to air programming a specified number of times.
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FOREIGN MARKETS. In addition to their domestic distribution activities,
some motion picture distributors generate revenues from distribution of motion
pictures in foreign theaters, home video, television and other foreign markets.
There has been a dramatic increase in recent years in the worldwide demand for
filmed entertainment. This growth is largely due to the privatization of
television stations, introduction of direct broadcast satellite services, and
increased home video and cable penetration.
OTHER MARKETS. Revenues also may be derived from the distribution of
motion pictures to airlines, schools, libraries, hospitals and the military,
licensing of rights to perform musical works and sound recordings embodied in a
motion picture, and licensing rights to manufacture and distribute merchandise,
clothing and similar commercial articles derived from characters or other
elements of a motion picture.
NEW TECHNOLOGIES. New means of delivery of entertainment product are
constantly being developed and offered to the consumer. The impact of emerging
technologies such as direct broadcast satellites and the Internet, on the
Company's operations cannot be determined at this time.
CURRENT COMPANY OPERATIONS
Management has attempted to focus the film production operations of the
Company on filling the niche for the production of mid-range independent feature
films. Within this niche the Company has been successful in attracting
recognized movie actors, obtaining distribution agreements with recognized
distribution companies, such as Miramax Films for DIAMONDS, and using production
values similar to the ones used by the "majors" to create feature films
comparable to those produced by the "majors" at substantially less cost. Most
recently the Company has concluded a distribution deal with Paramount Classics,
a division of Paramount Pictures for the domestic distribution of the Company's
next four feature films (the first being MY FIRST MISTER).
THE NEW SWISS FAMILY ROBINSON, staring Jane Seymour, was the first
feature film produced by the Company through its wholly owned subsidiary, Total
Films UK Limited, which was created solely for this project. Total Film UK
Limited was incorporated in England on February 11, 1997, under the name
Daneslide Limited.
The film was financed by CLT-UFA in exchange for distribution rights in
certain foreign territories, by the Company, and through a gap loan from Lewis
Horwitz Organization. This loan has since been repaid and its security interest
released.
The film's executive producer was Gerald Green, the president/CEO, a
director, and a principal shareholder of the Company, pursuant to a producer's
agreement between the Company, Total Films UK Limited, and Mr. Green. (See
"Certain Relationships and Related Transactions.") The film aired on January 10,
1999, on ABC's Wonderful World of Disney and received one of
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the highest ratings of any of Disney's shows during the season in that time
slot. Pursuant to the agreement between the American Broadcasting Companies,
Inc. and Total Film UK Limited, ABC has the exclusive rights to one additional
broadcast of the film by January 31, 2002, in the United States, its territories
and possessions, Saipan, and Bermuda, but excluding Spanish language broadcasts
in Puerto Rico. ABC's second and final broadcast of the film will take place in
summer 2000, after which the domestic television rights will revert to the
Company. The film is scheduled to be released on video this year.
During 1998 the Company completed production of CHICK FLICK. The film
was a very low budget picture that was financed entirely by the Company.
The third film is DIAMONDS, staring Kirk Douglas, Dan Aykroyd, and
Lauren Bacall. This film was produced by Sundowning, Inc., a wholly owned
subsidiary of the Company created for this project. Sundowning, Inc. was
incorporated in the State of Nevada on July 16, 1998, and is qualified to do
business in the State of California under the name "Sundowning Entertainment."
The film was financed through a co-production with a German company,
Cinerenta/Cinesun, and Total Film Group, Inc. The executive producers for the
film were Gerald Green and Rainer Bienger, and the producer of the film was
Patricia Green, the wife of Gerald Green. (See "Certain Relationships and
Related Transactions.) "J&M Entertainment" is handling the foreign sales for the
film.
The Company is in production with MY FIRST MISTER. The film stars
LeeLee Sobieski and Albert Brooks, and is directed by Christine Lahti. The film
is being financed through a German co-production, a private investor, and gap
financing from the Lewis Horwitz organization. The film will be released in the
United States and Canada by Paramount Classics. Mario Kassar is handling the
foreign sales for this film.
The Company is also in production with BRIDE OF THE WIND (aka ALMA)
staring Jonathan Price and directed by Bruce Beresford. The film is being
financed through a German co-production, a private investor, and gap financing
from the Lewis Horwitz organization. The film will be released in the United
States and Canada by Paramount Classics. Mario Kassar is handling the foreign
sales for this film.
THE ADVERTISING AND MARKETING BUSINESS
Total Creative, Inc. ("TCI") is engaged in web design and development,
digital advertising and other traditional advertising and marketing related
services in the marketing business. In order to maximize its competitive
potential, TCI operates three business units, each focusing on different segment
of the industry: 1) a graphic design studio, directed at the entertainment
industry; 2) a general advertising agency that creates print and broadcast
advertising for consumer and business-to-business marketers; and 3) an Internet
services company, which develops and creates web sites and e-commerce solutions.
TCI has offices in San Francisco and Los Angeles.
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TCI helps clients plan and implement their Internet strategy with a
particular emphasis on brand and creative content. Services include marketing
and brand consulting, information architecture, graphical user interface design,
content development, programming and integration management. TCI's major clients
include KPMG, Eastman Kodak, and MGM Home Entertainment. Since the formation of
TCI in March 1999, the Company's strategy has been to enhance TCI's brand
awareness and market position including aggressive new business development
efforts and negotiation of guaranteed production contracts with key film
clients. TCI also supplies the Company with the marketing and creative
advertising campaign work required for its films produced "in house," including
MY 1ST MISTER and BRIDE OF THE WIND (aka ALMA).
For the period from July 1, 1999, through December 31, 1999, one
customer, SDI Interactive, accounted for approximately 30% of the total revenues
generated by TCI.
EMPLOYEES
At February 25, 2000, the Company and its subsidiaries employed 28
persons on a full-time basis. In the film production segment, two are in
executive positions, two are administrative, and one is clerical. In addition,
the Company has several free-lance production personnel working on various film
productions. In the advertising and marketing business, five are in executive
positions, seventeen are employed in operations, and one is clerical. The
Company provides medical and dental insurance coverage, life insurance, a 401K
plan to the employees of the Company and its subsidiaries, which is optional.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The Company is involved in the business of producing, marketing, and
distributing commercial feature films. It primarily creates, develops and
produces feature-length, theatrical motion pictures. The Company generally
finances all or a substantial portion of the budgeted production costs of films
it produces through advances obtained from distributors and borrowings secured
by domestic and international licenses, from private investors, and through
co-production agreements.
Total Creative, Inc. ("TCI"), a wholly-owned subsidiary of the Company,
is an Internet services agency providing Internet business consulting, web site
development and media design and advertising services. As an expected result of
increases in revenues trailing increases in expenditures, the Company believes
TCI will continue to adversely affect the Company's consolidated results of
operations through the end of the 1999/2000 fiscal year.
<PAGE>
Page 14 of 37
The consolidated financial statements at June 30, 1999, and December
31, 1999, include the accounts of Total Film Group, Inc. and its wholly owned
subsidiaries: Total Creative, Inc., Total Films UK Limited, and Sundowning,
Inc. (collectively, the "Company"). All significant intercompany balances and
transactions have been eliminated upon consolidation.
The Company's revenues and results of operations are significantly
affected by accounting policies required for the industries in which it
operates. Among the more significant policies are the following:
REVENUE RECOGNITION: Revenues from distribution or releasing agreements
are recognized when the film is released and certain other conditions are met in
accordance with Statement of Financial Accounting Standards No. 53 ("SFAS 53"),
"Financial Reporting by Producers and Distributors of Motion Picture Films."
Amounts received in advance of the film being available for release are recorded
as deferred revenue. This revenue recognition method may result in significant
fluctuations in revenues and net earnings (losses) from period to period.
Revenues from TCI are generally recognized at the completion of production.
Revenue for long-term contracts is recognized on the percentage-of-completion
method.
MOTION PICTURE DEVELOPMENT COSTS AND AMORTIZATION: Motion picture
development costs represent those costs incurred in the production,
acquisition and distribution of motion pictures, which include production
costs, legal expenses, interest and overhead costs. These costs have been
capitalized in accordance with SFAS 53. The Company is amortizing the film
costs for completed films using the individual-film-forecast-computation
method, whereby the amortization of the budget of a film is recognized in the
proportion that current year revenues bear to management's estimate of
ultimate revenue from all markets. Motion picture development costs are
valued at lower of unamortized cost or estimated net realizable value.
Revenue and cost forecasts for films are regularly reviewed by management and
revised when warranted by changing conditions. When estimates of total
revenues and costs indicate that a film will result in an ultimate loss,
additional amortization is provided to fully recognize such loss.
RESULTS OF OPERATIONS
COMPARISON OF FISCAL YEARS ENDED JUNE 30, 1999 AND 1998
The Company's operating revenues for the fiscal year ended June 30,
1999, were $6,120,094, an increase of $6,037,765 or 99% from operating
revenues of $82,329 in the prior fiscal year ended June 30, 1998. This
increase is attributed to growth in movie release income, which was $0 at
June 30, 1998, as compared with $4,429,388 at June 30, 1999. Movie release
income for the period ended June 30, 1999, reflects the revenue from the
Company's film, THE NEW SWISS FAMILY ROBINSON. This movie was filmed during
the 1997/1998 fiscal year and broadcast on ABC Television Network in January
1999.
<PAGE>
Page 15 of 37
The Company's operating revenues generated by TCI for the fiscal
year ended June 30, 1999, were $1,690,706, an increase of $1,608,377 or 95%
from operating revenues of $82,329 in the prior fiscal year ended June 30,
1998. During this period of comparison, TCI acquired Michel/Russo Inc., a
marketing and advertising firm, and Skyrocket, LLC, a web development and
digital advertising company. The operations of these two companies were
merged into the existing TCI operation and the company began reorganizing its
management structure and business strategy.
Total operating expenses were $7,544,697 during the fiscal year ended
June 30, 1999, as compared to $473,132 during the fiscal year ended June 30,
1998. This increase of $7,071,565 in operating expenses is due to:
(i) amortization of motion picture development costs totaling $3,493,709 for
THE NEW SWISS FAMILY ROBINSON, and (ii) an increase in TCI's administrative
expenses as a fully operational division of the Company.
Amortization of additional consideration granted for debt during the
fiscal year ended June 30, 1999, was $257,813 as compared to $0 during the
fiscal year ended June 30, 1998. This expense represents the amortized
portion of the excess of market value over the warrant price for the warrants
granted as reflected in the equity section of the Company's balance sheet at
June 30, 1999.
For the fiscal year ended June 30, 1999, the Company's balance sheet
reflected goodwill (net of amortization) equal to $986,926. The goodwill
arises from the net deficit assumed by the Company in the Michel/Russo Inc.
and Skyrocket, LLC acquisitions as well as the value of stock options granted
in connection therewith.
The Company reported a net loss of $(1,579,433), including
$(257,813) for amortization of additional consideration granted for debt, or
$(0.19) per share, for the fiscal year ended June 30, 1999, as compared to a
net loss of $(391,486) or $(0.05) per share for the fiscal year ended June
30, 1998. The weighted average number of common shares outstanding for the
compared periods were 8,414,597 in fiscal year 1998/1999 and 7,740,667 in
fiscal year 1997/1998.
COMPARISON OF SIX MONTHS ENDED DECEMBER 31, 1999 AND 1998
The Company's operating revenues for the period ended December 31,
1999, were $1,256,999, a decrease of $3,611,142 or 74% from operating
revenues of $4,868,141 in the prior six month period ended December 31, 1998.
This decrease resulted primarily from a reduction in movie release income,
which was $4,093,815 at December 31, 1998, as compared to $85,331 at December
31, 1999. Movie release income for the period ended December 31, 1998,
reflects the revenue from the Company's film, THE NEW SWISS FAMILY ROBINSON,
while the Company did not have a film in wide release for the period ended
December 31, 1999. THE NEW SWISS FAMILY ROBINSON was filmed during the
1997/1998 fiscal year and broadcast on ABC Television Network in January 1999.
<PAGE>
Page 16 of 37
The Company's operating revenues generated by TCI for the period
ended December 31, 1999, were $1,171,667, an increase of $397,341 or 34% from
operating revenues of $774,326 in the prior six month period ended December
31, 1998. The six month period ended December 31, 1999, reflects the first
six months of operations for TCI after the company reorganized its management
and professional staffing structure and refocused its business strategy from
that of a graphic design boutique to its current strategy as an Internet
services agency.
Total operating expenses were $2,254,913 during the period ended
December 31, 1999 as compared to $4,255,755 during the period ended December 31,
1998. Administrative expenses increased $707,537 or 205% to $1,052,983 for the
period ended December 31, 1999 from $345,446 in the period ended December 31,
1998. The increase in such expenses is due principally to an increase in TCI's
administrative expenses as a fully operational division of the Company. TCI's
total headcount was eighteen employees at December 31, 1999, as compared with
twelve employees at December 31, 1998.
Interest expense for the period ended December 31, 1999, was $341,593
as compared to $5,641 during the period ended December 31, 1998. The increase
was due to increased borrowings. Total indebtedness for borrowed money increased
to $3,738,162 for the period ended December 31, 1999, from $296,527 in the
period ended December 31, 1998. See "Liquidity and Capital Resources" below for
additional discussion.
Amortization of additional consideration for the period ended
December 31, 1999, was $674,519 as compared to $0 during the period ended
December 31, 1998. This expense is directly related to the Company's
borrowings with The Orbiter Fund and the Lancer Group. See "Liquidity and
Capital Resources" below for additional discussion.
The Company reported a net loss of $(1,997,344) or $(0.23) per share
for the period ended December 31, 1999, as compared to net income of $670,200
or $0.08 per share for the period ended December 31,1998. The weighted
average number of common shares outstanding for the compared periods were
8,805,272 in fiscal 1999/2000 and 8,300,000 in fiscal 1998/1999.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at December 31, 1999 decreased to $791,967
from $3,132,062 at December 31, 1998. $3,000,000 of the cash balance at
December 31, 1998 represents unspent production funding for the film
DIAMONDS, which was in production from November 1998 to January 1999. The
Company expects to collect revenues from this film during the next two
quarters from home video, television, and foreign sales markets.
The Company has funded its working capital requirements through
operating revenues and proceeds from debt and equity financings. At times, the
<PAGE>
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Company has relied upon its transactional production loans to provide bridge
production financing prior to receipt of distribution advances.
The Company's borrowings consist principally of two notes: one note
for $2,000,000 to The Orbiter Fund and several notes totaling $2,000,000 to
the Lancer Group and associates. In February 1999 the Company obtained a
$2,000,000 bridge loan from The Orbiter Fund, an entity managed by one of the
principal shareholders of the Company. The loan bears interest at 13.5% and
matures May 2000. In September 1999, the Company obtained a $2,000,000
convertible note from the Lancer Group. This note bears interest at 12%,
payable quarterly, and matures March 2000. The Company has negotiated an
early retirement of these notes and is in the process of converting the debt
to a form of equity.
SUMMARY
Management believes that existing resources and cash generated from
operating activities, together with the conversion of the outstanding debt,
will be sufficient to meet the Company's working capital requirements through
the end of the fiscal year 1999/2000. The Company may seek other sources of
financing to meet its working capital requirements, including separate equity
or debt financing. The Company from time to time seeks additional financing
through the issuance of new debt or equity securities, additional bank
financings, or other means available to the Company to increase its working
capital.
ITEM 3. DESCRIPTION OF PROPERTY
The Company leases approximately 3,062 square feet of office space in
Beverly Hills, California. This space is used for the Company's corporate
headquarters and the film business. The lease expires on March 16, 2002. Monthly
lease payments are $5,358.
Total Creative, Inc. occupies approximately 5,000 square feet of
office space in Los Angeles, California, which is used for the advertising
and marketing business. The arrangement to occupy this space is for month to
month pursuant to an oral arrangement with the landlord. Monthly rental
payments are $12,000.
Total Creative, Inc. also occupies approximately 2,000 square feet of
office space in the San Francisco, California, area. This space houses the
digital advertising business of the Company. The arrangement to occupy this
space is for month to month pursuant to an oral arrangement with the landlord.
Monthly rental lease payments are $6,500.
Total Creative, Inc. has two major computer equipment leases used in
its advertising business. The principal amount of the first lease is $90,000,
with monthly payments of $2,062. The sixty month lease was entered into in June
1998. Total Creative, Inc. has the option to
<PAGE>
Page 18 of 37
purchase the equipment at the end of the lease period at its then fair market
value. The second lease was a thirty-six month lease entered into in September
1999. The principal amount of this lease is approximately $110,000. The monthly
payments are $3734. There is an option to purchase the equipment for fair market
value at the end of the lease.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information furnished by the
named shareholders and others concerning the ownership of common stock of the
Company as of March 10, 2000, of (i) each person who is known to the Company to
be the beneficial owner of more than 5 percent of the Common Stock; (ii) all
directors and executive officers; and (iii) directors and executive officers of
the Company as a group:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of Beneficial
of Beneficial Owner Ownership (1) Percent of Class
- ------------------- ----------------- ----------------
<S> <C> <C>
Michael Lauer 6,890,014(2) 43.6%
475 Steamboat Road
Greenwich, CT 06830
Lancer Offshore, Inc. 4,137,907(3) 26.2%
Kaya Flamboyan 9
Curacao, Netherland Antilles
Lancer Partners LP 1,942,107(4) 12.3%
475 Steamboat Road
Greenwich, CT 06830
Gerald Green 1,720,000(5) 18.27%
9019 Lloyd Place
West Hollywood, CA 90069
Manuel Pacheco 55,000(6) *
Eli Boyer 50,000(7) *
Monique L. Jones -0-
Executive Officers and 1,825,000 20.24%
Directors as a Group
(4 Persons)
- --------------------------
</TABLE>
<PAGE>
Page 19 of 37
*Represents less than 1%.
(1) Unless otherwise indicated, this column reflects amounts as to
which the beneficial owner has sole voting power and sole investment power.
(2) Mr. Lauer owns 310,000 of these shares directly in his name. Of the
remaining shares, 1,715,000 are held directly in the name of Lancer Offshore,
Inc.; 1,575,000 are held directly in the name of Lancer Partners LP; and 250,000
are held directly in the name of The Orbiter Fund, Ltd. Mr. Lauer is the general
partner of Lancer Partners LP. Mr. Lauer is the investment manager of Lancer
Offshore, Inc. and The Orbiter Fund, Ltd. Mr. Lauer controls the voting and
disposition of these shares by virtue of being the investment manager for these
entities. The Orbiter Fund, Ltd. has been granted warrants to purchase 250,000
shares. Also, pursuant to the conversion of the outstanding loans to the Company
, Lancer Partners LP will receive 367,107 shares and Lancer Offshore, Inc. will
receive 2,422,907 shares. The shares are issuable, and the warrants are
exercisable, within sixty days. The shares to be issued, and the shares
underlying the warrants, are included in the table and are considered to be
outstanding for purposes of computing the percentage interest held by Mr. Lauer.
(3) These shares are included in the total shares beneficially owned by
Mr. Lauer, who is deemed to share beneficial ownership of these shares with this
entity.
(4) These shares are included in the total shares beneficially owned by
Mr. Lauer, who is deemed to share beneficial ownership of these shares with this
entity.
(5) Of these shares 407,500 are held directly in the name of Mr. Green;
437,500 are held directly in the name of Mr. Green's wife, Patricia M. Green;
375,000 are held in trust for the children of Mr. and Mrs. Green.
Mr. and Mrs. Green control the voting of the shares held in trust. Mr. Green
also holds options to purchase 500,000 shares which are exercisable within
sixty days. The shares underlying these options are included in the table and
are considered to be outstanding for purposes of computing the percentage
interest held by Mr. Green.
(6) Mr. Pacheco holds options to purchase 55,000 which are exercisable
within sixty days. The shares underlying these options are included in the table
and are considered to be outstanding for purposes of computing the percentage
interest held by Mr. Pacheco.
(7) Mr. Boyer holds options to purchase 50,000 which are exercisable
within sixty days. The shares underlying these options are included in the table
and are considered to be outstanding for purposes of computing the percentage
interest held by Mr. Boyer.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS,
PROMOTERS AND CONTROL PERSONS
The following table sets forth as of March 15, 2000, the name, age, and
position of each executive officer and director of the Company and the term of
office of such director:
<TABLE>
<CAPTION>
NAME AGE POSITION(S) DIRECTOR SINCE
---- --- ----------- --------------
<S> <C> <C> <C>
Gerald Green 68 President, CEO, & Chairman 1997
Manuel Pacheco 43 Director 1997
Eli Boyer 80 Secretary, Treasurer, & Director 1997
Monique L. Jones 34 Chief Financial Officer --
</TABLE>
<PAGE>
Page 20 of 37
Directors are elected for a term of one year and until their successors
are elected and qualified. Annual meetings of the stockholders, for the
selection of directors to succeed those whose terms expire, are to be held at
such time each year as designated by the Board of Directors. The Board of
Directors has not selected a date for the next annual meeting of shareholders.
Officers of the Company are chosen by the Board of Directors. Each officer holds
his office for one year and until his successor is chosen and qualified.
Officers may also be removed by the Board of Directors whenever in its judgment
the best interests of the Company will be served by removing the officer.
Set forth below is certain biographical information regarding the
Company's executive officers and directors:
GERALD GREEN has been the president of the Company since January 1997.
From 1977 to 1997 he was self employed as a producer of feature length motion
pictures.
MANUEL PACHECO has been a practicing attorney in Mexico since 1982. He
received his bachelor of law degree from the Universidad Panamericana in Mexico
City in 1979, and received a master of law degree from Southern Methodist
University, Dallas, Texas, in 1982.
ELI BOYER is a certified public accountant and was a senior partner in
the national accounting firm of Laventhol and Horwath from 1966 to 1986. He has
been self-employed as a certified public accountant since 1986. He served as
chief financial officer of the Company from January 1997 until November 1999. He
is also a director of Bright Star Holding and Safety Harbor Spa, Inc. Mr. Boyer
received his bachelor of science degree in accounting in 1940 from UCLA. He
became a certified public accountant in 1943.
MONIQUE L. JONES has been the chief financial officer of the Company
since November 1999. From February 1996 until September 1999 she was employed by
USA Films (formerly Polygram Filed Entertainment) as manager of business
planning and development, director of business planning and development, and
director of film finance and planning. From October 1994 until October 1995 Ms.
Jones was employed by Coopers and Lybrand as an associate in the
entertainment/media practice division. She received her MBA in June 1993 from
UCLA, Los Angeles, California.
The following table sets forth as of March 15, 2000, the name, age, and
position of each executive officer and director, and each significant employee,
of Total Creative, Inc. :
<TABLE>
<CAPTION>
NAME AGE POSITION(S) DIRECTOR SINCE
---- --- ----------- --------------
<S> <C> <C> <C>
Gerald Green 68 Director, President, and Secretary 1998
Rod Dyer 64 Co-creative director --
Howard Russo 62 Co-creative director --
D. Daniel Michel 53 Co-creative director --
Douglas Humphreys 38 Significant Employee --
</TABLE>
<PAGE>
Page 21 of 37
<TABLE>
<S> <C> <C> <C>
April Minnich 42 Significant Employee --
</TABLE>
Set forth below is certain biographical information regarding the
executive officers and directors of Total Creative, Inc.:
ROD DYER has been employed as the co-creative director of Total
Creative, Inc. since June 1998. From 1967 until June 1998 Mr. Dyer was president
of Dyer Mutchnick, a design and advertising firm.
HOWARD RUSSO has been employed as co-creative director of Total
Creative, Inc. since January 1999. From February 1989 until December 1998, he
was the executive vice-president and chief financial officer of Michel/Russo,
Inc., a creative advertising agency. From January 1988 until January 1989,
Mr. Russo was senior vice-president and head of creative advertising for
Columbia Pictures, where he oversaw creative advertising for domestic
releases of motion pictures.
D. DANIEL MICHEL has been employed as co-creative director of Total
Creative, Inc. since January 1999. From February 1989 until December 1998, he
was the president of Michel/Russo, Inc., a creative advertising agency. From
January 1988 until January 1989, Mr. Michel was the president of marketing for
Columbia Pictures, where he directed marketing for domestic distribution of
motion pictures. He received a bachelor of science degree in anthropology in
1968 from Clairemont Men's College, and a master of science degree in journalism
in 1969 from Northwestern University.
DOUGLAS HUMPHREYS has been employed to supervise new media for Total
Creative, Inc. since April 1999. From January 1990 until April 1999, he was the
president and owner of Red Sky Films, a commercial production company, and
Skyrocket Interactive, a digital interactive company.
APRIL MINNICH has been employed to supervise business development for
Total Creative, Inc. since April 1999. From January 1990 until April 1999, she
was the director of marketing for Red Sky Films and Skyrocket Interactive, a
digital interactive company.
ITEM 6. EXECUTIVE COMPENSATION
COMPENSATION
The following table sets forth the aggregate executive compensation
awarded to, earned by, or paid to the named executive officer by any person for
all services rendered in all capacities
<PAGE>
Page 22 of 37
to the Company and its subsidiaries for the fiscal years ended June 30, 1999,
1998, and 1997:
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
-------------------------------------- --------------------------------------
Awards Payouts
------------------------- ---------
Other
Annual Restricted All Other
Name and Principal Compen- Stock Options/ LTIP Compen-
Positions Year Salary Bonus sation Award(s) SARs Payouts sation
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gerald Green, CEO 1999 $95,000(1) -- $250,000(2) -- 500,000 -- --
- -----------------------------------------------------------------------------------------------------------------------------------
1998 $80,000(1) -- $350,000(3) -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
1997 $80,000(1) -- -- -- -- -- --
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
- -----------------------
(1) Of this amount, $20,000 was paid as salary to Patricia M. Green,
wife of Mr. Green.
(2) Of this amount, $100,000 is deferred compensation to Mr. Green
for his producer's fee for the film DIAMONDS. Of the remaining amount $50,000
was paid as producer's fees to a company owned by Mrs. Green and $100,000 was
deferred.
(3) Of this amount, $300,000 is deferred compensation to Mr. Green
for his producer's fee for the film THE NEW SWISS FAMILY ROBINSON. The
remaining amount is deferred compensation to a company owned by Mr. Green's
wife, Patricia M. Green.
1998 STOCK OPTION PLAN
On June 19, 1998, the Board of Directors adopted a 1998 Non-Qualified
Stock Option Plan (the "Plan"), pursuant to which it was authorized to grant
options to purchase up to 700,000 shares of common stock to the Company's key
employees, officers, directors, consultants, and other agents and advisors.
Awards under the Plan consisted of non-qualified stock options. The Plan will
terminate on June 19, 2008. At March 15, 2000, all of the options under the plan
had been granted. Of the outstanding options, 45,000 had been exercised as of
March 15, 2000.
The Plan is administered by the Board of Directors which determined the
persons to whom awards were granted, the number of awards granted, and the
specific terms of each grant, including the vesting thereof, subject to the
provisions of the Plan.
The exercise price of each option granted under the Plan was determined
by the Board of Directors. The exercise price is (i) payable in cash; (ii)
payable in whole or in part in shares of stock of the Company, which shares
shall be valued at its then fair market value as determined by the Board of
Directors; or (iii) by the surrender or cancellation of other rights to stock of
the Company.
No option granted under the Plan is transferable other than by will or
the laws of descent and distribution, or pursuant to a qualified domestic
relations order. The options are subject to certain adjustments in the case of
stock splits, stock dividends, combination or consolidation of
<PAGE>
Page 23 of 37
shares, and in certain asset transfers. In the event that any holder of an
option, except a consultant, is terminated or resigns from his or her position
with the Company or a subsidiary within six months of the grant of an award, any
unexercised portion of such option immediately becomes null and void. In the
case of gross negligence, criminal misconduct, or willful or gross misconduct by
an employee, the Board of Directors may cancel any options held by such person.
STOCK OPTION GRANTS
During the year ended June 30, 1998, the Company granted a total of
155,000 options to employees under the 1998 Stock Option Plan. The following
table sets forth information concerning individual grants of stock options made
during that fiscal year to each of the named executive officers and the percent
each grant represents of total options granted to employees and non-employee
directors during the fiscal year:
<TABLE>
<CAPTION>
Number of
Securities Percent of
Underlying Total Exercise Expiration
Name Options Options Price Date
---- ------- ------- ----- ----
<S> <C> <C> <C> <C>
Manuel Pacheco 55,000 35.48% $2.00 6/19/01
Eli Boyer 50,000 32.26% $2.00 6/19/01
</TABLE>
During the year ended June 30, 1999, the Company granted a total of
805,000 options to employees. Of the options granted, 545,000 were granted under
the 1998 Stock Option Plan and 260,000 were granted pursuant to individual stock
option agreements. The following table sets forth information concerning grant
of stock options made during the fiscal year to the named executive officer and
the percent the grant represents of total options granted to employees during
the fiscal year:
<TABLE>
<CAPTION>
Number of
Securities Percent of
Underlying Total Exercise Expiration
Name Options Options Price Date
---- ------- ------- ----- ----
<S> <C> <C> <C> <C>
Gerald Green 500,000 62.1% $2.00 7/27/01
</TABLE>
Since June 30, 1999, and through March 15, 2000, the Company has
granted a total of 45,000 options to an employee pursuant to an individual stock
option agreement. The following table sets forth information concerning this
grant of stock options made during this fiscal year to the named executive
officer and the percent the grant represents of total options granted to
employees during the fiscal year:
<PAGE>
Page 24 of 37
<TABLE>
<CAPTION>
Number of
Securities Percent of
Underlying Total Exercise Expiration
Name Options Options Price Date
---- ------- ------- ----- ----
<S> <C> <C> <C> <C>
Monique Jones 10,000 100% $3.00 11/8/02
15,000 $4.00 11/8/03
20,000 $5.00 11/8/04
</TABLE>
Of the options granted to Ms. Jones, 10,000 vest after twelve months of
continuous employment; 15,000 will vest after twenty-four months of continuous
employment; and 20,000 will vest after thirty-six months of continuous
employment. All of the other options set forth above have fully vested.
2000 RESTRICTED STOCK BONUS PLAN
In January 2000 the Company adopted a Stock Bonus Plan (the "Stock
Bonus Plan") which allows the Company to issue up to 50,000 restricted shares of
the Company's common stock to directors, officers, employees, and others who
have performed bona fide services for the Company. The purpose of the Stock
Bonus Plan is to assist the Company in maintaining and developing a management
team, attracting qualified directors, officers, and employees capable of
assisting in the future success of the Company, and rewarding those individuals
who have contributed to the success of the Company. It is designed to aid the
Company in retaining the services of executives and employees and in attracting
new personnel when needed for future operations and growth and to provide such
personnel with an incentive to remain employees of the Company, to use their
best efforts to promote the success of the Company's business, and to provide
them with an opportunity to obtain or increase a proprietary interest in the
Company. It is also designed to permit the Company to reward those individuals
who are not employees of the Company but who are perceived by management as
having contributed to the success of the Company or who are important to the
continued business and operations of the Company. The Stock Bonus Plan is
administered by the Board of Directors. It will terminate not later than ten
years from its adoption by the Board of Directors. Pursuant to the terms of the
Stock Bonus Plan, the Company issued 7,500 shares to an employee of the Company
in January 2000.
COMPENSATION OF DIRECTORS
The bylaws provide that directors, as such, are not entitled to receive
any stated salary for their services. However, they may receive a fixed sum and
expenses for attendance at meetings of the Board. The Company has not adopted a
policy with regard to establishing any fixed sum for attendance at special or
regular meetings of the board, but it does intend to reimburse directors for
out-of-pocket expenses related to such meetings.
<PAGE>
Page 25 of 37
EMPLOYMENT AGREEMENTS
The Company has a full-time employment contract dated September 15,
1999, with Gerald Green to serve as the chief executive officer of the Company.
The agreement terminates on August 31, 2004. Under the contract Mr. Green
receives an annual base salary of $300,000 and a fixed annual bonus of $29,167.
He is also entitled to a contingent annual bonus equal to 10% of the net profits
of the Company before income taxes. Mr. Green will also receive an executive
producer's fee to be negotiated for each film project of the Company. The
agreement provides for an annual review and permits the Board of Directors to
increase or decrease the compensation based upon the services performed by
Mr. Green and the financial condition of the Company. Mr. Green has the right
to defer any part of the compensation upon prior written notice. He is
entitled to a car allowance of $1,500 per month. He is also entitled to
medical insurance for himself, his spouse, and children up to age
twenty-five, and the amount of medical and hospital expenses paid or payable
for such persons not covered by insurance. He is to receive three weeks paid
vacation each year. If Mr. Green is unable to perform his duties because of
illness or incapacity for more than twelve months, the Company may suspend
its payment obligation or terminate the agreement. Mr. Green is also to
receive screen and advertising credit in films in which he provides
creditable services.
The Company entered into an employment agreement dated
September 27,1999, with Monique L. Jones to act as chief financial officer
for the Company and its affiliates. The agreement may be terminated at any
time by either party. Ms. Jones receives an annual salary of $100,000, which
amount may be increased by the Company's executive committee after annual
review of her performance. She is entitled to the same medical, dental,
retirement, and other benefits afforded other similar employees of the
Company. Ms. Jones was also granted options to purchase 45,000 shares of
common stock of the Company.
Mr. Boyer, the Company's treasurer and secretary, has no employment
agreement or other compensatory plan or arrangement with the Company.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Gerald Green, the president, a director and principal shareholder of
the Company, may be deemed a promoter in relation to the organization of the
business of the Company and was the founder of Total Media Corporation. In
connection with the original acquisition of Total Media Corporation by the
Company, Mr. Green exchanged all of his shares of Total Media Corporation for
shares of the Company.
Mr. Green was employed by Total Films UK Limited, a wholly owned
subsidiary of the Company, as the executive producer of THE NEW SWISS FAMILY
ROBINSON. For his services, Mr. Green earned $300,000 and screen credit as
producer of the film. Payment of the cash consideration has been deferred,
without interest, until the film recoups its negative costs. Mr. Green is also
an officer and a director of Total Films UK Limited.
<PAGE>
Page 26 of 37
Mr. Green and his wife, Patricia M. Green, were also employed by
Sundowning, Inc. as the executive producer and the producer, respectively, of
the film DIAMONDS. For his services as producer of DIAMONDS, Mr. Green earned a
fee of $100,000, which is deferred, without interest, until the film recoups its
negative costs. Mr. and Mrs. Green are also officers and directors of
Sundowning, Inc. Mrs. Green, through her company, Saso Entertainment, Inc.,
earned $150,000 as producer's fees in connection with the film, $100,000 of
which has been deferred, without interest, until the film recoups its negative
costs. Of the total amount earned, $50,000 was paid during the fiscal year ended
June 30, 1999. A bonus of $40,000 was paid to Mrs. Green during the current
fiscal year.
Mrs. Green, through her company, Saso Entertainment, Inc., was paid
$75,000 as an in-house production executive in connection with the film 1ST
MISTER and $100,000 as a producer's fee for the film BRIDE OF THE WIND (aka
ALMA). These fees were paid during the current year.
Mr. Andrew Somper, a former director of the Company, was a partner in
the law firm of Berwin Leighton which performed legal services for the Company.
He is also a director and officer of Total Film UK Limited. Legal fees paid to
Berwin Leighton total approximately $80,000. In addition, Mr. Somper received
stock options for the purchase of 75,000 shares at $2.00 per share. Mr. Somper
exercised this option in February 2000, by canceling 30,000 options. He received
45,000 shares through such exercise.
In February 1999 the Company assumed the repayment of two loans and one
line of credit with a total principal amount of $150,000, the balance of which
at March 21, 2000, was $66,200, between Red Sky Films, LLC and Skyrocket, LLC as
the borrowers and Westamerica Bank as the lender.
In February 1999 the Company entered into a loan agreement with The
Orbiter Fund, an entity managed by Michael Lauer, a principal shareholder of the
Company. The principal amount of the loan was $2,000,000. The Company also
granted 250,000 warrants to The Orbiter Fund in connection with the loan. In
August 1999 the Company negotiated an extension of the initial payment of
principal in return for which the Company issued 250,000 shares to the fund.
In September 1999 the Company issued convertible notes in the amount
of $2,000,000, which was used for working capital. Of such funds, $1,800,000
were loaned by entities controlled by Michael Lauer, a principal shareholder
of the Company. All of the lenders were granted pro rata 250,000 shares of
restricted common stock. A cash fee of 7% of the gross amount was paid to
Capital Research, Ltd., plus 100,000 five-year warrants with an exercise
price of $2.25 per share. Capital Research, Ltd. and Bruce Cowen also each
loaned $50,000 to the Company in this transaction.
On February 28, 2000 the Company entered into an agreement with the
lenders in the two $2,000,000 loans made in February and September 1999 to
convert the principal amount of such loans into common stock of the Company and
to forgive the unpaid interest. Pursuant to the
<PAGE>
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agreement the Company intends to issue 2,790,014 shares to entities
controlled by Mr. Lauer. These shares include the pro rata amount of shares
which were to be issued to such entities in connection with the September
1999 loan. As of the date of the agreement, the Company owed $376,100 in
interest to the entities controlled by Mr. Lauer. The agreement does not
affect the 250,000 warrants granted to The Orbiter Fund in connection with
the February 1999 loan, or the 250,000 shares granted for extension of the
payments under such loan. Also in connection with this transaction, the
Company agreed to issue 26,667 shares and to pay $40,000 to Capital Research,
Ltd. as a transaction fee. In addition, Capital Research, Ltd. and an
additional lender are to receive 310,079 shares for loans made by them in
connection with the September 1999 loan.
At December 31, 1999, the Company had loaned approximately $51,100 to
Rod Dyer, a significant employee of Total Creative, Inc., the Company's wholly
owned subsidiary. The loan was made without interest and is payable upon demand
by the Company. Mr. Dyer has agreed to pledge his interest in the 50,000 shares
of common stock issued to him by the Company as security for repayment of the
loan. The loan is not evidenced by any written documents.
In October 1999 the Board of Directors authorized the Company to make
loans to Mr. Green up to $50,000 at an annual interest rate of 8%, payable
interest only monthly with the balance due and payable September 15, 2003, or
sooner, at the option of Mr. Green. During the current fiscal year the Company
has loaned $29,167 pursuant to this arrangement. In addition, the Company loaned
$58,065, without interest, to Mr. Green during the fiscal year ended June 30,
1999, and $48,835, without interest, during the current fiscal year through
March 15, 2000. As of March 15, 2000, none of the loans had been repaid.
ITEM 8. DESCRIPTION OF SECURITIES
COMMON STOCK
The Company has authorized 50,000,000 shares of common stock, par value
$.001 per share (the "Common Stock"). As of March 10, 2000, the Company had
outstanding 8,913,965 shares of Common Stock. All Common Shares are equal to
each other with respect to voting, and dividend rights, and, are equal to each
other with respect to liquidation rights. Special meetings of the shareholders
may be called by the Board of Directors, the President, or the holders of not
less than one-fifth of all the shares entitled to vote at the meeting. Holders
of shares of Common Stock are entitled to one vote at any meeting of the
shareholders for each share of Common Stock they own as of the record date fixed
by the Board of Directors. At any meeting of shareholders, a majority of the
outstanding shares of Common Stock entitled to vote, represented in person or by
proxy, constitutes a quorum. A vote of the majority of the shares of Common
Stock represented at a meeting will govern, even if this is substantially less
than a majority of the shares of Common Stock outstanding. Holders of shares are
entitled to receive such dividends as may be declared by the Board of Directors
out of funds legally available therefor, and upon liquidation are entitled to
participate pro rata in a distribution of assets available for such a
distribution to shareholders. There are no conversion, pre-emptive or other
<PAGE>
Page 28 of 37
subscription rights or privileges granted by the Company with respect to any
shares. Reference is made to the Articles of Incorporation and Bylaws of the
Company as well as to the applicable statutes of the State of Delaware for a
more complete description of the rights and liabilities of holders of shares.
The shares of the Company do not have cumulative voting rights, which means that
the holders of more than fifty percent of the shares of Common Stock voting for
election of directors may elect all the directors if they choose to do so. In
such event, the holders of the remaining shares aggregating less than fifty
percent will not be able to elect directors.
PREFERRED STOCK
The articles of incorporation of the Company authorize 500,000 shares
of preferred stock, par value $.001 per share. Such shares may be issued in such
series and have such rights, preferences, an designation as determined by the
Board of Directors. No preferred shares are outstanding.
CHANGE OF CONTROL
The creation and issuance of a series of preferred stock or the
issuance of shares of common stock by the Board of Directors could be used to
delay, defer, or prevent a change of control of the Company in certain takeover
attempts. Using such shares, the Board of Directors could create impediments to,
or delay persons seeking to effect, a takeover or transfer of control of the
Company by causing such additional authorized shares to be issued to a holder or
holders who might side with the Board in opposing a takeover bid that the Board
of Directors determines is not in the best interests of the Company and its
shareholders. Such an issuance could diminish the voting power of existing
shareholders who favor a change in control, and the ability to issue the shares
could discourage an attempt to acquire control of the Company.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS'S
COMMON EQUITY AND OTHER SHAREHOLDER MATTERS
MARKET FOR STOCK
The Common Stock of the Company is quoted on the OTC Electronic
Bulletin Board (OTC BB: "TFGP"). The table below sets forth for the periods
indicated the high and low bid quotations as reported by Nasdaq Trading & Market
Services. These quotations reflect inter-dealer prices, without retail mark-up,
mark-down, or commission and may not necessarily represent actual transactions.
<TABLE>
<CAPTION>
Quarter High Low
------- ---- ---
<S> <C> <C> <C>
FISCAL YEAR ENDED
JUNE 30, 1998 First $4.50 $2.75
</TABLE>
<PAGE>
Page 29 of 37
<TABLE>
<S> <C> <C> <C>
Second $3.875 $1.125
Third $4.00 $2.00
Fourth $4.25 $2.00
FISCAL YEAR ENDED
JUNE 30, 1999 First $3.1875 $1.3125
Second $3.75 $1.75
Third $5.25 $2.625
Fourth $5.875 $3.1875
FISCAL YEAR ENDING
JUNE 30, 2000 First $3.5625 $1.3125
Second $4.625 $2.6875
</TABLE>
OUTSTANDING OPTIONS, WARRANTS, AND CONVERTIBLE INSTRUMENTS
At March 15, 2000, the Company had outstanding options exercisable into
875,000 shares of common stock. Such options were issued pursuant to the
Company's Stock Option Plan and in individual option agreements.
At March 15, 2000, the Company had outstanding warrants to purchase
260,000 shares of common stock. Of the outstanding warrants, 200,000 were issued
in connection with the private offering by the Company in October 1999 and
60,000 were issued to Capital Research Ltd. in connection with the $2,000,000
loan from entities controlled by Michael Lauer and others in September 1999. As
of March 15, 2000, the Company had also agreed to, but not yet issued, warrants
to purchase 665,000 shares of common stock. Set forth below is a brief
description of the warrants to be issued:
- As part of the February 1999 $2,000,000 loan from The Orbiter
Fund, the Company agreed to issue three-year warrants to the
lender to purchase 250,000 shares at $2.00 per share.
- In connection with the September 1999 consulting agreement
with Capital Research Ltd., the Company is obligated to issue
warrants to purchase an aggregate of 150,000 shares.
- As part of the September 1999 $2,000,000 loan from various
entities controlled by Michael Lauer, one of our principal
shareholders, and others, the Company is obligated to issue
additional warrants to Capital Research Ltd. to purchase
40,000 shares at $2.25 per share.
- In connection with the private offering by the Company and
Total China, Inc. in October 1999, the Company is obligated to
issue warrants to JBRG Consultants to
<PAGE>
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purchase 200,000 common shares at $4.125 per share at any time
before November 19, 2002.
- In connection with a loan of $1,000,000 for the film 1st
Mister, the Company is obligated to issue warrants to Richard
Davimos, Jr. to purchase 25,000 common shares at $3.75 per
share, provided that if the note is repaid by June 1, 2000,
one-half of the warrants will be canceled.
In December 1998 the Company borrowed $50,000 from Merchants T&F and
issued 5,000 shares in partial consideration for loaning such funds. The shares
were issued to Murray Wilson, the president of such entity. The Company agreed
to repurchase such shares at $3.00 per share if they could not be sold under
Rule 144 after one year from December 1998.
Pursuant to the employment agreement with Rod Dyer, one of the
employees of Total Creative, Inc., the Company was obligated to issue 50,000
shares of common stock to him on January 4, 2000. Such shares had not been
issued at March 15, 2000. The Company is also obligated to issue another 50,000
to Mr. Dyer pursuant to his employment agreement on June 30, 2000.
SHARES ELIGIBLE FOR FUTURE SALE UNDER RULE 144
The Company had 8,913,965 shares of its common stock outstanding at
March 10, 2000. Of these shares, 4,363,915 are believed to be restricted
securities and 1,350,000 are believed to be control shares (non-restricted
shares held by affiliates of the Company) pursuant to Rule 144 promulgated by
the Securities and Exchange Commission. The control shares are not subject to
any holding requirement under Rule 144 and would be available for resale subject
to all other conditions of the rule. Management believes that 3,754,950 of the
restricted shares may have met the one year holding requirement of Rule 144.
Restricted shares held by affiliates, restricted shares held by non-affiliates
for less than two years, and control shares are not available for resale under
Rule 144 for a period of ninety days following the effective date of this
registration statement.
REGISTRATION RIGHTS
In October 1999 the Company commenced an offering of warrants to
purchase 200,000 shares of common stock. The offering closed on November 30,
1999 and the Company issued 200,000 warrants. In connection with this issuance,
the Company granted to the holders of the warrants the right to include the
shares underlying the warrants on a one-time basis in the next registration
statement filed by the Company under the Securities Act in which the Company
proposes to offer shares for cash or securities. The piggy-back registration
rights expire thirty-six months following the closing of the offering.
<PAGE>
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The Company has agreed to register warrants to purchase 200,000
shares of the Company's common stock exerciseable at $4.125 per share to be
issued to JBRG Consultants in connection with the private offering by the
Company and Total China, Inc. in October 1999. The agreement provides for
priority registration rights and/or piggyback registration rights as normally
attached as compensation warrants.
RECORD HOLDERS OF STOCK; TRANSFER AGENT
At March 10, 2000, the Company had 58 shareholders of record as
reported by the Company's transfer agent. The transfer agent for the Company is
Interwest Transfer Company, Inc., 1981 East 4800 South, Suite 100, Salt Lake
City, UT 84117.
DIVIDENDS
Since its inception, the Company has not paid any cash dividends on its
common stock and the Company does not anticipate that it will pay dividends in
the foreseeable future.
ITEM 2. LEGAL PROCEEDINGS
No legal proceedings are reportable pursuant to this item.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
No change in accountant is reportable pursuant to this item.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In January 1997, the Company issued 3,000,000 shares of common stock to
the six shareholders of Total Media Corporation, a Nevada corporation. The
shares were issued in a reverse acquisition transaction between the Company and
Total Media Corporation, in which such shareholders exchanged all of their
shares for the shares of the Company. Such securities were issued without
registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving any public offering. No general solicitations were
used in connection with the transaction. Each of the shareholders of Total Media
Corporation delivered appropriate investment representations to the Company with
respect to such transaction and consented to the imposition of restrictive
legends upon the certificates evidencing such securities. Each of the investors
was believed to be a sophisticated investor. No underwriting discounts or
commissions were paid in connection with such issuance.
In April 1997 the Company sold 1,000,000 shares of common stock to two
persons for cash proceeds of $50,000 and to five persons for conversion of notes
payable by the Company in an aggregate of $950,000 without registration in a
limited offering pursuant to Rule 504
<PAGE>
Page 32 of 37
promulgated by the Securities and Exchange Commission under the Securities Act
of 1933 and Section 3(b) thereunder. No underwriting discounts or commissions
were paid in connection with such issuances.
In July 1997 the Company sold 2,000,000 shares to four accredited
investors in a private placement of the shares. The shares were sold for an
aggregate of $2,000,000. Such securities were issued without registration under
the Act by reason of the exemption from registration afforded by the provisions
of Section 4(2) thereof, and Rule 506 promulgated thereunder, as transactions by
an issuer not involving any public offering. Such investors delivered
appropriate investment representations with respect to such transaction and
consented to the imposition of restrictive legends upon the certificates
evidencing such securities. No general solicitations were made in connection
with the transaction. No underwriting discounts or commissions were paid in
connection with such issuance.
In April 1998 the Company sold 800,000 shares of common stock for an
aggregate of $1,000,000 to eight persons without registration in a limited
offering pursuant to Rule 504 promulgated by the Securities and Exchange
Commission under the Securities Act of 1933 and Section 3(b) thereunder. No
underwriting discounts or commissions were paid in connection with such
issuances.
In October 1998 the Company borrowed $246,528 for working capital from
Sophia Toledo. The Company issued a ninety-day promissory note dated October 8,
1998, to Ms. Toledo evidencing such loan. The loan was repaid on May 19, 1999.
The note was issued in reliance upon the exemption provided in Section 3(a)(3)
of the Securities Act. No underwriting discounts or commissions were paid in
connection with such issuance.
In December 1998 the Company issued 5,000 shares to Murray Wilson in
connection with a loan of $50,000 by Merchants T&F, a company controlled by such
individual, in a private placement of the shares. The loan was repayable on or
before February 18, 1999, with a thirty day extension if the Company paid an
additional $5,000. The shares were issued as partial consideration for Merchants
T&F loaning the funds to the Company. The note was issued in reliance upon the
exemption provided in Section 3(a)(3) of the Securities Act. The shares were
issued without registration under the Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as a
transaction by an issuer not involving any public offering. Mr. Wilson delivered
appropriate investment representations with respect to such transaction and
consented to the imposition of a restrictive legend upon the certificate
evidencing such securities. No general solicitations were made in connection
with the transaction. Mr. Wilson is believed to be a sophisticated investor. No
underwriting discounts or commissions were paid in connection with such
issuance.
In January 1999 the Company issued 50,000 shares to Rod Dyer in
connection with his employment agreement with the Company. The shares were
issued without registration under the Act by reason of the exemption from
registration afforded by the provisions of Section 4(2)
<PAGE>
Page 33 of 37
thereof, as a transaction by an issuer not involving any public offering. Mr.
Dyer delivered appropriate investment representations with respect to such
transaction and consented to the imposition of a restrictive legend upon the
certificate evidencing such securities. No general solicitations were made in
connection with the transaction. Mr. Dyer is believed to be a sophisticated
investor. No underwriting discounts or commissions were paid in connection with
such issuance.
In February 1999 the Company borrowed $2,000,000 from The Orbiter Fund
Ltd., a corporation controlled by one of the Company's principal shareholders,
Michael Lauer. In connection with the transaction the Company agreed to issue
warrants to purchase 250,000 shares exercisable at $2.00 per share on or before
February 9, 2002. Of the number of warrants owed, the Company has issued
warrants to purchase 125,000 shares and is in the process of issuing the
remaining warrants. The Company also issued 250,000 shares to The Orbiter Fund
in August 1999 for an extension on the repayment of the loan.
In April 1999, the Company issued a total of 225,000 shares of common
stock to Douglas Humphreys and April Minnich, the two owners of Skyrocket LLC, a
California limited liability company. The shares were issued in an acquisition
transaction between the Company and Total Creative, Inc., and Skyrocket LLC, in
which such owners exchanged all of their interest in the limited liability
company for the shares of the Company. Such securities were issued without
registration under the Securities Act by reason of the exemption from
registration afforded by the provisions of Section 4(2) thereof, as transactions
by an issuer not involving any public offering. No general solicitations were
used in connection with the transaction. Each of the shareholders of Skyrocket
LLC delivered appropriate investment representations to the Company with respect
to such transaction and consented to the imposition of restrictive legends upon
the certificates evidencing such securities. Each of the investors was believed
to be a sophisticated investor. No underwriting discounts or commissions were
paid in connection with such issuance.
Also in April 1999 Madeleine Ali, an employee of the Company, exercised
her option to purchase 10,000 shares at $4.50 per share, the bid price of the
stock on the exercise date. Rather than paying cash, she canceled 4,445 of the
options which equaled the exercise price. Thus, she was issued 5,555 shares. In
January 2000 Ms. Ali was issued 7,500 shares pursuant to the Company's Stock
Bonus Plan. In February 2000 Ms. Ali also exercised her option to purchase
15,000 shares at $5.00 per share, the bid price of the stock on the date of
exercise. Rather than paying cash, she canceled 6,000 of the options which
equaled the exercise price. Thus, she was issued 9,000 shares. The shares were
issued pursuant to Rule 701 promulgated by the Securities and Exchange
Commission. No underwriting discounts or commissions were paid in connection
with such issuances.
In September 1999 the Company borrowed $2,000,000 from five accredited
investors and issued a six month promissory note to such persons. The notes were
issued in reliance upon the exemption provided in Section 3(a)(3) of the
Securities Act. No underwriting discounts or commissions were paid in connection
with such issuance.
<PAGE>
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In October 1999 the Company sold warrants to purchase 200,000 shares to
forty accredited investors in a private placement of the warrants. The warrants
were sold for an aggregate of $200,000. This amount was used to pay the cash
finder's fee in a concurrent offering of shares of Total China, Inc., one of the
Company's subsidiaries. The Company also issued warrants to purchase 200,000
shares of common stock to the finder. Such securities were issued without
registration under the Act by reason of the exemption from registration afforded
by the provisions of Section 4(2) thereof, and Rule 506 promulgated thereunder,
as transactions by an issuer not involving any public offering. Such investors
delivered appropriate investment representations with respect to such
transaction and consented to the imposition of restrictive legends upon the
certificates evidencing such securities. No general solicitations were made in
connection with the transaction.
Also in February 2000 Leonard Shapiro exercised his option to purchase
30,000 shares at $6.875 per share, the bid price of the stock on the date of
exercise. Rather than paying cash, he canceled 13,090 of the options which
equaled the exercise price. Thus, he was issued 16,910 shares. Such securities
were issued without registration under the Securities Act by reason of the
exemption from registration afforded by the provisions of Section 4(2) thereof,
as transactions by an issuer not involving any public offering. No general
solicitations were used in connection with the transaction. Mr. Shapiro
delivered appropriate investment representations to the Company with respect to
such transaction and consented to the imposition of restrictive legends upon the
certificates evidencing such securities. Mr. Shapiro was believed to be a
sophisticated investor. No underwriting discounts or commissions were paid in
connection with such issuance.
Also in February 2000 Andrew Somper, a former director of the Company,
exercised his option to purchase 75,000 shares at $5.00 per share, the bid price
of the stock on the date of exercise. Rather than paying cash, he canceled
30,000 of the options which equaled the exercise price. Thus, he was issued
45,000 shares. The shares were issued pursuant to Rule 701 promulgated by the
Securities and Exchange Commission. No underwriting discounts or commissions
were paid in connection with such issuances.
In February 2000 the Company borrowed $100,000 for working capital from
Trinity American Corporation in connection with the purchase of an option to
acquire a film library. The Company issued a three month promissory note dated
February 17, 2000, to such entity evidencing the loan. The note was issued in
reliance upon the exemption provided in Section 3(a)(3) of the Securities Act.
No underwriting discounts or commissions were paid in connection with such
issuance.
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware
expressly authorizes a Delaware corporation to indemnify its officers,
directors, employees, and agents against claims or liabilities arising out of
such persons' conduct as officers, directors, employees, or agents for the
corporation if they acted in good faith and in a manner they reasonably believed
<PAGE>
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to be in or not opposed to the best interests of the Company. Article XI of the
Bylaws of the Company require the Company to indemnify and hold harmless such
persons to the fullest extent authorized by Delaware law.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 (the "Act") may be permitted to directors, officers, controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company 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.
The Seventh article of the Articles of Incorporation of the Company,
subject to certain exceptions, limits the monetary liability of the directors to
the Company or its shareholders for any breach of fiduciary duty by the director
as a director.
PART F/S
Financial Statements. The following financial statements are included
in this registration statement:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Auditor F-1
Consolidated Balance Sheets as of June 30, 1999 and 1998 F-2
Consolidated Statements of Operations for the fiscal years
ended June 30, 1999 and 1998 F-3
Consolidated Statements of Stockholders' Equity for the fiscal
years ended June 30, 1999 and 1998 F-4
Consolidated Statements of Cash Flows for the fiscal years
ended June 30, 1999 and 1998 F-5
Notes to Financial Statements F-7
Consolidated Balance Sheets as of December 31, 1999 and 1998 F-1
Consolidated Statements of Operations and Accumulated Deficit
for the six month periods ended December 31, 1999
and 1998 F-3
Consolidated Statements of Stockholders' Equity for the six
month periods ended December 31, 1999 and 1998 F-4
Consolidated Statements of Cash Flows for the fiscal years
ended December 31, 1999 and 1998 F-5
</TABLE>
<PAGE>
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PART III
Items 1 and 2. Index to Exhibits and Description of Exhibits. The
following exhibits are included as part of this statement:
<TABLE>
<CAPTION>
Exhibit No. Description Page
<S> <C> <C>
2.1 Articles of Incorporation, as amended
2.2 Current Bylaws
3.1 Form of Common Stock Certificate
6.1 Reorganization Agreement dated January 29, 1997
6.2 Promissory Note to Merchants T&F dated
December 15, 1998
6.3 Loan Agreement with the Orbiter Fund dated
February 9, 1999, as amended August 11, 1999
6.4 Promissory Note to The Orbiter Fund dated
February 10, 1999
6.5 Warrant Certificate to the Orbiter Fund
6.6 Capital Research Ltd Agreement
6.7 Warrant Certificate to Capital Research Ltd.
6.8 $2 Million Convertible Note Term Sheet dated
September 21, 1999
6.9 Form of Convertible Promissory Note
6.10 Promissory Note Conversion Agreement dated
February 28, 2000
6.11 Form of Warrant Certificate in October 1999
Private Offering
6.12 Form of Registration Rights Agreement in October
1999 Private Offering
6.13 Form of Right of First Refusal Agreement in
October 1999 Private Offering
6.14 Promissory Note to Trinity American Corporation
dated February 17, 2000
6.15 Agreement Re Sale of Interest in Skyrocket, LLC
6.16 Michel/Russo, Inc. Stock Purchase Agreement, as
amended
6.17 Employment Agreement of Gerald Green
6.18 Employment Agreement of Rod Dyer
6.19 Employment Agreement of D. Daniel Michel, as
amended
6.20 Stock Option Certificate to D. Daniel Michel
6.21 Employment Agreement of Howard Russo, as amended
6.22 Stock Option Certificate to Howard Russo
6.23 Employment Agreement of Monique L. Jones
6.24 Stock Option Certificate to Monique L. Jones
6.25 1998 Non-Qualified Stock Option Plan
6.26 Form of Non-Qualified Stock Option Certificate
6.27 Stock Option Certificate for Madeleine Ali, as
amended
6.28 Stock Bonus Plan
6.29 Stock Purchase Agreement with U.S. Business
Network, Inc.
6.30 Executive Producer Agreement for DIAMONDS
6.31 Producer's Agreement for NEW SWISS FAMILY ROBINSON
</TABLE>
<PAGE>
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<TABLE>
<S> <C> <C>
6.32 Producer Agreement for CHICK FLICK
6.33 Office Lease Agreement
6.34 Paramount Pictures Corporation/Alma U.K.
Production, Limited letter agreement for BRIDE OF
THE WIND
6.35 Paramount Pictures Corporation/1st Mr. Inc. letter
agreement for MY FIRST MISTER
6.36 JBRG Consultants consulting agreement
10.1 Consent of auditor
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934,
the registrant caused this amended registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
Total Film Group, Inc.
Date: March 28, 2000 By /s/ Gerald Green, President
Date: March 28, 2000 By /s/ Monique L. Jones, Chief Financial
Officer
<PAGE>
INDEPENDENT AUDITORS' REPORT
Total Film Group, Inc. and Subsidiaries
Beverly Hills, California
We have audited the accompanying consolidated balance sheets of Total Film
Group, Inc. and Subsidiaries (the "Company"), as of June 30, 1999 and 1998, and
the related consolidated statements of operations, stockholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated 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 audits to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated 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 consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Total Film Group,
Inc. and Subsidiaries as of June 30, 1999 and 1998, and the results of its
operations and its cash flows for the years then ended, in conformity with
generally accepted accounting principles.
/s/ MILLER, KAPLAN, ARASE & CO., LLP
September 29, 1999, except for Note 4,
which is as of January 14, 2000.
F-1
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
2100393
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $1,130,179 $ 629,336
Time Certificate of Deposit 27,678 --
Accounts Receivable 423,413 91,285
Related Party Receivable 90,165 --
Other Receivable 30,000 139,177
Prepaid Expenses 50,557 2,272
---------- ----------
TOTAL CURRENT ASSETS 1,751,992 862,070
---------- ----------
MOTION PICTURE DEVELOPMENT COSTS
New Swiss Family Robinson 5,639,610 5,298,437
Less: Accumulated Amortization 3,493,709 --
---------- ----------
2,145,901 5,298,437
Diamonds 7,386,627 --
Other 778,161 738,465
---------- ----------
10,310,689 6,036,902
Less: Production Funding Received 7,219,391 --
---------- ----------
TOTAL MOTION PICTURE DEVELOPMENT COSTS, NET OF
AMORTIZATION AND PRODUCTION FUNDING RECEIVED 3,091,298 6,036,902
---------- ----------
PROPERTY, PREMISES AND EQUIPMENT
Furniture and Fixtures 37,589 25,679
Office Equipment 325,083 33,404
Leasehold Improvements 9,029 8,035
---------- ----------
371,701 67,118
Less: Accumulated Depreciation 256,753 12,851
---------- ----------
TOTAL PROPERTY, PREMISES AND EQUIPMENT 114,948 54,267
---------- ----------
OTHER ASSETS
Deposits 116,186 16,076
Organization Costs, Net of Amortization 126,784 200,137
Goodwill, Net of Amortization 986,926 --
Miscellaneous Investments 266,088 39,597
---------- ----------
TOTAL OTHER ASSETS 1,495,984 255,810
---------- ----------
TOTAL ASSETS $6,454,222 $7,209,049
========== ==========
</TABLE>
(See notes to consolidated financial statements)
F-2
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (cont.)
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
CURRENT LIABILITIES
Short Term Debt $ 2,000,000 $ --
Less: Unamortized Debt Discount 429,687 --
----------- -----------
1,570,313 --
Current Portion of Long-Term Debt 126,925 --
Current Portion of Obligation Under Capital Lease 1,121 1,495
Accounts Payable and Accrued Expenses 508,816 296,751
Income Taxes Payable 25,507 --
Interest Payable 89,507 --
Producer's Fee Payable, Related Party 300,000 300,000
Deferred Revenue -- 2,593,816
----------- -----------
TOTAL CURRENT LIABILITIES 2,622,189 3,192,062
----------- -----------
LONG-TERM LIABILITIES
Long-Term Debt, Net of Current Portion 52,652 645,768
Obligation Under Capital Lease, Net of Current Portion -- 1,122
----------- -----------
TOTAL LONG-TERM LIABILITIES 52,652 646,890
----------- -----------
TOTAL LIABILITIES 2,674,841 3,838,952
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $0.001 Par Value; Authorized 50,000,000 Shares;
Issued and Outstanding 8,630,000 Shares and 8,300,000 Shares,
Respectively 8,630 8,300
Stock Warrants Granted, Value in Excess of Exercise Price 687,500 --
Stock Options Exercisable, Fair Value 557,813 --
Additional Paid-in Capital 4,841,667 4,098,593
Accumulated Deficit (2,316,229) (736,796)
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 3,779,381 3,370,097
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 6,454,222 $ 7,209,049
=========== ===========
</TABLE>
(See notes to consolidated financial statements)
F-3
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Years Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
REVENUE
Movie Release Income $ 4,429,388 $ --
Design Fees 1,690,706 82,329
----------- -----------
6,120,094 82,329
----------- -----------
OPERATING EXPENSES
Administrative Expenses 3,911,239 411,556
Depreciation and Amortization 139,749 61,576
Amortization of Motion Picture
Development Costs 3,493,709 --
----------- -----------
7,544,697 473,132
----------- -----------
LOSS FROM OPERATIONS (1,424,603) (390,803)
----------- -----------
OTHER INCOME (EXPENSE)
Rental Income 184,868 3,475
Interest Income 20,107 1,211
Interest Expense (115,193) (5,089)
Amortization of Additional Consideration
Granted for Debt (257,813) --
Loss on Sale of Assets -- (449)
Miscellaneous Income 41,529 169
----------- -----------
(126,502) (683)
----------- -----------
LOSS BEFORE INCOME TAX EXPENSE (1,551,105) (391,486)
----------- -----------
INCOME TAX (EXPENSE) BENEFIT
Current (28,328) --
----------- -----------
(28,328) --
----------- -----------
NET LOSS $(1,579,433) $ (391,486)
=========== ===========
BASIC AND DILUTED LOSS PER SHARE $ (0.19) $ (0.05)
=========== ===========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 8,414,597 7,740,667
=========== ===========
</TABLE>
(See notes to consolidated financial statements)
F-4
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Stock Stock Additional
------------------ Warrants Options Paid-In Accumulated
Shares Amount Granted Exercisable Capital Deficit
--------- ------ -------- ----------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Balance, July 1, 1997 6,500,000 $6,500 $ -- $ -- $2,100,393 $ (345,310)
Issuance of Common Stock for Cash at $1.00
per Share Pursuant to Private Offering,
July 1997 1,000,000 1,000 -- -- 999,000 --
Issuance of Common Stock for Cash at $1.25
per Share Pursuant to Private Offering,
March 1998 600,000 600 -- -- 749,400 --
Issuance of Common Stock for Cash at $1.25
per Share Pursuant to Limited Offering,
April to May 1998 200,000 200 -- -- 249,800 --
Net Loss for the Year Ended June 30, 1998 -- -- -- -- -- (391,486)
--------- ------ -------- -------- ---------- -----------
Balance, June 30, 1998 8,300,000 8,300 -- -- 4,098,593 (736,796)
Issuance of Common Stock for Acquisition
of Skyrocket, LLC., January 1999 150,000 150 -- -- 337,350 --
Issuance of Common Stock for Acquisition of
Michel Russo, Inc., January 1999 100,000 100 -- -- 212,366 --
Issuance of Common Stock as Additional
Consideration for Debt, February 1999 15,000 5 -- -- 24,683 --
Issuance of Common Stock for Acquisition
of Skyrocket, LLC., June 1999 75,000 75 -- -- 168,675 --
Warrants Exercisable for 250,000 Shares of
Common Stock at $2.00 per Share,
Issued as Additional Consideration of
Debt, February 1999 -- -- 687,500 -- -- --
Stock Options Exercisable for 210,000
Shares of Common Stock at $2.00
per Share for Services Rendered
July 1998 - May 1999 -- -- -- 557,813 -- --
Net Loss for the Year Ended June 30, 1999 -- -- -- -- -- (1,579,433)
--------- ------ -------- -------- ---------- -----------
Balance, June 30, 1999 8,630,000 $8,630 $687,500 $557,813 $4,841,667 $(2,316,229)
========= ====== ======== ======== ========== ===========
</TABLE>
(See notes to consolidated financial statements)
F-5
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,579,433) $ (391,486)
----------- -----------
Adjustments to Reconcile Net Loss to Net Cash
Provided By Operating Activities:
Depreciation and Amortization 3,633,458 61,576
Loss on Sale of Assets -- 449
Adjustment for Liabilities Acquired from Merger (11,100) --
Abandoned Projects -- 8,580
Amortization of Loan Discount 284,956 --
Fair Value of Stock Options Granted 557,813 --
Decrease (Increase) in Assets:
Accounts Receivable (245,099) (76,919)
Related Party Receivable (90,165) --
Other Receivable 109,177 (126,119)
Prepaid Expenses (47,335) 12,785
Deposits (100,110) --
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses 47,329 255,803
Income Taxes Payable 25,507
Producer's Fee Payable, Related Party -- 300,000
Interest Payable 89,507 --
Deferred Revenue (2,593,816) 2,593,816
----------- -----------
TOTAL ADJUSTMENTS 1,660,122 3,029,971
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 80,689 2,638,485
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Used to Purchase Certificate of Deposit (27,678) --
Payment of Organization Costs -- (203,975)
Miscellaneous Investments (226,491) (16,723)
Purchase of Property and Equipment (19,083) (15,285)
Purchase of Subsidiaries (20,000) --
Proceeds from Production Funding Arrangement 7,219,391 --
Cash Used in Motion Picture Development , Net (7,767,496) (5,579,207)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (841,357) (5,815,190)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Issuance of Common Stock -- 2,000,000
Proceeds from Loans 3,203,428 3,159,580
Principal Payments Made on Loans (1,940,421)
Principal Payments on Capital Lease Obligations (1,496) (2,513,812)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,261,511 2,645,768
----------- -----------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 500,843 (530,937)
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE YEAR 629,336 1,160,273
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF THE YEAR $ 1,130,179 $ 629,336
=========== ===========
</TABLE>
(See notes to consolidated financial statements)
F-6
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Years Ended
-----------------------------
June 30, 1999 June 30, 1998
------------- - ------------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid $ 62,768 $187,406
======== ========
Income Taxes Paid $ 2,821 $ --
======== ========
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
DURING THE YEAR ENDED JUNE 30, 1999:
The Company issued 325,000 shares of common stock with a value of $549,966
as consideration for the acquisition of subsidiaries.
The Company issued 5,000 shares of common stock as consideration for debt
issued by the Company.
The Company granted warrants exercisable for 250,000 shares of common stock
at $2.00 per share with a fair value of $687,500 as additional
consideration for debt issued by the Company.
The Company granted stock options exercisable at $2.00 per share for
210,000 shares of common stock with a fair value of $557,813 for past
services rendered.
(See notes to consolidated financial statements)
F-7
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BUSINESS AND BACKGROUND:
Total Film Group, Inc. ("Total"), formerly known as Executive Marketing,
Inc., was organized under the laws of the State of Delaware on August 1,
1995.
Total is involved in the business of producing, marketing and distributing
commercial feature films. It primarily creates, develops and produces
feature-length, theatrical motion pictures.
Total Creative, Inc. ("TCI") is a wholly-owned subsidiary of Total which
formerly operated as Dyer Communications, Inc. TCI acquired substantially
all the assets of Skyrocket, LLC and Michel Russo, Inc. effective January
1, 1999. TCI is a graphic design boutique specializing in digital
advertising, entertainment marketing, film promotion, trade and consumer
advertising and packaging, including corporate advertising and corporate
identity.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of Total Film
Group, Inc. and its wholly owned subsidiaries: Total Radio, Inc., Total
Pictures, Inc., Total Film (UK) Ltd., Alien Sky (UK) Ltd., Total Creative,
Inc. and Sundowning, Inc. (collectively, the "Company"). All significant
intercompany balances and transactions have been eliminated upon
consolidation.
REVENUE RECOGNITION:
Revenues from distribution or releasing agreements are recognized when the
film becomes available for release and certain other conditions are met in
accordance with Statement of Financial Accounting Standards No. 53 ("SFAS
53"), "Financial Reporting by Producers and Distributors of Motion Picture
Films". Amounts received in advance of the film being available are
recorded as deferred revenue.
Revenues from graphic design are generally recognized at the completion of
production. Revenue for long-term contracts is recognized on the
percentage-of-completion method.
MOTION PICTURE DEVELOPMENT COSTS AND AMORTIZATION:
Motion picture development costs represent those costs incurred in the
production, acquisition and distribution of motion pictures, which include
production costs, legal expenses, interest and overhead costs. These costs
have been capitalized in accordance with SFAS 53. The Company is amortizing
the film costs for completed films using the individual-film-forecast-
computation method, whereby expense is recognized in the proportion that
current year revenues bear to management's estimate of ultimate revenue
from all markets.
Motion picture development costs are valued at lower of unamortized cost or
estimated net realizable value. Revenue and cost forecasts for films are
regularly reviewed by management and revised when warranted by changing
conditions. When estimates of total revenues and costs indicate that a film
will result in an ultimate loss additional amortization is provided to
fully recognize such loss.
F-8
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
CASH EQUIVALENTS:
The Company considers all short-term investments with an original maturity
of three months or less to be cash equivalents. Short-term investments
included in cash and cash equivalents for the years ended June 30, 1999 and
1998 were $0 and $26,375, respectively.
USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS:
The preparation of financial statements in accordance with generally
accepted accounting principles requires that management use estimates and
assumptions in preparing financial statements. Those estimates and
assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues
and expenses. Actual results could differ from those estimates.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Depreciation of the cost of
property and equipment is computed using the straight-line method over the
estimated useful lives of the related assets ranging from 1 to 7 years.
Total depreciation expense relating to property and equipment for the years
ended June 30, 1999 and 1998 were $31,189 and $10,222, respectively.
Expenditures for maintenance and repairs are charged to expense as
incurred. Additions and betterments are capitalized. The cost and related
accumulated depreciation of property and equipment sold or otherwise
disposed are removed from the accounts and any gain or loss is reflected in
the current year's earnings.
ORGANIZATION COSTS:
Organization costs, which reflect amounts expended to organize the Company,
are amortized by the straight-line method over five years.
Amortization expense relating to organization costs was $80,348 and $51,354
for the years ended June 30, 1999 and 1998, respectively.
GOODWILL:
The purchase price for the net assets of companies acquired in excess of
their fair market values are amortized using the straight line method over
twenty years. Amortization expense for the year ended June 30, 1999 was
$28,213.
ACCOUNTS RECEIVABLE:
Accounts receivable is stated net of allowance for doubtful accounts. The
allowance is based upon management's estimate of the collectibility of
accounts receivable. Management estimated the total allowance to be $12,155
and $14,365 for the years ended June 30, 1999 and 1998, respectively.
F-9
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
INCOME TAXES:
Income taxes are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred
taxes. Deferred taxes are recognized for differences between the basis of
assets and liabilities for financial statement and income tax purposes. The
differences relate primarily to different depreciation methods, net
operating loss carryforwards and state franchise tax. The deferred taxes
represent the future tax return consequences of those differences, which
will either be taxable or deductible when the assets and liabilities are
recovered or settled. A valuation allowance is recognized, if based on
weight of available evidence, it is more likely than not that some portion
or all of the deferred tax asset will not be realized.
CONCENTRATION OF CREDIT RISK:
The Company maintains bank account balances in institutions located in
California and Puerto Rico. The balances in California are insured by the
Federal Deposit Insurance Corporation up to $100,000. The Company's cash
balances exceeded the level of insurance coverage for the years ended June
30, 1999 and 1998 by $946,146 and $483,000, respectively.
Financial instruments that potentially subject the Company to credit risk
consist of accounts receivable. The Company grants credit to customers
located in its operating location, primarily California. Concentrations of
credit risk with respect to accounts receivable is somewhat limited due to
the number of customers comprising the Company's customer base and their
dispersion across different industries.
IMPAIRMENT OF LONG-LIVED ASSETS:
Periodically, the Company evaluates whether there has been impairment in
the carrying value of the long-lived assets, such as motion picture
development costs and property and equipment, in accordance with generally
accepted accounting principles. Management believes that the long-lived
assets in the accompanying balance sheets are recoverable.
NON-DIRECT RESPONSE ADVERTISING:
Non-direct response advertising costs are expensed the first time the
advertising takes place. Advertising expense for the year ended June 30,
1999 was $160,789.
EARNINGS (LOSS) PER SHARE:
Net income (loss) per share is computed using the weighted average number
of shares of common stock outstanding. Common equivalent shares from stock
options and warrants have been included in the computation when dilutive.
Basic EPS is calculated by dividing earnings available to common
stockholders (the "numerator") by the weighted-average number of common
shares outstanding (the "denominator") during the period. The computation
of diluted EPS is similar to the computation of basic EPS except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the dilutive potential common shares
(that is, securities such as options, warrants, convertible securities, or
contingent stock agreements) had been issued. In addition, in computing the
dilutive effect of convertible securities, the numerator is adjusted to add
back (a) any convertible preferred dividends and (b) the after-tax amount
of interest recognized in the period associated with any convertible debt.
F-10
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
EARNINGS (LOSS) PER SHARE: (CONTINUED)
Options and warrants representing common shares were excluded from the
average number of common equivalent shares outstanding in the diluted EPS
calculation for the year ended June 30, 1999 since that would have an
antidiluted effect on EPS.
FAIR VALUE OF FINANCIAL INSTRUMENTS:
The Company's financial instruments include cash, receivables, payables and
accrued expenses. The carrying amount of such financial instruments
approximates fair value because of the short maturity of these instruments.
ACCOUNTING FOR STOCK BASED COMPENSATION
As permitted under Statement of Financial Accounting Standards No. 123
("SFAS 123") "Accounting for Stock-Based Compensation", the Company uses
the intrinsic value based method of accounting as prescribed by APB Opinion
No. 25 "Accounting for Stock Issued to Employees" to account for
compensation expense for its stock-based employee compensation plan.
NEW ACCOUNTING PRONOUNCEMENTS:
In April 1998, the Accounting Standards Executive Committee of the AICPA
issued Statement of Position 98-5, Reporting on the Costs of Start-Up
Activities. Costs of start-up activities, including organization costs,
should be expensed as incurred. This SOP is effective for financial
statements for fiscal years beginning after December 15, 1998. Initial
application of this SOP should be reported as the cumulative effect of a
change in accounting principle, as described in Accounting Principles Board
Opinion No. 20, Accounting Changes. The Company is required to adopt the
SOP on its financial statements for the year ended June 30, 2000. Adoption
of the SOP will reduce the Company's total assets and net income by the
amount of unamortized organization costs. At June 30, 1999, organization
costs, net of amortization, in the Company's balance sheet was $126,784.
RECLASSIFICATIONS:
Certain reclassifications have been made to amounts reported in prior
periods to conform with current year presentation.
NOTE 2 - ACQUISITIONS:
Effective January 1, 1999, the Company acquired the net assets of
Skyrocket, LLC. The shareholders of Skyrocket, LLC received 150,000 shares
of common stock and $25,000 in cash. An additional 75,000 shares of common
stock were granted June 26, 1999.
Effective January 1, 1999, the Company acquired the net assets of Michel
Russo, Inc. The shareholders of Michel Russo, Inc. received 100,000 shares
of common stock.
NOTE 3 - REPORTABLE OPERATING SEGMENTS:
MANAGEMENT'S POLICY IN IDENTIFYING REPORTABLE SEGMENTS:
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology, marketing and distribution
strategies.
F-11
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 3 - REPORTABLE OPERATING SEGMENTS: (CONTINUED)
GENERAL INFORMATION:
The Company's has two reportable operating segments: motion picture films
and graphic arts. The motion picture segment engages in the production,
marketing and distribution of commercial feature films; the graphic arts
segment is involved in the development of advertising and marketing
campaigns for a variety of clients.
SEGMENT PROFIT OR LOSS:
The accounting policies of the segments are the same as those described in
the summary of significant accounting policies. Management evaluates
segment performance based on profit or loss from operations before income
taxes and nonrecurring gains and losses. Transfers between segments are
accounted for at market value.
FOR THE YEAR ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
Segments
--------------------------------
Totals Motion Pictures Graphic Arts
----------- --------------- ------------
<S> <C> <C> <C>
Revenues from external customers $ 6,120,094 $ 4,429,388 $ 1,690,706
Intersegment revenues 88,761 -- 88,761
Interest income 20,107 20,086 21
Interest expense 373,006 358,847 14,159
Depreciation and amortization 3,633,458 3,584,700 48,758
Segment profit (loss) (1,522,105) (890,419) (631,686)
Segment assets 9,387,462 7,934,141 1,453,321
</TABLE>
FOR THE YEAR ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Totals Motion Pictures Graphic Arts
----------- --------------- ------------
<S> <C> <C> <C>
Revenues from external customers $ 82,329 $ -- $ 82,329
Interest income 226,211 226,211 --
Interest expense 5,089 5,089 --
Depreciation and amortization 61,576 61,329 247
Segment profit (loss) (166,466) (107,224) (59,262)
Segment assets 8,933,586 8,439,263 494,323
</TABLE>
F-12
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 3 - REPORTABLE OPERATING SEGMENTS: (CONTINUED)
RECONCILIATION OF SEGMENT INFORMATION TO CONSOLIDATED AMOUNTS:
<TABLE>
<CAPTION>
For the Years Ended June 30,
----------------------------
1999 1998
------------ ------------
<S> <C> <C>
REVENUES
Total revenues for reportable segments $ 6,208,855 $ 82,329
Elimination of intersegment revenues (88,761) --
------------ ------------
Total consolidated revenues $ 6,120,094 $ 82,329
============ ============
INCOME OR LOSS
Total loss for reportable segments $ (1,522,105) $ (166,486)
Elimination of intersegment income (29,000) (225,000)
------------ ------------
Loss before income tax $ (1,551,105) $ (391,486)
============ ============
ASSETS
Total assets for reportable segments $ 9,387,462 $ 8,833,586
Eliminations of intersegment transactions (2,933,240) (1,724,537)
------------ ------------
Consolidated total $ 6,454,222 $ 7,209,049
============ ============
</TABLE>
Information for the Company's reportable segments relates to its
consolidated totals as follows:
MAJOR CUSTOMER INFORMATION:
Revenues from two customers of the Company's graphic arts segment represent
approximately $410,330 of the Company's consolidated revenues, for the year
ended June 30, 1999.
F-13
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 4 - LOANS PAYABLE:
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Mercantile National Bank credit line, entered into
March 23, 1999 with monthly principal payments of
$8,333, plus interest at 8.75% per annum. The
credit line matures March 15, 2000 $ 75,000 $ --
Note payable, assumed October 1997 with principal
secured by the cash proceeds related to the
distribution of the New Swiss Family Robinson.
The interest accrues at 1% above the bank's prime
rate of interest. The note matured July 28, 1998. -- 645,768
WestAmerica Bank note payable, assumed February 1999
with monthly principal payments of $2,500 plus a
variable rate of interest currently 10.25% per
annum. The debt matures September 2000. 35,000 --
WestAmerica Bank note payable, assumed February 1999
with monthly principal payments of $1,637 plus a
variable rate of interest currently 10.5% per
annum. The debt matures November 2000. 22,917 --
WestAmerica Bank credit line, assumed February 1999.
The interest rate is 10.75% per annum. (See Note 6.) 46,660 --
--------- ----------
179,577 645,768
126,925 --
--------- ----------
Less Current Portion $ 52,652 $ 645,768
========= ==========
</TABLE>
Future aggregate debt maturities are as follows:
<TABLE>
<CAPTION>
Year Ending
June 30 Amount
----------- ------
<S> <C>
2000 $ 126,925
2001 10,444
2002 2,064
2003 2,963
2004 and Thereafter 38,181
---------
$ 179,577
=========
</TABLE>
On February 11, 1999, the Company borrowed $2,000,000 with principal
payable quarterly at the rate of $375,000 beginning three months following
the date of the first advance and continuing on the same date of each
quarter thereafter until one year following the date of the first advance,
at which time the unpaid principal balance and accrued interest shall be
due and payable. Interest will accrue at a rate of 13.5% per year, payable
quarterly under the same terms as with principal.
The debt holder received as additional consideration 250,000 warrants to
purchase the Company's common stock. The fair value in excess of the
exercise price of the warrants of $687,500 has been recorded as an
unamortized debt discount to be amortized as interest over one year, the
term of the debt. The unamortized loan discount at June 30, 1999 was
$429,687.
Total interest expense for these obligations for the years ended June 30,
1999 and 1998 was $95,880 and $5,089.
F-14
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 5 - OBLIGATION UNDER CAPITAL LEASE:
The Company leases office equipment with lease term expiring March 2000.
This capital lease obligation has been recorded in the accompanying
financial statements at the present value of future minimum lease payments.
The capitalized cost of $5,939 is included in office equipment in the
accompanying balance sheet. Accumulated depreciation at June 30, 1999 and
1998 includes $2,673 and $1,405, respectively, related to the capitalized
cost of the office equipment, which was acquired under lease in March 1997.
NOTE 6 - LINE OF CREDIT:
The Company has available a line of credit from WestAmerica Bank for
$50,000. The credit line bears interest annually at 10.75% with monthly
payments equal to 0.417% of the outstanding balance, but not less than
$100. The line was assumed in January 1999 and expires in April 2007. The
balance outstanding on the line at June 30, 1999 was $46,660. (See Note 4).
NOTE 7 - RELATED PARTY TRANSACTIONS:
Producer's fee payable of $300,000 is owed to the Company's chief executive
officer. By agreement between the chief executive officer and the Company,
the full amount is being deferred without interest until there are
sufficient funds out of proceeds from the distribution of the "New Swiss
Family Robinson" production to pay off the outstanding amount.
The Company has receivables totaling $90,165 from its officers. The
receivables are short term in nature, do not carry a stated rate of
interest and are callable at the Company's discretation.
NOTE 8 - COMMITMENTS AND CONTINGENCIES:
The Company has entered into lease agreements for its office facilities,
office equipment and automobiles with terms ranging from two to five years
and monthly payments from $250 to $5,512. Future minimum lease payments are
as follows:
<TABLE>
<CAPTION>
Year Ending
June 30, Lease Payments
----------- --------------
<S> <C>
2000 $104,262
2001 94,499
2002 77,213
2003 25,352
----------
Total future minimum
lease payments $301,326
</TABLE>
The lease agreement for the corporate office facilities calls for lease
payments to increase from $5,358 to $5,512 per month starting in March
1999. None of the other lease agreements call for annual rental increases.
Total rental expense included in the financial statements for the years
ending June 30, 1999 and 1998 was $243,011 and $73,643, respectively.
The Company entered into an Employee Loan Out Agreement with Viridian
Holdings (a Company related to the Company's chief executive officer and a
shareholder of the Company) wherein Viridian would loan the Company the
services of its President and Chairman of the Board. The Company is
obligated to pay $4,000 per month in "pass-through" salary through October
1, 1999. In addition, the Company agreed to cover all medical expenses not
covered by insurance incurred by the President and his family. This
compensation arrangement for the Chairman is exclusive of producer fees
associated with the release of the Company's motion pictures. The agreement
can be extended on a year to year basis after the initial term has expired.
F-15
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 8 - COMMITMENTS AND CONTINGENCIES: (CONTINUED)
The Company is involved in various legal proceedings, which represent
routine litigation incident to the business, some of which are covered in
whole or in part by insurance. In management's opinion, none of the pending
litigation will have a material adverse effect on the Company's financial
position.
On January 21, 1999, the Company entered into an agreement with legal
counsel for assistance in the formation of a new subsidiary. The
subsidiary's primary function will be the production and distribution of
motion picture films. In addition to a $30,000 retainer paid to the
attorneys during the year, the Company agreed to compensate legal counsel
$300,000 plus time and expense charges upon completion of the securities
transaction. According to the agreement, the retainer will be applied to
the $300,000 liability once the transaction is completed. At June 30, 1999,
the formation of the new subsidiary was not yet complete.
NOTE 9 - INCOME TAXES:
The Company has available at June 30, 1999 and 1998, unused operating loss
carryforwards of approximately $2,325,000 and $750,000, respectively, which
may be applied against future taxable income and which expire in various
years through 2019. The amount of and ultimate realization of the benefits
from operating loss carryforwards for income tax purposes is dependent, in
part, upon the tax laws in effect, the future earnings of the Company, and
other future events, the effects of which cannot be determined. Because of
the uncertainty surrounding the realization of the loss carryforwards the
Company has established a valuation allowance equal to the amount of the
tax effect of loss carryforwards and, therefore, no deferred tax asset has
been recognized for the loss carryforwards.
The Company's net deferred tax assets (using a federal rate of 34%)
consisted of the following at:
<TABLE>
<CAPTION>
June 30, 1999 June 30, 1998
------------- -------------
<S> <C> <C>
Deferred Tax Assets $ 790,500 $ 255,000
Deferred Tax Asset Valuation (790,500) (255,000)
--------- ---------
Net Deferred Tax Assets $ - $ -
========= =========
</TABLE>
NOTE 10 - STOCKHOLDERS' EQUITY:
STOCK OPTION PLAN:
In July 1998, the Company adopted a Non-Qualified Stock Option Plan (the
"Plan"). As of June 1999, approximately 948,000 shares of Common Stock are
reserved for future issuance under this plan. The Plan allows for the
Company to grant stock options to purchase shares of the Company's
authorized but unissued Common Stock to officers, key employees,
non-employee directors and consultants. Options are generally priced at the
fair market value of the stock on the date of grant. Options are generally
exercisable immediately but unvested shares are held in escrow. Options
currently expire no later than five years from the date of grant.
During fiscal 1999, the Company granted non-employee directors and
consultants the option to purchase 210,000 shares of unissued Common Stock.
These options were granted for past services rendered with a fair value of
$557,813. The professional fees were charged against earnings in the
current year.
F-16
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 10 - STOCKHOLDERS' EQUITY: (CONTINUED)
STOCK OPTION PLAN: (CONTINUED)
Information relative to stock option activity is as follows (in thousands):
<TABLE>
<CAPTION>
Weighted
Options Average
Available Number Aggregate Exercise
for Grant of Shares Price Price
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance, July 1, 1998 $ -- -- $ -- $ --
Share Authorized for Issuance 948 -- -- --
Options Granted (850) 850 1,700 2.00
Options Exercised -- -- -- --
Options Cancelled -- -- -- --
------ ---- ------- -------
Balance, June 30, 1999 $ 98 850 $ 1,700 $ 2.00
====== ==== ======= =======
</TABLE>
As of June 30, 1999, approximately 98,000 shares of Common Stock were
reserved for issuance under the Plan.
The following table summarizes information concerning currently outstanding
and exercisable options:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Number Contractual Exercise Number Exercise
Exercise Prices Outstanding Life Price Exercisable Price
--------------- ----------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C>
$2.00 850,000 1.31 $ 2.00 743,332 $ 2.00
</TABLE>
STOCK - BASED COMPENSATION:
The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees", and related interpretations in accounting
for its plan. Accordingly, no compensation expense has been recognized for
its stock-based compensation plan other than for the stock options granted
to non-employee directors and consultants. Had compensation cost for the
Company's other options granted been determined based upon the fair value
at the grant date for awards under this plan been consistent with the
methodology prescribed under Statement of Financial Accounting Standards
No. 123, "Accounting for Stock-Based Compensation", the Company's net loss
and net loss per share would have been increased to the pro forma amounts
indicated below:
F-17
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 10 - STOCKHOLDERS' EQUITY: (CONTINUED)
STOCK - BASED COMPENSATION: (CONTINUED)
<TABLE>
<S> <C>
Net Loss as Reported $(1,579,433)
Proforma Net Loss (2,614,097)
Basic Net Loss per
Share as Reported (0.19)
Proforma Basic Net
Loss per Share (0.29)
</TABLE>
For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.
The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that have no vesting
restrictions and are fully transferable. In addition, option valuation
models require the input of highly subjective assumptions, including the
expected stock price volatility. Because the Company's options have
characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect
the fair value estimate, in the opinion of management, the existing models
do not necessarily provide a reliable single measure of the fair value of
its options.
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model using a dividend yield of 0% and the
following additional weighted average assumptions used for grants.
<TABLE>
<S> <C>
Expected Stock Price Volatility 66%
Risk-Free Interest Rate 6%
Expected Lives (In Years) 1.4
</TABLE>
Using Black-Scholes option valuation model, the weighted average estimated
fair value of employee stock options granted in the year ended June 30,
1999 was $1.94.
F-18
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1999 AND 1998
NOTE 11 - PRODUCTION FUNDING PAYABLE:
The Company entered into an agreement with Cinerenta Gesellshaft Fur
Internationale Filmproduktion mbH & Co Zweite Medienbeteiligungs kg (the
"limited partner") and Cinesun Internationale Filmproduktions Gesellshaft
mbH & Co kg (the "producer") whereby the limited partner has agreed to
contribute up to $8,263,340 to the producer for the purposes of financing
the production and delivery of "Diamonds". Under terms of the arrangement
the limited partner will have the rights to distribute the film in Germany,
Austria, German-speaking Switzerland, Alto Adige, Liechtenstein, and
German-speaking Luxembourg. A separate distribution arrangement has been
made with Miramax whereby Miramax will have the exclusive rights to
distribute the film in the United States and English-speaking Canada. The
film's collection agent will distribute gross receipts based upon the
agreement reached between the Company, the limited partner and all profit
participants. The agreement calls for gross receipts from anywhere outside
of English-speaking North America to be allocated to the limited partner
until the limited partner has recouped its initial contribution. The
agreement also specifies that all money from English-speaking North America
to be allocated to the Company until the Company has recouped its initial
contribution. Additional receipts over and above initial contributions will
be allocated towards recoupment of any monies advanced by the completion
guarantor towards completion and delivery of the film and to the sales
agents' deferred sales agency fees. Any further receipts are to be
allocated pro rata until the Company has received $100,000 and the limited
partner 10% of its total contributions. The balance accruing in the
collection account shall be allocated in perpetuity as follows: 50% to the
limited partner, 33% to the Company, 15% to profit participants and 2% to
insurers. When the limited partner has recouped 130% of its contribution,
the limited partners share of gross receipts shall be reduced to 43% with
the Company's increased to 40%. At June 30, 1999, the Company owed
$7,219,391 under this agreement.
NOTE 12 - SUBSEQUENT EVENTS:
Subsequent to June 30, 1999, the Company entered into three capital lease
agreements for computer and office equipment. Each capital lease obligation
will be recorded in the financial statements at the present value of future
minimum lease payments as of the lease date. Each lease term is three years
and payments are due monthly. The fair market value of the equipment will
be capitalized as property, premises and equipment and depreciated over its
estimated useful life.
F-19
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
------
December 31, 1999 December 31, 1998
----------------------- -------------------------
<S> <C> <C>
CURRENT ASSETS
Cash and Cash Equivalents $ 791,967 $ 3,132,062
Time Certificate of Deposit 20,342 -
Accounts Receivable 455,243 242,547
Related Party Receivable 174,058 -
Other Receivable 33,250 15,970
Prepaid Expenses 25,897 25,648
--------------------- --------------------
TOTAL CURRENT ASSETS 1,500,756 3,416,227
--------------------- --------------------
MOTION PICTURE DEVELOPMENT COSTS
New Swiss Family Robinson 5,618,933 5,240,684
Less: Accum Amortization New Swiss Family Robinson 3,561,015 3,196,410
--------------------- --------------------
2,057,918 2,044,274
Diamonds 7,912,125 5,302,568
Less: Production Funding (7,219,391) (7,219,391)
Other 1,339,064 774,481
--------------------- --------------------
TOTAL MOTION PICTURE DEVELOPMENT COSTS, NET 4,089,716 901,932
--------------------- --------------------
PROPERTY, PREMISES AND EQUIPMENT
Furniture and Fixtures 37,589 27,747
Office Equipment 434,439 38,474
Leasehold Improvements 9,028 9,024
--------------------- --------------------
481,056 75,245
Less: Accumulated Depreciation 300,371 20,138
--------------------- --------------------
TOTAL PROPERTY AND EQUIPMENT 180,685 55,107
--------------------- --------------------
OTHER ASSETS
Investment in Meet China.com/Total China, Inc. 66,738 -
Deposits 25,076 145,092
Organization Costs, Net of Amortization 98,808 184,828
Goodwill, Net of Amortization 953,088 -
Miscellaneous Investments 225,861 101,753
--------------------- --------------------
TOTAL OTHER ASSETS 1,369,570 431,673
--------------------- --------------------
TOTAL ASSETS $ 7,140,726 $ 4,804,938
===================== ====================
</TABLE>
UNAUDITED FINANCIAL STATEMENTS; FOR INTERNAL INFORMATIONAL PURPOSES ONLY
F-1
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
December 31, 1999 December 31, 1998
--------------------- -------------------------
<S> <C> <C>
CURRENT LIABILITIES
Short-Term Debt $ 4,000,000 $ -
Less: Unamortized Debt Discount 455,168 -
--------------------- --------------------
3,544,832 -
Current Portion of Long-Term Debt 135,395 -
Accounts Payable and Accrued Expenses 329,427 168,114
Interest Payable 291,100 -
Producer's Fee Payable, Related Party 300,000 300,000
--------------------- --------------------
TOTAL CURRENT LIABILITIES 4,600,754 468,114
--------------------- --------------------
LONG-TERM LIABILITIES
Long-Term Debt, Net of Current Portion 57,935 296,527
--------------------- --------------------
TOTAL LONG-TERM LIABILITIES 57,935 296,527
--------------------- --------------------
TOTAL LIABILITIES 4,658,688 764,641
--------------------- --------------------
STOCKHOLDERS' EQUITY
Common Stock, $0.001 Par Value; Authorized 50,000,000 Shares;
Issued and Outstanding 8,880,000 and 8,300,000 Shares
Respectively 8,880 8,300
Stock Warrants Granted 200,000 -
Stock Options Exercisable 1,057,813 -
Additional Paid-in Capital 5,528,917 4,098,593
Accumulated Deficit - Beginning of Period (2,316,229) (736,796)
Net Income (Loss) - Current Period (1,997,344) 670,200
--------------------- --------------------
TOTAL STOCKHOLDERS' EQUITY 2,482,037 4,040,297
--------------------- --------------------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $ 7,140,726 $ 4,804,938
===================== ====================
</TABLE>
UNAUDITED FINANCIAL STATEMENTS; FOR INTERNAL INFORMATIONAL PURPOSES ONLY
F-2
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT
DECEMBER 31, 1999
<TABLE>
<CAPTION>
December 31, 1999 December 31, 1998
-------------------- --------------------
<S> <C> <C>
REVENUE
Movie Release Income $ 85,331 $ 4,093,815
Design Fees 1,171,667 774,326
-------------------- --------------------
1,256,999 4,868,141
-------------------- --------------------
OPERATING EXPENSES
Administrative Expenses 1,052,983 345,446
Depreciation and Amortization 94,979 26,822
Amortization of Motion Picture Development Costs 67,306 3,196,410
Production and Design Costs 1,039,646 687,077
-------------------- --------------------
2,254,913 4,255,755
-------------------- --------------------
INCOME (LOSS) FROM OPERATIONS (997,915) 612,386
-------------------- --------------------
OTHER INCOME (EXPENSE)
Interest Income 514 1,689
Interest Expense (341,593) (5,641)
Amortization of Additional Consideration (Short Term Debt Discount) (674,519) -
Loan Fees (19,192) -
Miscellaneous Income 35,361 61,766
-------------------- --------------------
(999,429) 57,814
-------------------- --------------------
INCOME (LOSS) BEFORE INCOME TAX EXPENSE (1,997,344) 670,200
-------------------- --------------------
NET INCOME (LOSS) $ (1,997,344) $ 670,200
==================== ====================
LOSS PER SHARE $ (0.23) $ 0.08
==================== ====================
WEIGHTED AVERAGE NUMBER OF COMMON 8,805,272 8,300,000
SHARES OUTSTANDING ==================== ====================
</TABLE>
UNAUDITED FINANCIAL STATEMENTS; FOR INTERNAL INFORMATIONAL PURPOSES ONLY
F-3
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED
<TABLE>
<CAPTION>
December 31
---------------------------------------------
1999 1998
------------------- -------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $ (1,997,344) $ 670,200
---------------------- -----------------------
Adjustments to Reconcile Net Loss to Net Cash
Provided By (Used in) Operating Activities:
Depreciation and Amortization 162,285 3,223,232
Amortization of Additional Consideration 674,519 -
Decrease (Increase) in Assets:
Accounts Receivable (31,830) (151,262)
Related Party Receivable (83,893) -
Other Receivable (3,250) 123,207
Prepaid Expenses 24,660 (23,376)
Deposits 91,110 (129,016)
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses (179,389) (128,637)
Income Taxes Payable (25,507) -
Interest Payable 201,593 -
Deferred Revenue - (2,593,816)
---------------------- -----------------------
TOTAL ADJUSTMENTS 830,298 320,332
---------------------- -----------------------
NET CASH PROVIDED (USED) BY OPERATING
ACTIVITIES (1,167,046) 990,532
---------------------- -----------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash Proceeds from the Redemption of Certificate of Deposit 7,336 -
Cash Proceeds from Investors in Total China, Inc./MeetChina.com 2,146,950 -
Cash Used to Purchase Investment in Total China, Inc./MeetChina.com (2,213,688) -
Miscellaneous Investments, Net 40,227 (62,156)
Purchase of Property and Equipment (14,081) (8,127)
Prodeeds from Production Funding Arrangement - 7,219,391
Cash Used in Motion Picture Development , Net (1,041,513) (5,285,056)
---------------------- -----------------------
NET CASH PROVIDED (USED) BY INVESTING
ACTIVITIES (1,074,769) 1,864,052
---------------------- -----------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Loans 2,000,000 745,768
Principal Payments Made on Loans (95,276) (1,095,009)
Principal Payments on Capital Lease Obligations (1,121) (2,617)
---------------------- -----------------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 1,903,603 (351,858)
---------------------- -----------------------
</TABLE>
F-4
<PAGE>
TOTAL FILM GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTH PERIOD ENDED
<TABLE>
<CAPTION>
December 31
---------------------------------------------
1999 1998
------------------- -------------------
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (338,212) 2,502,726
CASH AND CASH EQUIVALENTS AT BEGINNING OF THE PERIOD 1,130,179 629,336
---------------------- -----------------------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD $ 791,967 $ 3,132,062
====================== =======================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest Paid $ 146,732 $ 5,641
====================== =======================
Income Taxes Paid $ 3,210 $ 800
====================== =======================
</TABLE>
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
DURING THE PERIOD ENDED DECEMBER 31, 1999:
The Company granted stock options exercisable at $2 per share for 250,000
shares of common stock as additional consideration for debt issued by the
Company.
The Company granted warrants exercisable for 165,000 shares of common stock
with an exercise prices ranging from $2.50 to $2.94 per share as
consideration for obtaining debt financing.
The Company granted warrants exercisable for 200,000 shares of common stock
at $3.75 per share to investors in Total China, Inc.
The Company ganted warrants exercisable for 200,000 shares of common stock
at $4.13 per share as consideration for obtaining financing in Total China,
Inc.
The Company converted 250,000 warrents to common stock as specified by the
terms of a debt renogiation.
UNAUDITED FINANCIAL STATEMENTS; FOR INTERNAL INFORMATIONAL PURPOSES ONLY
F-5
<PAGE>
EXHIBIT 2.1
CERTIFICATE OF INCORPORATION
OF
EXECUTIVE MARKETING, INC.
FIRST. The name of this corporation shall be:
EXECUTIVE MARKETING, INC.
SECOND. Its registered office in the State of Delaware is to be located at
1013 Centre Road, in the City of Wilmington, County of New Castle and its
registered agent at such address is CORPORATION SERVICE COMPANY.
THIRD. The purpose or purposes of the corporation shall be:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
FOURTH. The total number of shares of stock which this corporation is
authorized to issue is:
(a) Common. 50,000,000 shares of Common stock having a par value of $.001
per share;
(b) Preferred. 500,000 shares of Preferred stock having a par value of
$.001 per share and to be issued in such series and to have such rights,
preferences, and designation as determined by the Board of Directors of the
Corporation.
FIFTH. The name and address of the incorporator is as follows:
Sharon J. Branscome
Corporation Service Company
1013 Centre Road
Wilmington, DE 19805
SIXTH. The Board of Directors shall have the power to adopt, amend or
repeal the by-laws.
SEVENTH. No director shall be personally liable to the Corporation or its
stockholders for monetary damages for any breach of fiduciary duty by such
director as a director. Notwithstanding the foregoing sentence, a director shall
be liable to the extent provided by applicable law, (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to Section 174 of the Delaware General
Corporation Law or (iv) for any transaction from which the director derived an
improper personal benefit. No
<PAGE>
amendment to or repeal of this Article Seventh shall apply to or have any effect
on the liability or alleged liability of any director of the Corporation for or
with respect to any acts or omissions of such director occurring prior to such
amendment.
IN WITNESS WHEREOF, the undersigned, being the incorporator hereinbefore
named, has executed, signed and acknowledged this certificate of incorporation
this first day of August, A.D., 1995.
/s/ Sharon J. Branscome
Incorporator
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
EXECUTIVE MARKETING, INC.
Executive Marketing, Inc., a corporation organized and existing under and
by virtue of the General Corporation Law of the State of Delaware,
DOES HEREBY CERTIFY:
FIRST: That the Board of Directors of said corporation by the unanimous
written consent of its members, filed with the minutes of the Board, adopted a
resolution proposing and declaring advisable the following amendment to the
Certificate of Incorporation of said corporation:
RESOLVED, that Article First of the Certificate of Incorporation of
the Company shall be amended to read as follows: "The name of this
corporation shall be Total Film Group."
SECOND: That in lieu of a meeting and vote of stockholders, the
stockholders have given written consent to said amendment in accordance with the
provisions of Section 228 of the General Law of the State of Delaware, and
written notice of the adoption of the amendment has been given as provided in
Section 228 of the General Corporation Law of the State of Delaware to every
stockholder entitled to such notice.
THIRD: That the aforesaid amendment was duly adopted in accordance with the
applicable provisions of Section 242 and 228 of the General Corporation Law of
the State of Delaware.
IN WITNESS WHEREOF, said Executive Marketing, Inc. has caused this
certificate to be signed by Lynn Dixon, its President and its Secretary, this
4th day of February 1997.
Executive Marketing, Inc.
By /s/ Lynn Dixon
President and Secretary
<PAGE>
EXHIBIT 2.2
CERTIFICATE OF SECRETARY
OF
EXECUTIVE MARKETING, INC.
The undersigned, constituting the duly-appointed and current secretary of
Executive Marketing, Inc. (the "Company"), does hereby certify that the attached
copy of bylaws of the Company is a true and correct copy of the bylaws currently
in effect for the Company. IN WITNESS WHEREOF, the undersigned has executed this
document this 4th day of February 1997.
/s/ Lynn Dixon, Secretary
BY-LAWS
OF
EXECUTIVE MARKETING, INC.
ARTICLE I - OFFICES
SECTION 1. The registered office of the corporation in the State of
Delaware shall be at 1013 Centre Road, Wilmington, Delaware 19805-1297.
The registered agent in charge thereof shall be CSC Networks.
SECTION 2. The corporation may also have off ices at such other places as
the Board of Directors may from time to time appoint or the business of the
corporation may require.
ARTICLE II - SEAL
SECTION 1. The corporate seal shall have inscribed thereon the name of the
corporation, the year of its organization and the words "Corporate Seal,
Delaware."
ARTICLE III - STOCKHOLDERS' MEETINGS
SECTION 1. Meetings of stockholders shall be held at the registered office
of the corporation in this state or at such place, either within or without this
state, as may be selected from time to time by the Board of Directors.
SECTION 2. ANNUAL MEETINGS: The annual meeting of the stockholders shall be
held on such date as is determined by the Board of Directors for the purpose of
electing directors and for the transaction of such other business as may
properly be brought before the meeting.
SECTION 3. ELECTION OF DIRECTORS: Elections of the directors of the
corporation shall be by written ballot.
<PAGE>
SECTION 4. SPECIAL MEETINGS: Special meetings of the stockholders may be
called at any time by the President, or the Board of Directors, or stockholders
entitled to cast at least one-fifth of the votes which all stockholders are
entitled to cast at the particular meeting. At any time, upon written request of
any person or persons who have duly called a special meeting, it shall be the
duty of the Secretary to fix the date of the meeting, to be held not more than
sixty days after receipt of the request, and to give due notice thereof. If the
Secretary shall neglect or refuse to fix the date of the meeting and give notice
thereof, the person or persons calling the meeting may do so.
Business transacted at all special meetings shall be confined to the
objects stated in the call and matters germane thereto, unless all stockholders
entitled to vote are present and consent.
Written notice of a special meeting of stockholders stating the time and
place and object thereof, shall be given to each stockholder entitled to vote
thereat at least ten days before such meeting, unless a greater period of notice
is required by statute in a particular case.
SECTION 5. QUORUM: A majority of the outstanding shares of the corporation
entitled to vote, represented in person or by proxy, shall constitute a quorum
at a meeting of stockholders. If a majority of the outstanding shares entitled
to vote is represented at a meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice. At such adjourned
meeting at which a quorum shall be present or represented, any business may be
transacted which might have been transacted at the meeting as originally
noticed. The stockholders present at a duly organized meeting may continue to
transact business until adjournment, notwithstanding the withdrawal of enough
stockholders to leave less than a quorum.
SECTION 6. PROXIES: Each stockholder entitled to vote at a meeting of
stockholders or to express consent or dissent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
A duly executed proxy shall be irrevocable if it states that it is
irrevocable and if, and only as long as, it is coupled with an interest
sufficient in law to support an irrevocable power. A proxy may be made
irrevocable regardless of whether the interest with which it is coupled is an
interest in the stock itself or an interest in the corporation generally. All
proxies shall be filed with the Secretary of the meeting before being voted
upon.
SECTION 7. NOTICE OF MEETINGS: Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given which shall state the place, date and hour of the meeting, and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called.
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<PAGE>
Unless otherwise provided by law, written notice of any meeting shall be
given not less than ten nor more than sixty days before the date of the meeting
to each stockholder entitled to vote at such meeting.
SECTION 8. CONSENT IN LIEU OF MEETINGS: Any action required to be taken at
any annual or special meeting of stockholders of a corporation, or any action
which may be taken at any annual or special meeting of such stockholders, may be
taken without a meeting, without prior notice and without a vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to vote thereon were present and voted. Prompt notice of the taking of
the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
SECTION 9. LIST OF STOCKHOLDERS: The officer who has charge of the stock
ledger of the corporation shall prepare and make, at least ten days before every
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
No share of stock upon which any installment is due and unpaid shall be voted at
any meeting. The list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or, if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present.
ARTICLE IV - DIRECTORS
SECTION 1. The business and affairs of this corporation shall be managed by
its Board of Directors, no less than one in number or such other minimum number
as is required by law. The directors need not be residents of this state or
stockholders in the corporation. They shall be elected by the stockholders of
the corporation or in the case of a vacancy by remaining directors, and each
director shall be elected for the term of one year, and until his successor
shall be elected and shall qualify or until his earlier resignation or removal.
SECTION 2. REGULAR MEETINGS: Regular meetings of the Board shall be held
without notice other than this by-law immediately after, and at the same place
as, the annual meeting of stockholders. The directors may provide, by
resolution, the time and place for the holding of additional regular meetings
without other notice than such resolution.
SECTION 3. SPECIAL MEETINGS: Special Meetings of the Board may be called by
the President or any director upon two day notice. The person or persons
authorized to call
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<PAGE>
special meetings of the directors may fix the place for holding any special
meeting of the directors called by them.
SECTION 4. QUORUM: A majority of the total number of directors shall
constitute a quorum for the transaction of business.
SECTION 5. CONSENT IN LIEU OF MEETING: Any action required or permitted to
be taken at any meeting of the Board of Directors, or of any committee thereof,
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee. The Board of
Directors may hold its meetings, and have an office or offices, outside of this
state.
SECTION 6. CONFERENCE TELEPHONE: One or more directors may participate in a
meeting of the Board, of a committee of the Board or of the stockholders, by
means of conference telephone or similar communications equipment by means of
which all persons participating in the meeting can hear each other;
participation in this manner shall constitute presence in person at such
meeting.
SECTION 7. COMPENSATION: Directors as such, shall not receive any stated
salary for their services, but by resolution of the Board, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each regular or
special meeting of the Board provided, that nothing herein contained shall be
construed to preclude any director from serving the corporation in any other
capacity and receiving compensation therefor.
SECTION 8. REMOVAL: Any director or the entire Board of Directors may be
removed, with or without cause, by the holders of a majority of the shares then
entitled to vote at an election of directors, except that when cumulative voting
is permitted, if less than the entire Board is to be removed, no director may be
removed without cause if the votes cast against his removal would be sufficient
to elect him if then cumulatively voted at an election of the entire Board of
Directors, or, if there be classes of directors, at an election of the class of
directors of which he is a part.
ARTICLE V - OFFICERS
SECTION 1. The executive officers of the corporation shall be chosen by the
directors and shall be a President, Secretary and Treasurer. The Board of
Directors may also choose a Chairman, one or more Vice Presidents and such other
officers as it shall deem necessary. Any number of offices may be held by the
same person.
SECTION 2. SALARIES: Salaries of all officers and agents of the corporation
shall be fixed by the Board of Directors.
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<PAGE>
SECTION 3. TERM OF OFFICE: The officers of the corporation shall hold
office for one year and until their successors are chosen and have qualified.
Any officer or agent elected or appointed by the Board may be removed by the
Board of Directors whenever in its judgment the best interest of the corporation
will be served thereby.
SECTION 4. PRESIDENT: The President shall be the chief executive officer of
the corporation; he shall preside at all meetings of the stockholders and
directors; he shall have general and active management of the business of the
corporation, shall see that all orders and resolutions of the Board are carried
into effect, subject, however, to the right of the directors to delegate any
specific powers, except such as may be by statute exclusively conferred on the
President, to any other officer or officers of the corporation. He shall execute
bonds, mortgages and other contracts requiring a seal, under the seal of the
corporation. He shall be EX-OFFICIO a member of all committees, and shall have
the general power and duties of supervision and management usually vested in the
office of President of a corporation.
SECTION 5. SECRETARY: The Secretary shall attend all sessions of the Board
and all meetings of the stockholders and act as clerk thereof, and record all
the votes of the corporation and the minutes of all its transactions in a book
to be kept for that purpose, and shall perform like duties for all committees of
the Board of Directors when required. He shall give, or cause to be given,
notice of all meetings of the stockholders and of the Board of Directors, and
shall perform such other duties as may be prescribed by the Board of Directors
or President, and under whose supervision he shall be. He shall keep in safe
custody the corporate seal of the corporation, and when authorized by the Board,
affix the same to any instrument requiring it.
SECTION 6. TREASURER: The Treasurer shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation, and shall keep the moneys
of the corporation in a separate account to the credit of the corporation. He
shall disburse the funds of the corporation as may be ordered by the Board,
taking proper vouchers for such disbursements, and shall render to the President
and directors, at the regular meetings of the Board, or whenever they may
require it, an account of all his transactions as Treasurer and of the financial
condition of the corporation.
ARTICLE VI - VACANCIES
SECTION 1. Any vacancy occurring in any office of the corporation by death,
resignation, removal or otherwise, shall be filled by the Board of Directors.
Vacancies and newly created directorships resulting from any increase in the
authorized number of directors may be filled by a majority of the directors then
in office, although less than a quorum, or by a sole remaining director. If at
any time, by reason of death or resignation or other cause, the corporation
should have no directors in office, then any officer or any stockholder or an
executor, administrator, trustee or guardian of a stockholder, or other
fiduciary entrusted with like responsibility for the person or estate of a
stockholder, may call a special meeting of stockholders in accordance with the
provisions of these By-Laws.
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<PAGE>
SECTION 2. RESIGNATIONS EFFECTIVE AT FUTURE DATE: When one or more
directors shall resign from the Board, effective at a future date, a majority of
the directors then in office, including those who have so resigned, shall have
power to fill such vacancy or vacancies, the vote thereon to take effect when
such resignation or resignations shall become effective.
ARTICLE VII - CORPORATE RECORDS
SECTION 1. Any stockholder of record, in person or by attorney or other
agent, shall, upon written demand under oath stating the purpose thereof, have
the right during the usual hours for business to inspect for any proper purpose
the corporation's stock ledger, a list of its stockholders, and its other books
and records, and to make copies or extracts therefrom. A proper purpose shall
mean a purpose reasonably related to such person's interest as a stockholder. In
every instance where an attorney or other agent shall be the person who seeks
the right to inspection, the demand under oath shall be accompanied by a power
of attorney or such other writing which authorizes the attorney or other agent
to so act on behalf of the stockholder. The demand under oath shall be directed
to the corporation at its registered office in this state or at its principal
place of business.
ARTICLE VIII - STOCK CERTIFICATES, DIVIDENDS, ETC.
SECTION 1. The stock certificates of the corporation shall be numbered and
registered in the share ledger and transfer books of the corporation as they are
issued. They shall bear the corporate seal and shall be signed by the president.
SECTION 2. TRANSFERS: Transfers of shares shall be made on the books of the
corporation upon surrender of the certificates therefor, endorsed by the person
named in the certificate or by attorney, lawfully constituted in writing. No
transfer shall be made which is inconsistent with law.
SECTION 3. LOST CERTIFICATE: The corporation may issue a new certificate of
stock in the place of any certificate theretofore signed by it, alleged to have
been lost, stolen or destroyed, and the corporation may require the owner of the
lost, stolen or destroyed certificate, or his legal representative to give the
corporation a bond sufficient to indemnify it against any claim that may be made
against it on account of the alleged loss, theft or destruction of any such
certificate or the issuance of such new certificate.
SECTION 4. RECORD DATE: In order that the corporation may determine the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or 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 change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall
Bylaws 6
<PAGE>
not be more than sixty nor less than ten days before the date of such meeting,
nor more than sixty days prior to any other action. If no record date is fixed:
(a) The record date for determining stockholders entitled to notice of or
to vote at a meeting of stockholders shall be at the close of business on the
day next preceding the day on which notice is given, or, if notice is waived, at
the close of business on the day next preceding the day on which the meeting is
held.
(b) The record date for determining stockholders entitled to express
consent to corporate action in writing without a meeting, when no prior action
by the Board of Directors is necessary, shall be the day on which the first
written consent is expressed.
(c) The record date for determining stockholders for any other purpose
shall be at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
(d) A determination of stockholders of record entitled to notice of or to
vote at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
SECTION 5. DIVIDENDS: The Board of Directors may declare and pay dividends
upon the outstanding shares of the corporation, from time to time and to such
extent as they deem advisable, in the manner and upon the terms and conditions
provided by statute and the Certificate of Incorporation.
SECTION 6. RESERVES: Before payment of any dividend there may be set aside
out of the net profits of the corporation such sum or sums as the directors, f
rom time to time, in their absolute discretion, think proper as a reserve fund
to meet contingencies, or for equalizing dividends, or for repairing or
maintaining any property of the corporation, or for such other purpose as the
directors shall think conducive to the interests of the corporation, and the
directors may abolish any such reserve in the manner in which it was created.
ARTICLE IX - MISCELLANEOUS PROVISIONS
SECTION 1. CHECKS: All checks or demands for money and notes of the
corporation shall be signed by such officer or officers as the Board of
Directors may from time to time designate.
SECTION 2. FISCAL YEAR: The fiscal year shall begin on the first day of
January.
SECTION 3. NOTICE: Whenever written notice is required to be given to any
person, it may be given to such person, either personally or by sending a copy
thereof through the mail, or by telegram, charges prepaid, to his address
appearing on the books of the corporation, or
Bylaws 7
<PAGE>
supplied by him to the corporation for the purpose of notice. If the notice is
sent by mail or by telegraph, it shall be deemed to have been given to the
person entitled thereto when deposited in the United States mail or with a
telegraph office for transmission to such person. Such notice shall specify the
place, day and hour of the meeting and, in the case of a special meeting of
stockholders, the general nature of the business to be transacted.
SECTION 4. WAIVER OF NOTICE: Whenever any written notice is required by
statute, or by the Certificate or the By-Laws of this corporation a waiver
thereof in writing, signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Except in the case of a special meeting of
stockholders, neither the business to be transacted at nor the purpose of the
meeting need be specified in the waiver of notice of such meeting. Attendance of
a person either in person or by proxy, at any meeting shall constitute a waiver
of notice of such meeting, except where a person attends a meeting for the
express purpose of objecting to the transaction of any business because the
meeting was not lawfully called or convened.
SECTION 5. DISALLOWED COMPENSATION: Any payments made to an officer or
employee of the corporation such as a salary, commission, bonus, interest, rent,
travel or entertainment expense incurred by him, which shall be disallowed in
whole or in part as a deductible expense by the Internal Revenue Service, shall
be reimbursed by such officer or employee to the corporation to the full extent
of such disallowance. It shall be the duty of the directors, as a Board, to
enforce payment of each such amount disallowed. In lieu of payment by the
officer or employee, subject to the determination of the directors,
proportionate amounts may be withheld from his future compensation payments
until the amount owed to the corporation has been recovered.
SECTION 6. RESIGNATIONS: Any director or other officer may resign at any
time, such resignation to be in writing and to take effect from the time of its
receipt by the corporation, unless some time be fixed in the resignation and
then from that date. The acceptance of a resignation shall not be required to
make it effective.
ARTICLE X - ANNUAL STATEMENT
SECTION 1. The President and the Board of Directors shall present at each
annual meeting a full and complete statement of the business and affairs of the
corporation for the preceding year. Such statement shall be prepared and
presented in whatever manner the Board of Directors shall deem advisable and
need not be verified by a Certified Public Accountant.
ARTICLE XI - INDEMNIFICATION AND INSURANCE:
SECTION 1. (a) RIGHT TO INDEMNIFICATION. Each person who was or is made a
party or is threatened to be made a party or is involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative
(hereinafter a "proceeding"), by reason of
Bylaws 8
<PAGE>
the fact that he or she, or a person of whom he or she is the legal
representative, is or was a director or officer, of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans, whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Delaware General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than said law permitted
the Corporation to provide prior to such amendment), against all expense,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his or her heirs,
executors and administrators; provided, however, that, except as provided in
paragraph (b) hereof, the Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof) initiated by
such person only if such proceeding (or part thereof) was authorized by the
Board of Directors of the corporation. The right to indemnification conferred in
this Section shall be a contract right and shall include the right to be paid by
the Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition: provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses incurred by a
director or officer in his or her capacity as a director or officer (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a proceeding, shall be made
only upon delivery to the corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise. The Corporation may, by action of its Board of
Directors, provide indemnification to employees an agents of the Corporation
with the same scope and effect as the foregoing indemnification of directors and
officers.
(b) RIGHT OF CLAIMANT TO BRING SUIT:
If a claim under paragraph (a) of this Section is not paid in full by the
Corporation within thirty days after a written claim has been received by the
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any is required, has been tendered to the Corporation) that the claimant has
not met the standards of conduct which make it permissible under the Delaware
General Corporation law for the Corporation to indemnify the claimant for the
amount claimed, but the burden of proving such defense shall be on the
Corporation. Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel, or its
Bylaws 9
<PAGE>
stockholders) to have made a determination prior to the commencement of such
action that indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in the
Delaware General Corporation Law, nor an actual determination by the Corporation
(including its Board of Directors, independent legal counsel, or its
stockholders) that the claimant has not met such applicable standard or conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard or conduct.
(c) Notwithstanding any limitation to the contrary contained in
sub-paragraphs (a) and (b) of this section, the corporation shall, to the
fullest extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as the same may be amended and supplemented, indemnify any
and all persons whom it shall have power to indemnify under said section from
and against any and all of the expenses, liabilities or other matters referred
to in or covered by said section, and the indemnification provided for herein
shall not be deemed exclusive of any other rights to which those indemnified may
be entitled under any By-law, 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, and shall continue as to a
person who has ceased to be director, officer, employee or agent and shall inure
to the benefit of the heirs, executors and administrators of such a person.
(d) INSURANCE:
The Corporation may maintain insurance, at its expense, to protect itself
and any director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Delaware General Corporation Law.
ARTICLE XII - AMENDMENTS
SECTION 1. These By-Laws may be amended or repealed by the vote of
directors.
ARTICLE XIII - SPECIFIC CORPORATE PURPOSE
SECTION 1. The corporate purpose of the Company is to raise money and to
enter into a contract with 21st Century Hair Design, Inc. (the "Producer") ,
wherein the Company shall acquire the exclusive rights to market a hair product
known as "Halo Hair" in one specified market area. The Company will be required
to spend a specified minimum dollar amount to purchase television broadcast time
in order to air an infomercial produced by the Producer during an initial
marketing period which will commence with the selection of the market (the
"Market") by mutual agreement between the Company and the Producer and will
terminate at the end of the first full calendar month after said selection. The
Company will maintain the exclusive rights to said Market by purchasing
television air time each subsequent calendar month in an amount equal to the
greater of (a) 50% of the revenues received from hair product sales by the
Company in the
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<PAGE>
preceding month, or (b) 50% of the amount spent for purchase of broadcast time
during the initial marketing period. This continuing obligation to purchase air
time shall commence in the second calendar month after the initial marketing
period.
The Producer has identified seven categories of television markets based on
the size of the markets, i.e., number of households and percentage of market
share. Each category has a list of currently available markets supplied by a
commercial provider of television air time and has a dollar amount established
by Producer which must be expended in the initial marketing period in order to
secure the exclusive rights to said market. The Company and the Producer will
mutually agree in good faith to the Market assigned to the Company on a "first
come - first served" basis and based on the funds available to be spent by the
Company.
In the event the Company is unable to expend the funds necessary to
maintain the minimum requirements on an ongoing basis under the contract with
the Producer, it will forfeit all rights to the specified Market and will have
no further right to market the Halo Hair product or to broadcast the
infomercial.
In such event, the Company will call a shareholders' meeting and by
majority vote of all nonaffiliated shareholders will make a decision as to
whether to liquidate the Company or as to what business direction the Company
will pursue, if any. It is the announced intent of the company at the present
time to not pursue marketing of hair products, should it be unsuccessful in its
original efforts to market the Halo Hair product.
In the event the Company is successful in marketing Halo Hair and is able
to maintain its contractual relationship with the Producer, it currently intends
to maintain that business and to pursue marketing the Halo Hair product in its
designated Market. In such case the Company intends to distribute as dividends
to shareholders those funds earned but not required to be reinvested in
marketing the product or needed for operations.
The Company acknowledges that its current sole officer and director is or
may be an officer and/or director of other companies which will have the same
business purpose as Executive Marketing, Inc., except that said entities will
each have its own specified exclusive market. Therefore, based on the limited
business purpose of this Company and its exclusive Market, it does not believe
that there is any conflict of interest with any other entity controlled by its
current sole director.
/s/ Lynn Dixon, Secretary
August 1, 1995
Bylaws 11
<PAGE>
EXHIBIT 3.1
[Front of Certificate]
Not valid unless countersigned by transfer agent
Incorporated Under the Laws of the State of Delaware
CUSIP NO. 89150V 10 2
TOTAL
FILM GROUP, INC.
Number Shares
Authorized common stock: 50,000,000 shares
Par Value: $.001
THIS CERTIFIES THAT
IS THE RECORD HOLDER OF
Shares of TOTAL FILM GROUP, INC. Common Stock transferable on the
books of the Corporation in person or by duly authorized attorney upon surrender
of this Certificate properly endorsed. This Certificate is not valid until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile seal of the Corporation and the facsimile signature
of its duly authorized officers. Dated:
/s/ Eli Boyer /s/ Gerald Green
Secretary President
Total Film Group, Inc.
Corporate
Seal
Delaware
Interwest Transfer Co., Inc., P.O. Box 17136/Salt Lake City, Utah 84117
Countersigned & Registered
[Back of Certificate]
NOTICE: Signature must be guaranteed by a firm which is a member of a
registered national stock exchange, or by a bank (other than a saving
bank), or a trust company. The following abbreviations, when used in
the inscription on the face of this certificate, shall be construed as
though they were written out in full according to applicable laws or
regulations.
TEN COM as tenants in common UNI GIFT MIN ACT ...... Custodian ......
TEN ENT as tenants by the entireties (Cust) (Minor)
JT TEN as joint tenants with right of under Uniform Gifts to Minors
survivorship and not as Act ...............
<PAGE>
tenants in common (State)
Additional abbreviations may also be used though not in the above list.
For Value Received, _____________________ hereby sell, assign and transfer
unto
Please insert social security or other
identifying number of assignee
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including zip code, of assignee)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
______________________________________________________ Shares of the capital
stock represented by the within certificate, and do hereby irrevocably
constitute and appoint _________________ Attorney to transfer the said stock on
the books of the within named Corporation with full power of substitution in the
premises.
Dated
Notice: The signature of this assignment must correspond with the name as
written upon the face of the certificate in every particular without
alteration or enlargement or any change whatever
<PAGE>
EXHIBIT 6.1
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement"), entered into
this 29th day of January 1997, by, between, and among Executive Marketing, Inc.,
a publicly held Delaware corporation (hereinafter the "Purchaser"), Total Media
Corporation, a privately-held Nevada corporation (hereinafter the "Private
Company"), the name of which is in the process of being changed to "Total Film
Group, Inc.", and the shareholders of the Private Company whose names and
signatures are set forth upon the signature page of this Agreement (the
"Shareholders").
RECITALS:
WHEREAS, the Purchaser wishes to acquire, and the Shareholders are willing
to sell, all of the outstanding stock of the Private Company in exchange solely
for a part of the voting stock of the Purchaser whereby the Shareholders would
acquire a controlling interest of the Purchaser; and
WHEREAS, the parties hereto intend to qualify such transaction as a
tax-free exchange pursuant to Section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended;
NOW, THEREFORE, based upon the stated premises, which are incorporated
herein by reference, and for and in consideration of the mutual covenants and
agreements set forth herein, the mutual benefits to the parties to be derived
herefrom, and other good and valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the Purchaser, the Private Company, and the
Shareholders approve and adopt this Agreement and Plan of Reorganization and
mutually covenant and agree with each other as follows:
1. Shares to be Transferred and Shares to be Issued.
1.1 On the closing date the Shareholders shall transfer to the
Purchaser certificates for the number of shares of the common stock of the
Private Company described in Schedule "A," attached hereto and incorporated
herein, which in the aggregate shall represent all of the issued and outstanding
shares of the common stock of the Private Company.
1.2 In exchange for the transfer of the common stock of the Private
Company pursuant to subsection 1.1. hereof, the Purchaser shall on the closing
date and contemporaneously with such transfer of the common stock of the Private
Company to it by the Shareholders issue and deliver to the Shareholders the
number of shares of common stock of the Purchaser specified on Schedule "A"
hereof such that the Shareholders shall own approximately sixty-seven percent
(67%) of the outstanding common stock of the Purchaser.
2. Representations and Warranties of the Shareholders. Each of the
Shareholders, for himself, herself, or itself, and not for any other
Shareholder, represents and warrants to the Purchaser as set forth below. These
representations and warranties are made as an inducement
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for the Purchaser to enter into this Agreement and, but for the making of such
representations and warranties and their accuracy, the Purchaser would not be a
party hereto.
2.1 Ownership of Stock.
a. Each of the Shareholders is the record and beneficial owner
and holder of the number of fully paid and nonassessable shares of the common
stock of the Private Company listed in Schedule "A" hereto as of the date hereof
and will continue to own such shares of the common stock of the Private Company
until the delivery thereof to the Purchaser on the closing date and all such
shares of common stock are or will be on the closing date owned free and clear
of all liens, encumbrances, charges and assessments of every nature and subject
to no restrictions with respect to transferability. Each of the Shareholders
currently has, and will have at closing, full power and authority to dispose,
assign, and transfer his, her, or its shares of the Private Company in
accordance with the terms hereof. Each of the Shareholders currently has, and
will have at closing, full power and authority to vote his, her, or its shares
of the Private Company, without restriction of any kind.
b. Except for this Agreement, there are no outstand-ing options,
contracts, calls, commitments, agreements or demands of any character relating
to the common stock of the Private Company listed in Schedule "A" and owned by
each of the Shareholders.
2.2 Accuracy of All Statements Made by the Shareholders. No
representation or warranty by the Shareholders in this Agreement, nor any
statement, certificate, schedule, or exhibit hereto furnished or to be furnished
by or on behalf of the Shareholders pursuant to this Agreement, nor any document
or certificate delivered to the Purchaser by the Shareholders pursuant to this
Agreement or in connection with actions contemplated hereby, contains or shall
contain any untrue statement of material fact or omits or shall omit a material
fact necessary to make the statement contained therein not misleading.
3. Representations and Warranties of the Private Company. The Private
Company represents and warrants to the Purchaser as set forth below. These
representations and warranties are made as an inducement for the Purchaser to
enter into this Agreement and, but for the making of such representations and
warranties and their accuracy, the Purchaser would not be a party hereto.
3.1 Organization and Authority. The Private Company is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Nevada with full power and authority to enter into and perform the
transactions contemplated by this Agreement.
3.2 Capitalization. As of the date of the closing, the Private
Company will have a total of no more than 300 shares of common stock issued and
outstanding. All of the shares will have been duly authorized and validly issued
and will be fully paid and nonassessable. There are no options, warrants,
conversion privileges, or other rights presently outstanding for the purchase of
any authorized but unissued stock of the Private Company, except for the right
to
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convert the loans referred to in paragraph 7.9 into shares of the Purchaser at
the rate of one share for each $1.00 of loan.
3.3 Performance of This Agreement. The execution and performance of
this Agreement and the transfer of stock contem-plated hereby have been
authorized by the board of directors of the Private Company.
3.4 Financial Condition. The Private Company has had no material
operations since its inception. A list and description of all of the assets of
the Private Company has been previously furnished to the Purchaser, which list
and description is true and correct in all material respects.
3.5 Liabilities. The Private Company has entered into a loan out
agreement for the services of Gerald Green. Additionally, there are three motion
picture projects and an office lease. The Private Company has also borrowed
$950,000, which amounts are convertible into shares of common stock of the
Purchaser at the rate of one share for each $1.00 of principal due pursuant to
such loans. Other than these obligations, there are no material liabilities of
the Private Company, whether accrued, absolute, contingent or otherwise, which
arose or relate to any transaction of the Private Company, its agents or
servants occurring prior to the date of this Agreement, which in the aggregate
would create labilities to the Private Company in excess of $25,000. As of the
date hereof, there are no known circumstances, conditions, happenings, events or
arrangements, contractual or otherwise, which may hereafter give rise to
liabili-ties, except in the normal course of business of the Purchaser, or as
set forth in this subsection.
3.6 Litigation. There are no legal, administrative or other
proceedings, investigations or inquiries, product liability or other claims,
judgments, injunctions or restrictions, either threatened, pending, or
outstanding against or involving the Private Company or its subsidiaries, if
any, or their assets, properties, or business, nor does the Private Company or
its subsidiaries know, or have reasonable grounds to know, of any basis for any
such proceedings, investigations or inquiries, product liability or other
claims, judgments, injunctions or restrictions. In addition, there are no
material proceedings existing, pending or reasonably contemplated to which any
officer, director, or affiliate of the Private Company or as to which and of the
Shareholders is a party adverse to the Private Company or any of its
subsidiaries or has a material interest adverse to the Private Company or any of
its subsidiaries.
3.7 Taxes. All federal, state, foreign, county and local income,
profits, franchise, occupation, property, sales, use, gross receipts and other
taxes (including any interest or penalties relating thereto) and assessments
which are due and payable have been duly reported, fully paid and discharged as
reported by the Private Company, and there are no unpaid taxes which are, or
could become a lien on the properties and assets of the Private Company, except
as provided for in the financial statements of the Private Company, or have been
incurred in the normal course of business of the Private Company since that
date. All tax returns of any kind required to be filed have been filed and the
taxes paid or accrued.
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3.8 Accuracy of All Statements Made by the Private Company. No
representation or warranty by the Private Company in this Agreement, nor any
statement, certificate, schedule, or exhibit hereto furnished or to be furnished
by or on behalf of the Private Company pursuant to this Agreement, nor any
document or certificate delivered to the Purchaser by the Private Company
pursuant to this Agreement or in connection with actions contemplated hereby,
contains or shall contain any untrue statement of material fact or omits or
shall omit a material fact necessary to make the statement contained therein not
misleading.
4. Representations and Warranties of the Purchaser. The Purchaser
represents and warrants to the Private Company and to the Shareholders as set
forth below. These representations and warranties are made as an inducement for
the Private Company and the Shareholders to enter into this Agreement and, but
for the making of such representations and warranties and their accuracy, the
Private Company and the Shareholders would not be parties hereto.
4.1 Organization and Good Standing. The Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware with full power and authority to enter into and perform the
transactions contemplated by this Agreement.
4.2 Capitalization. As of the date of the closing, the Purchaser will
have a total of no more than 1,500,000 shares of common stock issued and
outstanding. All of the shares will have been duly authorized and validly issued
and will be fully paid and nonassessable. Except for the Purchaser's obligations
hereunder with respect to the shares to be issued pursuant to subsection 1.2
hereof, there are no options, warrants, conversion privileges, or other rights
presently outstanding for the purchase of any authorized but unissued stock of
the Purchaser. As of the closing, the Articles of Incorporation, as amended, of
the Purchaser (the "Purchser Articles") and as currently in effect shall be in
the form previously furnished to the Private Company and the Shareholders
providing among other things for two authorized classes of stock, namely fifty
million (50,000,000) shares of common stock (par value $.001) and 500,000 shares
of preferred stock (par value $.001), none of which preferred shares are
outstanding. The rights, preferences, and privileges of the stock shall be as
set forth in the Purchaser Articles.
4.3 Performance of This Agreement. The execution and performance of
this Agreement and the issuance of stock contem-plated hereby have been
authorized by the board of directors of the Purchaser.
4.4 Financials. True copies of the financial statements of the
Purchaser consisting of the balance sheets as of the fiscal year ended December
31, 1996, and statements of income, cash flow and changes in stockholder's
equity for such fiscal year, have been delivered by the Purchaser to the Private
Company. The year-end statement has been examined and certified by Pritchett,
Siler & Hardy, P.C., Certified Public Accountants. Said financial statements are
true and correct in all material respects and present an accurate and complete
disclosure of the financial condition of the Purchaser as of December 31, 1996,
and the earnings for the periods covered, in accordance with generally accepted
accounting principles applied on a consistent basis.
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4.5 Liabilities. There are no material liabilities of the Purchaser,
whether accrued, absolute, contingent or otherwise, which arose or relate to any
transaction of the Purchaser, its agents or servants which are not disclosed by
or reflected in said financial statements. As of the date hereof, there are no
known circumstances, conditions, happenings, events or arrangements, contractual
or otherwise, which may hereafter give rise to liabili-ties, except in the
normal course of business of the Purchaser.
4.6 Litigation. There are no legal, administrative or other
proceedings, investigations or inquiries, product liability or other claims,
judgments, injunctions or restrictions, either threatened, pending, or
outstanding against or involving the Purchaser or its subsidiaries, if any, or
their assets, properties, or business, nor does the Purchaser or its
subsidiaries know, or have reasonable grounds to know, of any basis for any such
proceedings, investigations or inquiries, product liability or other claims,
judgments, injunctions or restrictions. In addition, there are no material
proceedings existing, pending or reasonably contemplated to which any officer,
director, or affiliate of the Purchaser is a party adverse to the Purchaser or
any of its subsidiaries or has a material interest adverse to the Purchaser or
any of its subsidiaries.
4.7 Taxes. All federal, state, foreign, county and local income,
profits, franchise, occupation, property, sales, use, gross receipts and other
taxes (including any interest or penalties relating thereto) and assessments
which are due and payable have been duly reported, fully paid and discharged as
reported by the Purchaser, and there are no unpaid taxes which are, or could
become a lien on the properties and assets of the Purchaser, except as provided
for in the financial statements of the Purchaser, or have been incurred in the
normal course of business of the Purchaser since that date. All tax returns of
any kind required to be filed have been filed and the taxes paid or accrued.
4.8 Legality of Shares to be Issued. The shares of common stock of
the Purchaser to be issued by the Purchaser pursuant to this Agreement, when so
issued and delivered, will have been duly and validly authorized and issued by
the Purchaser and will be fully paid and nonassessable.
4.9 Tradability of Outstanding Shares. Of the shares of common stock
of the Purchaser to be outstanding as of closing, management reasonably believes
that up to 75,000 will not be restricted as defined in Rule 144 promulgated by
the Securities and Exchange Commission pursuant to the Securities Act of 1933,
as amended.
4.10 Accuracy of All Statements Made by the Purchaser. No
representation or warranty by the Purchaser in this Agreement, nor any
statement, certificate, schedule, or exhibit hereto furnished or to be furnished
by the Purchaser pursuant to this Agreement, nor any document or certificate
delivered to the Private Company or the Shareholders pursuant to this Agreement
or in connection with actions contemplated hereby, contains or shall contain any
untrue statement of material fact or omits to state or shall omit to state a
material fact necessary to make the statement contained therein not misleading.
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5. Covenants of the Parties.
5.1 Corporate Records.
a. Simultaneous with the execution of this Agreement by the
Private Company, such entity shall deliver to the Purchaser copies of the
articles of incorporation, as amended, and the current bylaws of the Private
Company, and copies of the resolutions duly adopted by the board of directors of
the Private Company approving this Agreement and the transactions herein
contemplated.
b. Simultaneous with the execution of this Agreement by the
Purchaser, such entity shall deliver to the Private Company copies of the
articles of incorporation, as amended, and the current bylaws of the Purchaser,
and copies of the resolutions duly adopted by the board of directors of the
Purchaser approving this Agreement and the transactions herein contemplated.
5.2 Access to Information.
a. The Purchaser and its authorized representatives shall have
full access during normal business hours to all properties, books, records,
contracts, and documents of the Private Company, and the Private Company shall
furnish or cause to be furnished to the Purchaser and its authorized
representatives all information with respect to its affairs and business as the
Purchaser may reasonably request. The Purchaser shall hold, and shall cause its
representatives to hold confidential, all such information and documents, other
than information that (i) is in the public domain at the time of its disclosure
to the Purchaser; (ii) becomes part of the public domain after disclosure
through no fault of the Purchaser; (iii) is known to the Purchaser or any of its
officers or directors prior to disclosure; or (iv) is disclosed in accordance
with the written consent of the Private Company. In the event this Agreement is
terminated prior to closing, the Purchaser shall, upon the written request of
the Private Company, promptly return all copies of all documentation and
information provided by the Private Company hereunder.
b. The Private Company and its authorized representatives shall
have full access during normal business hours to all properties, books, records,
contracts, and documents of the Purchaser, and the Purchaser shall furnish or
cause to be furnished to the Private Company and its authorized representatives
all information with respect to its affairs and business the Private Company may
reasonably request. The Private Company shall hold, and shall cause its
representatives to hold confidential, all such information and documents, other
than information that (i) is in the public domain at the time of its disclosure
to the Private Company; (ii) becomes part of the public domain after disclosure
through no fault of the Private Company; (iii) is known to the Private Company
or any of its officers or directors prior to disclosure; or (iv) is disclosed in
accordance with the written consent of the Purchaser. In the event this
Agreement is terminated prior to closing, the Private Company shall, upon the
written request of the Purchaser, promptly return all copies of all
documentation and information provided by the Purchaser hereunder.
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5.3 Actions Prior to Closing. From and after the date of this
Agreement and until the closing date:
a. The Purchaser and the Private Company shall each carry on its
business diligently and substantially in the same manner as heretofore, and
neither party shall make or institute any unusual or novel methods of purchase,
sale, management, accounting or operation.
b. Neither the Purchaser nor the Private Company shall enter into
any contract or commitment, or engage in any transaction not in the usual and
ordinary course of business and consistent with its business practices.
c. Neither the Purchaser nor the Private Company shall amend its
articles of incorporation or bylaws or make any changes in authorized or issued
capital stock, except as provided in this Agreement.
d. The Purchaser and the Private Company shall each use its best
efforts (without making any commitments on behalf of the company) to preserve
its business organization intact.
e. Neither the Purchaser nor the Private Company shall do any act
or omit to do any act, or permit any act or omission to act, which will cause a
material breach of any material contract, commitment, or obligation of such
party.
f. The Purchaser and the Private Company shall each duly comply
with all applicable laws as may be required for the valid and effective issuance
or transfer of stock contemplated by this Agreement.
g. Neither the Purchaser nor the Private Company shall sell or
dispose of any property or assets, except products sold in the ordinary course
of business.
h. The Purchaser and the Private Company shall each promptly
notify the other of any lawsuits, claims, proceedings, or investigations that
may be threatened, brought, asserted, or commenced against it, its officers or
directors involving in any way the business, properties, or assets of such
party.
5.4 Shareholders' Meeting or Consent. The Purchaser shall promptly
submit this Agreement and the transactions contemplated hereby for the approval
of its stockholders at a meeting of stockholders or for duly authorized consent,
and, subject to the fiduciary duties of the Board of directors of the Purchaser
under applicable law, shall use its best efforts to obtain stockholder approval
and adoption of this Agreement and the transactions contemplated hereby. In
connection with such meeting or action of the stockholders, the Purchaser shall
prepare a proxy or information statement to be furnished to the shareholders of
the Purchaser setting forth information about this Agreement and the
transactions contemplated hereby. The Private Party shall promptly furnish to
the Purchaser all information, and take such other actions, as may
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reasonably be requested in connection with any action to be taken by the
Purchaser in connection with the immediately preceding sentence. The Private
Company shall have the right to review and provide comments to the proxy or
information statement prior to mailing to the shareholders of the Purchaser.
5.5 No Covenant as to Tax or Accounting Consequences. It is expressly
understood and agreed that neither the Purchaser nor its officers or agents has
made any warranty or agreement, expressed or implied, as to the tax or
accounting consequences of the transactions contemplated by this Agreement or
the tax or accounting consequences of any action pursuant to or growing out of
this Agreement.
5.6 Indemnification. The Private Company shall indemnify Purchaser
for any loss, cost, expense, or other damage (including, without limitation,
attorneys' fees and expenses) suffered by Purchaser resulting from, arising out
of, or incurred with respect to the falsity or the breach of any representation,
warranty, or covenant made by the Private Company herein, and any claims arising
from the operations of the Private Company prior to the closing date. Purchaser
shall indemnify and hold the Private Company harmless from and against any loss,
cost, expense, or other damage (including, without limitation, attorneys' fees
and expenses) resulting from, arising out of, or incurred with respect to, or
alleged to result from, arise out of or have been incurred with respect to, the
falsity or the breach of any representation, covenant, warranty, or agreement
made by Purchaser herein, and any claims arising from the operations of
Purchaser prior to the closing date. The indemnity agreement contained herein
shall remain operative and in full force and effect, regardless of any
investigation made by or on behalf of any party and shall survive the
consummation of the transactions contemplated by this Agreement.
5.7 Publicity. The parties agree that no publicity, release, or other
public announcement concerning this Agreement or the transactions contemplated
by this Agreement shall be issued by any party hereto without the advance
approval of both the form and substance of the same by the other parties and
their counsel, which approval, in the case of any publicity, release, or other
public announcement required by applicable law, shall not be unreasonably
withheld or delayed.
5.8 Expenses. Except as otherwise expressly provided herein, each
party to this Agreement shall bear its own respective expenses incurred in
connection with the negotiation and preparation of this Agreement, in the
consummation of the transactions contemplated hereby, and in connection with all
duties and obligations required to be performed by each of them under this
Agreement.
5.9 Further Actions. Each of the parties hereto shall take all such
further action, and execute and deliver such further documents, as may be
necessary to carry out the transactions contemplated by this Agreement.
6. Conditions Precedent to the Purchaser's Obligations. Each and every
obligation of the Purchaser to be performed on the closing date shall be subject
to the satisfaction prior thereto of the following conditions:
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6.1 Truth of Representations and Warranties. The represen-tations and
warranties made by the Private Company and the Shareholders in this Agreement or
given on their behalf hereunder shall be substantially accurate in all material
respects on and as of the closing date with the same effect as though such
representations and warranties had been made or given on and as of the closing
date.
6.2 Performance of Obligations and Covenants. The Private Company and
the Shareholders shall have performed and complied with all obligations and
covenants required by this Agreement to be performed or complied with by them
prior to or at the closing.
6.3 Officer's Certificate. The Purchaser shall have been furnished
with a certificate (dated as of the closing date and in form and substance
reasonably satisfactory to the Purchaser), executed by an executive officer of
the Private Company, certifying to the fulfillment of the conditions specified
in subsections 6.1 and 6.2 hereof.
6.4 No Litigation or Proceedings. There shall be no litigation or any
proceeding by or before any governmental agency or instrumentality pending or
threatened against any party hereto that seeks to restrain or enjoin or
otherwise questions the legality or validity of the transactions contemplated by
this Agreement or which seeks substantial damages in respect thereof.
6.5 No Material Adverse Change. As of the closing date there shall
not have occurred any material adverse change, financially or otherwise, which
materially impairs the ability of the Private Company to conduct its business or
the earning power thereof on the same basis as in the past.
6.6 Shareholders' Execution of Agreement. This Agreement shall have
been duly executed and delivered by each of the parties owning in the aggregate
all of the outstanding stock of the Private Company as of the closing date.
7. Conditions Precedent to Obligations of the Private Company and the
Shareholders. Each and every obligation of the Private Company and the
Shareholders to be performed on the closing date shall be subject to the
satisfaction prior thereto of the following conditions:
7.1 Truth of Representations and Warranties. The represen-tations and
warranties made by the Purchaser in this Agreement or given on its behalf
hereunder shall be substantially accurate in all material respects on and as of
the closing date with the same effect as though such representations and
warranties had been made or given on and as of the closing date.
7.2 Performance of Obligations and Covenants. The Purchaser shall
have performed and complied with all obligations and covenants required by this
Agreement to be performed or complied with by it prior to or at the closing.
7.3 Officer's Certificate. The Private Company shall have been
furnished with a certificate (dated as of the closing date and in form and
substance reasonably satisfactory to the
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Private Company), executed by an executive officer of the Purchaser, certifying
to the fulfillment of the conditions specified in subsections 7.1 and 7.2
hereof.
7.4 No Litigation or Proceedings. There shall be no litigation or any
proceeding by or before any governmental agency or instrumentality pending or
threatened against any party hereto that seeks to restrain or enjoin or
otherwise questions the legality or validity of the transactions contemplated by
this Agreement or which seeks substantial damages in respect thereof.
7.5 No Material Adverse Change. As of the closing date there shall
not have occurred any material adverse change, financially or otherwise, which
materially impairs the ability of the Purchaser to conduct its business.
7.6 No Liabilities of Purchaser. As of the closing date the Purchaser
shall have no liabilities which in the aggregate exceed $1,000.
7.7 Stock Dividend or Forward Stock Split. As of the closing date the
Purchaser shall have approved a one and one-half for one forward split of the
outstanding stock of the Purchaser or a one-for-two stock dividend, such that
the number of post-forward split shares of the Purchaser issued and outstanding
at closing shall be 1,500,000. The shares to be issued pursuant to subsection
1.2 hereof shall reflect post-forward split or dividend shares.
7.8 Name Change. As of the closing date the Purchaser shall have duly
approved an amendment to the articles of incorporation of the Purchaser to
change the name of the Purchaser to "Total Film Group."
7.9 Outstanding Convertible Promissory Note. Purchaser shall honor
the agreement to convert the outstanding promissory notes issued by the Private
Company into common stock of the Purchaser following closing as set forth in
several promissory notes in the aggregate amount of $950,000. The principal of
such notes shall be convertible into common stock of the Purchaser at the rate
of one share of such stock for each $1.00 of such debt.
8. Securities Law Provisions.
8.1 Restricted Securities. Each of the parties hereto, severally and
not jointly, represents that he, she, or it is aware that the shares issued or
transferred to him, her, or it will not have been registered pursuant to the
Securities Act of 1933, as amended (the "1933 Act"), or any state securities
act, and thus will be restricted securities as defined in Rule 144 promulgated
by the Securities and Exchange Commission (the "SEC"). Therefore, under current
interpretations and applicable rules, he, she, or it will probably have to
retain such shares for a period of at least two years and at the expiration of
such two year period his, her, or its sales may be confined to brokerage
transactions of limited amounts requiring certain notification filings with the
SEC and such disposition may be available only if the issuer is current in its
filings with the SEC under the Securities Exchange Act of 1934, as amended, or
other public disclosure requirements.
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8.2 Non-distributive Intent. Each of the parties hereto, severally
and not jointly, covenants and warrants that the shares received are acquired
for his, her, or its own account and not with the present view towards the
distribution thereof and he, she, or it will not dispose of such shares except
(i) pursuant to an effective registration statement under the 1933 Act, or (ii)
in any other transac-tion which, in the opinion of counsel acceptable to the
issuer, is exempt from registration under the 1933 Act, or the rules and
regulations of the SEC thereunder. In order to effectuate the covenants of this
subsection 8.2, an appropriate legend will be placed upon each of the
certificates of common stock of issued or transferred pursuant to this
Agreement, and stop transfer instruc-tions shall be placed with the transfer
agent for the securities.
8.3 Evidence of Compliance with Private Offering Exemption. Each of
the parties hereto, severally and not jointly, hereby represents and warrants
that he, she, or it, either individually or together with his, her, or its
representative, has such knowledge and experience in business and financial
matters that he, she, or it is capable of evaluating the risks of this Agreement
and the transactions contemplated hereby, and that the financial capacity of
such party is of such proportion that the total cost of such person's commitment
in the shares would not be material when compared with his, her, or its total
financial capacity. Upon the written request of the issuer of the securities
issued or transferred pursuant to this Agreement, any party hereto shall provide
such issuer with evidence of compliance with the requirements of any federal or
state exemption from registration. The Purchaser and the Private Company shall
each file, with the assistance of the other and its respective legal counsel,
such notices, applications, reports, or other instruments as may be deemed by
each of them to be necessary or appropriate in an effort to document reliance on
such exemptions, unless an exemption requiring no filing is available in the
particular jurisdiction, all to the extent and in the manner as may be deemed by
such parties to be appropriate.
9. Change of Management. Upon and as a condition of closing this
Agreement:
9.1 Prior to closing the Purchaser will present to its shareholders
for approval the increase in the number of directors to three persons and the
election of Gerald Green, Eli Boyer, and Manuel Pacheco Esq. as directors of the
Purchaser effective immediately following the closing of this Agreement. Prior
to closing the Private Company will furnish material information of Gerald
Green, Eli Boyer, and Manuel Pacheco Esq. as nominees to be elected by the
shareholders of the Purchaser. Purchaser reserves the right to refuse to cause
the nomination of any or all such persons as directors of Purchaser if, after
review of the foregoing information concerning said persons, it is the opinion
of Purchaser that the election of such persons would not be in the best
interests of Purchaser.
9.2 The Private Company reserves the right to terminate this
Agreement if nominees selected by it are not elected or appointed as set forth
above.
10. Closing.
10.1 Time and Place. The closing of this transaction ("closing")
shall take place at 9777 Wilshire Blvd., Suite 1009, Beverly Hills, CA, at 1:00
p.m., Tuesday the 4th day of
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February 1997, or at such other time and place as the parties hereto shall agree
upon. Such date is referred to in this Agreement as the "closing date."
10.2 Documents To Be Delivered by the Private Company and the
Shareholders. At the closing the Private Company and the Shareholders shall
deliver to the Purchaser the following documents:
a. Certificates for the number of shares of common stock of the
Private Company in the manner and form required by subsection 1.1 hereof.
b. The certificate required pursuant to subsection 6.3 hereof.
c. Such other documents of transfer, certificates of authority,
and other documents as the Purchaser may reason-ably request.
10.3 Documents To Be Delivered by the Purchaser. At the closing the
Purchaser shall deliver to the Private Company and the Shareholders the
following documents:
a. Certificates for the number of shares of common stock of the
Purchaser as determined in sub-section 1.2 hereof.
b. The certificate required pursuant to subsection 7.3 hereof.
c. Such other documents of transfer, certificates of authority,
and other documents as the Private Company and the Shareholders may reasonably
request.
11. Termination. This Agreement may be terminated by the Purchaser or the
Private Company by notice to the other if, (i) at any time prior to the closing
date any event shall have occurred or any state of facts shall exist that
renders any of the conditions to its or their obligations to consummate the
transactions contemplated by this Agreement incapable of fulfillment, or (ii) on
February 28, 1997, if the closing shall not have occurred. Following termination
of this Agreement no party shall have liability to another party relating to
such termination, other than any liability resulting from the breach of this
Agreement by a party prior to the date of termination.
12. Miscellaneous.
12.1 Notices. All communications provided for herein shall be in
writing and shall be deemed to be given or made when served personally or when
deposited in the United States mail, certified return receipt requested,
addressed as follows, or at such other address as shall be designated by any
party hereto in written notice to the other party hereto delivered pursuant to
this subsection:
Purchaser: Lynn Dixon, President
Executive Marketing, Inc.
<PAGE>
311 South State Street
Suite 460
Salt Lake City, Utah 84111
Private Company: Gerald Green
1401 Park Way
Beverly Hills, California 90210
Shareholders: Gerald Green
1401 Park Way
Beverly Hills, California 90210
12.2 Default. Should any party to this Agreement default in any of the
covenants, conditions, or promises contained herein, the defaulting party shall
pay all costs and expenses, including a reasonable attorney's fee, which may
arise or accrue from enforcing this Agreement, or in pursuing any remedy
provided hereunder or by the statutes of the State of Utah
12.3 Assignment. This Agreement may not be assigned in whole or in
part by the parties hereto without the prior written consent of the other party
or parties, which consent shall not be unreasonably withheld.
12.4 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto, their heirs, executors,
administrators, successors and assigns.
12.5 Partial Invalidity. If any term, covenant, condition, or
provision of this Agreement or the application thereof to any person or
circumstance shall to any extent be invalid or unenforceable, the remainder of
this Agreement or application of such term or provision to persons or
circumstances other than those as to which it is held to be invalid or
unenforceable shall not be affected thereby and each term, covenant, condition,
or provision of this Agreement shall be valid and shall be enforceable to the
fullest extent permitted by law.
12.6 Entire Agreement. This Agreement constitutes the entire
understanding between the parties hereto with respect to the subject matter
hereof and supersedes all negotiations, representations, prior discussions, and
preliminary agreements between the parties hereto relating to the subject matter
of this Agreement.
12.7 Interpretation of Agreement. This Agreement shall be interpreted
and construed as if equally drafted by all parties hereto.
12.8 Survival of Covenants, Etc. All covenants, representations, and
warranties made herein to any party, or in any statement or document delivered
to any party hereto, shall survive the making of this Agreement and shall remain
in full force and effect until the obligations of such party hereunder have been
fully satisfied.
<PAGE>
12.9 Further Action. The parties hereto agree to execute and deliver
such additional documents and to take such other and further action as may be
required to carry out fully the transac-tions contemplated herein.
12.10 Amendment. This Agreement or any provision hereof may not be
changed, waived, terminated, or discharged except by means of a written
supplemental instrument signed by the party or parties against whom enforcement
of the change, waiver, termination, or discharge is sought.
12.11 Full Knowledge. By their signatures, the parties acknowledge
that they have carefully read and fully understand the terms and conditions of
this Agreement, that each party has had the benefit of counsel, or has been
advised to obtain counsel, and that each party has freely agreed to be bound by
the terms and conditions of this Agreement.
12.12 Headings. The descriptive headings of the various sections or
parts of this Agreement are for convenience only and shall not affect the
meaning or construction of any of the provisions hereof.
12.13 Counterparts. This Agreement may be executed in two or more
partially or fully executed counterparts, each of which shall be deemed an
original and shall bind the signatory, but all of which together shall
constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto executed the fore-going Agreement
and Plan of Reorganization as of the day and year first above written.
PURCHASER: Executive Marketing, Inc.
By /s/ Lynn Dixon, President
SHAREHOLDERS: /s/ Gerald Green, Individually
/s/ Patricia M. Green, Individually
Bagshaw, Ltd.
A British Virgin Islands Corporation
By
Its
/s/ Gerald Green, Trustee of the Aaron Green
Irrevocable Trust under Agreement dated October 2, 1996
<PAGE>
/s/ M. Patricia Green, Trustee of the Sarah Green
Irrevocable Trust under Agreement dated October 2, 1996
/s/ M. Patricia Green, Trustee of the Sophie Green
Irrevocable Trust under Agreement dated October 2, 1996.
/s/ Abraham Salaman, Individually
Meadow Brook Investments, LTD.
By /s/
Its By Power of Attorney
J.S.N. Capital Inc.
By /s/ David Cohen
Its Pres.
PRIVATE COMPANY: Total Media Corporation
By /s/ Gerald Green, President
<PAGE>
SCHEDULE "A"
TO THE
AGREEMENT AND PLAN OF REORGANIZATION
<TABLE>
<CAPTION>
NO. OF SHARES OF NO. OF SHARES OF
NAME OF THE PRIVATE COMPANY THE PURCHASER
SHAREHOLDER TO BE TRANSFERRED TO BE ISSUED
- ----------- ------------------- -----------------
<S> <C> <C>
Gerald Green 43.75 437,500
Patricia M. Green 43.75 437,500
Bagshaw, Ltd. 25 250,000
Gerald Green, Trustee of the
Aaron Green Irrevocable Trust
under agreement dated
October 2, 1996 12.5 125,000
M. Patricia Green, Trustee of the
Sarah Green Irrevocable Trust
under Agreement dated
October 2, 1996 12.5 125,000
M. Patricia Green, Trustee of the
Sophie Green Irrevocable Trust
under Agreement dated
October 2, 1996 12.5 125,000
Abraham Salaman 75 750,000
Meadow Brook Investments, LTD 37.5 375,000
J.S.N Capital Group 37.5 375,000
----- ---------
TOTALS 300 3,000,000
===== =========
</TABLE>
<PAGE>
EXHIBIT 6.2
PROMISSORY NOTE
December 15, 1998 Amount $50,000.00
FOR VALUE RECEIVED, the undersigned, Total Film Group, 9107 Wilshire Blvd, Suite
475, Beverly Hills, Ca. 90210 ("Maker") promises to pay to the order of
Merchants T&F, 445 Fifth Avenue, New York, NY 10016 ("Payee"), the principal sum
of Fifty Thousand Dollars ($50,000), on or before February 18, 1999.
In the event of a failure of the undersigned to make any payment due hereunder
as and when due, Payee shall have the right to take all action necessary to
collect said payment from the undersigned and the undersigned agrees to pay all
costs of such collection, including, without limitation, reasonable attorney's
fees. The undersigned waives presentment, demand and protest, and all notices
thereto.
By: /s/ Gerald Green, President
Total Film Group, Inc.
<PAGE>
EXHIBIT 6.3
Total Film Group, Inc.
February 9, 1999
The Orbiter Fund
980 Post Road East
Westport, CT 06880
Re: Two Million Dollar Bridge Loan
Dear Orbiter Fund:
This letter is to confirm our agreement in which The Orbiter Fund (the
"FUND") and Total Film Group ("TFG") hereby agree as follows:
The FUND hereby agrees to loan to TFG and TFG hereby agrees to borrow from
the FUND up to two million dollars ($2,000,000) on the following terms and
conditions:
1. Interest shall accrue at the rate of 13.5% per year, payable
quarterly, beginning three months following the date of the first
advance and continuing the same date of each third month thereafter;
2. Principal shall be payable at the rate of $375,000 every three months
beginning three months following the date of the first advance and
continuing on the same date of each third month thereafter until one
year following the date of the first advance, at which time the
balance of principal and accrued interest shall be due and payable;
3. This loan may be prepaid in full or in part anytime without penalty.
4. FUND hereby agrees to pay to TFG the funds as follows:
(A) On or before February 12, 1999, the sum of $1,000,000; and
(B) The balance of $1,000,000 on or before March 15, 1999.
5. As additional consideration for the loan, TFG hereby agrees to grant
to FUND 250,000 warrants for the purchase of TFG shares of common
stock at the price of $2.00 per share, exercisable for three years, on
the terms and conditions set forth on the attached Exhibit A.
<PAGE>
6. TFG agrees to execute and deliver to the FUND such additional
documents as the fund may reasonably request in order to reflect the
terms and conditions of this loan.
Please indicate your agreement to the foregoing by signing and returning
the enclosed copy of this letter.
Thank you.
Sincerely,
TOTAL FILM GROUP
By: /s/ Gerald Green, President
AGREED TO AND ACCEPTED
This 15th day of February, 1999
THE ORBITER FUND
By: /s/ Michael Lauer
Title Investment Manager
<PAGE>
TOTAL FILM GROUP, INC.
9107 Wilshire Boulevard
Suite 475
Beverly Hills, CA 90210
February 12, 1999
The Orbiter Fund
980 Post Road East
Westport, CT 06880
Re: Two Million Dollar Bridge Loan - Supplement to Letter Agreement Dated
February 8, 1999
Dear Orbiter Fund:
This letter is to supplement our earlier agreement dated February 9, 1999,
in which The Orbitor Fund, Ltd. ("FUND") agreed to Total Film Group, Inc.
("TFG") $2,000,000 (the "Agreement"). The FUND and TFG hereby supplement the
Agreement as follows:
1. At such time as TFG receives the first $1,000,000, TFG hereby agrees
to issue to the FUND 125,000 warrants for the purchase of 125,000 TFG
shares of common stock at the price of $2.00 per share, exercisable
for three years, on the terms and conditions set forth on the attached
Exhibit A, the Unanimous Consent in lieu of Special Meeting of the
Board of Directors of TFG. Exhibit A is also intended to be the
Exhibit A referred to in the Agreement.
2. At such time as TFG receives the second million dollars, TFG hereby
agrees to grant to FUND 125,000 additional warrants for the purchase
of 125,000 shares of TFG shares of common stock at the price of $2.00
per share, exercisable for three years on the terms and conditions set
forth on the attached Exhibit A.
3. The FUND hereby represents and warrants to TFG that it is an
"accredited investor" as the term is defined in Rule 501 under
Regulation D issued under the Securities Act of 1933. Attached as
Exhibit B is an excerpt from Rule 501 showing the definition of
accredited investor.
4. TFG agrees to deliver to the FUND a promissory note in substantially
the form of the attached Exhibit C on the receipt of the first advance
of part or all of the $2,000,000. The parties agree that interest will
only accrue on the amount of money actually advanced by FUND. If less
than the $2,000,000 is actually advanced, then the amount of the
quarterly payments of principal will be reduced proportionately.
5. Except as provided above, the Agreement remains in full force and
affect.
<PAGE>
Please indicate your agreement to the foregoing by signing and returning
the enclosed copy of this letter.
Sincerely,
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green, President
AGREED TO AND ACCEPTED
This 10th day of February, 1999
THE ORBITER FUND, LTD.
By: /s/ Michael Lauer, Investment Manager
Name/Title
<PAGE>
Total Film Group
August 11, 1999
Mr. Michael Lauer
The Orbiter Fund
475 Steamboat Road
1st Floor
Greenwich, CT 46830
Dear Michael,
I sincerely wish to apologize for the delay and my confusion regarding the
payment due on the Orbiter Fund bridge loan to Total Film Group (TFG).
If acceptable to you, I would request an extension of the loan with the
following modification of the agreement terms:
1. TFG will immediately cause to be issued to the Orbiter Fund 250,000
shares of stock in consideration for your approval of the extension.
2. $750,000 plus accrued interest will be paid on or before Sept. 30,
1999.
All other terms of our agreement which were documented in you letter to us
February 9, 1999, will remain unchanged.
Please indicate your agreement to the foregoing by signing below and
returning an executed copy of this letter by fax as soon as possible.
Sincerely,
/s/ Gerald Green /s/ Michael Lauer, The Orbiter Fund
Chairman & CEO
<PAGE>
EXHIBIT 6.4
PROMISSORY NOTE
February 10, 1999 Los Angeles, California $2,000,000
For value received, the undersigned, TOTAL FILM GROUP, INC., 9107 Wilshire
Boulevard, Suite 475, Beverly Hills, California 90210 ("MAKER") promises to pay
to the order of THE ORBITER FUND, LTD., 980 Post Road East, Westport,
Connecticut 06880 ("PAYEE") the sum of $2,000,000 plus interest at the rate of
13.5% per year payable quarterly, beginning three months following the date
first set forth above and continuing on the same date of each third month
thereafter, the sum of $375,000 plus interest accrued to such date, up to and
including one year following the date of this note, at which time the balance of
principal and accrued interest shall be due and payable. This note may be
prepaid in full or in part anytime without penalty. This note is also subject to
the terms of that certain letter agreement dated February 8, 1999 and supplement
dated February 12, 1999.
If the undersigned fails to make any payment due hereunder within five days
following receipt of written notice, payee shall have the right to take all the
action necessary to collect said payment. In such event, the undersigned agrees
to pay all reasonable costs of such collection, including, without limitation
reasonable attorney's fees. The undersigned waives presentment, demand, protest
and all notices thereto.
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green, President
<PAGE>
EXHIBIT 6.5
TOTAL FILM GROUP, INC.
(A Delaware Corporation)
WARRANT CERTIFICATE
WARRANT NUMBER: A-1 NUMBER OF WARRANTS: 125,000
FOR VALUE RECEIVED, Total Film Group, Inc. (the "Company"), a Delaware
corporation, hereby certifies that The Orbiter Fund, a _______________
corporation, the registered holder hereof, or registered assigns ("Holder") is
entitled to purchase subject to the terms and conditions hereinafter set forth
at any time on or before 5:00 p.m., Central time on February 7, 2002 (the
"Expiration Date"), and not thereafter one (1) share of the common stock
("Common Stock") of the Company for each one (1) Warrant exercised, at a price
of $2.00 per share of Common Stock (the "Warrant Price"), and receive a
certificate(s) for the Common Stock so purchased, upon presentation and
surrender to the transfer agent for the Company, with the form or subscription
duly executed, and accompanied by payment of the purchase price of each share
purchased, either in cash or by certified check or bank draft, payable to the
order of the Company. Fractional shares of the Company's Common Stock will not
be issued upon the exercise of the Warrant.
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE ACT OR THE
LAWS OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT THAT THE SALE OR
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND SUCH STATE STATUTES.
The Company covenants and agrees that all shares of Common Stock which may
be delivered upon the exercise of this Warrant will, upon delivery, be free from
all taxes, liens and charges with respect to the purchase thereof hereunder.
This Warrant shall not be exercised by Holder in any state where such exercise
would be unlawful such as a state in which the Company's Common Stock is not
registered. The Company will not attempt to qualify the shares represented by
this Warrant for sale in jurisdictions where holders of the Company's Warrants
reside, unless done as a part of the initial registration of its securities.
The number of shares of Common Stock purchasable upon the exercise of this
Warrant and the purchase price shall be subject to adjustment from time to time
as set forth herein.
<PAGE>
The Company agrees at all times to reserve or hold available a sufficient
number of shares of its Common Stock to cover the number of shares issuable upon
the exercise of this and all other Warrants of like tenor then outstanding.
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company, or to any other rights whatsoever except
the rights herein set forth, and no dividend shall be payable to accrue in
respect to this Warrant or the interest represented hereby, or the shares
purchasable hereunder, until or unless, and except to the extent that this
Warrant shall be exercised, and the Common Stock purchasable upon exercise
thereof shall become deliverable.
The Warrants are redeemable by the Company at any time prior to the
Expiration Date on not less than thirty (30) days prior written notice, at a
redemption price of $.01 per Warrant, provided that prior to the redemption the
closing price of the Common Stock issuable upon exercise of a Warrant shall
equal or exceed $2.25 per share for twenty (20) business days within any period
of thirty (30) consecutive business days ending within ten (10) days preceding
the written notice. If the Company shall elect to redeem Warrants, notice of
redemption shall be given to the holders of all outstanding Warrants to whom the
redemption shall apply by mailing by first-class mail a notice of such
redemption, not less than thirty (30) nor more than sixty (60) days prior to the
date fixed for redemption, to their last addresses as they shall appear upon the
registry books, but failure to give such notice by mailing to the holder of any
Warrants, or any defect therein, shall not affect the legality or validity of
the proceedings for the redemption of any other Warrants. The notice of
redemption to each holder of Warrants shall specify the date fixed for
redemption and the redemption price at which Warrants are to be redeemed, and
shall state that payment of the redemption price of the Warrants will be made at
the office of the Company upon presentation and surrender of such Warrants, and
shall also state that the right to exercise the Warrants so redeemed will
terminate as provided in this Agreement (stating the date of such termination)
and shall state the then current Warrant Price. If the giving of notice of
redemption shall have been completed as above provided, and if funds sufficient
for the redemption of the Warrants shall have been deposited with the Company
for such purpose, the right to exercise the Warrants shall terminate at the
close of business on the business day proceeding the date fixed for redemption,
and the holder of each Warrant shall thereafter be entitled upon surrender of
his Warrants only to receive the redemption price thereof, without interest.
This Warrant is exchangeable upon the surrender hereof by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder, each of such
new Warrants to represent the right to purchase such number of shares as many be
designated by the registered owner at the time of such surrender.
The Company may deem and treat the Holder at any time as the absolute owner
hereof for all purposes and shall not be affected by any notice to the contrary.
The issuance of this Warrant is subject to the following conditions:
<PAGE>
(1) If the Company shall at any time subdivide its outstanding shares of
Common Stock by recapitalization, reclassification or split-up thereof, or if
the Company shall declare a stock dividend or distribute shares of Common Stock
to its stockholders, the number of shares of Common Stock purchasable upon
exercise of this Warrant immediately prior to such subdivision shall be
proportionately increased in each instance, and if the Company shall at any time
combine the outstanding shares of Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased in each instance.
(2) If the Company shall distribute to all of the holders of its shares of
Common Stock any security (except as provided in the preceding paragraph) or
other assets (other than a distribution made as a dividend payable out of
earnings or out of any earned surplus legally available for dividends under the
laws of the jurisdiction of incorporation of the Company), the Board of
Directors shall be required to make such equitable adjustment in the Warrant
Price in effect immediately prior to the record date of such distribution as may
be necessary to preserve to the Holder of this Warrant rights substantially
proportionate to those enjoyed hereunder by such Holder immediately prior to the
happening of such distribution. Any such adjustment shall become effective as of
the day following the record date for such distribution.
(3) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is required to be adjusted as provided in the Warrant
Agency Agreement, the Warrant Price shall be adjusted (to the nearest cent) in
each instance by multiplying such Warrant Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of the Warrants immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
(4) In case of any reclassification of the outstanding shares of Common
Stock, other that a change covered by paragraph (1) above or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
that a consolidation merger in which the Company is the continuing corporation
and which does not result in any reclassification or capital reorganization of
the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expirations of the respective rights of exercise of the Warrant) to receive upon
the exercise thereof, for the same aggregate Warrant Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of the Warrants immediately prior to
such event; and if any classification also results in a change in shares of
Common Stock covered by paragraph (1) above, then such adjustment shall be made
pursuant to both paragraph (1) above and this paragraph (4). The provisions of
this paragraph (4) shall similarly apply to successive reclassifications, or
capital reorganizations, mergers or consolidations, sales or other transfers.
<PAGE>
(5) In case of the dissolution, liquidation or winding-up of the Company,
all rights under any of the Warrants not redeemed or expired by their terms
shall terminate on a date fixed by the Company, such date so fixed to be not
earlier than the date of the commencement of the proceedings for such
dissolution, liquidation or winding-up and not later than thirty (30) days after
such commencement date. Notice of such termination or purchase rights shall be
given to the registered Holder of this Warrant as the same shall appear on the
books of the Company, by certified or registered mail at least thirty (30) days
prior to such termination date.
(6) In case the Company shall, at any time prior to the Expiration Date of
the Warrants, and prior to the exercise thereof, offer to the holders of its
Common Stock any right to subscribe for additional shares of any class of the
Company, then the Company shall give written notice thereof to the registered
Holder of this Warrant not less than thirty (30) days prior to the date on which
the books of the Company are closed or a record date fixed for the determination
of stockholders entitled to such subscription rights. Such notice shall specify
the date as to which the books shall be closed or record date be fixed with
respect to such offer or subscription, and the right of the holders to
participate in such offer or subscription shall terminate if this Warrant shall
not be exercised on before the date of such closing of the books or such record
date.
(7) If the Company after the date hereof shall take any action affecting
the shares of its Common Stock, other than that action described above, which,
in the opinion of the Board of Directors of the Company, would materially affect
the rights of the Holder of this Warrant or the Warrant Price, the number of
shares of Common Stock purchasable on exercise of this Warrant shall be adjusted
in each instance and at such time as the Board of Directors of the Company, in
good faith, may determine to be equitable under the circumstances.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by its
duly authorized officer this 24 day of February 1999.
Total Film Group, Inc.
By /s/ Gerald Green, President
ATTEST:
/s/ Eli Boyer, Secretary
<PAGE>
ASSIGNMENT FORM
(To be executed by the registered Holder to effect a
Transfer of the Within Warrant)
For Value Received ___________________ hereby sells, assigns, and transfer unto
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including
postal zip code of assignee)
this Warrant and the rights represented thereby to purchase Common Stock in
accordance with the terms and conditions thereof, and does hereby irrevocable
constitute and appoint ______________ attorney to transfer this Warrant on the
books of the Company with full power of substitution.
Date: _________________ Signed __________________________
<PAGE>
SUBSCRIPTION FORM
(To Be Executed by the Registered Holder to Exercise The Rights
To Purchase Common Stock Evidenced By The Within Warrant)
The undersigned hereby irrevocably subscribes for ___________ shares of the
Common Stock of Total Film Group, Inc., pursuant and in accordance with the
terms and conditions of the Warrant and hereby makes payment of $___________
therefor, and requests that certificate(s) for such shares be issued in the name
of the undersigned and be delivered to the address stated below, and if such
number of shares shall not be all of the shares purchasable hereunder, that a
new Warrant of like tenor for the balance of the remaining shares purchasable
hereunder be delivered to the undersigned at the address stated below:
Date: _________________ Signed __________________________
SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED
NATIONAL STOCK EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK), OR A TRUST
COMPANY. THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE WARRANT. IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
<PAGE>
EXHIBIT 6.6
Capital Research Ltd
27241 Paseo Peregrino
San Juan Capistrano, CA 92675
Tel (949) 661-6218
Fax (949) 661-6260
September 10, 1999
Mr. Gerald Green
Chairman & CEO
Total Film Group
9107 Wilshire Blvd.
Suite 475
Beverly Hills, CA 90210
Dear Gerald
Jim Kelly, my partner and I have developed this comprehensive proposal on how
Capital Research can be an extension of Total Film Group in the capital markets
and assist the Management in the development and evaluation of a fundamentally
structured capital formation plan.
We are a results-driven firm that focuses on assisting our clients in achieving
their financial goals through the public markets, initially in your case, the
electronic bulletin board.
As such, Capital Research hereby proposes to assist the management of Total Film
Group related to:
1. Detailed review of the current financial condition of Total Film Group.
2. Assisting management in the development of a fundamentally structured
capital formation plan.
3. Assist in the signup of market makers who will trade the Company's stock on
the electronic bulletin board. Jim's firm, Shamrock Partners, is currently
a market maker in your common stock.
4. Assisting in building the Company's visibility and credibility with
investors and the media.
5. Providing guidance and support relating to the potential of listing on one
of the national exchanges such as the American Stock Exchange or NASDAQ.
6. Review the possibility of obtaining a research report on the Company that
will incorporate Company background, recent event, investment
consideration, Company statistics, financial model, market potential,
market analysis and recommendation.
<PAGE>
7. Assist in the sale of equity and or debt to fund operations of the Company
and Total Creative, Inc.
Our main focus initially will be the sale of between $1-2 million of equity and
or debt to fund the immediate requirement for working capital to fund the growth
of Total Creative.
In return for the above services Total Film Group agrees to compensate Capital
Research as follows:
- - $3,000 per month retainer paid on the fifteenth day of the month beginning
September 15, 1999. We will commit fifteen hours per month and any hour
over fifteen per month will be invoiced at $200 per hour.
- - Actual our-of-pocket expenses for travel, telephone, printing, and
administrative expenses.
- - 7% success fee on the gross proceeds of all funds raised for debt and or
equity sales. Additional, Capital Research will be granted 50,000 five year
warrants for each $1 million raised, priced at the warrant and or common
issue price to investors.
- - 100,000 five year warrants exercisable at $2.50 (today's closing price) of
the Company's common stock to be issued on the signing of this agreement.
Further Capital Research will be granted 25, 000 warrants on the first day
of each quarter starting December 1, 1999 that services continue to be
performed for Total Film Group. These additional warrants will be priced at
the closing price of the Company's common stock on the date granted and
term of the warrants will be for a five year period.
This agreement may be terminated by either party by providing ninety day written
notice. Compensation under this agreement will survive for an additional two
years for introductions made by Capital Research that result in subsequent sale
of debt or equity.
It is further agreed that Total Film Group will indemnify Capital Research and
its officers in line with standard indemnification agreement accorded these type
of services.
Gerald, I look forward to working with you and your management team in building
a world-class public company to the benefit of you and your shareholders.
Sincerely,
/s/ Bruce D. Cowen
Chairman and CEO
ACCEPTED FOR TOTAL FILM GROUP, INC.
/s/ Gerald Green on this date 9/10/99
Chairman and CEO
<PAGE>
EXHIBIT 6.7
TOTAL FILM GROUP, INC.
(A Delaware Corporation)
WARRANT CERTIFICATE
WARRANT NUMBER: A-1 NUMBER OF WARRANTS: 60,000
FOR VALUE RECEIVED, Total Film Group, Inc. (the "Company"), a Delaware
corporation, hereby certifies that CAPITAL RESEARCH LTD., a Delaware
corporation, the registered holder hereof, or registered assigns ("Holder") is
entitled to purchase subject to the terms and conditions hereinafter set forth
at any time, or from time to time, on or before 5:00 p.m., Mountain time on
September 21. 2004 (the "Expiration Date"), and not thereafter one (1) share of
the common stock ("Common Stock") of the Company for each one (1) Warrant
exercised, at a price of $2.25 per share of Common Stock (the "Warrant Price"),
and receive a certificate(s) for the Common Stock so purchased, upon
presentation and surrender to the transfer agent for the Company, with the form
or subscription duly executed, and accompanied by payment of the purchase price
of each share purchased, either in cash or by certified check or bank draft,
payable to the order of the Company. Fractional shares of the Company's Common
Stock will not be issued upon the exercise of the Warrant.
THESE WARRANTS HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR SOLD IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER THE ACT OR THE
LAWS OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE LETTER FROM THE
SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT THAT THE SALE OR
TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND SUCH STATE STATUTES.
The Company covenants and agrees that all shares of Common Stock which may
be delivered upon the exercise of this Warrant will, upon delivery, be free from
all taxes, liens and charges with respect to the purchase thereof hereunder.
This Warrant shall not be exercised by Holder in any state where such exercise
would be unlawful such as a state in which the Company's Common Stock is not
registered. The Company will not attempt to qualify the shares represented by
this Warrant for sale in jurisdictions where holders of the Company's Warrants
reside, unless done as a part of the initial or a subsequent registration of its
securities.
The number of shares of Common Stock purchasable upon the exercise of this
Warrant and the purchase price shall be subject to adjustment from time to time
as set forth herein.
<PAGE>
The Company agrees at all times to reserve or hold available a sufficient
number of shares of its Common Stock to cover the number of shares issuable upon
the exercise of this and all other Warrants of like tenor then outstanding.
This Warrant does not entitle the Holder to any voting rights or other
rights as a shareholder of the Company, or to any other rights whatsoever except
the rights herein set forth, and no dividend shall be payable to accrue in
respect to this Warrant or the interest represented hereby, or the shares
purchasable hereunder, until or unless, and except to the extent that this
Warrant shall be exercised, and the Common Stock purchasable upon exercise
thereof shall become deliverable.
This Warrant is exchangeable upon the surrender hereof by the Holder to the
Company for new Warrants of like tenor and date representing in the aggregate
the right to purchase the number of shares purchasable hereunder. Each of such
new Warrant certificate shall represent the right to purchase such number of
shares as may be designated by the registered owner at the time of such
surrender, provided that the aggregate of such new Warrant certificates shall
not exceed the total number of shares represented by the this Warrant.
The Company may deem and treat the Holder at any time as the absolute owner
hereof for all purposes and shall not be affected by any notice to the contrary.
The issuance of this Warrant is subject to the following conditions:
(1) If the Company shall at any time subdivide its outstanding shares of
Common Stock by recapitalization, reclassification or split-up thereof, or if
the Company shall declare a stock dividend or distribute shares of Common Stock
to its stockholders, the number of shares of Common Stock purchasable upon
exercise of this Warrant immediately prior to such subdivision shall be
proportionately increased in each instance, and if the Company shall at any time
combine the outstanding shares of Common Stock by recapitalization,
reclassification or combination thereof, the number of shares of Common Stock
purchasable upon exercise of this Warrant immediately prior to such combination
shall be proportionately decreased in each instance.
(2) If the Company shall distribute to all of the holders of its shares of
Common Stock any security (except as provided in the preceding paragraph) or
other assets (other than a distribution made as a dividend payable out of
earnings or out of any earned surplus legally available for dividends under the
laws of the jurisdiction of incorporation of the Company), the Board of
Directors shall be required to make such equitable adjustment in the Warrant
Price in effect immediately prior to the record date of such distribution as may
be necessary to preserve to the Holder of this Warrant rights substantially
proportionate to those enjoyed hereunder by such Holder immediately prior to the
happening of such distribution. Any such adjustment shall become effective as of
the day following the record date for such distribution.
(3) Whenever the number of shares of Common Stock purchasable upon the
exercise of this Warrant is required to be adjusted, the Warrant Price shall be
adjusted (to the nearest cent) in each instance by multiplying such Warrant
Price immediately prior to such adjustment by a
<PAGE>
fraction (x) the numerator of which shall be the number of shares of Common
Stock purchasable upon the exercise of the Warrants immediately prior to such
adjustment, and (y) the denominator of which shall be the number of shares of
Common Stock so purchasable immediately thereafter.
(4) In case of any reclassification of the outstanding shares of Common
Stock, other that a change covered by paragraph (1) above or which solely
affects the par value of such shares of Common Stock, or in the case of any
merger or consolidation of the Company with or into another corporation (other
that a consolidation merger in which the Company is the continuing corporation
and which does not result in any reclassification or capital reorganization of
the outstanding shares of Common Stock), or in the case of any sale or
conveyance to another corporation of the property of the Company as an entirety
or substantially as an entirety in connection with which the Company is
dissolved, the Holder of this Warrant shall have the right thereafter (until the
expirations of the respective rights of exercise of the Warrant) to receive upon
the exercise thereof, for the same aggregate Warrant Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property receivable upon such reclassification, capital
reorganization, merger or consolidation, or upon the dissolution following any
sale or other transfer, which a holder of the number of shares of Common Stock
of the Company would obtain upon exercise of the Warrants immediately prior to
such event; and if any classification also results in a change in shares of
Common Stock covered by paragraph (1) above, then such adjustment shall be made
pursuant to both paragraph (1) above and this paragraph (4). The provisions of
this paragraph (4) shall similarly apply to successive reclassifications, or
capital reorganizations, mergers or consolidations, sales or other transfers.
(5) In case of the dissolution, liquidation or winding-up of the Company,
all rights under any of the Warrants not redeemed or expired by their terms
shall terminate on a date fixed by the Company, such date so fixed to be not
earlier than the date of the commencement of the proceedings for such
dissolution, liquidation or winding-up and not later than thirty (30) days after
such commencement date. Notice of such termination or purchase rights shall be
given to the registered Holder of this Warrant as the same shall appear on the
books of the Company, by certified or registered mail at least thirty (30) days
prior to such termination date.
(6) In case the Company shall, at any time prior to the Expiration Date of
the Warrants, and prior to the exercise thereof, offer to the holders of its
Common Stock any right to subscribe for additional shares of any class of the
Company, then the Company shall give written notice thereof to the registered
Holder of this Warrant not less than thirty (30) days prior to the date on which
the books of the Company are closed or a record date fixed for the determination
of stockholders entitled to such subscription rights. Such notice shall specify
the date as to which the books shall be closed or record date be fixed with
respect to such offer or subscription, and the right of the holders to
participate in such offer or subscription shall terminate if this Warrant shall
not be exercised on before the date of such closing of the books or such record
date.
(7) If the Company after the date hereof shall take any action affecting
the shares of its Common Stock, other than that action described above, which,
in the opinion of the Board of Directors of the Company, would materially affect
the rights of the Holder of this Warrant or the Warrant Price, the number of
shares of Common Stock purchasable on exercise of this Warrant
<PAGE>
shall be adjusted in each instance and at such time as the Board of Directors of
the Company, in good faith, may determine to be equitable under the
circumstances.
(8) Following receipt of the written notice of intention to exercise this
Warrant, the Company shall take such steps as it deems appropriate to permit
exercise of the Warrant as specified in the notice and to issue such shares of
Common Stock pursuant to a valid exemption from registration or qualification
under applicable federal and state securities laws; PROVIDED, that in no event
shall the Company be required to consent to the general service of process or to
qualify as a foreign corporation in any jurisdiction where the Warrant Holder
resides if such jurisdiction is different than such Warrant Holder's residence
when the Warrant was originally issued. In order to comply with exemptions from
the registration requirements of the Act and certain state securities statutes,
the Company may require the Holder of this Warrant to make certain
representations and execute and deliver to the Company certain documents as a
condition to exercise of conversion rights hereunder, all in form and substance
satisfactory to the Company as determined in its sole discretion. In the event
the Company reasonably determines that the Warrant cannot be exercised in
compliance with applicable federal and state securities laws in the absence of
registration or qualification under such statutes, the Company shall be under no
obligation to permit exercise of the Warrant and issue any shares of common
stock pursuant hereto. The Company shall utilize its best efforts to qualify
such shares for sale under the applicable state laws in those jurisdictions in
which the Holder of the Warrant resides at the time of conversion. If,
notwithstanding such efforts to qualify such shares for sale in such state, the
Company is unable to so qualify such shares for sale in such state, the shares
delivered shall be subject to applicable restrictions on their transfer under
the laws of such state or, if no exemption from registration is available, this
Warrant shall not be exercisable.
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed by
its duly authorized officer this 21st day of September, 1999.
Total Film Group, Inc.
By /s/ Gerald Green, President
ATTEST:
/s/ Eli Boyer, Secretary
<PAGE>
ASSIGNMENT FORM
(To be executed by the registered Holder to effect a
Transfer of the Within Warrant)
For Value Received ___________________ hereby sells, assigns, and transfer unto
- --------------------------------------------------------------------------------
(Please print or typewrite name and address, including
postal zip code of assignee)
this Warrant and the rights represented thereby to purchase Common Stock in
accordance with the terms and conditions thereof, and does hereby irrevocable
constitute and appoint ___________ attorney to transfer this Warrant on the
books of the Company with full power of substitution.
Date: ________________ Signed __________________________
<PAGE>
SUBSCRIPTION FORM
(To Be Executed by the Registered Holder to Exercise The Rights
To Purchase Common Stock Evidenced By The Within Warrant)
The undersigned hereby irrevocably subscribes for ___________ shares of the
Common Stock of Total Film Group, Inc., pursuant and in accordance with the
terms and conditions of the Warrant and hereby makes payment of $___________
therefor, and requests that certificate(s) for such shares be issued in the name
of the undersigned and be delivered to the address stated below, and if such
number of shares shall not be all of the shares purchasable hereunder, that a
new Warrant of like tenor for the balance of the remaining shares purchasable
hereunder be delivered to the undersigned at the address stated below:
Date: ________________ Signed __________________________
SIGNATURE(S) MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER OF A REGISTERED
NATIONAL STOCK EXCHANGE, OR BY A BANK (OTHER THAN A SAVINGS BANK), OR A TRUST
COMPANY. THE SIGNATURE TO THIS SUBSCRIPTION FORM MUST CORRESPOND WITH THE NAME
AS WRITTEN UPON THE FACE OF THE WARRANT. IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT, OR ANY CHANGE WHATSOEVER.
<PAGE>
EXHIBIT 6.8
TOTAL FILM GROUP, INC.
TERM SHEET
Instrument & Amount $2 million convertible note
Interest Rate 12% simple interest payable quarterly
Term Six months or the earlier of raising of equity of
which 50% of each raise on an as received basis will
be used to repay note
Convertibility $2.00 per share at option of Lender prior to maturity
Equity Kicker 250,000 unregistered common shares
Event of Default 1. Upon event of default, the convertibility price
will be lowered to $1.50 per share
2. Each quarter that default exists, Lender will be
issued an additional 85, 000 shares
Fee 7% cash fee to be paid at closing on gross amount of
proceeds received payable to Capital Research Ltd.,
plus 100,000 five year warrants priced at $2.25 per
share
<TABLE>
<S> <C>
Participants & Amount Lancer Group, Inc. $1,000,000
Lancer Offshore, Inc. 800,000
Bruce Cowen 50,000
James Kelly 50,000
Capital Research, Ltd. 50,000
Martin Garvey 50,000
----------
$2,000,000
</TABLE>
Additional Terms Closing subject to approval of Total Film Group's
Board of Directors.
On behalf of Lender /s/ Michael Lauer on this date 9/21/99
Accepted on behalf of Total Film Group, Inc. /s/ Gerald Green
on this date 9/21/99
<TABLE>
<S> <C> <C>
1st Payment $1,200,000 September 1999
2nd Payment 800,000 October 1999
----------
Total $2,000,000
</TABLE>
<PAGE>
EXHIBIT 6.9
Date: Sept. 21, 1999
Amount: $__________
TOTAL FILM GROUP, INC.
SERIES A CONVERTIBLE PROMISSORY NOTE
---------------
Convertible into
Common Stock
of
Total Film Group, Inc.
(A Delaware Corporation)
---------------
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE. THESE
SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE TRANSFERRED OR
SOLD IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OR OTHER COMPLIANCE UNDER
THE ACT OR THE LAWS OF THE APPLICABLE STATE OR A "NO ACTION" OR INTERPRETIVE
LETTER FROM THE SECURITIES AND EXCHANGE COMMISSION OR AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE ISSUER, AND ITS COUNSEL, TO THE EFFECT THAT
THE SALE OR TRANSFER IS EXEMPT FROM REGISTRATION UNDER THE ACT AND SUCH STATE
STATUTES.
---------------
Total Film Group, Inc., a corporation duly organized and existing
under the laws of the State of Delaware (hereinafter referred to as the
"Maker"), for value received, hereby promises to pay to the following
registered holder hereof at the address stated,
*
the principal sum of ______ dollars ($_____) in such lawful money of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts, on the terms and at the time
hereinafter provided.
This Note is one of a series of notes to be issued by the Maker,
which in the aggregate shall total not more than $2,000,000. This Note is
subject to the following terms and provisions:
1. Payment and Interest. This Note shall be due and payable on or
before six months from the date hereof, except as set forth below. The Maker
shall pay to the holder of this Note simple interest on the principal amount
of this Note at the rate of 12% per annum commencing on
<PAGE>
the date of this Note. If the Maker shall raise equity funds through either a
private or public sale of its equity securities during the term of this Note,
or thereafter if this Note shall not be paid or converted in full, the Maker
shall apply not less than 50% of the net proceeds of such offering or
offerings, toward the payment of this and the other notes of which this Note
is a part. Such funds shall be applied pro rata to this Note and any other
outstanding notes issued in this series.
2. Conversion.
a. Subject to and in compliance with, the provisions
contained herein, the holder of this Note is entitled, at its option, at any
time prior to maturity, or in case this Note or some portion hereof shall
have been called for prepayment prior to such date, then, in respect of this
Note or such portion hereof, until and including, but not after, the close of
business within 10 days of the date of notice of prepayment, to convert this
Note (or any portion thereof), together with accrued but unpaid interest,
into fully paid and nonassessable shares (calculated as to each conversion to
the nearest share) of common stock (the "Shares") of the Maker by surrender
of this Note, duly endorsed (if so required by the Maker) or assigned to the
Maker or in blank, to "Total Film Group, Inc." at its offices, accompanied by
written notice to the Maker, in the form set forth below, that the holder
hereof selects to convert this Note or, if less than the entire amount hereof
is to be converted, the portion hereof to be converted. Such conversion shall
be effected at the rate of one Share for each $2.00 of principal and interest
to be converted; provided, however, that during any continuing Event of
Default as set forth below, the conversion price shall be reduced to $1.50.
No fractions of Shares will be issued on conversion, but instead of any
fractional interest, the Maker will round up such fractional share to the
next whole share.
b. If the Maker shall at any time subdivide its outstanding
shares of common stock by recapitalization, reclassification or split-up
thereof, or if the Maker shall declare a stock dividend or distribute shares
of its common stock to its stockholders, the number of Shares convertible
pursuant to this Note immediately prior to such subdivision shall be
proportionately increased in each instance, and if the Maker shall at any
time combine the outstanding shares of common stock by recapitalization,
reclassification or combination thereof, the number of Shares convertible
pursuant to this Note immediately prior to such combination shall be
proportionately decreased in each instance.
c. Whenever the number of Shares convertible pursuant to
this Note is required to be adjusted, the conversion price shall be adjusted
(to the nearest cent) in each instance by multiplying such conversion price
immediately prior to such adjustment by a fraction (x) the numerator of which
shall be the number of Shares purchasable upon the conversion of this Note
immediately prior to such adjustment, and (y) the denominator of which shall
be the number of Shares so convertible immediately thereafter.
3. Prepayment. This Note is subject to prepayment, in whole or in
part, at any time upon not less than 10 days notice by certified or
registered mail at the election of the Maker. Prepayment shall be effected by
paying the amount equal to the outstanding principal amount of this Note,
plus all interest accrued but unpaid to the date of prepayment. During the 10
days following the date of any notice of prepayment, the holder shall have
the right to convert this
<PAGE>
Note to the common stock of the Maker, on the terms and conditions provided
for in paragraph 2 above.
4. Limitations on Right of Conversion. Following receipt of the
written notice of intention to convert the Note, the Maker shall take such
steps as it deems appropriate to permit conversion of the Note as specified
in the notice and to issue such Shares pursuant to a valid exemption from
registration or qualification under applicable federal and state securities
laws; PROVIDED, that in no event shall the Maker be required to consent to
the general service of process or to qualify as a foreign corporation in any
jurisdiction where the Note holder resides if such jurisdiction is different
than such Note holder's residence when the Note was originally issued. In
order to comply with exemptions from the registration requirements of the Act
and certain state securities statutes, the Maker may require the holder of
this Note to make certain representations and execute and deliver to the
Maker certain documents as a condition to exercise of conversion rights
hereunder, all in form and substance satisfactory to the Maker as determined
in its sole discretion. In the event the Maker reasonably determines that the
Note cannot be converted in compliance with applicable federal and state
securities laws in the absence of registration or qualification under such
statutes, the Maker shall be under no obligation to permit conversion of the
Note and issue any shares of common stock pursuant hereto. The Maker shall
utilize its best efforts to qualify such Shares for sale under the applicable
state laws in those jurisdictions in which the holder of the Note resides at
the time of conversion. If, notwithstanding such efforts to qualify such
Shares for sale in such state, the Maker is unable to so qualify such Shares
for sale in such state, the Shares delivered shall be subject to applicable
restrictions on their transfer under the laws of such state or, if no
exemption from registration is available, this Note shall not be convertible.
5. Satisfaction and Discharge of Note. This Note shall cease to be
of further effect (except as to any surviving rights of conversion, transfer,
or exchange of the Note herein expressly provided for) when:
a. The Maker has paid or caused to be paid all sums payable
hereunder by the Maker, including all principal amounts and interest accrued
under the Note, or the Note has been fully converted as set forth above; and
b. All the conditions precedent herein provided for relating
to the satisfaction and discharge of this Note have been complied with.
6. Events of Default. "Event of Default," when used herein, whatever
the reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law pursuant to any judgment,
decree, or order of any court or any order, rule, or regulation of any
administration or government body or be caused by the provisions of any
paragraph herein, means any one of the following events:
a. Default in the payment of any interest on this Note when
it becomes due and payable, and continuance of such default for a period of
30 days; or
<PAGE>
b. Default in the payment of the principal amount of this
Note when due, whether at maturity, upon prepayment, or otherwise; or
c. Default in the performance or breach of any covenant or
warranty of the Maker in this Note (other than a covenant or warranty, the
breach or default in performance of which is elsewhere in this section
specifically dealt with), and continuation of such default or breach for a
period of 30 days after there has been given to the Maker by registered or
certified mail, by the holder of this Note, a written notice specifying such
default or breach and requiring it to be remedied and stating that such
notice is a notice of default hereunder;
d. The entry of a decree or order by a court having
jurisdiction in the premises adjudging the Maker a bankrupt or insolvent
under the Federal Bankruptcy Act or any other applicable federal or state
law, or appointing a receiver, liquidator, assignee, trustee (or other
similar official) of the Maker or of any substantial part of its property ,
or ordering the winding up or liquidation of its affairs, and the continuance
of any such decree or order unstayed and in effect for a period of 60
consecutive days; or
e. The institution by the Maker of proceedings to be
adjudicated a bankrupt or insolvent, or the consent by it to the institution
of bankruptcy or insolvency proceedings against it, or a filing by it of a
petition or answer or consent seeking reorganization or relief under the
Federal Bankruptcy Act or any other applicable federal or state law; or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee (or other similar official) of the
Maker or of any substantial part of its property, or the making by it of any
assignment for the benefit of creditors, or the admission by it in writing of
its inability to pay its debts generally as they become due, or the taking of
corporate action by the Maker in furtherance of any such action.
7. Acceleration of Maturity. If an Event of Default occurs and is
continuing then, in every such case, the holder of this Note may declare the
principal of this Note to be due and payable immediately, by a notice in
writing to the Maker of such default, and upon any such declaration, such
principal shall become immediately due and payable. At such time after such
declaration of acceleration has been made, and before a judgment or decree
for payment of money due has been obtained by the holder, the holder of this
Note, by written notice to the Maker, may rescind and annul such declaration
and its consequences, if all Events of Default, other than the nonpayment of
the principal of this Note which has become due solely by such acceleration,
has been cured or waived. No such rescission shall affect any subsequent
default or impair any right consequent thereon.
8. Penalty for Default. If any Event of Default shall exist on the
last day of any calendar quarter after the date of this Note, the Maker
shall, subject to compliance with state and federal securities laws, issue to
the record holder of this Note 50,000 shares of common stock of the Maker.
The payment of such shares shall not cure any Event of Default and shall be
in addition to any other remedies available to the holder of this Note. If
the Maker shall at any time subdivide its outstanding shares of common stock
by recapitalization, reclassification or split-up thereof, or if the Maker
shall declare a stock dividend or distribute shares of its common stock to
<PAGE>
its stockholders, the number of shares to be issued pursuant to this
paragraph immediately prior to such subdivision shall be proportionately
increased in each instance, and if the Maker shall at any time combine the
outstanding shares of common stock by recapitalization, reclassification or
combination thereof, the number of shares to be issued pursuant to this
Paragraph immediately prior to such combination shall be proportionately
decreased in each instance. Notwithstanding the foregoing, in the event the
Maker reasonably determines that the shares cannot be issued in compliance
with applicable federal and state securities laws in the absence of
registration or qualification under such statutes, the Maker shall be under
no obligation to issue the shares of common stock pursuant hereto.
9. Restrictions. The holder of this Note, by acceptance hereof, both
with respect to the Note and the Shares to be issuable upon conversion of the
Note, or the shares to be issued upon an Event of Default, represents and
warrants as follows:
a. The Note and the shares of common stock are being
acquired for the holder's own account to be held for investment purposes only
and not with a view to, or for, resale in connection with any distribution of
such Note or shares or any interest therein without registration, an
applicable exemption from registration, or other compliance under the Act,
and the holder hereof has no direct or indirect participation in any such
undertaking or in underwriting such an undertaking.
b. The holder hereof has been advised and understands that
the Note and the shares have not been registered under the Act and the Maker
is under no obligation to register the Note and/or the Shares under the Act,
except as set forth in Paragraph 4 hereof.
10. Default Costs. Should the Maker or the holder of this Note
default in any of the covenants, conditions, or promises contained herein,
the defaulting party shall pay all costs and expenses, including a reasonable
attorney's fee, which may arise or accrue therefrom, or in pursuing any
remedy provided hereunder or by the statutes of any state.
11. Rights Are Cumulative. The rights and remedies granted to the
parties hereunder shall be in addition to and cumulative of any other rights
or remedies either may have under any document or documents executed in
connection herewith or available under applicable law. No delay or failure on
the part of a party in the exercise of any power or right shall operate as a
waiver thereof nor as an acquiescence in any default nor shall any single or
partial exercise of any power or right preclude any other or further exercise
thereof or the exercise of any other power or right.
12. Waiver and Amendment. None of the provisions hereof may be
changed, waived, terminated or discharged orally, but only by an instrument
in writing signed by the party against whom enforcement of the change,
waiver, termination or discharge is sought.
13. Notices. All communications provided for herein shall be in
writing and shall be deemed to be given or made when served personally or
when deposited in the United States mail addressed, if to the Maker at 9107
Wilshire Blvd., Suite 475, Beverly Hills, CA 90210, Attention:
<PAGE>
Gerald Green, President, or if to holder of this Note, at the address
furnished to the Maker by such holder, or at such other address as shall be
designated by any party hereto in written notice to the other party hereto
delivered pursuant to this paragraph.
14. Negotiability and Transferability. This Note is negotiable and
transferable, subject to compliance with the provisions of paragraph 9 hereof.
15. Presentment Waiver. The makers, guarantors, and endorsers
hereof, if any, severally waive presentment for payment, protest, and notice
of protest and of nonpayment of this Note.
Total Film Group, Inc.
By /s/ Gerald Green, President
<PAGE>
Total Film Group, Inc.
9107 Wilshire Boulevard
Suite 475
Beverly Hills, CA 90210
Re: Conversion of Note
Gentlemen:
The undersigned owner of this Note hereby irrevocably exercises the
option to convert this Note or the portion hereof designated, into shares of
common stock of Total Film Group, Inc., in accordance with the terms of this
Note, and directs that the shares issuable and deliverable upon the
conversion be issued in the name of and delivered to the undersigned unless a
different name has been indicated below. If shares are to be issued in the
name of a person other than the undersigned, the undersigned will pay any
transfer taxes payable with respect thereto.
Date:
--------------------------------
(Signature)
FILL IN FOR REGISTRATION OF SHARES
- ------------------------- ---------------------------------------
(Printed Name) (Social Security or other
identifying number)
- --------------------------------------------------------------
(Street Address)
- ------------------------------------ ---------------------
(City, State, and ZIP Code) Portion to be converted
(if less than all)
<PAGE>
Schedule of Note Holders
<TABLE>
<CAPTION>
Name and Address Amount
<S> <C>
The Lancer Group $1,000,000
375 Park Avenue, Suite 2006
New York, NY 10152
Lancer Offshore, Inc. $800,000
Kaya Flamboyan 9
Curacao, Netherlands Antilles
Bruce Cowen $50,000
27241 Paseo Peregrino
San Juan Capistrano, CA 92675
James Kelly $50,000
218 4th Avenue
New Town Square, PA 19073
Capital Research, Ltd. $50,000
27241 Paseo Peregrino
San Juan Capistrano, CA 92675
Martin Garvey $50,000
c/o The Lancer Group
375 Park Avenue, Suite 2006
New York, NY 10152
</TABLE>
<PAGE>
EXHIBIT 6.10
Total Film Group, Inc.
Promissory Note Conversion Agreement
This Agreement is entered into today between Total Film Group, Inc. and the
holders of $4 million of its Promissory Notes including The Orbiter Fund or
its designee in the amount of $2 million, Lancer Offshore in the amount of
$1,800,000, Bruce Cowen in the amount of $50,000, James Kelly in the amount
of $50,000, Martin Garvey in the amount of $50,000 and Capital Research Ltd
in the amount of $50,000.
Total Film Group and the above lenders have agreed to a modification of the
existing Agreements to facilitate a conversion into common shares upon the
signing of this Agreement. The modifications are as follows:
- Conversion of the $4 million in Notes 2,936,667 unregistered common
shares of Total Film Group
- Interest accrued Forgiven
- Transaction Fee 2% cash fee payable to
Capital Research Ltd.
The conversion of the Notes does not release Total Film Group from issuing the
shares outstanding from the issuance of the $2 million Convertible Promissory
Notes to Lancer Offshore and others.
On behalf of Lenders: The Orbiter Fund /s/ Michael Lauer
Lancer Offshore /s/ Michael Lauer
Bruce Cowen /s/ Bruce D. Cowen
James Kelly /s/ James Kelly
Capital Research /s/ Bruce D. Cowen
On behalf of Total Film: Gerald Green /s/ Gerald Green
Dated this 28th day of February 2000
<PAGE>
EXHIBIT 6.11
THIS WARRANT AND THE UNDERLYING SHARES OF COMMON STOCK ISSUABLE UPON ITS
EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAWS, AND NO SALE OR TRANSFER
THEREOF MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT OR AN
OPINION OF COUNSEL FOR THE HOLDER, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT AND ANY APPLICABLE STATE
SECURITIES LAWS.
No. W-____
TOTAL FILM GROUP, INC.
Common Stock Purchase Warrant
Total Film Group, Inc., a Delaware corporation (the "Company"),
hereby certifies that, for value received,
________________________________________, or registered permitted assigns, is
entitled, subject to the terms set forth below, to purchase from the Company
at any time or from time to time before 5:30 P.M., Pacific Standard Time, on
November 5,2002, ________________ ( ) shares of fully paid and nonassessable
shares of Common Stock, $.001 par value, of the Company, at a purchase price
per share of $3.75 (such purchase price per share as adjusted from time to
time as herein provided is referred to herein as the "Purchase Price"). The
number and character of such shares of Common Stock and the Purchase Price
are subject to adjustment as provided herein.
This Warrant is one of a series of Common Stock Purchase Warrants
(the "Warrants") evidencing the right to purchase shares of Common Stock of
the Company, issued pursuant to the offering of Warrants made by the Company
and of shares of common stock of Total China, Inc. pursuant to the
Confidential Private Placement Memorandum (the "Offering"), dated October 29,
1999 (the "Memorandum"), a copy of which is on file at the principal office
of the Company. The holder of this Warrant shall be entitled to all of the
benefits of the Offering, as provided therein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include Total Film Group, and any
corporation which shall succeed or assume the obligations of the Company
hereunder.
(b) The term "Common Stock" includes the Company's Common Stock,
$.001 par value per share, as authorized on the date of the Agreement and any
other securities into which or for which any of such Common Stock may be
convened or exchanged pursuant to a plan of recapitalization, reorganization,
merger, sale of assets or otherwise.
<PAGE>
(c) "Current Market Price" shall mean, on any date specified herein,
the average of the daily Market Price during the 10 consecutive trading days
commencing 15 trading days before such date, except that, if on any such date
the shares of Common Stock are not listed or admitted for trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date.
(d) "Market Price" shall mean, on any date specified herein, the
amount per share of the Common Stock, equal to (a) the last reported sale
price of such Common Stock, regular way, on such date or, in case no such
sale takes place on such date, the average of the closing bid and asked
prices thereof, regular way, on such date, in either case as officially
reported on the principal national securities exchange on which such Common
Stock is then listed or admitted for trading, or (b) if such Common Stock is
not then listed of admitted for trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
reported trading price of the Common Stock on such date, or (c) if there
shall have been no trading on such date or if the Common Stock is not so
designated, the average of the closing bid and asked prices of the Common
Stock on such date as shown by the NASD automated quotation system or the
Nasdaq SmallCap Market, or (d) if such Common Stock is not then listed or
admitted for trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof (as of a date which is within
20 days of the date as of which the determination is to be made) determined
in good faith by the Board of Directors of the Company.
(e) "NASD" shall mean the National Association of Securities
Dealers, Inc.
1. Exercise of Warrant.
1.1 This Warrant may be exercised by the Holder hereof, in whole or
in part, at any time or from time to time prior to the expiration date, by
surrendering to the Company at its principal office this Warrant, with the
form of Election to Purchase Shares attached hereto as Exhibit A (or a
reasonable facsimile thereof) duly executed by the holder and accompanied by
payment of the Purchase Price for the number of shares of Common Stock
specified in such form.
1.2 Payment of the Purchase Price may be made as follows (or by any
combination of the following): (i) in United States currency by cash or
delivery of a certified check or bank draft payable to the order of the
Company or by wire transfer to the Company, (ii) by cancellation of such
number of the shares of Common Stock otherwise issuable to the holder upon
such exercise as shall be specified in such Election to Purchase Shares, such
that the excess of the aggregate Current Market Price of such specified
number of shares on the date of exercise over the portion of the Purchase
Price attributable to such shares shall equal the Purchase Price attributable
to the shares of Common Stock to be issued upon such exercise, in which case
such amount shall be deemed to have been paid to the Company and the number
of shares issuable upon such exercise shall be reduced by such specified
number, or (iii) by surrender to the Company for cancellation certificates
representing shares of Common Stock of the Company owned by the holder
(properly endorsed for transfer in blank) having a Current Market Price on
the date of Warrant exercise equal to the Purchase Price.
<PAGE>
1.3 Partial Exercise. This Warrant maybe exercised in part by
surrender of this Warrant in the manner and at the place provided in Section
1.1 except that the amount payable by the holder on such partial exercise
shall be the amount specified by the holder in the form of Election to
Purchase Shares attached hereto as Exhibit A. On any such partial exercise
the Company at its expense will forthwith issue and deliver to or upon the
order of the holder hereof a new Warrant or Warrants of like tenor in the
name of the holder hereof or as such holder (upon payment by such holder of
any applicable transfer taxes) may request, calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock for which such
Warrant or Warrants may still be exercised.
1.4 Trustee for Warrantholders. In the event that a bank or trust
company shall have been appointed as trustee for the holders of the Warrants
pursuant to Section 4.2, such bank or trust company shall have all the powers
and duties of a warrant agent appointed pursuant to Section 12 and shall
accept, in its own name for the account of the Company or such successor
person as may be entitled thereto, all amounts otherwise payable to the
Company or such successor, as the case may be, on exercise of this Warrant
pursuant to this Section 1.
2. Delivery of Stock Certificates. etc. on Exercise. As soon as practicable
after the exercise of this Warrant in full or in part, and in any event
within 10 days thereafter, the Company at its expense (including the payment
by it of any applicable issue taxes) will cause to be issued in the name of
and delivered to the holder hereof, or as such holder (upon payment by such
holder of any applicable transfer taxes and, if requested by the Company,
demonstration by such holder of compliance with applicable securities laws)
may direct, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which such holder shall be entitled
on such exercise, plus, in lieu of any fractional share to which such holder
would otherwise be entitled, cash equal to such fraction multiplied by the
then current market value of one full share, together with any other stock or
other securities and property (including cash, where applicable) to which
such holder is entitled upon such exercise pursuant to Section 1 or otherwise.
3. Adjustment for Dividends in Other Stock. Property. etc.: Reclassification.
etc. In case at any time or from time to time, the holders of Common Stock
shall have received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) shall have become entitled
to receive, without payment therefor,
(a) other or additional stock or other securities or property
(other than cash) by way of dividend, or
(b) any cash (excluding cash dividends payable solely out of
earnings or earned surplus of the Company), or
(c) other or additional stock or other securities or property
(including cash) by way of spin-off, split-up,
reclassification, recapitalization, combination of shares or
similar corporate rearrangement,
<PAGE>
other than additional shares of Common Stock issued as a stock dividend or in
a stock-split (adjustments in respect of which are provided for in Section
5.3), then and in each such case the holder of this Warrant, on the exercise
hereof as provided in Section 1, shall be entitled to receive the amount of
stock and other securities and property (including cash in the cases referred
to in clauses (b) and (c) of this Section 3) which such holder would hold on
the date of such exercise if on the date hereof he had been the holder of
record of the number of shares of Common Stock called for on the face of this
Warrant and had thereafter, during the period from the date hereof to and
including the date of such exercise, retained such shares and all such other
or additional stock and other securities and property (including cash in the
cases referred to in clauses (b) and (c) of this Section 3) receivable by him
as aforesaid during such period, giving effect to all adjustments called for
during such period by Sections 4 and 5.
4. Adjustment for Reorganization. Consolidation. Merger. etc.
4.1 Reorganization. In case at any time or from time to time, the
Company shall (a) effect a reorganization, (b) consolidate with or merge into
any other person or party, or (c) transfer all or substantially all of its
properties or assets to any other person under any plan or arrangement
contemplating the dissolution of the Company, then, in each such case, the
holder of this Warrant, on the exercise hereof as provided in Section 1 at
any time after the consummation of such reorganization, consolidation or
merger or the effective date of such dissolution as the case may be, shall
receive, in lieu of the Common Stock issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and
property (including cash) to which such holder would have been entitled upon
such consummation or in connection with such dissolution, as the case may be,
if such holder had so exercised this Warrant immediately prior thereto, all
subject to further adjustment thereafter as provided in Sections 3 and 5.
4.2 Dissolution. In the event of any dissolution of the Company
following the transfer of all or substantially all of its properties or
assets, the Company, prior to such dissolution, shall at its expense deliver
or cause to be delivered the stock and other securities and property
(including cash, where applicable) receivable by the holders of the Warrants
after the effective date of such dissolution pursuant to this Section 4 to a
bank or trust company having its principal office in New York, New York, as
trustee for the holder or holders of the Warrants.
4.3 Continuation of Terms. Upon any reorganization, consolidation,
merger or transfer (and any dissolution following any transfer) referred to
in this Section 4, this Warrant shall continue in hill force and effect and
the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Warrant after the
consummation of such reorganization, consolidation or merger or the effective
date of dissolution following any such transfer, as the case may be, and
shall be binding upon the issuer of any such stock or other securities,
including, in the case of any such transfer, the person acquiring all or
substantially all of the properties or assets of the Company, whether or not
such person shall have expressly assumed the terms of this Warrant as
provided in Section 6.
5. Adjustment for Issue or Sale of Common Stock at Less Than The Purchase
Price in Effect.
<PAGE>
5.1 General. If the Company shall, at any time or from time to time,
issue any additional shares of Common Stock (other than shares of Common
Stock excepted from the provisions of this Section 5 by Section 5.4) for a
Net Consideration Per Share less than the Purchase Price in effect
immediately prior to such issuance, then, and in each such case:
(a) the Purchase Price shall be lowered to an amount
determined by multiplying such Purchase Price then in effect by a fraction:
(1) the numerator of which shall be (a) the number
of shares of Common Stock outstanding (excluding treasury shares, but
including for this purpose shares of Common Stock issuable upon the exercise
of the Warrants) immediately prior to the issuance of such additional shares
of Common Stock, plus (b) the number of shares of Common Stock which the net
aggregate consideration, if any, received by the Company for the total number
of such additional shares of Common Stock so issued would purchase at the
Purchase Price in effect immediately prior to such issuance, and
(2) the denominator of which shall be (a) the
number of shares of Common Stock outstanding (excluding treasury shares, but
including for this purpose shares of Common Stock issuable upon the exercise
of the Warrants) immediately prior to the issuance of such additional shares
of Common Stock, plus (b) the number of such additional shares of Common
Stock so issued; and
(b) the holder of this Warrant shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive the number
of shares of Common Stock determined by multiplying the number of shares of
Common Stock which would otherwise (but for the provisions of this Section
5.1) be issuable on such exercise by the fraction of which (i) the numerator
is the Purchase price which would otherwise (but for the provisions of this
Section 5.1) be in effect, and (ii) the denominator is the Purchase Price in
effect on the date of such exercise.
5.2 Definitions. etc. For purposes of this Section 5 and
Section 7:
The issuance of any warrants, options or other subscription or
purchase rights with respect to shares of Common Stock and the issuance of
any securities convertible into or exchangeable for shares of Common Stock
(or the issuance of any warrants, options or any rights with respect to such
convertible or exchangeable securities) shall be deemed an issuance at such
time of such Common Stock if the Net Consideration Per Share which may be
received by the Company for such Common Stock (as hereinafter determined)
shall be less than the Purchase Price at the time of such issuance and,
except as hereinafter provided, an adjustment in the Purchase Price and the
number of shares of Common Stock issuable upon exercise of this Warrant shall
be made upon each such issuance in the manner provided in Section 5.1. Any
obligation, agreement or undertaking to issue warrants, options, or other
subscription or purchase rights at any time in the future shall be deemed to
be an issuance at the time such obligation, agreement or undertaking is made
or arises. No adjustment of the Purchase Price and the number of shares of
Common Stock issuable upon exercise of this Warrant shall be made under
Section 5.1 upon the issuance of any shares of Common Stock which are issued
pursuant to the exercise of any warrants, options or
<PAGE>
other subscription or purchase rights or pursuant to the exercise of any
conversion or exchange rights in any convertible securities if any adjustment
shall previously have been made upon the issuance of any such warrants,
options or other rights or upon the issuance of any convertible securities
(or upon the issuance of any warrants, options or any rights therefor) as
above provided. Any adjustment of the Purchase Price and the number of shares
of Common Stock issuable upon exercise of this Warrant with respect to this
Section 5.2 which relates to warrants, options or other subscription or
purchase rights with respect to shares of Common Stock shall be disregarded
if, as, and to the extent that such warrants, options or other subscription
or purchase rights expire or are canceled without being exercised, so that
the Purchase Price effective immediately upon such cancellation or expiration
shall be equal to the Purchase Price that otherwise would have been in effect
at the time of the issuance of the expired or canceled warrants, options or
other subscriptions or purchase rights, with such additional adjustments as
would have been made to that Purchase Price had the expired or canceled
warrants, options or other subscriptions or purchase rights not been issued.
For purposes of this Section 5.2, the "Net Consideration Per Share"
which may be received by the Company shall be determined as follows:
(A) The "Net Consideration Per Share" shall mean the amount
equal to the total amount of consideration, if any, received by the Company
for the issuance of such warrants, options, subscriptions, or other purchase
rights or convertible or exchangeable securities, plus the minimum amount of
consideration, if any, payable to the Company upon exercise or conversion
thereof, divided by the aggregate number of shares of Common Stock that would
be issued if all such warrants, options, subscriptions, or other purchase
rights or convertible or exchangeable securities were exercised, exchanged or
converted.
(B) The "Net Consideration Per Share" which may be received
by the Company shall be determined in each instance as of the date of
issuance of warrants, options, subscriptions or other purchase rights, or
convertible or exchangeable securities without giving effect to any possible
future price adjustments or rate adjustments which may be applicable with
respect to such warrants, options, subscriptions or other purchase rights or
convertible securities.
For purposes of this Sections, if a part or all of the consideration
received by the Company in connection with the issuance of shares of the
Common Stock or the issuance of any of the securities described in this
Section 5 consists of property other than cash, such consideration shall be
deemed to have the same value as shall be determined in good faith by the
Board of directors of the Company.
This Section 5.2 shall not apply under any of the circumstances
described in Section 5.4.
5.3 Extraordinary Events. In the event that the Company shall (i)
issue additional shares of the Common Stock as a dividend or other
distribution on outstanding Common Stock, (ii) subdivide its outstanding
shares of Common Stock, or (iii) combine its outstanding shares of the Common
Stock into a smaller number of shares of the Common Stock, then, in each such
event, the Purchase Price shall, simultaneously with the happening of such
event, be adjusted by multiplying the then Purchase Price by a fraction, the
numerator of which shall be the number of
<PAGE>
shares of Common Stock outstanding immediately prior to such event and the
denominator of which shall be the number of shares of Common Stock
outstanding immediately after such event, and the product so obtained shall
thereafter be the Purchase Price then in effect. The Purchase Price, as so
adjusted, shall be readjusted in the same manner upon the happening of any
successive event or events described herein in this Section 5.3. The holder
of this Warrant shall thereafter, on the exercise hereof as provided in
Section 1, be entitled to receive that number of shares of Common Stock
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this Section 5.3) be issuable on such
exercise by a fraction of which (i) the numerator is the Purchase Price which
would otherwise (but for the provisions of this Section 5.3) be in effect,
and (ii) the denominator is the Purchase Price in effect on the date of such
exercise.
5.4 Excluded Shares. Section 5.1 shall not apply to the (i) issuance
of shares of Common Stock, or options therefor, to directors, officers,
employees, advisors and consultants of the Company on and after the date of
this Warrant pursuant to any stock option, stock purchase, stock ownership or
compensation plan approved by the compensation committee of the Company's
Board of Directors, (ii) issuance of shares of Common Stock upon the exercise
of all options and warrants to purchase Common Stock outstanding as of the
date of this Warrant or upon conversion of debt outstanding as of such date,
and (iii) the issuance of shares of Common Stock upon the exercise of the
warrants issued or issuable pursuant to the Company's Confidential Private
Placement Memorandum dated October 29, 1999, as amended from time to time.
6. No Dilution or Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms of the Warrants, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of
all such action as may be necessary or appropriate in order to protect the
rights of the holders of the Warrants against dilution or other impairment.
Without limiting the generality of the foregoing, the Company (a) will not
increase the par value of any shares of stock receivable on the exercise of
the Warrants above the amount payable therefor on such exercise, (b) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
stock on the exercise of all Warrants from time to time outstanding, and (c)
will not transfer all or substantially all of its properties and assets to
any other person (corporate or otherwise), or consolidate with or merge into
any other person or permit any such person to consolidate with or merge into
the Company (if the Company is not the surviving person), unless such other
person shall expressly assume in writing and will be bound by all the terms
of the Warrants.
7. Accountants' Certificate as to Adjustments. In each case of any adjustment
or readjustment in the shares of Common Stock issuable on the exercise of the
Warrants, the Company at its expense will promptly cause its Treasurer or
Chief Financial Officer or, if the holder of a Warrant so requests,
independent certified public accountants selected by the Company to compute
such adjustment or readjustment in accordance with the terms of the Warrants
and prepare a certificate setting forth such adjustment or readjustment and
showing in
<PAGE>
detail the facts upon which such adjustment or readjustment is based,
including a statement of (a) the consideration received or receivable by the
Company for any additional shares of Common Stock issued or sold or deemed to
have been issued or sold, (b) the number of shares of Common Stock
outstanding or deemed to be outstanding, and (c) the Purchase Price and the
number of shares of Common Stock to be received upon exercise of this
Warrant, in effect immediately prior to such issue or sale and as adjusted
and readjusted as provided in this Warrant. The Company will forthwith mail a
copy of each such certificate to each holder of a Warrant, and will, on the
written request at any time of any holder of a Warrant, furnish to such
holder a like certificate setting forth the Purchase Price at the time in
effect and showing how it was calculated.
8. Notices of Record Date. etc. In the event of
(a) any taking by the Company of a record of the holders of
any class or securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or
any transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Company, or
(d) any proposed issue or grant by the Company of any
shares of stock of any class or any other securities, or any right or option
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities (other than the issue of Common Stock on the
conversion of the Notes and the exercise of the Warrants), then and in each
such event the Company will mail or cause to be mailed to each registered
holder of a Warrant a notice specifying (i) the date on which any such record
is to be taken for the purpose of such dividend, distribution or right and
stating the amount and character of such dividend, distribution or right,
(ii) the date on which any such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation
or winding-up is to take place, and the time, if any is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange
their shares of Common Stock for securities or other property deliverable on
such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up, and (iii) the
amount and character of any stock or other securities, or rights or options
with respect thereto, proposed to be issued or granted, the date of such
proposed issue or grant and the persons or class operations to whom such
proposed issue or grant is to be offered or made. Such notice shall be mailed
at least 20 days prior to the date specified in such notice on which any such
action is to be taken.
<PAGE>
9. Reservation of Stock, etc., Issuable on Exercise of Warrants. The Company
will at all times reserve and keep available, solely for issuance and
delivery on the exercise of the Warrants, all shares of Common Stock from
time to time issuable on the exercise of the Warrants.
10. Exchange of Warrants. On surrender for exchange of any Warrant, properly
endorsed, to the Company, the Company at its expense will issue and deliver
to or on the order of the holder thereof a new Warrant or warrants of like
tenor, in the name of such holder or as such holder (upon payment by such
holder of any applicable transfer taxes and, if requested by the Company,
demonstration by such holder of compliance with applicable securities laws)
may direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
11. Replacement of Warrants. On receipt of evidence reasonably satisfactory
to the Company of the loss, theft, destruction or mutilation of any Warrant
and, in the case of any such loss, theft or destruction of any Warrant, on
delivery of an indemnity agreement or security reasonably satisfactory in
form and amount to the Company or, in the case of any such mutilation, on
surrender and cancellation of such warrant, the Company at its expense will
execute and deliver, in lieu thereof, a new Warrant of like tenor.
12. Warrant Agent. The Company hereby appoints Interwest Transfer Co., Inc.,
with offices in Salt Lake City, Utah, as its agent for the purpose of issuing
Common Stock on the exercise of the Warrants pursuant to Section 1,
exchanging Warrants pursuant to Section 10, and replacing Warrants pursuant
to Section 11, or any of the foregoing, and thereafter any such issuance,
exchange or replacement, as the case maybe, shall be made at such office by
such agent. The Company may change such agent and designate a new agent in
the United States for the above-described purposes by written notice to each
holder of a Warrant.
13. Remedies. The Company stipulates that the remedies at law of the holder
of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate, and that a holder of this Warrant
may suffer irreparable harm and that such terms may be specifically enforced
by a decree by a court of competent jurisdiction for the specific performance
of any agreement contained herein or by an injunction against a violation of
any of the terms hereof or otherwise.
14. Negotiability. This Warrant is issued upon the following terms, to all of
which each holder or owner hereof by the taking hereof consents and agrees:
(a) subject to compliance with all applicable securities laws, title
to this Warrant may be transferred by endorsement (by the holder hereof
executing the form of assignment at the end hereof) and delivery in the same
manner as in the case of a negotiable instrument transferable by endorsement
and delivery;
(b) any person in possession of this Warrant properly endorsed is
authorized to represent himself as absolute owner hereof and is empowered to
transfer absolute title hereto by
<PAGE>
endorsement and delivery hereof to a bona fide purchaser hereof for value;
each prior taker or owner waives and renounces all of his equities or rights
in this Warrant in favor of each such bona fide purchaser, and each such bona
fide purchaser shall acquire absolute title hereto and to all rights
represented hereby; and
(c) until this Warrant is transferred on the books of the Company,
the Company may treat the registered holder hereof as the absolute owner
hereof for all purposes, notwithstanding any notice to the contrary.
15. Notices. All notices or other communications required or permitted to be
given pursuant to this Agreement shall be in writing and shall be considered
as duly given on (a) the date of delivery, if delivered in person, by
nationally recognized overnight delivery service or by facsimile or (b) three
days after mailing if mailed from within the continental United States by
registered or certified mail, return receipt requested to the party entitled
to receive the same, if to the Company, Total Film Group, Inc., 9107 Wilshire
Boulevard, Suite 475, Beverly Hills, California 90210, with a copy to Law
Offices of Stephen R. Field, 620 Fifth Avenue, New York, New York, 10020,
Attn: Stephen R. Field, Esq. And if to the holder of a Warrant, at the
address of such holder shown on the books of the Company. Any party may
change his or its address by giving notice to the other party stating his or
its new address. Commencing on the 10th day after the giving of such notice,
such newly designated address shall be such party's address for the purpose
of all notices or other communications required or permitted to be given
pursuant to this Agreement.
16. Governing Law. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State
of California, without regard to its conflicts of law principles. All parties
hereto (i) agree that any legal suit, action or proceeding arising out of or
relating to this Agreement shall be instituted only in a federal or state
court in Los Angeles, California or in the State of California, (ii) waive
any objection which they may now or hereafter have to the laying of the venue
of any such suit, action or proceeding, and (iii) irrevocably submit to the
jurisdiction of such federal or state court in Los Angeles, California in any
such suit, action or proceeding, but such consent shall not constitute a
general appearance or be available to any other person who is not a party to
this Agreement. All parties hereto agree that the mailing of any process in
any suit, action or proceeding in accordance with the notice provisions of
this Agreement shall constitute personal service thereof.
17. Entire Agreement; Waiver of Breach. This Agreement constitutes the entire
agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it
may not be modified or amended in any manner other than as provided herein;
and no waiver of any breach or condition of this Agreement shall be deemed to
have occurred unless such waiver is in writing, signed by the party against
whom enforcement is sought, and no waiver shall be claimed to be a waiver of
any subsequent breach or condition of a like or different nature.
18. Severability. If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner
<PAGE>
affect or render invalid or unenforceable any other severable provision of
this Agreement, and this Agreement shall be carried out as if any such
invalid or unenforceable provision were not contained herein.
19. Amendment. This Warrant and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
20. Expiration. The right to exercise this Warrant shall expire at 5:30 P.M.,
Pacific Standard time, on November 5, 2002.
21. Attorneys Fees and Costs. In the event of any litigation arising under or
relating to this Warrant, the prevailing party in such dispute shall be
entitled to recover its costs and expenses, including reasonable attorney
fees, from the other.
22. Redemption. The Company, at its option, may redeem this Warrant, upon not
less than 30 days' notice, at a price of $0.25 per Warrant, provided that the
shares of the Company's Common Stock are then publicly traded on the NASDAQ
electronic bulletin board or on any national securities exchange closing sale
price of a share of the Common Stock of the Company has been at least $10.00
per share for 10 consecutive business days ending within 10 days of the date
of the notice of redemption. In the event that the Company exercises its
right to redeem this Warrant, this Warrant will be exercisable until the
close of business on the date fixed for redemption in such notice. If any
Warrant called for redemption is not exercised by such time, it will cease to
be exercisable and the holder thereof will be entitled only to the redemption
price.
23. Restrictions on Transferability; Restrictive Legend. The holder
acknowledges that the shares of Common Stock issuable upon exercise of this
Warrant are subject to restrictions under applicable Federal and state
securities laws. Each certificate representing shares of Common Stock issued
shall, upon the exercise of this Warrant, bear the following legend in
addition to such other restrictive legends as may be required by law:
"The shares represented by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act"), or any
state securities laws, and no sale or transfer thereof may be effected
without an effective registration statement or an opinion of counsel for the
holder, satisfactory to the company, that such registration is not required
under the act and any applicable state securities laws."
Dated: November 30, 1999
TOTAL FILM GROUP INC.
By: /s/ Gerald Green
President
<PAGE>
EXHIBIT A to
Common Stock Purchase Warrant
[FORM OF]
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the Warrant to
purchase ____ shares of Common Stock, par value $001 per share ("Common
Stock"), of Total Film Group, Inc. and hereby elects to make payment by
placing a checkmark next to the selected method set forth below:
<TABLE>
<S> <C>
(a) makes payment of $ _____ therefor; _____
(b) makes payment therefor by reduction pursuant to Section 1.2
(b)(ii) of the Warrant of the number of shares of Common Stock
otherwise issuable to the Holder upon exercise of the Warrant
by _______ shares; or _____
(c) makes payment therefor by delivery of the following Common
Stock certificates of the Company (properly endorsed for
transfer in blank) for cancellation by the Company pursuant to
Section 1.2 or 1.3 of the Warrant, certificates of which are
attached hereto for cancellation [list certificates by number
and amount]. _____
</TABLE>
The undersigned hereby requests that certificates for such shares be
issued and delivered as follows:
ISSUE TO:
--------------------------------------------------------------------
(NAME)
- -----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
- -----------------------------------------------------------------------------
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO:
------------------------------------------------------------------
(NAME)
- -----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
<PAGE>
If the number of shares of Common Stock purchased (and/or reduced) hereby is
less than the number of shares of Common Stock covered by the Warrant, the
undersigned requests that a new Warrant representing the number of shares of
Common Stock not so purchased (or reduced) be issued and delivered as follows:
ISSUE TO:
--------------------------------------------------------------------
(NAME)
- -----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO:
------------------------------------------------------------------
(NAME)
- -----------------------------------------------------------------------------
(ADDRESS, INCLUDING ZIP CODE)
Date:
------------------- --------------------------------------
(Signature)
(Signature must conform to name of holder
as specified on the face of the Warrant)
--------------------------------------
(Print Name)
--------------------------------------
(Street Address)
--------------------------------------
(City, State and Zip Code)
--------------------------------------
(Person's Social Security Number
or Tax Identification Number)
<PAGE>
FORM OF ASSIGNMENT
(To be signed only on transfer of warrant)
For value received, the undersigned hereby sells, assigns, and
transfers unto ____________________________ the right represented by the
within Warrant to purchase shares of Common Stock of Total Film Group, Inc.
to which the within Warrant relates, and appoints
________________________________ as its attorney to transfer such right on
the books of World Wireless Communications, Inc. with full power of
substitution in the premises.
Dated:
------------------- --------------------------------------
(Signature)
(Signature must conform to name of holder
as specified on the face of the Warrant)
--------------------------------------
(Print Name)
--------------------------------------
(Street Address)
--------------------------------------
(City, State and Zip Code)
--------------------------------------
(Person's Social Security Number
or Tax Identification Number)
Signed in the presence of:
- ------------------------
<PAGE>
Schedule of Subscribers
<TABLE>
<CAPTION>
Number of Warrant
Name Warrants Number
<S> <C> <C>
Frank Argano 9,090 W-China 45
Stanley Berk 2,411 W-China 1
Timothy J. Coltrell 2,273 W-China 3
Allan Corn 2,225 W-China 4
Richard Davimos 4,545 W-China 50
Richard Davimos, Jr. 13,635 W-China 48
Jacques L. Devore 2,411 W-China 2
Larry du Boef 4,545 W-China 6
Margaret Elardi 40,000 W-China 7
Garry Fetman 2,273 W-China 8
Thomas Fuchs 2,273 W-China 9
Daly City Anesthesia Medical Group
Money Purchase and Profit
Sharing Pension Trust 2,273 W-China 10
Randall L. Gaynor 2,273 W-China 11
Stephen P. Grayson, A Professional Corporation
Profit Sharing Plan 2,273 W-China 44
Martin L. Herman 2,273 W-China 14
Alan I. Kazden 10,000 W-China 15
Richard H. Kirschner, A Professional Corporation
Profit Sharing Plan 2,273 W-China 16
Daniel Kramer 2,273 W-China 17
Jeffrey Leifer 2,273 W-China 18
Einav David Limor 2,273 W-China 22
Michael B. Miller 2,273 W-China 20
Arthur S. Mishler 2,500 W-China 21
Arthur Newman 2,273 W-China 23
Alan Pachtman 2,500 W-China 24
Sam Picardi 4,545 W-China 25
Steve Poltz 4,545 W-China 26
Gerard Renk 9,090 W-China 46
Ronald Rotter 2,273 W-China 28
Lamar Rutherford 4,545 W-China 29
Nathan Schulhof 2,273 W-China 30
David Schwuartzman 2,273 W-China 31
Robert M. Smith 4,545 W-China 32
Harold and Elizabeth Springer 2,273 W-China 43
Joy Wexler Starr 2,273 W-China 34
Richard Stern 2,273 W-China 35
Strasser & Associates, Inc. 2,273 W-China 36
</TABLE>
<PAGE>
Schedule of Subscribers
Page 2
<TABLE>
<CAPTION>
Number of Warrant
Name Warrants Number
<S> <C> <C>
Sugarman Family Partners 6,818 W-China 37
Swan Alley (Nominees) Limited 2,500 W-China 38
Stephen R. Willey 5,000 W-China 39
Scott S. Zacky 10,000 W-China 40
Laurence Zalk 9,090 W-China 41
</TABLE>
<PAGE>
EXHIBIT 6.12
REGISTRATION RIGHTS AGREEMENT
OF
TOTAL FILM GROUP, INC.
Agreement made as of the _____ day of November 1999, by and among
Total Film Group, Inc., a Delaware corporation currently having its office
and principal place of business at 9107 Wilshire Boulevard, Suite 425,
Beverly Hills, California 90210 (the "Corporation"), and each party hereto
purchasing a warrant to purchase common stock of the Corporation (each of the
last named persons shall hereinafter be referred to individually as a
"Holder" and collectively as the "Holders").
WHEREAS, upon the closing of the offering of up to $200,000 of the
Warrants (as defined below) pursuant to the Confidential Private Placement
Memorandum of the Corporation and Total China, Inc. dated October 29, 1999
(the "Offering"), as defined in the Offering (the "Effective Date"), the
Holders will collectively own warrants to purchase up to 200,000 shares of
common stock, $1.00 par value per share, of the Corporation (shares of such
common stock, together with shares of common subsequently acquired by the
parties, being referred to as the Shares and collectively as the "Stock") at
an exercise price of $3.75 per share exercisable during a period of three
years from the date of the Effective Date (the 'Warrants");
WHEREAS, upon the Effective Date, the Corporation and the Holders
desire to provide for certain registration rights for the Stock of the
Corporation or any interest therein now or hereafter owned by the Holders;
NOW, THEREFORE, effective upon the Effective Date, in consideration
of the mutual covenants and conditions herein contained, each of the parties
hereby agrees as follows:
1. Piggyback and Demand Registration Rights.
1.1 (a) If the Corporation shall propose to file a registration
statement under the Securities Act of 1933, as amended (the "Securities
Act"), at any time during the 36-month period after the Effective Date,
either on its own behalf or that of any of its shareholders for an offering
of shares of the capital stock of the Corporation (including shares to be
issued pursuant to the exercise of any warrants, including the Warrants) for
cash or securities, the Corporation shall give written notice as promptly as
possible of such proposed registration to each Holder and shall use
reasonable efforts to include such number or amount of shares of the Stock
owned by such Holders (including shares to be issued pursuant to the exercise
of any warrants, including the Warrants) (each a "Seller" or "Registering
Holder" and collectively, the "Sellers" or "Registering Holders") in such
registration statement as such Seller or Sellers shall request within 10 days
after receipt of such notice from the Corporation, provided, that (A) each
Seller furnishes the Company with a written notice of its irrevocable
exercise of the Warrants in whole or in part within 10 days after the receipt
of such notice from the Corporation, (B) if shares of the Stock are being
offered
<PAGE>
by the Corporation in an underwritten offering, any shares of the Stock
proposed to be included in the registration statement on behalf of such
Seller(s) shall be included in the underwriting offering on the same terms
and conditions as the Stock being offered by the Corporation, and (C) each
Seller shall be entitled to include such number of shares of the Stock owned
by such Seller in such registration statement, one time only during the
applicable period set forth herein, so that the proportion of shares of the
Stock of each Seller to be included in such registration statement to the
total number of shares of the Stock owned by him is equal to the proportion
that the number of shares of the Stock of all Sellers to be included in such
registration statement bears to the total number of shares of the Stock owned
by all Sellers (except that each Seller shall have the right not to exercise
such piggyback registration right set forth herein once, in which case such
Seller shall have the right set forth in this Section 1.1 with respect to the
next succeeding registration statement described in this Section 1.1 proposed
to be filed by the Corporation during such 36- month period); and provided
further, that (i) the Corporation shall not be required to include such
number or amount of shares owned by such Seller(s) in any such registration
statement if it relates solely to securities of the Corporation to be issued
pursuant to a stock option or other employee benefit plan, (ii) the
Corporation may, as to an offering of securities of the Corporation by the
Corporation, withdraw such registration statement at its sole discretion and
without the consent of any Seller and abandon such proposed offering and
(iii) the Corporation shall not be required to include such number of shares
of the Stock owned by such Seller in such registration statement if the
Corporation is advised in writing by its underwriter or investment banking
firm that it reasonably believes that the inclusion of such Seller's shares
would have an adverse effect on the offering, provided that if such
limitation is imposed, the effects of such limitation shall be allocated
among the Sellers pro rata in proportion to the number of shares of the Stock
as to which such Sellers have requested inclusion therein.
(b) A registration filed pursuant to this Section 1.1(a)
shall not be deemed to have been effected unless the registration statement
related thereto (i) has become effective under the Securities Act and (ii)
has remained effective for a period of at least nine months (or such shorter
period of time in which all of the Stock registered thereunder has actually
been sold thereunder); provided, however, that if, after any registration
statement filed pursuant to Section 1.1(a) becomes effective and prior to the
time the registration statement has been effective for a period of at least
nine months, such registration statement is interfered with by any stop
order, injunction or other order or requirement of the Commission or other
governmental agency or court solely due to actions or omissions to act of the
Corporation, such registration statement shall not be considered one of the
registrations applicable pursuant to Section 1.1(a).
1.2 Delay or Suspension of Registration. Notwithstanding any other
provision of this Section to the contrary, if the Corporation shall furnish
to the Holder or Holders:
(a) certificate signed by the President of the Corporation
stating that, in the good faith judgment of a majority of the members of the
entire Board of Directors of the Corporation, it would adversely and
materially affect the Corporation's ability to enter into an agreement with
respect to, or to consummate, a bona fide material transaction to which it is
or would be a party, or the Corporation has a plan to register Stock to be
sold for its own account
<PAGE>
within a 90-day period after the filing of the registration statement under
Section 1(a), for the Corporation to use its reasonable best efforts to
effect the registration of the Stock; or
(b) both (A) a certificate signed by the President of the
Corporation stating that, in the good faith judgment of a majority of the
members of the entire Board of Directors of the Corporation, a material fact
exists which the Corporation has a bonafide business purpose for preserving
as confidential and (B) an opinion of counsel to the Corporation to the
effect that the registration by the Corporation (following the offer or sale
by the Holder or Holders of the Stock pursuant to an effective registration
statement would require disclosure of the material fact which is referenced
in the President's certificate required under Section 1 .2(b)(A) and which,
in such counsel's opinion, is not otherwise required to be disclosed, then
the Corporation's obligations pursuant to Section 1.1 with respect to any
such registration shall be deferred or offers and sales of the Stock by the
Holder or Holders shall be suspended, as the case may be, until the earliest
of (1) the date on which, as applicable (a) the Corporation's use of
reasonable best efforts to effect the registration of the Stock would no
longer have such a material adverse effect or (b) the material fact is
disclosed to the public or ceases to be material; (2) 135 days from the date
of receipt by the Holder or Holders of the materials referred to in Section
1.2(a) and (b) above; and (3) such time as the Corporation notifies the
Holder or Holders that it has resumed use of its reasonable best efforts to
effect registration of the Stock or that offers and sales of Stock pursuant
to an effective registration statement may be resumed, as the case may be. A
particular material transaction to which the Corporation is or would be a
party or a particular material fact shall not give rise to more than one
deferral or suspension notice by the Corporation pursuant to the provisions
of this Section 1.2.
1.3 In connection with any registration or qualification pursuant to
the provisions of this Article I, all Sellers, and the Corporation shall,
except as prohibited under the blue sky or securities laws of any
jurisdiction under which a registration or qualification is being effected,
pay (pro rata based on the relative number of shares included in such
registration) all of the fees and expenses, which shall not include fees and
expenses of legal counsel for any Seller and any underwriting or selling
discounts, fees, commissions or similar charges with respect to the shares of
Stock as to which registration is requested; provided, however, that in the
event the Corporation shall have incurred out-of-pocket expenses in
connection with the preparation of any registration statement which shall be
withdrawn prior to its effective date at the request of a Seller, such Seller
shall promptly reimburse the Corporation for all out-of-pocket expenses
including, without limitation, attorneys' fees and expenses, accounting costs
and all fees and expenses relating to blue sky filings incurred by the
Corporation in connection with such preparation (including any filing
thereof; and provided further. However, that the Corporation shall not be
required in the case of any registration hereunder to make blue sky filings
in more than 10 states.
1.4 (a) In each case of registration of shares of Stock under the
Securities Act pursuant to these registration provisions, the Corporation
shall unconditionally indemnify and hold harmless each of the Sellers, each
underwriter (as defined in the Securities Act), and each person who controls
any such underwriter within the meaning of Section 15 of the Securities Act
or Section 20(a) of the Securities Exchange Act of 1934 (the Sellers and each
such underwriter, and each such person who controls any such underwriter
being referred to for purposes of this Section
<PAGE>
1.4, as an "Indemnified Person") from and against any and all losses, claims,
damages, liabilities and expenses arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
registration statement under which such shares of the Stock were registered
under the Securities Act, any prospectus or preliminary prospectus contained
therein or any amendment or supplement thereto (including, in each case, any
documents incorporated by reference therein), or arising out of any omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, except
insofar as such losses, claims, damages, liabilities or expenses arise out of
any such untrue statement or omission or alleged untrue statement or omission
based upon information relating to any of the Sellers or any underwriter and
furnished to the Corporation or the Registering Holder, as the case may be,
in writing by any of the Sellers or such underwriter expressly for use
therein; provided that the foregoing indemnification with respect to a
preliminary prospectus shall not inure to the benefit of any underwriter (or
to the benefit of any person controlling such underwriter) from whom the
person asserting any such losses, claims, damages, liabilities or expenses
purchased shares of the Stock to the extent such losses, claims, damages or
liabilities result from the fact that a copy of the final prospectus had not
been sent or given to such person at or prior to written confirmation of the
sale of such shares to such person.
(b) In each case of a registration of shares of the Stock
under the Securities Act pursuant to these registration provisions, each of
the Sellers participating in the registration, severally and not jointly,
shall unconditionally indemnify and hold harmless the Corporation (and its
directors and officers) each underwriter and each person, if any, who
controls the Corporation or such underwriter within the meaning of Section 15
of the Securities Act of Section 20(a) of the Securities Exchange Act of
1934, to the same extent as the foregoing indemnity from the Corporation to
the Sellers but only with reference to information relating to such Seller
and furnished to the Corporation by such Seller for use in the registration
statement, any prospectus or preliminary prospectus contained therein or any
amendment or supplement thereto. Each Seller will use all reasonable efforts
to cause any underwriters of shares of Stock to be sold by any of the Sellers
to indemnify the Corporation on the same terms as the sellers agree to
indemnify the Corporation or the Registering Holder, as the case may be, but
only with reference to information furnished in writing by such underwriter
for use in the registration statement.
(c) In case any action or proceeding shall be brought
against or instituted which involves any Indemnified Person, such Indemnified
Person shall promptly notify the person against whom such indemnity may be
sought (the "Indemnifying Person") in writing and the Indemnifying Person
shall retain counsel reasonably satisfactory to the Indemnified Person to
represent the Indemnified Person and any others the Indemnifying Person may
designate in such proceeding and shall pay the fees and disbursements of such
counsel related to such proceeding. In any such action or proceeding; any
Indemnified Person shall have the right to obtain its own counsel, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Person unless (i) the Indemnifying Person has agreed to the retention of such
counsel at its expense or (ii) the named parties to any such action or
proceeding include both the Indemnifying Person and the Indemnified Person,
and the Indemnified Person has been advised by counsel that there may be one
or more defenses available to such Indemnified Person which are different
from or additional to those available to the Indemnifying Person (in which
case, if the Indemnified
<PAGE>
Person notifies the Indemnifying Person that it wishes to employ separate
counsel at the expense of the Indemnifying Person, the Indemnifying Person
shall not have the right to assume the defense of such action or proceeding
on behalf of such Indemnified Person). It is understood that the Indemnifying
Person shall not be liable for the fees and expenses of more than one
separate firm of attorneys at any time for all such similarly situated
Indemnified Persons. The Indemnifying Person shall not be liable for any
settlement of any action or proceeding effected without its written consent.
(d) In the event the indemnifications provided for in this
Article V are unavailable or insufficient, then the Sellers shall each
contribute to the amount paid or payable as a result of such losses, claims,
damages, liabilities, actions and expenses in such proportion as is
appropriate to reflect (A) the relative benefits received by each Seller and
(B) the relative fault of each Seller.
(e) Notwithstanding anything in this Article V to the
contrary, the Corporation shall not be liable to any Seller for any losses,
claims, damages or liabilities arising out of or caused by (A) any reasonable
delay (I) in filing or processing any registration statement or any
preliminary or final prospectus, amendment or supplement thereto after the
inclusion of such Seller's Stock in such registration statement, or (2) in
requesting such registration statement be declared effective by the
Commission and (B) the failure of the Commission for any reason to declare
effective any registration statement.
2. MISCELLANEOUS.
2.1 Notices. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as duly given on (a) the date of delivery, if delivered
in person, by nationally recognized overnight delivery service or by
facsimile or (b) three days after mailing if mailed from within the
continental United States by registered or certified mail, return receipt
requested to the party entitled to receive the same, if to the Corporation,
Total Film Group, Inc., 9107 Wilshire Boulevard, Suite 425, Beverly Hills,
California 90210 ,with a copy to Law Offices of Stephen R. Field, 620 Fifth
Avenue, New York, New York, Attn: Stephen R. Field, Esq.; and if to any
Holder, at his or its address as set forth in the books and records of the
Corporation. Any party may change his or its address by giving notice to the
other party stating his or its new address. Commencing on the 10th day after
the giving of such notice, such newly designated address shall be such
party's address for the purpose of all notices or other communications
required or permitted to be given pursuant to this Agreement.
2.2 Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of
the State of California, without regard to its conflicts of law principles.
All parties hereto (i) agree that any legal suit, action or proceeding
arising out of or relating to this Agreement shall be instituted only in a
federal or state court in Los Angeles, California, (ii) waive any objection
which they may now or hereafter have to the laying of the venue of any such
suit, action or proceeding, and (iii) irrevocably submit to the jurisdiction
of any federal or state court in Los Angeles, California, in any such suit,
action or
<PAGE>
proceeding, but such consent shall not constitute a general appearance or be
available to any other person who is not a party to this Agreement. All
parties hereto agree that the mailing of any process in any suit, action or
proceeding in accordance with the notice provisions of this Agreement shall
constitute personal service thereof.
2.3 Entire Agreement: Waiver of Breach. This Agreement constitutes
the entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it
may not be modified or amended in any manner other than as provided herein;
and no waiver of any breach or condition of this Agreement shall be deemed to
have occurred unless such waiver is in writing, signed by the party against
whom enforcement is sought, and no waiver shall be claimed to be a waiver of
any subsequent breach or condition of a like or different nature.
2.4 Binding Effect: Assignability. This Agreement and all the terms
and provisions hereof shall be binding upon and shall inure to the benefit of
the parties and their respective heirs, successors and permitted assigns.
This Agreement and the rights of the parties hereunder shall not be assigned
except with the written consent of all parties hereto.
2.5 Captions. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit or extend the scope or
intent of this Agreement or any provision hereof
2.6 Number and Gender. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine, the feminine or the neuter gender shall include the masculine,
feminine and neuter.
2.7 Severability. If any provision of this Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render invalid
or unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
2.8 Amendments. This Agreement may not be amended except in writing
signed by all of the parties hereto.
2.9 Compliance with Securities Laws. Commencing with the Effective
Date, the Corporation will use its best efforts to comply thereafter with the
applicable provisions of the Securities Act and the Securities Exchange Act
of 1934.
2.10 Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument. In addition, this Agreement may
contain more than one counterpart of the signature page and this Agreement
may be executed by the affixing of such signature pages executed by the
parties to one copy of the Agreement; all of such counterpart signature pages
shall be read as though one, and
<PAGE>
they shall have the same force and effect as though all of the signers had
signed a single signature page.
IN WITNESS WHEREOF, the undersigned have executed this Agreement on
the date first above written.
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green, President
NUMBER OF WARRANTS HOLDERS
By:
- ----------------------------- -----------------------------
<PAGE>
Schedule of Holders
<TABLE>
<CAPTION>
Number of
Date Warrants Name
<S> <C> <C>
11/17/99 9,090 Frank Argano
11/5/99 2,411 Stanley Berk
11/11/99 2,273 Timothy J. Coltrell
11/11/99 2,225 Allan Corn
4,545 Richard Davimos
13,635 Richard Davimos, Jr.
11/10/99 2,411 Jacques L. Devore
11/11/99 4,545 Larry du Boef
11/11/99 40,000 Margaret Elardi
11/11/99 2,273 Garry Fetman
11/11/99 2,273 Thomas Fuchs
11/11/99 2,273 Daly City Anesthesia Medical Group
Money Purchase and Profit
Sharing Pension Trust
11/11/99 2,273 Randall L. Gaynor
11/11/99 2,273 Stephen P. Grayson, A Professional
Corp. Profit Sharing Plan
11/11/99 2,273 Martin L. Herman
11/11/99 10,000 Alan I. Kazden
11/11/99 2,273 Richard H. Kirschner, A Professional
Corp. Profit Sharing Plan
11/11/99 2,273 Daniel Kramer
2,273 Jeffrey Leifer
11/11/99 2,273 Einav David Limor
11/11/99 2,273 Michael B. Mille
11/11/99 2,500 Arthur S. Mishler
11/11/99 2,273 Arthur Newman
11/11/99 2,500 Alan Pachtman
4,545 Sam Picardi
11/11/99 4,545 Steve Poltz
11/11/99 9,090 Gerard Renk
11/12/99 2,273 Ronald Rotter
11/11/99 4,545 Lamar Rutherford
11/11/99 2,273 Nathan Schulhof
11/11/99 2,273 David Schwuartzman
11/11/99 4,545 Robert M. Smith
11/11/99 2,273 Harold and Elizabeth Springer
11/11/99 2,273 Joy Wexler Starr
11/11/99 2,273 Richard Stern
11/11/99 2,273 Strasser & Associates, Inc.
11/8/99 6,818 Sugarman Family Partners
11/16/99 2,500 Swan Alley (Nominees) Limited
5,000 Stephen R. Willey
11/11/99 10,000 Scott S. Zacky
11/11/99 9,090 Laurence Zalk
</TABLE>
<PAGE>
EXHIBIT 6.13
RIGHT OF FIRST REFUSAL AGREEMENT
THIS AGREEMENT made this 29th day of October, 1999, between Total
China, Inc. (the "Corporation"), a Delaware corporation with offices 9107
Wilshire Blvd., Suite 475, Beverly Hills, CA 90210 and each party hereto
purchasing shares of common stock of the Corporation (each of the last named
person shall hereinafter sometimes be referred to individually as a
"Shareholder" and collectively as the "Shareholders").
WHEREAS, the Corporation wishes to grant the Shareholders a right of
first refusal to purchase all or substantially all of assets of the
Corporation (the "Assets"), in the event that the Corporation wishes to sell
the Assets in accordance with the terms and conditions set forth herein;
NOW, THEREFORE, the parties agree as follows:
1. Right of First Refusal.
(a) In the event that the Corporation ("Transferor") shall
receive from a non-affiliated person ("Third Party Transferee") a written
bona fide offer to purchase the Assets owned by the Transferor (the "Offer"),
which Offer the Transferor desires to accept, the Transferor shall give the
Shareholders written notice of such desire (the "Notice"). The Notice shall
include the purchase price and the terms of the Offer, together with a copy
of the Offer.
(b) Each Shareholder shall have, for a period of 30 days
following the delivery of the Notice, an option to purchase all of the Assets
on the same terms and conditions as set forth in the Offer, on the Pro Rata
Basis (as defined herein), and if the Shareholders shall elect to exercise
such option, such Shareholders shall within such 30-day period give their
written election notice of exercise to the Transferor and to the other
Shareholders. Pro Rata Basis shall mean the ratio of the number of shares of
common stock of the Corporation owned by a Shareholder to the total number of
shares of common stock of the Corporation purchased by the Shareholders.
(c) In the event that a Shareholder fails to exercise such
option with respect to all the Assets, each exercising Shareholder shall have
an option to elect to purchase all of the share of the Assets that otherwise
could have been purchased by a non-electing Shareholder on the same terms and
conditions as set forth in the Offer, on the Pro Rata Basis, which option
must be exercised by his written election notice to the other Shareholders
within 10 days after the expiration of the 30-day option period set for in
Section 1(b).
(d) The closing of any purchase and sale of the Assets
shall take place at the principal office of the Corporation on a mutually
agreed date after 10 business days, but not more than 15 business days, from
the date on which the options granted to the Shareholders to purchase the
Assets in Sections 1(b) and (c) expire.
(e) In the event that the Shareholders shall fail to
exercise the option to purchase all of the Assets owned by the Transferor,
the Transferor may thereafter transfer all of
<PAGE>
the Assets owned by it to the Third-Party Transferee on the terms and at the
price described in the Offer within 120 days thereafter. If the Transferor
does not consummate the transfer to the Third-Party Transferee within such
120 day period, the Assets of the Transferor shall again became subject to
all of the terms and conditions of this Agreement.
2. Notices. All notices or other communications required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be considered as duly given on (a) the date of delivery, if delivered
in person, by nationally recognized overnight delivery service or by
facsimile or (b) three days after mailing if mailed from within the
continental United States by registered or certified mail, return receipt
requested to the party entitled to receive the same, if to the Corporation,
Total China, Inc., 9107 Wilshire Blvd., Suite 475, Beverly Hills, CA 90210
with a copy to Law Offices of Stephen R. Field, 620 Fifth Avenue, Third
Floor, New York, New York 10020, Attn: Stephen R. Field, Esq., facsimile
number (212) 332-6055, and if to a Shareholder, at the address shown on the
books and records of the Corporation. Any party may change his address by
giving notice to the other party stating his new address. Commencing on the
10th day after the giving of such notice, such newly designated address shall
be such parts address for the purpose of all notices or other communications
required or permitted to be given pursuant to this Agreement.
3. Governing Law. This Agreement and the rights of the parties
hereunder shall be governed by and construed in accordance with the laws of
the State of California determined without regard to conflicts of law
principles. All parties hereto (i) agree that any legal suit, action or
proceeding arising out of or relating to this Agreement shall be instituted
only in a federal or state court in Los Angeles, California, (ii) waive any
objection which they may now or hereafter have to the laying of the venue of
any such suit, action or proceeding, and (iii) irrevocably submit to the
exclusive jurisdiction of such federal or state court in Los Angeles,
California in any such suit, action or proceeding, but such consent shall not
constitute a general appearance or be available to any other person who is
not a party to this Agreement. All parties hereto agree that the mailing of
any process in any suit, action or proceeding in accordance with the notice
provisions of this Agreement shall constitute personal service thereof.
4. Entire Agreement; Waiver of Breach. This Agreement constitutes
the entire agreement among the parties and supersedes any prior agreement or
understanding among them with respect to the subject matter hereof, and it
may not be modified or amended in any manner other than as provided herein;
and no waiver of any breach or condition of this Agreement shall be deemed to
have occurred unless such waiver is in writing, signed by the party against
whom enforcement is sought, and no waiver shall be claimed to be a waiver of
any subsequent breach or condition of a like or different nature.
5. Binding Effect; Assignability. This Agreement and all the terms
and provisions hereof shall be binding upon and shall inure to the benefit of
the parties and their respective heirs, successors and permitted assigns.
This Agreement and the rights of the parties hereunder shall not be assigned
except with the written consent of all parties hereto.
<PAGE>
6. Captions. Captions contained in this Agreement are inserted only
as a matter of convenience and in no way define, limit or extend the scope or
intent of this Agreement or any provision hereof.
7. Number and Gender. Wherever from the context it appears
appropriate, each term stated in either the singular or the plural shall
include the singular and the plural, and pronouns stated in either the
masculine, the feminine or the neuter gender shall include the masculine,
feminine and neuter.
8. Severability. If any provision of this Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach
only to such provision and shall not in any manner affect or render invalid
or unenforceable any other severable provision of this Agreement, and this
Agreement shall be carried out as if any such invalid or unenforceable
provision were not contained herein.
9. Amendments. This Agreement may not be amended except in a
writing signed by all of the parties hereto.
10. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original but all of which
shall constitute one and the same instrument. In addition, this Agreement may
contain more than one counterpart of the signature page and this Agreement
may be executed by the affixing of such signature pages executed by the
parties to one copy of the Agreement; all of such counterpart signature pages
shall be read as though one, and they shall have the same force and effect as
though all of the signers had signed a single signature page.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
Total China, Inc.
By: /s/ Gerald Green, President
INVESTORS:
- ------------------------------ ------------------------------------
Signature Print Name
<PAGE>
Schedule of Investors
NAME
Frank Argano
Stanley Berk
Timothy J. Coltrell
Allan Corn
Richard Davimos
Richard Davimos, Jr.
Jacques L. Devore
Larry du Boef
Margaret Elardi
Garry Fetman
Thomas Fuchs
Daly City Anesthesia Medical Group Money Purchase and
Profit Sharing Pension Trust
Randall L. Gaynor
Stephen P. Grayson, A Professional Corp. Profit Sharing
Plan
Martin L. Herman
Alan I. Kazden
Richard H. Kirschner, A Professional Corp. Profit Sharing
Plan
Daniel Kramer
Jeffrey Leifer
Einav David Limor
Michael B. Mille
Arthur S. Mishler
Arthur Newman
Alan Pachtman
Sam Picardi
Steve Poltz
Gerard Renk
Ronald Rotter
Lamar Rutherford
Nathan Schulhof
David Schwuartzman
Robert M. Smith
Harold and Elizabeth Springer
Joy Wexler Starr
Richard Stern
Strasser & Associates, Inc.
Sugarman Family Partners
Swan Alley (Nominees) Limited
Stephen R. Willey
Scott S. Zacky
Laurence Zalk
<PAGE>
EXHIBIT 6.14
TOTAL
Film Group
PROMISSORY NOTE
February 17, 2000 Amount $100,000
FOR VALUE RECEIVED, the undersigned, Total Film Group, 9107 Wilshire Blvd.,
Suite 475, Beverly Hills, CA 90210 ("Maker") promises to repay to Trinity
American Corporation ("Payee"), the principal sum of One Hundred Thousand
Dollars (4100,000), on or before May 17, 2000.
In the event of a failure of the undersigned to make any payment due
hereunder as and when due, Payee shall have the right to take all action
necessary to collect said payment from the undersigned and the undersigned
agrees to pay all costs of such collection, including, without limitation,
reasonable attorney's fees. The undersigned waives presentment, demand and
protest, and all notices thereto.
By: /s/ Eli Boyer, Secretary-Treasurer
On behalf of Total Film Group, Inc.
<PAGE>
EXHIBIT 6.15
AGREEMENT RE SALE OF INTEREST IN
SKYROCKET, LLC
Douglass B. Humphreys ("Humphreys") and April S. Minnich ("Minnich"),
individually and as the members and owners of 100% of Skyrocket LLC, a
California limited liability company ("Skyrocket"), on the one hand, and
Total Film Group, Inc., a Delaware corporation ("Total") and Dyer
Communications, Inc., a California corporation ("DCI"), on the other hand,
agree as follows:
I. RECITALS
A. Skyrocket is a limited liability company organized, validly existing,
and in good standing under the laws of the State of California. The
Secretary of State's file number for Skyrocket is 101997090046.
B. Total is a Delaware corporation duly organized, validly existing, and
in good standing under the laws of the State of Delaware.
C. DCI is a California corporation duly organized, validly existing, and
in good standing under the laws of the State of California.
D. Humphreys and Minnich are individuals residing in the State of
California, and are the sole members and owners of Skyrocket.
E. Humphreys and Minnich desire to sell Skyrocket to Total and Dyer, and
Total and Dyer desire to purchase Skyrocket from Humphreys and Minnich.
II. SALE
Humphreys and Minnich hereby sell and transfer 99% of Skyrocket to Total and
1% of Skyrocket to DCI, on the terms and conditions set forth in this
Agreement. Humphreys shall include in the transfer all of their interest in
the assets of Skyrocket whether real, personal, tangible, or intangible
including the goodwill, business and trade names of Skyrocket. Thereafter,
Total and DCI shall have all rights of ownership of Skyrocket including the
rights of a member of the limited liability company and the right to amend
the Articles of Organization and the Operating Agreement.
III. EFFECTIVE DATE
Although this Agreement is entered into as of the date it is executed by the
parties, the effective date for all purposes of the Agreement shall be
January 1st, 1999.
<PAGE>
IV. CONSIDERATION
In consideration for the sale and transfer of 100% interest in Skyrocket and
all of its assets and property, Total shall immediately pay to Humphreys and
Minnich Twenty-five thousand Dollars ($25,000.00) and deliver One Hundred
Fifty Thousand (150,000) shares of restricted common stock of Total with
Seventy-five Thousand (75,000) of said shares delivered to Minnich and
Seventy-five Thousand (75,000) of said shares delivered to Humphreys.
V. RIGHT TO DIVEST / CONDITIONAL CONSIDERATION
At any time within six months from the date of the execution of this
Agreement, Total and DCI have the right, in their sole discretion, to divest
themselves from ownership and return 100% interest in Skyrocket back to
Humphreys and Minnich. If Total and DCI exercise their right to divest
themselves from ownership in Skyrocket, they may also in their sole
discretion elect to terminate either one or both of the Employment Agreements
Total is concurrently entering into with Humphreys and Minnich.
Furthermore, at any point in time within six months from the date of
execution of this Agreement, Total and DCI may decide to retain ownership in
Skyrocket at which point Total shall deliver to Humphreys and Minnich a total
of Seventy-five Thousand (75,000) shares of its restricted common stock with
Thirty-seven Thousand Five Hundred (37,500) shares delivered to Minnich and
stock with Thirty-seven Thousand Five Hundred (37,500) shares delivered to
Humphreys.
If, on the sixth month anniversary of the date of execution of this Agreement
by Total and DCI, Total and DCI have not made an election to retain ownership
of Skyrocket, then such inaction shall be deemed to be an election to divest
themselves from ownership of Skyrocket and return 100% interest of Skyrocket
back to Humphreys and Minnich. In that event, Humphreys and Minnich shall
retain all consideration given them pursuant to Paragraph IV above.
VI. COVENANTS AND CONDITIONS
A. Covenants of Humphreys and Minnich.
Humphreys and Minnich represent and warrant that:
a. Humphreys and Minnich own 100% of Skyrocket, and consent to
the sale of their interest in Skyrocket to Total and DCI.
b. Humphreys and Minnich have disclosed to Total and DCI all
known debts, obligations, liens, encumbrances, rights,
defenses, or liabilities concerning Skyrocket or any assets
owned by Skyrocket. A copy of Exhibit "A" reflecting a summary
of assets and liabilities is attached hereto and incorporated
herein by reference.
<PAGE>
c. The execution, delivery, and performance of this Agreement are
within Humphreys and Minnich's powers and this Agreement
constitutes a valid and binding obligation of Humphreys and
Minnich.
d. Skyrocket has complied with all licensing, permit, and
fictitious name requirements necessary to lawfully conduct the
business in which it is engaged in compliance with all laws
and regulations applicable to any sales, leases, or the
furnishing of services by Skyrocket, including without
limitation those requiring consumer or other disclosures.
e. Skyrocket has all trade names, trade name rights, services
marks, copyrights, patents, licenses, permits and franchises
required in order for Skyrocket to conduct and operate its
business as now or proposed to be conducted without conflict
with the rights of others.
f. Humphreys, Minnich and Skyrocket warrant that Skyrocket has
good and marketable title to all assets covered by this
Agreement and further warrant that its title to said assets is
free and clear of any liens, encumbrances or other defects.
g. The execution, delivery and performance by Humphreys, Minnich
and Skyrocket of this Agreement is not in conflict with any
law, rule, regulation, order or directive, or any indenture,
agreement, or undertaking to which Skyrocket is a party or by
which Skyrocket may be bound or affected, and will not result
in the creation or imposition of any lien pursuant to the
terms of any such indenture, agreement, or undertaking.
h. No representation, warranty, or statement by Skyrocket
contained in this Agreement, in any record or certificate or
other writing furnished by Humphreys, Minnich, or Skyrocket to
Total and DCI (including, without limitation, any financial
statements, books, or records) at any time contains any untrue
statement of material fact, or omits to state a material fact.
i. There are no debts, litigation, claims, tax claims,
proceedings, disputes or litigation pending, or to their
knowledge threatened against or affecting Skyrocket or its
property, except as disclosed in writing to Total and DCI
prior to the date of this Agreement. That all debts and
obligations of Skyrocket have been fully disclosed to Total
and DCI and are set forth in Exhibit "A" which is attached
hereto and incorporated herein by reference.
j. That all of Skyrocket's tax returns and payments that have
become due from it through the date of this Agreement have
been filed and paid by it including any returns or taxes due
for state or federal income or franchise tax, personal or real
property tax levied against any of said assets, sales, or
other tax.
<PAGE>
k. Except in the normal course of business and for adequate
value, Skyrocket shall not dispose of any of its assets
between the date of this Agreement and the date on which the
sale shall become effective.
l. All warranties made in this Agreement shall survive the
consummation of the sale and transfer of the assets and
interest in Skyrocket to Total and DCI and that Humphreys and
Minnich agree to be personally bound and personally liable,
jointly and severally, on such warranties should any of them
prove to be untrue from and after the date of this Agreement.
B. Covenants of Total and DCI.
1. Total represents and warrants that:
a. It is a Delaware corporation in good standing, and qualified
to do business in the State of California.
b. The execution, delivery and performance by Total of this
Agreement is not in conflict with any law, rule, regulation,
order or directive, or any indenture, agreement, or
undertaking to which Total is a party or by which Total may be
bound or affected, and will not result in the creation or
imposition of any lien pursuant to the terms of any such
indenture, agreement, or undertaking.
2. DCI represents and warrants that:
a. It is a California corporation in good standing, and qualified
to do business in the State of California.
b. The execution, delivery and performance by Total of this
Agreement is not in conflict with any law, rule, regulation,
order or directive, or any indenture, agreement, or
undertaking to which Total is a party or by which Total may be
bound or affected, and will not result in the creation or
imposition of any lien pursuant to the terms of any such
indenture, agreement, or undertaking.
C. Conditions to Sale.
At the sole discretion of Total and DCI, the sale may be canceled and all
consideration paid therefore returnable in the event any of the representations
and warranties set forth in Paragraph A above are untrue or not complied with,
or in the event any of the following conditions do not take place:
1. Humphreys and Minnich fail to execute the employment contracts attached
hereto as Exhibits "B" and "C".
<PAGE>
2. Humphreys, Minnich, and Skyrocket fail to deliver to Total and DCI all
of Skyrocket's property, assets, Operating agreement, Articles of
Organization, records, books, correspondence, intellectual property,
and other writings requested by Total and DCI; or fail to cooperate and
execute all additional documentation to conclude the sale of their 100%
interest in Skyrocket and transfer of its assets to Total and DCI.
VII. ASSIGNIBILITY
This Agreement is assignable by Total and DCI. Total and DCI have the right
to assign their rights and obligations under this Agreement at any time.
VIII. FINANCIAL CONTROL
Upon execution of this Agreement and the payment required pursuant to
Paragraph IV above, Total shall have the exclusive right to control
Skyrocket's finances and shall immediately assume responsibility for handling
all financial affairs of Skyrocket including collecting accounts receivable
and assuring that all accounts payable and other debts are timely paid. Total
shall take responsibility for the finances, accounting, administration,
personnel and all management functions and shall be responsible for the
operation of Skyrocket except to the extent such duties may be delegated to
Humphreys and Minnich pursuant to their Employment Agreements.
IX. INDEMNITY
A. Except as otherwise expressly provided in this Agreement, Skyrocket,
Humphreys and Minnich shall indemnify and hold Total, DCI or their
assignees free and harmless from any and all claims, liability, loss,
damage, or expense resulting from their ownership and transfer of said
assets and interest to Total and DCI or their operation of said assets,
including any claim, liability, loss, or damage arising by reason of
the injury or death of any person or persons, or the damage of any
property.
B. In the event of any liability of Skyrocket which was not previously
disclosed to Total and DCI, Skyrocket's members, Humphreys and Minnich
shall pay, protect, defend, and indemnify Total and/or DCI, and their
employees, officers, directors, shareholders, affiliates,
correspondents, agents, and representatives (herein collectively
referred to as Total/DCI0 against, and hold Total/DCI harmless from,
all claims, actions, proceedings, liabilities, damages, losses,
expenses (including, without limitation, attorney's fees and costs) and
other amounts incurred by Total/DCI.
X. GENERAL PROVISIONS
A. Notices.
Any notices from one party to the other required by this Agreement shall be
given to the parties at the following addresses:
<PAGE>
Total Film Group, Inc. & Dyer Communications, Inc.
9107 Wilshire Blvd., Suite 475
Beverly Hills, California 90210
Skyrocket LLC
60 Green Street
San Francisco, California 94111
Douglass B. Humphreys
60 Green Street
San Francisco, California 94111
April S. Minnich
60 Green Street
San Francisco, California 94111
B. Laws.
This Agreement shall be construed under the laws of the State of California.
C. Binding effect.
This Agreement is binding upon and shall inure to the benefit of the legal
successors and assigns of the parties.
D. Execution in Counterparts.
This Agreement may be executed in any number of counterparts which, when taken
together, shall constitute but one agreement.
E. Entire Agreement.
This Agreement is intended by the parties as the final expression of their
agreement in connection with the acquisition and supersedes all prior
understandings or agreements concerning the subject matter hereof. This
Agreement may be amended only by a writing signed by all the parties.
However, in construing the intent of the parties, it shall be permissible to
read this Agreement in conjunction with the Employment Agreements of
Humphreys and Minnich as well as the Option to Acquire Skyrocket LLC and
Right to Control Finances.
F. Authority.
Humphreys and Minnich warrant and covenant that they are authorized to enter
into this Agreement individually and on behalf of Skyrocket and that all
appropriate or necessary resolutions to enter into this binding contract have
been obtained and complied with.
<PAGE>
Total and DCI warrant and covenant that they are authorized to enter into
this Agreement and that all appropriate or necessary resolutions to enter
into this contract have been obtained and complied with.
DATED: 4/27/99 TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Its: President
DATED: 4/27/99 DYER COMMUNICATIONS, INC.
By: /s/ Gerald Green
Its: President
DATED: 4/23/99 /s/ Douglass B. Humphreys
DATED: 4/23/99 /s/ April S. Minnich
<PAGE>
EXHIBIT 6.16
As of December 23, 1998
Mr. Dan Michel
12533 San Vicente Boulevard
Los Angeles, California 90049
Mr. Howard Russo
327 10th Street
Santa Monica, California 90402
Re: Michel/Russo, Inc./Stock Purchase
Dear Dan and Howard:
This letter will confirm the terms of the agreement ("Agreement") reached
between Dan Michel ("Michel") and Howard Russo ("Russo") (individually, a
"Seller" and collectively, "Sellers"), as sole owner of Michel/Russo, Inc.
("MR"), on the one hand, and Total Film Group, Inc. ("Total"), on the other
hand, with respect to the acquisition by Total of 100% of MR's issued and
outstanding capital stock for the possible purpose of forming a new marketing
and design company in combination with Dyer Communications, Inc. and/or other
entities. For the purpose of this letter, such possible new marketing and
design company shall be named Total Communications, Inc. ("TC"). The terms
are the following:
1. Definitions: In addition to the terms defined elsewhere in the
Agreement, the following terms when used in this Agreement shall have
the following meaning:
a. "Agreement" means this deal letter together with all the exhibits and
schedules referred to herein.
b. "Closing Date" means on such date as the parties shall mutually
designate, but in any event on or before January 6, 1999.
c. "Disclosure Schedule" means the schedule of even date herewith written
by Sellers and containing exceptions to the specific representations
and warranties.
d. "Due Diligence Report" means the due diligence report established, upon
Total's request, by Sellers on the general legal, social and tax
matters related to MR, and the financial statements as of December 31,
1997, as well as MR's operations and statements for the period from
January 1, 1998 to November 30, 1998.
e. "Knowledge" or "known" or "best knowledge" means, with respect to any
representation or warranty or other statement in this Agreement
qualified by the knowledge of any party, such party's actual knowledge,
but including all facts which such party should have
<PAGE>
discovered by conducting such reasonable examination as a reasonably
prudent person would conduct in making such representation, warranty or
other statement.
f. "Shares" means 100% of MR's issued and outstanding capital stock.
2. Conditions Precedent:
a. Total and Sellers each acknowledge and agree that the obligations of
Total are expressly conditioned upon and subject to the following: (i)
Total's receipt of this Agreement fully executed by Sellers; (ii) the
representations and warranties of Sellers contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date as though made at and as of that date (except where such
representation and warranty is made as of a date specifically set forth
therein), and Sellers shall have delivered to Total a certificate to
that effect; and (iii) Sellers shall in all material respects have
performed and complied with all terms, agreements, covenants and
conditions of this Agreement to be performed or complied with by
Sellers at the Closing Date, and Sellers shall have delivered to Total
a certificate to that effect.
b. The obligations of Sellers under this Agreement are subject, at the
option of Sellers, to the satisfaction or waiver of each of the
following conditions at or prior to the Closing Date: (i) the
representations and warranties of Total contained in this Agreement
shall be true and correct in all material respects on and as of the
Closing Date as though made at and as of that date (except where such
representation and warranty is made as of a date specifically set forth
therein), and Total shall have delivered to Sellers a certificate to
such effect; (ii) Total shall in all material respects have performed
and complied with all terms, agreements, covenants and conditions of
this Agreement to be performed or complied with by it at the Closing
Date, and Total shall have delivered to Sellers a certificate to that
effect; and (iii) Michel and Russo shall have been fully released from
their guaranties or other personal liability with respect to the
obligations of MR described in Exhibit 6 of the Disclosure Schedule for
which Michel or Russo has executed a guaranty or otherwise incurred any
personal liability.
3. Purchase of Shares/Consideration:
a. Sale: Subject to the terms and conditions set forth herein, on the
Closing Date, Michel and Russo shall sell and transfer to Total and
Total shall purchase from Michel and Russo 100% of the Shares. Michel
and Russo represent and warrant that they have no interest in the
assets of MR, whether real, personal, tangible or intangible including
the goodwill, business and trade names of MR, which shall remain the
property of MR after the closing of the purchase of the Shares by
Total. The parties acknowledge that Exhibit 15 of the Disclosure
Schedule lists certain items which are owned personally by Michel or
Russo and which are located at the offices of MR. Michel and Russo
shall be permitted to remove such items from such offices at any time.
<PAGE>
b. Consideration: In consideration for the sale and transfer of 100% of
the Shares and all of MR's assets and property, Total shall deliver to
Michel and Russo a number of shares of common stock of Total (the
"Total Shares") having an aggregate value equal to $318,700. For
purposes hereof, the value per share of Total Shares shall be deemed to
be the average closing bid price per share of Total common stock on the
OTC Bulletin Board on each of the ten consecutive trading days
immediately prior to the Closing Date on which such shares may be
traded. Of the Total Shares, 50% shall be delivered to Michel and 50%
shall be delivered to Russo.
c. Financial Control: On the Closing Date, Total shall have the exclusive
right to control MR's finances and shall immediately assume
responsibility for handling all financial affairs of MR including,
without limitation, collecting accounts receivable and assuring that
all accounts payable and other debts are timely paid. Total shall take
responsibility for the finances, accounting, administration, personnel
and all management functions and shall be responsible for the operation
of MR except to the extent such duties may be delegated to Michel and
Russo pursuant to their Employment Agreements.
d. Transfer Taxes: Any California and/or Delaware transfer tax which may
be payable in connection with the sale of the Shares will be the sole
responsibility of Sellers.
e. Expenses: Total agrees to pay, without right of reimbursement from
Sellers, the costs incurred by it in the performance of its obligations
under this Agreement and the consummation of the transactions
contemplated hereby, including the fees and disbursements of its
counsel, accountants and consultants employed by it in connection
herewith. Total shall cause MR to pay, without right of reimbursement
from Sellers, the costs incurred by Sellers in connection with the
transactions contemplated hereby, including the fees and disbursements
of their counsel and accountants employed by them in connection
herewith.
f. Release of Guaranties: Total shall pay on the Closing Date or otherwise
secure the discharge of Sellers' liability under each guaranty or other
personal obligation which either Seller may have with respect to any of
the obligations of MR described in Section 2(b)(iii).
4. Closing:
The closing shall take place at the offices of Total on the Closing Date. At
the closing, Sellers shall deliver to Total stock certificates representing
the Shares duly endorsed for transfer to Total, and Total shall deliver to
Sellers stock certificates representing the Total Shares in the name of
Sellers as designated by each of them prior to the Closing Date. On the
Closing Date, MR shall be in possession of all of MR's property, assets,
operating agreements, records, books, correspondence and intellectual
property. After the closing, Total shall have all rights of ownership of MR.
<PAGE>
5. Indemnity:
a. Subject to the limitations set forth in this Section 5 below, Sellers
hereby agree severally and proportionately to indemnify and hold
harmless Total (and its successors, assigns, representatives and
agents) from and against any and all claims, demands, causes of action,
costs (including reasonable attorneys' fees and costs), expenses,
losses and damages (collectively, "Losses") arising out of or resulting
from any breach by Sellers of any of Sellers' representations,
warranties and agreements contained in this Agreement, net of (i) any
tax adjustments, benefits, savings or reductions, and (ii) any
insurance proceeds, in either case to which Total (or such other
indemnified party) is entitled by virtue of such claims, demands,
causes of action, costs, expenses, losses and damages. Each of the
Sellers shall bear fifty percent (50%) of any indemnification liability
hereunder. Sellers may, but shall not be obligated to, satisfy any
claims of Total or any of its successors, assigns, representatives or
agents for indemnification by transferring to such indemnified party
Total Shares having a value equal to the amount of indemnification
owing to such indemnified party, with each Total Share being valued at
the amount per share determined under Section 3(b) above (with the
number and price per share of Total Shares to be transferred being
subject to appropriate adjustment in the event of any stock dividend,
split, subdivision, combination, reclassification, merger or
reorganization affecting the shares of Total common stock).
b. Sellers' representations and warranties contained herein shall survive
for a period of three (3) years from the Closing Date and shall then
expire. Upon the expiration of a representation or warranty pursuant to
this Section 5(b), unless written notice of a claim based on such
representations or warranty specifying in reasonable detail the facts
on which the claim is based shall have been delivered to the Sellers
prior to the expiration of such representation or warranty, such
representation or warranty shall be deemed to be of no further force or
effect, as if never made, and no action may be brought based on the
same, whether for breach of contract, tort or under any other legal
theory.
c. No claim for indemnification will be made by Total or any of its
successors, assigns, representatives or agents unless the aggregate of
all Losses incurred by such party otherwise indemnified against
hereunder exceeds $5,000 and only to the extent of any such Losses in
excess of $5,000. The Sellers shall not be required to pay
indemnification for Losses (whether in an action for indemnification or
otherwise) by Total or any of its successors, assigns, representatives
or agents (including any Losses previously recovered) in excess of an
aggregate maximum amount of $468,700; provided, however, that that such
maximum amount shall not apply to any Losses which are incurred as a
result of any fraudulent misrepresentation of the Sellers.
d. Indemnification as provided in this Section 5 shall be the exclusive
remedy for monetary damages (whether at law or in equity). Without
limiting the foregoing, neither Sellers nor any of the respective
officers, employees, agents, stockholders, affiliates or
representatives of MR or Sellers shall have any liability or obligation
to Total in respect of any statement,
<PAGE>
representation, warranty or assurance of any kind made by any of them,
except for the representations and warranties set forth in this
Agreement or the Disclosure Schedule.
6. Employment Agreements:
On or before January 31, 1998, Total shall enter into an Employment Agreement
with each of Michel and Russo (each, an "Employment Agreement"). Promptly
after the Closing Date, Total shall prepare and deliver to each of Michel and
Russo an initial draft of such Employment Agreement. Such Employment
Agreement shall contain the terms summarized in Exhibit A attached hereto and
such further provisions as the parties mutually agree upon. Total shall have
the right to assign such Employment Agreements to TC or to any of its
subsidiaries or related entities; provided, however, that any such assignment
shall not be deemed to relieve Total of any liability for the performance of
such Employment Agreements; and provided, further that each of Michel and
Russo may terminate his Employment Agreement (upon 60 days written notice to
Total) if in his sole discretion he elects to do so at any time after any
such assignment which has not been approved in writing by him in advance
(other than the contemplated assignment to TC, which Michel and Russo hereby
approve in advance). Notwithstanding the foregoing, Total may provide written
notification to Michel and Russo of such assignment, and if neither Michel
nor Russo objects to such assignment within ten (10) business days after his
receipt of such notification, their right to terminate their respective
Employment Agreements after such assignment shall be deemed waived. If either
Michel or Russo is entitled under this Section 6 to terminate his employment
after such assignment and does so, Total shall be obligated to pay the
balance then due on the Employment Agreement when such balance would
otherwise be payable under the Employment Agreement (i.e., the total amount
of Fixed and Incentive Compensation provided below and the value of all other
benefits set forth herein through the end of the then current Term or renewal
term (or through the end of the next succeeding renewal term if such
termination occurs in the final sixty (60) days of any year and no notice of
non-renewal is provided by either party prior to such sixty-day period)).
Such payment shall be made at the expiration of the 60-day notice period.
7. Representations and Warranties of Sellers:
The representations and warranties are made severally and proportionately by
each Seller.
All the specific representations and warranties made herein are true and
correct on the date hereof effective on the Closing Date and shall survive
the date of this Agreement for the period set forth in Section 5(b). All
statements made in the Disclosure Schedule are deemed representations.
a. Corporate and Stock Representation:
(i) Capitalization: The shares of MR are duly and validly issued in
compliance with all applicable laws and regulations and fully paid, and
constitute all of the issued shares in MR. MR has not issued any other
shares, bonds, convertibles, or similar instruments. No option,
warrant, agreement or commitment of any kind obligating MR to issue any
equity interests in other stock exists. MR is not obligated or
committed to purchase, redeem or otherwise acquire any of its
outstanding shares or options related thereto.
<PAGE>
(ii) Ownership of the Shares: The Shares are owned by Sellers free and
clear of all liens, pledges, encumbrances, claims, options or
restrictions affecting any of the rights attached to such Shares. Each
Seller has full legal right, power and authority to enter into this
Agreement and to assign and transfer the Shares held by him to Total.
(iii) Incorporation of MR: MR is in all respects duly organized, in
good standing and validly existing under the laws of the State of
California, and MR has all the requisite corporate power to own its
assets and to carry out its business as it is now conducted, and said
business has been conducted and is now being conducted to the best
knowledge of Sellers in conformity with all applicable laws and
regulations. No action is pending or threatened, to the best knowledge
of Sellers, to declare MR bankrupt and it has not filed or commenced
any proceedings for judicial or extra-judicial arrangements or
settlements with its creditors.
(iv) Corporate Documents: Sellers have delivered to Total, true and
complete and updated copies of the latest version of the by-laws and
all other corporate charter documents of MR. A copy of such documents
is attached in Exhibit 1 of the Disclosure Schedule. To the best
knowledge of the Sellers, all accounts, books, financial and other
records of whatsoever kind of MR required to be maintained by law have
been fully, properly and accurately maintained in all material respects
in accordance with applicable law and contain due and accurate records
in all material respects of all matters required to be rendered
therein, and reflect truly and accurately in all material respects all
transactions involving the businesses and affairs of MR. The minute
books of MR contain complete and accurate records of all shareholders'
and directors' meetings and of all actions taken by such shareholders
and directors. The meetings referred to in such minute books were duly
and validly adopted. The signature(s) appearing on all documents
contained in such minute books is/are the true signature(s) of the
person(s) purporting to have signed. The books of registered shares or
other registered stock of MR reflect accurately the number of shares or
other stock held by the Sellers.
(v) Representation and Banks: Set forth in Exhibit 2 of the Disclosure
Schedule are: (1) the names and addresses of all banks and other
financial institutions in which MR has an account with the names and
addresses of all persons authorized to draw on said accounts, and (2)
the names and addresses of all persons holding a power of attorney on
behalf of MR and the subject and scope of such power of attorney.
b. Assets: Except as set forth in Exhibit 3 of the Disclosure Schedule, MR
is the owner free and clear of all mortgages, liens, pledges,
encumbrances, claims, preemption rights, options, restrictions,
easements and commitments of any kind of all installations, accounts
receivable, cash and all other fixed and current assets, including but
not limited to raw materials, in process products and finished products
that it presently owns; the list of the leasing agreements and rentals
is set forth in Exhibit 4 of the Disclosure Schedule. There is no
pledge on the assets of MR to the benefit of any third party except as
set forth in Exhibit 4 of the Disclosure Schedule.
<PAGE>
c. Intellectual Property: Set forth in Exhibit 5 of the Disclosure
Statement is a true and complete list and copy of all trademarks,
currently used trade names, corporate names and logos, whether
registered or not, used, or owned but not used by MR (the "Intellectual
Property"), and of all license agreements (as a licensor or licensee)
relating to the Intellectual Property.
d. Contracts and Commitments:
(i) List of Agreements and Commitments: Set forth in Exhibit 7 of the
Disclosure Schedule is a true and complete list of all material
agreements and commitments (other than license agreements related to
intellectual property, insurance policies or labor agreements referred
to in other sections of this Agreement) to which MR is a party or by
which it or any of its assets may be bound.
(ii) Real Property Leases: Set forth in Exhibit 8 of the Disclosure
Schedule is a complete list and copy of all the lease agreements of
real property.
(iii) MR has not entered into any written or oral agreement, commitment
or understanding limiting or restraining it from carrying out its
activities the way it would appear most appropriate to it, and notably
from engaging or competing in any business in which it may engage, with
any third party.
(iv) Debts to and from related parties: MR is not indebted to any past
or present director, officer or employee of Sellers or MR, other than
for payment of salaries and compensation for services actually rendered
to MR in the ordinary course of business and reimbursement of expenses
incurred in the ordinary course of business, except as set forth in
Exhibit 9-A of the Disclosure Schedule. Except as set forth in Exhibit
9-B of the Disclosure Schedule, there are no debts owed to MR by any of
the same persons.
e. Insurance: Set forth in Exhibit 10 of the Disclosure Schedule is a true
and complete list and copy of all insurance policies maintained by MR.
All the assets of MR have been adequately insured with reputable and
notably solvent insurance carriers; the insurance policies are still in
force and full effect and all related premiums have been and still are
fully paid in due course, and MR is, in the good faith judgment of its
directors, adequately insured against the risks which it deemed
appropriate. Neither Sellers nor MR has received any notification of
cancellation or suspension of any policy or any notification of the
cancellation, suspension or reduction of the coverage thereunder.
f. Employees: Set forth in Exhibit 11 of the Disclosure Schedule is a true
and complete list of all employees of MR (other than Sellers)
specifying their current salary, commissions, remuneration in kind,
bonuses, pensions and other benefits.
g. Compliance with laws, agreements and litigation: Except as disclosed in
Exhibit 12 of the Disclosure Schedule.
<PAGE>
(i) To the best of Sellers' knowledge, MR has complied with all
applicable laws, regulations, court decisions, arbitration awards and
other legal requirements affecting its business and operations.
(ii) To the best of Sellers' knowledge, all written agreements of any
kind to which MR is a party or by which it or any of its assets may be
bound are valid and enforceable in accordance with their terms.
(iii) No material claim, investigation, action or proceeding is pending
or, to the knowledge of MR threatened against MR, before any court,
arbitrator, tribunal or official authority.
(iv) Sellers have the right, power, capacity and authority to enter
into this Agreement and to consummate the transactions contemplated
therein. No prior authorization, consent or approval of, or
notification to, any other person, firm or entity is required in order
for Sellers to consummate the transactions contemplated hereby.
h. Financial Statements:
(i) Referenced Financial Statements: Set forth in Exhibit 13 of the
Disclosure Schedule is the unaudited Financial Statement of MR at and
for the eleven months ended November 30, 1998.
(ii) Taxes: Except as set forth in Exhibit 14 of the Disclosure
Schedule there are no tax liens or mortgages on any assets of MR and
there are no pending tax examinations or tax claims asserted on MR, or
to the best knowledge of Sellers, any basis of such claim.
8. Representations and Warranties of Total: Total hereby represents and
warrants to Sellers as follows:
a. Corporate and Stock Representation:
(i) Capitalization: The Total Shares will, upon issuance thereof in
accordance with the provisions hereof, be duly and validly issued in
compliance with all applicable laws and regulations and fully paid, and
will represent approximately __% of the issued and outstanding shares
in Total.
(ii) The Total Shares: Upon issuance thereof to Sellers, the Total
Shares will be free and clear of all liens, pledges, encumbrances,
claims, options or restrictions affecting any of the rights attached to
such Total Shares. Total has full legal right, power and authority to
enter into this Agreement and to issue the Total Shares to Sellers.
(iii) Incorporation of Total. Total is in all respects duly organized,
in good standing and validly existing under the laws of the State of
Delaware, and Total has all the requisite corporate power to own its
assets and to carry out its business as it is now conducted, and
<PAGE>
said business has been conducted and is now being conducted to the best
knowledge of Total in conformity with all applicable laws and
regulations. No action is pending or threatened, to the best knowledge
of Total, to declare Total bankrupt and it has not filed or commenced
any proceedings for judicial or extra-judicial arrangements or
settlements with its creditors.
(iv) Corporate Documents: Total has delivered to Sellers, true and
complete and updated copies of the latest version of the by-laws and
all other corporate charter documents of Total. To the best knowledge
of Total, all accounts, books, financial and other records of
whatsoever kind of Total required to be maintained by law have been
fully, properly and accurately maintained in all material respects in
accordance with applicable law and contain due and accurate records in
all material respects of all matters required to be rendered therein,
and reflect truly and accurately in all material respects all
transactions involving the businesses and affairs of Total.
b. Annual Report. Total has provided to the Sellers a true and complete
copy of its Annual Report for the year ended December 31, 1997. Except
as disclosed by Total to Sellers in writing, since December 31, 1997,
there has been no material adverse effect on Total's business,
financial condition, results of operations or prospects. To the best
knowledge of Total, the Total annual report provided to Sellers does
not contain any untrue statement of a material fact.
9. Plan of Reorganization:
Total and Seller hereby adopt this Agreement as a "plan of reorganization"
within the meaning of sections 1.368-2(g) and 1.368-3(a) of the United States
Treasury Regulations. No party shall take any action inconsistent with the
treatment of the transfer of the Shares hereby as a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code.
10. Miscellaneous:
a. Notices: All notices hereunder shall be made in writing by personal
delivery or first class registered or certified mail to the applicable
address indicated below, or to such other address as the applicable
party may designate by written notice to the other, and the date of
such mailing or delivery shall be deemed the date of such notice.
Total Film Group, Inc.
9107 Wilshire Boulevard, Suite 475
Beverly Hills, California 90210
Michel Russo, Inc.
1501 Colorado Avenue, Suite 2
Santa Monica, California 90404
Dan Michel
<PAGE>
12533 San Vicente Boulevard
Los Angeles, California 90049
Howard Russo
327 10th Street
Santa Monica, California 90402
Copies of any notices sent to MR or any of the Sellers shall be
delivered in addition to Russell C. Hansen, Gibson, Dunn & Crutcher
LLP, 2029 Century Park East, Los Angeles, California 90067.
b. Assignment: Except as provided herein, this Agreement may not be
assigned by any party without the prior written consent of the other
party. This Agreement shall inure to the benefit of the parties hereto
and their respective successors and permitted assigns.
c. Governing Law: This Agreement has been made and entered into in Los
Angeles County, and shall be construed in accordance with the laws of
the State of California applicable to agreements which are signed and
fully performed within such State. All actions, proceedings or
litigation brought by any party against another shall be instituted and
prosecuted solely within the State of California and not anywhere else.
d. Entire Agreement. This Agreement, its exhibits and the Disclosure
Schedule, the documents incorporated by reference, and the documents
executed on the Closing Date in connection herewith, constitute the
entire agreement between the parties hereto with respect to the subject
matter hereof and supersede all prior agreements and understandings,
oral and written, between the parties hereto with respect to the
subject matter hereof.
e. Attorneys' Fees. If any litigation is commenced (including any
proceedings in a bankruptcy court) between the parties hereto or their
representatives concerning any provision of this Agreement or the
rights and duties of any person or entity hereunder, solely as between
the parties hereto or their successors, the party or parties prevailing
in such proceeding will be entitled to the reasonable attorneys' fees
and expenses of counsel and court costs incurred by reason of such
litigation.
f. Severability. The validity, legality or enforceability of the remainder
of this Agreement will not be affected even if one or more of the
provisions of this Agreement will be held to be invalid, illegal or
unenforceable in any respect.
g. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
If the above terms are in accordance with your understanding, please acknowledge
your agreement by signing where indicated below.
<PAGE>
Sincerely yours,
Total Film Group, Inc.
By: /s/ Gerald Green
Its: President
Agreed and Accepted this 23rd day of December, 1998.
/s/ D. Daniel Michel, Jr.
/s/ Howard Russo
<PAGE>
Exhibit A
Principal Terms of Employment Agreements
For the purpose of this Exhibit, the employing entity shall be called "Company".
The material terms of the Employment Agreements of Michel and Russo are the
following:
a. Title and Capacity:
(i) Michel: Executive Vice President and Chief Operating Officer of TC
(or, pending the formation of TC, each of Dyer Communications and MR).
(ii) Russo: Executive Vice President and Co-Creative Director of TC
(or, pending the formation of TC, each of Dyer Communications and MR).
b. Term/Exclusivity:
(i) The Term shall be one (1) year commencing as of January 1, 1999,
which shall be subject to automatic renewal for one (1) additional year
commencing as of January 1, 2000 unless the Company notifies Michel or
Russo , as the case may be, of its desire not to renew at least sixty
(60) days prior to December 31, 1999. If so renewed, the Term shall be
subject to automatic renewal for an additional renewal period of one
(1) year through December 31, 2001, unless either party notifies the
other of its desire not to renew at least sixty (60) days prior to
December 31, 2000; provided, however, that if Michel or Russo, as the
case may be, provides such notice of non-renewal, then during the year
ending December 31, 2001, he shall not (A) compete with the Company's
business, (B) call on, solicit, take away or attempt to call on ,
solicit or take away any of the customers of the Company or (C) solicit
any of the Company's employees to leave the employ of the Company. The
Term and possible extension(s) shall be subject to earlier termination
as briefly described in subparagraph f below.
(ii) The services shall be exclusive and all results and proceeds of
services owned by Company; provided, however, that Sellers shall be
entitled to devote a non-material portion of their time to other
activities and business interests.
(iii) The services shall be rendered in Company's business premises in
Los Angeles County, which shall be not more than ten (10) miles from
the current location of Total's offices at 9107 Wilshire Boulevard,
Suite 475, Beverly
Hills, California.
c. Fixed Compensation:
For each of Michel and Russo:
(i) For year 1: $150,000 per year.
<PAGE>
(ii) For possible year 2: $175,000 per year.
(iii) For possible year 3: $195,000 per year.
Such compensation shall be payable in accordance with Company's standard payroll
policies and shall have deducted any applicable withholding taxes and standard
and legally required deductions.
d. Incentive Compensation:
Each of Michel and Russo shall receive within 30 days after Total reports its
revenues for 1999 and each calendar year during which he is employed under
this Agreement, and in any event within 120 days after the end of each such
year, an incentive compensation payment ("Incentive Compensation") equal to
six and one-third percent (6.333%) of the amount, if any, by which (i) the
gross sales revenue of TC (which for purposes of this paragraph (d) shall
include in any event MR, Dyer Communications, Skyrocket Interactive and any
business unit providing similar services which may be created or acquired by
Total, TC or their subsidiaries or affiliates) during such calendar year,
exceeds (ii) the gross sales revenue in 1998 of MR, Dyer Communications and
Skyrocket Interactive. For purposes hereof, gross sales revenues shall be
determined in accordance with generally accepted accounting principles,
consistently applied, and shall be the amount of gross sales revenues of TC
which are reflected in the audited financial statements of Total. Such gross
sales revenues shall be certified by the chief financial officer of Total and
shall be subject to reasonable opportunity for audit thereof by Michel, Russo
or their respective representatives. Michel and Russo shall not audit the
books of the Company more than once in any twelve month period. Any such
audit shall be conducted during normal business hours after reasonable
advance notice to Total and shall be completed within thirty (30) days after
Total provides all requested records.
e. Benefits:
(i) Automobile Allowance: Monthly automobile allowance equal to the sum
of (a) $395.00 in the case of Michel and $391.78 in the case of Russo
plus (b) the lesser of (i) the incremental monthly cost to each of
Michel and Russo, as the case may be, of insuring his leased car on his
personal automobile insurance policy with coverage comparable to that
currently maintained by the Company or (ii) the monthly cost currently
being incurred by MR in insuring such car.
(ii) Business Expenses: Reasonable business and travel expenses will be
reimbursed to each of Michel and Russo. Such expenses shall be
reimbursed within 30 days after delivery to Company of an itemized
statement and sufficient backup documentation. In no event shall the
nature and amount of such expenses be less than the expenses currently
provided by MR (on an annual basis).
(iii) Medical and other benefits: The Company shall provide to each of
the Sellers and their dependents the same medical and dental coverage
as is maintained for Gerald Green or his successor as Total's chief
executive officer. In the event that such medical and
<PAGE>
dental coverage is not available in full (whether as a result of any
pre-existing condition exclusion or otherwise) until a later date, the
Company shall, in the interim, pay or reimburse Michel and Russo for
the cost of maintaining their current coverage after the Closing Date
under COBRA. On or before June 30, 1999, the Company will adopt a
401(k) plan or other tax deferred savings plan providing benefits to
Sellers which are substantially the same as those currently provided to
Sellers under the Simple IRA currently provided by MR to Sellers. The
Company shall take whatever action is necessary in accordance with
applicable law to terminate the active participation of the
participants in such Simple IRA. Upon the expiration of the current
term of the life insurance policies currently maintained by MR for the
benefit of Michel and Russo (which the parties understand to be May 14,
1999 in the case of Russo and July 27, 1999 in the case of Michel), the
Company shall either renew such coverage or provide insurance coverage
of at least the same amounts for the remainder of the Term of
employment of Michel or Russo, as the case may be. Upon the expiration
of the current term of the disability insurance policy currently
maintained by MR for Michel and Russo (which the parties understand to
be March 2, 1999, the Company shall either renew such coverage or
provide disability insurance coverage of at least the same amounts with
at least the same benefits for the remainder of the Term of employment
of Michel or Russo, as the case may be.
(iv) Vacation: twenty working days per accruing, for accounting
purposes, prorata for each week of services rendered hereunder, to be
utilized at such times and periods as shall be mutually agreed in good
faith between the parties.
(v) Travel: all travel shall be conducted during normal business hours;
same class of travel and accommodations as provided to other similar
level executives of Total.
f. Termination:
(i) Death or Disability: Immediately upon death or upon notice for
absence caused by disability for 60 consecutive days (or 90 days in the
aggregate) in any 12 month period of the Term, all Fixed and Incentive
Compensation vested to the date of death or disability is paid;
provided, however, that the Company shall have no right to terminate
either Seller's employment as a result of the disability of such Seller
unless such Seller is entitled to full benefits for permanent, total
disability under the disability insurance policy maintained by the
Company for the benefit of such Seller pursuant to Section (e)(iii)
above.
(ii) For Cause: Immediately upon cause for termination; Customary
definition (including (a) material breach which is not cured within
five (5) days after the Company provides written notice of such breach,
(b) felony and (c) alcoholism); all accrued Fixed and Incentive
Compensation vested to the termination date is paid, without prejudice
to any of Company's other rights. In the event of termination for cause
of a Seller in accordance with the foregoing sentence, the prohibitions
set forth in Section (b)(i)(A), (B) and (C) shall apply for one year
after the effective date of such termination.
<PAGE>
(iii) Without cause: Upon 3 (three) months prior notice; provided,
however, that in the event that either Seller is terminated without
cause pursuant to this Section (f)(iii), such Seller shall be entitled
to his full Fixed and Incentive Compensation and all other benefits set
forth herein through the end of the then current Term or renewal term
(or through the end of the next succeeding renewal term if such
termination occurs in the final sixty (60) days of any year and no
notice of non-renewal is provided by either party prior to such
sixty-day period).
(iv) In the event of the termination of the employment of either Seller
by the Company, then irrespective of whether such termination is
voluntary or involuntary or with or without cause, such Seller shall
thereafter hold in confidence and not disclose any of the trade secrets
or confidential information of the Company which is not known or
available to the public, except that such Seller may disclose any such
trade secret or confidential information to the extent and only to the
extent required by law or legal process.
g. Sellers' Right to Terminate Employment Agreement:
(i) Each of Michel and Russo may terminate his employment agreement
(upon 60 days written notice to Total) if in his sole discretion he
elects to do so at any time after any entity or person other than Total
acquires a controlling interest in TC, any entity or person other than
Gerald Green acquires a controlling interest in Total. Notwithstanding
the foregoing, Total may provide written notification to Michel and
Russo of such acquisition, and if neither Michel nor Russo objects to
such acquisition within ten (10) business days after his receipt of
such notification, their right to terminate their respective Employment
Agreements after such acquisition shall be deemed waived. For purposes
hereof, the term "controlling interest" shall mean ownership of record
and beneficially of capital stock or other equity securities of TC or
Total, as the case may be, having at least 50% of the total voting
power of the such company or the total right to any dividends or other
distributions by such company, whether in the ordinary course or upon
liquidation. If either Michel or Russo elects to terminate his
employment in such event, Total shall be obligated to pay the balance
then due on the Employment Agreement (i.e., the total amount of Fixed
and Incentive Compensation and the value of all other benefits set
forth herein through the end of the then current Term or renewal term
(or through the end of the next succeeding renewal term if such
termination occurs in the final sixty (60) days of any year and no
notice of non-renewal is provided by either party prior to such
sixty-day period)). Such payment shall be made at the expiration of the
60-day notice period; provided, however, that such Incentive
Compensation shall be paid at the time such Incentive Compensation
would otherwise be payable hereunder.
(ii) Each of Michel and Russo may terminate his employment agreement
(upon 60 days' written notice) if in his sole discretion he elects to
do so at any time after he is asked or instructed to report to any
person other than Gerald Green. Notwithstanding the foregoing, Total
may provide written notification to Michel and Russo of such change in
reporting relationship, and if neither Michel nor Russo objects to such
change within thirty (30) days after his receipt of such notification,
their right to terminate their respective
<PAGE>
Employment Agreements after such change shall be deemed waived. If such
decision is made, Total shall be obligated to pay the balance then due
on the Employment Agreement (i.e., the total amount of Fixed and
Incentive Compensation and the value of all other benefits set forth
herein through the end of the then current Term or renewal term (or
through the end of the next succeeding renewal term if such termination
occurs in the final sixty (60) days of any year and no notice of
non-renewal is provided by either party prior to such sixty-day
period)). Such payment shall be made at the expiration of the 60-day
notice period; provided, however, that such Incentive Compensation
shall be paid at the time such Incentive Compensation would otherwise
be payable hereunder.
h. No Duty to Mitigate Damages. In the event of the termination of the
employment of either Seller, whether in accordance with the provisions
of this Agreement or otherwise, such Seller shall have no obligation to
seek employment or to accept any employment in order to mitigate the
damages or other amounts owing by the Company to such Seller hereunder,
and in the event that such Seller accepts other employment, any
compensation earned by him in connection therewith shall not reduce or
otherwise affect the amount of any payment required to be made to such
Seller as a result of such termination.
<PAGE>
As of July 28, 1999
Mr. D. Daniel Michel
11414 Bolas Street
Los Angeles, CA 90049
Mr. Howard Russo
327 10th Street
Santa Monica, CA 90402
Re: Michel/Russo, Inc. / Stock Purchase
Dear Dan and Howie:
Reference is hereby made to the agreement ("Agreement") dated as of December
23rd, 1998 between D. Daniel Michel and Howard Russo, on the one hand, and
Total Film Group, Inc.("Total"), on the other hand, with respect to the
acquisition by Total of one hundred percent (100%) of Michel/Russo, Inc.
issued and outstanding capital stock.
The Agreement is amended as follows:
1. The provisions of Paragraph 3.b are hereby intentionally deleted and
replaced by the following provisions: "In consideration for the sale
and transfer of 100% of the Shares and all of MR's assets and property,
Total shall deliver to Michel and Russo 100,000 shares of common stock
of Total ("Total Shares"), such certificates to bear a restrictive
legend in compliance with Rule 144 promulgated by the Securities and
Exchange Commission under the Securities Act of 1933, as amended, as
follows: 50,000 of said shares to be delivered to D. Daniel Michel and
50,000 of said shares to be delivered to Howard Russo.
2. The provisions of Paragraph 3.e are hereby intentionally deleted and
replaced by the following provisions: "Each party agrees to pay,
without right of reimbursement from the other party, the costs incurred
by it in the performance of its obligations under this Agreement and
the consummation of the transactions contemplated hereby, including the
fees and disbursements of its counsels, accountants and consultants
employed by such party in connection herewith; provided, however, that
Total agrees, upon presentation of the appropriate invoice, to pay
Sellers' attorneys' fees up to $12,800 (twelve thousand eight hundred
dollars)".
3. In Paragraph 8.b., 2nd line, the words "December 31, 1997" are hereby
intentionally deleted and replaced by the words "June 30, 1998".
4. In Paragraph 8.b., 3rd line, the words "December 31, 1997" are hereby
intentionally deleted and replaced by the words "June 30, 1998".
<PAGE>
5. The provisions of Paragraph d. of Exhibit A are hereby intentionally
deleted and replaced by the following provisions:
"IX. Incentive Compensation & Stock Option:
A. Incentive Compensation: Each of Michel and Russo shall receive within
thirty (30) days after Company reports its revenues for the six (6)
month period ended June 30, 1999 and then for each fiscal year during
which he is employed under this Agreement, and in any event within one
hundred and twenty (120) days after the end of such six (6) month
period ended June 30, 1999 and then of each such fiscal year, an
incentive compensation payment ("Incentive Compensation") equal to five
percent (5%) of the net profits of TC and its wholly owned
subsidiaries. The term "net profits" as used in this paragraph, shall
mean TC's and its wholly owned subsidiaries' consolidated annual net
operating income before the deduction or allowance for federal or state
income taxes. The determination of net profits shall be made by TC's
auditor in accordance with generally accepted accounting principles,
consistent with TC's past accounting practices, and shall be conclusive
on all parties. Michel and Russo may, at their own expense, but not
more than once annually, audit the applicable records. Any such audit
shall be conducted only by a public accountant during reasonable
business hours after reasonable advance notice and in such manner as
not to interfere with Company's normal business activities and shall
not continue more than thirty (30) consecutive days.
B. Stock Option: As additional compensation, Total hereby grants to each
of Michel and Russo the option to purchase 50,000 shares of common
stock of Total as set forth in the form of Stock Option attached hereto
as Exhibit B and incorporated herein by this reference".
6. In Paragraph e.(iv) of Exhibit A, 1st line, the word "annum" is added
between the words "twenty working days per" and the word "accruing".
All other terms and conditions of the Agreement remain the same.
Thank you for acknowledging your agreement with the above terms by signing
where indicated below.
Sincerely yours,
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green Date: 12/23/99
Its: President
ACCEPTED AND AGREED:
/s/ Daniel Michel, Jr. Date: 12/23/99
/s/ Howard Russo Date: 12/23/99
<PAGE>
EXHIBIT 6.17
EMPLOYMENT AGREEMENT
1. Date and Parties
THIS EMPLOYMENT AGREEMENT ("Agreement") is dated as of September 15,
1999, by and between TOTAL FILM GROUP INC., a Delaware corporation, with its
principal place of business at 9107 Wilshire Boulevard, #475, Beverly Hills,
California 90211 ("Employer") and GERALD GREEN, an individual ("Executive").
2. Recitals
2.1 Employer is engaged primarily in the business of financing,
producing and distributing theatrical motion pictures and related products
and activities in the United States, and/ or elsewhere.
2.2 Executive has extensive experience and expertise in this
area.
2.3 The services to be rendered by Executive to Employer on a
full-time basis under this Agreement are essential to the eventual success of
Employer.
3. Employment
Employer hereby employs Executive and Executive hereby accepts
employment upon the terms and conditions hereinafter set forth.
4. Term
The term of this Agreement shall begin as of September 15, 1999, and
shall expire on August 31, 2004.
5. Services
The services to be rendered by Executive shall be as Chief Executive
Officer of Employer, and in such capacity Executive shall be responsible for
the day-to-day operation and management of Employer, making sure that
Employer's business operates smoothly and according to the policies and plans
set forth by the Board of Directors of Employer. Executive shall also be
responsible for such other duties as may be designated by Employer's Board of
Directors consistent with the foregoing named office. Employer further
engages Executive to render services exclusively for and as directed by
Employer as an executive producer of theatrical motion pictures and in any
other capacities designated by Employer in all areas and fields throughout
the entertainment industry subject to the terms and conditions of this
agreement. Executive hereby accepts such employment and agrees to keep and
perform, diligently and conscientiously, all of the duties assumed by him
under this agreement.
<PAGE>
6. Extent of Services
6.1 Executive shall devote substantially all of his business time,
attention andenergies to his services as an employee of Employer and to the
furtherance of its business interests. Executive shall not during the term of
this Agreement be engaged in any other business activities which shall
substantially affect Executive's obligations to devote his time, attention
and energies to the affairs of Executive, without the consent of the Board of
Directors.
6.2 Executive agrees to render services as the chief executive
officer of the Employer and as an executive producer in theatrical motion
pictures and such other services as Employer may reasonably designate, on an
exclusive basis, and to devote sufficient time, attention, skills and efforts
in connection with Employer's business and to comply with all instructions
issued by Employer; to perform services conscientiously to the full limit of
his ability at all times and whenever and wherever required and desired by
Employer and as instructed by Employer. These shall include artistic taste
and judgment, Executive's agreement to faithfully perform such duties and
exercise such powers from time to time as the Board of Directors may
prescribe. This agreement, however, shall not be interpreted to prevent
Executive from having investments and devoting time to such personal matters
that may require attention so long as such activities will not interfere with
their performance of services required under this agreement.
7. Compensation
Employer shall pay to Executive as compensation for Executive's
services, for the term of this Agreement the following:
7.1 An annual salary of $350,000, subject to increases as authorized
by the Board of Directors, payable in equal monthly amounts, subject to
standard withholding and other payroll deductions, payable semi-monthly at
the 15th and at the end of each month during the term of this Agreement.
Additionally, on or before June 15 of each year, Employer shall pay to
Executive the sum of $29,166.67 as a bonus.
7.2 An annual bonus equal to 10% of the net profits of Employer
before income tax determined in accordance with generally accepted accounting
principles, consistently applied, to be determined by Employer's outside
accountants and paid as soon as such figure has been determined, but in no
event later than September 15th of each year commencing with the fiscal year
ending June 30, 2000.
7.3 If Executive's employment ends before the end of a fiscal year
of Employer, Executive's bonus shall be calculated by multiplying Employer's
net profit before income tax for such fiscal year by a fraction, the
numerator of which is the number of months Executive was employed by Employer
during such fiscal year treating any partial month as an entire month, and
the denominator of which is twelve. Such bonus shall be paid as soon as
practicable after Employer has determined its net profit for such fiscal
year. Employer shall be entitled to reduce the amount payable to Executive by
the amount of any draws previously paid to Executive not
<PAGE>
previously reimbursed to Executive. Net profits shall be determined using
generally accepted accounting principles, consistently applied;
7.4 An executive producer's fee to be negotiated for each project
prior to the commencement of principal photography for each such project.
7.5 Employer agrees to reimburse Executive for all reasonable
business expenses incurred by Executive in connection with Executive's
services under this agreement. Executive shall also render services at such
other places as Employer may designate from time to time. When and if
Executive is required to render such services away from the home of
Executive, Employer agrees to furnish or reimburse Executive for first class
transportation and living expenses for Executive and one other person as may
be reasonably required on account of the rendition of such services, or to
pay Executive a fixed weekly sum as reimbursement for such expenses.
Employer's obligations under this paragraph shall not be affected by any
suspension for any cause or by any right on Employer's part to withhold
compensation payable to Executive, but shall continue to and including the
time that this agreement expires or is otherwise terminated.
7.6 Employer agrees to review the services provided by Executive
under this agreement at least annually and, subject to the direction of the
Board of Directors, depending upon the financial condition of Employer and
Executive's performance during the period in question, to increase or
decrease such compensation and/or award bonuses either directly or by way of
contributions to deferred compensation plans, such amount to be determined by
corporation in its sole discretion.
7.7 Employee shall have the right to elect to defer any part of the
compensation to be paid Executive provided that Executive delivers written
notice to Corporation prior to the date Executive obtains an unqualified and
unconditional right to the compensation.
8. Other Allowances
Employer agrees to pay to or on behalf of Executive:
8.1 Up to $1,500 a month to lease an automobile and all related
insurance, maintenance, gasoline and oil expenses for such vehicle.
8.2 The premium for medical, hospital and major medical insurance
covering Executive, his spouse and children up to age 25 and the amount of
medical and hospital expenses paid or payable for such persons not covered by
such insurance.
8.3 Vacation pay for 3 weeks each year as well as pay for all the
legal holidays provided by Employer for its full-time employees. At
Executive's option, each or all of this vacation time may be accrued and
Executive may elect to take the vacation time or payment in place of taking
the time off in later years. Employer acknowledges that Executive is still
entitled to his full 3 week vacation for the 3 fiscal year ending June 30,
1997, 1998 and 1999.
<PAGE>
9. Authority
Executive shall have such authority as is conferred by Employer's
bylaws upon the person holding the position to which Executive is hereby
appointed, along with all authority customarily exercised by the person
holding such position, and such other and additional authority as may be
conferred upon or delegated to him by Employer's Board of Directors.
10. Life or Other Insurance
Employer may, in its discretion, at any time after the date of this
agreement, apply for and procure as owner and for its own benefit, insurance
on Executive's life, or any other insurance, such as health or accident
insurance, in such amounts and in such form as Employer may choose. Employee
shall have no interest whatsoever in any such policy but shall, at the
request of corporation, submit to such medical examinations, supply such
information and execute such documents as may be required by the insurance
company to whom Employer has applied for such insurance. Executive shall have
the right to have assigned to him any then existing life insurance policies
on his life existing at the end of the term of this agreement.
11. Illness or Incapacity
Executive shall receive full compensation for any period of illness
or incapacity during the term of this agreement. However, if Executive
develops an illness or incapacity which will totally disable him from
rendering services to Employer for a period of more than twelve months,
Employer shall have the right to suspend its payment obligation or terminate
this agreement at its option. Such right to suspend or terminate shall be
exercisable by Employer by giving at least thirty days written notice of its
intention to suspend or terminate this agreement. If Executive is able to
resume his duties under this agreement within thirty days following receipt
of such notice and if Executive shall continue to perform such duties on a
regular basis for three consecutive months, thereafter, this agreement shall
continue in full force and Employer's notice of intention to suspend shall
have no further effect. For purposes of this clause, Executive shall be
considered to be totally disabled if, by reason of illness or incapacity,
physical and mental, Executive is unable to fully perform all services
required of him or comply with each of his obligations under this agreement.
In such event, Employer shall have the right to have medical examinations of
Executive made by such physician or physicians as Employer may reasonably
designate, provided that Executive may have present or participating in such
medical examinations any physician of his own choice at his own expense.
12. Credit
Employer agrees to consult with Executive in connection with any
screen and advertising credit and billing to be accorded Executive for
particular services rendered by him under this agreement.
<PAGE>
13. Miscellaneous
13.1 Severability. If, in any judicial proceeding, a court shall
refuse to enforce any part or parts of the agreement, then such unenforceable
parts shall be deemed eliminated from these provisions for the purpose of
those proceedings to the extent necessary to permit the remaining parts to be
enforced
13.2 Assignment. Executive's rights and obligations pursuant to this
Employment Agreement may not be assigned by Employer without Executive
consent which Executive may give or withhold in the sole and arbitrary
exercise of its discretion.
13.3 Notices. Any notices to be given under this agreement by either
party to the other may be effected by personal delivery in writing or by
mail, registered or certified, postage prepaid, with return receipt requested
or by fax. Mailed notices shall be addressed to the parties at the addresses
appearing below, but each party may change his or its address by written
notice in accordance with this paragraph. Notices delivered personally shall
be deemed communicated as of actual receipt; mailed notices shall be deemed
communicated as two business days after mailing, first class postage affixed.
Notices delivered by fax shall be deemed communicated on the business day
they are sent or if sent on a non-business day, on the next business day.
13.4 Entirety Clause. This Agreement supersedes any and all other
agreements, either oral or in writing, between the parties with respect to
the employment of Executive by Employer and contains all of the covenants and
agreements between the parties with respect to such employment in any manner
whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, orally or otherwise
have been made by any party, or anyone acting on behalf of any party, which
are not embodied in this Agreement. Any modification of this Agreement will
be effective only if it is in writing signed by the party to be charged.
13.5 Damages. In the event of a breach of this Agreement by either
Employer or Executive resulting in damages to the other party, that party may
recover from the party breaching the Agreement any and all damages including,
without limitation, reasonable attorneys' fees and court costs that may be
sustained.
13.6 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
The parties have executed this Agreement on the date first above
written.
TOTAL FILM GROUP INC.
By: /s/ Eli Boyer
Address: 9107 Wilshire Blvd., #475
Beverly Hills, California 90210
<PAGE>
/s/ Gerald Green, "Executive"
Address: 9019 Lloyd Place
West Hollywood, CA 90069
<PAGE>
EXHIBIT 6.18
EMPLOYMENT AGREEMENT
SUMMARY OF PARTICULARS
RECITALS:
1. Dyer Communications, Inc. desires assurance of the continued
association and services of John Rodney Dyer in order to retain his
experience, abilities, and knowledge, and is therefore willing to
engage his services on the terms and conditions set forth below.
2. John Rodney Dyer desires to continue in the employ of Dyer
Communications, Inc. and is willing do so on the terms and conditions
set forth below.
3. The parties also acknowledge that Dyer Communications, Inc. may become
part of a new marketing and design company which may be formed in
combination with Michel Russo, Inc. and/or other entities. For the
purpose of this Agreement, such possible new marketing and design
company will be named Total Communications, Inc. ("TC").
Therefore, in consideration of the above recitals and of the mutual promises
and conditions in this agreement ("Agreement"), it is agreed as follows:
I. EMPLOYER: Dyer Communications, Inc. ("Company")
II. EMPLOYEE: John Rodney Dyer ("Employee")
III. TITLE AND CAPACITY: President of Company.
IV. DUTIES AND OBLIGATIONS: Customary duties of President, reporting to
Gerald Green or his successor, as described in Paragraph 1 of Appendix
A.
V. EXCLUSIVITY: Employee's services shall be exclusive, as more fully
described in Paragraph 6 of Appendix A; provided, however, that
Employee shall be entitled to devote a non-material portion of his time
to other activities and business interests.
VI. TERM: The Term of Employee's employment hereunder ("Term") shall
commence as of January 1, 1999 and end at midnight on December 31,
1999; provided, however, that unless Company or Employee gives written
notice to the other party at least sixty (60) days before any
anniversary of the date of this Agreement, this Agreement's Term shall
be extended for additional one (1) year terms on January 1 of each
year. This Agreement's Term shall include any automatic extensions
pursuant to the preceding sentence; and provided further, however, that
this Agreement may be terminated as provided for in Appendix B of this
Agreement.
VII. FIXED COMPENSATION: Employee shall receive $100,000 ("Fixed
Compensation") per annum payable in accordance with Company's standard
policies, as set forth in
<PAGE>
Paragraph 3.1 of Appendix A. Company's Board of Directors shall review
Employee's Fixed Compensation then being paid to Employee not less
frequently than every twelve (12) months. Following such review,
Company's Board of Directors may, in its sole discretion, decide to
increase Employee's Fixed Compensation and/or any other benefits.
Company's Board of Directors shall not decrease Employee's Fixed
Compensation without Employee's prior written approval.
VIII. INCENTIVE COMPENSATION: Employee shall receive within thirty (30) days
after Company reports its revenues for the six (6) month period ended
June 30, 1999 and then for each fiscal year during which he is employed
under this Agreement, and in any event within one hundred and twenty
(120) days after the end of such six (6) month period ended June 30,
1999 and then of each such fiscal year, an incentive compensation
payment ("Incentive Compensation") equal to five percent (5%) of the
net profits of TC and its wholly owned subsidiaries. The term "net
profits" as used in this paragraph, shall mean TC's and its wholly
owned subsidiaries' consolidated annual net operating income before the
deduction or allowance for federal or state income taxes. The
determination of net profits shall be made by TC's auditor in
accordance with generally accepted accounting principles, consistent
with TC's past accounting practices, and shall be conclusive on all
parties. Employee may, at his own expense, but not more than once
annually, audit the applicable records. Any such audit shall be
conducted only by a public accountant during reasonable business hours
after reasonable advance notice and in such manner as not to interfere
with Company's normal business activities and shall not continue more
than thirty (30) consecutive days.
IX. STOCK BONUS: As additional compensation to Employee under this
Agreement, Company shall grant to Employee shares of common stock, par
value $.001 (the Common Stock") of Total Film Group, Inc., a Delaware
corporation and parent of the Company (hereinafter the "Parent"),
pursuant to the following terms and conditions:
A. Stock Issuances: Subject to the terms set forth in this Section IX,
Company shall cause the Parent to issue shares of Common Stock to
Employee as follows: 50,000 shares immediately upon execution of this
Agreement by both parties hereto; 50,000 shares on the first business
day one year from the date of this Agreement (hereinafter the "Second
Bonus Payment"); and 50,000 shares on the first business day eighteen
months from the date of this Agreement (hereinafter the "Third Bonus
Payment"). The stock certificates shall bear a restricted legend in
compliance with Rule 144 promulgated by the Securities and Exchange
Commission under the Securities Act of 1933, as amended.
B. Effect of Termination of Employment, Death or Disability:
Notwithstanding the provisions of Paragraph XIV C., in the event that
this Agreement is terminated without cause or the Employee resigns from
his position with Company prior to the date of the Second Bonus
Payment, the obligation of Company to grant the Second Bonus and the
Third Bonus Payments shall be null and void and Employee shall have no
further rights to such stock bonuses. Notwithstanding the provisions of
Paragraph XIV C., if this Agreement is terminated without cause or the
Employee resigns from his position with Company after
<PAGE>
the date of the Second Bonus Payment, but prior to the Third Bonus
Payment, the obligation of Company to grant the Third Bonus Payment
shall be null and void and Employee shall have no further rights to
such stock bonus. In the event that Employee is terminated at any time
for cause as set forth in Paragraph XIV B., any and all rights such
individual may have in the unissued stock bonuses shall be null and
void and Employee shall have no further rights to such stock bonuses.
In the event of the death of the Employee, all rights such individual
may have in the unissued stock bonuses shall be null and void and
Employee and/or Employee's estate shall have no further rights to such
stock bonuses. In the event of the disability of Employee as set forth
in Paragraph XIV A., Employee shall continue to have the right to
receive the bonus shares hereunder until this Agreement is terminated.
C. Reservation of Stock: Company shall cause the Parent to reserve for
issuance of the stock bonuses set forth above the number of shares of
Common Stock subject to such unissued stock bonuses. The Parent may
reserve either authorized but unissued shares or issued shares that
have been acquired by the Parent.
D. Dilution or Other Adjustment: In the event that the number of shares of
Common Stock of the Parent from time to time issued and outstanding is
increased pursuant to a stock split or a stock dividend, the number of
shares of Common Stock to be issued pursuant to the Second or Third
Bonus Payment shall be increased proportionately. In the event that the
number of shares of Common Stock of the Parent from time to time issued
and outstanding is reduced by a combination or consolidation of shares,
the number of shares of Common Stock to be issued pursuant to the
Second or Third Bonus Payment shall be reduced proportionately. No
fraction shares shall be issued, and any fractional shares resulting
from the computations pursuant to this subparagraph shall be eliminated
from the respective Second or Third Bonus Payment. No adjustment shall
be made for cash dividends, for the issuance of additional shares of
Common Stock for consideration approved by the Board of Directors of
the Parent, or for the issuance to stockholders of rights to subscribe
for additional Common Stock or other securities.
E. Assignment: Neither the Second or Third Bonus Payment may be assigned
by Employee without the prior written consent of Company.
F. Securities Law Provisions: Company shall cause the Parent to take all
reasonable steps as it deems appropriate to permit issuance of the
shares of Common Stock as specified in this Paragraph pursuant to a
valid exemption from registration or qualification under applicable
federal and state securities laws; provided, that in no event shall the
Parent be required to consent to the general service of process or to
qualify as a foreign corporation in any jurisdiction where Employee
resides if such jurisdiction is different than Employee's present
residence. In order to comply with exemptions from the registration
requirements of the Security Act of 1933, and certain state securities
statutes, the Parent may require Employee to make certain
representations and execute and deliver to Parent certain documents as
a condition to issuance of the shares of Common Stock hereunder, all in
form and substance satisfactory to Parent as determined in its sole
discretion. In the event
<PAGE>
Parent reasonably determines that the shares of Common Stock cannot be
issued in compliance with applicable federal and state securities laws
in the absence of registration or qualification under such statutes,
neither Parent nor Company shall be under any obligation to issue the
shares of Common Stock pursuant hereto. Neither Company nor Parent is
under any obligation to provide registration rights in connection with
any of the shares of Common Stock issued pursuant to this Paragraph.
G. Right of First Refusal; Option upon Termination or Death: Employee
agrees that he will not sell, transfer, assign, or in any way alienate
any of the shares of Common Stock of the Parent received as stock
bonuses pursuant to this Agreement (hereinafter the "Shares"), or any
right or interest therein, whether voluntary or by operation of law, or
by gift or otherwise without the prior written consent of the Parent,
except through a transfer which meets the requirements of this
subparagraph.
a. Voluntary Sales: In the event that Employee wishes to dispose of the
Shares or any portion thereof (the "Offered Shares") through a
voluntary sale or other disposition, Employee shall first notify the
Parent of the identities of the proposed purchaser or purchasers, the
number of Offered Shares and the proposed price and terms of sale. The
Parent shall thereupon have a right of first refusal to purchase the
Offered Shares at the price and on the terms offered by the proposed
purchaser. If the Parent does not exercise its right to purchase with
respect to all of the Offered Shares within ten (10) business days
following receipt of the notice from Employee, Employee shall have the
right for a period of ninety (90) days thereafter to sell the Offered
Shares not purchased by the Parent at the same or higher prices and
terms as were available to the Parent.
b. Termination or Death of Employee: In addition to the right of first
refusal in the event of voluntary sales as set forth above, for a
period of ninety (90) days following the termination of Employee's
employment with Company, either voluntarily on the part of Employee or
for good cause by Company, or following the death of Employee, the
Parent shall have the option to purchase a portion or all of the Shares
at a purchase price equal to seventy five percent (75%) of the average
bid price of the Shares as quoted on the Bulletin Board, or other
quotation service, for the five (5) trading days immediately prior to
the date of termination or death. Employee shall make no voluntary
sales of the Shares during such ninety (90) day period without the
prior written consent of the Parent. Any voluntary sales of the Shares
following such ninety (90) day period shall be subject to subparagraph
a. above.
c. Permitted Transfers: Notwithstanding any provisions of this
subparagraph to the contrary, Employee may transfer the Shares, or any
portion thereof, to his spouse or issue, or to a trust for his or their
benefit. The transferee, or any subsequent transferee, shall hold such
Shares subject to all the provisions of this Agreement and shall make
no further transfers other than as permitted in subparagraph a. above.
As a condition to the effectiveness of any permitted transfer
contemplated hereby, the transferee shall execute an acknowledgment and
consent of the provisions hereof. On the death or termination of
Employee, the transferee shall be required to sell the Shares as
provided in subparagraph
<PAGE>
b. above in the same manner and to the same extent as Employee would
have been required to sell the Shares.
d. Endorsement of Stock Certificate(s): Each certificate representing
Shares subject to this Paragraph shall be stamped with a legend in
substantially the following form: "The transfer of the shares of stock
represented by the within certificate is restricted under the terms of
an Employment Agreement dated as of January 1st, 1999, a copy of which
is on file at the office of Company".
H. Amendment: This Section XI shall not be amended without the prior
written consent of the Parent. The Parent shall be deemed a third party
beneficiary of this Agreement.
X. AUTOMOBILE ALLOWANCE: Employee shall be entitled to a monthly
automobile allowance of $1,087.25 per month, in accordance with
Paragraph 3.3 of Appendix A.
XI. BUSINESS EXPENSES: Reasonable business expenses and travel expenses
will be reimbursed to Employee in accordance with Paragraphs 3.4.1 and
3.4.2 of Appendix A.
XII. MEDICAL AND OTHER BENEFITS: Same as provided to other similar level
executives of Company, as more fully described in Paragraph 3.5 of
Appendix A.
XIII. VACATION: Employee shall be entitled to twenty (20) days annual paid
vacation leave as set forth in Paragraph 3.6 of Appendix A.
XIV. TERMINATION: As set out in Appendix B, summarized as
follows:
A. Death or Disability: Immediately upon death or upon notice for absence
caused by disability for sixty (60) consecutive days (or ninety (90)
days in the aggregate) in any twelve (12) month period of the Term; all
Fixed and Incentive Compensation vested to the date of death or
disability is paid; provided, however, that Company shall have no right
to terminate Employee's employment as a result of the disability of
Employee unless Employee is entitled to full benefits for permanent,
total disability under the disability insurance policy maintained by
Company for the benefit of Employee.
B. For Cause: Immediately upon cause for termination; Customary definition
(including (a) material breach which is not cured within five (5)
business days after Company provides written notice of such breach, (b)
felony, and (c.) alcoholism); all accrued Fixed and Incentive
Compensation vested to the termination date is paid, without prejudice
to any of Company's other rights.
C. Without Cause: Upon three (3) months prior notice; provided, however,
that in the event that Employee is terminated pursuant to this Section,
Employee shall be entitled to his full Fixed and incentive Compensation
and all other benefits set forth herein through the end of the then
current Term or renewal term (or through the end of the next succeeding
renewal term if such termination occurs within the final sixty (60)
days of any year and no
<PAGE>
notice of non-renewal is provided by Company or either party - as
applicable - prior to such sixty-day period.
XV. GOVERNING LAW: This Agreement shall be subject to the Laws of the State
of California as more fully described in Paragraph 18 of Appendix A.
XVI. ARBITRATION: Disputes to be resolved by binding arbitration, as more
fully described in Paragraph 17 of Appendix A.
XVII. WORK LOCATION: Services to be rendered in Company's business premises
in Los Angeles County, which shall be no more than ten (10) miles from
9107 Wilshire Blvd., Beverly Hills, CA.
XVIII. ADDITIONAL TERMS: Additional customary terms as set forth in Appendices
A and B attached hereto are incorporated by reference herein
(collectively, including this Summary of Particulars, this "
Agreement").
IN WITNESS WHEREOF, the parties hereto have executed this Agreement at Los
Angeles, as of January 1st, 1999.
DYER COMMUNICATIONS, INC.
By: /s/ Gerald Green
Its: President
ACCEPTED AND AGREED:
/s/ John Rodney Dyer
END OF SUMMARY OF PARTICULARS
<PAGE>
APPENDIX A
SCOPE OF APPENDIX A
All terms and conditions of this Appendix A are incorporated in the Agreement
(hereinafter this "Agreement").
1. DUTIES AND OBLIGATIONS
1.1 Company hereby employs Employee and Employee hereby agrees to render
services in the capacity of President of Company, consistent with the
provisions of Paragraph 2 of this Appendix A.
1.2 Employee also hereby agrees that Employee's services may be assigned
and/or loaned by Company to any of its subsidiaries or related
entities. Any such subsidiary or related entity to whom Employee's
services are assigned or loaned hereunder is hereafter referred to as a
"Borrower Company". In the event Employee's services are assigned
and/or loaned to a Borrower Company, Company agrees to remain liable
for all compensation and benefits to which Employee is entitled.
1.3 In serving as President of Company, and subject to the policies and
directives of Company's Board of Directors, Employee shall be in charge
of and responsible for all development, production and operational
matters of Company. Employee shall consult with the management
committee in the decision-making process of Company relating to all
material matters concerning administrative and operational matters.
1.4 Employee's responsibilities shall include performing all services
customarily rendered by executives of a similar position in the
advertising industry as reasonably required by the management
committee. Subject to the provisions of Section VI of the Summary of
Particulars, Employee shall devote his entire and exclusive productive
business time, ability and attention to the business of Company during
the term of this Agreement.
1.5 Employee shall not on behalf of Company, without the specific prior
written approval of the management committee of Company, or except in
accordance with Company's bylaws, or in accordance with guidelines
provided by Company's Board of Directors from time to time, do or
contract for any of the following:
1.5.1 Borrow money on behalf of Company or loan of Company's money.
1.5.2 Assign, mortgage, encumber, transfer or sell any of Company's assets or
property.
1.5.3 Enter into any material contract or executory commitments on behalf of
Company which involves a payment by Company of more than $5,000.
1.6 It is expressly understood and agreed that Employee shall not submit or
furnish to any person or entity other than Company any ideas, formats,
material or properties relating to
<PAGE>
the advertising and design business and that any and all ideas,
formats, material and/or properties relating to the advertising and
design business conceived, created, developed and/or written by
Employee during the Term or any extension thereof shall be and become
the sole and absolute property of Company for any and all purposes
whatsoever pursuant to the terms hereof.
2. TERM
As provided in Section VII of the Summary of Particulars.
3. COMPENSATION AND BENEFITS
3.1 Fixed Compensation
During the Term of this Agreement, Company shall pay Employee for all
services rendered and all rights granted hereunder the fixed compensation
provided in Section VII of the Summary of Particulars. Such compensation
shall be payable in accordance with Company's standard payroll policies and
shall have deducted any applicable withholding taxes and standard and/or
legally required deductions.
3.2 Incentive Compensation
Employee shall be entitled to the Incentive Compensation set forth in Section
VIII of the Summary of Particulars.
3.3 Automobile Allowance
Employee shall be entitled to an automobile allowance as set forth in Section X
of the Summary of Particulars. Other than the foregoing allowance, Company shall
not pay and Employee shall not be entitled to reimbursement for any other costs
or expenses related to the operation, maintenance or insurance of Employee's
automobile.
3.4 Business Expenses
3.4.1 Subject to the provisions of Section XI of the Summary of Particulars,
during the Term of this Agreement, Company shall pay or reimburse
Employee for all necessary and reasonable expenses incurred or paid by
Employee, in connection with the performance of Employee's services
under this Agreement upon receipt of invoices, receipts or such other
supporting information evidencing the nature and payment of such
expenses by Employee, as is reasonably deemed appropriate by Company
and is consistent with Company's accounting practices. Any major
expense (e.g. travel) outside of or in excess of amounts contained in
Company's policies must be pre-approved by the management committee of
Company in writing.
<PAGE>
3.4.2 Notwithstanding Paragraph 3.4.1, all such business expenses will be
subject to such limits and categories applicable to other similar level
executives of Company as may from time to time be provided in writing
by the management committee of Company or any applicable Borrower
Company.
3.4.3 Company shall provide an office suitable for a similar level executive
of Employee's standing and the services of a secretary, for Employee's
use in connection with Employee's services hereunder. The amount of
compensation payable to such secretary shall be subject to the approval
of Company.
3.5 Insurance
3.5.1 Company agrees to cause Employee to be covered by medical and dental
insurance plans provided to employees of Company under the terms and
conditions provided to such employees, or other substantially similar
plans. Such insurance will contain coverage and benefits no less
favorable than that provided to any other similar level executive of
Company.
3.5.2 Company may secure "key man" insurance covering Employee and Employee
shall have no right, title or interest in or to such insurance.
Employee agrees to submit to any usual and customary medical
examination required to effect such insurance (at which examination
Employee may elect to have his own physician present) and to sign such
application or other documents reasonably required in connection
therewith.
3.5.3 Whenever compensation is payable to Employee hereunder during any
period when he is partially or totally disabled and such disability
except for the provisions hereof, would entitle him to disability
income or to salary continuation payments from Company according to the
terms of any plan now or hereafter adopted by Company (it being
acknowledged that Company currently has no such plan in effect or has
any immediate plans to implement such a plan) or according to Company's
policy in effect at the time of such disability, the compensation
payable to him hereunder shall be inclusive of any such disability
income or salary continuation and shall not be in addition thereto. If
disability income is payable directly to Employee by an insurance
company under an insurance policy paid for by Company or by a
governmental agency, the amounts paid to him by said insurance company
or governmental agency shall be considered to be a part of the payments
to be made by Company pursuant to this Paragraph and shall not be in
addition thereto.
3.6 Vacation and Holidays
Company shall provide Employee with the normal Company and public holidays,
and up to 20 working days per year during the Term as paid vacation accruing
- - for accounting purposes - pro-rata for each week of services rendered
hereunder during the Term of this Agreement, to be utilized at such times and
periods as shall be mutually agreed to in good faith between Employee and
Company. Employee agrees that, unless Employee received written direction
from Company
<PAGE>
to not take all or part of his vacation, all paid vacation days accrued
during the Term shall be payable at the termination of Employee's employment
hereunder based upon his then current rate of pay.
3.7 Other Benefits
Employee shall be considered for inclusion in any other benefits or plans
offered to other similar level executives of Company; provided, however that
nothing herein shall require Company to increase the value of benefits and
compensation to which Employee is entitled pursuant to Paragraph 3.1 through
3.6 above or the Summary of Particulars.
4. EXTENT OF SERVICES
4.1 Subject to the provisions of Section V of the Summary of Particulars,
Employee shall devote Employee's exclusive business time, attention and
energies to the business of Company, and any Borrower Company to which
Employee's services are assigned or loaned under the terms of this
Agreement, to the best of Employee's ability with loyalty, good faith
and full regard for the efficient and economic conduct of such
businesses.
4.2 Employee hereby warrants and represents that Employee's employment
hereunder does not and shall not conflict in any way whatsoever with
any involvement, or violate any agreement that Employee now or
previously has or may have during the Term of Employee's employment
hereunder with any person or entity.
5. OWNERSHIP OF RESULT OF SERVICES
5.1 Any and all results and proceeds of services performed by Employee
within the scope of Employee's duties hereunder shall be owned by
Company, or any applicable Borrower Company, and shall be deemed in all
respects as works made for hire, and Company shall be the sole and
absolute author and proprietor thereof.
5.2 Employee agrees to execute and deliver to Company, or to any Borrower
Company during or after the Term of said employment, such assignment or
other instruments as Company, or the respective related entity or
subsidiary of Company, may reasonably require from time to time to
evidence the ownership of the rights and interests and of the results
and proceeds of Employee's services as before mentioned.
5.3 Employee hereby appoints Company, or such applicable Borrower Company
(and their respective successors and assigns as the case may be) as
Employee's irrevocable attorney- in-fact with full power of
substitution and delegation in Employee's name or in the name of
Company or applicable Borrower Company to take such actions and execute
such documents as Company may deem reasonably necessary to enforce and
protect any and all of such rights and interests which documents
Employee has previously failed or refused to sign and deliver to
Company or Company's designee (after Employee has been given a
reasonable opportunity to do so). In the event that any document is
signed in Employee's
<PAGE>
name pursuant to the powers granted hereunder, Company shall provide a
copy of such document to Employee.
6. NON-DISCLOSURE OF TRADE SECRETS
6.1. Employee shall not:
6.1.1 Except for actions taken in the course of Employee's employment, during
the Term of this Agreement or at any time thereafter, willfully use or
divulge to any person, company or corporation, either directly or
indirectly, any financial or other material information of a
confidential or proprietary nature obtained by Employee while in the
employment of Company or any Borrower Company. The parties hereby
stipulate that, as between them, the foregoing matters are important,
material and confidential and gravely affect the effective and
successful conduct of the business of Company and its goodwill, and
that any intentional, willful or habitual breach of the terms of this
provision is a material breach of this Agreement and constitutes
grounds for termination.
6.1.2 During the Term of this Agreement, be actively engaged or concerned or
interested in any business whatsoever other than that of Company except
as (i) the owner for investment of shares or other securities quoted or
dealt in or on any recognized stock exchange; or (ii) as a passive
investor in any other business which is not in competition in the same
market with any business or company owned by Company or any affiliate
of Company; or (iii) as the co-owner of Pane e Vino.
6.1.3 If terminated by Company, within 1 (one) year of the termination of
Employee's employment hereunder, howsoever effected, engage in any
business in competition with Company, and/or call on, solicit, take
away, or attempt to call on, solicit, take away any of the customers of
Company, and/or directly or indirectly solicit, hire or recruit any
employee of Company.
6.2 If any of the restrictions contained in clause 6 is held not to be
valid as going beyond what is reasonable for the protection of the
interests of Company, but would be valid if part of the wordings were
deleted or its extent reduced or modified, then such restriction shall
apply with such modifications as may be necessary to make it
enforceable.
7. TERMINATION
This Agreement may be terminated as set forth in Appendix B attached hereto
and incorporated herein.
8. DAMAGES
In the event that Employee is awarded any damages as compensation for any
breach of this Agreement, a breach of any covenant contained in this
Employment Agreement (whether express or implied by either law or fact), or
any other cause of action based in whole or in part on a
<PAGE>
breach of any provision of this Agreement or related in any way to Employee's
employment hereunder (other than with respect to physical injuries suffered
by Employee or intentional or grossly negligent actions by Company or its
employees), such damages shall be limited to contractual damages and shall
exclude punitive damages and any other type of tort damages. Employee
specifically waives any right to seek or be entitled to injunctive or other
equitable relief in the event of a breach by Company hereunder. Employee
agrees and acknowledges that in making any claims or recovering any damages
awarded in connection with this Agreement, Employee will look solely to
Company or any applicable Borrower Company and to Company's assets or the
assets of any applicable Borrower Company and will in no circumstances seek
to recover such damages from any of Company's or Borrower Company's
constituent shareholders, directors or executives or any of Company's or
Borrower Company's parents, subsidiaries or related entities or Gerald Green,
personally.
9. PROVISIONS SURVIVING TERMINATION
It is expressly agreed that notwithstanding termination of Employee's
employment with and by Company for any reason or cause or under any
circumstances whatsoever, such termination shall be without prejudice to the
rights and obligations of Employee and Company, respectively, in relation to
the time up to and including the date of termination, and all the provisions
of this Appendix A and of Appendix B of this Agreement which expressly or
impliedly by their terms survive the termination of this Agreement, including
without limitation the provisions of Paragraphs 5 through 19 of this Appendix
A shall remain and continue in full force and effect unless and until
Company's board of Directors in their absolute discretion resolves otherwise
and so notifies Employee in writing.
10. WAIVER
10.1 The waiver by either party of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any
subsequent breach.
10.2 No waiver shall be valid unless it is in writing and signed by the
party to be charged; and, in the case of Company, on behalf of Company
pursuant to a resolution by Company's Board of Directors.
11. REPRESENTATIONS AND WARRANTIES
11.1 Employee hereby represents, warrants and agrees that Employee is under
no disability, restriction or prohibition, whether contractual or
otherwise (i) with respect to his rights to execute this Agreement,
(ii) to grant the rights to his services as provided hereunder, or
(iii) with respect to his right to perform the terms and provisions
herein contained. Employee hereby agrees and does hereby defend,
indemnify, save and hold Company, and its directors, officers,
partners, shareholders, employees, agents, legal representatives,
licensees, affiliates, predecessors, successors and assigns, harmless
from and against any and all claims, demands, damages, liabilities,
costs, losses and expenses (including legal costs and reasonable
outside attorneys' fees) arising out of or in connection with any
<PAGE>
breach of any of the warranties, representations and agreements made by
Employee in this Agreement. Employee agrees to reimburse Company, on
demand, for any payment made by Company at any time with respect to any
such demand, liability, costs, loss or expense to which the foregoing
indemnity applies; provided, such payment arises from a final adverse
judgment or arbitration or a settlement made with Employee's prior
consent, which consent Employee shall not unreasonably withhold.
Company shall notify Employee in writing of any such claim, demand or
action promptly after Company has been formally advised thereof and
Employee shall have the right, at his expense to participate in the
defense thereof with counsel of his choice.
11.2 Company hereby represents, warrants and agrees that it is under no
disability, restriction or prohibition, whether contractual or
otherwise to (i) with respect to its rights to execute this Agreement,
or (ii) with respect to its rights to perform the material terms and
provisions contained therein. Company hereby agrees and does hereby
defend, indemnify, save and hold Employee harmless from and against any
and all claims, demands, damages, liabilities, costs, losses and
expenses (including legal costs and reasonable outside attorneys' fees)
arising out of or in connection with any breach of any of the
warranties, representations and agreements made by Company in this
Agreement. Company agrees to reimburse Employee, on demand, for any
payment made by Employee at any time with respect to any such demand,
liability, costs, loss or expense to which the foregoing indemnity
applies; provided, such payment arises from a final adverse judgment or
arbitration or a settlement made with Company's prior consent, which
consent Company shall not unreasonably withhold. Employee shall notify
Company in writing of any such claim, demand or action promptly after
Employee has been formally advised thereof and Company shall have the
right, at his expense to participate in the defense thereof with
counsel of its choice.
12. ENTIRE AGREEMENT
12.1 No representation, promise or inducement has been made by either party
that is not embodied in this Agreement, or incorporated by reference
herein, and neither party shall be bound by or be liable for any
alleged representation, promise or inducement not so set forth.
12.2 This Agreement contains the entire agreement and understanding of the
parties and is effective on the date set forth in Paragraph 3 of
Appendix A of this Agreement for the commencement of this Agreement.
This Agreement supersedes and voids all prior agreements, arrangements
and understandings entered into between Company or any or its
respective related entities or subsidiaries, on the one hand, and
Employee, on the other hand.
12.3 This Agreement may not be changed orally but only by an agreement in
writing signed pursuant to a resolution of Company's Board of Directors
and by the party against whom enforcement of any waiver, change,
modification, extension or discharge is sought.
<PAGE>
13. ASSIGNMENT
Employee acknowledges that the services to be rendered by Employee are unique
and personal. Accordingly, Employee may not assign or encumber any of the
Employee's rights or delegate any of Employee's duties or obligations under
this Agreement.
14. NOTICES
Any notice required or desired to be given under this Agreement shall be
deemed given if it is expressed in writing and sent by certified mail or if
delivered by telefax or personally to the following persons, or such other
persons as may be designated in writing by the parties hereto from time to
time:
If to Company: Dyer Communications, Inc.
8360 Melrose Avenue, 3rd Floor
Los Angeles, CA 90069
with a courtesy copy to: Total Film Group, Inc.
9107 Wilshire Blvd., Suite 475
Beverly Hills, CA 90210
Attention: Gerald Green
and
Ronald N. Vance, Esq.
American Plaza II
57 West 200 South
Suite 310
Salt Lake City, Utah 84101
If to Parent: Total Film Group, Inc.
9107 Wilshire Blvd., Suite 475
Beverly Hills, CA 90210
Attention: Gerald Green
with a courtesy copy to: Ronald N. Vance, Esq.
American Plaza II
57 West 200 South
Suite 310
Salt Lake City, Utah 84101
If to Employee: John Rodney Dyer
153 South Camden Drive
Beverly Hills, CA 90210
<PAGE>
15. GENERAL
15.1 It is acknowledged that the rights of Company under this Agreement are
of a special, unique and intellectual character, which gives them a
peculiar value and that each breach or threatened breach of any
provision of this Agreement may cause Company irreparable injury and
damage, which cannot be reasonably or adequately compensated in damages
and in action at law. Accordingly, without limiting any right or remedy
which Company may otherwise have, Employee specifically agrees that
Company shall be entitled to seek, in addition to any other rights and
remedies, injunctive relief or other equitable relief to enforce and
protect its rights under this Agreement and to prevent or curtail any
breach or threatened breach.
15.2 Nothing in this Agreement shall be construed as to so require the
commission of any act contrary to law and wherever there is any
conflict between any provision of this Agreement and any present or
future statute, law, ordinance or regulation, the latter shall prevail,
but in such event, the provision of this Agreement so affected shall be
curtailed and limited only to the extent necessary to bring it within
such legal requirements.
15.3 If any term or provision of this Agreement is held to be invalid or
unenforceable under California law, the remaining portions of this
Agreement will continue to be valid and will be performed, construed
and enforced to the fullest extent permitted by law, and the invalid or
unenforceable term will be deemed amended and limited in accordance
with the intent of the parties, as determined from the face of the
Agreement, to the extent necessary to permit the maximum enforceability
or validation of the term or provision.
15.4 Section 508 of the Federal Communication Act makes it a criminal
offense for any person connected with the production or preparation of
any program intended for broadcasting to accept or pay any money,
service or other valuable consideration for the inclusion of any matter
as a part of any such program without disclosing the same to the
employer of the person to whom such payment is made or to the person
for whom such program is being produced. Employee understands that it
is Company's policy not to permit any employee of Company to accept or
to pay any such consideration and Employee represents and agrees that
Employee has not accepted, nor will accept, and that Employee has not
paid, or will not pay, any money, service or other valuable
consideration for the inclusion of any "plug", reference or product
identification or any other matter with respect to the Company's
projects.
16. ATTORNEYS FEES
In the event of any legal action or arbitration which arises out of or
relates to any provision of this Agreement, the losing party to such action
(based on the final judgment, arbitration decision or settlement thereof)
shall bear the reasonable attorneys' fees and related costs of the prevailing
party.
17. ARBITRATION
<PAGE>
17.1 Any claim, controversy or dispute arising under or in connection with
this Agreement shall be settled exclusively by arbitration in
accordance with this Section 17.1. Such dispute shall promptly be
submitted by Employee and Company for resolution to a single arbitrator
(who shall be a retired former judge of a trial court of federal
jurisdiction in California or a federal district court) selected by the
parties hereto in accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA").
17.2 The decision of the Arbitrator shall be final and binding upon the
parties and judgment may be entered thereon by any court having
jurisdiction. Company and Employee hereby submit to the in personam
jurisdiction of the Superior Court of the State of California for
purposes of confirming any ruling made by the Arbitrator.
17.3 In any arbitration hereunder concerning Company's right to terminate
Employee's employment hereunder, the following shall apply:
17.3.1 If the Arbitrator shall hold that Company terminated Employee's
employment pursuant to Paragraph 1 or 2 of Appendix B, Employee shall
be entitled to no remedy or compensation other than the compensation or
benefits expressly payable pursuant to Paragraph 1.2 or 2.3 of Appendix
B, as applicable.
17.3.2 If the Arbitrator shall hold that Employee was not terminated for any
of the reasons set forth in Paragraphs 1 or 2 of Appendix B, Company
shall be deemed for all purposes of this Agreement to have given notice
of termination on the fifth (5th) business day after notice was
initially given pursuant to paragraph 1 or 2 of Appendix B. In such
event, Employee shall be entitled to receive only such amounts as
provided for in Paragraph 3 of Appendix B.
17.4 For the avoidance of doubt, Employee and Company agree that the
Arbitrator shall not be authorized to award punitive, exemplary or any
other type of non-contractual damages consistent with Paragraph 10 of
this Appendix A.
18. GOVERNING LAW
This Agreement shall be deemed to have been made under and shall be
interpreted in accordance with and governed by the laws of the State of
California applicable to contracts executed and to be performed in California.
19. CONSTRUCTION
The language of this Agreement shall always and for all purposes be construed
as a whole according to its fair common meaning and not strictly for or
against either of the parties hereto.
END OF APPENDIX A
<PAGE>
APPENDIX B
All terms and conditions of this Appendix B are incorporated in the Agreement.
1. Death or Disability:
1.1 Employee's employment hereunder shall terminate automatically in the
event of Employee's death, or upon written notice in the event of
Employee's absence or inability to render the services required
hereunder because of illness or incapacity after sixty (60) consecutive
days (or ninety (90) days in the aggregate) in any twelve (12) month
period during the Term; provided, however, that Company shall have no
right to terminate Employee's employment as a result of his disability
unless he is entitled to full benefits for permanent, total disability
under the disability insurance policy maintained by Company for the
benefit of Employee pursuant to Section XIV of the Summary of
Particulars.
1.2 In case of termination hereunder due to death, absence or inability to
render the services required because of illness or incapacity, Employee
or his estate shall be entitled to receive all Fixed Compensation which
has accrued and would otherwise be payable to Employee pursuant to
Paragraph 3.1 of Appendix A together with the Incentive Compensation
which has accrued and vested as of the date of termination.
2. Termination For Cause:
2.1 Company may at any time by written notice to Employee, terminate
Employee's employment hereunder, without prejudice to any of Company's
other rights, for any of the events listed under Section 2.2 below
which are not capable of immediate cure (including, without limitation,
the events set forth in paragraphs 2.2.2, 2.2.3 and 2.2.4), or which,
if capable of cure, remains uncured for a period of five (5) business
days after Employee receives written notice from Company that such an
event has occurred, and setting forth the nature of the breach and the
action required to remedy the same.
2.2 The following acts shall constitute grounds for termination of
Employee's employment hereunder:
2.2.1 Breach of any material term of this Agreement or malfeasance or
material non-feasance with respect to Employee's duties which is set
forth in this Agreement or asserted by a resolution of Company's board
of directors;
2.2.2 Conviction of a felony offense or other criminal offense involving
dishonesty or moral turpitude;
2.2.3 Becoming bankrupt and having a second receiving order (or any analogous
order under any applicable law) made against Employee or making any
general composition with Employee's creditors;
<PAGE>
2.2.4 Alcoholism or drug addiction.
2.3 Termination under Paragraph 2.1 shall be effective upon the date of
written notice, or as stated in such notice. In the event of any such
termination, all of Company's obligations under this Agreement and the
Appendices attached hereto shall forthwith cease and terminate on such
effective date with the exception of Company's obligation to pay any
Fixed and Incentive Compensation which have accrued and vested and are
payable to Employee pursuant to Paragraph 3 of Appendix A, without
prejudice to any of Company's other rights and Employee shall have no
other claim or recourse against Company or any affiliate thereof,
whether or not under this Agreement, for the payment or the performance
of any other obligation.
3. Termination Without Cause:
3.1 Company shall have the right at any time to terminate Employee's
employment hereunder for any reason without cause by giving three (3)
months prior written notice to Employee of such termination. In the
event of any such termination, Employee shall be entitled to his full
Fixed and Incentive Compensation and all other benefits set forth
herein through the end of the current Term or renewal term (or through
the end of the next succeeding renewal term if such termination occurs
within the final sixty (60) days of any year and no notice of
non-renewal is provided by Company or either party - as applicable -
prior to such sixty-day period.
3.2 Any amounts payable to Employee pursuant to Paragraph 3.1 shall be
payable in accordance with Company's payroll policies, less applicable
withholding taxes and payroll deductions, if any, and any other legally
required deductions. Furthermore, the remedy provided for in Paragraph
3.1 above shall be deemed liquidated damages and shall constitute the
sole and exclusive remedy at law, in arbitration or in equity for any
dispute whatsoever, whether of a contractual or non-contractual nature,
which is based in whole or in part, on the contention that Company did
not have sufficient cause to terminate Employee's employment, or acted
in an improper or unlawful fashion in terminating Employee's
employment.
END OF APPENDIX B
<PAGE>
EXHIBIT 6.19
EMPLOYMENT AGREEMENT
SUMMARY OF PARTICULARS
RECITALS
1. As of December 23, 1998, Total Film Group, Inc. entered into an
agreement ("Agreement") with Dan Michel and Howard Russo, as sole
owners of Michel/Russo, Inc. ("MR") with respect to the acquisition by
Total Film Group, Inc. of 100 percent of MR's issued and outstanding
capital stock for the possible purpose of forming a new marketing and
design company in combination with Dyer communications, Inc. and/or
other entities. For the purpose of the Agreement, such possible new
marketing and design company was named Total Communications, Inc.
("IC") which name shall be kept for the purpose of this Employment
Agreement.
2. Paragraph 6 of the Agreement provides that Total Film Group, Inc. shall
enter into a long- form Employment Agreement with each of Dan Michel
and Howard Russo and that such long-form Employment Agreement shall
contain the terms summarized in Exhibit A of the Agreement and such
further provisions as the parties mutually agree upon.
Therefore, it is agreed as follows:
I. EMPLOYER: Total Film Group, Inc. ("Company")
II. EMPLOYEE: D. Daniel Michel, Jr. ("Employee")
III. TITLE AND CAPACITY: Executive Vice President, Chief Operating Officer
of TC
IV. ASSIGNMENT: Company shall have the right to assign this Employment
Agreement to TC or to any of its subsidiaries or related entities;
provided, however, that any such assignment shall not be deemed to
relieve Company of any liability for the performance of this Employment
Agreement, and provided, further that Employee may terminate this
Employment Agreement (upon sixty (60) days written notice to Company)
if in his sole discretion he elects to do so at any time after any such
assignment which has not been approved in writing by him in advance
(other than the contemplated assignment to TC, which Employee hereby
approves in advance). Notwithstanding the foregoing, Company may
provide written notification to Employee of such assignment, and if
Employee does not object in writing to such assignment within ten (10)
business days after his receipt of such notification, his right to
terminate this Employment Agreement after such assignment shall be
deemed waived. If Employee is entitled under this Section IV to
terminate his employment after such assignment and does so, Company
shallbeobligated to pay the balance then due on this Employment
Agreement when such balance would otherwise be payable under this
Employment Agreement (i.e., the total amount of Fixed and Incentive
Compensation provided below and the value of all other benefits set
forth herein through the end of the then current Term or renewal term
(or through the end of the next
<PAGE>
succeeding renewal term if such termination occurs in the final sixty
(60)days of any year and no notice of non-renewal is provided by
Company or either party - as applicable - prior to such sixty-day
period. Such payment shall be made at the expiration of the 60-day
notice period: provided, however, that the Incentive Compensation
shall be paid at the time such Incentive Compensation would otherwise
be payable hereunder.
V. DUTIES AND OBLIGATIONS: Customary duties of Executive Vice President,
Chief Operating Officer of TC, reporting to Gerald Green, as described
in Paragraph 1 of Appendix A.
VI. EXCLUSIVITY: Employee's services shall be exclusive as more fully
described in Paragraph 6 of Appendix A; provided, however, that
Employee shall be entitled to devote a non-material portion of his time
to other activities and business interests.
VII. TERM: The Term shall be one (1) year commencing as of January 1, 1999,
which shall be subject to automatic renewal for one (1) additional year
commencing as of January 1, 2000 unless Company notifies Employee of
its desire not to renew at least sixty (60) days prior to December 31,
1999. If so renewed, the Term shall be subject to automatic renewal for
an additional renewal period of one (1) year through December 31, 2001,
unless either party notifies the other of its desire not to renew at
least sixty (60) days prior to December 31, 2000; provided, however,
that if Employee provides such notice of non- renewal, then during the
year ending December 31, 2001, he shall not (i) compete with the
Company's business; (ii) call on, solicit, take away, or attempt to
call on, solicit or take away any of the customers of the Company
and/or (iii) directly or indirectly solicit to leave the company, hire
or recruit any employee of the Company. The Term and possible
extension(s) shall be subject to earlier termination as more fully
described in Appendix B.
VIII. FIXED COMPENSATION: Employee shall receive:
a. For year 1: $150,000 per year.
b. For possible year 2: $175,000 per year.
c. For possible year 3: $195,000 per year.
payable in accordance with standard Company policies, as set forth in
Paragraph 3.1 of Appendix A.
IX. INCENTIVE COMPENSATION: Employee shall receive within thirty (30) days
after Company reports its revenues for 1999 and each calendar year
during which he is employed under this Agreement, and in any event
within one hundred and twenty (120) days after the end of each such
year, an incentive compensation payment ("Incentive Compensation")
equal to six and one-third percent (6.333%)of the amount, if any, by
which (i) the gross sales revenue of TC (which for purposes of this
paragraph IX shall include in any event MR, Dyer Communications,
Skyrocket Interactive and any business unit providing similar services
which may be created or acquired by Company, TC or their subsidiaries
or affiliates) during such calendar year, exceeds (ii) the gross sales
revenues in 1998 of MR, Dyer Communications and Skyrocket Interactive.
For purposes hereof,
<PAGE>
gross sales revenues shall be determined in accordance with generally
accepted accounting principles, consistently applied, and shall be the
amount of gross sales revenues of TC which are reflected in the audited
financial statements of Company. Such gross sales revenues shall be
certified by the chief financial officer of Company. Employee may, at
his own expense, but not more than once annually audit the applicable
records. Any such audit shall be conducted only by a public accountant
during reasonable business hours after reasonable advance notice and in
such manner as not to interfere with Company's normal business
activities, and shall not continue more than thirty (30) consecutive
days after Company provides access to all such requested records.
X. AUTOMOBILE ALLOWANCE: Employee shall be entitled to a monthly
automobile allowance of $395.00 plus the lesser of (i) the incremental
monthly cost of Employee of insuring his leased car on his personal
insurance policy with coverage comparable to that currently maintained
or (ii) the monthly cost currently being incurred by MR in insuring
such car, in accordance with Paragraph 3.3 of Appendix A.
XI. BUSINESS EXPENSES: Reasonable business expenses and travel expenses
will be reimbursed to Employee in accordance with Paragraphs 3.4.1 and
3.4.2 of Appendix A. In no event shall the nature and amount of such
expenses be less than the expenses currently provided by MR (on an
annual basis).
XII. MEDICAL AND OTHER BENEFITS: Company shall provide to Employee and his
dependents the same medical and dental coverage as is maintained for
Gerald Green or his successor as Company's chief executive officer. In
the event that such medical and dental coverage is not available in
full (whether as a result of any pre-existing condition exclusion or
otherwise) until a later date, Company shall, in the interim, pay or
reimburse Employee for the cost of maintaining his current coverage
under COBRA. On or before June 30, 1999, Company will adopt a 401(k)
plan or other tax deferred savings plan providing benefits to Employee
which are substantially the same as those currently provided to
Employee under Simple IRA currently provided by MR to Employee. Company
shall take whatever action is necessary in accordance with applicable
law to terminate the active participation of the participants in such
Simple IRA. Upon the expiration of the current term of the life
insurance policy currently maintained by MR for the benefit of Employee
(July 27, 1999), Company shall either renew such coverage or provide
insurance coverage of at least the same amount for the remainder of the
Term of employment of Employee. Upon the expiration of the current term
of the disability insurance policy currently maintained by MR for
Employee (which the parties understand to be March 2, 1999, Company
shall either renew such coverage or provide disability insurance
coverage of at least the same amounts with at least the same benefits
for the remainder of the Term of employment of Employee.
XIII. VACATION: Employee shall be entitled to twenty (20) days annual paid
vacation leave as set forth in Paragraph 3.6 of Appendix A.
<PAGE>
XIV. TERMINATION: As set out in Appendix B, summarized as follows:
A. Death or Disability: Immediately upon death or upon notice for absence
caused by disability for sixty (60) consecutive days (or ninety (90)
days in the aggregate) in any twelve (12) month period of the Term, all
Fixed and Incentive Compensation vested to the date of death or
disability is paid; provided, however, that Company shall have no right
to terminate Employee's employment as a result of the disability of the
Employee unless the Employee is entitled to full benefits for
permanent, total disability under the disability insurance policy
maintained by Company for the benefit of Employee.
B. For Cause: Immediately upon cause for termination; Customary definition
(including (a) material breach which is not cured within five (5)
business days after Company provides written notice of such breach, (b)
felony, and (c) alcoholism); all accrued Fixed and Incentive
Compensation vested to the termination date is paid, without prejudice
to any of Company's other rights.
C. Without Cause: Upon three (3) months prior notice; provided, however,
that in the event that Employee is terminated pursuant to this Section,
Employee shall be entitled to his full Fixed and Incentive Compensation
and all other benefits set forth herein through the end of the then
current Term or renewal term (or through the end of the next succeeding
renewal term if such termination occurs within the final sixty (60)
days of any year and no notice of non-renewal is provided by Company or
either party - as applicable - prior to such sixty-day period).
XV. EMPLOYEE'S TERMINATION RIGHT
A. Employee may terminate this Employment Agreement (upon sixty (60) days
written notice to Company) if in his sole discretion he elects to do so
at any time after any entity or person other than Company acquires a
controlling interest in TC, any entity or person other than Gerald
Green acquires a controlling interest in Company. Notwithstanding the
foregoing, Company may provide written notification to Employee of such
acquisition, and if Employee does not object to such acquisition within
ten (10) business days after his receipt of such notification, his
right to terminate this Employment Agreement after such acquisition
shall be deemed waived. For purposes hereof, the term "controlling
interest" shall mean ownership of record and beneficially of capital
stock or other equity securities of TC or Company, as the case may be,
having at least 50% of the total voting power of such company or the
total right to any dividends or other distributions by such company,
whether in the ordinary course or upon liquidation. If Employee elects
to terminate his employment in such event, Company shall be obligated
to pay the balance then due on this Employment Agreement (i.e., the
total amount of Fixed and Incentive Compensation and the value of all
other benefits set forth herein through the end of the then current
Term or renewal term (or through the end of the next succeeding renewal
term if such termination occurs in the final sixty (60) days of any
year and no notice of non-renewal is provided by Company or either
party - as applicable - prior to such sixty-day period)). Such payment
shall be made at the expiration of the sixty day notice period;
provided, however, that the
<PAGE>
Incentive Compensation shall be paid at the time such Incentive
Compensation would otherwise be payable hereunder.
B. Employee may terminate this Employment Agreement (upon sixty (60) days
written notice to Company) if in his sole discretion he elects to do so
at any time after he is asked or instructed to report to any person
other than Gerald Green. Notwithstanding the foregoing, Company may
provide written notification to Employee of such change in reporting
relationship, and if Employee does not object in writing to such change
within thirty (30) days after his receipt of such notification, his
right to terminate this Employment Agreement after such change shall be
deemed waived. If Employee elects to terminate his employment in such
event, Company shall be obligated to pay the balance then due on this
Employment Agreement (i.e., the total amount of Fixed and Incentive
Compensation and the value of all other benefits set forth herein
through the end of the then current Term or renewal term (or through
the end of the next succeeding renewal term if such termination occurs
in the final sixty (60) days of any year and no notice of non-renewal
is provided by Company or either party - as applicable - prior to such
sixty- day period)). Such payment shall be made at the expiration of
the sixty-day notice period; provided, however, the Incentive
Compensation shall be paid at the time such Incentive Compensation
would otherwise be payable hereunder.
XVI. NO DUTY TO MITIGATE DAMAGES: In the event of the termination of this
Employment Agreement, whether in accordance with the provisions of this
Employment Agreement or otherwise, Employee shall have no obligation to
seek employment or to accept any employment in order to mitigate the
damages or other amounts owing by Company to Employee hereunder, and in
the event that Employee accepts other employment, any compensation
earned by him in connection therewith shall not reduce or otherwise
affect the amount of any payment required to be made to Employee as a
result of such termination.
XVII. GOVERNING LAW: This Agreement shall be subject to the laws of the State
of California as more fully described in Paragraph 18 of Appendix A.
XVIII. ARBITRATION: Disputes to be resolved by binding arbitration, as more
fully described in Paragraph 17 of Appendix A.
XIX. WORK LOCATION: Services to be rendered in Company's business premises
in Los Angeles County, which shall be no more than ten (10) miles from
9107 Wilshire Boulevard, Beverly Hills, CA.
XX. ADDITIONAL TERMS: Additional customary terms as set forth in Appendices
A and B attached hereto are incorporated by reference herein
(collectively, including this Summary of Particulars, this "Employment
Agreement").
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Employment Agreement
at Los Angeles, as of the 29 day of January 1999.
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Its: President
/s/ D. Daniel Michel, Jr.
END OF SUMMARY OF PARTICULARS
<PAGE>
APPENDIX A
SCOPE OF APPENDIX A
All terms and conditions of this Appendix A are incorporated in the
Employment Agreement (hereinafter this "Employment Agreement")
1. DUTIES AND OBLIGATIONS
1.1 Company hereby employs Employee and Employee hereby agrees to render
services in the capacity of Executive Vice President, Chief Operating
Officer of TC consistent with the provisions of Paragraph 2 of this
Appendix A.
1.2 Any assignment, whether to an affiliate or not, is subject to Section
IV of the Summary of Particulars.
1.3 In serving as Executive Vice President, Chief Operating Officer of TC,
and subject to the policies and directives of Company's Board of
Directors, Employee shall be in charge of and responsible for the day
to day operation of TC. Employee shall consult with the management
committee in the decision-making process of Company, relating to such
reasonably specific actions as the Board of Directors of the Company
may reasonably specify, consistent with requirements applicable to the
Company's other business units.
1.4 Employee's responsibilities shall include performing all services
customarily rendered by executives of a similar position in the
advertising industry as reasonably required by the management
committee. Subject to the provisions of Section VI of the Summary of
Particulars, Employee shall devote his entire and exclusive productive
business time, ability and attention to the business of Company during
the term of this Employment Agreement.
1.5 Employee shall not on behalf of Company, without the specific prior
written approval of the management committee of Company, or except in
accordance with Company's bylaws, or in accordance with guidelines
provided by Company's Board of Directors from time to time, do or
contract for any of the following:
1.5.1 Borrow money on behalf of Company or loan of Company's money.
1.5.2 Assign, mortgage, encumber, transfer or sell any of Company's assets or
property.
1.5.3 Enter into any material contract or executory commitments on behalf of
Company which involves a payment by Company of more than $5,000.00.
1.6 It is expressly understood and agreed that Employee shall not submit or
furnish to any person or entity other than Company any ideas, formats,
material or properties relating to the advertising and design business
of the company (other than ideas, formats, material
<PAGE>
and properties submitted or furnished to or for the benefit of
customers in the ordinary course of business) and that any and all
ideas, formats, material and/or properties relating to the advertising
and design business of the company (other than ideas, formats, material
and properties submitted or furnished to or for the benefit of
customers in the ordinary course of business) conceived, created,
developed and/or written by Employee during the Term or any extension
thereof shall be and become the sole and absolute property of Company
for any and all purposes whatsoever pursuant to the terms hereof.
2. TERM
As provided in Section VII of the Summary of Particulars.
3. COMPENSATION AND BENEFITS
3.1 Fixed Compensation
During the Term of this Employment Agreement, Company shall pay Employee for
all services rendered and all rights granted hereunder the fixed compensation
provided in Section VIII of the Summary of Particulars. Such compensation
shall be payable in accordance with Company's standard payroll policies and
shall have deducted any applicable withholding taxes and standard and legally
required deductions.
3.2 Incentive Compensation
Employee shall be entitled to the Incentive Compensation set forth in Section
IX of the Summary of Particulars.
3.3 Automobile Allowance
Employee shall be entitled to an automobile allowance as set forth in Section X
of the Summary of Particulars. Other than the foregoing allowance, Company shall
not pay and Employee shall not be entitled to reimbursement for any other costs
or expenses related to the operation or maintenance of Employee's automobile.
3.4 Business Expenses
3.4.1 Subject to the provisions of Section XI of the Summary of Particulars,
during the Term of this Employment Agreement, Company shall pay or
reimburse Employee for all necessary and reasonable expenses incurred
or paid by Employee, in connection with the performance of Employee's
services under this Employment Agreement upon receipt of invoices,
receipts or such other supporting information evidencing the nature and
payment of such expenses by Employee, as is reasonably deemed
appropriate by Company and is consistent with Company's accounting
practices. Any major expense (e.g. travel) outside of or in excess of
amounts contained in Company's policies must be pre-approved by the
management committee of Company in writing. All payments or
reimbursements to
<PAGE>
Employee shall be made within 30 days after Employee's submission of
such invoices or information.
3.4.2 Notwithstanding Paragraph 3.4.1, all such business expenses will be
subject to such limits and categories applicable to other similar level
executives of Company as may from time to time be provided in writing
by the management committee of Company; provided, however, that all
travel should be conducted during normal business hours and Employee
shall be entitled to the same class of travel and accommodations as is
provided to other similar level executives of Company.
3.4.3 Company shall provide an office suitable for a similar level executive
of Employee's standing and the services of a secretary, for Employee's
use in connection with Employee's services hereunder. The amount of
compensation payable to such secretary shall be subject to the approval
of Company.
3.5 Insurance
Subject to the provisions of Section XII of the Summary of Particulars:
3.5.1 Company agrees to cause Employee to be covered by medical and dental
insurance as provided in Section XII of the Summary of Particulars.
3.5.2 Company may secure "key man" insurance covering Employee and Employee
shall have no right, title or interest in or to such insurance.
Employee agrees to submit to any usual and customary medical
examination required to effect such insurance (at which examination
Employee may elect to have his own physician present) and to sign such
application or other documents reasonably required in connection
therewith.
3.5.3 Whenever compensation is payable to Employee hereunder during any
period when he is partially or totally disabled and such disability
except for the provisions hereof, would entitle him to disability
income or to salary continuation payments from Company according to the
terms of any plan now or hereafter adopted by Company (it being
acknowledged that Company currently has no such plan in effect or has
any immediate plans to implement such a plan other than for the
disability coverage required by Section XII of the Summary of
Particulars) or according to Company's policy in effect at the time of
such disability, the compensation payable to him hereunder shall be
inclusive of any such disability income or salary continuation and
shall not be in addition thereto. If disability income is payable
directly to Employee by an insurance company under an insurance policy
paid for by Company or by a governmental agency, the amounts paid to
him by said insurance company or governmental agency shall be
considered to be a part of the payments to be made by Company pursuant
to this Paragraph and shall not be in addition thereto.
<PAGE>
3.6 Vacation and Holiday
Company shall provide Employee with the normal Company and public holidays,
and up to 20 working days per year during the Term as paid vacation accruing
pro-rata for each week of services rendered hereunder during the Term of this
Employment Agreement, to be utilized at such times and periods as shall be
mutually agreed to in good faith between Employee and Company. Employee
agrees that all paid vacation days accrued during the Term shall be payable
at the termination of Employee's employment hereunder based upon his then
current rate of pay.
3.7 Other Benefits
Employee shall be considered for inclusion in any other benefits or plans
offered to other similar level executives of Company; provided, however, that
nothing herein shall require Company to increase the value of benefits and
compensation to which Employee is entitled pursuant to Paragraph 3.1 through
3.6 above or the Summary of Particulars.
4. EXTENT OF SERVICES
4.1 Employee hereby warrants and represents that Employee's employment
hereunder does not and shall not conflict in any way whatsoever with
any involvement, or violate any agreement that Employee now or
previously has or may have during the Term of Employee's employment
hereunder with any person or entity.
5. OWNERSHIP OF RESULT OF SERVICES
5.1 Any and all results and proceeds of services performed by Employee
within the scope of Employee's duties hereunder for Company's
advertising and design business shall be owned by Company (or customers
of Company for whom Company provides services) and shall be deemed in
all respects as works made for hire, and Company (or customers of
Company for whom Company provides services) shall be the sole and
absolute author and proprietor thereof.
5.2 Employee agrees to execute and deliver to Company, or to any Borrower
Company during or after the Term of said employment, such assignment or
other instruments as Company, or the respective related entity or
subsidiary of Company, may reasonably require from time to time to
evidence the ownership of the rights and interests and of the results
and proceeds of Employee's services as before mentioned.
6. NON-DISCLOSURE OF TRADE SECRETS
6.1 Employee shall not:
6.1.1 Except for actions taken in the course of Employee's employment, during
the Term of this Employment Agreement or at any time thereafter,
willfully use or divulge to any person, company or corporation, either
directly or indirectly, any financial or other material
<PAGE>
information of a confidential or proprietary nature obtained by
Employee while in the employment of Company or any Borrower Company.
The parties hereby stipulate that, as between them the foregoing
matters are important, material and confidential and gravely affect the
effective and successful conduct of the business of Company and its
goodwill. This section should not apply to any such information that
becomes publicly available other than by disclosure by Employee in
violation hereof.
6.1.2 During the Term of this Employment Agreement, be actively engaged or
concerned or interested in any business whatsoever other than that of
Company except (i) as the owner for investment of shares or other
securities quoted or dealt in or on any recognized stock exchange; or
(ii) as a passive investor in any other business which is not in
competition in the same market with any business or company owned by
Company or any affiliate of Company, or (iii) for activities and
businesses to which Employee devotes a non-material portion of his
time.
6.1.3 Within one (1) year of the termination of Employees employment for
cause pursuant to Section 2 of Appendix B or as a result of the
election by Employee not to renew the term of this Employment Agreement
for the year ending December 31, 2001 pursuant to Section VI of the
Summary of Particulars, engage in any business in competition with
Company, and/or call on, solicit, take away or attempt to call on,
solicit, take away any of the customers of Company, and/or directly or
indirectly solicit to leave the Company, hire or recruit any employee
of Company.
6.2 If any of the restrictions contained in clause 6 is held not to be
valid as going beyond what is reasonable for the protection of the
interest of Company, but would be valid if part of the wordings were
deleted or its extent reduced or modified, then such restriction shall
apply with such modifications as may be necessary to make it
enforceable.
7. TERMINATION
This Employment agreement may be terminated as set forth in Appendix B
attached hereto and incorporated herein.
8. DAMAGES
In the event that any party is awarded any damages as compensation for any
breach of this Employment Agreement, a breach of any covenant contained in
this Employment Agreement (whether expressed or implied by either law of
fact), or any other cause of action based in whole or in part on a breach of
any provision of this Employment Agreement or related in any way to
Employee's employment hereunder (other than with respect to physical injuries
suffered by Employee or intentional or grossly negligent actions by Company
or its employees on the one hand, or Employee on the other hand), such
damages shall be limited to contractual damages and shall exclude punitive
damages and any other type of tort damages. Employee agrees and acknowledges
that in making any claims or recovering any damages awarded in connection
with this Employment Agreement, Employee will look solely to Company and to
Company's assets
<PAGE>
and will in no circumstances seek to recover such damages from any of
Company's constituent shareholders, directors or executives or any of
Company's parents, subsidiaries or related entities or Gerald Green
personally.
9. PROVISIONS SURVIVING TERMINATION
It is expressly agreed that notwithstanding termination of Employee's
employment with and by Company for any reason or cause or under any
circumstances whatsoever, such termination, shall be without prejudice to the
rights and obligations of Employee and Company, respectively, in relation to
the time up to and including the date of termination, and all the provisions
of this Appendix A and of Appendix B of this Employment Agreement which
expressly or impliedly by their terms survive the termination of this
Employment Agreement, including without limitation the provisions of
Paragraphs 5 through 19 of this Appendix A shall remain and continue in full
force and effect.
10. WAIVER
10.1 The waiver by either party of a breach of any provision of this
Employment Agreement shall not operate or be construed as a waiver of
any subsequent breach.
10.2 No waiver shall be valid unless it is in writing and signed by the
party to be charged.
11. REPRESENTATIONS AND WARRANTIES
11.1 Employee hereby represents, warrants and agrees that Employee is under
no disability, restriction or prohibition, whether contractual or
otherwise (i) with respect to his rights to execute this Employment
Agreement, (ii) to grant the rights to his services as provided
hereunder, or (iii) with respect to his right to perform the terms and
provisions herein contained. Employee hereby agrees and does hereby
defend, indemnify, save and hold Company, and its directors, officers,
partners, shareholders, employees, agents, legal representatives,
licensees, affiliates, predecessors, successors and assigns harmless
from and against any and all claims, demands, damages, liabilities,
costs, losses and expenses (including legal costs and reasonable
outside attorneys' fees) arising out of or in connection with any
breach of any of the warranties, representations and agreements made by
Employee in this Employment Agreement. Employee agrees to reimburse
Company, on demand, for any payment made by Company at any time with
respect to any such demand, liability, costs, loss or expense to which
the foregoing indemnity applies; provided, such payment arises from a
final adverse judgment or arbitration or a settlement made with
Employee's prior consent, which consent Employee shall not unreasonably
withhold. Company shall notify Employee in writing of any such claim,
demand or action promptly after Company has been formally advised
thereof and Employee shall have the right, at his expense to
participate in the defense thereof with counsel of his choice.
11.2 Company hereby represents, warrants and agrees that it is under no
disability, restriction or prohibition, whether contractual or
otherwise to (i) with respect to its rights to execute
<PAGE>
this Employment Agreement or (ii) with respect to its rights to perform
the material terms and provisions contained therein. Company hereby
defends, indemnifies, saves and holds Employee harmless from and
against any and all claims, demands, damages, liabilities, costs,
losses and expenses (including legal costs and reasonable outside
attorneys' fees) arising out of or in connection with any breach of any
of the warranties, representations and agreements made by Company in
this Employment Agreement. Company agrees to reimburse Employee, on
demand for any payment made by Employee at any time with respect to any
such demand, liability, costs, loss or expense to which the foregoing
indemnity applies; provided, such payment arises from a final adverse
judgment or arbitration or a settlement made with Company's prior
consent, which consent Company shall not unreasonably withhold.
Employee shall notify Company in writing of any such claim, demand or
action promptly after Employee has been formally advised thereof and
Company shall have the right, at his expense to participate in the
defense thereof with counsel of its choice. Employee shall be entitled
to indemnification and the benefits of Company's insurance coverage to
the same extent as any other officer of the company.
12. ENTIRE AGREEMENT
12.1 No representation, promise or inducement has been made by either party
that is not embodied in this Employment Agreement, or incorporated by
reference herein, and neither party shall be bound by or be liable for
any alleged representation, promise or inducement not so set forth.
12.2 The Agreement and this Employment Agreement contain the entire
agreement and understanding of the parties and this Employment
Agreement is effective on the date set forth in Paragraph 2 of Appendix
A of this Employment Agreement for the commencement of this Employment
Agreement. The Agreement and this Employment Agreement supersede and
void all prior agreements, arrangements and understandings entered into
between Company or any of its respective related entities or
subsidiaries, on the one hand and Employee, on the other hand. In the
event of any inconsistency between any provision of this Employment
Agreement and provision of the Agreement, the provisions of the
Agreement shall apply and such inconsistent provision of this
Employment Agreement shall be of no force or affect.
12.3 This Employment Agreement may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
13. ASSIGNMENT
Employee acknowledges that the services to be rendered by Employee are unique
and personal. Accordingly, Employee may not assign or encumber any of the
Employee's rights or delegate any of Employee's duties or obligations under this
Employment Agreement.
<PAGE>
14. NOTICES
Any notice required or desired to be given under this Employment Agreement
shall be deemed given if it is expressed in writing and sent by certified
mail or if delivered by telefax or personally to the following persons, or
such other persons as may be designated in writing by the parties hereto from
time to time.
If to Company: Total Film Group
9107 Wilshire Blvd., Suite 475
Beverly Hills, CA 90210
Attention: Gerald Green
If to Employee: D. Daniel Michel, Jr.
12533 San Vicente Blvd.
Los Angeles, CA 90049
with a copy to: Russell C. Hansen
Gibson, Dunn & Crutcher
2029 Century Park East
Los Angeles, CA 90067-3026
15. GENERAL
15.1 It is acknowledged that the rights of each party under this Employment
Agreement are of a special, unique and intellectual character, which
gives them a peculiar value and that each breach or threatened breach
of any provision of this Employment Agreement may cause the other party
irreparable injury and damage, which cannot be reasonably or adequately
compensated in damages and in action at law. Accordingly, without
limiting any right or remedy which any party may otherwise have, the
parties specifically agree that each party shall be entitled to seek,
in addition to any other rights and remedies, injunctive relief or
other equitable relief to enforce and protect its or his rights under
this Employment Agreement and to prevent or curtail any breach or
threatened breach.
15.2 Nothing in this Employment Agreement shall be construed as to so
require the commission of any act contrary to law and wherever there is
any conflict between any provision of this Employment Agreement and any
present or future statute, law, ordinance or regulation, the latter
shall prevail, but in such event, the provision of this Employment
Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within such legal requirements.
15.3 If any term or provision of this Employment Agreement is held to be
invalid or unenforceable under California law, the remaining portions
of this Employment Agreement will continue to be valid and will be
performed, construed and enforced to the fullest extent permitted by
law, and the invalid or unenforceable term will be deemed amended and
limited in accordance with the intent of the parties, as determined
from the face of the
<PAGE>
Employment Agreement to the extent necessary to permit the maximum
enforceability or validation of the term or provision.
15.4 Section 508 of the Federal Communication Act makes it a criminal
offense for any person connected with the production or preparation of
any program intended for broadcasting to accept or pay any money,
service or other valuable consideration for the inclusion of any matter
as a part of any such program without disclosing the same to the
employer of the person to whom such payment is made or to the person
for whom such program is being produced. Employee understands that it
is Company's policy not to permit any employee of Company to accept or
to pay any such consideration and Employee represents and agrees that
Employee has not accepted, nor will accept, and that Employee has not
paid, or will not pay, any money, service or other valuable
consideration for the inclusion of any "plug," reference or product
identification or any similar matter with respect to the Company's
projects.
16. ATTORNEYS FEES
In the event of any legal action or arbitration which arises out of or
relates to any provision of this Employment Agreement, the losing party to
such action (based on the final judgment, arbitration decision or settlement
thereof) shall bear the reasonable attorneys fees and related costs of the
prevailing party.
17. ARBITRATION
17.2 Any claim, controversy or dispute arising under or in connection with
this Employment Agreement shall be settled exclusively by arbitration
in accordance with this Section 17.1. Such dispute shall promptly be
submitted by Employee and Company for resolution to a single arbitrator
(who shall be a retired or former judge of a trial court of general
jurisdiction in California or a federal district court) selected by the
parties hereto in accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA").
17.3 The decision of the Arbitrator shall be final and binding upon the
parties and judgment may be entered thereon by any court having
jurisdiction. Company and Employee hereby submit to the in personam
jurisdiction of the Superior Court of the State of California for
purposes of confirming any ruling made by the Arbitrator.
17.3 In any arbitration hereunder concerning Company's right to terminate
Employee's employment hereunder, the following shall apply:
17.3.1 If the Arbitrator shall hold that Company terminated Employee's
employment pursuant to Paragraphs 1.2 or 3 of Appendix B, Employee
shall be entitled to no remedy of compensation other than the
compensation or benefits expressly payable pursuant to Paragraph 1.2 or
3 of Appendix B, as applicable.
<PAGE>
17.3.2 If the Arbitrator shall hold that Employee was not terminated for any
of the reasons set forth in Paragraphs 1.2 or 3 of Appendix B, Company
shall be deemed for all purposes of this Employment Agreement to have
given notice of termination on the fifth (5th) business day after
notice was initially given pursuant to Paragraphs 1.2 or 3 of Appendix
B if such notice was given. In such event, Employee shall be entitled
to receive only such amounts as provided for in Paragraphs 1.2 or 3 of
Appendix B.
17.4 For the avoidance of doubt, Employee and Company agree that the
Arbitrator shall not be authorized to award punitive, exemplary or any
other type of non-contractual damages consistent with Paragraph 10 of
this Appendix A.
18. GOVERNING LAW
This Employment Agreement shall be deemed to have been made under and shall
be interpreted in accordance with and governed by the laws of the State of
California applicable to contracts executed and to be performed in California.
19. CONSTRUCTION
The language of this Employment Agreement shall always and for all purposes
be construed as a whole according to its fair common meaning and not strictly
for or against either of the parties hereto.
END OF APPENDIX A
<PAGE>
APPENDIX B
All terms and conditions of this Appendix B are incorporated in the
Employment Agreement.
1. Death or Disability
1.1 Employee's employment hereunder shall terminate automatically in the
event of Employee's death, or upon written notice in the event of
Employee's absence or inability to render the services required
hereunder because of illness or incapacity after sixty (60) consecutive
days (or ninety (90) days in the aggregate) in any twelve (12) month
period during the term; provided, however, that Company shall have no
right to terminate Employee's employment as a result of his disability
unless he is entitled to full benefits for permanent, total disability
under the disability insurance policy maintained by Company for the
benefit of Employee pursuant to Section XII of the Summary of
Particulars.
1.2 In case of termination hereunder due to death, absence or inability to
render the services required because of illness or incapacity, Employee
or his estate shall be entitled to receive all Fixed Compensation which
has accrued and would otherwise be payable to Employee pursuant to
Paragraph 3.1 of Appendix A together with the Incentive Compensation
which has accrued and vested as of the date of termination.
2. Termination For Cause
2.1 Company may at any time by written notice to Employee, terminate
Employee's employment hereunder, without prejudice to any of Company's
other rights, for any of the events listed under paragraphs 2.2.2,
2.2.3 and 2.2.4, or any event listed in paragraph 2.2.1 which remains
uncured for a period of five (5) business days after Employee receives
written notice from Company that such an event has occurred, and
setting forth the nature of the breach and the action required to
remedy the same.
2.2 Subject to Section 2.1, the following acts shall constitute grounds for
termination of Employee's employment hereunder:
2.2.1 Breach of any material term of this Employment Agreement or malfeasance
or material non-feasance with respect to Employee's duties which are
set forth in this Employment Agreement.
2.2.2 Conviction of a felony offense.
2.2.3 Becoming bankrupt.
2.2.4 Alcoholism or drug addiction.
2.3 Termination under Paragraph 2.1 shall be effective upon the date of
written notice in the case of termination under Section 2.2.2, 2.2.3 or
2.2.4 or, upon expiration of the five (5)
<PAGE>
business day cure period specified in section 2.2.1 if the event
specified in the Company's notice thereunder has not been cured. In the
event of any such termination, all of the Company's compensation
obligations under this Employment Agreement and the Appendices attached
hereto shall forthwith cease and terminate on such effective date with
the exception of Company's obligation to pay any Fixed and Incentive
Compensation which have accrued and vested and are payable to Employee
pursuant to Paragraph 3 of Appendix A, without prejudice to any of
Company's other rights.
3. Termination Without Cause
3.1 Company shall have the right at any time to terminate Employee's
employment hereunder for any reason without cause by giving three (3)
months prior written notice to Employee of such termination. In the
event of any such termination, Employee shall be entitled to his full
Fixed and Incentive Compensation and all other benefits set forth in
this Employment Agreement through the end of the current Term or
renewal term (or through the end of the next succeeding renewal term if
such termination occurs within the final sixty (60) days of any year
and no notice of non-renewal is provided by Company or either party -
as applicable - prior to such sixty-day period).
3.2 Any amounts payable to Employee pursuant to Paragraph 3.1 shall be
payable in accordance with Company's payroll policies, less applicable
withholding taxes and payroll deductions, if any, and any other legally
required deductions. Furthermore, the remedy provided for in Paragraph
3.1 above shall be deemed liquidated damages and shall constitute the
sole and exclusive remedy at law, in arbitration or in equity for any
dispute whatsoever, whether of a contractual or non-contractual nature,
which is based in whole or in part, on the contention that Company did
not have sufficient cause to terminate Employee's employment, or acted
in an improper or unlawful fashion in terminating Employee's
employment.
END OF APPENDIX B
<PAGE>
As of July 28, 1999
Mr. D. Daniel Michel
11414 Bolas Street
Los Angeles, CA 90049
Re: Employment Agreement
Dear Dan:
Reference is hereby made to your employment agreement ("Agreement") dated as
of January 29, 1999. The Agreement is amended as follows:
In the Summary of Particulars, the provisions of Paragraph IX. Incentive
Compensation are hereby intentionally deleted and replaced by the following
provisions:
"IX. INCENTIVE COMPENSATION & STOCK OPTION:
A. Incentive Compensation: Employee shall receive within thirty (30) days
after Company reports its revenues for the six (6) month period ended
June 30, 1999 and then for each fiscal year during which he is employed
under this Agreement, and in any event within one hundred and twenty
(120) days after the end of such six (6) month period ended June 30,
1999 and then of each such fiscal year, an incentive compensation
payment ("Incentive Compensation") equal to five percent (5%) of the
net profits of TC and its wholly owned subsidiaries. The term "net
profits" as used in this paragraph, shall mean TC's and its wholly
owned subsidiaries' consolidated annual net operating income before the
deduction or allowance for federal or state income taxes. The
determination of net profits shall be made by TC's auditor in
accordance with generally accepted accounting principles, consistent
with TC's past accounting practices, and shall be conclusive on all
parties. Employee may, at his own expense, but not more than once
annually, audit the applicable records. Any such audit shall be
conducted only by a public accountant during reasonable business hours
after reasonable advance notice and in such manner as not to interfere
with Company's normal business activities and shall not continue more
than thirty (30) consecutive days.
B. Stock Option: As additional compensation, Company hereby grants to
Employee the option to purchase 50,000 shares of common stock of
Company as set forth in the form of Stock Option attached hereto as
Appendix C and incorporated herein by this reference".
<PAGE>
All other terms and conditions of the Agreement shall remain the same.
Sincerely yours.
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green Date: 12/23/99
Its: President
ACCEPTED AND AGREED:
/s/ D. Daniel Michel, Jr. Date: 12/23/99
<PAGE>
EXHIBIT 6.20
STOCK OPTION
THIS STOCK OPTION (the "Option") is granted effective the 1st day of January
1999, by Total Film Group, Inc., a Delaware corporation (the "Company")
pursuant to an employment agreement dated January 29, 1999, by and between
the Company and D. Daniel Michel, Jr. ("Optionee").
RECITALS
WHEREAS, the Company has engaged Optionee to provided services to the Company
and as additional compensation the Company has agreed to issue Optionee
options to purchase up to 50,000 shares of the Company's common stock, par
value $.001 (the "Common Stock"); and
WHEREAS, the options shall vest immediately and shall be exercisable provided
that the Optionee remains employed by the Company at the time of exercise;
NOW, THEREFORE, in consideration of the mutual terms and conditions of this
Option, the parties hereto agree as follows:
1. GRANT OF OPTION
The Company hereby grants to Optionee the right and option to purchase all or
any part of an aggregate of 50,000 shares of Common Stock on the terms and
conditions hereof.
2. EXERCISE PRICE
The exercise price of this Option shall be $2.00 per share.
3. VESTING; TERM OF OPTION
Subject to the other provisions contained herein, the Options granted
pursuant to this Option shall vest immediately; provided that such Options
shall be exercisable only if Optionee is continuously employed by the Company
through and including the particular date of exercise. Further subject to the
other provisions contained herein, any Option may be exercised, in whole or
in part, at any time commencing immediately, but prior to 12:00 midnight
December 31st, 2000. In no event may an Option be exercised after the
expiration of its term.
4. SHAREHOLDER'S RIGHTS
The Optionee shall have the rights of a shareholder only with respect to
Common Stock fully paid for by Optionee under this Option.
<PAGE>
5. PERSONS ENTITLED TO EXERCISE
During Employee's lifetime, this Option can only be exercised by Optionee,
and neither this Option nor any right hereunder can be transferred other than
by testamentary disposition or the laws of descent and distribution. neither
this Option nor any right hereunder shall be subject to lien, attachment,
execution, or similar process. In the even of any alienation, assignment,
pledge, hypothecation, or other transfer of this Option or any right
hereunder, or in the event of any levy, attachment, execution, or similar
process, this Option and all rights granted hereunder shall be immediately
null and void.
6. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK
In the event that the number of shares of Common Stock of the Company from
time to time issued or outstanding is increased pursuant to a stock split or
a stock dividend, the number of shares of Common Stock then covered by this
Option shall be increased proportionally, with no increase in the total
purchase price of the shares then so covered. In the event that the number of
shares of Common Stock of the Company from time to time issued and
outstanding is reduced by a combination or consolidation of shares, the
number of shares of Common Stock then covered by this Option shall be reduced
proportionately, with no reduction in the total purchase price of the shares
then so covered. In the event that the Company should transfer assets to
another corporation and distribute the stock of such other corporation
without the surrender of Common Stock of the Company, and if such disposition
is not taxable as a dividend and no gain or loss is recognized by reason of
section 355 of the Internal Revenue Code of 1986 (the "Code"), or any
amendment or successor statute of like tenor, then the total purchase price
of the Common Stock then covered by each outstanding Option shall be reduced
by an amount that bears the same ratio to the total purchase price then in
effect as the market value of the stock distributed in respect of a share of
the Common Stock of the Company, immediately following the distribution,
bears to the aggregate of the market value at such time of a share of the
Common Stock of the Company plus the stock distributed in respect thereof. In
the event that the Company distributes the stock of a subsidiary to its
shareholders, makes a distribution of a major portion of its assets, or
otherwise distributes significant portion of the value of its issued and
outstanding Common Stock to its shareholders, the number of shares then
subject to this Option, or the exercise price of this Option, may be adjusted
in the reasonable discretion of the Board or a duly authorized committee. All
such adjustments shall be made by the Board or duly authorized committee,
whose determination upon the same, absent demonstrable error, shall be final
and binding. No fractional shares shall be issued, and any fractional shares
resulting from the computations pursuant to this section shall be eliminated
from this Option. No adjustment shall be made for cash dividends, for the
issuance of additional shares of Common Stock for consideration approved by
the Board, or for the issuance to stockholders of rights to subscribe for
additional Common Stock or other securities.
7. METHOD OF EXERCISE
This Option may be exercised by delivery of a notice of exercise, a form of
which is attached hereto as Exhibit "A" and incorporated herein by this
reference, setting forth the number of
<PAGE>
Options to be exercised together with either:
a. A certified check or bank check payable to the order of the Company in the
amount of full exercise price of the Common Stock being purchased;
b. Shares of Common Stock of the Company already owned by the Optionee equal
to the exercise price with the Common Stock valued at its fair market value
based on the closing bid quotation for such stock on the close of business on
the day last preceding the date of the exercise of such Option, as reported
on the OTC Bulletin Board, or if not quoted on the OTC Bulletin Board, then
as determined by the Company through any other reliable means of
determination available on the close of business on the day last preceding
the date of such exercise;
c. Options or other rights to purchase Common Stock valued at the amount by
which the closing bid quotations (as determined in accordance with
subparagraph (b) above) of the Common Stock subject to options or other
rights exceeds the exercise or purchase price provided on such options or
rights; or
d. Cancellation of debt owed by the Company to the Optionee, including debt
incurred for professional services rendered, employment relationships, or
otherwise, upon presentation of an invoice for services provided to the
Company.
As soon as practicable after receipt by the Company of such notice, a
certificate or certificates representing such shares of Common Stock shall be
issued in the name of the Optionee, or, if the Optionee shall so request in
the notice exercising the Option, in the name of the Optionee and another
person jointly, with right of survivorship, and shall be delivered to the
Optionee. If this Option is not exercised with respect to all Common Stock
subject hereto, Optionee shall be entitled to receive a similar Option of
like tenor covering the number of shares of Common Stock with respect to
which this Option shall not have been exercised.
8. WITHHOLDING
If the exercise of this Option is subject to withholding or other trust fund
payment requirements of the Code or applicable state or local laws, such
requirements may, at the discretion of the Board or a duly authorized
committee and to the extent permitted by the then governing provisions of the
Code, be met (i) by the holder of this Option either delivering shares of
Common Stock or canceling Options or other rights to acquire Common Stock
with a fair market value equal to such requirements; (ii) by the Company
withholding shares of Common Stock subject to this Option with a fair market
value equal to such requirements; or (iii) by the Company making such
withholding or other trust fund payment and the Optionee reimbursing the
Company such amount paid within 10 days after written demand therefor from
the Company.
9. AVAILABILITY OF SHARES
During the term of this Option, the Company shall at all times reserve for
issuance the number of shares of Common Stock subject to this Option.
<PAGE>
10. LIMITATIONS ON RIGHT TO EXERCISE
If the Board of Directors, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the Common Stock under
any state or federal law, this Option may not be exercised, in whole or in
part, until such listing, registration, or qualification shall have been
obtained free of any conditions not acceptable to the board.
11. RESTRICTIONS ON TRANSFER
The Option and the Common Stock subject to the Option (collectively referred
to as the "Securities") are subject to registration under the Security Act of
1933, as amended (the "Securities Act"), and any applicable state securities
statutes. Optionee acknowledges that unless a registration statement with
respect to the Securities is filed and declared effective by the Securities
and exchange Commission, and the appropriate state governing agency, the
Securities have or will be issued in reliance on specific exemptions from
such registration requirements for transactions by an issuer not involving a
public offering and specific exemptions under state statutes. Any disposition
of the Securities may, under certain circumstances, be inconsistent with such
exemptions. The Securities may be offered for sale, sold, or otherwise
transferred only if (i) registered under the Security Act, and in some cases,
under the applicable state securities acts, or, if not registered, (ii) only
if pursuant to an exemption from such registration requirements and only
after the Optionee provides an opinion of counsel or other evidence
satisfactory to the Company to the effect that registration is not required.
In some states, specific conditions must be met or approval of the securities
regulatory authorities may be required before any such offer or sale. If Rule
144 is available (and no assurance is given that it would be), only routine
sales of Common Stock in limited amounts can be made after one year following
the acquisition date of the Securities, as determined under Rule 144(d), in
accordance with the terms and conditions of Rule 144. The Company is under no
obligation to make Rule 144 available. In the event Rule 144 is not
available, compliance with Regulation A or some other disclosure exemption
may be required before the Optionee can sell, transfer, or otherwise dispose
of the Securities without registration.
If the Securities are not registered, the Company may refuse to transfer the
Securities to any transferee who does not furnish in writing to the Company
the same representations and warranties set forth in this paragraph and agree
to the same conditions with respect to such Securities as are set forth
herein. The Company may further refuse to transfer the Securities if certain
circumstances are present reasonably indicating that the proposed
transferee's representations and warranties are not accurate. In any event,
in the absence of an effective registration statement covering the
Securities, the Company may refuse to consent to any transfer in the absence
of an opinion of legal counsel, satisfactory to and independent of counsel of
the Company, that such proposed transfer is consistent with the above
conditions and applicable securities laws.
<PAGE>
12. RECORD OWNER
The Company may deem the Optionee as the absolute owner of this Option for
all purposes. This Option is exercisable only by the Optionee or by the
Optionee's duly designated or appointed representative. This Option is not
assignable.
13. NO RIGHT OF EMPLOYMENT
Nothing contained in this Option shall be construed as conferring on the
Optionee any right to continue or remain as an employee of the Company or its
subsidiaries.
14. VALIDITY AND CONSTRUCTION
The validity and construction of this Option shall be governed by the laws of
the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this document the day
and year first above written.
Company TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Its: President
Optionee: /s/ D. Daniel Michel, Jr.
<PAGE>
EXHIBIT "A"
FORM OF EXERCISE
To: Total Film Group, Inc.
The Undersigned, the owner of the attached Option, hereby irrevocably elects
to exercise the purchase rights represented by the Option for, and to
purchase thereunder, ________ shares of Common Stock of Total Film Group, Inc.
Enclosed is payment in the amount of $_________, the exercise price of the
Common Stock to be acquired.
Please have the certificate(s) registered in the name of __________________
and delivered to __________________.
If this exercise does not include all of the Common Stock covered by the
attached Option, please deliver a new Option of like tenor for the balance of
the Common Stock to the undersigned at the foregoing address.
DATED this ___________ day of ________________, _____.
Signature of Optionee_____________________
<PAGE>
EXHIBIT 6.21
EMPLOYMENT AGREEMENT
SUMMARY OF PARTICULARS
RECITALS
1. As of December 23, 1998, Total Film Group, Inc. entered into an
agreement ("Agreement") with Dan Michel and Howard Russo, as sole
owners of Michel/Russo, Inc. ("MR") with respect to the acquisition by
Total Film Group, Inc. of 100 percent of MR's issued and outstanding
capital stock for the possible purpose of forming a new marketing and
design company in combination with Dyer communications, Inc. and/or
other entities. For the purpose of the Agreement, such possible new
marketing and design company was named Total Communications, Inc.
("IC") which name shall be kept for the purpose of this Employment
Agreement.
2. Paragraph 6 of the Agreement provides that Total Film Group, Inc. shall
enter into a long- form Employment Agreement with each of Dan Michel
and Howard Russo and that such long-form Employment Agreement shall
contain the terms summarized in Exhibit A of the Agreement and such
further provisions as the parties mutually agree upon.
Therefore, it is agreed as follows:
I. EMPLOYER: Total Film Group, Inc. ("Company")
II. EMPLOYEE: Howard Russo ("Employee")
III. TITLE AND CAPACITY: Executive Vice President, Co-Creative
Director of TC
IV. ASSIGNMENT: Company shall have the right to assign this Employment
Agreement to TC or to any of its subsidiaries or related entities;
provided, however, that any such assignment shall not be deemed to
relieve Company of any liability for the performance of this Employment
Agreement, and provided, further that Employee may terminate this
Employment Agreement (upon sixty (60) days written notice to Company)
if in his sole discretion he elects to do so at any time after any such
assignment which has not been approved in writing by him in advance
(other than the contemplated assignment to TC, which Employee hereby
approves in advance). Notwithstanding the foregoing, Company may
provide written notification to Employee of such assignment, and if
Employee does not object in writing to such assignment within ten (10)
business days after his receipt of such notification, his right to
terminate this Employment Agreement after such assignment shall be
deemed waived. If Employee is entitled under this Section IV to
terminate his employment after such assignment and does so, Company
shallbeobligated to pay the balance then due on this Employment
Agreement when such balance would otherwise be payable under this
Employment Agreement (i.e., the total amount of Fixed and Incentive
Compensation provided below and the value of all other benefits set
forth herein through the end of the then current Term or renewal term
(or through the end of the next
<PAGE>
succeeding renewal term if such termination occurs in the final sixty
(60)days of any year and no notice of non-renewal is provided by
Company or either party - as applicable - prior to such sixty-day
period. Such payment shall be made at the expiration of the 60-day
notice period: provided, however, that the Incentive Compensation
shall be paid at the time such Incentive Compensation would otherwise
be payable hereunder.
V. DUTIES AND OBLIGATIONS: Customary duties of Executive Vice President,
Co- Creative Director of TC, reporting to Gerald Green, as described in
Paragraph 1 of Appendix A.
VI. EXCLUSIVITY: Employee's services shall be exclusive as more fully
described in Paragraph 6 of Appendix A; provided, however, that
Employee shall be entitled to devote a non-material portion of his time
to other activities and business interests.
VII. TERM: The Term shall be one (1) year commencing as of January 1, 1999,
which shall be subject to automatic renewal for one (1) additional year
commencing as of January 1, 2000 unless Company notifies Employee of
its desire not to renew at least sixty (60) days prior to December 31,
1999. If so renewed, the Term shall be subject to automatic renewal for
an additional renewal period of one (1) year through December 31, 2001,
unless either party notifies the other of its desire not to renew at
least sixty (60) days prior to December 31, 2000; provided, however,
that if Employee provides such notice of non- renewal, then during the
year ending December 31, 2001, he shall not (i) compete with the
Company's business; (ii) call on, solicit, take away, or attempt to
call on, solicit or take away any of the customers of the Company
and/or (iii) directly or indirectly solicit to leave the company, hire
or recruit any employee of the Company. The Term and possible
extension(s) shall be subject to earlier termination as more fully
described in Appendix B.
VIII. FIXED COMPENSATION: Employee shall receive:
a. For year 1: $150,000 per year.
b. For possible year 2: $175,000 per year.
c. For possible year 3: $195,000 per year.
payable in accordance with standard Company policies, as set forth in
Paragraph 3.1 of Appendix A.
IX. INCENTIVE COMPENSATION: Employee shall receive within thirty (30) days
after Company reports its revenues for 1999 and each calendar year
during which he is employed under this Agreement, and in any event
within one hundred and twenty (120) days after the end of each such
year, an incentive compensation payment ("Incentive Compensation")
equal to six and one-third percent (6.333%)of the amount, if any, by
which (i) the gross sales revenue of TC (which for purposes of this
paragraph IX shall include in any event MR, Dyer Communications,
Skyrocket Interactive and any business unit providing similar services
which may be created or acquired by Company, TC or their subsidiaries
or affiliates) during such calendar year, exceeds (ii) the gross sales
revenues in 1998 of MR, Dyer Communications and Skyrocket Interactive.
For purposes hereof,
<PAGE>
gross sales revenues shall be determined in accordance with generally
accepted accounting principles, consistently applied, and shall be the
amount of gross sales revenues of TC which are reflected in the audited
financial statements of Company. Such gross sales revenues shall be
certified by the chief financial officer of Company. Employee may, at
his own expense, but not more than once annually audit the applicable
records. Any such audit shall be conducted only by a public accountant
during reasonable business hours after reasonable advance notice and in
such manner as not to interfere with Company's normal business
activities, and shall not continue more than thirty (30) consecutive
days after Company provides access to all such requested records.
X. AUTOMOBILE ALLOWANCE: Employee shall be entitled to a monthly
automobile allowance of $391.78 plus the lesser of (i) the incremental
monthly cost of Employee of insuring his leased car on his personal
insurance policy with coverage comparable to that currently maintained
or (ii) the monthly cost currently being incurred by MR in insuring
such car, in accordance with Paragraph 3.3 of Appendix A.
XI. BUSINESS EXPENSES: Reasonable business expenses and travel expenses
will be reimbursed to Employee in accordance with Paragraphs 3.4.1 and
3.4.2 of Appendix A. In no event shall the nature and amount of such
expenses be less than the expenses currently provided by MR (on an
annual basis).
XII. MEDICAL AND OTHER BENEFITS: Company shall provide to Employee and his
dependents the same medical and dental coverage as is maintained for
Gerald Green or his successor as Company's chief executive officer. In
the event that such medical and dental coverage is not available in
full (whether as a result of any pre-existing condition exclusion or
otherwise) until a later date, Company shall, in the interim, pay or
reimburse Employee for the cost of maintaining his current coverage
under COBRA. On or before June 30, 1999, Company will adopt a 401(k)
plan or other tax deferred savings plan providing benefits to Employee
which are substantially the same as those currently provided to
Employee under Simple IRA currently provided by MR to Employee. Company
shall take whatever action is necessary in accordance with applicable
law to terminate the active participation of the participants in such
Simple IRA. Upon the expiration of the current term of the life
insurance policy currently maintained by MR for the benefit of Employee
(July 27, 1999), Company shall either renew such coverage or provide
insurance coverage of at least the same amount for the remainder of the
Term of employment of Employee. Upon the expiration of the current term
of the disability insurance policy currently maintained by MR for
Employee (which the parties understand to be March 2, 1999, Company
shall either renew such coverage or provide disability insurance
coverage of at least the same amounts with at least the same benefits
for the remainder of the Term of employment of Employee.
XIII. VACATION: Employee shall be entitled to twenty (20) days annual paid
vacation leave as set forth in Paragraph 3.6 of Appendix A.
<PAGE>
XIV. TERMINATION: As set out in Appendix B, summarized as follows:
A. Death or Disability: Immediately upon death or upon notice for absence
caused by disability for sixty (60) consecutive days (or ninety (90)
days in the aggregate) in any twelve (12) month period of the Term, all
Fixed and Incentive Compensation vested to the date of death or
disability is paid; provided, however, that Company shall have no right
to terminate Employee's employment as a result of the disability of the
Employee unless the Employee is entitled to full benefits for
permanent, total disability under the disability insurance policy
maintained by Company for the benefit of Employee.
B. For Cause: Immediately upon cause for termination; Customary definition
(including (a) material breach which is not cured within five (5)
business days after Company provides written notice of such breach, (b)
felony, and (c) alcoholism); all accrued Fixed and Incentive
Compensation vested to the termination date is paid, without prejudice
to any of Company's other rights.
C. Without Cause: Upon three (3) months prior notice; provided, however,
that in the event that Employee is terminated pursuant to this Section,
Employee shall be entitled to his full Fixed and Incentive Compensation
and all other benefits set forth herein through the end of the then
current Term or renewal term (or through the end of the next succeeding
renewal term if such termination occurs within the final sixty (60)
days of any year and no notice of non-renewal is provided by Company or
either party - as applicable - prior to such sixty-day period).
XV. EMPLOYEE'S TERMINATION RIGHT
A. Employee may terminate this Employment Agreement (upon sixty (60) days
written notice to Company) if in his sole discretion he elects to do so
at any time after any entity or person other than Company acquires a
controlling interest in TC, any entity or person other than Gerald
Green acquires a controlling interest in Company. Notwithstanding the
foregoing, Company may provide written notification to Employee of such
acquisition, and if Employee does not object to such acquisition within
ten (10) business days after his receipt of such notification, his
right to terminate this Employment Agreement after such acquisition
shall be deemed waived. For purposes hereof, the term "controlling
interest" shall mean ownership of record and beneficially of capital
stock or other equity securities of TC or Company, as the case may be,
having at least 50% of the total voting power of such company or the
total right to any dividends or other distributions by such company,
whether in the ordinary course or upon liquidation. If Employee elects
to terminate his employment in such event, Company shall be obligated
to pay the balance then due on this Employment Agreement (i.e., the
total amount of Fixed and Incentive Compensation and the value of all
other benefits set forth herein through the end of the then current
Term or renewal term (or through the end of the next succeeding renewal
term if such termination occurs in the final sixty (60) days of any
year and no notice of non-renewal is provided by Company or either
party - as applicable - prior to such sixty-day period)). Such payment
shall be made at the expiration of the sixty day notice period;
provided, however, that the
<PAGE>
Incentive Compensation shall be paid at the time such Incentive
Compensation would otherwise be payable hereunder.
B. Employee may terminate this Employment Agreement (upon sixty (60) days
written notice to Company) if in his sole discretion he elects to do so
at any time after he is asked or instructed to report to any person
other than Gerald Green. Notwithstanding the foregoing, Company may
provide written notification to Employee of such change in reporting
relationship, and if Employee does not object in writing to such change
within thirty (30) days after his receipt of such notification, his
right to terminate this Employment Agreement after such change shall be
deemed waived. If Employee elects to terminate his employment in such
event, Company shall be obligated to pay the balance then due on this
Employment Agreement (i.e., the total amount of Fixed and Incentive
Compensation and the value of all other benefits set forth herein
through the end of the then current Term or renewal term (or through
the end of the next succeeding renewal term if such termination occurs
in the final sixty (60) days of any year and no notice of non-renewal
is provided by Company or either party - as applicable - prior to such
sixty- day period)). Such payment shall be made at the expiration of
the sixty-day notice period; provided, however, the Incentive
Compensation shall be paid at the time such Incentive Compensation
would otherwise be payable hereunder.
XVI. NO DUTY TO MITIGATE DAMAGES: In the event of the termination of this
Employment Agreement, whether in accordance with the provisions of this
Employment Agreement or otherwise, Employee shall have no obligation to
seek employment or to accept any employment in order to mitigate the
damages or other amounts owing by Company to Employee hereunder, and in
the event that Employee accepts other employment, any compensation
earned by him in connection therewith shall not reduce or otherwise
affect the amount of any payment required to be made to Employee as a
result of such termination.
XVII. GOVERNING LAW: This Agreement shall be subject to the laws of the State
of California as more fully described in Paragraph 18 of Appendix A.
XVIII. ARBITRATION: Disputes to be resolved by binding arbitration, as more
fully described in Paragraph 17 of Appendix A.
XIX. WORK LOCATION: Services to be rendered in Company's business premises
in Los Angeles County, which shall be no more than ten (10) miles from
9107 Wilshire Boulevard, Beverly Hills, CA.
XX. ADDITIONAL TERMS: Additional customary terms as set forth in Appendices
A and B attached hereto are incorporated by reference herein
(collectively, including this Summary of Particulars, this "Employment
Agreement").
<PAGE>
IN WITNESS WHEREOF the parties hereto have executed this Employment Agreement at
Los Angeles, as of the 29 day of January 1999.
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Its: President
/s/ Howard Russo
END OF SUMMARY OF PARTICULARS
<PAGE>
APPENDIX A
SCOPE OF APPENDIX A
All terms and conditions of this Appendix A are incorporated in the Employment
Agreement (hereinafter this "Employment Agreement")
1. DUTIES AND OBLIGATIONS
1.1 Company hereby employs Employee and Employee hereby agrees to render
services in the capacity of Executive Vice President, Co-Creative
Director of TC consistent with the provisions of Paragraph 2 of this
Appendix A.
1.2 Any assignment, whether to an affiliate or not, is subject to Section
IV of the Summary of Particulars.
1.3 In serving as Executive Vice President, Co-Creative Director of TC, and
subject to the policies and directives of Company's Board of Directors,
Employee shall be in charge of and responsible for the creative output
of TC. Employee shall consult with the management committee in the
decision-making process of Company, relating to such reasonably
specific actions as the Board of Directors of the Company may
reasonably specify, consistent with requirements applicable to the
Company's other business units.
1.4 Employee's responsibilities shall include performing all services
customarily rendered by executives of a similar position in the
advertising industry as reasonably required by the management
committee. Subject to the provisions of Section VI of the Summary of
Particulars, Employee shall devote his entire and exclusive productive
business time, ability and attention to the business of Company during
the term of this Employment Agreement.
1.5 Employee shall not on behalf of Company, without the specific prior
written approval of the management committee of Company, or except in
accordance with Company's bylaws, or in accordance with guidelines
provided by Company's Board of Directors from time to time, do or
contract for any of the following:
1.5.1 Borrow money on behalf of Company or loan of Company's money.
1.5.2 Assign, mortgage, encumber, transfer or sell any of Company's assets or
property.
1.5.3 Enter into any material contract or executory commitments on behalf of
Company which involves a payment by Company of more than $5,000.00.
1.6 It is expressly understood and agreed that Employee shall not submit or
furnish to any person or entity other than Company any ideas, formats,
material or properties relating to the advertising and design business
of the company (other than ideas, formats, material
<PAGE>
and properties submitted or furnished to or for the benefit of
customers in the ordinary course of business) and that any and all
ideas, formats, material and/or properties relating to the advertising
and design business of the company (other than ideas, formats, material
and properties submitted or furnished to or for the benefit of
customers in the ordinary course of business) conceived, created,
developed and/or written by Employee during the Term or any extension
thereof shall be and become the sole and absolute property of Company
for any and all purposes whatsoever pursuant to the terms hereof.
2. TERM
As provided in Section VII of the Summary of Particulars.
3. COMPENSATION AND BENEFITS
3.1 Fixed Compensation
During the Term of this Employment Agreement, Company shall pay Employee for
all services rendered and all rights granted hereunder the fixed compensation
provided in Section VIII of the Summary of Particulars. Such compensation
shall be payable in accordance with Company's standard payroll policies and
shall have deducted any applicable withholding taxes and standard and legally
required deductions.
3.2 Incentive Compensation
Employee shall be entitled to the Incentive Compensation set forth in Section
IX of the Summary of Particulars.
3.3 Automobile Allowance
Employee shall be entitled to an automobile allowance as set forth in Section
X of the Summary of Particulars. Other than the foregoing allowance, Company
shall not pay and Employee shall not be entitled to reimbursement for any
other costs or expenses related to the operation or maintenance of Employee's
automobile.
3.4 Business Expenses
3.4.1 Subject to the provisions of Section XI of the Summary of Particulars,
during the Term of this Employment Agreement, Company shall pay or
reimburse Employee for all necessary and reasonable expenses incurred
or paid by Employee, in connection with the performance of Employee's
services under this Employment Agreement upon receipt of invoices,
receipts or such other supporting information evidencing the nature and
payment of such expenses by Employee, as is reasonably deemed
appropriate by Company and is consistent with Company's accounting
practices. Any major expense (e.g. travel) outside of or in excess of
amounts contained in Company's policies must be pre-approved by the
management committee of Company in writing. All payments or
reimbursements to
<PAGE>
Employee shall be made within 30 days after Employee's submission of
such invoices or information.
3.4.2 Notwithstanding Paragraph 3.4.1, all such business expenses will be
subject to such limits and categories applicable to other similar level
executives of Company as may from time to time be provided in writing
by the management committee of Company; provided, however, that all
travel should be conducted during normal business hours and Employee
shall be entitled to the same class of travel and accommodations as is
provided to other similar level executives of Company.
3.4.3 Company shall provide an office suitable for a similar level executive
of Employee's standing and the services of a secretary, for Employee's
use in connection with Employee's services hereunder. The amount of
compensation payable to such secretary shall be subject to the approval
of Company.
3.5 Insurance
Subject to the provisions of Section XII of the Summary of Particulars:
3.5.1 Company agrees to cause Employee to be covered by medical and dental
insurance as provided in Section XII of the Summary of Particulars.
3.5.2 Company may secure "key man" insurance covering Employee and Employee
shall have no right, title or interest in or to such insurance.
Employee agrees to submit to any usual and customary medical
examination required to effect such insurance (at which examination
Employee may elect to have his own physician present) and to sign such
application or other documents reasonably required in connection
therewith.
3.5.3 Whenever compensation is payable to Employee hereunder during any
period when he is partially or totally disabled and such disability
except for the provisions hereof, would entitle him to disability
income or to salary continuation payments from Company according to the
terms of any plan now or hereafter adopted by Company (it being
acknowledged that Company currently has no such plan in effect or has
any immediate plans to implement such a plan other than for the
disability coverage required by Section XII of the Summary of
Particulars) or according to Company's policy in effect at the time of
such disability, the compensation payable to him hereunder shall be
inclusive of any such disability income or salary continuation and
shall not be in addition thereto. If disability income is payable
directly to Employee by an insurance company under an insurance policy
paid for by Company or by a governmental agency, the amounts paid to
him by said insurance company or governmental agency shall be
considered to be a part of the payments to be made by Company pursuant
to this Paragraph and shall not be in addition thereto.
<PAGE>
3.6 Vacation and Holiday
Company shall provide Employee with the normal Company and public holidays,
and up to 20 working days per year during the Term as paid vacation accruing
pro-rata for each week of services rendered hereunder during the Term of this
Employment Agreement, to be utilized at such times and periods as shall be
mutually agreed to in good faith between Employee and Company. Employee
agrees that all paid vacation days accrued during the Term shall be payable
at the termination of Employee's employment hereunder based upon his then
current rate of pay.
3.7 Other Benefits
Employee shall be considered for inclusion in any other benefits or plans
offered to other similar level executives of Company; provided, however, that
nothing herein shall require Company to increase the value of benefits and
compensation to which Employee is entitled pursuant to Paragraph 3.1 through
3.6 above or the Summary of Particulars.
4. EXTENT OF SERVICES
4.1 Employee hereby warrants and represents that Employee's employment
hereunder does not and shall not conflict in any way whatsoever with
any involvement, or violate any agreement that Employee now or
previously has or may have during the Term of Employee's employment
hereunder with any person or entity.
5. OWNERSHIP OF RESULT OF SERVICES
5.1 Any and all results and proceeds of services performed by Employee
within the scope of Employee's duties hereunder for Company's
advertising and design business shall be owned by Company (or customers
of Company for whom Company provides services) and shall be deemed in
all respects as works made for hire, and Company (or customers of
Company for whom Company provides services) shall be the sole and
absolute author and proprietor thereof.
5.2 Employee agrees to execute and deliver to Company, or to any Borrower
Company during or after the Term of said employment, such assignment or
other instruments as Company, or the respective related entity or
subsidiary of Company, may reasonably require from time to time to
evidence the ownership of the rights and interests and of the results
and proceeds of Employee's services as before mentioned.
6. NON-DISCLOSURE OF TRADE SECRETS
6.1 Employee shall not:
6.1.1 Except for actions taken in the course of Employee's employment, during
the Term of this Employment Agreement or at any time thereafter,
willfully use or divulge to any person, company or corporation, either
directly or indirectly, any financial or other material
<PAGE>
information of a confidential or proprietary nature obtained by
Employee while in the employment of Company or any Borrower Company.
The parties hereby stipulate that, as between them the foregoing
matters are important, material and confidential and gravely affect the
effective and successful conduct of the business of Company and its
goodwill. This section should not apply to any such information that
becomes publicly available other than by disclosure by Employee in
violation hereof.
6.1.2 During the Term of this Employment Agreement, be actively engaged or
concerned or interested in any business whatsoever other than that of
Company except (i) as the owner for investment of shares or other
securities quoted or dealt in or on any recognized stock exchange; or
(ii) as a passive investor in any other business which is not in
competition in the same market with any business or company owned by
Company or any affiliate of Company, or (iii) for activities and
businesses to which Employee devotes a non-material portion of his
time.
6.1.3 Within one (1) year of the termination of Employees employment for
cause pursuant to Section 2 of Appendix B or as a result of the
election by Employee not to renew the term of this Employment Agreement
for the year ending December 31, 2001 pursuant to Section VI of the
Summary of Particulars, engage in any business in competition with
Company, and/or call on, solicit, take away or attempt to call on,
solicit, take away any of the customers of Company, and/or directly or
indirectly solicit to leave the Company, hire or recruit any employee
of Company.
6.2 If any of the restrictions contained in clause 6 is held not to be
valid as going beyond what is reasonable for the protection of the
interest of Company, but would be valid if part of the wordings were
deleted or its extent reduced or modified, then such restriction shall
apply with such modifications as may be necessary to make it
enforceable.
7. TERMINATION
This Employment agreement may be terminated as set forth in Appendix B
attached hereto and incorporated herein.
8. DAMAGES
In the event that any party is awarded any damages as compensation for any
breach of this Employment Agreement, a breach of any covenant contained in
this Employment Agreement (whether expressed or implied by either law of
fact), or any other cause of action based in whole or in part on a breach of
any provision of this Employment Agreement or related in any way to
Employee's employment hereunder (other than with respect to physical injuries
suffered by Employee or intentional or grossly negligent actions by Company
or its employees on the one hand, or Employee on the other hand), such
damages shall be limited to contractual damages and shall exclude punitive
damages and any other type of tort damages. Employee agrees and acknowledges
that in making any claims or recovering any damages awarded in connection
with this Employment Agreement, Employee will look solely to Company and to
Company's assets
<PAGE>
and will in no circumstances seek to recover such damages from any of
Company's constituent shareholders, directors or executives or any of
Company's parents, subsidiaries or related entities or Gerald Green
personally.
9. PROVISIONS SURVIVING TERMINATION
It is expressly agreed that notwithstanding termination of Employee's
employment with and by Company for any reason or cause or under any
circumstances whatsoever, such termination, shall be without prejudice to the
rights and obligations of Employee and Company, respectively, in relation to
the time up to and including the date of termination, and all the provisions
of this Appendix A and of Appendix B of this Employment Agreement which
expressly or impliedly by their terms survive the termination of this
Employment Agreement, including without limitation the provisions of
Paragraphs 5 through 19 of this Appendix A shall remain and continue in full
force and effect.
10. WAIVER
10.1 The waiver by either party of a breach of any provision of this
Employment Agreement shall not operate or be construed as a waiver of
any subsequent breach.
10.2 No waiver shall be valid unless it is in writing and signed by the
party to be charged.
11. REPRESENTATIONS AND WARRANTIES
11.1 Employee hereby represents, warrants and agrees that Employee is under
no disability, restriction or prohibition, whether contractual or
otherwise (i) with respect to his rights to execute this Employment
Agreement, (ii) to grant the rights to his services as provided
hereunder, or (iii) with respect to his right to perform the terms and
provisions herein contained. Employee hereby agrees and does hereby
defend, indemnify, save and hold Company, and its directors, officers,
partners, shareholders, employees, agents, legal representatives,
licensees, affiliates, predecessors, successors and assigns harmless
from and against any and all claims, demands, damages, liabilities,
costs, losses and expenses (including legal costs and reasonable
outside attorneys' fees) arising out of or in connection with any
breach of any of the warranties, representations and agreements made by
Employee in this Employment Agreement. Employee agrees to reimburse
Company, on demand, for any payment made by Company at any time with
respect to any such demand, liability, costs, loss or expense to which
the foregoing indemnity applies; provided, such payment arises from a
final adverse judgment or arbitration or a settlement made with
Employee's prior consent, which consent Employee shall not unreasonably
withhold. Company shall notify Employee in writing of any such claim,
demand or action promptly after Company has been formally advised
thereof and Employee shall have the right, at his expense to
participate in the defense thereof with counsel of his choice.
11.2 Company hereby represents, warrants and agrees that it is under no
disability, restriction or prohibition, whether contractual or
otherwise to (i) with respect to its rights to execute
<PAGE>
this Employment Agreement or (ii) with respect to its rights to perform
the material terms and provisions contained therein. Company hereby
defends, indemnifies, saves and holds Employee harmless from and
against any and all claims, demands, damages, liabilities, costs,
losses and expenses (including legal costs and reasonable outside
attorneys' fees) arising out of or in connection with any breach of any
of the warranties, representations and agreements made by Company in
this Employment Agreement. Company agrees to reimburse Employee, on
demand for any payment made by Employee at any time with respect to any
such demand, liability, costs, loss or expense to which the foregoing
indemnity applies; provided, such payment arises from a final adverse
judgment or arbitration or a settlement made with Company's prior
consent, which consent Company shall not unreasonably withhold.
Employee shall notify Company in writing of any such claim, demand or
action promptly after Employee has been formally advised thereof and
Company shall have the right, at his expense to participate in the
defense thereof with counsel of its choice. Employee shall be entitled
to indemnification and the benefits of Company's insurance coverage to
the same extent as any other officer of the company.
12. ENTIRE AGREEMENT
12.1 No representation, promise or inducement has been made by either party
that is not embodied in this Employment Agreement, or incorporated by
reference herein, and neither party shall be bound by or be liable for
any alleged representation, promise or inducement not so set forth.
12.2 The Agreement and this Employment Agreement contain the entire
agreement and understanding of the parties and this Employment
Agreement is effective on the date set forth in Paragraph 2 of Appendix
A of this Employment Agreement for the commencement of this Employment
Agreement. The Agreement and this Employment Agreement supersede and
void all prior agreements, arrangements and understandings entered into
between Company or any of its respective related entities or
subsidiaries, on the one hand and Employee, on the other hand. In the
event of any inconsistency between any provision of this Employment
Agreement and provision of the Agreement, the provisions of the
Agreement shall apply and such inconsistent provision of this
Employment Agreement shall be of no force or affect.
12.3 This Employment Agreement may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of
any waiver, change, modification, extension or discharge is sought.
13. ASSIGNMENT
Employee acknowledges that the services to be rendered by Employee are unique
and personal. Accordingly, Employee may not assign or encumber any of the
Employee's rights or delegate any of Employee's duties or obligations under
this Employment Agreement.
<PAGE>
14. NOTICES
Any notice required or desired to be given under this Employment Agreement
shall be deemed given if it is expressed in writing and sent by certified
mail or if delivered by telefax or personally to the following persons, or
such other persons as may be designated in writing by the parties hereto from
time to time.
If to Company: Total Film Group
9107 Wilshire Blvd., Suite 475
Beverly Hills, CA 90210
Attention: Gerald Green
If to Employee: Howard Russo
327 10th Street
Santa Monica, CA 90402
with a copy to: Russell C. Hansen
Gibson, Dunn & Crutcher
2029 Century Park East
Los Angeles, CA 90067-3026
15. GENERAL
15.1 It is acknowledged that the rights of each party under this Employment
Agreement are of a special, unique and intellectual character, which
gives them a peculiar value and that each breach or threatened breach
of any provision of this Employment Agreement may cause the other party
irreparable injury and damage, which cannot be reasonably or adequately
compensated in damages and in action at law. Accordingly, without
limiting any right or remedy which any party may otherwise have, the
parties specifically agree that each party shall be entitled to seek,
in addition to any other rights and remedies, injunctive relief or
other equitable relief to enforce and protect its or his rights under
this Employment Agreement and to prevent or curtail any breach or
threatened breach.
15.2 Nothing in this Employment Agreement shall be construed as to so
require the commission of any act contrary to law and wherever there is
any conflict between any provision of this Employment Agreement and any
present or future statute, law, ordinance or regulation, the latter
shall prevail, but in such event, the provision of this Employment
Agreement so affected shall be curtailed and limited only to the extent
necessary to bring it within such legal requirements.
15.3 If any term or provision of this Employment Agreement is held to be
invalid or unenforceable under California law, the remaining portions
of this Employment Agreement will continue to be valid and will be
performed, construed and enforced to the fullest extent permitted by
law, and the invalid or unenforceable term will be deemed amended and
limited in accordance with the intent of the parties, as determined
from the face of the
<PAGE>
Employment Agreement to the extent necessary to permit the maximum
enforceability or validation of the term or provision.
15.4 Section 508 of the Federal Communication Act makes it a criminal
offense for any person connected with the production or preparation of
any program intended for broadcasting to accept or pay any money,
service or other valuable consideration for the inclusion of any matter
as a part of any such program without disclosing the same to the
employer of the person to whom such payment is made or to the person
for whom such program is being produced. Employee understands that it
is Company's policy not to permit any employee of Company to accept or
to pay any such consideration and Employee represents and agrees that
Employee has not accepted, nor will accept, and that Employee has not
paid, or will not pay, any money, service or other valuable
consideration for the inclusion of any "plug," reference or product
identification or any similar matter with respect to the Company's
projects.
16. ATTORNEYS FEES
In the event of any legal action or arbitration which arises out of or
relates to any provision of this Employment Agreement, the losing party to
such action (based on the final judgment, arbitration decision or settlement
thereof) shall bear the reasonable attorneys fees and related costs of the
prevailing party.
17. ARBITRATION
17.2 Any claim, controversy or dispute arising under or in connection with
this Employment Agreement shall be settled exclusively by arbitration
in accordance with this Section 17.1. Such dispute shall promptly be
submitted by Employee and Company for resolution to a single arbitrator
(who shall be a retired or former judge of a trial court of general
jurisdiction in California or a federal district court) selected by the
parties hereto in accordance with the Commercial Arbitration Rules of
the American Arbitration Association ("AAA").
17.3 The decision of the Arbitrator shall be final and binding upon the
parties and judgment may be entered thereon by any court having
jurisdiction. Company and Employee hereby submit to the in personam
jurisdiction of the Superior Court of the State of California for
purposes of confirming any ruling made by the Arbitrator.
17.3 In any arbitration hereunder concerning Company's right to terminate
Employee's employment hereunder, the following shall apply:
17.3.1 If the Arbitrator shall hold that Company terminated Employee's
employment pursuant to Paragraphs 1.2 or 3 of Appendix B, Employee
shall be entitled to no remedy of compensation other than the
compensation or benefits expressly payable pursuant to Paragraph 1.2 or
3 of Appendix B, as applicable.
<PAGE>
17.3.2 If the Arbitrator shall hold that Employee was not terminated for any
of the reasons set forth in Paragraphs 1.2 or 3 of Appendix B, Company
shall be deemed for all purposes of this Employment Agreement to have
given notice of termination on the fifth (5th) business day after
notice was initially given pursuant to Paragraphs 1.2 or 3 of Appendix
B if such notice was given. In such event, Employee shall be entitled
to receive only such amounts as provided for in Paragraphs 1.2 or 3 of
Appendix B.
17.4 For the avoidance of doubt, Employee and Company agree that the
Arbitrator shall not be authorized to award punitive, exemplary or any
other type of non-contractual damages consistent with Paragraph 10 of
this Appendix A.
18. GOVERNING LAW
This Employment Agreement shall be deemed to have been made under and shall
be interpreted in accordance with and governed by the laws of the State of
California applicable to contracts executed and to be performed in California.
19. CONSTRUCTION
The language of this Employment Agreement shall always and for all purposes
be construed as a whole according to its fair common meaning and not strictly
for or against either of the parties hereto.
END OF APPENDIX A
<PAGE>
APPENDIX B
All terms and conditions of this Appendix B are incorporated in the
Employment Agreement.
1. Death or Disability
1.1 Employee's employment hereunder shall terminate automatically in the
event of Employee's death, or upon written notice in the event of
Employee's absence or inability to render the services required
hereunder because of illness or incapacity after sixty (60) consecutive
days (or ninety (90) days in the aggregate) in any twelve (12) month
period during the term; provided, however, that Company shall have no
right to terminate Employee's employment as a result of his disability
unless he is entitled to full benefits for permanent, total disability
under the disability insurance policy maintained by Company for the
benefit of Employee pursuant to Section XII of the Summary of
Particulars.
1.2 In case of termination hereunder due to death, absence or inability to
render the services required because of illness or incapacity, Employee
or his estate shall be entitled to receive all Fixed Compensation which
has accrued and would otherwise be payable to Employee pursuant to
Paragraph 3.1 of Appendix A together with the Incentive Compensation
which has accrued and vested as of the date of termination.
2. Termination For Cause
2.1 Company may at any time by written notice to Employee, terminate
Employee's employment hereunder, without prejudice to any of Company's
other rights, for any of the events listed under paragraphs 2.2.2,
2.2.3 and 2.2.4, or any event listed in paragraph 2.2.1 which remains
uncured for a period of five (5) business days after Employee receives
written notice from Company that such an event has occurred, and
setting forth the nature of the breach and the action required to
remedy the same.
2.2 Subject to Section 2.1, the following acts shall constitute grounds for
termination of Employee's employment hereunder:
2.2.1 Breach of any material term of this Employment Agreement or malfeasance
or material non-feasance with respect to Employee's duties which are
set forth in this Employment Agreement.
2.2.2 Conviction of a felony offense.
2.2.3 Becoming bankrupt.
2.2.4 Alcoholism or drug addiction.
2.3 Termination under Paragraph 2.1 shall be effective upon the date of
written notice in the case of termination under Section 2.2.2, 2.2.3 or
2.2.4 or, upon expiration of the five (5)
<PAGE>
business day cure period specified in section 2.2.1 if the event
specified in the Company's notice thereunder has not been cured. In the
event of any such termination, all of the Company's compensation
obligations under this Employment Agreement and the Appendices attached
hereto shall forthwith cease and terminate on such effective date with
the exception of Company's obligation to pay any Fixed and Incentive
Compensation which have accrued and vested and are payable to Employee
pursuant to Paragraph 3 of Appendix A, without prejudice to any of
Company's other rights.
3. Termination Without Cause
3.1 Company shall have the right at any time to terminate Employee's
employment hereunder for any reason without cause by giving three (3)
months prior written notice to Employee of such termination. In the
event of any such termination, Employee shall be entitled to his full
Fixed and Incentive Compensation and all other benefits set forth in
this Employment Agreement through the end of the current Term or
renewal term (or through the end of the next succeeding renewal term if
such termination occurs within the final sixty (60) days of any year
and no notice of non-renewal is provided by Company or either party -
as applicable - prior to such sixty-day period).
3.2 Any amounts payable to Employee pursuant to Paragraph 3.1 shall be
payable in accordance with Company's payroll policies, less applicable
withholding taxes and payroll deductions, if any, and any other legally
required deductions. Furthermore, the remedy provided for in Paragraph
3.1 above shall be deemed liquidated damages and shall constitute the
sole and exclusive remedy at law, in arbitration or in equity for any
dispute whatsoever, whether of a contractual or non-contractual nature,
which is based in whole or in part, on the contention that Company did
not have sufficient cause to terminate Employee's employment, or acted
in an improper or unlawful fashion in terminating Employee's
employment.
END OF APPENDIX B
<PAGE>
As of July 28, 1999
Mr. Howard Russo
327 10th Street
Santa Monica, CA 90402
Re: Employment Agreement
Dear Howie:
Reference is hereby made to your employment agreement ("Agreement") dated as
of January 29, 1999.
The Agreement is amended as follows:
In the Summary of Particulars, the provisions of Paragraph IX. Incentive
Compensation are hereby intentionally deleted and replaced by the following
provisions:
"IX. INCENTIVE COMPENSATION & STOCK OPTION:
A. Incentive Compensation: Employee shall receive within thirty (30) days
after Company reports its revenues for the six (6) month period ended
June 30, 1999 and then for each fiscal year during which he is employed
under this Agreement, and in any event within one hundred and twenty
(120) days after the end of such six (6) month period ended June 30,
1999 and then of each such fiscal year, an incentive compensation
payment ("Incentive Compensation") equal to five percent (5%) of the
net profits of TC and its wholly owned subsidiaries. The term "net
profits" as used in this paragraph, shall mean TC's and its wholly
owned subsidiaries' consolidated annual net operating income before the
deduction or allowance for federal or state income taxes. The
determination of net profits shall be made by TC's auditor in
accordance with generally accepted accounting principles, consistent
with TC's past accounting practices, and shall be conclusive on all
parties. Employee may, at his own expense, but not more than once
annually, audit the applicable records. Any such audit shall be
conducted only by a public accountant during reasonable business hours
after reasonable advance notice and in such manner as not to interfere
with Company's normal business activities and shall not continue more
than thirty (30) consecutive days.
B. Stock Option: As additional compensation, Company hereby grants to
Employee the option to purchase 50,000 shares of common stock of
Company as set forth in the form of Stock Option attached hereto as
Appendix C and incorporated herein by this reference".
<PAGE>
All other terms and conditions of the Agreement shall remain the same.
Sincerely yours.
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Its: President
ACCEPTED AND AGREED:
/s/ Howard Russo
<PAGE>
EXHIBIT 6.22
STOCK OPTION
THIS STOCK OPTION (the "Option") is granted effective the 1st day of January
1999, by Total Film Group, Inc., a Delaware corporation (the "Company")
pursuant to an employment agreement dated January 29, 1999, by and between
the Company and Howard Russo ("Optionee").
RECITALS
WHEREAS, the Company has engaged Optionee to provided services to the Company
and as additional compensation the Company has agreed to issue Optionee
options to purchase up to 50,000 shares of the Company's common stock, par
value $.001 (the "Common Stock"); and
WHEREAS, the options shall vest immediately and shall be exercisable provided
that the Optionee remains employed by the Company at the time of exercise;
NOW, THEREFORE, in consideration of the mutual terms and conditions of this
Option, the parties hereto agree as follows:
1. GRANT OF OPTION
The Company hereby grants to Optionee the right and option to purchase all or
any part of an aggregate of 50,000 shares of Common Stock on the terms and
conditions hereof.
2. EXERCISE PRICE
The exercise price of this Option shall be $2.00 per share.
3. VESTING; TERM OF OPTION
Subject to the other provisions contained herein, the Options granted
pursuant to this Option shall vest immediately; provided that such Options
shall be exercisable only if Optionee is continuously employed by the Company
through and including the particular date of exercise. Further subject to the
other provisions contained herein, any Option may be exercised, in whole or
in part, at any time commencing immediately, but prior to 12:00 midnight
December 31st, 2000. In no event may an Option be exercised after the
expiration of its term.
4. SHAREHOLDER'S RIGHTS
The Optionee shall have the rights of a shareholder only with respect to
Common Stock fully paid for by Optionee under this Option.
<PAGE>
5. PERSONS ENTITLED TO EXERCISE
During Employee's lifetime, this Option can only be exercised by Optionee,
and neither this Option nor any right hereunder can be transferred other than
by testamentary disposition or the laws of descent and distribution. neither
this Option nor any right hereunder shall be subject to lien, attachment,
execution, or similar process. In the even of any alienation, assignment,
pledge, hypothecation, or other transfer of this Option or any right
hereunder, or in the event of any levy, attachment, execution, or similar
process, this Option and all rights granted hereunder shall be immediately
null and void.
6. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK
In the event that the number of shares of Common Stock of the Company from
time to time issued or outstanding is increased pursuant to a stock split or
a stock dividend, the number of shares of Common Stock then covered by this
Option shall be increased proportionally, with no increase in the total
purchase price of the shares then so covered. In the event that the number of
shares of Common Stock of the Company from time to time issued and
outstanding is reduced by a combination or consolidation of shares, the
number of shares of Common Stock then covered by this Option shall be reduced
proportionately, with no reduction in the total purchase price of the shares
then so covered. In the event that the Company should transfer assets to
another corporation and distribute the stock of such other corporation
without the surrender of Common Stock of the Company, and if such disposition
is not taxable as a dividend and no gain or loss is recognized by reason of
section 355 of the Internal Revenue Code of 1986 (the "Code"), or any
amendment or successor statute of like tenor, then the total purchase price
of the Common Stock then covered by each outstanding Option shall be reduced
by an amount that bears the same ratio to the total purchase price then in
effect as the market value of the stock distributed in respect of a share of
the Common Stock of the Company, immediately following the distribution,
bears to the aggregate of the market value at such time of a share of the
Common Stock of the Company plus the stock distributed in respect thereof. In
the event that the Company distributes the stock of a subsidiary to its
shareholders, makes a distribution of a major portion of its assets, or
otherwise distributes significant portion of the value of its issued and
outstanding Common Stock to its shareholders, the number of shares then
subject to this Option, or the exercise price of this Option, may be adjusted
in the reasonable discretion of the Board or a duly authorized committee. All
such adjustments shall be made by the Board or duly authorized committee,
whose determination upon the same, absent demonstrable error, shall be final
and binding. No fractional shares shall be issued, and any fractional shares
resulting from the computations pursuant to this section shall be eliminated
from this Option. No adjustment shall be made for cash dividends, for the
issuance of additional shares of Common Stock for consideration approved by
the Board, or for the issuance to stockholders of rights to subscribe for
additional Common Stock or other securities.
7. METHOD OF EXERCISE
This Option may be exercised by delivery of a notice of exercise, a form of
which is attached hereto as Exhibit "A" and incorporated herein by this
reference, setting forth the number of
<PAGE>
Options to be exercised together with either:
a. A certified check or bank check payable to the order of the Company in the
amount of full exercise price of the Common Stock being purchased;
b. Shares of Common Stock of the Company already owned by the Optionee equal
to the exercise price with the Common Stock valued at its fair market value
based on the closing bid quotation for such stock on the close of business on
the day last preceding the date of the exercise of such Option, as reported
on the OTC Bulletin Board, or if not quoted on the OTC Bulletin Board, then
as determined by the Company through any other reliable means of
determination available on the close of business on the day last preceding
the date of such exercise;
c. Options or other rights to purchase Common Stock valued at the amount by
which the closing bid quotations (as determined in accordance with
subparagraph (b) above) of the Common Stock subject to options or other
rights exceeds the exercise or purchase price provided on such options or
rights; or
d. Cancellation of debt owed by the Company to the Optionee, including debt
incurred for professional services rendered, employment relationships, or
otherwise, upon presentation of an invoice for services provided to the
Company.
As soon as practicable after receipt by the Company of such notice, a
certificate or certificates representing such shares of Common Stock shall be
issued in the name of the Optionee, or, if the Optionee shall so request in
the notice exercising the Option, in the name of the Optionee and another
person jointly, with right of survivorship, and shall be delivered to the
Optionee. If this Option is not exercised with respect to all Common Stock
subject hereto, Optionee shall be entitled to receive a similar Option of
like tenor covering the number of shares of Common Stock with respect to
which this Option shall not have been exercised.
8. WITHHOLDING
If the exercise of this Option is subject to withholding or other trust fund
payment requirements of the Code or applicable state or local laws, such
requirements may, at the discretion of the Board or a duly authorized
committee and to the extent permitted by the then governing provisions of the
Code, be met (i) by the holder of this Option either delivering shares of
Common Stock or canceling Options or other rights to acquire Common Stock
with a fair market value equal to such requirements; (ii) by the Company
withholding shares of Common Stock subject to this Option with a fair market
value equal to such requirements; or (iii) by the Company making such
withholding or other trust fund payment and the Optionee reimbursing the
Company such amount paid within 10 days after written demand therefor from
the Company.
9. AVAILABILITY OF SHARES
During the term of this Option, the Company shall at all times reserve for
issuance the number of shares of Common Stock subject to this Option.
<PAGE>
10. LIMITATIONS ON RIGHT TO EXERCISE
If the Board of Directors, in its sole discretion, shall determine that it is
necessary or desirable to list, register, or qualify the Common Stock under
any state or federal law, this Option may not be exercised, in whole or in
part, until such listing, registration, or qualification shall have been
obtained free of any conditions not acceptable to the board.
11. RESTRICTIONS ON TRANSFER
The Option and the Common Stock subject to the Option (collectively referred
to as the "Securities") are subject to registration under the Security Act of
1933, as amended (the "Securities Act"), and any applicable state securities
statutes. Optionee acknowledges that unless a registration statement with
respect to the Securities is filed and declared effective by the Securities
and exchange Commission, and the appropriate state governing agency, the
Securities have or will be issued in reliance on specific exemptions from
such registration requirements for transactions by an issuer not involving a
public offering and specific exemptions under state statutes. Any disposition
of the Securities may, under certain circumstances, be inconsistent with such
exemptions. The Securities may be offered for sale, sold, or otherwise
transferred only if (i) registered under the Security Act, and in some cases,
under the applicable state securities acts, or, if not registered, (ii) only
if pursuant to an exemption from such registration requirements and only
after the Optionee provides an opinion of counsel or other evidence
satisfactory to the Company to the effect that registration is not required.
In some states, specific conditions must be met or approval of the securities
regulatory authorities may be required before any such offer or sale. If Rule
144 is available (and no assurance is given that it would be), only routine
sales of Common Stock in limited amounts can be made after one year following
the acquisition date of the Securities, as determined under Rule 144(d), in
accordance with the terms and conditions of Rule 144. The Company is under no
obligation to make Rule 144 available. In the event Rule 144 is not
available, compliance with Regulation A or some other disclosure exemption
may be required before the Optionee can sell, transfer, or otherwise dispose
of the Securities without registration.
If the Securities are not registered, the Company may refuse to transfer the
Securities to any transferee who does not furnish in writing to the Company
the same representations and warranties set forth in this paragraph and agree
to the same conditions with respect to such Securities as are set forth
herein. The Company may further refuse to transfer the Securities if certain
circumstances are present reasonably indicating that the proposed
transferee's representations and warranties are not accurate. In any event,
in the absence of an effective registration statement covering the
Securities, the Company may refuse to consent to any transfer in the absence
of an opinion of legal counsel, satisfactory to and independent of counsel of
the Company, that such proposed transfer is consistent with the above
conditions and applicable securities laws.
<PAGE>
12. RECORD OWNER
The Company may deem the Optionee as the absolute owner of this Option for
all purposes. This Option is exercisable only by the Optionee or by the
Optionee's duly designated or appointed representative. This Option is not
assignable.
13. NO RIGHT OF EMPLOYMENT
Nothing contained in this Option shall be construed as conferring on the
Optionee any right to continue or remain as an employee of the Company or its
subsidiaries.
14. VALIDITY AND CONSTRUCTION
The validity and construction of this Option shall be governed by the laws of
the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this document the day
and year first above written.
Company TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Its: President
Optionee: /s/ Howard Russo
<PAGE>
EXHIBIT "A"
FORM OF EXERCISE
To: Total Film Group, Inc.
The Undersigned, the owner of the attached Option, hereby irrevocably elects to
exercise the purchase rights represented by the Option for, and to purchase
thereunder, _________ shares of Common Stock of Total Film Group, Inc.
Enclosed is payment in the amount of $_________, the exercise price of the
Common Stock to be acquired.
Please have the certificate(s) registered in the name of ____________________
and delivered to ____________________.
If this exercise does not include all of the Common Stock covered by the
attached Option, please deliver a new Option of like tenor for the balance of
the Common Stock to the undersigned at the foregoing address.
DATED this _________ day of ______________, _____.
Signature of Optionee _____________________
<PAGE>
EXHIBIT 6.23
TOTAL
FILM GROUP
MEMORANDUM
To: Monique L Jones
From: Total Film Group, Inc.
Date: 09/27/99
Re: Employment Terms with Total Film Group, Inc.
For and on behalf of Total Film Group, Inc. (the "Company"), I confirm that
the Company is willing to engage your services, and you confirm that you are
willing to do so, on the terms and conditions set forth below.
1. Position: Chief Financial Officer of Total Film Group, Inc. and its
affiliates.
2. Term: On and from November 8, 1999, terminable at will (see Exhibit A
attached and incorporated herein by this reference) by either party.
3. Probation Period: Three (3) months.
4. Fixed Compensation: $100,000 per annum payable in accordance with
Company's standard payroll policies and shall have deducted any
applicable withholding taxes and standard and/or legally required
deductions. Company's executive committee shall review employee's
compensation then being paid to employee not less frequently than every
twelve (12) months. Following such review, Company's executive
committee may, in its sole discretion, decide to increase employee's
Fixed Compensation. Company's executive committee shall not decrease
employee's Fixed Compensation without employee's prior written
approval.
5. Stock Option: As additional compensation, Company hereby grants to
employee the following options to purchase shares of common stock of
Company as set forth in the form of Stock Option attached hereto as
Exhibit B and incorporated herein by this reference: (i) after 12
months of continuous employment, 10,000 shares at $3 per share; (ii)
after 24 months of continuous employment, 15,000 shares at $4 per
share; (iii) after 36 months of continuous employment, 20,000 shares at
$5 per share. The options shall be exercisable provided that employee
remains employed by the Company at the time of exercise.
6. Medical, Dental: Same as provided to other similar level personnel of
Company.
7. Parking and Other Benefits: Parking paid by Company; other benefits and
perquisites generally available to other similar level personnel of
Company.
<PAGE>
8. 401(k) Plan: Employee shall be eligible after 6 months of continued
employment. Same plan as provided to other similar level personnel of
Company.
9. Holidays: 9 legal Holidays.
10. Vacation: 15 days per 12 months of employment at times to be approved
by a member of the Company's executive committee.
11. Non-Accumulations: Vacation accrues pro-rata monthly. Vacation must be
taken within 12 months of the date earned unless deferred at the
Company's written request. If not taken within 12 months, vacation will
cease to accrue until previously earned vacation is taken. Any accrued
vacation entitlement that has not been taken will be paid out on
termination of employment.
12. Duties: As, how and where assigned by a member of the Company's
executive committee.
13. Extent of Services: Full time.
14. Ownership of Results of Services: The Company.
15. Confidentiality: Absolute, during employment and after termination.
16. Non-Breach: You represent that these arrangements do not breach any
other contract governing your services.
17. Modifications: These arrangements cannot be changed or added except as
agreed in writing by a member of the Company's executive committee.
18. Rules and regulations: You agree to comply with the rules and
regulations of the Company.
19. Smoking: No smoking policy.
20. Termination: As provided in paragraph 2. Above; or without prejudice to
its other rights, the Company may (at any time by written notice
effective on the date of such notice) terminate this Agreement for any
of the following acts or omissions on the part of the employee: (i) as
provided in California Labor Code Section 2924; (ii) breach of a term
of this Agreement; (iii) any criminal offense or behavior involving
dishonesty or moral turpitude; (iv) becoming bankrupt or subject to a
receiving order or general composition with creditors; (v)
non-compliance, after due warning, with a lawful instruction or
direction from Company's executive committee; (vi) commission of other
ads or omissions, which give the Company cause to terminate employment,
including, but not limited to, theft, active alcoholism or drug
addiction, malfeasance or misfeasance with respect to employees duties.
<PAGE>
In consideration of my employment, I agree to conform to the rules and
regulations of Total Film Group, Inc. I also agree that I am employed on an
at-will basis, as described in the attached, and that any oral statement or
conduct by a supervisor or the management of Total Film Group, Inc. will not
alter my at-will employment status. My employment may be terminated at any time,
either by me or by Total Film Group, Inc., with or without cause or notice.
SO AGREED:
/s/ Monique L. Jones /s/ Gerald Green
President
Dated: 9/29/99 Dated: 9/29/99
<PAGE>
EXHIBIT A
TOTAL FILM GROUP, INC.
AT-WILL EMPLOYMENT
Employment with Total Film Group, Inc. is a relationship which exists solely
as long as both Total Film Group, Inc. and the employee determine it is to
their individual advantage.
The employee is free to leave Total Film Group, Inc. at any time, as is Total
Film Group, Inc. free to determine that the continued relationship is not in
its best interests. Total Film Group, Inc. reserves the right to change the
status of or terminate any employee at any time, with or without cause or
with or without notice. Total Film Group, Inc. also reserves the right to lay
off or terminate employees if or when a position no longer exists or there is
an Economic need to reduce the workforce.
PROBATIONARY EMPLOYEES
Employees who have not completed the probationary period may be dismissed
with or without cause, for any reason, and without notice or pay in lieu of
notice.
NON-PROBATIONARY EMPLOYEES
Employees who have passed their probationary period may be dismissed with or
without cause Total Film Group, Inc. will have the option of giving the
employee fifteen (15) working days notice of termination or pay in lieu of
notice. In addition, Total Film Group, Inc. has the sole authority and
discretion to grant severance pay conditioned on the employee signing a
standard separation of employment agreement containing a general release. The
amount of the severance pay, if granted, will be determined solely by Total
Film Group, Inc.
Regardless of the above, in the event Total Film Group, Inc. considers that
the employee has engaged in either gross negligence or willful misconduct,
Total Film Group, Inc. has the right to terminate the employee without giving
either notice or pay in lieu of notice.
VOLUNTARY TERMINATION
Should any employee desire to leave voluntarily, the employee should provide
at least fifteen(15) working days notice of termination. Total Film Group,
Inc. reserve the right to provide pay in lieu of notice to any employee who
decides to voluntarily terminate the employment.
AGREED TO:
/s/ Monique J. Jones
<PAGE>
EXHIBIT 6.24
STOCK OPTION
THIS STOCK OPTION (the "Option") is granted this 4th day of November 1999, by
Total Film Group, Inc., a Delaware corporation (the "Company") pursuant to a
resolution of the Board of Directors of the Company (the "Board") to Monique
L. Jones ("Optionee").
RECITALS
WHEREAS, the Company has engaged Optionee to provide services to the Company
as its chief financial officer and as additional compensation the Company has
agreed to issue Optionee options to purchase up to 45,000 shares of the
Company's common stock, par value $.001 (the "Common Stock"); and
WHEREAS, the options shall vest over a period of several years and shall be
exercisable provided that the Optionee remains employed by the Company at the
time of vesting;
NOW, THEREFORE, in consideration of the mutual terms and conditions of this
Option, the parties hereto agree as follows:
1. GRANT OF OPTION: The Company hereby grants to Optionee the right and
option to purchase all or any part of an aggregate of 45,000 shares of
Common Stock on the terms and conditions hereof.
2. EXERCISE PRICE: The exercise price of this Option shall be $3.00 per
share for the exercise of the first 10,000 Options, $4.00 per share for
the exercise of the next 15,000 Options, and $5.00 per share for the
final 20,000 Options.
3. VESTING; TERM OF OPTION: Subject to the other provisions contained
herein, 10,000 of the Options granted pursuant to this Option shall
vest on the day following twelve (12) months of continuous employment
of Optionee as chief financial officer of the Company; 15,000 of the
Options granted pursuant to this Option shall vest on the day following
twenty-four (24) months of continuous employment of Optionee as chief
financial officer of the Company; and 20,000 of the Options granted
pursuant to this Option shall vest on the day following thirty-six (36)
months of continuous employment of Optionee as chief financial officer
of the Company. Further subject to the other provisions contained
herein, any Option which has vested may be exercised, in whole or in
part, at any time commencing immediately upon vesting, but prior to
12:00 midnight three (3) years from the date of vesting. Any Option
vested and outstanding at the time of the Optionee's cessation of
employment for any reason as chief financial officer of the Company
shall terminate immediately upon such cessation of employment. Any
Option not vested at the time of cessation of Optionee's employment as
chief financial officer of the Company shall be null and void. In no
event may an Option be exercised after the expiration of its term.
<PAGE>
4. SHAREHOLDER'S RIGHTS: The Optionee shall have the rights of a
shareholder only with respect to Common Stock fully paid for by
Optionee under this Option.
5. PERSONS ENTITLED TO EXERCISE: During Employee's lifetime, this Option
can only be exercised by Optionee, and neither this Option nor any
right hereunder can be transferred other than by testamentary
disposition or the laws of descent and distribution. neither this
Option nor any right hereunder shall be subject to lien, attachment,
execution, or similar process. In the even of any alienation,
assignment, pledge, hypothecation, or other transfer of this Option or
any right hereunder, or in the event of any levy, attachment,
execution, or similar process, this Option and all rights granted
hereunder shall be immediately null and void.
6. ADJUSTMENT TO NUMBER OF SHARES OF COMMON STOCK: In the event that the
number of shares of Common Stock of the Company from time to time
issued or outstanding is increased pursuant to a stock split or a stock
dividend, the number of shares of Common Stock then covered by this
Option shall be increased proportionally, with no increase in the total
purchase price of the shares then so covered. In the event that the
number of shares of Common Stock of the Company from time to time
issued and outstanding is reduced by a combination or consolidation of
shares, the number of shares of Common Stock then covered by this
Option shall be reduced proportionately, with no reduction in the total
purchase price of the shares then so covered. In the event that the
Company should transfer assets to another corporation and distribute
the stock of such other corporation without the surrender of Common
Stock of the Company, and if such disposition is not taxable as a
dividend and no gain or loss is recognized by reason of section 355 of
the Internal Revenue Code of 1986 (the "Code"), or any amendment or
successor statute of like tenor, then the total purchase price of the
Common Stock then covered by each outstanding Option shall be reduced
by an amount that bears the same ratio to the total purchase price then
in effect as the market value of the stock distributed in respect of a
share of the Common Stock of the Company, immediately following the
distribution, bears to the aggregate of the market value at such time
of a share of the Common Stock of the Company plus the stock
distributed in respect thereof. In the event that the Company
distributes the stock of a subsidiary to its shareholders, makes a
distribution of a major portion of its assets, or otherwise distributes
significant portion of the value of its issued and outstanding Common
Stock to its shareholders, the number of shares then subject to this
Option, or the exercise price of this Option, may be adjusted in the
reasonable discretion of the Board or a duly authorized committee. All
such adjustments shall be made by the Board or duly authorized
committee, whose determination upon the same, absent demonstrable
error, shall be final and binding. No fractional shares shall be
issued, and any fractional shares resulting from the computations
pursuant to this section shall be eliminated from this Option. No
adjustment shall be made for cash dividends, for the issuance of
additional shares of Common Stock for consideration approved by the
Board, or for the issuance to stockholders of rights to subscribe for
additional Common Stock or other securities.
<PAGE>
7. METHOD OF EXERCISE: This Option may be exercised by delivery of a
notice of exercise, a form of which is attached hereto as Appendix "A"
and incorporated herein by this reference, setting forth the number of
Options to be exercised together with either:
a. A certified check or bank check payable to the order of the Company in
the amount of full exercise price of the Common Stock being purchased;
b. Shares of Common Stock of the Company already owned by the Optionee
equal to the exercise price with the Common Stock valued at its fair
market value based on the closing bid quotation for such stock on the
close of business on the day last preceding the date of the exercise of
such Option, as reported on the OTC Bulletin Board, or if not quoted on
the OTC Bulletin Board, then as determined by the Company through any
other reliable means of determination available on the close of
business on the day last preceding the date of such exercise;
c. Options or other rights to purchase Common Stock valued at the amount
by which the closing bid quotations (as determined in accordance with
subparagraph (b) above) of the Common Stock subject to options or other
rights exceeds the exercise or purchase price provided on such options
or rights; or
d. Cancellation of debt owed by the Company to the Optionee, including
debt incurred for professional services rendered, employment
relationships, or otherwise, upon presentation of an invoice for
services provided to the Company.
As soon as practicable after receipt by the Company of such notice, a
certificate or certificates representing such shares of Common Stock shall be
issued in the name of the Optionee, or, if the Optionee shall so request in
the notice exercising the Option, in the name of the Optionee and another
person jointly, with right of survivorship, and shall be delivered to the
Optionee. If this Option is not exercised with respect to all Common Stock
subject hereto, Optionee shall be entitled to receive a similar Option of
like tenor covering the number of shares of Common Stock with respect to
which this Option shall not have been exercised.
8. WITHHOLDING: If the exercise of this Option is subject to withholding
or other trust fund payment requirements of the Code or applicable
state or local laws, such requirements may, at the discretion of the
Board or a duly authorized committee and to the extent permitted by the
then governing provisions of the Code, be met (i) by the holder of this
Option either delivering shares of Common Stock or canceling Options or
other rights to acquire Common Stock with a fair market value equal to
such requirements; (ii) by the Company withholding shares of Common
Stock subject to this Option with a fair market value equal to such
requirements; or (iii) by the Company making such withholding or other
trust fund payment and the Optionee reimbursing the Company such amount
paid within 10 days after written demand therefor from the Company.
9. AVAILABILITY OF SHARES: During the term of this Option, the Company
shall at all times reserve for issuance the number of shares of Common
Stock subject to this Option.
<PAGE>
10. LIMITATIONS ON RIGHT TO EXERCISE: If the Board of Directors, in its
sole discretion, shall determine that it is necessary or desirable to
list, register, or qualify the Common Stock under any state or federal
law, this Option may not be exercised, in whole or in part, until such
listing, registration, or qualification shall have been obtained free
of any conditions not acceptable to the board.
11. RESTRICTIONS ON TRANSFER: The Option and the Common Stock subject to
the Option (collectively referred to as the "Securities") are subject
to registration under the Security Act of 1933, as amended (the
"Securities Act"), and any applicable state securities statutes.
Optionee acknowledges that unless a registration statement with respect
to the Securities is filed and declared effective by the Securities and
exchange Commission, and the appropriate state governing agency, the
Securities have or will be issued in reliance on specific exemptions
from such registration requirements for transactions by an issuer not
involving a public offering and specific exemptions under state
statutes. Any disposition of the Securities may, under certain
circumstances, be inconsistent with such exemptions. The Securities may
be offered for sale, sold, or otherwise transferred only if (i)
registered under the Security Act, and in some cases, under the
applicable state securities acts, or, if not registered, (ii) only if
pursuant to an exemption from such registration requirements and only
after the Optionee provides an opinion of counsel or other evidence
satisfactory to the Company to the effect that registration is not
required. In some states, specific conditions must be met or approval
of the securities regulatory authorities may be required before any
such offer or sale. If Rule 144 is available (and no assurance is given
that it would be), only routine sales of Common Stock in limited
amounts can be made after one year following the acquisition date of
the Securities, as determined under Rule 144(d), in accordance with the
terms and conditions of Rule 144. The Company is under no obligation to
make Rule 144 available. In the event Rule 144 is not available,
compliance with Regulation A or some other disclosure exemption may be
required before the Optionee can sell, transfer, or otherwise dispose
of the Securities without registration.
If the Securities are not registered, the Company may refuse to transfer the
Securities to any transferee who does not furnish in writing to the Company
the same representations and warranties set forth in this paragraph and agree
to the same conditions with respect to such Securities as are set forth
herein. The Company may further refuse to transfer the Securities if certain
circumstances are present reasonably indicating that the proposed
transferee's representations and warranties are not accurate. In any event,
in the absence of an effective registration statement covering the
Securities, the Company may refuse to consent to any transfer in the absence
of an opinion of legal counsel, satisfactory to and independent of counsel of
the Company, that such proposed transfer is consistent with the above
conditions and applicable securities laws.
12. RECORD OWNER: The Company may deem the Optionee as the absolute owner
of this Option for all purposes. This Option is exercisable only by the
Optionee or by the Optionee's duly designated or appointed
representative. This Option is not assignable.
<PAGE>
13. NO RIGHT OF EMPLOYMENT: Nothing contained in this Option shall be
construed as conferring on the Optionee any right to continue or remain
as an employee of the Company or its subsidiaries.
14. VALIDITY AND CONSTRUCTION: The validity and construction of this Option
shall be governed by the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have executed this document the day
and year first above written.
Company TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Its: President
Optionee /s/ Monique L. Jones
<PAGE>
APPENDIX "A"
FORM OF EXERCISE
To: Total Film Group, Inc.
The Undersigned, the owner of the attached Option, hereby irrevocably elects
to exercise the purchase rights represented by the Option for, and to
purchase thereunder, ____________ shares of Common Stock of Total Film Group,
Inc.
Enclosed is payment in the amount of $_________________ , the exercise price
of the Common Stock to be acquired.
Please have the certificate(s) registered in the name of _____________________
and delivered to ___________________________ .
If this exercise does not include all of the Common Stock covered by the
attached Option, please deliver a new Option of like tenor for the balance of
the Common Stock to the undersigned at the foregoing address.
DATED this ________ day of _____________________ , ___________ .
- -------------------------------
Signature of Optionee
<PAGE>
EXHIBIT 6.25
TOTAL FILM GROUP, INC.
(A Delaware Corporation)
1998 NON-QUALIFIED STOCK OPTION PLAN
Total Film Group, Inc., a Delaware corporation, (the "Company"),
hereby adopts this 1998 Non-Qualified Stock Option Plan (the "Plan") this
19th day of June 1998, under which options to acquire stock of the Company
may be granted from time to tome to employees and consultants of the Company
or its subsidiaries, if any. In addition, at the discretion of the board of
directors, options to acquire stock of the Company may from time to time be
granted under this Plan to other individuals who contribute to the success of
the Company or its subsidiaries, if any, and are not employees of the
Company, all on the terms and conditions set forth herein.
1. PURPOSE OF THE PLAN. The Plan is intended to aid the Company in
maintaining and developing a management team, attracting qualified officers
and employees capable of assisting in the future success of the Company, and
rewarding those individuals who have contributed to the success of the
Company. It is designed to aid the Company in retaining the services of
executives and employees and in attracting new personnel when needed for
future operations and growth and to provide such personnel with an incentive
to remain employees of the Company, to use their best efforts to promote the
success of the company's business, and to provide them with an opportunity to
obtain or increase a proprietary interest in the Company. It is also designed
to permit the Company to reward those individuals who are not employees of
the Company but who are perceived by management as having contributed to the
success of the Company or who are important to the continued business and
operations of the Company. The above aims will be effectuated through the
granting of options ("Options") to purchase shares of common stock of the
Company, par value $.001 per share (the "Stock"), subject to the terms and
conditions of this Plan.
2. EFFECTIVE DATE. The Plan shall become effective immediately on
adoption by the board of directors of the Company (the "Board").
3. ADMINISTRATION OF THE PLAN. Administration of the Plan shall be
by the Board. Subject to compliance with applicable provisions of the
governing law, the Board may delegate administration of the Plan or specific
administrative duties with respect to the Plan, on such terms and to such
committees of the Board as it deems proper; provided however, that if less
than the entire Board is administering the Plan or grants under the Plan,
action may be taken only by a committee of two or more "disinterested
directors" as that term is defined in Rule 16b-3, and the regulations and
releases thereunder all as promulgated by the Securities and Exchange
Commission under authority of the Securities Exchange Act of 1934, as
amended. Any option approved by the Board shall be approved by a majority
vote of those members of the Board in attendance at a meeting at which a
quorum is present. Any option approved by a committee designated by the Board
shall be approved as specified by the Board at the time of delegation. The
interpretation and construction of the terms of the Plan by the Board or a
duly authorized committee shall be final and binding on all participants in
the Plan absent a showing of
<PAGE>
demonstrable error. No member of the Board or duly authorized committee shall
be liable for any action taken or determination made in good faith with
respect to the Plan.
4. SHARES OF STOCK SUBJECT TO THE PLAN. A total of two hundred
thousand (200,000) shares of Stock may be subject to, or issued pursuant to,
Options granted under the terms of this Plan. Any shares subject to an Option
under the Plan, which Option for any reason expires or is forfeited,
terminated, or surrendered unexercised as to such shares, shall be added back
to the total number of shares reserved for issuance under the terms of this
Plan, and if any right to acquire Stock granted under the Plan is exercised
by the delivery of shares of Stock or the relinquishment of rights to shares
of Stock, only the net shares of Stock issued (the shares of Stock issued
less the shares of Stock surrendered) shall count against the total number of
shares reserved for issuance under the terms of this Plan.
5. RESERVATION OF STOCK ON GRANTING OF OPTION. At the time of
granting any Option under the terms of this Plan, there will be reserved for
issuance on the exercise of the Option the number of shares of Stock of the
Company subject to such Option. The Company may reserve either authorized but
unissued shares or issued shares that have been reacquired by the Company.
6. ELIGIBILITY. Options under the Plan may be granted to employees,
including officers, and directors of the Company or its subsidiaries, as may
be existing from time to time, and to other individuals who are not employees
of the Company, but performed bona fide services to the Company, as may be
deemed in the best interest of the Company by the Board or a duly authorized
committee. Such Options shall be in the amounts, and shall have the rights
and be subject to the restrictions, as may be determined by the Board or a
duly authorized committee, all as may be within the general provisions of
this Plan.
7. TERM OF OPTIONS AND CERTAIN LIMITATIONS ON RIGHT TO EXERCISE.
(a) Each Option shall have the term established by the
Board or duly authorized committee at the time the Option is granted but in
no event may an Option have a term in excess of five (5) years from the time
of grant or vesting, whichever is later.
(b) The term of the Option, once it is granted, may be
reduced only as provided for in this Plan and under the written provisions of
the Option.
(c) Unless otherwise specifically provided by the written
provisions of the Option, no holder or his or her legal representative,
legatee, or distributee will be, or shall be deemed to be, a holder of any
shares subject to an Option unless and until the holder exercises his or her
right to acquire all or a portion of the Stock subject to the Option and
delivers the required consideration to the Company in accordance with the
terms of this Plan and then only to the extent of the number of shares of
Stock acquired. Except as specifically provided in this Plan or as otherwise
specifically provided by the written provisions of the Option, no adjustment
to the exercise price or the number of shares of Stock subject to the Option
shall be made for dividends
<PAGE>
or other rights for which the record date is prior to the date the Stock
subject to the Option is acquired by the holder.
(d) Options under the Plan shall vest and become
exercisable at such time or times and on such terms as the Board or a duly
authorized committee may determine at the time of the grant of the Option.
(e) Options granted under the Plan shall contain such other
provisions, including, without limitation, further restrictions on the
vesting and exercise of the Option, as the Board or a duly authorized
committee shall deem advisable.
(f) In no event may an Option be exercised after the
expiration of its term.
8. EXERCISE PRICE. The exercise price of each Option issued under
the Plan shall be determined by the Board or a duly authorized committee on
the date of grant.
9. PAYMENT OF EXERCISE PRICE. The exercise of any Option shall be
contingent on receipt by the Company of cash, certified bank check to its
order, or other consideration acceptable to the Company; provided, that at
the discretion of the Board or a duly authorized committee, the written
provisions of the Option may provide that payment can be made in whole or in
part in shares of Stock of the Company, which Stock shall be valued at its
then fair market value as determined by the Board or a duly authorized
committee, or by the surrender or cancellation of other rights to Stock of
the Company. Any consideration approved by the Board or a duly authorized
committee, that calls for the payment of the exercise price over a period of
more than one year shall provide for interest, which shall not be included as
part of the exercise price, that is equal to or exceeds the imputed interest
provided for in section 483 of the Code or any amendment or successor section
of like tenor.
10. WITHHOLDING. If the grant or exercise of an Option pursuant to
this Plan is subject to withholding or other trust fund payment requirements
of the Code or applicable state or local laws, such requirements may, at the
discretion of the Board or a duly authorized committee and to the extent
permitted by the terms of the Option and the then governing provisions of the
Code and the Exchange Act, be met (i) by the holder of the Option either
delivering shares of Stock or canceling Options or other rights to acquire
Stock with a fair market value equal to such requirements; (ii) by the
Company withholding shares of Stock subject to the Option with a fair market
value equal to such requirements; or (iii) by the Company making such
withholding or other trust fund payment and the Option holder reimbursing the
Company such amount paid within 10 days after written demand therefor from
the Company.
11. DILUTION OR OTHER ADJUSTMENT. In the event that the number of
shares of Stock of the Company from time to time issued and outstanding is
increased pursuant to a stock split or a stock dividend, the number of shares
of Stock then covered by each outstanding Option granted hereunder shall be
increased proportionately, with no increase in the total purchase price of
the shares then so covered, and the number of shares of Stock subject to the
Plan shall be increased by the same proportion. In the event that the number
of shares of Stock of
<PAGE>
the Company from time to time issued and outstanding is reduced by a
combination or consolidation of shares, the number of shares of Stock then
covered by each outstanding Option granted hereunder shall be reduced
proportionately, with no reduction in the total purchase price of the shares
then so covered, and the number of shares of Stock subject to the Plan shall
be reduced by the same proportion. In the event that the Company should
transfer assets to another corporation and distribute the stock of such other
corporation without the surrender of Stock of the Company, and if such
distribution is not taxable as a dividend and no gain or loss is recognized
by reason of section 355 of the Code or any amendment or successor statute of
like tenor, then the total purchase price of the Stock then covered by each
outstanding Option shall be reduced by an amount that bears the same ratio to
the total purchase price then in effect as the market value of the stock
distributed in respect of a share of the Stock of the Company, immediately
following the distribution, bears to the aggregate of the market value at
such time of a share of the Stock of the Company plus the stock distributed
in respect thereof. In the event that the Company distributes the stock of a
subsidiary to its shareholders, makes a distribution of a major portion of
its assets, or otherwise distributes significant portion of the value of its
issued and outstanding Stock to its shareholders, the number of shares then
subject to each outstanding Option and the Plan, or the exercise price of
each outstanding Option, may be adjusted in the reasonable discretion of the
Board or a duly authorized committee. All such adjustments shall be made by
the Board or duly authorized committee, whose determination upon the same,
absent demonstrable error, shall be final and binding on all participants
under the Plan. No fractional shares shall be issued, and any fractional
shares resulting from the computations pursuant to this section shall be
eliminated from the respective Option. No adjustment shall be made for cash
dividends, for the issuance of additional shares of Stock for consideration
approved by the Board, or for the issuance to stockholders of rights to
subscribe for additional Stock or other securities.
12. OPTIONS TO FOREIGN NATIONALS. The Board or a duly authorized
committee may, in order to fulfill the purposes of this Plan and without
amending the Plan, grant Options to foreign nationals or individuals residing
in foreign countries that contain provisions, restrictions, and limitations
different from those set forth in this Plan and the Options made to United
States residents in order to recognize differences among the countries in
law, tax policy, and custom. Such grants shall be made in an attempt to
provide such individuals with essentially the same benefits as contemplated
by a grant to United States residents under the terms of this Plan.
13. ASSIGNMENT. No Option granted under this Plan shall be
transferable other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined in the Code.
Except as permitted by the foregoing, each Option granted under the Plan and
the rights and privileges thereby conferred shall not be transferred,
assigned, pledged, or hypothecated in any way (whether by operation of law or
otherwise), and shall not be subject to execution, attachment, or similar
process. On any attempt to transfer, assign, pledge, hypothecate, or
otherwise dispose of the Option, or of any right or privilege conferred
thereby, contrary to the provisions thereof, or on the levy of any attachment
or similar process on such rights and privileges, the Option and such rights
and privileges shall immediately become null and void.
<PAGE>
14. EFFECT OF TERMINATION OF EMPLOYMENT. In the event that any
holder is terminated or resigns from his or her position with the Company or
a subsidiary within six months of the grant of an award, any unexercised
portion of such Option shall immediately become null and void and such holder
shall have no further rights thereunder. In the event that any officer or
employee of the Company or a subsidiary is terminated at any time for, in the
determination of the Board or a duly authorized committee, gross negligence
in the performance of his or her duties, substantial failure to meet written
standards established by the Company for the performance of his or her
duties, criminal misconduct, or willful or gross misconduct in the
performance of his or her duties, the Board or a duly authorized committee
may cancel any and all rights such individual may have in the unexercised
portion of any Option held at the time of termination. The Board or a duly
authorized committee may, at the time of the grant of the Option, establish
any other restrictions on the exercise of such Option subsequent to the
termination or resignation of any individual that it deems appropriate. The
foregoing paragraph shall not apply to consultants who are issued options.
15. LISTING AND REGISTRATION OF SHARES. Each Option shall be subject
to the requirement that if at any time the Board shall determine, in its sole
discretion, that it is necessary or desirable to list, register, or qualify
the shares covered thereby on any securities exchange or under any state or
federal law, or obtain the consent or approval of any governmental agency or
regulatory body as a condition of, or in connection with, the granting of
such Option or the issuance or purchase of shares thereunder, such Option may
not be exercised in whole or in part unless and until such listing,
registration, consent, or approval shall have been effected or obtained free
of any conditions not acceptable to the Board.
16. EXPIRATION AND TERMINATION OF THE PLAN. The Plan may be
abandoned or terminated at any time by the Board or a duly authorized
committee except with respect to any Options then outstanding under the Plan.
The Plan shall otherwise terminate on the earlier of the date that is: (i)
ten years after the date the Plan is adopted by the Board; or (ii) ten years
after the date the Plan is approved by the shareholders of the Company.
17. FORM OF OPTIONS. Options granted under the Plan shall be
represented by a written agreement which shall be executed by the Company and
the holder and which shall contain such terms and conditions as may be
determined by the Board or a duly authorized committee and permitted under
the terms of this Plan.
18. NO RIGHT OF EMPLOYMENT. Nothing contained in this Plan or any
Option awarded pursuant to this Plan shall be construed as conferring on a
director, officer, or employee any right to continue or remain as a director,
officer, or employee of the Company or its subsidiaries.
19. AMENDMENT OF THE PLAN. This Plan may not be amended more than
once during any six month period, other than to comport with changes in the
Code or the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder. Subject to the foregoing and the
limitations, the Board or a duly authorized committee may modify and amend
the Plan in any respect.
<PAGE>
The foregoing Plan was duly adopted by the Board of Directors on the
19th day of June 1998.
/s/ Eli Boyer, Secretary
<PAGE>
TOTAL FILM GROUP, INC.
(A Delaware Corporation)
AMENDMENT NO. 1
TO
1998 NON-QUALIFIED STOCK OPTION PLAN
Total Film Group, Inc., a Delaware corporation, (the "Company"),
hereby amends Paragraph 4 of the 1998 Non-Qualified Stock Option Plan (the
"Plan") this 27th day of July 1998, to read as follows:
4. SHARES OF STOCK SUBJECT TO THE PLAN. A total of seven
hundred thousand (700,000) shares of Stock may be subject to, or issued
pursuant to, Options granted under the terms of this Plan. Any shares
subject to an Option under the Plan, which Option for any reason
expires or is forfeited, terminated, or surrendered unexercised as to
such shares, shall be added back to the total number of shares reserved
for issuance under the terms of this Plan, and if any right to acquire
Stock granted under the Plan is exercised by the delivery of shares of
Stock or the relinquishment of rights to shares of Stock, only the net
shares of Stock issued (the shares of Stock issued less the shares of
Stock surrendered) shall count against the total number of shares
reserved for issuance under the terms of this Plan.
All other provisions of the Plan shall remain in full force and
effect as originally set forth in the Plan.
The foregoing amendment was duly adopted by the Board of Directors
on the 27th day of July 1998.
/s/ Eli Boyer, Secretary
<PAGE>
EXHIBIT 6.26
NON-QUALIFIED STOCK OPTION
THIS NON-QUALIFIED STOCK OPTION (the "Option") is granted this
__________ day of ______________________ 199____, by Total Film Group, Inc.,
a Delaware corporation, (the "Company") pursuant to a resolution of the Board
of Directors of the Company, under the terms of the 1998 Non-Qualified Stock
Option Plan of the Company (the "1998 Option Plan") to
___________________________________ ("Optionee").
RECITALS:
WHEREAS, the Company has engaged Optionee to provided services to
the Company and as compensation for which the Company has agreed to issue
Optionee options to purchase up to _______________ shares of the Company's
common stock, par value $.001 (the "Common Stock"); and
WHEREAS, the Company has agreed to issue the Options pursuant to its
1998 Option Plan.
NOW, THEREFORE, in consideration of the mutual terms and conditions
of this Option, the parties hereto agree as follows:
1. Grant of Option. The Company hereby irrevocable grants to
Optionee the right and option to purchase all or any part of an aggregate of
________________ shares of Common Stock on the terms and conditions hereof.
2. Exercise Price. The exercise price of this Option shall be
$__________ per share.
3. Term of Option. Subject to the other provisions contained herein,
the Option may be exercised, in whole or in part, at any time commencing
________, but prior to 12:00 midnight three years from the date of this
Option.
4. Shareholder's Rights. The Optionee shall have the rights of a
shareholder only with respect to Common Stock fully paid for by Optionee
under this Option.
5. Persons Entitled to Exercise. During the Optionee's lifetime,
this Option can only be exercised by the Optionee, and neither this Option
nor any right hereunder can be transferred other than by testamentary
disposition or the laws of descent and distribution. Neither this Option nor
any right hereunder shall be subject to lien, attachment, execution, or
similar process. In the event of any alienation, assignment, pledge,
hypothecation, or other transfer of this Option or any right hereunder, or in
the event of any levy, attachment, execution, or similar process, this Option
and all rights granted hereunder shall be immediately null and void.
6. Adjustment to Number of Shares of Common Stock. The number of
shares of Common Stock subject to this Option shall be adjusted to take into
account any stock split, stock
<PAGE>
dividend, or recapitalization of the Common Stock of the Company as provided
in the 1998 Option Plan.
7. Method of Exercise. This Option may be exercised, in accordance
with all of the terms and conditions set forth in this Option and the 1998
Option Plan, by delivery of a notice of exercise, a form of which is attached
hereto as Exhibit "A" and incorporated herein by this reference, setting
forth the number of Options to be exercised together with either:
a. A certified check or bank check payable to the order of
the Company in the amount of the full exercise price of the Common Stock
being purchased;
b. Shares of Common Stock of the Company already owned by
the Optionee equal to the exercise price with the Common Stock valued at its
fair market value based on the closing bid quotation for such stock on the
close of business on the day last preceding the date of the exercise of such
Option, as reported on the OTC Bulletin Board, or if not quoted on the OTC
Bulletin Board, then as determined by the Company through any other reliable
means of determination available on the close of business on the day last
preceding the date of such exercise;
c. Options or other rights to purchase Common Stock valued
at the amount by which the closing bid quotations (as determined in
accordance with subparagraph (b) above) of the Common Stock subject to
options or other rights exceeds the exercise or purchase price provided on
such options or rights; or
d. Cancellation of debt owed by the Company to the
Optionee, including debt incurred for professional services rendered,
employment relationships, or otherwise, upon presentation of an invoice for
services provided to the Company.
As soon as practicable after receipt by the Company of such notice, a
certificate or certificates representing such shares of Common Stock shall be
issued in the name of the Optionee, or, if the Optionee shall so request in
the notice exercising the Option, in the name of the Optionee and another
person jointly, with right of survivorship, and shall be delivered to the
Optionee. If this Option is not exercised with respect to all Common Stock
subject hereto, Optionee shall be entitled to receive a similar Option of
like tenor covering the number of shares of Common Stock with respect to
which this Option shall not have been exercised.
8. Availability of Shares. During the term of this Option, the
Company shall at all times keep available for issuance the number of shares
of Common Stock subject to this Option.
9. Limitations on Right to Exercise. If the Board of Directors, in
its sole discretion, shall determine that it is necessary or desirable to
list, register, or qualify the Common Stock under any state or federal law,
this Option may not be exercised, in whole or in part, until such listing,
registration, or qualification shall have been obtained free of any
conditions not acceptable to the board.
<PAGE>
10. Restrictions on Transfer. The Option and the Common Stock
subject to the Option (collectively referred to as the "Securities") are
subject to registration under the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable state securities statutes. Optionee
acknowledges that unless a registration statement with respect to the
Securities is filed and declared effective by the Securities and Exchange
Commission, and the appropriate state governing agency, the Securities have
or will be issued in reliance on specific exemptions from such registration
requirements for transactions by an issuer not involving a public offering
and specific exemptions under state statutes. Any disposition of the
Securities may, under certain circumstances, be inconsistent with such
exemptions. The Securities may be offered for sale, sold, or otherwise
transferred only if (i) registered under the Securities Act, and in some
cases, under the applicable state securities acts, or, if not registered,
(ii) only if pursuant to an exemption from such registration requirements and
only after the Optionee provides an opinion of counsel or other evidence
satisfactory to the Company to the effect that registration is not required.
In some states, specific conditions must be met or approval of the securities
regulatory authorities may be required before any such offer or sale. If Rule
144 is available (and no assurance is given that it would be), only routine
sales of the Common Stock in limited amounts can be made after one year
following the acquisition date of the Securities, as determined under Rule
144(d), in accordance with the terms and conditions of Rule 144. The Company
is under no obligation to make Rule 144 available. In the event Rule 144 is
not available, compliance with Regulation A or some other disclosure
exemption may be required before the Optionee can sell, transfer, or
otherwise dispose of the Securities without registration.
If the Securities are not registered, the Company may refuse to
transfer the Securities to any transferee who does not furnish in writing to
the Company the same representations and warranties set forth in this
paragraph and agree to the same conditions with respect to such Securities as
are set forth herein. The Company may further refuse to transfer the
Securities if certain circumstances are present reasonably indicating that
the proposed transferee's representations are not accurate. In any event, in
the absence of an effective registration statement covering the Securities,
the Company may refuse to consent to any transfer in the absence of an
opinion of legal counsel, satisfactory to and independent of counsel of the
Company, that such proposed transfer is consistent with the above conditions
and applicable securities laws.
11. Record Owner. The Company may deem the Optionee as the absolute
owner of this Option for all purposes. This Option is exercisable only by the
Optionee or by the Optionee's duly designated or appointed representative.
This Option is not assignable.
12. Validity and Construction. The validity and construction of this
Option shall be governed by the laws of the State of Utah.
IN WITNESS WHEREOF, the parties hereto have executed this document
the day and year first above written.
<PAGE>
Company: Total Film Group, Inc.
By
----------------------------
Its
---------------------------
Optionee:
------------------------------
Signature
------------------------------
Please Print Name
<PAGE>
EXHIBIT "A"
FORM OF EXERCISE
(To be signed only upon exercise of Option)
To: Total Film Group, Inc.
The undersigned, the owner of the attached Option, hereby
irrevocable elects to exercise the purchase rights represented by the Option
for, and to purchase thereunder, __________________ shares of Common Stock of
Total Film Group, Inc. Enclosed is payment in the amount of
$____________________________________________, the exercise price of the
Common Stock to be acquired. Please have the certificate(s) registered in the
name of _______________________ and delivered to
_________________________________________________________________. If this
exercise does not include all of the Common Stock covered by the attached
Option, please deliver a new Option of like tenor for the balance of the
Common Stock to the undersigned at the foregoing address.
DATED this ___________ day of ____________________ 199____.
--------------------------
Signature of Optionee
<PAGE>
Schedule of Optionees
<TABLE>
<CAPTION>
Number Exercise
Name Grant Date of Shares Price Term of Option
<S> <C> <C> <C> <C>
Manuel Pacheco June 19, 1998 55,000 $2.00 June 19, 1998
Eli Boyer June 19, 1998 50,000 $2.00 June 19, 1998
Bruce Mandes June 19, 1998 50,000 $2.00 16,666 June 19, 1998
16,666 May 15, 1999
16,668 May 15, 2000
Gerald Green July 27, 1998 500,000 $2.00 July 27, 1998
</TABLE>
<PAGE>
EXHIBIT 6.27
REVISED STOCK OPTION
NUMBER 2
THIS REVISED STOCK OPTION (the "Option") is granted this 9th day of
February 2000, by Total Film Group, Inc., a Delaware corporation, (the
"Company") to Madeleine Ali ("Optionee").
RECITALS:
WHEREAS, the Company had granted a stock option dated January 1,
1999, to Optionee to purchase up to 100,000 shares of the Company's common
stock, par value $.001 (the "Common Stock"), which option was evidenced by a
Stock Option document; and
WHEREAS, the Optionee exercised 25,000 of such options; and
WHEREAS, the Optionee has tendered the original Stock Option
document which has been canceled and this document is hereby furnished to
Optionee for the balance of the options available to the Optionee;
NOW, THEREFORE, in consideration of the mutual terms and conditions
of this Option, the parties hereto agree as follows:
1. Grant of Option. The Company hereby irrevocable grants to
Optionee the right and option to purchase all or any part of an aggregate of
75,000 shares of Common Stock on the terms and conditions hereof.
2. Exercise Price. The exercise price of this Option shall be $2.00
per share.
3. Vesting; Term of Option. Subject to the other provisions
contained herein, 20,000 of such Options shall vest on January 1, 2001;
25,000 of such Options shall vest on January 1, 2002; and 30,000 of such
Options shall vest on January 1, 2003; provided that such Options shall vest
only if Optionee is continuously employed by the Company through and
including the particular date of vesting. Further subject to the other
provisions contained herein, any Option which has vested may be exercised, in
whole or in part, at any time commencing immediately upon vesting, but prior
to 12:00 midnight three years from the date of vesting. In no event may an
Option be exercised after the expiration of its term.
4. Shareholder's Rights. The Optionee shall have the rights of a
shareholder only with respect to Common Stock fully paid for by Optionee
under this Option.
5. Persons Entitled to Exercise. During the Optionee's lifetime,
this Option can only be exercised by the Optionee, and neither this Option
nor any right hereunder can be transferred other than by testamentary
disposition or the laws of descent and distribution. Neither this Option nor
any right hereunder shall be subject to lien, attachment, execution, or
similar process. In the
<PAGE>
event of any alienation, assignment, pledge, hypothecation, or other transfer
of this Option or any right hereunder, or in the event of any levy,
attachment, execution, or similar process, this Option and all rights granted
hereunder shall be immediately null and void.
6. Adjustment to Number of Shares of Common Stock. In the event that
the number of shares of Common Stock of the Company from time to time issued
and outstanding is increased pursuant to a stock split or a stock dividend,
the number of shares of Common Stock then covered by this Option shall be
increased proportionately, with no increase in the total purchase price of
the shares then so covered. In the event that the number of shares of Common
Stock of the Company from time to time issued and outstanding is reduced by a
combination or consolidation of shares, the number of shares of Common Stock
then covered by this Option shall be reduced proportionately, with no
reduction in the total purchase price of the shares then so covered. In the
event that the Company should transfer assets to another corporation and
distribute the stock of such other corporation without the surrender of
Common Stock of the Company, and if such distribution is not taxable as a
dividend and no gain or loss is recognized by reason of section 355 of the
Internal Revenue Code of 1986 (the "Code"), or any amendment or successor
statute of like tenor, then the total purchase price of the Common Stock then
covered by each outstanding Option shall be reduced by an amount that bears
the same ratio to the total purchase price then in effect as the market value
of the stock distributed in respect of a share of the Common Stock of the
Company, immediately following the distribution, bears to the aggregate of
the market value at such time of a share of the Common Stock of the Company
plus the stock distributed in respect thereof. In the event that the Company
distributes the stock of a subsidiary to its shareholders, makes a
distribution of a major portion of its assets, or otherwise distributes
significant portion of the value of its issued and outstanding Common Stock
to its shareholders, the number of shares then subject to this Option, or the
exercise price of this Option, may be adjusted in the reasonable discretion
of the Board or a duly authorized committee. All such adjustments shall be
made by the Board or duly authorized committee, whose determination upon the
same, absent demonstrable error, shall be final and binding. No fractional
shares shall be issued, and any fractional shares resulting from the
computations pursuant to this section shall be eliminated from this Option.
No adjustment shall be made for cash dividends, for the issuance of
additional shares of Common Stock for consideration approved by the Board, or
for the issuance to stockholders of rights to subscribe for additional Common
Stock or other securities.
7. Method of Exercise. This Option may be exercised by delivery of a
notice of exercise, a form of which is attached hereto as Exhibit "A" and
incorporated herein by this reference, setting forth the number of Options to
be exercised together with either:
a. A certified check or bank check payable to the order of
the Company in the amount of the full exercise price of the Common Stock
being purchased;
b. Shares of Common Stock of the Company already owned by
the Optionee equal to the exercise price with the Common Stock valued at its
fair market value based on the closing bid quotation for such stock on the
close of business on the day last preceding the date of the exercise of such
Option, as reported on the OTC Bulletin Board, or if not quoted on the OTC
<PAGE>
Bulletin Board, then as determined by the Company through any other reliable
means of determination available on the close of business on the day last
preceding the date of such exercise;
c. Options or other rights to purchase Common Stock valued
at the amount by which the closing bid quotations (as determined in
accordance with subparagraph (b) above) of the Common Stock subject to
options or other rights exceeds the exercise or purchase price provided on
such options or rights; or
d. Cancellation of debt owed by the Company to the
Optionee, including debt incurred for professional services rendered,
employment relationships, or otherwise, upon presentation of an invoice for
services provided to the Company.
As soon as practicable after receipt by the Company of such notice, a
certificate or certificates representing such shares of Common Stock shall be
issued in the name of the Optionee, or, if the Optionee shall so request in
the notice exercising the Option, in the name of the Optionee and another
person jointly, with right of survivorship, and shall be delivered to the
Optionee. If this Option is not exercised with respect to all Common Stock
subject hereto, Optionee shall be entitled to receive a similar Option of
like tenor covering the number of shares of Common Stock with respect to
which this Option shall not have been exercised.
8. Withholding. If the exercise of this Option is subject to
withholding or other trust fund payment requirements of the Code or
applicable state or local laws, such requirements may, at the discretion of
the Board or a duly authorized committee and to the extent permitted by the
then governing provisions of the Code, be met (i) by the holder of this
Option either delivering shares of Common Stock or canceling Options or other
rights to acquire Common Stock with a fair market value equal to such
requirements; (ii) by the Company withholding shares of Common Stock subject
to this Option with a fair market value equal to such requirements; or (iii)
by the Company making such withholding or other trust fund payment and the
Optionee reimbursing the Company such amount paid within 10 days after
written demand therefor from the Company.
9. Availability of Shares. During the term of this Option, the
Company shall at all times reserve for issuance the number of shares of
Common Stock subject to this Option.
10. Limitations on Right to Exercise. If the Board of Directors, in
its sole discretion, shall determine that it is necessary or desirable to
list, register, or qualify the Common Stock under any state or federal law,
this Option may not be exercised, in whole or in part, until such listing,
registration, or qualification shall have been obtained free of any
conditions not acceptable to the board.
11. Restrictions on Transfer. The Option and the Common Stock
subject to the Option (collectively referred to as the "Securities") are
subject to registration under the Securities Act of 1933, as amended (the
"Securities Act"), and any applicable state securities statutes. Optionee
acknowledges that unless a registration statement with respect to the
Securities is filed and declared effective by the Securities and Exchange
Commission, and the appropriate state
<PAGE>
governing agency, the Securities have or will be issued in reliance on
specific exemptions from such registration requirements for transactions by
an issuer not involving a public offering and specific exemptions under state
statutes. Any disposition of the Securities may, under certain circumstances,
be inconsistent with such exemptions. The Securities may be offered for sale,
sold, or otherwise transferred only if (i) registered under the Securities
Act, and in some cases, under the applicable state securities acts, or, if
not registered, (ii) only if pursuant to an exemption from such registration
requirements and only after the Optionee provides an opinion of counsel or
other evidence satisfactory to the Company to the effect that registration is
not required. In some states, specific conditions must be met or approval of
the securities regulatory authorities may be required before any such offer
or sale. If Rule 144 is available (and no assurance is given that it would
be), only routine sales of the Common Stock in limited amounts can be made
after one year following the acquisition date of the Securities, as
determined under Rule 144(d), in accordance with the terms and conditions of
Rule 144. The Company is under no obligation to make Rule 144 available. In
the event Rule 144 is not available, compliance with Regulation A or some
other disclosure exemption may be required before the Optionee can sell,
transfer, or otherwise dispose of the Securities without registration.
If the Securities are not registered, the Company may refuse to
transfer the Securities to any transferee who does not furnish in writing to
the Company the same representations and warranties set forth in this
paragraph and agree to the same conditions with respect to such Securities as
are set forth herein. The Company may further refuse to transfer the
Securities if certain circumstances are present reasonably indicating that
the proposed transferee's representations are not accurate. In any event, in
the absence of an effective registration statement covering the Securities,
the Company may refuse to consent to any transfer in the absence of an
opinion of legal counsel, satisfactory to and independent of counsel of the
Company, that such proposed transfer is consistent with the above conditions
and applicable securities laws.
12. Record Owner. The Company may deem the Optionee as the absolute
owner of this Option for all purposes. This Option is exercisable only by the
Optionee or by the Optionee's duly designated or appointed representative.
This Option is not assignable.
13. No Right of Employment. Nothing contained in this Option shall
be construed as conferring on the Optionee any right to continue or remain as
an employee of the Company or its subsidiaries.
14. Validity and Construction. The validity and construction of this
Option shall be governed by the laws of the State of Utah.
IN WITNESS WHEREOF, the parties hereto have executed this document
the day and year first above written.
Company: Total Film Group, Inc.
By /s/ Gerald Green,
President
Optionee: /s/ Madeleine Ali
<PAGE>
EXHIBIT "A"
FORM OF EXERCISE
(To be signed only upon exercise of Option)
To: Total Film Group, Inc.
The undersigned, the owner of the attached Option, hereby
irrevocable elects to exercise the purchase rights represented by the Option
for, and to purchase thereunder, __________________ shares of Common Stock of
Total Film Group, Inc. Enclosed is payment in the amount of
$____________________________________________, the exercise price of the
Common Stock to be acquired. Please have the certificate(s) registered in the
name of _______________________ and delivered to
_________________________________________________________________. If this
exercise does not include all of the Common Stock covered by the attached
Option, please deliver a new Option of like tenor for the balance of the
Common Stock to the undersigned at the foregoing address.
DATED this ___________ day of ____________________ 199____.
--------------------------------
Signature of Optionee
<PAGE>
EXHIBIT 6.28
TOTAL FILM GROUP, INC.
2000 STOCK BONUS PLAN
Total Film Group, Inc., a Delaware corporation, (the "Company"),
hereby adopts this 2000 Stock Bonus Plan (the "Plan") this 3rd day of January
2000, under which shares of common stock of the Company may be granted from
time to time to officers, directors, employees and consultants of the Company
or its subsidiaries, if any.
1. PURPOSE OF THE PLAN. The Plan is intended to aid the Company in
maintaining and developing a management team, attracting qualified directors,
officers, and employees capable of assisting in the future success of the
Company, and rewarding those individuals who have contributed to the success
of the Company. It is designed to aid the Company in retaining the services
of executives and employees and in attracting new personnel when needed for
future operations and growth and to provide such personnel with an incentive
to remain employees of the Company, to use their best efforts to promote the
success of the Company's business, and to provide them with an opportunity to
obtain or increase a proprietary interest in the Company. It is also designed
to permit the Company to reward those individuals who are not employees of
the Company but who are perceived by management as having contributed to the
success of the Company or who are important to the continued business and
operations of the Company. The above aims will be effectuated through the
issuance of shares of common stock of the Company, par value $.001 per share
(the "Stock"), subject to the terms and conditions of this Plan.
2. EFFECTIVE DATE. The Plan shall become effective immediately on
adoption by the board of directors of the Company (the "Board").
3. ADMINISTRATION OF THE PLAN. Administration of the Plan shall be
by the Board. Subject to compliance with applicable provisions of the
governing law, the Board may delegate administration of the Plan or specific
administrative duties with respect to the Plan, on such terms and to such
committees of the Board as it deems proper; provided however, that if less
than the entire Board is administering the Plan or grants under the Plan,
action may be taken only by a committee of two or more "disinterested
directors" as that term is defined in Rule 16b-3, and the regulations and
releases thereunder all as promulgated by the Securities and Exchange
Commission under authority of the Securities Exchange Act of 1934, as
amended. Any issuance approved by the Board shall be approved by a majority
vote of those members of the Board in attendance at a meeting at which a
quorum is present. Any issuance approved by a committee designated by the
Board shall be approved as specified by the Board at the time of delegation.
The interpretation and construction of the terms of the Plan by the Board or
a duly authorized committee shall be final and binding on all participants in
the Plan absent a showing of demonstrable error. No member of the Board or
duly authorized committee shall be liable for any action taken or
determination made in good faith with respect to the Plan.
<PAGE>
4. SHARES OF STOCK SUBJECT TO THE PLAN. A total of 50,000 shares of
Stock may be subject to, or issued pursuant to, the terms of this Plan.
5. ELIGIBILITY. Stock under the Plan may be issued to employees,
including officers, and directors of the Company or its subsidiaries, as may
be existing from time to time, and to other individuals who are not employees
of the Company, but performed BONA FIDE services to the Company, as may be
deemed in the best interest of the Company by the Board or a duly authorized
committee. Such services to the Company or a subsidiary shall not be in
connection with the offer or sale of securities in a capital-raising
transaction and shall not be in connection, directly or indirectly, with the
promotion or maintenance of a market for the Stock or any other securities of
the Company.
6. WITHHOLDING. If the issuance of Stock pursuant to this Plan is
subject to withholding or other trust fund payment requirements of the
Internal Revenue Code or applicable state or local laws, such requirements
may, at the discretion of the Board or a duly authorized committee, be met by
the Company making such withholding or other trust fund payment and the
shareholder reimbursing the Company such amount paid within 10 days after
written demand therefor from the Company.
7. EXPIRATION AND TERMINATION OF THE PLAN. The Plan may be abandoned
or terminated at any time by the Board or a duly authorized committee. The
Plan shall otherwise terminate on the earlier of the date that is: (i) ten
years after the date the Plan is adopted by the Board; or (ii) ten years
after the date the Plan is approved by the shareholders of the Company.
8. NO RIGHT OF EMPLOYMENT. Nothing contained in this Plan shall be
construed as conferring on a director, officer, or employee any right to
continue or remain as a director, officer, or employee of the Company or its
subsidiaries.
9. COMPLIANCE WITH SECURITIES LAWS. The shares of Stock issued under
the Plan shall be issued in compliance with applicable federal and state
securities laws. It is the intent of this Plan that such shares of the Stock
shall qualify for issuance under Rule 701 promulgated by the U.S. Securities
and Exchange Commission under the Securities Act of 1933, as amended, and
similar state exemptions from registration.
The foregoing Plan was duly adopted by the Board of Directors on the
3rd day of January 2000.
/s/ Eli Boyer, Secretary
<PAGE>
EXHIBIT 6.29
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT is entered into as of the 16th day of
December, 1999, by and among U.S. BUSINESS NETWORK, INC., a Delaware
corporation, which does business as "MeetChina.com" (the "Corporation"), with
its principal place of business located at 7200 Redwood Boulevard, Suite 222,
Novato, California 94945, and TOTAL CHINA, INC., a Delaware corporation
("Total China") and a wholly owned subsidiary of TOTAL FILM GROUP, INC., a
Delaware corporation, and TOTAL FILM GROUP, INC., (unless the context
requires otherwise, "TFG" shall mean in this Agreement TFG and Total China
collectively) with its principal place of business at 9107 Wilshire Blvd.,
Suite 475, Beverly Hills, California 90210.
WHEREAS, TFG wishes to purchase from the Corporation, and the
Corporation wishes to issue and sell to TFG, certain shares of the
Corporation's Common Stock, par value $0.01 per share ("Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants herein
contained and other valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
SECTION 1. Purchase and Sale of Common Stock.
1.1 Purchase and Sale of the Common Stock. Subject to the terms and
conditions of this Agreement and on the basis of the representations and
warranties set forth herein, the Corporation agrees to issue and sell to TFG
and TFG agrees to purchase from the Corporation, 922,767 shares of the Common
Stock, par value $.01 per share, of the Corporation ("Common Stock"), at a
per share purchase price of $2.16739 and for an aggregate purchase price of
$1,999,995 (the "Purchase Price"). The shares of Common Stock to be purchased
by TFO are hereinafter referred as the "Shares."
1.2 Closing. The purchase and sale of the Shares (the "Closing")
will take place during normal business hours (E.S.T) at the offices of Foley,
Hoag & Eliot LLP ("FHE"), One Post Office Square, Boston, Massachusetts at or
prior to 5:00 p.m. (E.S.T.) on December 17, 1999 upon delivery of the
Purchase Price by Total China. Contemporaneously with the signing of this
Agreement, the Corporation has deposited with FHE a stock certificate in the
name of Total China representing the Shares being purchased by Total China
hereunder, a copy of which is attached as Exhibit A hereto (the
"Certificate"). The Corporation has given irrevocable instructions to FHE to
deliver the Certificate by overnight courier to TFG at the address of TFG set
forth in the preamble to this Agreement, or as otherwise instructed by TFG,
upon the receipt of the Purchase Price from TFG by wire transfer or other
methods selected by TFG. If TFG fails to tender the payment for the Purchase
Price on or before 5:00 p.m. E.S.T. on December 17, 1999, the Corporations
obligation to sell the Shares, and FHE' s obligation to deliver the
Certificate, will terminate, provided, however, that in the event TFG
notifies the Corporation that it intended to tender the funds by wire
transfer and such transfer is delayed by inter-bank procedures, TFG may
postpone the time for payment of the Purchase Price until 12:00 p.m.
<PAGE>
E.S.T. on December 20, 1999 (at which time the Corporation's obligations to
deliver the Shares shall terminate) by delivery to the Corporation, via fax,
a letter of an executive officer of TFG's bank stating that the bank had
commenced wiring funds for the Purchase Price prior to 2:00 p.m. E.S.T. on
December 17, 1999 and stating the federal funds number of such wire transfer.
SECTION 2. Agreement Regarding the Letter of Intent; Integration.
2. 1 Agreement Regarding the Letter of Intent. The Corporation and
TFG agree that, effective upon the Closing, the Letter of Intent dated July
13, 1999 by and between the Corporation and TFG (the "Letter of Intent") and
any other agreement, understanding or arrangement of whatever form or nature
relating to the purchase to the Corporation's equity securities are null and
void ab initio, and have no force and effect whatsoever as between the
Corporation and TFG. A copy of the Letter of Intent is attached as Exhibit B
hereto. This Agreement is in settlement of disputed claims and is intended by
the parties as the final expression of their agreement and as the entire,
complete and exclusive statement of the terms hereof. This Agreement
supersedes all prior undertakings and agreements, written or oral, between
the parties hereto in connection with the subject matter of the Letter of
Intent.
2.2 Releases and Waiver.
(a) Releases. Effective upon the Closing, the Corporation
releases, forever discharges, and covenants not to sue, commence or prosecute
judicial or administrative proceedings against, TFG, its officers, directors,
employees, shareholders, subsidiary corporations, parent corporations,
general partners, limited partners, and agents, from and with respect to any
and all claims, demands, causes of action or damages of any kind whatsoever,
whether known or unknown, asserted or that might have been asserted, which
the Corporation now has or ever had arising up to the date of this Agreement
out of or in any manner relating directly or indirectly to the acquisition or
potential acquisition of shares of capital stock of the Corporation, and any
other rights or interest associated with the Letter of Intent.
Effective upon the Closing, TFG releases, forever discharges, and
covenants not to sue, commence or prosecute judicial or administrative
proceedings against, the Corporation, its officers, directors, employees,
shareholders, subsidiary corporations, parent corporations, general partners,
limited partners, and agents (including FHE), from and with respect to any
and all claims, demands, causes of action or damages of any kind whatsoever,
whether known or unknown, asserted or that might have been asserted, which
TFG now has or ever had arising up to the date of this Agreement out of or in
any manner relating directly or indirectly to TFG's acquisition or potential
acquisition of shares of capital stock of the Corporation, and any other
rights or interest associated with the Letter of Intent.
Effective upon the Closing, TFG also releases, forever discharges,
and covenants not to sue, commence or prosecute judicial or administrative
proceedings against, the prospective investors in the Corporation who are
discussing or have discussed with the Corporation the purchase and sale of
certain of the Corporation's equity securities (including, but not limited to
Citicorp Capital Asia Limited) ("Prospective Investors"), their officers,
directors, employees,
<PAGE>
shareholders, subsidiary corporations, parent corporations, affiliates,
general partners, limited partners, and agents, from and with respect to any
and all claims, demands, causes of action or damages of any kind whatsoever,
whether known or unknown, asserted or that might have been asserted, which
TFG now has or ever had arising up to the date of this Agreement out of or in
any manner relating, directly or indirectly, to TFG's acquisition or
potential acquisition of shares of capital stock of the Corporation, and any
other rights or interest associated with the Letter of Intent.
(b) Waiver of Civil Code Section 1542. All parties
acknowledge that they have read and understood the following language
contained in Section 1542 of the California Civil Code:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE
MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
But for the obligations arising under this Agreement, having
reviewed this provision, each party hereby voluntarily waives and releases
any rights it may have under this provision, or under any statutory or
non-statutory law of similar effect, and fully and generally releases all
liability for unknown or unsuspected claims set forth in the foregoing
release.
SECTION 3. The Corporation's Right to Repurchase.
3. 1 The Corporation's Right to Repurchase. Total China hereby
grants the Corporation a right to repurchase 44,457 shares of Common Stock
being sold hereunder, such number to be adjusted for subsequent stock split,
stock dividends, stock combination or the like (the "Repurchase Shares"), at
a cash price equal to two-thirds (2/3) of the Market Value of such Repurchase
Shares (the "Repurchase Nice"). Such repurchase right will be exercisable
only on the 120th day after an initial public offering of any class of the
capital stock of the Corporation on the Hong Kong Stock Exchange, the Growth
Enterprise Market of the Hong Kong Stock Exchange, the New York Stock
Exchange, NASDAQ, the Singapore Stock Exchange or similar exchanges or share
marketplace (the "IPO"). For purposes of this Section 3.1, the Market Value
of the shares subject to the Corporation's right to repurchase shall be
determined as follows:
(i) if such securities are listed on any established stock
exchange or a national market system, their market value shall be the average
closing sales price for such securities as quoted on such system or exchange
for the twenty trading days preceding the date on which the value is to be
determined (or if there are no sales for such date, then for the immediately
preceding business day on which there were sales), as reported in the Wall
Street Journal or similar publication, and
(ii) if such securities are regularly quoted by a
recognized securities dealer but selling prices are not reported, their fair
market value shall be the mean between the high bid and low asked prices for
such securities on the date the value is to be determined (or if there are no
<PAGE>
quoted prices for such date, then for the immediately preceding business day
on which there were quoted prices).
3.2 Exercise of the Repurchase Right. The Corporation shall exercise
the repurchase right provided herein by giving irrevocable written notice to
TFG setting forth the number of Repurchase Shares to be repurchased by the
Corporation and the aggregate amount of the Repurchase Price. The closing of
the repurchase shall occur at the offices of the Corporation within 5
business days after the Corporation has given such written notice. At the
closing, TFG shall deliver a stock certificate representing the Repurchase
Shares against the payment by the Corporation of the Repurchase Price. The
repurchase right shall expire two (2) years after the date of this Agreement,
whether or not the IPO shall have occurred.
3.3 Expiration of the Repurchase Right. The Corporation's repurchase
right provided herein shall expire on the second anniversary of the date of
the Closing, whether or not the IPO has occurred.
SECTION 4. Representations and Warranties of the Corporation. The
Corporation hereby represents and warrants to TFG as follows:
4.1 Organization. The Corporation is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and authority to carry out the
transactions contemplated hereby. The Corporation will, as promptly as
practicable after the date hereof, file a Statement by Foreign Corporation
with the Secretary of State of California and quality in California as a
foreign corporation. Exhibit C contains true, complete and accurate copies of
the Certificate of Incorporation and the By-Laws, as amended to date (the
"By-laws"), of the Corporation.
4.2 Capitalization. The entire authorized capital stock of the
Corporation consists of:
(a) Capitalization. As of the date hereof and prior to the
issuance of the Shares, the authorized capital stock of the Company consists
of 30,000,000 shares of Common Stock of which 3,691,070 shares are issued and
outstanding. All of the presently issued and outstanding shares of capital
stock of the Company are duly authorized, validly issued, fully paid and
non-assessable.
(b) Shareholders List. Attached hereto as Schedule A is a
complete list of all holders of capital stock of the Company and securities
convertible into the capital stock of the Company as of the date hereof
Except as set forth in the Disclosure Schedule, no subscription, warrant,
option, convertible security or other right (contingent or other) to purchase
or acquire any share of any class of capital stock of the Company is
authorized or outstanding and there is no commitment by the Company to issue
shares, warrants, options or other such rights or to distribute to holders of
any class of its capital stock any evidence of indebtedness or asset. Other
than applicable stock restriction agreements with respect to restricted stock
granted certain of the Company's employees, the Company has no obligation
(contingent or other) to purchase, redeem
<PAGE>
or otherwise acquire any share of its capital stock or any interest therein
or to pay any dividend or make other distribution in respect thereof.
4.3 Authorization. The execution, delivery and performance by the
Corporation of this Agreement and all other agreements to be entered into by
the Corporation pursuant hereto and the issuance, sale and delivery of the
Shares, have been duly authorized by all requisite corporate action of the
Corporation. This Agreement and all such other agreements have been duly
executed and delivered on behalf of the Corporation and constitute valid and
binding obligations of the Corporation, enforceable in accordance with the
terms hereof and thereof. The execution, delivery and performance of this
Agreement and all such other agreements do not, (a) violate any provision of
law, statute, ordinance, rule or regulation or any ruling, writ, injunction,
order, judgment or decree of any court, administrative agency or other
governmental body or (b) conflict with or result in any breach of any of the
material terms, conditions or provisions of, or constitute a default (or give
rise to any right of termination, cancellation or acceleration) under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of the Corporation under, the
Certificate of Incorporation or By-laws or any material note, indenture,
mortgage, lease, contract, purchase order or other instrument, document or
agreement to which the Corporation is a party or by which it or any of its
property is bound or affected.
4.4 Authorization of Shares. The issuance, sale and delivery
hereunder by the Corporation of the Shares have been duly authorized by all
requisite corporate action of the Corporation. The Shares, when sold and
delivered in accordance with the terms hereof, will be validly issued and
outstanding, fully paid and nonassessable, with no personal liability
attaching to the ownership thereof, and not subject to preemptive or any
other similar rights of the stockholders of the Corporation or others.
4.5 Equity Investments. The Corporation formed USBN Computer Network
(Chengdu) Corporation Limited ("USBN-Chengdu") on December 1, 1998 as a
wholly foreign- owned enterprise in the People's Republic of China ('PRC").
No other person or entity has any interest in, or any right to acquire any
interest in USBN-Chengdu. USBN-Chengdu obtained a business license to operate
a branch in Shenzhen and Shanghai and is in the process of obtaining a
business license to operate a branch in Beijing. Except as stated above, the
Corporation has never had, nor does it currently own, any capital stock or
other equity interest or proprietary interest, directly or indirectly, in any
corporation, association, trust, partnership, joint venture or other entity.
Two of the shareholders of the Corporation have an equity interest
in LTH Corp., a U.S. corporation which in turn wholly owns an entity in the
PRC called MeiShang Wang Computer Network (Shenzhen) Company Limited
("MSW-Shenzhen"). In July 1999, MSW-Shenzhen (i) stopped transacting
business, and (ii) transferred its assets and customers to USBN-Chengdu.
MSW-Shenzhen is not currently and will not engage in business activities that
would be competitive with the business of USBN-Chengdu. LTH Corp. applied to
dissolve MSW-Shenzhen with the PRC authorities in December 1999.
<PAGE>
4.6 Financial Statements. The Corporation has furnished to TB) the
unaudited balance sheet of the Corporation as of July 31, 1999 (the "Balance
Sheet") and the related unaudited statements of operation and stockholders'
equity of the Corporation for the ten (10)months then ended ("Statement of
Operations"). The Balance Sheet and the Statement of Operations
(collectively, the "Financial Statements") have been prepared in accordance
with generally accepted accounting principles consistently applied. The
Balance Sheet fairly presents, in all material respects, the financial
position of the Corporation as of its date without regard to MSW- Shenzhen,
and the Statement of Operations fairly presents the results of operations of
the Corporation for the period therein set forth. A copy of the Financial
Statements is attached hereto as Exhibit D.
4.7 Absence of Changes. Except as disclosed in the Disclosure
Schedule, since July 31, 1999 there has not been (a) any material adverse
change in the financial condition, results of operations, assets, liabilities
or business of the Corporation, (b) any material asset or property of the
Corporation made subject to a lien of any kind, (c) any waiver of any
valuable right of the Corporation, or the cancellation of any material debt
or claim held by the Corporation, (d) any payment of dividends on, or other
distribution with respect to, or any direct or indirect redemption or
acquisition of, any shares of the capital stock of the Corporation, or any
agreement or commitment therefore, or (e) any mortgage, pledge or
hypothecation of any tangible or intangible asset of the Corporation, except
in the ordinary course of business.
4.8 Compliance with Laws. The Corporation has complied with all
applicable laws, rules, regulations and orders, except where noncompliance
would not materially adversely affect its business or condition, financial or
otherwise.
4.9 Taxes. All applicable tax returns required to be filed by the
Corporation have been filed and are true and complete, and all taxes,
assessments, fees, and other governmental charges upon the Corporation, or
upon any of its properties, income, or franchises, shown in its returns to be
due and payable, have been paid or, if any of its tax returns have not been
filed or if any taxes have not been paid or reserved for, the failure to file
or pay would not have a material adverse effect on the operation and
financial condition of the Corporation as a whole.
4.10 Absence of Liabilities. Except as set forth in the Balance
Sheet, the Corporation has no obligation or liability (absolute, accrued or
contingent) as of the date of the Balance Sheet that is required to be set
forth in the Balance Sheet in accordance with generally accepted accounting
principles consistently applied.
4.11 Intellectual Property Rights.
(a) the Corporation has the right to use the Intellectual
Property Rights (as hereinafter defined) necessary or required for the
conduct of its business as presently conducted, free and clear of all rights
of others;
(b) no royalties or other amounts are payable by the
Corporation to other persons by reason of the ownership or use of said
Intellectual Property Rights;
<PAGE>
(c) to the best of the Corporation's knowledge, no product
marketed or sold or proposed to be marketed or sold by the Corporation
violates or will violate any license or infringes any Intellectual Property
Rights of another; and
(d) the Corporation has not received any notice that any of
such Intellectual Property Rights or the operation or proposed operation of
the Corporation s business conflicts or will conflict with the rights of
others, nor is the Corporation aware of any reasonable basis to believe that
any such violation, infringement or conflict will or may exist;
(e) the Corporation is the registered owner of the
"meetchina.com" domain name and has filed an application to register the
trademark "MEETCHINA" with the Patent and Trademark Office in the United
States. The Corporation has also filed an application to register the Chinese
characters _________ (having the meaning of "meet") with the Trademark Office
in China.
As used herein, the term "Intellectual Property Rights' means all
patents, trademarks, service marks, trade names, URLs, domain names,
copyrights, inventions, trade secrets, proprietary processes and formulae,
applications for patents, trademarks, service marks and copyrights, and other
industrial and intellectual property rights.
4.12 Proprietary Information of Third Parties. To the best of the
Corporation's knowledge, no third party has claimed or has reason to claim
that any person employed by or affiliated with the Corporation has (a)
violated or may be violating any of the terms or conditions of his or her
employment, non-competition, non-disclosure or inventions agreement with such
third party, (b) disclosed or may be disclosing or utilized or may be
utilizing any trade secret or proprietary information or documentation of
such third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. No third party has requested information from the Corporation
which suggests that such a claim might be contemplated. To the best of the
Corporation's knowledge, no person employed by or affiliated with the
Corporation has employed or proposes to employ any trade secret or any
information or documentation proprietary to any former employer, and, to the
best of the Corporation's knowledge, no person employed by or affiliated with
the Corporation has violated any confidential relationship which such person
may have had with any third party, in connection with the development,
manufacture or sale of any product or proposed product or the development or
sale of any service or proposed service of the Corporation, and the
Corporation has no reason to believe there will be any such employment or
violation.
4.13 Litigation. There is no action, suit, claim, proceeding or
investigation, at law, in equity or otherwise, or by or before any
governmental instrumentality or other agency, now pending, or, to the
Corporation's knowledge, threatened against or affecting the Corporation,
nor, to the Corporation's knowledge, does there exist any reasonable basis
therefore, which in either case could reasonably be expected to have a
material effect on the Corporation.
4.14 No Defaults. Except as set forth in the Disclosure Schedule,
the Corporation is not in violation or breach of, or in default under, any
provision of (a) the Certificate of
<PAGE>
Incorporation or the By-Laws or any note, indenture, mortgage, lease,
contract, purchase order or other instrument, document or agreement to which
the Corporation is a party or by which it or any of its property is bound or
affected, including, without limitation, any licenses or legal requirements
of USBN-Chengdu, or (b) any law, rule or regulation of any jurisdiction; any
ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body, including, without
limitation, any licenses or legal requirements of USBN- Chengdu, which breach
could reasonably be expected to have a material adverse effect on the
Corporation. To the best knowledge of the Corporation, there exists no
condition, event or act which after notice, lapse of time, or both, could
constitute a violation or breach of, or a default under, any of the foregoing.
4. 15 Government Consents. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the
Corporation in connection with the execution or delivery of this Agreement,
the offer, issuance, sale and delivery of the Shares, or the other
transactions to be consummated at the Closings, as contemplated by this
Agreement, except such filings as shall have been made prior to and shall be
effective on and as of the Closing. Subject to the accuracy of the
representations and warranties of TFG set forth in Section 5 hereof, the
provisions of Section 5 of the Securities Act are inapplicable to the
offering, issuance, sale and delivery of the Shares by virtue of the
exemption afforded by Section 4(2) of the Securities Act.
4.16 Employees. None of the Corporation's employees is represented
by any labor union, and there is no labor strike or other labor trouble
pending with respect to the Corporation or, to the Corporation's knowledge,
threatened.
4.17 No Brokers. There are no claims for brokerage commission or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
or on behalf of the Corporation, and the Corporation agrees to indemnity and
hold TFG harmless against any liability or expense arising out of any such
claims.
SECTION 5. Representations and Warranties of TFG. Total China and
TFG represent and warrant to the Corporation severally and jointly that:
5.1 Organization and Corporate Power. Each of Total China and TFG is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction. Each of Total China and TFG has all required
corporate power and authority to own its property, to carry on its business
as presently conducted and to carry out the transactions contemplated hereby.
Total China is a wholly owned subsidiary of TFG.
5.2 Authorization. This Agreement has been duly executed and
delivered by each of Total China and TFG and is the valid and binding
obligations of Total China and TFG, enforceable in accordance with their
terms, except as limited by bankruptcy, insolvency and other laws affecting
the enforcement of creditors rights generally. The execution, delivery and
performance of this Agreement and any other agreement, instrument, or
document entered into by
<PAGE>
Total China and TFG pursuant to this Agreement have been duly authorized by
all necessary corporate action of TFG.
5.3 Purchase Entirely for Own Account. The Shares to be received by
Total China will be acquired for investment for Total China's own account,
not as a nominee or agent and not with a view to the distribution of any part
thereof. Neither Total China, nor TFG has any present intention of selling,
granting any participation in, or otherwise distributing the same. Neither
Total China, nor TFG has any contract, undertaking, agreement or arrangement
with any person to sell, transfer, or grant participations to such person or
to any third person, with respect to any of the Shares.
5.4 Restricted Securities. TFG understands that the Shares may not
be sold, transferred, or otherwise disposed of without registration under the
Securities Act of 1933, as amended (the" 1933 Act"), or an exemption
therefrom, and that in the absence of an effective registration statement
covering the Shares or an available exemption from registration under the
1933 Act, the Shares must be held indefinitely. In the absence of an
effective registration statement covering the Shares, TFG will sell,
transfer, or otherwise dispose of the Shares only in a manner consistent with
its representations and agreements set forth herein.
5.5 Brokerage. There are no claims for brokerage commission or
finder's fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by
or on behalf of TFG, and TFG agrees to indemnify and hold the Corporation
harmless against any liability or expense arising out of any such claims.
5.6 Further Limitations on Disposition. TFG and Total China further
agree not to make any disposition of all or any portion of the Shares unless
and until:
(a) There is then in effect a registration statement under
the 1933 Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or
(b) (i) TFG shall have notified the Corporation of the
proposed disposition and shall have furnished the Corporation with a
statement of the circumstances surrounding the proposed disposition and (ii)
if reasonably requested by the Corporation, TFG shall have furnished the
Corporation with an opinion of counsel, satisfactory to the Corporation, that
such disposition will not require registration of such Shares under the 1933
Act.
5.7 Legends. It is understood that the stock certificates evidencing
the Shares may bear substantially the following legends:
(a) "These securities have not been registered under the
Securities Act of 1933. They may not be sold, offered for sale pledged or
hypothecated in the absence of a registration statement in effect with
respect to the securities under such Act or an opinion of counsel
satisfactory to the Corporation that such registration is not required."
<PAGE>
(b) "These securities are subject to restrictions on
transfer and other terms and conditions set forth in the Stock Purchase
Agreement, dated as of December 1&', 1999, a copy of which may be obtained
from the corporation at its principal executive offices.
SECTION 6. Conditions Precedent to Closing by TFG. The obligation of
TFG to purchase and pay for Shares by TFG is subject to satisfaction of the
following conditions precedent at or before Closing:
6.1 Corporate Proceedings. All corporate and other proceedings to be
taken and all waivers and consents to be obtained in connection with the
transactions contemplated by this Agreement with respect to such Closing
shall have been taken or obtained and all documents incident to such
transactions shall be reasonably satisfactory in form and substance to TFG.
6.2 Representations and Warranties Correct. The representations and
warranties made by the Corporation in Section 4 hereof shall be true and
correct in all material respects when made, and shall be true and correct at
the time of the Closing in all material respects, with the same force and
effect as if they had been made at and as of the time of the Closing.
6.3 Compliance with Covenants. The Corporation shall have duly
complied with and performed all covenants and agreements of the Corporation
herein which are required to be complied with and performed at or before the
Closing including, without limitation, delivery of the Shares.
6.4 Certificate of President. The Corporation shall have provided to
TFG a certificate, signed by its President and dated the date of the Closing,
in form and substance reasonably satisfactory to TFG, confirming compliance
with the conditions set forth in Sections 6.1, 6.2 and 6.3.
SECTION 7. Conditions of the Corporation's Obligations at Closing.
The obligations of the Corporation under Section 1.2 of this Agreement are
subject to the fulfillment on or before the Closing of each of the following
conditions:
7.1 Representations and Warranties. The representations and
warranties of TFG contained in Section 5 shall be true on and as of the date
of the Closing with the same effect as though such representations and
warranties had been made on and as of the date of the Closing.
7.2 Payment of Purchase Price. TFG shall have delivered to the
Corporation payment of the Purchase Price.
SECTION 8. Financial Information.
8.1 Access to Records and Personnel. So long as TFG owns not less
than 44,457 of the Shares (which number shall be appropriately adjusted to
take account of any stock split, stock dividend, combination of shares or the
like (the "Minimum Shares"), TFG shall have the right to
<PAGE>
receive certain information from the Corporation (in addition to and not in
lieu of rights as a stockholder or otherwise available to TFG), as set forth
in this Section 8.
8.2 Financial Reports. The Corporation agrees to furnish TFG with
the following, all of which shall include USBN-Chengdu for so long as it is a
subsidiary of the Corporation:
8.2.1 Within thirty (30) days after the end of each month and
each fiscal quarter, an unaudited financial report of the Corporation, which
report shall be prepared in accordance with generally accepted accounting
principles consistently applied (except that the financial report may (i) be
subject to normal year-end audit adjustments neither individually nor in the
aggregate material and (ii) not contain all notes thereto which may be required
in accordance with generally accepted accounting principles) and shall be
certified by either the chief executive officer or the chief financial officer
of the Corporation to have been so prepared, and which shall include the
following:
(a) a consolidated income statement for such period,
together with a cumulative income statement from the first day of the
then-current fiscal year to the last day of such period;
(b) a consolidated balance sheet as of the last day
of such period; and
(c) a statement of sources and application of funds
and statement of changes in working capital for such period.
8.2.2 Within ninety (90) days after the end of each fiscal
year of the Corporation, audited consolidated financial statements of the
Corporation, which shall include an income statement for such fiscal year and
a balance sheet as of the last day thereof, and statements of stockholders'
equity and changes in financial position for such fiscal year, each prepared
in accordance with generally accepted accounting principles consistently
applied, and certified by a firm of independent certified public accountants
of recognized national standing.
8.2.3 If for any period the Corporation shall have any
subsidiary whose accounts are consolidated with those of the Corporation,
then in respect of such period the financial statements delivered pursuant to
the foregoing Sections 8.2.1 and 8.2.2 shall be the consolidated and
consolidating financial statements of the Corporation and all such
consolidated subsidiaries.
SECTION 9. Additional Agreements of the Corporation.
9.1 Board Observer Right. As long as TFG holds not less than the
Minimum Shares and until the listing of any equity securities of the
Corporation on the Hong Kong Stock Exchange, the Growth Enterprise Market of
the Hong Kong Stock Exchange, the New York Stock Exchange, NASDAQ, the
Singapore Stock Exchange or similar exchanges or share marketplace, TFG shall
be entitled (i) to receive timely notice of all meetings of the Board of
Directors of the Corporation and (ii) to designate one representative, who
shall be reasonably acceptable to the Corporation, to attend the meetings of
the Board of Directors of the Corporation as an observer and without the
right to vote as such meetings. The TFG observer
<PAGE>
shall recuse himself or herself from the meeting of the Board of Directors if
so reasonably requested by the Board of Directors.
9.2 Right of First Refusal.
(a) The Corporation hereby grants to TFG a right of first
refusal to purchase, pro rata, all (or any part) of any ANew Securities (as
defined in this Section 9.2) that the Corporation may, from time to time,
propose to sell or issue if the issue price of such New Securities is below
the per share purchase of the Shares being sold hereunder (appropriately
adjusted to take account of any stock split, stock dividend, combination of
shares or the like). TFG's pro rata share, for purposes of this right of
first refusal, is the ratio of (i) the number of shares of Common Stock then
held of record by TFG to (ii) the sum of the total number of shares of Common
Stock then issued and outstanding on a fully diluted basis.
(b) "New Securities" shall mean any equity securities of
the Corporation, whether now authorized or not, and rights, options, or
warrants to purchase such equity securities, and securities of any type
whatsoever that are, or may become, convertible into such equity securities;
provided, however, that New Securities do not include (i) shares of Common
Stock (or options, warrants or other rights to purchase Common Stock) issued
or to be issued to officers, employees or directors of the Corporation
pursuant to either a stock purchase or option plan or other employee stock
bonus arrangement approved by the directors of the Corporation not exceeding
20% of the all the issued and outstanding shares of capital stock of the
Corporation on a fully diluted basis; (ii) securities issued in a public
offering pursuant to a registration under the Securities Act or other
applicable laws and regulations; or (iii) shares of Common Stock issued in
connection with any stock split, stock dividend, combination of shares or
recapitalization by the Corporation.
(i) In the event that the Corporation proposes to
issue New Securities and the proposed issue price is below the per share
purchase price of the Shares being sold hereunder, at least 10 days before
such issuance, it shall give to TFG written notice of its intention,
describing in such notice the type of New Securities, the price, and the
terms upon which the Corporation proposes to issue such New Securities (the
"Offer Notice"). TFG shall have 10 days from the date of its receipt of any
such Offer Notice to agree to purchase all or a part of its pro rata share of
such New Securities for the price and upon the terms specified in the Offer
Notice by giving written notice to the Corporation and stating therein the
quantity of New Securities to be purchased. Upon the earlier of(x) the
expiration of such 10-day period or (y) receipt by the Corporation of notices
from TFG pursuant to the immediately preceding sentence, the Corporation
shall give to TFG a written notice setting forth the number of New Securities
subscribed to be purchased pursuant to the exercise of such rights by TFG.
Any agreement by TFG to purchase New Securities shall be binding on TFG.
(ii) In the event that TFG fail to exercise in
full the above-described right of first refusal within said 10-day period or
to purchase in a timely manner all New Securities respecting which such right
was exercised or such purchase made, the Corporation shall have 60 days
thereafter to issue or sell to one or more third parties the New Securities
respecting which
<PAGE>
such right was not exercised or such purchase was not made, at a price and
upon terms no more favorable to the purchasers thereof than specified in the
Offer Notice. In the event the Corporation has not so sold the New Securities
within said 60-day period, the Corporation shall not thereafter issue or sell
any New Securities without first offering such New Securities to TFG in the
manner provided above.
(c) The right of first refusal set forth in this Section
9.2 may not be assigned, in whole or in part.
9.3 Piggyback Registration Rights.
(a) If, after the Corporation has effected an initial
public offering of its Common Stock pursuant to a registration under the
Securities Act (or equivalent foreign laws) at a public offering with
aggregate net offering proceeds to the Corporation of more than $15,000,000
(a "Qualifying Public Offering"), the Corporation decides to register any of
its Common Stock for sale to the public and such registration proposes to
include shares of Common Stock held by Kenneth Leonard, Thomas Rosenthal and
Joseph Tong or their Affiliates (each a "Founder" and collectively, the
"Founders"), the Corporation shall: (a) promptly give TFG written notice
thereof (which shall include a list of the jurisdictions in which the
Corporation intends to attempt to qualify those securities under the
applicable Blue Sky or other securities laws); and (b) include in that
registration (and any related qualification under Blue Sky laws or other
compliance), and in any underwriting involved therein, some of all the Shares
specified in a written request delivered to the Corporation by TFG 20 days
after delivery of the written notice from the Corporation. For purpose of
this Section 9.3(a), "Affiliates" means in respect of a person, any other
person if it directly or indirectly through one or more intermediaries,
controls, is controlled by, or is under common control with, the other
specified person. For the purpose of this definition, control means the
ownership, directly or indirectly, of shares possessing more than 50% of the
voting power of a person.
(b) In the event the general condition of the market, and
the status of the persons proposing to sell securities pursuant to the
registration requires a limitation of the number of shares to be
underwritten, the number of shares to be included in the registration shall
be allocated among all the Founders and TFG, in proportion, as nearly as
practicable, to the respective amounts of securities which the TFG and the
Founders would otherwise be entitled to include in the registration.
9.4 Corporate Existence. The Corporation shall preserve and maintain
its corporate existence, rights and franchises in full force and effect.
9.5 Use of Proceeds. The Corporation shall utilize the Purchase
Price for (i) working capital, (ii) repayment of the loans set forth in
paragraph 2 of the Disclosure Schedule, and (iii) payment of the salaries
(accrued or otherwise) set forth in paragraph 3 of the Disclosure Schedule.
<PAGE>
SECTION 10. Exchanges; Lost. Stolen or Mutilated Certificates. Upon
surrender by TFG to the Corporation of a certificate or certificates
representing Shares purchased or acquired by TFG hereunder, the Corporation
at its expense shall issue in exchange therefore, and deliver to TFG, a new
certificate or certificates representing such shares, in such denomination or
denominations as may be requested by TFG. Upon receipt of evidence
satisfactory to the Corporation of the loss, theft, destruction or mutilation
of any certificate representing any Shares, and in case of any such loss,
theft or destruction, upon delivery of an indemnity agreement reasonably
satisfactory to the Corporation, or in case of any such mutilation, upon
surrender and cancellation of such certificate, the Corporation at its
expense shall issue and deliver to TFG a new certificate for such Shares, of
like tenor, in lieu of such lost, stolen or mutilated certificate.
SECTION 11. Survival of Representations, Warranties and Agreements.
The covenants, representations and warranties of the Corporation contained in
Section 4 hereof shall survive the Closing for twelve (12) months.
SECTION 12. Indemnification. The Corporation shall indemnify, defend
and hold harmless each of TFG and their respective officers, directors,
shareholders, attorneys, agents, etc., from and against all liabilities,
losses, and damages, together with all reasonable costs and expenses related
thereto (including, without limitation, legal and accounting fees and
expenses), which would not have been incurred if(a) all of the
representations and warranties of the Corporation herein had been true and
correct when made or (b) all of the covenants and agreements of the
Corporation herein had been duly and timely complied with and performed.
SECTION 13. Agreements of the Founders with TFG. For purpose of this
Section only, each of Kenneth Leonard, Thomas Rosenthal and Joseph Jiawei
Tong agrees with TFG as follows:
(a) Co-Sale Right. If a Founder proposes to sell, pledge,
or otherwise transfer any shares of the Common Stock then held by such
Founder or his Affiliates (a 'Transferring Founder") (the "Stock") or any
interest therein to any person or entity, but excluding another Founder, the
Transferring Founder shall give written notice to TFG setting forth the
number of shares to be sold by such Transferring Founder, the proposed sale
price and the name of the prospective buyer (the 'Transfer Notice"), TFG
shall have the right, exercisable upon written notice to the Transferring
Founder within 20 days after the date the Transfer Notice is delivered to
TFG, to participate in the sale of Stock on the same terms and conditions as
the transferring Founder to the extent of TFG's Pro Rata Share (the "Co-Sale
Right"). "Pro Rata Share" means the percentage equal to: (x) the total number
of shares of Common Stock held by TFG , divided by (y) the total number of
shares of Common Stock then actually issued and outstanding. Notice of
exercise of a Co-Sale Right shall indicate the number of shares of Stock TFG
wishes to sell under its Co-Sale Right. To the extent that any prospective
purchaser or purchasers prohibits assignment or otherwise refuses to purchase
shares or other securities from TFG, the Transferring Founder shall not sell
to the prospective purchaser or purchasers any Stock unless and until,
simultaneously with the sale, the Transferring Founder purchases those shares
or other securities from TFG.
<PAGE>
(b) Sale by Transferring Shareholder. If TFG does not
exercise its Co-Sale Right with respect to the sale of the Stock subject to
the Transfer Notice, the Transferring Founder may, not later than 90 days
following delivery to TFG of the Transfer Notice, conclude a transfer of all
of the Stock covered by the Transfer Notice on the terms and conditions not
more favorable than those contained in the Transfer Notice. Any proposed
transfer on terms and conditions more favorable than those described in the
Transfer Notice, as well as any subsequent proposed transfer of any Stock by
the Transferring Founder, or any transfer after the 90-day period, shall
again be subject to the Right of Co-Sale Right of TFG and shall require
compliance by the Transferring Founder with the procedures described in this
Section 13. This Section 13 will terminate upon the listing of any equity
securities of the Corporation on the Hong Kong Stock Exchange, the New York
Stock Exchange, NASDAQ, the Singapore Stock Exchange and similar exchanges or
share marketplace.
(c) Amendments. Except as otherwise provided herein, this
Section may be amended, and compliance with any provision of this Agreement
may be omitted or waived, only by the written agreement between the Founders
and TFG.
SECTION 14. Successors and Assigns. This Agreement shall be binding
upon, and inure to the benefit of, each of the parties hereto and, except as
otherwise expressly provided herein, each other person who shall become a
registered holder named in any certificate evidencing the Shares transferred
to such holder by TFG or its permitted transferees, and their respective
legal representatives, successors and assigns.
SECTION 15. Entire Agreement; Effect on Prior Documents. This
Agreement and the other documents referred to herein or delivered pursuant
hereto contain the entire agreement among the parties with respect to the
transactions contemplated hereby and supersede all prior negotiations,
commitments, agreements and understandings among them with respect thereto.
SECTION 16. Termination of Certain Covenants Upon Qualifying Public
Offering. Any provision hereof to the contrary notwithstanding, the covenants
of the Corporation set forth in Sections 8. 9.1 and 9.2 hereof shall
terminate upon the listing of any equity securities of the Corporation on the
Hong Kong Stock Exchange, the Growth Enterprise Market of the Hong Kong Stock
Exchange, the New York Stock Exchange, NASDAQ, the Singapore Stock Exchange
or similar exchanges or share marketplace. Notwithstanding the foregoing,
Section 2 of this Agreement shall survive this Agreement and the Closing and
shall remain in full force and effect indefinitely.
SECTION 17. Notices. Any notice or communication given pursuant to
this Agreement by any party to any other party shall be in writing and shall
be sufficiently given if personally delivered, sent by facsimile to the
party's facsimile number set forth in this Section or other means of
electronic transmission, or four (4) business days after deposit by mail,
postage prepaid to the parties at the following addresses or to such other
address as either party may hereafter designate to the others by like notice:
(i) if to the Corporation, to:
<PAGE>
U.S. Business Network, Inc.
China Operations Shenzhen Office
1016 North Huaqing Road Baohua Building Suite 818
Shenzhen, China
Attn: President
Telephone: 011-86-755-377-9065
Telecopy: 011-86-755-377-9063
with a copy to:
Howard Zhang, Esq
Foley, Hoag & Eliot, LLP
Boston, MA 02109
Telephone: 617-832-1225
Facsimile: 617-832-7000
(ii) if to TFG, to:
Total Film Group, Inc.
9107 Wilshire Blvd., Ste. 475
Beverly Hills, CA 90210
Attn: Gerald Green, CEO
Telephone: 310-275-8404
Telecopy: 310-275-1585
with a copy to:
David M. Wolf, Esq.
9000 Sunset Blvd, Suite 1005
Los Angeles, CA 90069
Telephone: 310-278-6060
Facsimile: 310-278-6064
SECTION 18. Amendments; Waivers. Except as otherwise provided
herein, this Agreement may be amended, and compliance with any provision of
this Agreement may be omitted or waived, only by the written agreement
between the Corporation and TFG.
SECTION 19. Counterparts. This Agreement may be executed in any
number of counterparts, each such counterpart shall be deemed to be an
original instrument, and all such counterparts together shall constitute but
one agreement.
SECTION 20. Headings. The headings of the various sections of this
Agreement have been inserted for convenience of reference only and shall not
be deemed to be a part of this Agreement.
<PAGE>
SECTION 21. Nouns and Pronouns. Whenever the context may require,
any pronouns used herein shall include the corresponding masculine, feminine
or neuter forms, and the singular form of names and pronouns shall include
the plural and vice-versa.
SECTION 22. Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the substantive laws of the State
of California without regard to its principles of conflicts of laws.
SECTION 23. Severability. Any provision of this Agreement that is
prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereto and any
such prohibition or unenforceability in any jurisdiction shall not invalidate
or render unenforceable such provision in any other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement under
seal as of the day and year first above written.
U.S. BUSINESS NETWORK, INC.
By: /s/ Kenneth Leonard
Title: Chairman
USBN Computer Network
(Chengdu)
Corporation Limited
By: /s/ Joseph Tong
Title: CEO, President of China Operations
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Title: President
TOTAL CHINA, INC.
By: /s/ Gerald Green
Title President
For Purpose of Section 13 only
/s/ Kenneth Leonard
/s/ Thomas M. Rosenthal
/s/ Joseph Tong
<PAGE>
EXHIBIT 6.30
EXECUTIVE PRODUCER AGREEMENT
"SUNDOWNING" GERALD GREEN
The following are the terms and conditions of the agreement
("Agreement") dated as of July 29,1998 between SUNDOWNING, INC. (producer), a
Nevada corporation, and TOTAL FILM GROUP, INC. ("Lender") for the executive
producing services of GERALD GREEN ("Artist")(Social Security Number 611 44
3355) in connection with a proposed motion picture project tentatively
entitled "SUNDOWNING" ("Picture").
1. CONDITIONS PRECEDENTS: Producer's obligations under this
Agreement are conditioned upon the following "Conditions Precedents": 1.
Producers receipt of copies of this Agreement fully executed by Lender and
Artist; b/ Artist providing Producer with all documents which may be required
by any governmental agency or otherwise for Artist to render services
hereunder; and U Producer's receipt of all forms and documents necessary to
enable Producer to effect payment to Lender, including tax and corporation
identification forms.
2. ENGAGEMENT: The services of Artist are being furnished to
Producer by Lender. Consequently, all services and obligations to be
performed hereunder by Artist shall be deemed to be performed by Artist at
the direction of Lender, and all compensation and other payments, if any, for
the performances of such services and obligations shall be paid by Producer
to Lender. All agreements, warranties and representations made by Artist
shall be deemed made in addition by Lender and vice-versa, and at the
election of Producer a breach of this Agreement by Lender and/or Artist
individually shall be deemed a breach by both.
3. SERVICES / EXCLUSIVITY: If Producer elects to proceed with the
production of the Picture and subject to Paragraph 10 below, then Lender
shall 'provide the services of Artist to personally render all services
customarily rendered by individual producers in the motion picture industry
in connection with the pre-production, production and post-production of the
Picture and as otherwise required by Producer. The term of Artist's services
shall commence on the date hereof and shall continue until the full and
satisfactory completion of all services to be rendered by Artist hereunder or
the earlier termination hereof, if any, by Producer (as herein provided).
Artist shall render services hereunder on an non-exclusive basis - but first
priority, in person basis -during development until 8 weeks prior to the
Start Date and on an exclusive basis during the "Pre-Production Period"
(i.e., the period commencing 8 weeks prior to the scheduled date for
commencement of principal photography of the Picture ("Start Date") and
continuing until four (4) weeks after the conclusion of principal photography
of the Picture; thereafter Artist's services shall be non-exclusive to
Producer (provided that Artist's services to third parties or on Artist's own
account shall not materially interfere with Artist's services hereunder)
until Delivery (as defined in Paragraph 8 below) of the completed Picture
(including required television coverage) which shall be delivered by Artist
in connection with the post-production schedule approved by Producer. Time is
of the essence in connection with all producing services and Delivery of the
Picture hereunder.
<PAGE>
4. APPROVALS AND CONTROLS:
a. Producer shall retain all approvals and controls,
including without limitation, the right to designate the production manager,
estimator and location auditor, and the right to initiate at any time and in
any respect in connection with the Picture.
b. Lender shall cause Artist to render Artist's services at
such places Producer will designate and at the times required by Producer,
including Saturdays, Sundays, nights and holidays. Lender shall cause Artist
to render Artist's services hereunder and devote Artist's best talents,
efforts and abilities in accordance with the instructions, control and
directions of Producer (including those of creative, artistic or dramatic
taste and judgment). Lender shall cause Artist to meet or collaborate with
persons designated by Producer at such time and place as Producer may
designate.
5. COMPENSATION: Upon the conditions that Lender and Artist fully
perform all services and obligations required hereunder and that neither
Lender nor Artist is not in material default hereunder, and subject to
Producer's right of suspension and/or termination on account of Lenders
and/or Artists default or disability or an event of force majeure and subject
to the provisions of paragraph 10 hereunder, Producer shall pay Lender as
full and complete consideration for Artist's services, rights granted and
representations, warranties and agreements made hereunder, the following
Fixed Compensation at the following times
a. Fixed Compensation: The amount ("Fixed Compensation") of
$350,000 as follows:
(i) 25% upon commencement of pre-production of the
Picture
(ii) 25% upon commencement of principal photography
of the Picture;
(iii) 25% upon completion of principal photography of
the Picture; and
(iv) 25% upon completion of the final corrected
answer print of the Picture and of all items required
by Producer in connection with the completion and
full delivery of the Picture to Producer.
b. Payment: Said compensation is an all-inclusive flat fee
and no additional compensation shall be payable by reason of overtime,
weekend work, holidays, etc. All payments of Cash Compensation to Artist)
hereunder shall be made on Producers regular payday in the week following
that week in which such payment shall have accrued. No additional payments
shall be required for services rendered at night or on Saturdays, Sundays or
holidays or for meal delays, hazardous work, violation of rest periods, or
otherwise.
c. Deferred Compensation: Provided that Lender nor Artist
are not in material default hereunder, Lender shall receive:
<PAGE>
(i) Deferred Compensation: $100,000 (one hundred
thousand dollars), which shall be deferred and
payable on a pro-rata basis with all similar
deferments from unspent contingency, if any, as
reflected in the cost report at the delivery of the
Picture and the balance, if any, at the point
immediately preceding when net Proceeds first became
payable, if ever.
(ii) Participation Definition: The balance of the
Deferred Compensation, if any, shall be computed,
determined and paid in accordance with Producer's
standard definition of Net Proceeds.
6. TRANSPORTATION AND EXPENSES: If Producer requires Artist to
perform services a t a location more than 50 miles away from Artist's
principal residence, which is Los Angeles, California:
(a) Transportation: Producer shall furnish Artist with
first-class (if available and if used)transportation (by air if appropriate)
to and from such location.
(b) Living expenses: If such location is an overnight
location, then Producer shall pay Artist first class living expenses.
7. CREDIT: If the Picture is produced and if Artist fully performs
all services and materials obligations as executive producer of the Picture,
then subject to Producers standard exclusions and exceptions (including
artwork title exceptions), Artist's name shall be accorded an Executive
Producer credit - such credit accorded to Artist to precede the credit
accorded to any other Executive Producer" credit, if any - as follows:
a. On screen: On a separate card, in the main titles (i.e.,
where the individual credits for the principal cast and individual
Producer(s) appear, whether located at the beginning or the end of the
Picture), on all positive prints of the Picture in a size of type not less
prominent than that used for credit to any other individual in connection
with the Picture.
b. In paid advertising: In the billing block portion of any
paid advertising relating primarily to the Picture issued by, or under the
control of, Producer ('Paid Ads") in a size of type not less prominent than
that used for credit to any other individual in connection with the Picture.
c. Exclusions and exceptions: Producer's Paid Ad credit
obligations shall not apply to the following ("Excluded Ads"): group, list,
institutional or so-called teaser advertising; announcement advertising;
advertising relating primarily to the source material upon which the Picture
is based, or to the author, any member of the cast, the Producer(s),
Artist(s) or any other personnel involved with the production of the Picture;
so-called "award" or "congratulatory" advertisements, including
advertisements or announcements relating to consideration or nomination for
an award; trailers (including promotional films) or other advertising;
screen, radio or television advertising; advertising in narrative form;
advertising for film festivals, film markets and the like; advertising % page
(or the equivalent in SAG's) in size or less; outdoor advertising
<PAGE>
(including, but no limited to, 24-sheets); theater display advertising ;
advertising in which no credit is accorded other than credit to one or two
stars of the Picture and/or to Producer and/or to any other company financing
or distributing the Picture. The following items shall not be considered Paid
Ads or Excluded Ads for any purposes hereunder: videocassettes, videodiscs
and other home video devices and the covers, packages, containers or jackets
therefore; publicity or promotional items and materials; advertising relating
to subsidiary or ancillary rights in the Picture (including, but not limited
to, novelizations, screenplays or other publications, products,
merchandising, music publishing or soundtrack recordings); voice-overs;
advertising, publicity and exploitation relating to by-products or commercial
tie-ins; and other advertising not relating primarily to the Picture; or
other customary excluded advertising of any distributor(s) of the Picture.
d. General terms: All other matters with respect to
Artist's credit shall be determined by Producer in its sole discretion. Any
reference to the "title" of the Picture shall be deemed to mean the "regular"
title unless such reference is specifically made to the "artwork" title.
Producer shall inform its licensees of the above credit information. The
casual or inadvertent failure by Producer or any failure by a third party to
comply with the credit provisions of this Agreement shall not be deemed to be
a breach by Producer. Producer agrees upon receipt of written notice from
Artist of a failure to comply with the credit provisions of this Agreement to
take such steps as are reasonable and practicable to cure such failure on a
prospective basis as to future prints and advertisements, as applicable,
which are distributed or issued by Producer or under the control of Producer.
8. DELIVERY/LENGTH/RATING/COVER SHOTS: Lender shall cause Artist to
deliver the completed Picture to Producer within a post-production schedule
and delivery date approved by Producer, and in this regard time is of the
essence. "Delivery" shall be deemed to have occurred only upon Artist's
delivery to Producer of an answer print which conforms with all of Producer's
delivery requirements, including, without limitation, the following
requirements: provided, however, that in the event that the requirements for
the delivery, length, rating and cover shots set forth in the agreement for
the director of the Picture are less restrictive than Artist's requirements,
then such less restrictive delivery, length, rating and cover shots
requirements shall apply:
a. The Picture shall have a running time, including main
and end titles, of not less than 90 minutes and no more than 110 minutes,
shall be photographed on 35mm film, in the English language and in color.
b. The Picture shall adhere to the existing
producer-approved shooting script as of the commencement of principal
photography of the Picture, and Artist shall not make any changes therein
without the prior written approval of Producer, excepting only minor changes
required by the exigencies of production.
c. The Picture shall qualify for an MPAA rating in the
United States no more restrictive than "R".
<PAGE>
d. Artists shall photograph and furnish to Producer "cover
shots" and alternative scenes and dialogue which can be incorporated into the
Picture to render it suitable for exhibition on United States network
primetime television and Mist shall deliver to Producer a television version
which shall be in accordance with applicable network "Standard and Practices"
regulations. Such cover shots and alternate scenes and dialogue shall be such
that same can be integrated into such primetime network version of the
Picture without materially changing or impairing the continuity of the
storyline of the Picture. Producer shall have the absolute right to use such
cover shots and/or cut the Picture (or such television version) in order to
meet broadcast requirements.
e. Artist will comply with Producer's budget and business
practices.
9. NAME AND LIKENESS: Lender also hereby grants to Producer
the right to use and display Artist's name and/or likeness and/or
biographical material for advertising, publicizing, promoting and exploiting,
in whole or in part, the Picture, and all subsidiary and ancillary rights of
any nature relating to the Picture, or Artist's services hereunder throughout
the universe, in perpetuity, in any and all media now known or hereafter
devised, including, but not limited to, featurettes, promotional films and/or
commercial tie-ins The foregoing shall not be construed as granting Producer
the right to use Artist's name or likeness in connection with any
merchandising items, except that Producer may use Artist's name as contained
in the billing block of the Picture in connection with such uses. Lender
shall have the right to furnish Producer with a written biography of Artist.
Provided Lender delivers such material to Producer within 5 business days
after Producer's request therefore, Producer shall use good faith efforts to
utilize information contained therein in connection with the advertisement
publicity, promotion and/or exploitation of the Picture.
10. UTILIZATION OF SERVICES/"PAY OR PLAY":
a. Producer's rights: Producer is not obligated to produce,
distribute and/or exploit the Picture, or, if commenced, to continue the
production, distribution or exploitation of the Picture in any territory;
provided that in no event shall the foregoing limit Producers obligation to pay
sums accrued and unpaid to Lender hereunder, including pursuant to any "pay-
or-play" obligation hereunder. Regardless of whether or not Producer elects to
produce, distribute and/or exploit the Picture (or to commence same) Producer is
not obligated to use the services in whole or in part of Lender and/or Artist
hereunder.
b. "Pay or Play": Lender shall be deemed to be "pay or
play" for purposes of the preceding section upon notice in writing to Lender
of Producer's election to make Lender "Pay or Play" or when all of the
following have occurred: (i) Producer has approved, in its sole discretion,
the final shooting script, budget and production and post-production
schedules for the Picture; and (ii) All principal cast members of the Picture
have been made unconditionally "pay or play" for their fixed compensation;
and (iii) Producer's receipt of a signed agreement (in form and substance
satisfactory to Producer) with the financier by which such financier
unconditionally agrees to finance the Picture; and (iv) Producers receipt of
a signed agreement (in form and substance satisfactory to Producer) with a
completion guarantor by which such guarantor
<PAGE>
unconditionally agrees to bond the Picture and approves the final budget of
the Picture; and (v) Producer's receipt of a signed agreement (in form and
substance satisfactory to Producer) with the E&O insurance company by which
such company agrees to insure the Picture for errors and omissions.
11. RESULTS AND PROCEEDS DROIT MORAL:
a. Producer shall be the sole and exclusive owner, in
perpetuity and throughout the universe, of (i) the results and proceeds of
Artist's services hereunder which shall be a "work made for hire" for
Producer under the U.S. Copyright Law, specially ordered or commissioned for
use as a part of a motion picture or other audio-visual work and/or prepared
within the scope of Artist's employment; (ii) all right, title and interest
in and to the Picture and the material upon which it is based, including but
not limited to, the copyright in and to the Picture and any renewals and
extensions of such copyright; (iii) all distribution, exhibition and
exploitation rights in the Picture and the results and proceeds of Artist's
services hereunder in any and all media, whether now known or hereafter
devised; (iv) any and all allied, ancillary and subsidiary rights in and to
the Picture; and (v) all other tangible and intangible rights properties, and
proceeds of every kind and nature in and to the Picture and in each of the
foregoing, in every stage of development, production and completion. Lender
and Artist hereby specifically acknowledge that the compensation payable
hereunder by Producer includes and is full and adequate compensation in
respect to any right to which Lender and/or Artist may now be or shall
hereafter become entitled to (including Lenders and/or Artist's rental and
lending rights to the Picture and other derived products). If under the
applicable law of any territory or jurisdiction, any additional or different
form of compensation is required with respect to rental and lending rights,
Producer, Lender and Artist agree that the grant of said rights shall
nevertheless be fully effective; provided, however, that Producer shall pay
Lender the minimum compensation required, if any, under such applicable law
or, if required by such law, the parties shall in good faith negotiate the
amount hereof in accordance with the applicable law, and further provided
that any sums paid to Lender pursuant to this Agreement, including, without
limitation, the Fixed Compensation, any payments in excess of the minimum
required under any applicable collective bargaining agreement and any
payments in connection with the exploitation of the Picture in supplemental
and ancillary markets and media shall be credited toward the amount required
to be paid to Lender under such law to the maximum extent allowed. Without
limiting the generality of the foregoing, in the event the results and
proceeds of Artist's services hereunder are not deemed to be a
"work-made-for-hire" for Producer, Lender and Artist hereby irrevocably and
exclusively grant and assign all right, title and interest in and to such
results and proceeds to Producer, including all rights of every kind and
nature therein and thereto, throughout the universe, in perpetuity, in any
and all media, whether now known or hereafter devised, and all copyrights,
renewals rights and extensions thereof. Lender and Artist hereby waives any
so-called "moral rights of author" or "droit moral" rights Lender and Artist
may have in connection with the Picture.
b. No termination of this Agreement shall affect the rights
granted hereunder by Lender and Artist, and the representations and
warranties of Lender and Artist shall survive such termination.
<PAGE>
12. PUBLICITY LIMITATIONS: Lender and Artist shall not by means
of press, publicity or advertising agencies employed or paid by Lender and/or
Artist, or otherwise, authorize, circulate, publish or otherwise disseminate
any news stories or articles or other publicity of any kind, containing
Artist's name and relating directly or indirectly to Artist's engagement, the
subject matter of this Agreement, the Picture, or the services to be rendered
by Artist or others in connection with the Picture, unless the same are first
approved in writing by Producer. Lender and/or Artist may, however,
disseminate publicity which contains Artist's name and incidentally
identifies the Picture and the services Artist rendered thereon so long as
such publicity is not an advertisement for the Picture and does not contain
any material which is derogatory in nature to Producer, the Picture or any
element thereof or individual(s) or entity(ies) rendering services in
connection therewith.
13. INJUNCTIVE RELIEF: Lender and Artist acknowledge that the
services to be rendered by Artist hereunder are of a special, unique,
unusual, extraordinary and intellectual character, making them difficult to
replace and giving them a peculiar value, the loss of which cannot be
reasonably compensated in damages in an action of law; that if Lender and/or
Artist breach any provision of this Agreement, Producer will be caused
irreparable damage: and that, therefore, Producer shall be entitled, as a
matter of right, at its election, to enforce this Agreement in all of the
provisions hereof by injunction or other equitable relief.
14. CONTINGENCIES:
a. Suspension: In the event of Force Majeure (e.g.,
interruption of or material interference with the preparation, commencement,
production, completion, or distribution of the Picture or of a substantial
number of motion pictures produced and/or proposed to be produced by Producer
by any cause or occurrence beyond the control of Producer, including fire,
flood, epidemic, earthquake, explosion, accident, riot, war - declared or
undeclared -, blockade, embargo, act of public enemy, civil disturbance,
labor dispute, strike, lockout, inability to secure sufficient labor, death
or disability of key personnel rendering services on the Picture other than
Artist, power, essential commodities, any applicable law or any act of God),
or any capacity of Artist which prevents Artist from performing or complying
with any of the material terms or conditions of this Agreement ("Artist's
incapacity'), or any failure or refusal by Lender and/or Artist to perform or
comply with any of the material terms or conditions hereof at the times and
in the manner specified (other than by reason of Force Majeure or Artist's
Incapacity) ("breach by Artist"), Producer shall have the right, by notice to
Lender, to postpone the commencement of or suspend the rendition of services
by Artist and/or the running of time hereunder, which suspension shall
commence as of the occurrence of the event. Such suspension shall end within
2 weeks (or, if such event is a breach by Artist, 4 weeks) after the
cessation of such event.
b. Termination:
(i) Producer termination right: If an Artist's
incapacity continues for a consecutive period in excess of 10 days or an
aggregate period in excess of 14 days during the performance of Artist's
services hereunder, or if a Force Majeure continues in excess of 6
<PAGE>
consecutive weeks, or if there is a breach by Lender and/or Artist, Producer
shall have the right to terminate this Agreement by written notice to Lender,
which termination shall be effective as of the effective date set forth in
such notice. Prior to a termination of this Agreement by Producer based upon
the first breach by Lender and/or Artist, Producer shall notify specifying
the nature of the breach and Lender and/or Artist shall have a period of 2
business days (1 business day during principal photography) after receipt of
Producers notice within which to cure such first breach. Even if such breach
is cured within said period, Lender and Artist shall remain liable for
damages and expenses occurred by Producer as a result of such breach. If such
breach is not cured to the reasonable satisfaction of Producer within said
period, Producer may terminate this Agreement as set forth above. If Artist
dies, this Agreement shall immediately and automatically terminate.
(ii) Artist termination right: If Producer
suspends payment of compensation due to a Force Majeure for 6 weeks or more,
Lender and/or Artist shall have the right to terminate this Agreement and
Producer shall subsequently have the right to re-establish the operation of
this Agreement within 1 week after receipt of Lenders termination notice and
resumption of payment of compensation, if any, due Lender hereunder, and the
operation hereof, if so re-established, shall not thereafter be suspended
because of the same event of Force Majeure.
c. Right of examination: If any claim disputing the
existence of Artist's incapacity is made by either party, Producer shall have
the right to have Artist examined by such physicians as Producer may
designate. Artist's own physician may be present at such examinations at
Artist's sole cost and expense, provided Artist's physician shall not
interfere with any such examination.
d. Effect of suspension: During the period of any
suspension, no compensation or other benefits hereunder shall accrue, become
payable or be provided to Lender. Lender shall not cause Artist to render
services for any third party during the exclusive period. Nevertheless,
Lender shall have the right to cause Artist to render services to third
parties during any Force Majeure suspension, subject to Producer's right to
require Artist to resume services hereunder upon 48 hours' prior notice.
Producer shall have the right (exercisable at any time) to extend the period
of services of Artist and the running of time hereunder for a period equal to
the period of such suspension.
e. Effect of termination: Except with respect to the "pay
or play" provisions, termination of this Agreement for any reason shall
release and discharge Producer from all further obligations whatsoever to
Lender and/or Artist and shall terminate any rights of Lender and/or Artist
hereunder. Nevertheless, if the termination is not for a breach by Lender or
Artist, Producer shall pay any Cash Compensation due and unpaid prior to the
termination.
15. NOTICES AND PAYMENTS: Any notice pertaining hereto shall be in
writing. Any such notice and any payment due hereunder shall be served by
delivering said notice or payment personally or by sending it by mail
(postage prepaid) addressed as follows:
To Lender and/or to Artist:
Total Film Group, Inc.
<PAGE>
9107 Wilshire Blvd., Suite 475
Beverly Hills, CA 90210
Telecopier: (310) 275 1585
To Producer:
Sundowning, Inc.
9107 Wilshire Blvd., Suite 475
Beverly Hills, CA 90210
Telecopier: (310) 275 1585
The date of personal delivery, mailing of such notice or payment
shall be deemed the date of service of such notice or payment.
16. REPRESENTATIONS AND WARRANTIES: Lender and Artist represent and
warrant that: (a) There is a valid agreement between Lender and Artist
whereby Artist is obligated to render services to Lender throughout at least
the full term set forth in this Agreement; (b) Lender is authorized under
said agreement to enter into this Agreement with Producer, to furnish
Artist's services to Producer, to grant to Producer the rights herein set
forth, and to authorize the payments by Producer to third parties, if any,
specified in this Agreement. Lender is free to enter into this Agreement and
not subject to any conflicting obligations or any disability which will or
might prevent or interfere with the execution and performance of this
Agreement by Lender or Artist; ( c) Lender shall fully perform and Lender
shall cause Artist to fully perform each and all of the terms and obligations
of this Agreement to be performed by Lender or Artist; (d) No rights of any
third party are or will be violated by Lenders or Artist's entering into or
performing this Agreement, and neither Lender nor Artist have made nor shall
hereafter make any agreement with any third party which could interfere with
the rights granted to Producer hereunder or the full performance of Lenders
or Artist's obligations or Artists services hereunder; (e) All of the work
performed by Artist shall be wholly original with Artist and none of the same
has been or will be copied from or based upon other work. To the best of
Lender's and Artist's knowledge, the reproduction, exhibition or any other
use of Artist's work or any of the right herein granted shall not defame any
person or entity nor violate any copyright, right of privacy or publicity, or
any other right of any person or entity. The warranty in this sub-paragraph
(e) shall not apply to any material as furnished to Artist by Producer; (f)
That Lender is, and has been for more than 30 days prior to the date hereof,
a corporation duly organized and existing under the laws of Lenders state or
country of incorporation; that Lender is a bone fide corporate business
entity established for a valid business purpose within the meaning of the tax
laws of its country of incorporation and not a mere sham, conduit, or Agent
for Artist. Lender acknowledges that the foregoing representations and
warranties will be relied upon by Producer for the purpose of determining
whether or not it is necessary to make withholdings for taxes from monies
being paid to Lender hereunder, and Lender agrees that if withholdings are
not made from said payments, and if thereafter it is determined that such
withholdings were legally required, Lender and Artist will indemnify Producer
against all loss, costs, damages and expenses relating thereto.
17. INDEMNITY:
<PAGE>
a. Lender and Artist will indemnify Producer, its
associates, affiliated and related entities, successors, assigns, licensees,
officers, directors, employees and agents, and hold them harmless from and
against any and all claims, liabilities, damages, costs and expenses,
including reasonable outside attorneys' fees, arising out of, resulting from,
based upon or incurred because of a breach by Lender and/or Artist of any
agreement, representation or warranty made by Lender and/or Artist hereunder.
Except with respect to (I) matters constituting a breach by Lender and/or
Artist of any of the representations, warranties and/or agreements contained
in this Agreement; and/or (ii) gross negligence or willful misconduct by
Lender and/or Artist, Producer shall indemnify Lender and Artist and hold
them harmless from and against any and all liability, damages, costs and
expenses, including reasonable attorneys' fees, (other than with respect to
any settlement entered into without Producer's prior written consent) arising
out of any third party claim against Artist resulting from (I) any material
supplied by Producer for use in connection with the Picture; and (ii)
Producers development, production, distribution and/or exploitation of the
Picture.
b. Producer, on one hand, and Lender and Artist, on the
other hand, shall, upon presentation of any claim or institution of any
action covered by the indemnity provisions, promptly notify the other of the
presentation of such claim or the institution of such action, giving full
details thereof.
18. RIGHT TO WITHHOLD: Producer shall have the right to deduct and
withhold from any sums payable to Lender hereunder any amounts required to be
deducted and withheld by Producer pursuant to any present or future law,
ordinance or regulation of the united States or of any state thereof or any
subdivision of any state thereof, or any other country, including without
limitation, any country wherein Lender causes Artist to perform any of his
services hereunder, or pursuant to any present or future rule or regulation
of any union or guild (if any) having jurisdiction over the services to be
performed by Artist hereunder.
19. INSURANCE: Producer shall have the right to apply for and take
out, at Producer's expense, life, health, accident, cast or other insurance
covering Artist, in any amount Producer deems necessary to protect Producer's
interest hereunder. Lender and Artist shall not have any right, title or
interest in or to such insurance. Lender shall cause Artist to assist
Producer in obtaining such insurance by submitting to usual and customary
medical and other examinations, and by signing such applications, statements
and other instruments as may be reasonably required by any insurance company.
In the event Artists fails or is unable to qualify for such insurance at
customary rates and subject only to customary exclusions and deductible
amounts (if any), Producer shall have the right to terminate this Agreement.
During the term of this Agreement, Artist shall not travel on any chartered
or unscheduled airline or plane, unless requested to do so by Producer, or
engage in any conduct prohibited by any policy of insurance obtained by
Producer in accordance with this Agreement.
20. E&O/GENERAL LIABILITY INSURANCE: Lender and Artist shall be
covered by the errors and omissions and general liability insurance policies
for the Picture to the extent that Producer obtains and maintains same and
subject to the terms, conditions and restrictions of such policies and
endorsements thereto.
<PAGE>
21. MISCELLANEOUS:
a. Governing law / legal proceedings / non-waiver / effect
of termination / entire agreement / separability: This Agreement shall be
governed and construed in accordance with the laws of the State of California
applicable to contracts entered into and fully performed therein. Only the
California courts (state and federal) shall have jurisdiction over
controversies regarding this Agreement; any proceeding involving such
controversies shall be brought in those courts, in Los Angeles county, and
not elsewhere. Any process in such proceedings may be served upon Artist by,
among other methods, delivering it or mailing it, by registered or certified
mail, directed to such address Artist designated in this Agreement. Any such
delivery or mail service shall have the same effect as personal services
within the State of California. No waiver by Artist or Producer of any
failure by the other to keep or perform any covenant or condition of this
Agreement shall constitute a waiver of any preceding or succeeding breach of
the same or any other covenant or condition. Neither the expiration nor
termination of this Agreement shall affect Producers ownership of the results
and proceeds of Lenders and Artists services hereunder or alter Producer's
rights therein, or any warranty or undertaking made by Artist hereunder. This
Agreement constitutes the entire agreement between Producer, on one hand, and
Lender and Artist, on the other hand, with respect to the subject matter and
may only be amended by a written instrument executed by Producer, Lender and
Artist.
b. Visas and labor permits: Lender shall cause Artist to
cooperate with Producer and assist Producer in securing such visas and labor
permits which may be required by any governmental agency in connection with
Artist's rendition of services hereunder. If, in spite of such cooperation
and assistance, Producer is unable to secure such visas and labor permits
within a reasonable period of time prior to the Start Date, Producer shall
have the right to suspend Lender's and Artist's services hereunder until a
final determination concerning such visa or labor permit is made by the
applicable authority, and Producer shall have the right to terminate this
Agreement, Lenders and Artist's engagement hereunder if such visas and labor
permits cannot be secured.
c. Remedies cumulative: All remedies accorded herein or
otherwise available to either Producer, Lender or Artist shall be cumulative
and no one such remedy shall be exclusive of any other. Without waiving any
rights or remedies under this Agreement or otherwise, Producer may from time
to time recover, by action at law, any damages arising out of any breach of
this Agreement by Artist and may institute and maintain subsequent actions
for additional damages which may arise from the same or other breaches. The
commencing or maintaining of any such action or actions by Producer shall not
constitute an election on Producers part to terminate this Agreement nor
constitute or result in the termination of Lenders and/or Artist's services
hereunder unless Producer shall expressly so elect by written notice to
Lender.
d. Artist's remedies: No action or omission by Producer
shall constitute a breach of this Agreement unless Lender first notifies in
writing setting forth the alleged breach or default and Producer does not
cure the same. If Producer breached its obligations hereunder, the damage, if
any, caused Lender and/or Artist shall not be irreparable or sufficient to
entitle Lender and/or Artist to injuctive or other equitable relief.
Consequently, Lender's and Artist's rights and
<PAGE>
remedies shall be limited to the right, if any, to obtain damages at law and
Lender and Artist shall not have any right in such event to terminate or
rescind this Agreement or any of the rights granted to Producer hereunder or
to enjoin or restrain the development, production, advertising, promotion,
distribution, exhibition or exploitation of the Picture and/or any of
Producers rights hereunder. Producers payment of any compensation or
performance of any obligation hereunder shall not constitute a waiver by
Producer of any breach by Lender and/or Artist or of any rights or remedies
which Producer may have as a result of such breach.
e. Captions: The captions used in connection with the
paragraphs and subparagraphs of this Agreement are inserted only for the
purposes of reference. Such captions shall not be deemed to govern, limit,
modify, or in any other manner affect the scope, meaning, or intent of the
provisions of this Agreement or any part thereof, nor shall such captions
otherwise be given any legal effect.
f. Illegality: Nothing contained herein shall require the
commission of any act or the payment of any compensation which is contrary to
law, and if there shall exist any conflict between any provision contained
herein and any law, regulation or provision of any applicable collective
bargaining agreement, the latter shall prevail, and the provision or
provisions herein affected shall be curtailed, limited or eliminated to the
extent (but only to the extent necessary to remove such conflict), and as so
modified, this Agreement shall continue in full force and effect.
g. Assignment: This Agreement is non-assignable by Lender
or Artist. This Agreement may be assigned freely by Producer, in whole or in
part, to any party (including any successor entity or other party acquiring
all or substantially all of the business or assets of Producer or into which
Producer is merged or consolidated), without restriction, and such assignment
shall be binding upon Lender and Artist and inure to the benefit of Producers
successors, assignees, licensees, grantees and associates, affiliated and
subsidiary entities and shall be deemed a notation forever releasing and
discharging Producer from any further liability or obligation to Lender and
Artist.
h. Further instruments: Lender and Artist shall duly
execute, acknowledge and deliver to Producer or cause to be executed,
acknowledged and delivered to Producer, any and all assignments or
instruments which Producer may deem necessary to carry out and effectuate the
purposes and intent of this Agreement, including, without limitation,
separate assignments of any rights granted by Lender and Artist in this
Agreement. Lender and Artist hereby irrevocably grant Producer the power
coupled with an interest, with rights of substitution and delegation, to sign
such separate documents in Lenders and/or Artist's name and as Lenders and/or
Artist's attorney-in-fact if Lender and/or Artist have not complied with
Producers request within 5 business days thereafter (or such shorter period
of time as Producer shall reasonably require. If Producer signs any document
as Lenders and/or Artist's attorney-in-fact, Producer will provide Lender
with copies of any such documents.
This Agreement constitutes the entire understanding of the parties
hereto and replaces any and all formal agreements, understandings and
representations, either oral or written, relating in any way to the subject
matter hereto. No modifications, alterations or amendments of this
<PAGE>
Agreement shall be valid or binding unless it is in writing and signed by the
party to be charged with such modification, alteration or amendment.
By signing in the spaces provided below, Producer and Lender accept
and agree to all of the terms and conditions hereof
The parties hereto have executed and delivered this Agreement as of
the date first written above.
SUNDOWNING, INC.
By: /s/ Eli Boyer
Its: Director
AGREED TO AND ACCEPTED
TOTAL FILM GROUP, INC.
By: /s/ Gerald Green
Its: President
By signing below, Artist acknowledges that Artist has read this
Agreement and confirms all grants, representations, warranties and agreements
made by Lender and agrees to perform the services provided for therein in
accordance with the terms and conditions thereof and, if Artist fails to do
so, Artist acknowledges that Producer shall have the same rights and remedies
against Artist as Producer has against Lender. Artist shall look solely to
Lender for any and all compensation hereunder and, if Artist's employment
agreement with Lender becomes ineffective or if Lender ceases to exist, then
Artist, at the election of Producer, shall be deemed substituted as a direct
party hereto in lieu of Lender.
/s/ Gerald Green
<PAGE>
EXHIBIT 6.31
DATED 21 JUNE 1997
TOTAL FILMS UK LIMITED (1)
TOTAL FILM GROUP INC (2)
PRODUCER'S AGREEMENT
For the Services of Gerald Green
BERWIN LEIGHTON
Adelaide House London Bridge, London EC4R 9HA
Telephone 0171 623 3144 Fax 0171 623 4416
<PAGE>
PRODUCER'S AGREEMENT
DATE: 21 June 1997
PARTIES:
1. The Production Company TOTAL FILMS UK LIMITED
(registered no.
3316646) whose registered
office is at Adelaide
House, London Bridge, London
EC4R 9HA
2. The Loan Out Company TOTAL FILM GROUP INC of 9107
Wilshire Blvd,
Beverly Hills, California,
USA
3. The Producer GERALD GREEN c/o Total Film
Group Inc of
9107 Wilshire Blvd, Beverly
Hills, California USA
RECITALS:
(A) The Production Company proposes to produce the Film intended primarily
for theatrical exploitation throughout the world.
(B) The Loan Out Company is entitled to the exclusive services of the
Producer.
(C) The Production Company wishes to engage the Loan Out Company to provide
services of the Producer as producer of the Film on the terms and
conditions set out in this Agreement.
1 Interpretation
1.1 In this Agreement:
Act means the Copyright Designs and
Patents Act 1988
the Film means a film and all sound
recordings made in connection with
and/or incorporated in the
soundtrack to such film, which is
tentatively entitled "New Swiss
Family Robinson" based on a
Screenplay by Stewart Raffill
1.2 In this Agreement the expression "film" shall bear the meaning ascribed
to it in s 5(I)(b) of the Act.
2 Engagement
2.1 The Production Company engages the Loan Out Company to provide the
services of the Producer and the Loan Out Company undertakes to provide
the services of the Producer to the Production Company as principal
producer of the Film.
<PAGE>
2.2 The engagement shall commence on 21 July 1997 and shall continue until
the earlier of:
2.2.1 the completion of the Film in all respects ready for delivery to the
principal distributor of the Film; or
2.2.2 termination of the services of the Producer supplied by the Loan Out
Company pursuant to the provisions of this Agreement.
2.3 The services to be rendered by the Producer and supplied by the Loan
Out Company shall be as more particularly set out in Schedule 1
("Services").
3. Compensation
3.1 Subject to the provisions of this Agreement and the observance and
performance by the Producer of all his obligations under it, the
Production Company shall pay to the Loan Out Company for all services
rendered by the Producer in respect of the Film and for all rights in
the products of such services the sum of US$300,000 (three hundred
thousand United States dollars) payable as a deferment in first
position pro rata and pair passe with other deferrals providing
services and facilities from 100% of all sums actually received by US
from the exploitation of the Film throughout the world after repayment
of loan finance p1w interest made available by the principal financiers
of the Film.
3.2 The Production Company is expressly authorized by the Producer to
deduct and withhold from all sums due to the Producer all deductions
(if any) in accordance with local laws and regulations from time to
time applicable.
3.3 All sums payable under this clause 3 shall be paid to the Loan Out
Company whose receipt shall be a full and sufficient discharge to the
Production Company.
3.4 The Loan Out Company and the Producer acknowledges that the
remuneration provided under this clause 3 shall be inclusive of all
guild and union minimum basic fees overtime and all residual repeat and
payments direct or indirect employment and like taxes and state
governmental and/or social security contributions.
4. Expenses
4.1 The Production Company will provide the Producer with first class
return air fare from Los Angeles to Puerto Rico for the purpose of
providing the Services and it is acknowledged that more than one return
trip may be required.
4.2.1 While the Producer is in Puerto Rico providing the Services on
location, the Production Company shall provide him with first class
living accommodation, a rental car and per diem of $150.
<PAGE>
5 Rights/consents
5.1 The Producer and the Loan Out Company severally assign with full title
guarantee to the Production Company the entire copyright whether
vested, contingent or future and all other rights of whatever nature
in, and to the product of, the Services whether now known or in the
future created to which the Producer is now or may at any time after
the date of this Agreement be entitled by virtue of, or pursuant to,
any of the laws in force in any part of the world to hold to the
Production Company, its successors, assigns and licenses absolutely for
the whole period of such rights for the time being capable of being
assigned together with all renewals reversions and extensions
throughout the world.
5.2 The Producer irrevocably and unconditionally grants and confirms to the
Production Company its successors, assigns and licensees in respect of
the Services and the product of the Services, all consents required
pursuant to the Copyright Designs and Patents Act 1983 Part II and all
other laws now or in the future in force in any part of the world which
may be required in respect of the Services for the exploitation by the
Production Company, its successors, assigns and licensees of the
Services and the product of the Services whether or not by means of the
Film in any and all media by any and all means now known or developed
in the future for the full duration of the rights acquired by the
Company pursuant to this Agreement pursuant to the laws in force in any
part of the world.
5.3 The Producer irrevocably and unconditionally waives all rights relating
to the Services or the Film to which the Producer is now or may in the
future be entitled pursuant to the provisions of the Copyright Designs
and Patents Act 1988 Sections 70,80,84 and 85 and any other moral
rights to which the Producer may be entitled under any legislation now
existing or in future enacted in any past of the world.
5.4 The Producer acknowledges that all rights of copyright, privacy,
publicity and all other rights in and to the Film and any photographs,
films and sound recordings made by the Production Company, its
successors, assigns and licensees in connection with the Film featuring
the Producer and all other products of his Services belong to the
Production Company absolutely and that the Production Company shall
have the right to exploit any and all of the foregoing in any and all
media by any and all manner or means throughout the world for the full
period of copyright together with the right to authorize others so to
do.
5.5 Without prejudice to the generality of the rights assigned by clauses
5.1. 5.2, 5.3 and 5.4 the Production Company shall have the right:
5.5.1 to make produce sell publicly exhibit lease license hire market
publicize distribute exhibit diffuse broadcast adapt and reproduce
mechanically graphically electronically or otherwise howsoever by any
manner and means (whether now known or hereafter devised) the Film and
all products of the Services throughout the universe;
<PAGE>
5.5.2 to permit any third party to exercise any of such rights in the sole
discretion of the Production Company;
5.5.3 to rent copies of the Film and the Producer confirms that the
consideration under clause 3 comprises equitable remuneration for the
rental right of the Producer.
5.6 The Producer, having acknowledged his understanding of the needs of the
film production by granting the Production Company the unlimited rights
to make changes in the Film and other products of the Services as
elsewhere provided herein, hereby expressly irrevocably and
unconditionally waives the right provided for by the Act, or by the
laws of any other jurisdiction, to object to derogatory treatment of
the Film or other products of the Services.
5.7 The Producer expressly unconditionally and irrevocably waives the right
to be identified as Producer of the Film pursuant to the Act or the
laws of any other jurisdiction but without prejudice to clause 7 of
this Agreement.
6. Loan Out Company's warranties
6.1 The Loan Out Company hereby warrants undertakes and agrees that:
6.1.1 the Loan Out Company and the Producer is free to enter into this
Agreement and grant to the Company all rights and consents grated in it
and has not entered, and will not enter into, any arrangement which may
conflict with it.
6.1.2 the Services and the products of the Services shall be original with
the Producer and shall not be obscene or defamatory or infringe on the
copyright common law right or any other right of any person;
6.1.3 the Loan Out Company will ensure that the Producer will render the
Services to the best of his skill and ability in a professional and
workmanlike manner in willing co-operation with others in the manner
required by the Production Company and in accordance with the
production schedule established by the Production Company. In
particular, without prejudice to the generality of the foregoing, the
Producer shall observe the times set out in the call sheets and the
Producer shall do everything in such capacity to ensure performances
from an artists engaged for the Film are of first clear quality
suitable for international exploitation;
6.1.4 the Loan Out Company shall not without the consent in writing of the
Production Company issue any publicity relating to or otherwise reveal
or make public any financial or other confidential information in
connection with the Film or the terms of this Agreement or the business
of the Production Company and will not knowingly commit any act which
might prejudice or damage the reputation of the Production Company or
inhibit the successful exploitation of the Film;
<PAGE>
6.1.5 The Producer is in a good state of health and in order to enable the
Company to effect insurance on the Producer against loss arising from
the inability of the Producer to perform the Service such insurance
shall be on normal terms with no exclusions or unusual deductibles;
6.1.6 the Producer shall not at any time during this Agreement or any period
of his engagement participate in any hazardous or dangerous pursuits or
voluntarily take any risks which might prevent the Producer from being
ready and able at all times to perform the Services and in particular
(but not by way of limitation) shall travel by air only as a passenger
on a regular scheduled flight and shall not take part in motor racing,
hang-gliding or any form of sport involving unusual risk of death or
personal injury and shall observe all requirements of insurers;
6.1.7 the Production Company shall be entitled to use and authorize others to
use the name likeness photograph and biography of the Producer in
connection with the Film but shall not without the Producer's prior
consent represent the Producer as endorsing any commercial product
other then the Film or sound track albums and the like associated
therewith;
6.1.8 the Producer shall at all times throughout his engagement keep the
Production Company informed of his whereabouts and telephone number;
6.1.9 the Producer will not on behalf of the Production Company enter into
any Commitment contract or arrangement with any person or engage any
person without the Production Company's prior written consent;
6.1.10 the Producer shall willingly co-operate with the Production Company and
shall repeat such services rendered by the Producer as when and where
requested by the Production Company and follow all reasonable
directions and instructions given by the Production Company,
6.1.11 the Producer shall attend at such locations and times as are reasonably
required by the Production Company from time to time;
6.1.12 the Producer shall comply with and observe all union rules and
regulations and all the final agreements rules and regulations relating
to safety fire prevention or general administration in force at any
place in which the Producer shall be required by the Production Company
to render any services;
6.1.13 the Producer now is and will remain at all times when rendering
services a Mexican subject ordinarily resident in the USA;
6.1.14 upon the expiry or earlier termination of the Producer's engagement the
Producer will deliver up to the Production Company all scripts
photographs and other literary or dramatic properties all film
materials and all other properties documents and things,
<PAGE>
whatsoever which the Producer may have in the Producer's possession or
under the Producer's control relating to the Film;
6.1.15 the Producer shall at the request of the Production Company render
Services in connection with the promotion and advertising of the Film
without further remuneration except reimbursement of expenses in
accordance with clause 4.1. The Producer shall attend press conferences
and make non-commercial appearances including broadcasting by radio and
television and the like all of which services if required outside the
period of his engagement shall be subject to the Producer's other
professional engagements;
6.1.16 the Loan Out Company shall indemnify the Production Company and keep it
fully indemnified at all times against all actions, proceedings, costs,
claims, awards, damages, expenses (including without limitation legal
expenses) and liabilities arising directly or indirectly from any
breach of the Producer's undertakings obligations or warranties under
this Agreement.
7 Credit
7.1 Subject to the provisions contained in this clause 7 and the observance
and performance by the Loan Out Company of its obligation and of all
the Producer's obligations the Production Company agrees to accord
credit to the Producer on all positive copies of the Film made by it or
under its control as set out in Schedule 2. The Production Company also
agrees to accord the Producer credit as set out in Schedule 2 in major
paid advertising relating to the Film issued by the Production Company.
7.2 The Production Company's obligation to accord credit in advertisements
shall apply only to the billing portion (excluding artwork and
advertising copy). The Production Company shall not be obliged to
accord credit to the Producer in;
7.2.1 teaser advertising or publicity;
7.2.2 advertising relating primarily to the cast, Producer or other personnel
connected with the production of the Film;
7.2.3 trailers or radio or television group or list advertising or
institution or other publicity;
7.2.4 publicity not primarily relating to the Film;
7.2.5 advertising in narrative form;
7.2.6 so-called 24 sheets 16 sheets 7 sheets 30 x 40, or 40 x 60s
7.2.7 newspaper or other periodical advertising occupying 8 column inches or
less;
7.2.8 by-products commercial tie-ups or merchandising
<PAGE>
7.2.9 in connection with any television exploitation of the Film or any
exploitation publication or fictionalization of the story screenplay or
other literary dramatic or musical material upon which the Film is
based;
7.3 In according credit in paid advertising if the title of the Film is
used more than once ie a so-called 'regular' use and a so-called
'artwork' use (such as for example the weaving oldie title as part of
the background of the advertising or a display use or a fanciful use)
any reference in this Agreement including any Schedule to the title of
the film shall be to the so-called regular use of the title as
distinguished from the 'artwork' use of the title.
7.4 No casual or inadvertent failure by the Production Company or any third
party to accord any credit or comply with the provisions of this clause
7 or Schedule 2 shall constitute a breach by the Production Company of
its obligations. In the event of any breach by the Production Company
of its obligations under this clause 7 the rights and remedies of the
Producer (if any) shall be limited to the recovery of damages in an
action at law and in no event shall the producer be entitled by reason
of such breach to terminate this Agreement or seek to enjoin or
restrain the distribution or exploitation of the Film. Notwithstanding
the foregoing the Production Company agrees that if the Producer shall
give written notice to the Production Company of any breach of the
provisions of this clause 7 the Production Company will use its
reasonable endeavours to procure the remedying of such breach as
regards the future. The Production Company shall not be required to
incur expense or liability in so doing save such expense as may be
inherent in giving notice to distributors and others.
8 Production Company's liability
8.1 The Production Company shall not be liable for:
8.1.1 any loss of or damage to any clothing or other personal property of the
Producer whether such loss or damage is caused by negligence or
otherwise howsoever except to the extent that the Production Company
receives compensation from an insurance company or other third party;
8.1.2 the death or injury of the Producer caused in any way during the
engagement under this Agreement except so far as otherwise required by
law and to the extent that the Production Company may receive
compensation from an insurance company or other third party;
8.1.3 any representation made to or for the Producer by any employee or agent
of the Production Company and in particular the Production Company
shall not be bound by any prior condition or purported agreement
inconsistent with this Agreement.
9 Waiver
<PAGE>
9.1 No waiver by the Production Company of any failure by the Loan Out
Company to observe any covenant or condition of this Agreement shall be
deemed to be a waiver of any preceding or succeeding failure or of any
other covenant or condition nor shall it be deemed a continuing waiver.
The rights and remedies provided for in this Agreement are cumulative
and no one of them shall be deemed to be exclusive of the others or of
any rights or remedies allowed by law. The rights granted to the
Production Company are irrevocable and shall not revert to the Loan Out
Company of the Producer under any circumstances whatsoever. In the
event that the Production company terminates or cancels (or purports to
terminate or cancel) this Agreement or any other agreement entered into
by and between the Production Company and the Producer (and even if
such cancellation or termination or purported termination or
cancellation is ultimately determined by a court to have been without
proper or legal cause or ultimately determined by such a court that the
Production Company committed any material breach, of any such
agreement) the damage (if any) caused to the Producer thereby is not
irreparable or sufficient to entitle the Producer to injunctive or
other equitable relief and the Producer shall not have any right to
terminate this Agreement or any such other agreement or any of the
Production Company's rights hereunder.
10 Insurance
The Production Company may secure in its own name or otherwise at its
own expense life accident health cast pre-production and other
insurance covering the Producer independently or together with others
and the Producer shall not have any right title or interest in or to
such insurance. The Producer shall assist the Production Company to
procure such insurance and shall in timely fashion submit to such
customary medical and other examinations and sign such applications and
other instruments in writing as may be required by the insurance
company involved.
11. Conditions precedent
As a condition precedent to any and all liability of the Production
Company the Producer shall at the Loan Out Company's own expense apply
for and assist the Production Company in applying for and do all such
things as may be necessary in support of any application for the
Producer's membership of any trade union labor or professional
organization or guild and/or for passports visas work permits or other
matters necessary to enable the Production Company to make use of the
Producer's services. If as a result of such application being refused
revoked or cancelled otherwise than by reason of the Loan Out Company's
default the Production Company shall be unable to make use of the
Producer's services this Agreement shall he deemed null and void and
without effect and without liability whatsoever on the parties save
that the Producer shall repay to the Production Company any sums
previously paid to him pursuant to clause 3.
12 No obligation
<PAGE>
Nothing contained in this Agreement shall constitute an undertaking by
the Production Company to produce the Film or to utilize the Services
in connection with the Film or to incorporate the products of the
services in the Film. The Production Company shall not be required to
commence or continue the production release exhibition or other
exploitation of the Film and no compensation shall be payable to the
Producer for any alleged loss of publicity or opportunity to enhance
the Products reputation.
13 Pay/Play
If the Production Company in its sole discretion considers it desirable
it may, whether having commenced or not to use the Services, decide
that such services or any part thereof are not satisfactory and it may
substitute another Producer in his place. The Producer hereby releases
the Production Company in that event from any further obligation to
make any use of the Producer's services or any part thereof but unless
the provisions of clauses 14 and 15 apply the Producer shall remain
entitled to payment pursuant to clause 3.
14. Suspension Termination
14.1 The Production Company shall be entitled by oral notice to the Loan Out
Company given at any time during the subsistence of any of the
following events (as a courtesy to be confirmed in writing) to suspend
the engagement of the Producer's services for the remainder of the
duration of the event and any time reasonably required by the
Production Company to resume the use of such services and to extend the
term of the engagement of the Producer's services by the period of such
suspension namely:
14.1.1 the Producer is prevented from performing services owing to any injury
or illness or any mental or physical disability for 5 consecutive days
or an aggregate of 14 days;
14.1.2 the Producer is unable in the opinion of the Production Company to
perform or continue to perform his services;
14.1.3 the Producer fails or refuses to perform or observe any of his services
and obligations in accordance with the terms of this Agreement or is in
breach of any of the warranties and agreements on the part of the
Producer contained in it;
14.1.4 the Producer shall have failed to submit pursuant to clause 10 to
medical examination or shall make untrue or inaccurate replies or
statements for the purpose of insurance or the Production Company is
unable to effect insurance on the Producer at normal rates on normal
terms;
14.1.5 the development pro-production production or post-production of the
Film is prevented or interrupted by reason of any cause beyond the
control of the Production Company such as (but not by way of
limitation) war, civil disturbance, order of a government ministry or
department or public authority, fire, natural catastrophe, labor
dispute, withdrawal of
<PAGE>
labor, breakdown or interruption of power supplies or other services or
transport (public or otherwise) or death or illness of a principal
artiste or a senior technician.
14.2 Whether or not this engagement has been suspended if for 7 days (or
more) consecutive or in the aggregate there subsists any event provided
for in clauses 14.1.1, 14.1.2 or 14.1.5 or at any time without prior
suspension during the subsistence of the event set out in clause 14.1.3
or in the events provided for in clause 14.1.4 then in any such case
the Production Company shall be entitled by written notice to the Loan
Out Company to terminate this engagement but without prejudice to its
rights accrued up to the date of termination or the commencement of
suspension prior to the termination (as the case may be).
14.3 If and when this engagement has been suspended on account of any event
provided for in clause 14.1.5 and this suspension has continued for 8
weeks or more, the Loan Out Company shall be entitled by notice in
writing to the Production Company to terminate this engagement except
that if within 7 days of the receipt of such notice the Production
Company serves a counter notice upon the Loan Out Company that it
wishes to resume the engagement of the Producers services the
Producer's notice shall be cancelled and of no further effect and the
engagement of the Producer's services shall be resumed at the date
specified in the counter notice.
14.4 Any claim which either party shall have against the other for or in
respect of any breach non-observance or non-performance or repudiation
of any of the provisions of this Agreement occurring prior to such
termination or out of which such termination shall have arisen shall
not be affected or prejudiced.
15 Effect of Suspension/Termination
15.1 In the event of suspension of the engagement pursuant to clause 14:
15.1.1 while such suspension lasts payment of remuneration under clause 3 will
cease to fail due and upon resumption of the engagement the date for
payment of such remuneration shall be postponed by a period equal to
the duration of such suspension;
15.1.2 during the suspension Loan Out Company and the Producer shall continue
to comply with all its obligations not affected by such suspension and
the Loan Out Company shall not without the prior consent of the
Production Company agree to provide the services of the Producer to any
other person;
15.1.3 the Production Company will remain entitled to all rights hereby
granted or assigned to it.
15.2 In the event of termination of this Agreement whether or not pursuant
to clause 14:
<PAGE>
15.2.1 the Loan Out Company shall be entitled to the remuneration due under
clause 3 up to the date of the event giving rise to such termination
(or the beginning of any suspension preceding such termination);
15.2.2 the Production Company will remain entitled to all rights hereby
granted or assigned to it.
15.3 The Loan Out Company acknowledges that the services of the Producer
hereunder are of a unique character, the loss of which cannot be
reasonably or adequately compensated in damages in an action at law,
and by mason Thereof the Producer agrees that the Production Company
shall be entitled to injunctive and other equitable relief to prevent
or curtail any breach of this Agreement by the Producer.
16 Conflict
Nothing contained in this Agreement shall be construed so as to require
the commission of any act contrary to law and wherever there is any
conflict between my provision of this Agreement and any statute law
ordinance or regulation contrary to which the parties have no legal
right to contact then the latter shall prevail but in such event the
provisions of this Agreement so affected shall be curtailed and limited
only to the extent necessary to bring them within the legal
requirements.
17 Assignment
The Production Company shall not transfer or assign this Agreement or
all or any part of the Production Company's rights under it without the
approval in writing of the Loan Out Company.
18. Notices
18.1 All communications between the parties with respect to any of the
provisions of this Agreement shall be delivered to the parties in
person or sent to the addresses set out in this Agreement or to such
other addresses as may be notified by the parties for the purpose of
this clause 18 by prepaid registered or recorded delivery post or by
facsimile transmission or other electronic means of written
communication with immediate confirmation by letter.
18.2 Communications which are sent or dispatched as set out below shall be
deemed to have been received by the addressee at the times stated:
18.2.1 by hand - the date of dispatch;
182.2 by post - two business days after dispatch;
18.2.3 by cable - one business day after dispatch;
<PAGE>
18.2.4 by facsimile transmission or other electronic means of written
communication on dispatch.
18.3 proving service by post it shall only be necessary to prove that the
communication was contained in an envelope which was duly addressed
stamped and posted by registered or recorded delivery post. In proving
service by cable telex facsimile transmission or other electronic means
of written communication proof of service will be accepted on proof of
posting of the confirmatory letter.
19. Entire agreement
This Agreement (including any attached exhibits) contains the full and
complete understanding between the parties and supersedes all prior
agreements and understandings whether written or oral pertaining
thereto and cannot be modified except by a written instrument signed by
the Loan Out Company, the Producer and the Production Company. The Loan
Out Company acknowledges that no representation or promise not
expressly contained in this Agreement has been made by the Production
Company or any of its agents employees or representatives.
20 No partnership/employment
Nothing contained in this Agreement shall or shall be deemed to
constitute a partnership or a contract of employment between the
parties.
21. Law
This Agreement shall be construed in accordance with and governed by
the laws of England whose courts shall be the courts of competent
jurisdiction.
AS WITNESS this Agreement has been signed by the duly authorized representatives
of the parties the day and year first before written
SIGNED by ANDREW SOMPER /s/ Andrew Somper
for and on behalf of
TOTAL FILMS UK LIMITED
SIGNED by for and on behalf of TOTAL FILM GROUP INC. /s/ Gerald Green
SIGNED by GERALD GREEN /s/ Gerald Green
<PAGE>
Schedule 1
Producer's Services ("Services")
1 The Services shall be rendered to the Production Company on an
exclusive basis in accordance with clause 2 of the Agreement and
thereafter as and when required by the Production Company subject to
the Producer's other professional commitments.
2 Subject to the provisions of this Agreement the Loan Out Company will
ensure that the Producer will:
(a) perform all services usually rendered by a Producer of first
class films, including all pre-production and post-production
services, fully and completely and to the best of the
Producer's ability in a professional and workmanlike manner,
in full co-operation with others and in accordance with the
Production Company's directions at such location or locations
and at such times as the Production Company shall direct;
(b) render all services required under this Agreement strictly in
accordance with the production schedule established by the
Production Company in consultation with the Producer or as the
Production Company may otherwise direct.
3 Without limitation of the foregoing the Producer shall to such extent
as the Production Company may require:
(a) consult with and advise the persons responsible for the
writing of all treatments scripts and other story material
upon which the Film is based;
(b) upon completion of the final shooting script for the Film
co-operate with the Production Company in the preparation of a
proper detailed production schedule and budget for the
production of the Film;
(c) attend all pro-production preparation script schedule and
budget conferences tests rehearsals and like matters and
assist in the selection of locations cast and technicians
prior to the principal photography of the Film;
(d) upon completion of the photography and recording of the Film
supervise in conjunction with the Director the cutting titling
mid editing post-synchronization scoring dubbing and
completion thereof in order to make due and proper delivery of
the Film in a first class condition to the Production
Company's distributors;
(e) appear at such times and such places as the Production Company
may designate from time to time in connection with the
principal photography of the Film and for the purposes of
making promotional photographs, consulting with
representatives of television companies recording studios
processing laboratories completion
<PAGE>
guarantors and other organizations, and any other purpose
reasonably related to the engagement provided for in this
Agreement.
Schedule 2
Credit
In the main titles on a separate card the following wording shall appear
immediately prior to the credit accorded to the director of the Film and 100%
the size of the credit accorded the Director:
Produced by Gerald Green
In relation to paid to advertising, credit shall be accorded in all paid
advertisements subject to clause 7 of this Agreement,
It is agreed that at the option of the Loan Out Company it may elect to
substitute the above credit with:
Executive Producer Gerald Green
<PAGE>
EXHIBIT 6.32
PRODUCER AGREEMENT
"CHICK FLICK" / PATRICIA GREEN
The following are the terms and conditions of the agreement ("Agreement")
dated as of September 29, 1997 between TOTAL MEDIA CORPORATION ("Producer")
and PATRICIA GREEN ("Artist") (Social Security Number 604 68 5739) in
connection with a proposed motion picture project tentatively entitled "CHICK
FLICK" ("Picture").
1. CONDITIONS PRECEDENTS: Producer's obligations under this Agreement are
conditioned upon the following "Conditions Precedents": a/ Producer's
receipt of copies of this Agreement fully executed by Artist; and b/
Artist providing Producer with all documents which may be required by
any governmental agency or otherwise for Artist to render services
hereunder.
2. EMPLOYMENT: Artist agrees to render services as a producer in
connection with the possible production of the Picture.
3. ABANDONMENT: Producer shall have the right to abandon the Picture at
any time without any further obligation to Artist.
4. SERVICES / EXCLUSIVITY: If Producer elects to proceed with the
production of the Picture and subject to Paragraph 10 below, then
Artist shall personally render all services customarily rendered by
individual producers in the motion picture industry in connection with
the pre-production, production and post-production of the Picture and
as otherwise required by Producer. The term of Artist's services shall
commence on the date hereof and shall continue until the full and
satisfactory completion of all services to be rendered by Artist
hereunder or the earlier termination hereof, if any, by Producer (as
herein provided). Artist shall render services hereunder on an
non-exclusive basis - but first priority, in person basis - during
development until 8 weeks prior to the Start Date and on an exclusive
basis during the "Pre-Production Period" (i.e., the period commencing 8
weeks prior to the schedule date for commencement of principal
photography of the Picture ("Start Date") and continuing until four (4)
weeks after the conclusion of principal photography of the Picture;
thereafter Artist's services shall be non-exclusive, but rendered on a
first priority, regular in-person basis until Delivery (as defined in
Paragraph 8 below) of the completed Picture (including required
television and airline coverage) which shall be delivered by Artist in
connection with the post-production schedule approved by Producer. Time
is of the essence in connection with all producing services and
Delivery of the Picture hereunder.
5. APPROVALS AND CONTROLS:
<PAGE>
a. Producer shall retain all approvals and controls, including
without limitation, the right to designate the production
manager, estimator and location auditor, and the right to
initiate at any time and in any respect in connection with the
Picture.
b. Artist shall render services at such places Producer will
designate and at the times required by Producer, including
Saturdays, Sundays, nights and holidays. Artist shall render
Artist's services hereunder and devote Artist's best talents,
efforts and abilities in accordance with the instructions,
control and directions of Producer including those of
creative, artistic or dramatic taste and judgment). Artist
shall meet or collaborate with persons designated by Producer
at such time and place as Producer may designate.
6. COMPENSATION: Provided that the Picture is produced and released as a
feature length theatrical motion picture, and provided Artist is not in
breach or default of any representation warranty or obligation
hereunder, Mist shall be entitled to the following:
Net Receipts: An amount equal to 100% of the Net Receipts, if any, of the
Picture until Artist receives a sum of $25,000. "Net Receipts" shall be
defined, computed, paid and accounted for in accordance with Producer's
standard definition of Net Receipts, provided such definition defines Net
Receipts as the gross receipts received by or credited to the account of
Producer from all sources of exploitation of the Picture in excess of the
aggregate of: (i) the final production cost of the Picture (including,
without limitation, the spent portion of the contingency, third party legal
fees and any deferments paid by Producer in connection with the Picture);
(ii) actual interest and finance costs paid by Producer with respect to the
cost of the production; and (iii) 10% overhead. Producer makes no
representation that the Picture will generate, any, or any particular amount
of, Net Receipts.
Said compensation is an all-inclusive flat fee and no additional compensation
shall be payable by reason of overtime, weekend work, holidays, etc. No
additional payments shall be required for services rendered at night or on
Saturdays, Sundays or holidays or for meal delays, hazardous work, violation
of rest periods, or otherwise.
7. CREDIT: If the Picture is produced and if Artist fully performs all
services and materials obligations as producer of the Picture, then
subject to Producer's standard exclusions and exceptions (including
artwork title exceptions), Producer shall accord Artist the following
credit:
a. On screen: On a card to be shared only with other producer(s),
in the main titles (i.e., where the individual credits for the
principal cast and individual Producer(s) appear, whether
located at the beginning or the end of the Picture) on all
positive prints of the Picture in a size of type not less than
that used for credit to any other individual in connection
with the Picture.
b. In paid advertising: In the billing block portion of any paid
advertising relating primarily to the Picture issued by, or
under the control of, Producer ("Paid Ads")
<PAGE>
in a size of type not less prominent than that used for credit
to any other individual in connection with the Picture.
c. Exclusions and exceptions: Producer's Paid Ad credit
obligations shall not apply to the following ("Excluded Ads"):
group, list, institutional or so-called teaser advertising;
announcement advertising; advertising relating primarily to
the source material upon which the Picture is based, or to the
author, any member of the cast, the Producer(s), Artist(s) or
any other personnel involved with the production of the
Picture; so-called "award" or "congratulatory" advertisements,
including advertisements or announcements relating to
consideration or nomination for an award; trailers (including
promotional films) or other advertising; screen, radio or
television advertising; advertising in narrative form;
advertising for film festivals, film markets and the like;
advertising1/2page (or the equivalent in SAU's) in size or
less; outdoor advertising (including, but no limited to,
24-sheets); theater display advertising; advertising in which
no credit is accorded other than credit to one or two stars of
the Picture and/or to Producer and/or to any other company
financing or distributing the Picture. The following items
shall not be considered Paid Ads or Excluded Ads for any
purposes hereunder: videocassettes, videodiscs and other home
video devices and the covers, packages, containers or jackets
therefor; publicity or promotional items and materials;
advertising relating to subsidiary or ancillary rights in the
Picture (including, but not limited to, novelizations,
screenplays or other publications, products, merchandising,
music publishing or soundtrack recordings); voice-overs;
advertising, publicity and exploitation relating to
by-products or commercial tie-ins; and other advertising not
relating primarily to the Picture; or other customary excluded
advertising of any distributor(s) of the Picture.
d. General terms: All other matters with respect to Artist's
credit shall be determined by Producer in its sole discretion.
Any reference to the "title" of the Picture shall be deemed to
mean the "regular" title unless such reference is specifically
made to the "artwork" title. Producer shall inform its
licensees of the above credit information. The casual or
inadvertent failure by Producer or any failure by a third
party to comply with the credit provisions of this Agreement
shall not be deemed to be a breach by Producer. Producer
agrees upon receipt of written notice from Artist of a failure
to comply with the credit provisions of this Agreement to take
such steps as are reasonable and practicable to cure such
failure on a prospective basis as to future prints and
advertisements, as applicable, which are distributed or issued
by Producer or under the control of Producer.
8. DELIVERY/LENGTH/RATING/COVER SHOTS: Artist shall deliver the completed
Picture to Producer within a post-production schedule and delivery date
approved by Producer, and in this regard time is of the essence.
"Delivery" shall be deemed to have occurred only upon Artist's delivery
to Producer of an answer print which conforms with all of Producer's
delivery requirements, including, without limitation, the following
requirements; provided, however, that in the event that the
requirements for the delivery,
<PAGE>
length, rating and cover shots set forth in the agreement for the
director of the Picture are less restrictive than Artist's
requirements, then such less restrictive delivery, length, rating and
cover shots requirements shall apply:
a. The Picture shall have a running time, including main and end
titles, of not less than 80 minutes and no more than 110
minutes, shall be photographed on 35mm film, in the English
language and in color.
b. The Picture shall adhere to the existing producer-approved
shooting script as of the commencement of principal
photography of the Picture, and Artist shall not make any
changes therein without the prior written approval of
Producer, excepting only minor changes required by the
exigencies of production.
c. The Picture shall qualify for an MPAA rating no more
restrictive than "R".
d. Artists shall photograph and furnish to Producer "cover shots"
and alternative scenes and dialogue which can be incorporated
into the Picture to render it suitable for exhibition on
United States network primetime television and Artist shall
deliver to Producer a television version which shall be in
accordance with applicable network "Standard and Practices"
regulations. Such cover shots and alternate scenes and
dialogue shall be such that same can be integrated into such
primetime network version of the Picture without materially
changing or impairing the continuity of the storyline of the
Picture. Producer shall have the absolute right to use such
cover shots and/or cut the Picture (or such television
version) in order to meet broadcast requirements.
e. Artist will comply with Producer's budget and business
practices.
9. NAME AND LIKENESS: Artist also hereby grants to Producer the perpetual
right to use and display Artist's name and/or likeness and/or
biographical material for advertising, publicizing, promoting and
exploiting, in whole or in part, the Picture, and all subsidiary and
ancillary rights of any nature relating to the Picture, or Artist's
services hereunder, in any and all media now known or hereafter
devised, including, but not limited to, featurettes, promotional films
and/or commercial tie-ins. The foregoing shall not be construed as
granting Producer the right to use Artist's name or likeness in
connection with any merchandising items, except that Producer may use
Artist's name as contained in the billing block of the Picture in
connection with such uses. Artist shall have the right to furnish
Producer with a written biography of Artist. Provided Artist delivers
such material to Producer within 5 business days after Producer's
request therefor, Producer shall use good faith efforts to utilize
information contained therein in connection with the advertisement,
publicity, promotion and/or exploitation of the Picture.
10. UTILIZATION OF SERVICES / "PAY OR PLAY":
<PAGE>
a. Producer's rights: Producer is not obligated to produce,
distribute and/or exploit the Picture, or, if commenced, to
continue the production, distribution or exploitation of the
Picture in any territory; provided that in no event shall the
foregoing limit Producer's obligation to pay sums accrued and
unpaid to Artist hereunder, including pursuant to any
"pay-or-play" obligation hereunder. Regardless of whether or
not Producer elects to produce, distribute and/or exploit the
Picture (or to commence same) Producer is not obligated to use
the services in whole or in part of Artist hereunder.
b. "Pay or Play": Artist shall be deemed to be "pay or play" for
purposes of the preceding section upon notice in writing to
Artist of Producer's election to make Artist "Pay or Play" or
when all of the following have occurred:
(i) Producer has approved, in its sole discretion, the
final shooting script, budget and production and
post-production schedules for the Picture; and
(ii) All principal cast members of the Picture have been
made unconditionally "pay or play" for their fixed
compensation; and
(iii) Producer's receipt of a signed agreement (in form and
substance satisfactory to Producer) with the
financier by which such financier unconditionally
agrees to finance the Picture; and
(iv) Producer's receipt of a signed agreement (in form and
substance satisfactory to Producer) with the
insurance company by which such company agrees to
insure the Picture (including errors and omissions
insurance).
11. RESULTS AND PROCEEDS / DROIT MORAL:
a. Producer shall be the sole and exclusive owner, in perpetuity
and throughout the universe, of (i) the results and proceeds
of Artist's services hereunder which shall be a "work made for
hire" for Producer under the U.S. Copyright Law, specially
ordered or commissioned for use as a part of a motion picture
or other audio- visual work and/or prepared within the scope
of Artist's employment; (ii) all right, title and interest in
and to the Picture and the material upon which it is based,
including but not limited to, the copyright in and to the
Picture and any renewals and extensions of such copyright;
(iii) all distribution, exhibition and exploitation rights in
the Picture and the results and proceeds of Artist's services
hereunder in any and all media, whether now known or hereafter
devised; (iv) any and all allied, ancillary and subsidiary
rights in and to the Picture; and (v) all other tangible and
intangible rights, properties, and proceeds of every kind and
nature in and to the Picture and in each of the foregoing, in
every stage of development, production and completion. Artist
hereby specifically acknowledges that the compensation payable
hereunder by Producer includes and is full and adequate
compensation in
<PAGE>
respect to any right to which Artist may now be or shall
hereafter become entitled to (including Artist's rental and
lending rights to the Picture and other derived products). If
under the applicable law of any territory or jurisdiction, any
additional or different form of compensation is required with
respect to rental and lending rights, Producer and Artist
agree that the grant of said rights shall nevertheless be
fully effective; provided, however, that Producer shall pay
Artist the minimum compensation required, if any, under such
applicable law or, if required by such law, the parties shall
in good faith negotiate the amount hereof in accordance with
the applicable law, and further provided that any sums paid to
Artist pursuant to this Agreement, including, without
limitation, the Cash Compensation, any payments in excess of
the minimum required under any applicable collective
bargaining agreement and any payments in connection with the
exploitation of the Picture in supplemental and ancillary
markets and media shall be credited toward the amount required
to be paid to Artist under such law to the maximum extent
allowed. Without limiting the generality of the foregoing, in
the event the results and proceeds of Artist's services
hereunder are not deemed to be a "work-made-for-hire" for
Producer, Artist hereby irrevocably and exclusively grants and
assigns all right, title and interest in and to such results
and proceeds to Producer, including all rights of every kind
and nature therein and thereto, throughout the universe, in
perpetuity, in any and all media whether now known or
hereafter devised, and all copyrights, renewals rights and
extensions thereof. Artist hereby waives any so-called "moral
rights of author" or "droit moral" rights Artist may have in
connection with the Picture.
b. No termination of this Agreement shall affect the rights
granted hereunder by Artist, and the representations and
warranties of Artist shall survive such termination.
12. PUBLICITY LIMITATIONS: Artist shall not by means of press, publicity or
advertising agencies employed or paid by Artist, or otherwise,
authorize, circulate, publish or otherwise disseminate any news stories
or articles or other publicity of any kind, containing Artist's name
and relating directly or indirectly to Artist's engagement, the subject
matter of this Agreement, the Picture, or the services to be rendered
by Artist or others in connection with the Picture, unless the same are
first approved in writing by Producer. Artist may, however, disseminate
publicity which contains Artist's name and incidentally identifies the
Picture and the services Artist rendered thereon so long as such
publicity is not an advertisement for the Picture and does not contain
any material which is derogatory in nature to Producer, the Picture or
any element thereof or individual(s) or entity(ies) rendering services
in connection therewith.
13. INJUNCTIVE RELIEF: Artist acknowledges that the services to be rendered
by Artist hereunder are of a special, unique, unusual, extraordinary
and intellectual character, making them difficult to replace and giving
them a peculiar value, the loss of which cannot be reasonably
compensated in damages in an action of law; that if Artist breach any
provision of this Agreement, Producer will be caused irreparable
damage; and that,
<PAGE>
therefore, Producer shall be entitled, as a matter of right, at its
election, to enforce this Agreement in all of the provisions hereof by
injunction or other equitable relief.
14. CONTINGENCIES:
a. Suspension: In the event of Force Majeure (e.g., interruption
of or material interference with the preparation,
commencement, production, completion, or distribution of the
Picture or of a substantial number of motion pictures produced
and/or proposed to be produced by Producer by any cause or
occurrence beyond the control of Producer, including fire,
flood, epidemic, earthquake, explosion, accident, riot, war -
declared or undeclared -, blockade, embargo, act of public
enemy, civil disturbance, labor dispute, strike, lockout,
inability to secure sufficient labor, death or disability of
key personnel rendering services on the Picture other than
Artist, power, essential commodities, any applicable law or
any act of God), or any capacity of Artist which prevents
Artist from performing or complying with any of the material
terms or conditions of this Agreement ("Artist's incapacity"),
or any failure or refusal by Artist to perform or comply with
any of the material terms or conditions hereof at the times
and in the manner specified (other than by reason of Force
Majeure or Artist's Incapacity) ("breach by Mist"), Producer
shall have the right, by notice to Mist, to postpone the
commencement of or suspend the rendition of services by Mist
and/or the running of time hereunder, which suspension shall
commence as of the occurrence of the event. Such suspension
shall end within 2 weeks (or, if such event is a breach by
Mist, 4 weeks) after the cessation of such event.
b. Termination:
(i) Producer termination right: If an Artist's incapacity
continues for a consecutive period in excess of 10
days or an aggregate period in excess of 14 days
during the performance of Artist's services
hereunder, or if a Force Majeure continues in excess
of 6 consecutive weeks, or if there is a breach by
Artist, Producer shall have the right to terminate
this Agreement by written notice to Artist, which
termination shall be effective as of the effective
date set forth in such notice. Prior to a termination
of this Agreement by Producer based upon the first
breach by Artist, Producer shall notify specifying
the nature of the breach and Artist shall have a
period of 2 business days (1 business day during
principal photography) after receipt of Producer's
notice within which to cure such first breach. Even
if such breach is cured within said period, Artist
shall remain liable for damages and expenses occurred
by Producer as a result of such breach. If such
breach is not cured to the reasonable satisfaction of
Producer within said period, Producer may terminate
this Agreement as set forth above. If Artist dies,
this Agreement shall immediately and automatically
terminate.
<PAGE>
(ii) Artist termination right: If Producer suspends
payment of compensation due to a Force Majeure for 6
weeks or more, Artist shall have the right to
terminate this Agreement and Producer shall
subsequently have the right to re-establish the
operation of this Agreement within 1 week after
receipt of Artist's termination notice and resumption
of payment of compensation, if any, due Artist
hereunder, and the operation hereof, if so
re-established, shall not thereafter be suspended
because of the same event of Force Majeure.
c. Right of examination: If any claim disputing the existence of
Artist's incapacity is made by either party, Producer shall
have the right to have Artist examined by such physicians as
Producer may designate. Artist's own physician may be present
at such examinations at Artist's sole cost and expense,
provided Artist's physician shall not interfere with any such
examination.
d. Effect of suspension: During the period of any suspension, no
compensation or other benefits hereunder shall accrue, become
payable or be provided to Artist. Artist shall not render
services for any third party during the exclusive period.
Nevertheless, Artist shall have the right to cause Artist to
render services to third parties during any Force Majeure
suspension, subject to Producer's right to require Artist to
resume services hereunder upon 48 hours' prior notice.
Producer shall have the right (exercisable at any time) to
extend the period of services of Artist and the running of
time hereunder for a period equal to the period of such
suspension.
e. Effect of termination: Except with respect to the "pay or
play" provisions, termination of this Agreement for any reason
shall release and discharge Producer from all further
obligations whatsoever to Artist and shall terminate any
rights of Mist hereunder. Nevertheless, if the termination is
not for a breach by Artist, Producer shall pay any Cash
Compensation due and unpaid prior to the termination.
15. NOTICES AND PAYMENTS: Any notice pertaining hereto shall be in writing.
Any such notice and any payment due hereunder shall be served by
delivering said notice or payment personally or by sending it by mail
(postage prepaid) addressed as follows:
To Artist: Patricia Green
207 South El Camino Drive
Beverly Hills, CA 90212
To Producer: Total Media Corporation
9107 Wilshire Blvd.
Suite 475
Beverly Hills, CA 90210
Telecopier: (310) 275 1585
<PAGE>
The date of personal delivery, mailing of such notice or payment shall be deemed
the date of service of such notice or payment.
16. REPRESENTATIONS AND WARRANTIES: Artist represents and warrants that:
(a) all material created, added, interpolated and/or submitted by
Artist for the Picture (other than material specifically furnished by
Producer for use by Artist) shall be wholly original with Artist and,
to the best of Artist's knowledge (including that which Artist should
have known, in the exercise of reasonable prudence), is not the subject
of any actual or threatened litigation or claim, and shall not infringe
upon or violate the rights of privacy of, or constitute defamation of
any party, or violate any common law, statutory rights or any other
rights of any party; (b) Artist is not under any obligation or
disability, which will in any manner prevent or restrict Artist from
entering into and freely performing this Agreement as herein provided;
and (c) Artist has not accepted nor paid, nor will Artist accept or pay
or agree to accept or pay any money, service or other valuable
consideration as defined in Section 507 of the Federal communication
Act of 1934, as amended, for the inclusion of any matter in the
Picture, other than payment by Producer to Artist hereunder. The terms
of this Paragraph shall survive the expiration or termination of this
Agreement.
17. INDEMNITY:
a. Artist will indemnify Producer, its associates, affiliated and
related entities, successors, assigns, licensees, officers,
directors, employees and agents, and hold them harmless from
and against any and all claims, liabilities, damages, costs
and expenses, including reasonable outside attorneys' fees,
arising out of, resulting from, based upon or incurred because
of a breach by Artist of any agreement, representation or
warranty made by Artist hereunder. Except with respect to (i)
matters constituting a breach by Artist of any of the
representations, warranties and/or agreements contained in
this Agreement; and/or (ii) gross negligence or willful
misconduct by Mist, Producer shall indemnify Artist and hold
him harmless from and against any and all liability, damages,
costs and expenses, including reasonable attorneys' fees,
(other than with respect to any settlement entered into
without Producer's prior written consent) arising out of any
third party claim against Artist resulting from (i) any
material supplied by Producer for use in connection with the
Picture; and (ii) Producer's development, production,
distribution and/or exploitation of the Picture.
b. Producer and Artist shall, upon presentation of any claim or
institution of any action covered by the foregoing indemnity
provisions, promptly notify the other of the presentation of
such claim or the institution of such action, giving full
details thereof.
18. RIGHT TO WITHHOLD: Producer shall have the right to deduct and withhold
from any sums payable to Artist hereunder any amounts required to be
deducted and withheld by Producer pursuant to any present or future
law, ordinance or regulation of the united States or of any state
thereof or any subdivision of any state thereof, or any other country,
<PAGE>
including without limitation, any country wherein Artist performs any
of his services hereunder, or pursuant to any present or future rule or
regulation of any union or guild (if any) having jurisdiction over the
services to be performed by Artist hereunder.
19. INSURANCE: Producer shall have the right to apply for and take out, at
Producer's expense, life, health, accident, cast or other insurance
covering Artist, in any amount Producer deems necessary to protect
Producer's interest hereunder. Artist shall not have any right, title
or interest in or to such insurance. Artist shall assist Producer in
obtaining such insurance by submitting to usual and customary medical
and other examinations, and by signing such applications, statements
and other instruments as may be reasonably required by any insurance
company. In the event Artists fails or is unable to qualify for such
insurance at customary rates and subject only to customary exclusions
and deductible amounts (if any), Producer shall have the right to
terminate this Agreement. During the term of this Agreement, Artist
shall not travel on any chartered or unscheduled airline or plane,
unless requested to do so by Producer, or engage in any conduct
prohibited by any policy of insurance obtained by Producer in
accordance with this Agreement.
20. E&O / GENERAL LIABILITY INSURANCE: Artist shall be covered by the
errors and omissions and general liability insurance policies for the
Picture to the extent that Producer obtains and maintains same and
subject to the terms, conditions and restrictions of such policies and
endorsements thereto.
21. MISCELLANEOUS:
a. Governing law / legal proceedings / non-waiver / effect of
termination / entire agreement / separability: This Agreement
shall be governed and construed in accordance with the laws of
the State of California applicable to contracts entered into
and fully performed therein. Only the California courts (state
and federal) shall have jurisdiction over controversies
regarding this Agreement; any proceeding involving such
controversies shall be brought in those courts, in Los Angeles
county, and not elsewhere. Any process in such proceedings may
be served upon Artist by, among other methods, delivering it
or mailing it, by registered or certified mail, directed to
such address Artist designated in this Agreement. Any such
delivery or mail service shall have the same effect as
personal services within the State of California. No waiver by
Artist or Producer of any failure by the other to keep or
perform any covenant or condition of this Agreement shall
constitute a waiver of any preceding or succeeding breach of
the same or any other covenant or condition. Neither the
expiration nor termination of this Agreement shall affect
Producer's ownership of the results and proceeds of Artist's
services hereunder or alter Producer's rights therein, or any
warranty or undertaking made by Artist hereunder. This
Agreement constitutes the entire agreement between Producer
and Artist with respect to the subject matter and may only be
amended by a written instrument executed by Producer and
Artist.
<PAGE>
b. Visas and labor permits: Artist shall cooperate with Producer
and assist Producer in securing such visas and labor permits
which may be required by any governmental agency in connection
with Artist's rendition of services hereunder. If, in spite of
such cooperation and assistance, Producer is unable to secure
such visas and labor permits within a reasonable period of
time prior to the Start Date, Producer shall have the right to
suspend Artist's services hereunder until a final
determination concerning such visa or labor permit is made by
the applicable authority, and Producer shall have the right to
terminate this Agreement and Artist's engagement hereunder if
such visas and labor permits cannot be secured.
c. Remedies cumulative: All remedies accorded herein or otherwise
available to either Producer or Artist shall be cumulative and
no one such remedy shall be exclusive of any other. Without
waiving any rights or remedies under this Agreement or
otherwise, Producer may from time to time recover, by action
at law, any damages arising out of any breach of this
Agreement by Artist and may institute and maintain subsequent
actions for additional damages which may arise from the same
or other breaches. The commencing or maintaining of any such
action or actions by Producer shall not constitute an election
on Producer's part to terminate this Agreement nor constitute
or result in the termination of Artist's services hereunder
unless Producer shall expressly so elect by written notice to
Artist.
d. Artist's remedies: No action or omission by Producer shall
constitute a breach of this Agreement unless Artist first
notifies in writing setting forth the alleged breach or
default and Producer does not cure the same. If Producer
breached its obligations hereunder, the damage, if any, caused
Artist shall not be irreparable or sufficient to entitle
Artist to injunctive or other equitable relief. Consequently,
Artist's rights and remedies shall be limited to the right, if
any, to obtain damages at law and Artist shall not have any
right in such event to terminate or rescind this Agreement or
any of the rights granted to Producer hereunder or to enjoin
or restrain the development, production, advertising,
promotion, distribution, exhibition or exploitation of the
Picture and/or any of Producer's rights hereunder. Producer's
payment of any compensation or performance of any obligation
hereunder shall not constitute a waiver by Producer of any
breach by Artist or of any rights or remedies which Producer
may have as a result of such breach.
e. Captions: The captions used in connection with the paragraphs
and subparagraphs of this Agreement are inserted only for the
purposes of reference. Such captions shall not be deemed to
govern, limit, modify, or in any other manner affect the
scope, meaning, or intent of the provisions of this Agreement
or any part thereof, nor shall such captions otherwise be
given any legal effect.
f. Illegality: Nothing contained herein shall require the
commission of any act or the payment of any compensation which
is contrary to law, and if there shall exist any conflict
between any provision contained herein and any law, regulation
or
<PAGE>
provision of any applicable collective bargaining agreement,
the latter shall prevail, and the provision or provisions
herein affected shall be curtailed, limited or eliminated to
the extent (but only to the extent necessary to remove such
conflict), and as so modified, this Agreement shall continue
in full force and effect.
g. Assignment: This Agreement is non-assignable by Artist;
however, Artist may assign to Fluid Films, Inc. the right to
his Fixed Compensation as defined in Paragraph ---. hereof
provided a notice of irrevocable assignment in Producer's
usual form shall be signed by Owner and the assignee and
delivered to Producer. This Agreement may be assigned freely
by Producer, in whole or in part, to any party (including any
successor entity or other party acquiring all or substantially
all of the business or assets of Producer or into which
Producer is merged or consolidated), without restriction, and
such assignment shall be binding upon Artist and inure to the
benefit of Producer's successors, assignees, licensees,
grantees and associates, affiliated and subsidiary entities
and shall be deemed a novation forever releasing and
discharging Producer from any further liability or obligation
to Artist.
h. Further instruments: Artist shall duly execute, acknowledge
and deliver to Producer or cause to be executed, acknowledged
and delivered to Producer, any and all assignments or
instruments which Producer may deem necessary to carry out and
effectuate the purposes and intent of this Agreement,
including, without limitation separate assignments of any
rights granted by Artist in this Agreement. Artist hereby
irrevocably grant Producer the power coupled with an interest,
with rights of substitution and delegation, to sign such
separate documents in Artist's name and as Artist's
attorney-in-fact if Artist have not complied with Producer's
request within 5 business days thereafter (or such shorter
period of time as Producer shall reasonably require. If
Producer signs any document as Artist's attorney-in-fact,
Producer will provide Artist with copies of any such documents
(but failure to do so shall not constitute a breach).
This Agreement constitutes the entire understanding of the parties hereto and
replaces any and all formal agreements, understandings and representations,
either oral or written, relating in any way to the subject matter hereto. No
modifications, alterations or amendments of this Agreement shall be valid or
binding unless it is in writing and signed by the party to be charged with such
modification, alteration or amendment.
By signing in the spaces provided below, Producer and Artist accept and agree to
all of the terms and conditions hereof.
<PAGE>
The parties hereto have executed and delivered this Agreement as of the date
first written above.
TOTAL MEDIA CORPORATION
By: /s/ Gerald Green
Its: CEO
AGREED TO AND ACCEPTED:
/s/ Patricia Green
<PAGE>
EXHIBIT 6.33
STANDARD OFFICE LEASE-GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
1. Basic Lease Provisions ("Basic Lease Provisions")
1.1 Parties: This Lease, dated, for reference purposes only,
February 28, 1997. Is made by and Between Daishin U.S.A. Co. Ltd. (herein
called "Lessor") and Total Film Group doing business under the name of
(herein called "Lessee").
1.2 Premises: Suite Number(s) 475, 4th floors, consisting of
approximately 3,062 sq. feet, more or less, as defined In paragraph 2 end as
shown on Exhibit "A" hereto (the "Premises").
1.3 Building: Commonly described as being located at 9107 Wilshire
Boulevard in the City of Beverly Hills, County of Los Angeles, State of
California as more particularly described in Exhibit hereto, and as defined
in paragraph 2.
1.4 Use: General Office subject to paragraph 6.
1.5 Term: Five (5) years commencing March 17,1997 ("Commencement
Date") and ending March 16, 2002 as defined in paragraph 3.
1.6 Base Rent: payable monthly on the first day of each month
shall be as follows:
(i) months 1 - 24 shall be equal to $5.358.50 per month.
(ii) months 25 - 60 shall be equal to $5,511.60 per month
1.7 Base Rent increase: See 1.6 above. The monthly Base Rent
payable under paragraph 1.6 above shall be adjusted as provided in paragraph
4.3 below.
1.8 Rent Paid Upon Execution: $32,151.00 for the first six (6)
months of the lease term.
1.9 Security Deposit: $16,075.50 - See paragraph 57 for
additional provisions
1.10 Lessee's Share of Operating Expense increase: 2.6% as defined
in paragraph 4.2.
2. Premises, Parking and Common Areas.
2.1 Premises: The Premises are a portion of a building, herein
sometimes referred to as the "Building" identified in paragraph 1.3 of the
Basic Lease Provisions. "Building" shall include adjacent parking structures
used in connection therewith. The Premises, the Building, the Common Areas,
the land upon which the same are located, along with all other buildings and
improvements thereon or thereunder, are herein collectively referred to as
the "Office Building Project." Lessor hereby leases to Lessee and Lessee
leases from Lessor for the term, at the rental, and upon all of the
conditions set forth herein, the real properly referred to in the Basic Lease
<PAGE>
Provisions, paragraph 1.2, as the "Premises" including rights to the Common
Areas as hereinafter specified.
2.2 Vehicle Parking: So long as Lessee is not in default, and
subject to the rules and regulations attached hereto, and as established by
Lessor from time to time, Lessee shall be entitled to rent and use 8 parking
spaces in the Office Building Project at the monthly rate applicable from
time to time for monthly parking asset by Lessor and/or its licensee. See
Paragraph 50 of Addendum.
2.2.1 If Lessee commits, permits or allows any of the
prohibited activities described in the Lease or the rules then in effect,
then Lessor shall have the right, without notice, in addition to such other
rights and remedies that it may have, to remove or tow away the vehicle
involved and charge the cost to Lessee, which cost shall be immediately
payable upon demand by Lessor.
2.2.2 The monthly parking rate per parking space will be
posted rates per month at the commencement at the term of this Lease, and is
subject to change upon five (5) days prior written notice to Lessee. Monthly
parking fees shall be payable one month in advance prior to the first day of
each calendar month.
2.3 Common, Areas - Definition. The term "Common Areas" is defined
as all areas and facilities outside the Premises and within the exterior
boundary line of the Office Building Project that are provided and designated
by the Lessor from lime to time for the general non-exclusive use of Lessor.
Lessee and of other lessees of the Office Building Project and their
respective employees, suppliers, shippers, customers and invitees, including
but not limited to common entrances, lobbies, corridors, stairways and
stairwells, public restrooms, elevators, escalators, parking areas to the
extent not otherwise prohibited by this Lease, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, parkways, ramps, driveways,
landscaped areas and decorative walls.
2.4 Common Areas - Rules and Regulations. Lessee agrees to abide by
and conform to the rules and regulations attached hereto as Exhibit B with
respect to the Office Building Project and Common Areas, and to cause its
employees, suppliers, shippers, customers, and invitees to so abide and
conform. Lessor or such other person(s) as Lessor may appoint shall have the
exclusive control and management at the Common Areas arid shall have the
right, from time to time to modify, amend and enforce said rules end
regulations. Lessor shall not be responsible to Lessee for the non-compliance
with said rules and regulations by other lessees, their agents, employees and
invitees of the Office Building Project.
2.5 Common Areas - Changes. Lessor shall have the right, In Lessor's
sole discretion, from time to time:
(a) To make changes to the Building interior and exterior
and Common Areas, including, without limitation, changes in the location,
size, shape, number, and appearance thereof, including but not limited to the
lobbies, windows, stairways, air shafts, elevators,
<PAGE>
escalators, restrooms, driveways, entrances, parking spaces, parking areas,
loading and unloading areas, ingress, egress, direction of traffic,
decorative walls, landscaped areas and walkways; provided, however, Lessor
shall at all times provide the parking facilities required by applicable law;
(b) To close temporarily any of the Common Areas for
maintenance purposes so long as reasonable access to the Premises remains
available;
(c) To designate other land and improvements outside the
boundaries of the Office Building Project to be a part of the Common Areas,
provided that such over land improvements have a reasonable and functional
relationship to the Office Building Project;
(d) To add additional buildings and Improvements to the
Common Areas;
(e) To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Office Building
Project, or any portion hereto;
(f) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas and Office Building
Project as Lessor may, in the exercise of sound business judgment deem to be
appropriate.
3. Term.
3.1 Term. The term and Commencement Date of this Lease shall be as
specified in paragraph 1.5 of the Basic Lease Provisions.
3.2 Delay In Possession. Notwithstanding said commencement date, if
for any reason Lessor cannot deliver possession of the Premises to Lessee on
said date and subject to paragraph 3.2.2, Lessor shall not be subject to any
liability therefore, nor shall such failure affect the validity of (his Lease
or the obligations of Lessee hereunder or extend the term hereof; but, in
such case, Lessee shall not be obligated to pay rent or perform any other
obligation Lessee under the terms of the Lease, except as may be otherwise
provided in this Lease, until possession of the Premises is tendered to
Lessee, as hereinafter defined; provided, however, that if Lessor shall not
have delivered possession of the Premises within sixty (60) days following
said Commencement Date, as the same may be extended under the terms of a Work
Letter executed by Lessor and Lessee's option, by notice in writing to Lessor
within ten (10) days thereafter, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided,
however, that, as to Lessee's obligations, Lessee first reimburses Lessor for
all costs incurred for Non-Standard Improvements and, as to Lessor's
obligations. Lessor shall return any money previously deposited by Lessee
(less any offsets Lessor for Non-Standard improvements); and provided
further, that if such written notice by Lessee is not received by Lessor
within said ten (10) day period, Lessee's right to cancel this Lease
hereunder shell terminate and be of no further force or effect.
<PAGE>
3.2.1 Possession Tendered - Defined. Possession of the
Premises shall be deemed tendered to Lessee ("Tender of Possession") when (1)
the improvements to be provided by Lessor under this Lease are substantially
completed, (2) the Building utilities are ready for use in the Premises, (3)
Lessee has reasonable access to the Premises, and (4) ten (10) days shall
have expired following advance written notice to Lessee of the occurrence of
the matters described in (1) and (2) above of this paragraph 3.2.1.
3.2.2 Delays Caused by Lessee. There shall be no abatement
of rent, and the sixty (60) day period following the Commencement Date before
which Lessee's right to cancel this Lease accrues under paragraph 3.2, shall
be deemed extended to the extent of any delays caused by acts or omissions of
Lessee, Lessee's agents, employees and contractors.
3.3 Early Possession, if Lessee occupies the Premises prior to said
Commencement Date, such occupancy shall be subject to all provisions of this
Lease, such occupancy shall not change the termination date, and Lessee shall
pay rent for such occupancy.
3.4 Uncertain Commencement. In the event commencement of the Lease
term is defined as the completion of the improvements, Lessee and Lessor
shall execute an amendment to this Lease establishing the date of Tender of
Possession (as defined In paragraph 3.2.1) or the actual taking of possession
by Lessee, whichever first occurs, as the Commencement Date.
4. Rent.
4.1 Base Rent. Subject to adjustment as hereinafter provided in
paragraph 4.3, and except as may be otherwise expressly provided in this
Lease, Lessee shall pay to Lessor the Base Rent for the Premises set forth in
paragraph 1.6 of the Basic Lease Provisions, without offset or deduction.
Lessee shall pay Lessor upon execution hereof the advance Base Rent described
in paragraph 1.8 of the Basic Lease Provisions. Rent for any period during
the term hereof which is for less than one month shall be pro-rated based
upon the actual number of days of the calendar month involved. Rent shall be
payable in lawful money of the United States to Lessor at the address stated
herein or to such other persons or at such other places as Lessor may
designate in writing.
4.2 Operating Expense Increase. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent. Lessee's Share, as hereinafter
defined, of the amount by which all Operating Expenses, as hereinafter
defined, for each Comparison Year exceeds the amount of all Operating
Expenses for the Base Year, such excess being hereinafter referred to as the
"Operating Expense Increase" in accordance with the following provisions:
(a) "Lessee's Share" is defined, for purposes of this
Lease, as the percentage set forth In paragraph 1.10 of the Basic Lease
Provisions, which percentage has been determined by dividing the approximate
square footage of the Premises by the total approximate square footage of the
rentable space contained In the Office Building Project. It is understood and
agreed that the square footage figures set forth in the Basic Lease
Provisions are approximations which Lessor and Lessee agree are reasonable
and shall not be subject to revision except in
<PAGE>
connection with an actual change in the size of the Premises or a change in
the space available for lease in the Office Building Project.
(b) "Base Year" is defined as the calendar year in which
the Lease term commences.
(c) "Comparison Year" is defined as each calendar year
during the term of this Lease subsequent to the Base Year; provided, however,
Lessee shall have no obligation to pays share of the Operating Expense
Increase applicable to the first twelve (12) months of the Lease Term other
than such as are mandated by governmental authority, as to which government
mandated expenses Lessee shall pay Lessee's Share, notwithstanding they,
occur during the first twelve (12) months. Lessee's Share of the Operating
Expense increase for the first and last Comparison Years of the Lease Term
shall be prorated according to that portion of such Comparison Year as to
which Lessee is responsible for a share of such increase.
(d) "Operating Expenses" is defined, for purposes of this
Lease, to include all costs, if any, incurred by Lessor in the exercise of
its reasonable discretion, for:
(i) The operation, repair, maintenance, and
replacement, in neat, clean, safe, good order and condition, of the Office
Building Project, including but not limited to, the following:
(aa) The Common Areas, including their
surfaces, coverings, decorative items, carpets, drapes and window coverings,
and including parking areas, loading and unloading areas, trash areas,
roadways, sidewalks, walkways, stairways, parkways, driveways, landscaped
areas, striping, bumpers, irrigation systems, Common Area lighting
facilities, building exteriors and roofs, fences and gates;
(bb) All heating, air conditioning,
plumbing, electrical systems, life safety equipment, telecommunication and
other equipment used in common by, or for the benefit of, lessees or
occupants of the Office Building Project, including elevators and escalators,
tenant directories, fire detection systems including sprinkler system
maintenance and repair.
(ii) Trash disposal, janitorial and security
services;
(iii) Any other service to be provided by Lessor
that is elsewhere in this Lease stated to be an "Operating Expense";
(iv) The cost of the premiums for the liability
and property insurance policies to be maintained by Lessor under paragraph 8
hereof;
(v) The amount of the real property taxes to be
paid by Lessor under paragraph 10.1 hereof;
<PAGE>
(vi) The cost of water, sewer, gas, electricity,
and other publicly mandated services to the Office Building Project;
(vii) Labor, salaries and applicable fringe
benefits and costs, materials, supplies and tools, used in maintaining and/or
cleaning the Office Building Project and accounting and a management fee
attributable lathe operation of the Office Building Project;
(viii) Replacing and/or adding improvements
mandated by any governmental agency and any repairs or removals necessitated
thereby amortized over its useful life according to Federal income tax
regulations or guidelines for depreciation thereof (including interest on the
unamortized balance as is then reasonable in the judgment of Lessor's
accountants;
(ix) Replacements of equipment or improvements
that have a useful life for depreciation purposes according to Federal Income
tax guidelines of five (5) years or less, as amortized over such life.
(e) Operating Expenses shall not include the costs of
replacements of equipment or improvements that have a useful life for Federal
income tax purposes in excess of five (5) years unless it is of the type
described in paragraph 4.2(d)(viii), in which case their cost shall be
included as above provided.
(f) Operating Expenses shall not include any expenses paid
by any lessee directly to third parties, or as to which Lessor is otherwise
reimbursed by any third party, other tenant, or by insurance proceeds.
(g) Lessee's Share of Operating Expense Increase shall be
payable by Lessee within ten (10) days after a reasonably detailed statement
of actual expenses is presented to Lessee by Lessor. At Lessor's option,
however, an amount may be estimated by Lessor from time to time in advance of
Lessees Share of the Operating Expense Increase for any Comparison Year, and
the same shall be payable monthly or quarterly, as Lessor shall designate,
during each Comparison Year of the Lease term, on the same day as the Base
Rent is due hereunder, in the event that Lessee pays Lessor's estimate of
Lessees Share of Operating Expense Increase as aforesaid, Lessor shall
deliver to Lessee within sixty (60 days after the expiration of each
Comparison Year a reasonably detailed statement showing Lessee's Share of the
actual Operating Expense Increase incurred during such year. If Lessee's
payments under this paragraph 4.2(g) during said Comparison Year exceed
Lessee's Share as indicated on said statement. Lessee shall be entitled to
credit the amount of such overpayment against Lessee's Share of Operating
Expense increase next falling due, if Lessee's payments under this paragraph
during said Comparison Year were less than Lessee's Share as indicated on
said statement, Lessee shall pay to Lessor the amount of the deficiency
within ten (10) days after delivery by Lessor to Lessee of said statement.
Lessor and Lessee shall forthwith adjust between them by cash payment any
balance determined to exist with respect to that portion of the last
Comparison Year for which Lessee is responsible as to Operating Expense
Increases, notwithstanding that the Lease term may have terminated before the
end of such Comparison Year.
<PAGE>
4.3 Rent increase. See paragraph 1.6 of the Lease
(Deleted)
5. Security Deposit. Lessee shell deposit with Lessor upon execution hereof
the security deposit set forth in paragraph 1.9 of the Basic Lease Provisions
as security for Lessee's faithful performance of Lessee's obligations
hereunder. If Lessee fails to pay rent or other charges due hereunder, or
otherwise defaults with respect to any provisional this Lease, Lessor may
use, apply or retain all or any portion of said deposit for the payment of
any rent or other charge in default for the payment of any other sum to which
Lessor may become obligated by reason of Lessees default, or to compensate
Lessor for any loss or damage which Lessor may suffer thereby. If Lessor so
uses or applies all or any portion of said deposit, Lessee shall within ten
(10) days after written demand therefore deposit cash with Lessor in an
amount sufficient to restore said deposit to the full amount then required of
Lessee. If the monthly Base Rent shall, from time to time, increase during
the term of this Lease, Lessee shall, at the time at such increase, deposit
with Lessor additional money as a security deposit so that the total amount
of the security deposit held by Lessor shall at all times bear the same
proportion to the then current Base Rent as the initial security deposit
bears to the Initial Base Rent set forth in paragraph 1.6 at the Basic Lease
Provisions. Lessor shall not be required to keep said security deposit
separate from its general accounts. It Lessee performs all of Lessee's
obligations hereunder, said deposit, or so much thereof as has not heretofore
been applied by Lessor, shall be returned, without payment at interest or
other increment for its use to Lessee (or, at Lessor's Option, to the last
assignee, if any, at Lessee's interest hereunder) at the expiration of the
term thereof, and after Lessee has vacated the Premises. No trust
relationship is created herein between Lessor and Lessee with respect to said
Security Deposit.
6. Use.
6.1 Use. The Premises shall be used and occupied only for the
purpose set forth in paragraph 1.4 of the Basic Lease Provisions or any other
use which is reasonably comparable to that use and for no other purpose.
6.2 Compliance with Law.
(a) Lessor warrants to Lessee that the Premises, in the state
existing on the date that the Lease term commences, but without regard to
alterations or improvements made by Lessee or the use for which Lessee will
occupy the Premises, does not violate any covenants or restrictions to
record, or any applicable building code, regulation or ordinance in effect on
such Lease term Commencement Date, in the event it is determined that this
warranty has been violated, then it shall be the obligation of the Lessor,
after written notice from Lessee, to promptly, at Lessor's sole cost and
expense, rectify any such violation.
(b) Except as provided in paragraph 6.2(a) Lessee shall, at
Lessee's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, orders, covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus, now in
effect or which may hereafter come into effect, whether or not they reflect a
change in policy
<PAGE>
from that now existing, during the term or any part at the term hereof,
relating in any manner to the Premises and the occupation and use by Lessee
of the Premises. Lessee shall conduct its business in a lawful manner and
shall not use or permit the use of the Premises or the Common Areas in any
manner that will tend to create waste or a nuisance or shall lend to disturb
other occupants of the Office Building Project.
6.3 Condition of Premises.
(a) Lessor shall deliver the Premises to Lessee in a clean
condition on the Lease Commencement Date (unless Lessee is already in
possession) and Lessor warrants to Lessee that the plumbing, lighting, air
conditioning, and heating system in the Premises shall be in good operating
condition. In the event that it is determined that this warranty has been
violated, then it shall be the obligation of Lessor, after receipt of written
notice from Lessee setting forth with specificity the nature of the
violation, to promptly, at Lessor's sole cost, rectify such violation.
(b) Except as otherwise provided in this Lease, Lessee
hereby accepts the Premises and the Office Building Project in their
condition existing as of the Lease Commencement Date or the date that Lessee
takes possession of the Premises, whichever is earlier, subject to all
applicable zoning, municipal, county and state laws, ordinances and
regulations governing and regulating the use of the Premises, and any
easements, covenants or restrictions of record, and accepts this Lease
subject thereto and to all matters disclosed thereby and by any exhibit is
attached hereto. Lessee acknowledges that it has satisfied itself by its own
independent investigation that the Premises are suitable for its intended
use, and that neither Lessor nor Lessor's agent or agents has made any
representation or warranty as to the present or future suitability of the
Premises, Common Areas, or Office Building Project for the conduct of
Lessee's business.
7. Maintenance, Repairs, Alterations and Common Area Services.
7.1 Lessor's Obligations. Lessor shall keep the Office Building
Project, including the Premises, interior and exterior walls, roof, and
common areas, and the equipment whether used exclusively for the Premises or
in common with other premises, in good condition and repair; provided,
however, Lessor shall not be obligated to paint, repair or replace wall
coverings, onto repair or replace any improvements that are not ordinarily a
part of the Building or are above then Building standards. Except as provided
in paragraph 9.5, there shall be no abatement of rent or liability of Lessee
on account of any injury or interference with Lessee's business with respect
to any improvements, alterations or repairs made by Lessor to the Office
Building Projector any part thereof. Lessee expressly waives the benefits of
any statute now or hereafter in effect which would otherwise afford Lessee
the right to make repairs at Lessor's expense onto terminate this Lease
because of Lessor's failure to keep the Premises in good order, condition and
repair.
7.2 Lessee's Obligations.
(a) Notwithstanding Lessor's obligation to keep the
Premises in good condition and repair, Lessee shall be responsible for
payment of the cost thereof to Lessor as
<PAGE>
additional rent or that portion of the cost of any maintenance and repair of
the Premises, or any equipment (wherever located) that serves only Lessee or
the Premises, to the extent such cost is attributable to causes beyond normal
wear and tear. Lessee shall be responsible for the cost of painting,
repairing or replacing wall coverings, and to repair or replace any Premises
Improvements that are not ordinarily a part of the Building or that are above
then Building standards. Lessor may, at its option, upon reasonable notice,
elect to have Lessee perform any particular such maintenance or repairs the
cost of which is otherwise Lessee's responsibility hereunder.
(b) On the last day of the term hereof, or on any sooner
termination, Lessee shall surrender the Premises to Lessor in the same
condition as received, ordinary wear and tear excepted, clean and free of
debris. Any damage or deterioration of the Premises shall not be deemed
ordinary wear and tear if the same could have been prevented by good
maintenance practices by Lessee. Lessee shall repair any damage to the
Premises occasioned by the installation or removal of Lessee's trade
fixtures, alterations, furnishings and equipment. Except as otherwise stated
in this Lease, Lessee shall leave the airlines, power panels, electrical
distribution systems, lighting fixtures, air conditioning, window coverings,
wall coverings, carpets, wall paneling, ceilings and plumbing on the Premises
and in good operating condition.
7.3 Alterations and Additions.
(a) Lessee shall not, without Lessor's prior written
consent make any alterations, improvements, additions, utility installations
or repairs in, on or about the Premises, or the Office Building Project. As
used in this paragraph 7.3 the term "Utility Installation" shall mean
carpeting, window and wall coverings, power panels, electrical distribution
systems, lighting fixtures, air conditioning, plumbing, and telephone and
telecommunication wiring end equipment. At the expiration of the term, Lessor
may require the removal of any or all of said alterations, improvements,
additions or utility installations, and the restoration of the Premises and
the Office Building Project to their prior condition, at Lessee's expense.
Should Lessor permit Lessee to make its own alterations, improvements,
additions or Utility Installations, Lessee shall use only such contractor as
has been expressly approved by Lessor, and Lessor may require Lessee to
provide Lessor, at Lessee's sole cost and expense, a lien and completion bond
in an amount equal to one and one-half times the estimated cost of such
improvements, to insure Lessor against any liability for mechanic's and
maintenance's liens and to insure completion of the work. Should Lessee make
any alterations, improvements, additions or Utility Installations without the
prior approval of Lessor, or use a contractor not expressly approved by
Lessor, Lessor may, at any time during the term of this Lease, require that
Lessee remove any part or all of the same.
(b) Any alterations, improvements, additions or Utility
Installations in or about the Premises or the Office Building Project that
Lessee shall desire to make shall be presented to Lessor in written form,
with proposed detailed plans. If Lessor shall give its consent to Lessee's
making such alteration, improvement, addition or Utility Installation, the
consent shall be deemed conditioned upon Lessee acquiring a permit to do so
from the applicable governmental agencies, furnishing a copy thereof to
Lessor prior to the commencement of the work, and compliance by Lessee with
all conditions of said permit in a prompt and expeditious manner.
<PAGE>
(c) Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been have been furnished to or for
Lessee at or for use in the premises; which claims are or may be secured by
any mechanic's or maintenance's lien against the Premises, the Building or
the Office Building Project, or any interest therein.
(d) Lessee Shell give Lessor not less than ten (10) days'
notice prior to the commencement of any work in the Premises by Lessee, and
Lessor shall have the right to post notices of non-responsibility in or on
the Premises or the Building as provided by law if Lessee shall, in good
faith contest the validity of any such lien, claim or demand, then Lessee
shall, at its sole expense defend Itself and Lessor against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof against the Lessor or the Premises, the
Building or the Office Building Project, upon the condition that if Lessor
shall require, Lessee shall furnish to Lessor a surety bond satisfactory to
Lessor in an amount equal to such contested lien claim or demand indemnifying
Lessor against liability for the same and holding the Premises, the Building
and the Office Building Project free from the effect of such lien or claim.
In addition, Lessor may require Lessee to pay Lessor's reasonable attorneys'
fees and costs in participating in such action if Lessor shall decide it is
in Lessor's best interest so to do.
(e) All alterations, improvements, additions and utility
installations (whether or not such utility installations constitute trade
fixtures of Lessee), which may be made to the Premises by Lessee, including
but not limited to, floor coverings, paneling, doors, drapes, build-ins,
moldings, sound attenuation, and lighting and telephone or communication
systems, conduit, wiring and outlets, shall be made and done in a good and
workmanlike manner and of good and sufficient quality and materials and shall
be the property at Lessor and remain upon and be surrendered with the
Premises at the expiration of the Lease term, unless Lessor requires their
removal pursuant to paragraph 7.3(a). Provided Lessee is not in default,
notwithstanding the provisions of this paragraph 7.3(e), Lessee's personal
property and equipment, other than that which is a fixed to the Premises so
that it cannot be removed without material damage to the Premises or the
Building, and other than utility installations, shall remain the properly of
Lessee and may be removed by Lessee subject to the provisions of paragraph
7.2.
(f) Lessee shall provide Lessor with as-built plans and
specifications for any alterations, improvements, additions or utility
installations.
7.4 Utility Additions. Lessor reserves the right to install newer
additional utility facilities throughout the Office Building Project for the
benefit of Lessor or Lessee, or any other lessee of the Office Building
Project, including, but not by way of limitation, such utilities as plumbing,
electrical systems, communication systems, and fire protection and detection
systems, so long as such installations do not unreasonably interfere with
Lessee's use of the Premises.
8. Insurance; Indemnity
8.1 Liability Insurance - Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease a policy of
Comprehensive General Liability Insurance utilizing an Insurance Services
Office standard form with Broad Form General Liability Endorsement
<PAGE>
(GL0404), or equivalent, in an amount of not less then $1,000,000 per
occurrence of bodily injury and property damage combined or in a greater
amount as reasonably determined by Lessor and shall insure Lessee with Lessor
as an additional insured against liability arising out of the use, occupancy
or maintenance of the Premises. Compliance with the above requirement shall
not, however, limit the liability of Lessee hereunder.
8.2 Liability Insurance - Lessor. Lessor shall obtain and keep in
force during the term of this Lease a policy of Combined Single Limit Bodily
Injury and Broad Form Property Damage insurance, plus coverage against such
other risks Lessor deems advisable from time to time, insuring Lessor, but
not Lessee, against liability arising out of the ownership, use, occupancy or
maintenance of the Office Building Project in an amount not less than
$5,000,000.00 per occurrence.
8.3 Property Insurance - Lessee. Lessee shall, at Lessee's expense,
obtain and keep in force during the term of this Lease for the benefit of
Lessee, replacement cost fire and extended coverage insurance, with vandalism
and malicious mischief, sprinkler leakage and earthquake sprinkler leakage
endorsements, in an amount sufficient to cover not less than 100% of the full
replacement cost, as the same may exist from time to time, of all of Lessee's
personal property, fixtures, equipment and tenant improvements.
8.4 Property insurance - Lessor. Lessor shall obtain and keep in
force during the term of this Lease a policy or policies of insurance
covering loss or damage to the Office Building Project improvements, but not
Lessee's personal property, fixtures, equipment or tenant improvements, in
the amount of the full replacement cost thereof, as the same may exist from
time to time, utilizing Insurance Services Office standard form, or
equivalent, providing protection against all perils included within the
classification of fire, extended coverage, vandalism, malicious mischief,
plate glass, and such other perils as Lessor deems advisable or maybe
required by a lender having a lien on the Office Building Project. In
addition, Lessor shall obtain and keep in force, during the term of this
Lease, a policy of rental value insurance covering a period of one year, with
loss payable to Lessor, which insurance shall also cover all Operating
Expenses for said period. Lessee will not be named in any such policies
carried by Lessor and shall have no right to any proceeds therefrom. The
policies required by these paragraphs 8.2 and 8.4 shall contain such
deductibles as Lessor or the aforesaid lender may determine. In the event
that the Premises shall suffer an insured loss as defined in paragraph 9.1(f)
hereof, the deductible amounts under the applicable insurance policies shall
be deemed an Operating Expense. Lessee shall not do or permit to be done
anything which shall invalidate the insurance policies carried by Lessor.
Lessee shall pay the entirety of any increase in the properly insurance
premium for the Office Building Project over what it was immediately prior to
the commencement of the term of this Lease if the increase is specified by
Lessor's insurance carrier as being caused by the nature of Lessee's
occupancy or any act or omission of Lessee.
8.5 Insurance Policies. Lessee shall deliver to Lessor copies of
liability insurance policies required under paragraph 8.1 or certificates
evidencing the existence and amounts of such insurance within seven (7) days
after the Commencement Date of this Lease. No such policy shall be
cancellable or subject to reduction of coverage or other modification except
after thirty (30)
<PAGE>
days prior written notice to Lessor. Lessee shall, at least thirty (30) days
prior to the expiration of such policies, furnish Lessor with renewals
thereof.
8.6 Waiver of Subrogation. Lessee and Lessor each hereby release and
relieve the other, and waive their entire right of recovery against the
other, for direct or consequential loss or damage arising out of or incident
to the perils covered by property insurance carried by such party, whether
due to the negligence of Lessor or Lessee or their agents, employees,
contractors and or invitees. If necessary all property insurance policies
required under this Lease shall be endorsed to so provide.
8.7 Indemnity. Lessee shall Indemnify and hold harmless Lessor and
its agents, Lessor's master or ground Lessor, partners and lenders, from and
against any and all claims for damage to the person or property of anyone or
any entity arising from Lessee's use of the Office Building Project, or from
the conduct of Lessees business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or else-where and
shall further indemnify and hold harmless Lessor from and against any and all
claims, costs and expenses arising from any breach or default in the
performance of any obligation on Lessee's part to be performed under the
terms of this Lease, or arising from any act or omission of Lessee, or any at
Lessee's agents, contractors, employees, or invitees, and from and against
all costs, attorney's fees, expenses and liabilities incurred by Lessor as
the result of any such use, conduct, activity, work, things done, permitted
or suffered, breach, default or negligence, and in dealing reasonably
therewith, including but not limited to the defense or pursuit of any claim
or any action or proceeding involved therein; and in case any action or
proceeding be brought against Lessor by reason of any such matter, Lessee
upon notice from Lessor shall defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in
such defense, Lessor need not have first paid any such claim in order to be
so indemnified. Lessee, as a material part of the consideration to Lessor,
hereby assumes all risk of damage to property of Lessee or injury to persons,
in, upon or about the Office Building Project arising from any cause and
Lessee hereby waives all claims in respect thereof against Lessor.
8.8 Exemption of Lessor from liability. Lessee hereby agrees that
Lessor shall not be liable for injury to Lessee's business or any loss of
income therefrom or for loss of or damage to the goods, wares, merchandise or
other property of Lessee, Lessee's employees, invitees, customers, or any
other person in or about the Premises or the Office Building Project, nor
shall Lessor be liable for injury to the personal Lessee, Lessee's employees,
agents or contractors, whether such damage or injury is caused by or results
from theft, fire, steam, electricity, gas, water or rain, or from the
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, or from any
other cause, whether said damage or injury results from conditions arising
upon the Premises or upon other portions of the Office Building Project, or
from outer sources or places, or from new construction or the repair,
alteration or improvement or any part of the Office Building Project, or of
the equipment, fixtures or appurtenances applicable thereto, and regardless
of whether the cause of such damage or injury or the means of repairing the
same is inaccessible. Lessor shall not be liable for any damages arising from
any act or neglect at any other lessee, occupant or user of the Office
<PAGE>
Building Project, nor from the failure of Lessor to enforce the provisions of
any other lease or any other lessee of the Office Building Project.
8.9 No Representational Adequate Coverage. Lesser makes no
representation that the limits or forms of coverage of insurance specified in
this paragraph 8 are adequate to cover Lessee's property or obligations under
this Lease.
9. Damage or Destruction.
9.1 Definitions.
(a) "Premises Damage" shall mean if the Premises are
damaged or destroyed to any extent.
(b) "Premises Building Partial Damage" shall mean if the
Building of which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is less then fifty percent (50%) of the then
Replacement Cost of the building.
(c) "Premises Building Total Destruction" shall mean if the
Building on which the Premises are a part is damaged or destroyed to the
extent that the cost to repair is fifty percent (50%) or more of the then
Replacement Cost of the Building.
(d) "Office Building Project Buildings" shall mean all of
the buildings on the Office Building Project site.
(e) "Office Building Project Buildings Total Destruction"
shall mean if the Office Building Project Buildings are damaged or destroyed
to the extent that the cost or repair is fifty percent (50%) or more of the
then Replacement Cost of the Office Building Project Buildings.
(f) "Insured Loss" shall mean damage or destruction which
was caused by an event required to be covered by the insurance described in
paragraph 8. The fact that an insured Loss has a deductible amount shall not
make the loss an uninsured loss.
(g) "Replacement Cost" shall mean the amount of money
necessary to be spent in order to repair or rebuild the damaged areas to the
condition that existed immediately prior to the damage occurring, excluding
all improvements made by Lessee, other than those installed by Lessor at
Lessee's expense.
9.2 Premises Damage; Premises Building Partial Damage.
(a) Insured Loss: Subject to the provisions of paragraphs
9.4 and 9.5, if at any time during the term of this Lease there is damage
which is an Insured Loss and which falls into the classification of either
Premises Damage or Premises Building Partial Damage, then Lessor shall, as
soon as reasonably possible and to the extent the required materials and
labor are readily
<PAGE>
available through usual commercial channels, at Lessor's expense, repair such
damage (but not Lessee's fixtures, equipment or tenant improvements
originally paid for by Lessee) to its condition existing at the time of the
damage, and this Lease shall continue in full force and effect.
(b) Uninsured Loss: Subject to the provisions of paragraphs
9.4 and 9.5, if at any time during the term of this Lease there is damage
which is not an Insured Loss and which falls within the classification of
Premises Damage or Premises Building Partial Damage, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the
repairs at Lessee's expense), which damage prevents Lessee from making any
substantial use of the Premises, Lessor may at Lessor's option either (i)
repair such damage as soon as reasonably possible at Lessor's expense, in
which event this Lease shall continue in full force and affect, or (ii) give
written notice to Lessee within thirty (30) days after the data of the
occurrence of such damage of Lessor's intention to cancel and terminate this
Lease as of the date of the occurrence at such damage, in which event this
Lease shall terminate as of the date of the occurrence of such damage.
9.3 Premises Building Total Destruction; Office Building Project
Total Destruction. Subject to the provisions of paragraphs 9.4 and 9.5, if at
any time during the term of this Lease there is damage, whether or not it is
an Insured Loss, which falls into the classifications of either (i) Premises
Building Total Destruction, or (ii) Office Building Project Total
Destruction, then Lessor may at Lessor's option either (i) repair such damage
or destruction as soon as reasonably possible at Lessor's expense (to the
extent the required materials are readily available through usual commercial
channels to its condition existing at the time of the damage, but not
Lessee's fixtures, equipment or tenant improvements, and this Lease shall
continue in full force and effect, or (ii) give written notice to Lessee
within thirty (30) days after the date of occurrence of such damage of
Lessor's intention to cancel and terminate this Lease, in which case this
Lease shall terminate as of the date of the occurrence of such damage.
9.4 Damage Near End at Term.
(a) Subject to paragraph 9.4, if at any time during the
last twelve (12) months of the term of this Lease there is substantial damage
to the Premises, Lessor may at Lessor's option cancel and terminate this
Lease as of the date of occurrence of such damage by giving written notice to
Lessee of Lessor's election to do so within 30 days after the date of
occurrence of such damage.
(b) Notwithstanding paragraph 9.4(a), in the event that
Lessee has an option to extend or renew this Lease, and the time within which
said option may be exercised has not yet expired, Lessee shall exercise such
option, if it is to be exercised at all, no later than twenty (20) days after
the occurrence of an insured Loss falling within the classification of
Premises Damage during the last twelve (12) months of the term of this Lease,
if Lessee duly exercises such option during said twenty (20) day period,
Lessor shall, at Lessor's expense, repair such damage, but not Lessee's
fixtures, equipment or tenant improvements, as soon as reasonably possible
and this Lease shall continue in full force and effect, it Lessee fails to
exercise such option during said twenty (20) day period, then Lessor may at
Lessor's option terminate and cancel this Lease as of
<PAGE>
the expiration of said twenty (20) day period by giving written notice to
Lessee of Lessor's election to do so within ten (10) days after the
expiration of said twenty (20) day period notwithstanding any term or
provision in the grant of option to the contrary.
9.5 Abatement of Rent; Lessee's Remedies.
(a) In the event Lessor repairs or restores the Building or
Premises pursuant to the provisions of this paragraph 9, and any part of the
Premises are not usable (including loss of use due to loss of access or
essential services, the rent payable hereunder (including Lessee's Share of
Operating Expense increase for the period during which such damage, repair or
restoration continues shall be abated, provided (1) the damage was not the
result of the negligence of Lessee, and (2) such abatement shall only be to
the extent the operation and profitability of Lessee's business as operated
from the Premises is adversely affected. Except for said abatement of rent,
if any, Lessee shall have no claim against Lessor for any damage suffered by
reason of any such damage, destruction, repair or restoration.
(b) If Lessor shall be obligated to repair or restore the
Premises or the Building under the provisions of this Paragraph 9 and shall
not commence such repair or restoration within ninety (90) days after such
occurrence, or if Lessor shall not complete the restoration and repair within
six (6) months after such occurrence, Lessee may at Lessee's option cancel
and terminate this Lease by giving Lessor written notice of Lessee's election
to do so at any time prior to the commencement or completion, respectively,
of such repair or restoration, in such event this Lease shall terminate as of
the date of such notice.
(c) Lessee agrees to cooperate with Lessor in connection
with any such restoration and repair, including but not limited to the
approval and/or execution of plans and specifications required.
9.6 Termination - Advance Payments. Upon termination of this Lease
pursuant to this paragraph 9, an equitable adjustment shall be made
concerning advance rent and any advance payments made by Lessee to Lessor.
Lessor shall, in addition, return to Lessee so much of Lessee's security
deposit as has not theretofore been applied by Lessor.
9.7 Waiver. Lessor and Lessee waive the provisions of any statute
which relate to termination of leases when leased property is destroyed and
agree that such event shall be governed by the terms of this Lease.
10. Real Property Taxes.
10.1 Payment of Taxes. Lessor shall pay the real property tax as
defined in paragraph 10.3, applicable to the Office Building Project subject
to reimbursement by Lessee of Lessee's share of such taxes in accordance with
the provisions of paragraph 4.2, except as otherwise provided in paragraph
10.2.
<PAGE>
10.2 Additional Improvements. Lessee shall not be responsible
for paying any increase in real property tax specified in the tax assessor's
records and work sheets as being caused by additional improvements placed
upon the Office Building Project by other lessees or by Lessor for the
exclusive enjoyment of any other lessee. Lessee shall, however, pay to Lessor
at the time that Operating Expenses are payable under paragraph 4.2(c) the
entirety of any increase in real property tax if assessed solely by reason of
additional improvements placed upon the Premises by Lessee or at Lessee's
request.
10.3 Definition of "Real Property Tax." As used herein, the term
"real property tax" shall include any form of real estate tax or assessment,
general, special, ordinary or extraordinary, and any license fee, commercial
rental tax, improvement bond or bonds, levy or tax (other than inheritance,
personal income or estate taxes) imposed on the Office Building Project or
any portion thereof by any authority having the direct or indirect power to
tax, including any city, county, stale or federal government, or any school,
agricultural, sanitary, tire, street, drainage or other improvement district
thereof, as against any legal or equitable interest of Lessor in the Office
Building Project or in any portion thereof, as against Lessor's right to rent
or other income therefrom, and as against Lessor's business of leasing the
Office Building Project. The term "real property tax" shall also include any
tax, fee, levy, assessment or charge (i) in substitution of, partially or
totally, any tax, fee, levy, assessment or charge hereinabove included within
the definition of "real property tax' or (ii) the nature of which was
hereinbefore included within the definition of "real property tax' or (iii)
which is imposed for a service or right not charged prior to June 1, 1978,
or, if previously charged, has been increased since June 1,1978, or (iv)
which is imposed as result of change in ownership, as defined by applicable
local statutes for property tax purposes, at the Office Building Project or
which is added to a tax or charge hereinbefore included within the definition
of real property tax by reason of such change of ownership, or (v) which is
imposed by reason of this transaction, any modifications or changes hereto,
or any transfers hereof.
10.4 Joint Assessment. If the improvements or property, the
taxes for which are to be paid separately by Lessee under paragraph 10.2 or
10.5 are not separately assessed, Lessee's portion of that tax shall be
equitably determined by Lessor from the respective valuations assigned in the
assessor's work sheets or such other information (which may include the cost
of construction) as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.5 Personal Property Taxes.
(a) Lessee shall pay prior to delinquency all taxes assessed
against and levied upon trade fixtures, furnishings, equipment and all other
personal property of Lessee contained in the Premises or elsewhere.
(b) If any of Lessee's said personal property shall be
assessed with Lessor's real property, Lessee shall pay to Lessor the taxes
attributable to Lessee within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee's property.
<PAGE>
11. Utilities.
11.1 Services Provided by Lessor. Lessor shall provide heating,
ventilation, air conditioning, and janitorial service as reasonably required,
reasonable amounts of electricity for normal lighting and office machines,
water for reasonable and normal drinking and lavatory use, and replacement
light bulbs and/or fluorescent tubes and ballasts for standard overhead
fixtures.
11.2 Services Exclusive to Lessee. Lessee shall pay for all water,
gas, heat, light, power, telephone and other utilities and services specially
or exclusively supplied and/or metered exclusively to the Premises or to
Lessee, together with any taxes thereon. If any such services are not
separately metered to the Premises, Lessee shall pay at Lessor's option,
either Lessee's share or a reasonable proportion to be determined by Lessor
of all charges jointly metered with other premises in the Building.
11.3 Hours of service. Said services and utilities shall be provided
during generally accepted business days and hours or such other days or hours
as may hereafter be set forth. Utilities and services required at other times
shall be subject to advance request and reimbursement by Lessee to Lessor of
the cost thereof.
11.4 Excess Usage by Lessee. Lessee shall not make connection to the
utilities except by or through existing outlets and shall not install or use
machinery or equipment in or about the Premises that uses excess water,
lighting or power, or suffer or permit any act that causes extra burden upon
the utilities or services, including but not limited to security services,
over standard office usage by the Office Building Project. Lessor shall
require Lessee to reimburse Lessor for any excess expenses or costs that may
arise out of a breach of this subparagraph by Lessee. Lessor may, in its sole
discretion, install at Lessee's expense supplemental equipment and/or
separate metering applicable to Lessee's excess usage or loading.
11.5 Interruptions. There shall be no abatement of rent and Lessor
shall not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor's
reasonable control or in cooperation with governmental request or directions.
12. Assignment and Subletting.
12.1 Lessor's Consent Required. Lessee shall not voluntarily or by
operation of law assign, transfer, mortgage, sublet, or otherwise transfer or
encumber all or any part of Lessee's interest in the Lease or in the
Premises, without Lessor's prior written consent, which Lessor shall not
unreasonably withhold. Lessor shall respond to Lessee's request for consent
hereunder in a timely manner and any attempted assignment, transfer,
mortgage, encumbrance or subletting without such consent shall be void, and
shall constitute a material default and breach of this Lease without the need
for notice to Lessee under paragraph 13.1. "Transfer" within the meaning of
this paragraph 12 shall include the transfer or transfers aggregating: (a) if
Lessee is a corporation, more than twenty-five percent (25%) of the voting
stock of such corporation, or (b) if Lessee is a
<PAGE>
partnership, more than twenty-five percent (25%) of the profit and loss
participation in such partnership.
12.2 Lessee Affiliate. Notwithstanding the provisions of paragraph
12.1 hereof, Lessee may assign or sublet the Premises, or any portion
thereof, without Lessor's consent, to any corporation which controls, is
controlled by or is under common control with Lessee, or to any corporation
resulting from the merger or consolidation with Lessee, or to any person or
entity which acquires all the assets of Lessee as a going concern at the
business that is being conducted on the Premises, all of which, are referred
to as "Lessee Affiliate"; provided that before such assignment shall be
effective, (a) said assignee shall assume, in full, the obligations of Lessee
under this Lease and (b) Lessor shall be given written notice of such
assignment and assumption. Any such assignment shall not, in any way, affect
or limit the liability of Lessee under the terms at this Lease even if after
such assignment or subletting the terms of this Lease are materially changed
or altered without the consent of Lessee, the consent of whom shall not be
necessary.
12.3 Terms and Conditions Applicable to Assignment and
Subletting.
(a) Regardless of Lessor's consent, no assignment or
subletting shall release Lessee of Lessee's obligations hereunder or alter
the primary liability of Lessee to pay the rent and other sums due Lessor
hereunder including Lessee's Share of Operating Expense Increase, and to
perform all other obligations to be performed by Lessee hereunder.
(b) Lessor may accept rent from any person other than
Lessee pending approval or disapproval of such assignment.
(c) Neither a delay in the approval or disapproval of such
assignment or subletting, nor the acceptance of rent, shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for the breach
of any of the terms or conditions of this paragraph 12 or this Lease.
(d) If Lessee's obligations under this Lease have been
guaranteed by third parties, then an assignment or sublease, and Lessor's
consent thereto, shall not be effective unless said guarantors give their
written consent to such sublease and the terms thereof.
(e) The consent by Lessor to any assignment or subletting
shall not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the sub
lessee. However, Lessor may consent to subsequent sub lettings and
assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable on the Lease or sublease and
without obtaining their consent and such action shall not relieve such
persons from liability under this Lease or said sublease; however, such
persons shall not be responsible to the extent any such amendment or
modification enlarges or increases the obligations of the Lessee or sub
lessee under this Lease or such sublease.
<PAGE>
(f) In the event of any default under this Lease, Lessor
may proceed directly against Lessee, any guarantors or any one else
responsible for the performance at this Lease, including the sub lessee,
without first exhausting Lessor's remedies against any other person or entity
responsible therefore to Lessor, or any security held by Lessor or Lessee.
(g) Lessor's written consent to any assignment or
subletting of the Premises by Lessee shall not constitute an acknowledgment
that no default then exists under this Lease of the obligations to be
performed by Lessee nor shall such consent be deemed a waiver of any then
existing default, except as may be otherwise stated by Lessor at the time.
(h) The discovery of the fact that any financial statement
relied upon by Lessor in giving its consent to an assignment or subletting
was materially false shall, at Lessor's election, render Lessor's said
consent null and void.
12.4 Additional Terms and Conditions Applicable to subletting.
Regardless of Lessor's consent, the borrowing terms and conditions shall
apply to any subletting by Lessee of all or any part of the Premises and
shall be deemed included in all subleases under this Lease whether or not
expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of
Lessee's interest in all rentals and income arising from any sublease
heretofore or hereafter made by Lessee, and Lessor may collect such rent and
income and apply same toward Lessee's obligations under this Lease; provided,
however, that until a default shall occur in the performance of Lessee's
obligations under this Lease, Lessee may receive, collect and enjoy the rents
accruing under such sublease. Lessor shall not, by reason of this or any
other assignment of such sublease to Lessor nor by reason of the collection
at the rents from a sub lessee, be deemed liable to the sub lessee for any
failure of Lessee to perform and comply with any of Lessee's obligations to
such sub lessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sub lessee, upon receipt of a written notice from Lessor
stating that a default exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor the rents due and to become due under the
sublease. Lessee agrees that such sub lessee shall have the right to rely
upon any such statement and request from Lessor, and that such sub lessee
shall pay such rents to Lessor without any obligation or right to inquire as
to whether such default exists and notwithstanding any notice from or claim
from Lessee to the contrary. Lessee shall have no right or claim against said
sub lessee or Lessor for any such rents so paid by said sub lessee to Lessor.
(b) No sublease entered into by Lessee shall be effective
unless and until it has been approved in writing by Lessor. In entering into
any sublease, Lessee shall use only such formal sub lessee as is satisfactory
to Lessor, and once approved by Lessor, such sublease shall not be changed or
modified without Lessor's prior written consent. Any sublease shall, by
reason of entering into a sublease under this Lease, be deemed, for the
benefit to Lessor, to have assumed and agreed to conform and comply with each
and every obligation herein to be performed by Lessee other than such
obligations as are contrary to or inconsistent with provisions contained in a
sublease to which Lessor has expressly consented in writing.
<PAGE>
(c) In the event Lessee shall default in the performance of
its obligations under this Lease, Lessor at its option and without any
obligation to do so, may require any sub lessee to attorn to Lessor, in which
event Lessor shall undertake the obligations of Lessee under such sublease
from the time of the exercise of said option to the termination of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents
or security deposit paid by such sub lessee to Lessee or for any other prior
defaults of Lessee under such sublease.
(d) No sub lessee shall further assign or sublet all or any
part of the Premises without Lessor's prior written consent.
(e) With respect to any subletting to which Lessor has
consented, Lessor agrees to deliver a copy of any notice of default by Lessee
to the sub lessee. Such sub lessee shall have the right to cure a default of
Lessee within three (3) days after service of said notice of default upon
such sub lessee, and the sub lessee shall have a right of reimbursement and
offset from and against Lessee for any such defaults cured by the sub lessee.
12.5 Lessors Expenses. In the event Lessee shall assign or
sublet the Premises or request the consent of Lessor to any assignment or
subletting or it Lessee shall request the consent of Lessor for any act
Lessee proposes to do then Lessee shall pay Lessor's reasonable costs and
expenses incurred in connection therewith, including attorneys', architects',
engineers' or other consultants' fees.
12.6 Conditions to Consent. Lessor reserves the right to
condition any approval to assign or sublet upon Lessor's determination that
(a) the proposed assignee or sub lessee shall conduct a business on the
Premises of a quality substantially equal to that of Lessee and consistent
with the general character of the other occupants of the Office Building
Project and not in violation of any exclusives or rights then held by other
tenants, and (b) the proposed assignee or sub lessee be at least as
financially responsible as Lessee was expected to be at the time of the
execution of this Lease or of such assignment or subletting, whichever is
greater.
13. Default; Remedies.
13.1 Default. The occurrence of any one or more of the following
events shall constitute a material default of this Lease by Lessee:
(a) The vacation or abandonment of the Premises by Lessee.
Vacation of the Premises shall include the failure to occupy the Premises for
a continuous period of sixty (60) days or more, whether or not the rent is
paid.
(b) The breach by Lessee of any of the covenants,
conditions or provisions of paragraphs 7.3(a), (b) or (d) (alterations), 12.1
(assignment or subletting), 13.1(a) (vacation or abandonment), 13.1(e)
(insolvency), 13.1(f) (false statement), 16(a) (estoppel certificate), 30(b)
(subordination), 33 (auctions), or 41.1 (easements), all of which are hereby
deemed to be material, non-curable defaults without the necessity of any
notice by Lessor to Lessee thereof.
<PAGE>
(c) The failure by Lessee to make any payment of rent or
any other payment required to be made by Lessee hereunder, as and when due
where such failure shall continue for a period of three (3) days after
written notice thereof from Lessor to Lessee, in the event that Lessor serves
Lessee with a Notice to Pay Rent or Quit pursuant to applicable Unlawful
Detainer statutes such Notice to Pay Rent or Quit shall also constitute the
notice required by this subparagraph.
(d) The failure by Lessee to observe or perform any of the
covenants, conditions or provisions of this Lease to be observed or performed
by Lessee other than those referenced in subparagraphs (b) and (c), above,
where such failure shall continue for a period of thirty (30) days after
written notice thereof from Lessor to Lessee; provided, however, that if the
nature at Lessee's noncompliance is such that more than thirty (30) days are
reasonably required for its cure, then Lessee shall not be deemed to be in
default if Lessee commenced such cure within said thirty (30) day period and
thereafter diligently pursues such cure to completion. To the extent
permitted by law, such thirty (30) day notice shall constitute the sole and
exclusive notice required to be given to Lessee under applicable Unlawful
Detainer statutes.
(e) (i) The making by Lessee of any general arrangement or
general assignment for the benefit of creditors; (ii) Lessee becoming a
"debtor" as defined in 11 U.S.C. Section 101 or any successor statute thereto
(unless, in the case of a petition filed against Lessee, the same is
dismissed within sixty (60) days; (iii) the appointment of a trustee or
receiver to take possession or substantially all of Lessee's assets located
at the Premises or of Lessee's interest in his Lease, where possession is not
restored to Lessee within thirty (30) days; or (iv) the attachment, execution
or other judicial seizure of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where such seizure is not
discharged within thirty (30) days. In the event that any provisional this
paragraph 13.1(e) is contrary to any applicable law, such provision shall be
of no force or effect.
(f) The discovery by Lessor that any financial statement
given to Lessor by Lessee, or its successor in interest or by any guarantor
of Lessee's obligation hereunder, was materially false.
13.2 Remedies. In the event of any material default or breach of
this Lease by Lessee, Lessor may at any time thereafter, with or without
notice or demand and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason at such default:
(a) Terminate Lessee's right to possession of the Premises
by any lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the Premises
to Lessor. In such event Lessor shall be entitled to recover from Lessee all
damages incurred by Lessor by reason at Lessee's default including, but not
limited to, the cost of recovering possession of the Premises; expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorneys' fees, and any real estate commission actually paid; the
worth at the time of award by the court having jurisdiction thereof of the
amount by which the unpaid rent for the balance of the term after the time of
such award exceeds the amount of such rental loss for the same period that
Lessee proves could be reasonably
<PAGE>
avoided; that portion of the leasing commission paid by Lessor pursuant to
paragraph 15 applicable to the unexpired term of this Lease.
(b) Maintain Lessee's right to possession in which case
this Lease shall continue in effect whether or not Lessee shall have vacated
or abandoned the Premises. In such event Lessor shall be entitled to enforce
all of Lessor's rights and remedies under this Lease, including the right to
recover the rent as it becomes due hereunder.
(c) Pursue any other remedy now or hereafter available to
Lessor under the laws or judicial decisions of the state wherein the Premises
are located. Unpaid installments of rent and other unpaid monetary
obligations of Lessee under the terms of this Lease shall bear interest from
the date due at the maximum rate then allowable by law.
13.3 Default by Lessor. Lessor shall not be in default unless
Lessor fails to perform obligations required of Lessor within a reasonable
time but in no event later than thirty (30) days after written notice by
Lessee to Lessor and to the holder of any first mortgage or deed of trust
covering the Premises whose name and address shall have theretofore been
furnished to Lessee in writing, specifying wherein Lessor has failed to
perform such obligation; provided, however, that if the nature of Lessor's
obligation is such that more than thirty (30) days are required for
performance then Lessor shall not be in default if Lessor commences
performance within such 30- day period and thereafter diligently pursues the
same to completion.
13.4 Late Charges. Lessee hereby acknowledges that late payment
by Lessee to Lessor of Base Rent, Lessee's Share of Operating Expense
Increase or other sums due hereunder will cause Lessor to incur costs not
contemplated by this Lease, the exact amount of which will be extremely
difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed on
Lessor by the terms of any mortgage or trust deed covering the Office
Building Project. Accordingly, if any installment of Base Rent, Operating
Expense Increase, or any other sum due from Lessee shall not be received by
Lessor or Lessor's designee within five (5) days after such amount shall be
due, then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a late charge equal to 6% of such overdue amount. The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of late payment by Lessee. Acceptance of
such late charge by Lessor shall in no event constitute a waiver of Lessee's
default with respect to such overdue amount, nor prevent Lessor from
exercising any of the other rights and remedies granted hereunder.
14. Condemnation. If the Premises or any portion thereat or the Office
Building Project are taken under the power of eminent domain, or sold under
the threat of the exercise of said power (all of which are herein called
"condemnation"), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first
occurs; provided that if so much of the Premises or the Office Building
Project are taken by such condemnation as would substantially and adversely
affect the operation and profitability of Lessee's business conducted from
the Premises, Lessee shall have the option, to be exercised only in writing
within thirty (30) days after Lessor shall have given Lessee written notice
of such taking (or in the
<PAGE>
absence of such notice, within thirty (30) days after the condemning
authority shall have taken possession), to laminate this Lease as of the date
the condemning authority takes such possession, if Lessee does not terminate
this Lease in accordance with the foregoing, this Lease shall remain in full
force and effect as to the portion of the Premises remaining, except that the
rent and Lessee's Share of Operating Expense Increase shall be reduced in the
proportion that the floor area of the Premises taken bears to the first floor
area of the Premises. Common Areas taken shall be excluded from the Common
Areas usable by Lessee and no reduction of rent shall occur with respect
thereto or by reason thereof. Lessor shall have the option in its sole
discretion to terminate this Lease as of the taking of possession by the
condemning authority, by giving written notice to Lessee of such election
within thirty (30) days after receipt of notice of a taking by condemnation
of any part of the Premises or the Office Building Project. Any award for the
taking of all or any part of the Premises or the Office Building Project
under the power of eminent domain or any payment made under threat of the
exercise of such power shall be the property of Lessor, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that
Lessee shall be entitled to any separate award for loss of or damage to
Lessee's trade fixtures, removable personal property and unamortized tenant
improvements that have been paid for by Lessee. For that purpose the cost of
such improvements shall be amortized over the original term of this Lease
excluding any options. In the event that this Lease is not terminated by
reason of such condemnation, Lessor shall to the extent of severance damages
received by Lessor in connection with such condemnation, repair any damage to
the Premises caused by such condemnation except to the extent that Lessee has
been reimbursed therefore by the condemning authority. Lessee shall pay any
amount in excess of such severance damages required to complete such repair.
15. Broker's Fee.
(a) The brokers involved in this transaction are South Park Group,
Inc. as "listing broker" and Grubb & Ellis as "cooperating broker," licensed
real estate broker(s). A "cooperating broker" is defined as any broker other
than the listing broker entitled to a share of any Commission arising under
this Lease. Upon execution of this Lease by both parties, Lessor shall pay to
said brokers jointly, or in such separate shares as they may mutually
designate in writing, a fee as set forth in a separate agreement between
Lessor and said broker(s), or in the event there is no separate agreement
between Lessor and said broker(s), the sum of as per separate agreement for
brokerage services rendered by said broker(s) to Lessor in this transaction.
(b) Lessor further agrees that (i) If Lessee exercises any Option,
as defined in paragraph 39.1 of this Lease, which is granted to Lessee under
this Lease, or any subsequently granted option which is substantially similar
to an Option granted to Lessee under this Lease, or (ii) if Lessee acquires
any rights to the Premises or of her premises described in this Lease which
are substantially similar to what Lessee would have acquired had an Option
herein granted to Lessee been exercised, or (iii) if Lessee remains in
possession of the Premises after the expiration of the term of this Lease
after having failed to exercise an Option, or (iv) if said broker(s) are the
procuring cause of any other lease or sale entered into between the parties
pertaining to the Premises and/or any adjacent property in which Lessor has
an interest, or (v) if the Base Rent is increased, whether by agreement or
operation of an escalation clause contained herein, then as to
<PAGE>
any of said transactions or rent increases, Lessor shall pay said broker(s) a
fee in accordance with the schedule at said broker(s) in effect at the time
of execution of this Lease. Said fee shall be paid at the time such increased
rental is determined.
(c) Lessor agrees to pay said fee not only on behalf of Lessor but
also on behalf of any person, corporation, association, or other entity
having an ownership interest in said real property or any part thereof, when
such fee is due hereunder any transferee at Lessor's interest in this Lease,
whether such transfer is by agreement or by operation of law, shall be deemed
to have assumed Lessor's obligation under this paragraph 15. Each listing and
cooperating broker shall be a third party beneficiary of the provisions of
this paragraph 15 to the extent of their interest in any commission arising
under this Lease and may enforce that right directly against Lessor;
provided, however, that all brokers having a right to any part of such total
commission shall be a necessary party to any suit with respect thereto.
(d) Lessee and Lessor each represent and warrant to the other that
neither has had any dealings with any person, firm, broker or finder (other
than the person(s), if any, whose names are set forth in paragraph 15(a),
above), in connection with the negotiation of this Lease and/or the
consummation of the transaction contemplated hereby, and no other broker or
other person, firm or entity is entitled to any commission or finder's fee in
connection with said transaction and Lessee and Lessor do each hereby
indemnity and hold the other harmless from and against any costs, expenses,
attorneys' fees or liability for compensation or charges which may be claimed
by any such unnamed broker, under or other similar party by reason of any
dealings or actions of the indemnifying party.
16. Estoppel Certificate.
(a) Each party (as "responding party") shall at any time upon not
less than ten (10) days' prior written notice from the other party
("requesting party") execute, acknowledge and deliver to the requesting party
a statement in writing (i) certifying that this Lease is unmodified and in
full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are not, to the responding
party's knowledge, any uncured defaults on the part of the requesting party,
or specifying such defaults if any are claimed. Any such statement may be
conclusively relied upon by any prospective purchaser or encumbrancer of the
Office Building Project or of the business of Lessee.
(b) At the requesting party's option, the failure to deliver such
statement within such time shall be a material default of this Lease by the
party who is to respond, without any further notice to such party, or it
shall be conclusive upon such party that (i) this Lease is in full force and
effect, without modification except as may be represented by the requesting
party, (ii) there are no uncured defaults in the requesting party's
performance, and (iii) if Lessor is the requesting party, not more than one
month's rent has been paid in advance.
(c) If Lessor desires to finance, refinance, or sell the Office
Building Project, or any part thereof, Lessee hereby agrees to deliver to any
lender or purchaser designated by Lessor such
<PAGE>
financial statements of Lessee as may be reasonably required by such lender
or purchaser. Such statements shall include the past three (3) years'
financial statements of Lessee. All such financial statements shall be
received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.
17. Lessor's Liability. The term "Lessor" as used herein shall mean only the
owner or owners, at the time in question, of the fee title or a lessee's
interest in a ground lease of the Office Building Project, and except as
expressly provided in paragraph 15, in the event at any transfer of such
title or interest, Lessor herein named (and in case of any subsequent
transfers then the grantor) shall be relieved from and after the sale of such
transfer of all liability as respects Lessor's obligations thereafter to be
performed, provided that any funds in the hands of Lessor or the then grantor
at the time of such transfer, in which Lessee has an interest, shall be
delivered to the grantee. The obligations contained in this Lease to be
performed by Lessor shall, subject as aforesaid, be binding on Lessor's
successors and assigns, only during their respective periods of ownership.
18. Severability. The invalidity of any provision of this Lease as determined
by a court of competent jurisdiction shall in no way affect the validity of
any other provision hereof.
19. Interest on Past-due Obligations. Except as expressly herein provided,
any amount due to Lessor not paid when due shall bear interest at the maximum
rate then allowable by law or judgments from the date due. Payment of such
interest shall not excuse or cure any default by Lessee under this Lease;
provided, however, that interest shall not be payable on late charges
incurred by Lessee nor on any amounts upon which late charges are paid by
Lessee.
20. Time of Essence. Time is of the essence with respect to the obligations
to be performed under this Lease.
21. Additional Rent. All monetary obligations of Lessee to Lessor under the
terms of this Lease, including but not limited to Lessee's Share of Operating
Expense Increase and any other expenses payable by Lessee hereunder shall be
deemed to be rent.
22. Incorporation of Prior Agreements; Amendments. This Lease contains all
agreements of the parties with respect to any matter mentioned herein. No
prior or contemporaneous agreement or understanding pertaining to any such
matter shall be effective. This Lease may be modified in writing only, signed
by the parties in interest at the time of the modification, except as
otherwise stated in this Lease. Lessee hereby acknowledges that neither the
real estate broker listed in paragraph 15 hereof nor any cooperating broker
on this transaction nor the Lessor or any employee or agents of any at said
persons has made any oral or written-warrantees or representations to Lessee
relative to the condition or use by Lessee of the Premises or the Office
Building Project and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use
and adaptability of the Premises and the compliance thereof with all
applicable laws and regulations in effect during the term of this Lease.
23. Notices. Any notice required or permitted to be given hereunder shall be
in writing and may be given by personal delivery or by certified or
registered mail, and shall be deemed
<PAGE>
sufficiently given if delivered or addressed to Lessee or to Lessor at the
address noted below or adjacent to the signature of the respective parties,
as the case may be. Mailed notices shall be deemed given upon actual receipt
at the address required, or forty-eight hours following deposit in the mail,
postage prepaid, whichever first occurs. Either party may by notice to the
other specify a different address for notice purposes except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice purposes. A copy of all notices required or
permitted to be given to Lessor hereunder shall be concurrently transmitted
to such party or parties at such addresses as Lessor may from time to time
hereafter designate by notice to Lessee.
24. Waivers. No waiver by Lessor of any provision hereof shall be deemed a
waiver of any other provision hereof or of any subsequent breach by Lessee of
the same or any other provision. Lessor's consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor's consent
to or approval of any subsequent act by Lessee. The acceptance of rent
hereunder by Lessor shall not be a waiver of any preceding breach by Lessee
of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor's knowledge of such
preceding breach at the time of acceptance of such rent.
25. Recording. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the others "short form" memorandum of
this Lease for recording purposes.
26. Holding Over. If Lessee, with Lessor's consent, remains in possession of
the Premises or any part thereof after the expiration of the term hereof,
such occupancy shall be a tenancy from month to month upon all the provisions
of this Lease pertaining to the obligations of Lessee, except that the rent
payable shall be two hundred percent (200%) of the rent payable immediately
preceding the termination date of this Lease, and all Options, if any,
granted under the terms of this Lease shall be deemed terminated and be of no
further effect during said month to month tenancy.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. Covenants and Conditions. Each provision of this Lease performable by
Lessee shall be deemed both a covenant and a condition.
29. Binding Effect; Choice of Law. Subject to any provisions hereof
restricting assignment or subletting by Lessee and subject to the provisions
of paragraph 17, this Lease shall bind the parties, their personal
representatives, successors and assigns. This Lease shall be governed by the
laws of the State where the Office Building Project is located and any
litigation concerning this Lease between the parties hereto shall be
initiated in the county in which the Office Building Project is located.
30. Subordination. See Paragraph 53 of Addendum
<PAGE>
31. Attorneys' Fees.
31.1 If either party or the broker(s) named herein bring an action
to enforce the terms hereof or declare rights hereunder, the prevailing party
in any such action, trial or appeal thereon, shall be entitled to his
reasonable attorneys' fees to be paid by the losing party as fixed by the
court in the same or a separate suit, and whether or not such action is
pursued to decision or judgment. The provisions of this paragraph shall inure
to the benefit of the broker named herein who seeks to enforce a right
hereunder.
31.2 The attorneys' fee award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred in good faith.
31.3 Lessor shall be entitled to reasonable attorneys' fees and all
other costs and expenses incurred in the preparation and service of notice at
default and consultations in connection therewith, whether or not a legal
transaction is subsequently commenced in connection with such default.
32. Lessor's Access.
32.1 Lessor and Lessor's agents shall have the right to enter the
Premises at reasonable times for the purpose of inspecting the same,
performing any services required of Lessor, showing the same to prospective
purchasers, lenders, or lessees, taking such safety measures, erecting such
scaffolding or other necessary structures, making such alterations, repairs,
improvements or additions to the Premises or to the Office Building Project
as Lessor may reasonably deem necessary or desirable and the erecting, using
and maintaining of utilities, services, pipes and conduits through the
Premises and/or other premises as long as there is no material adverse effect
to Lessee's use of the Premises. Lessor may at any time place on or about the
Premises or the Building any ordinary "For Sale" signs and Lessor may at any
time during the last 120 days of the term hereof place on or about the
Premises any ordinary "For Lease" signs.
32.2 All activities of Lessor pursuant to this paragraph shall be
without abatement of rent, nor shall Lessor have any liability to Lessee for
the same.
32.3 Lessor shall have the right to retain keys to the Premises and
to unlock all doors in or upon the Premises other than to files, vaults and
safes, and in the case of emergency to enter the Premises by any reasonably
appropriate means, and any such entry shall not be deemed a forceable or
unlawful entry or defamer of the Premises or an eviction. Lessee waives any
charges for damages or injuries or interference with Lessee's property or
business in connection therewith.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, either
voluntarily or involuntarily, any auction upon the Premises or the Common
Areas without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether
to grant
<PAGE>
such consent. The holding of any auction on the Premises or Common Areas in
violation at this paragraph shall constitute a material default of this Lease.
34. Signs. Lessee shall not place any sign upon the Premises or the Office
Building Project without Lessor's prior written consent. Under no
circumstances shall Lessee place a sign on any roof of the Office Building
Project.
35. Merger. The voluntary or other surrender of this Lease by Lessee, or a
mutual cancellation thereof, or a termination by Lessor, shall not work a
merger, and shall, at the option of Lessor, terminate all or any existing
subtenancies or may, at the option of Lessor, operate as an assignment to
Lessor of any or all of such subtenancies.
36. Consents. Except for paragraphs 33 (auctions) and 34 (signs) hereof,
wherever in this Lease the consent of one party is required to an act of the
other party such consent shall not be unreasonably withheld or delayed.
37. Guarantor. In the event that there is a guarantor of this Lease, said
guarantor shall have the same obligations as Lessee under this Lease.
38. Quiet Possession. Upon Lessee paying the rent for the Promises and
observing and performing all of the covenants, conditions and provisions on
Lessee's part to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all at the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such
Execution is binding upon all parties holding an Ownership interest in the
Office Building Project.
39. Options. None
(section deleted)
40. Security Measures - Lessor's Reservations.
40.1 Lessee hereby acknowledges that Lessor shall have no obligation
whatsoever to provide guard service or other security measures for the
benefit of the Premises or the Office Building Project. Lessee assumes all
responsibility for the protection of Lessee, its agents, and invitees and the
property of Lessee and of Lessee's agents and invitees from acts of third
parties. Nothing herein contained shall prevent Lessor, at Lessor's sole
option, from providing security protection for the Office Building Project or
any part thereof, in which event the cost thereof shall be included within
the definition of Operating Expenses, as set forth in paragraph 4.2(b).
40.2 Lessor shall have the following rights:
(a) To change the name, address or title of the Office
Building Project or building in which the Premises are located upon not less
than 90 days prior written notice:
<PAGE>
(b) To, at Lessees expense, provide and install Building
standard graphics on the door of the Premises and such portions of the Common
Areas as Lessor shall reasonably deem appropriate;
(c) To permit any lessee the exclusive right to conduct any
business as long as such exclusive does not conflict with any rights
expressly given herein;
(d) To place such signs, notices or displays as Lessor
reasonably deems necessary or advisable upon the roof, exterior of the
buildings or the Office Building Project or on pole signs in the Common Areas:
40.3 Lessee shall not:
(a) Use a representation (photographic or otherwise) of the
Building or the Office Building Project or their name(s) in connection with
Lessee's business;
(b) Suffer or permit anyone, except in emergency, to go
upon the roof of the Building.
41. Easements.
41.1 Lessor reserves to itself the right, from time to time, to
grant such easements, rights and dedications that Lessor deems necessary or
desirable, and to cause the recordation of Parcel Maps and restrictions, so
long as such easements, rights, dedications, maps and restrictions do not
unreasonably interfere with the use of the Premises by Lessee. Lessee shall
sign any at the aforementioned documents upon request of Lessor and failure
to do so shall constitute a material default of this Lease by Lessee without
the need for further notice to Lessee.
41.2 The obstruction of Lessee's view, air, or light by any
structure erected in the vicinity of the Building, whether by Lessor or third
parties, shall in no way affect this Lease or impose any liability upon
Lessor.
42. Performance Under Protest. If at anytime a dispute shall arise as to any
amount or sum of money to be paid by one party to the other under the
provisions hereof, the party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment, and there shall survive
the right on the part of said party to institute suit for recovery of such
sum. If it shall be adjudged that there was no legal obligation on the part
of said party to pay such sum or any part thereof, said party shall be
entitled to recover such sum or so much thereof as it was not legally
required to pay under the provisions of this Lease.
43. Authority. If Lessee is a corporation, trust, general or limited
partnership, Lessee, and each individual executing this Lease on behalf of
such entity represent and warrant that such individual is duly authorized to
execute and deliver this Lease on behalf of said entity. If Lessee is
<PAGE>
a corporation trust or partnership, Lessee shall, within thirty (30) days
after execution of this Lease, deliver to Lessor evidence of such authority
satisfactory to Lessor.
44. Conflict. Any Conflict between the printed provisions, Exhibits or
Addenda of this Lease and the typewritten or handwritten provisions, if any,
shall be controlled by the typewritten or handwritten provisions.
45. No Offer. Preparation of his Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to Lessee to lease.
This Lease shall become binding upon Lessor and Lessee only when fully
executed by both parties.
46. Lender Modification. Lessee agrees to make such reasonable modifications
to this Lease as may be reasonably required by an institutional lender in
connection with the obtaining of normal financing or refinancing of the
Office Building Project.
47. Multiple Parties. If more than one person or entity is named as either
Lessor or Lessee herein, except as otherwise expressly provided herein, the
obligations of the Lessor or Lessee herein shall be the joint and several
responsibility of all persons or entities named herein as such Lessor or
Lessee, respectively.
48. Work Letter. This Lease is supplemented by that certain Work Letter of
even date executed by Lessor and Lessee, attached hereto as Exhibit C, and
incorporated herein by this reference.
49. Attachments. Attached hereto are the following documents which constitute
a part of this Lease:
Addendum to Standard Office Lease
Exhibit A -- Standard Office Lease Floor Plan
Exhibit B -- Rules & Regulations for Standard Office Lease
Exhibit C -- Work Letter to Standard Office Lease
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM
AND PROVISION CONTAINED HEREIN AND, BY EXECUTION OF THIS LEASE, SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL
ESTATE BROKER OR ITS AGENTS OP EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
<PAGE>
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
RELATING THERETO; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF
THEIR OWN LEGAL COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE.
LESSOR LESSEE
Daishin U.S.A. Co., Ltd. Total Film Group
By: /s/ Haruhiko Machida By: /s/ Gerald Green
Its: Vice President Its: C.E.O.
Date: 3-6-97
Executed at Beverly Hills Executed at Beverly Hills
Address: 9107 Wilshire Blvd. Address: 1401 Parkway
Beverly Hills, CA 90210 Beverly Hills, CA 90210
<PAGE>
EXHIBIT 6.34
As of November 17, 1999
Alma U.K. Production, Limited
c/o Total Film Group Inc.
9107 Wilshire Blvd., Suite #475
Beverly Hills, CA 90210
Attn: Gerald Green
Re: "BRIDE OF THE WIND"
Gentlemen:
This letter confirms the agreement between Paramount Classics ("PC"), a
division of Paramount Pictures Corporation, and Alma U.K. Production, Limited
("Producer") in connection with the motion picture currently entitled "BRIDE
OF THE WIND" (the "Picture"). The material terms and conditions are as
follows:
1. Conditions Precedent: PC shall have no obligation under this Agreement
until PC has received (in form and substance satisfactory to PC) and
approved the complete chain-of- title for the Picture. The parties
shall have no obligations under this Agreement with respect to the
Picture, if Producer does not complete the Picture.
2. Territory: United States and Canada (excluding French language rights
in Canada), as customarily defined by PC, all on a fully-crossed basis.
For avoidance of doubt, PC shall have the right to distribute the
English language version of the Picture throughout Canada.
3. Term: 17 years. PC shall have a first negotiation on all post-term
distribution and other rights granted to PC.
4. Rights: Subject to the reserved rights and the terms hereof, Producer
hereby grants to PC exclusively, during the Term in the Territory, all
rights of every kind, in and relating to the Picture including, without
limitation, the exclusive right to distribute, exhibit, reissue,
advertise, promote or otherwise exploit the Picture, in all media
(other than non- theatrical), in all versions and all languages, by any
and every means and devices now known or hereafter devised. Producer
hereby grants PC a first position security interest in the Picture to
secure PC' s rights subject to customary financier requirements.
Producer shall sign appropriate documentation to further evidence the
above.
Remake, sequel, and television production rights are reserved to
Producer, and no such rights shall be exploited prior to the expiration
of two (2) years after the initial general theatrical release of the
Picture in the Territory. Non-theatrical, soundtrack album, music
publishing, print publishing, and merchandising rights are reserved to
Producer. PC shall have a right of first negotiation with respect to
merchandising rights. If no agreement is reached within 15 business
days after PC receives a notice from Producer that it intends to
<PAGE>
dispose the merchandising rights, Producer shall be free to negotiate
elsewhere with respect to the merchandising rights.
5. Advance/P&A: For avoidance of doubt, Producer is entitled to no advance
and no funding of P&A. Producer shall provide up to Ten Million Dollars
($10,000,000) in P&A. If PC is required to expend any P&A sums to be
provided by Producer hereunder, Producer shall advance such sums to PC,
in accordance with a mutually agreed upon schedule, for each Picture.
Provided that Producer provides the P&A, PC shall have the obligation
to release the Picture theatrically in accordance with the P&A provided
by Producer. PC shall efforts to release the Picture in all other
media.
6. Distribution Fees: Continuing 12 1/2 % fee for
theatrical, home video,
Continuing 15% fee for all forms of
television;
7. Application of Gross Receipts: PC shall receive, on a continuing basis,
its distribution fee, and its distribution costs (including video costs
and Residual payments), all in accordance with PC's customary
definition. Thereafter, the balance of proceeds shall be remitted to
Producer. PC shall have the right to incur reasonable and customary
direct (but not overhead) distribution costs, including video costs,
but not including P&A costs, without the approval of Producer.
8. Delivery: Producer shall provide PC with delivery (satisfactory to PC)
of those Mandatory Delivery Items specified in the delivery schedule
attached hereto on or before a date to be mutually approved by both
parties (the "Mandatory Delivery Date"). Producer shall provide PC with
delivery (satisfactory to PC) of the balance of the items, including
documents, specified in the delivery schedule attached hereto on or
before a date to be mutually approved by both parties. In order to
assist PC in preparing marketing materials for the Picture, Producer
shall use reasonable efforts to provide PC with access to any materials
requested by PC before the Mandatory Delivery Date.
9. Home Video: One hundred percent (100%) of revenues received by PC (or
its home video subsidiary) in connection with the home video
exploitation of the Picture shall be included in the gross receipts of
the Picture and such revenues shall be subject to the Distribution Fee
as set forth in Paragraph 6 above. Producer shall have mutual approval
with PC as to the home video release, campaign, and budget.
10. Participations and Residuals: Producer shall be responsible for all
third party participations and deferments. PC shall advance collective
bargaining payments and guild and union residuals (collectively
"Residuals") in the Territory during the Term, provided Producer
advises PC in writing with all information necessary to make such
Residual payments prior to delivery of the Picture to PC. PC shall be
entitled to recoup any such Residual payments as distribution costs
under Paragraph 7. With respect to such Residual payments and provided
that Producer has provided PC with the information as set forth above,
PC shall sign customary guild distributor assumption agreements.
<PAGE>
11. Picture Elements: The Picture, as delivered, shall have a running time
between 85-120 minutes, shall not exceed a "R" rating, and shall
substantially conform to the screenplays reviewed by Ruth Vitale and
David Dinerstein.
12. Marketing Materials/Media Buy: Producer shall directly place the media
buys through Western Media in consultation with PC. Producer, through
Total Creative, Inc., shall create the marketing materials for the
Picture, in consultation with PC. Producer may (but shall not be
obligated to) purchase prints through PC, and if it purchases prints
through PC, it shall receive the benefits of PC pricing and rebates to
the extent such priding and rebates are made available to other
producers which are wholly financing production and providing all
domestic P&A.
13. Budget Minimums: The aggregate all-in "Negative Cost" (i.e., the total
of all amounts paid to bona fide third parties for the financing and
production of the motion picture) of the Picture shall not be less than
Twelve Million Five Hundred Thousand Dollars ($12,500,000).
14. Cutting and Editing. Provided that the Picture is delivered to PC in
accordance with Paragraph 11 of this Agreement, PC shall have the right
to cut or edit the Picture only to cause the Picture to comply with
standards and practices (broadcast, airline and otherwise), commercial
breaks, potential or actual legal claims, censorship, rating (as set
forth above), television, non-theatrical and panning and scanning
requirements in the Territory. With respect to such cuts or edits,
subject to PC's release exigencies and budgetary requirements, the
director of the Picture ("Director") shall be given the first
opportunity to physically make such cuts or edits, provided that
Director notifies PC within five (5) business days after receipt of
PC's notice that Director is ready, willing and able to make the
required cuts or edits as and when required by PC. PC shall use
reasonable efforts to notify its third party licensees of the foregoing
cutting and editing rights; provided that no third party failure nor
any casual or inadvertent failure by PC to comply with the immediately
preceding sentence shall constitute a breach or default of this
Agreement.
15. Holdbacks: Producer shall comply with PC's customary holdbacks,
including without limitation, with respect to Mexican and
French-language Canadian pay, free, and basic television.
16. Option on Next Picture: PC shall have the exclusive, irrevocable option
to distribute the next motion picture produced by Producer (or any
subsidiary of Producer) which Producer intends to release on a
rent-a-system basis, on the terms set forth herein. Such option may be
exercisable not later than seventy-two hours after Producer submits the
screenplay to PC.
17. Representations and Warranties: Producer represents and warrants that
it has the full right, power and authority to enter into this agreement
and to grant PC all the Rights herein granted.
<PAGE>
18. Short Form Assignment: Producer shall deliver to PC the Short Form
Assignment, attached hereto and incorporated herein, signed and
notarized on its behalf.
19. Further Agreements: PC agrees to enter into customary bank/other
financier and completion bond documentation, subject to PC' s
reasonable and customary requirements in connection therewith. PC shall
act in good faith and in a timely manner so as not to frustrate
Producer's timely financing arrangements. The balance of the terms
applicable to this agreement shall be negotiated in good faith in
accordance with PC's customary parameters. Unless or until execution of
the Binding Term Sheet, this letter agreement shall be the final and
binding understanding between the parties and shall be governed by the
laws of the state of California, U.S., as though it had been fully
negotiated and signed in that jurisdiction.
Best regards.
Sincerely,
Karen Magid, on behalf of,
Paramount Classics, a division of Paramount Pictures Corporation
ACCEPTED AND AGREED:
Alma U.K. Production, Limited.
By: /s/ Leon Morgan
Its: Director
<PAGE>
SHORT FORM ASSIGNMENT
As of November 17, 1999
KNOW ALL MEN BY THESE PRESENTS that, pursuant to and subject to an agreement
("Agreement") dated November 17, 1999 between Paramount Classics, a division
of Paramount Pictures Corporation ("PC") and Alma U.K. Production, Limited
("Producer"), the following shall apply with respect to that certain motion
picture presently entitled "BRIDE OF THE WIND" (the "Picture").
Subject to the terms of the aforesaid Agreement, and for good and valuable
consideration, receipt of which is hereby acknowledged, Producer hereby
irrevocably grants and assigns to PC, its successors and assigns, for the
"Term" (as defined in the Agreement) and throughout the "PC Territory" (as
defined in the Agreement) under copyright (including all extended and renewal
terms thereof), and without limitation, the sole and exclusive distribution
rights in and to the Picture and all other exploitation rights, other than
the reserved rights as specified in the Agreement, with respect thereto, in
any and all media and by any and all means (whether now known or hereafter
devised), subject to and in accordance with all of the terms and conditions
of said Agreement.
Alma U.K. Production, Limited
By: /s/ Leon Morgan
Its: Director
<PAGE>
UNITED KINGDOM OF GREAT BRITAIN
ENGLAND, CITY OF LONDON
STATE OF ____________________)
COUNTY OF __________________)
On 16th March 2000, before me, MARTIN JOHN SCANNALL , a Notary
Public, personally appeared LEON RHYS MORGAN
proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is subscribed to the within instrument, and
acknowledged that he executed the same in his authorized capacity, and that
by his signature(s) on the instrument the person(s) or the entity upon behalf
of which the person(s) acted, executed the instrument.
WITNESS my hand and official seal.
/s/ M J Scannall
Signature of Notary
OPTIONAL SECTION:
CAPACITY CLAIMED BY SIGNER:
__ Individual __ Trustee
__ Corporate Officer(s) __ Guardian/Conservator
__ Partner(s) __ Other
__ Attorney-in-fact
SIGNER IS REPRESENTING:
(Self or name of person(s) or entity[ies])
- ------------------------------------------------------------------------------
This certificate must be attached TITLE OF DOCUMENT
to the document described at right: -----------------
NUMBER OF PAGES
-----------------
DATE OF DOCUMENT
-----------------
SIGNER(S) OTHER THAN
--------------
NAMED ABOVE
----- -----------------
<PAGE>
DELIVERY SCHEDULE
Schedule of delivery items under agreement (the "Agreement") dated as of
November 1 7, 1999 between PARAMOUNT CLASSICS ("PC"), a division of Paramount
Pictures Corporation, a Delaware corporation and Alma U.K. Production,
Limited ("Producer"), relating to the proposed feature-length theatrical
motion picture entitled "BRIDE OF THE WIND" (the "Picture"). The items below
marked with an asterisk are Mandatory Delivery Items and must be delivered to
PC on or before the Mandatory Delivery Date as set forth in the Agreement.
A. If the picture shall be in standard color:
1. Original Picture and Soundtrack Negative (Deliver to
Post Production):
* (a) Original Picture Negative: The original first-class
completely edited color 35mm picture negative, fully
timed (access to which is guaranteed by a laboratory
letter in the form attached to the Agreement as
Exhibit "C", subject only to the changes, if any,
that may be mutually agreed upon in writing after
good faith negotiations, shall be deemed satisfactory
delivery of this item); and
* (b) Original Optical Soundtrack Negative: Access to the
original and delivery of one copy of a first-class
completely edited 35mm synchronizing optical
soundtrack negative (including combined dialogue,
sound effects and music) on estar base stock made
from the original magnetic soundtrack described in
Paragraph 5 below (access to which is guaranteed by a
laboratory letter in the form attached to the
Agreement as Exhibit "C" shall be deemed satisfactory
delivery of this item).
The elements listed in subparagraphs (a) and (b) above are to
be without scratches or injury, so that clear first-class
composite positive prints can be made therefrom in order to
properly exhibit and perform the Picture, and in order to
properly reproduce the recorded sound of the Picture and the
musical compositions included in the score thereof in
synchronism with the photographic action of the Picture.
* 2. Interpositive (Deliver to Post Production):
One technically first class 35mm interpositive of the Picture.
The Interpositives shall be fully cut, main and end titled,
edited and assembled and conformed in all respects to the
composite answer print, and original negative. The
Interpositive must be manufactured in first generation from
the original picture negative after the answer print has been
manufactured. The interpositive to be exact duplicate of
Original Negative.
* 3. Internegative (Deliver to Post Production):
<PAGE>
One technically first class 35mm Estar Internegatives of the
Picture, made from the first generation Interpositive
manufactured from the original negative, from which positive
release prints of the Picture can be struck. The internegative
to be struck from Item A2.
* 4. Check Print (Deliver to Post Production):
One complete, final, technically first class composite 35mm
prints of the Picture, fully color corrected to release print
standards fully cut, main and end titled, edited, scored and
assembled and conformed in all respects to the answer print.
The check print will be struck from Items A3 and A4.
5. Intentionally Deleted.
* 6. Answer Print (Deliver to Post Production):
A first-class completely edited 35mm composite answer print
from the original negative, fully timed and color-corrected,
made from the items in Paragraphs 1(a) and (b) above.
* 7. Textless Backgrounds & Overlays: Titles and Texted Scenes
(Deliver to Post Production):
Delivery of the master negative, a corresponding daily print,
and one (1) set of first-class completely edited color 35mm
Interpositives (or fine grains if the Picture is produced in
black-and-white) made from the original camera Negative of the
following:
(a) If the titles are shot over the Picture (i.e., not if
they are shot over black) all main title and end
title textless backgrounds, without lettering; and
(b) If the titles are shot over the Picture (i.e., not if
they are shot over black) textless backgrounds,
without lettering of any forewords and/or other
scenes carrying superimposed titles.
* 8. Original Magnetic Soundtrack (Deliver to Post Production):
Access to the original and delivery of one copy of the
original monaural master track (whether the Picture is
recorded using a monaural or stereo format) on 35mm magnetic
film on which are recorded three separate signals, one
including all dialogue, one including all sound effects and
one including all music, each in synchronization with the
others and all in synchronization with the Original Picture
Negative (described in Paragraph A.1.(a) above.
<PAGE>
If the Picture is (or shall be) recorded in four or six track
stereo, in addition to the above monaural split dialogue,
music, effects master, the following items must also be
delivered (all items must be in synchronization with the
Original Picture Negative):
(a) Access to the original and delivery of one copy of
the final 35mm magnetic two track stereo matrixed
Print Master and if there is a digital mix, then
delivery of the 6 track digital print master;
(b) Access to the final 35mm magnetic four track or six
track stereo dialogue stem;
(c) Access to the final 35mm magnetic four track or six
track stereo music stem;
(d) Access to the final 35mm four track or six track
stereo sound effects stem; and
(e) Access to the original and delivery of one copy of
the final 35mm four and two track music and effects
stereo master, formatted with music and effects
married into the left, center, right and surround
channels and if there is a digital mix, then delivery
of the 6 track digital music and effects master.
* 9. Video Elements (Deliver to Post Production):
(a) Either
(i) A first-class Dl format videotape in
525/NTSC of the final version of the Picture
which shall be either the original film to
tape transfer master or a first generation
dub from such master in the following
formats: Full Frame, Letterbox (in the same
aspect ratio as the original Theatrical
presentation), and 16X9 (in the same aspect
ratio as the original Theatrical
presentation.
The audio for the above referenced NTSC and
PAL masters should be as follows:
Channel 1 -- English Composite Stereo Left
Channel 2 -- English Composite Stereo Right
Channel 3 -- Fully Filled Music and Effects
Stereo Left
Channel 4 -- Fully Filled Music and Effects
Stereo Right
All video masters must have drop frame
timecode with the program starting at
01:00:00:00. All master tapes must have one
minute of color bars and 1000 Hz. tone, ten
seconds of slate indicating the
<PAGE>
name and date of the production, the running
length and whether the textless elements
(see below) are included at the end of the
program. Technically, the program must
adhere to SMPTE specifications.
or
(ii) A first-class high definition D5 format
videotape of the final version of the
picture which shall be either the original
film to tape transfer master or a first
generation dub from such master in the
following formats: 4X3 Full Frame and 16x9
(in the same aspect ratio as the original
theatrical presentation)
The audio for the above referenced D5
masters should be as follows:
Channel 1 -- English Composite Stereo Left
Channel 2 -- English Composite Stereo Right
Channel 3 -- Fully Filled Music and Effects
Stereo Left
Channel 4 -- Fully Filled Music and Effects
Stereo Right
All video masters must be recorded at 59.94.
All master tapes must have one minute of
color bars and 1000 Hz. tone, ten seconds of
slate indicating the name and date of the
production, the running length and whether
the textless elements (see below) are
included at the end of the program.
Technically, the program must adhere to
SMPTE specifications.
(b) Either together with Item 9(a), or separately, a
first-class videotape in the identical format as
supplied under Item 9(a) containing the textless
backgrounds of the Main and End titles of the Picture
as well as textless backgrounds for any other scenes
over which subtitles, location titles, or other
printing appears in the final version of the Picture.
(c) One copy of the final Master Video Technical
Evaluation report as created by any pre-approved lab
for each video master delivered. Should the
evaluation prove that any of the master videotapes
are not of acceptable quality, it is the producer's
responsibility to repair any faults listed on the
evaluation report. This evaluation report must be
submitted prior to final acceptance. If there are any
faults not corrected, a written explanation
accompanying the evaluation must be accepted by PC.
10. Subtitling Disk and Spotting List for English Subtitles
(Deliver to Post Production):
<PAGE>
If the Picture is not an English language picture, one
subtitling disk and spotting list for English subtitles.
Access to any available French and/or Spanish subtitles.
11. Cutting Materials (Deliver to Post Production):
(a) Intentionally deleted.
(b) Intentionally deleted.
(c) Trims and Outtakes: Access to all unused takes and
trims and all other film picture and soundtrack
material produced for or used in the process of
preparing the Picture, whether or not actually used
in the Picture. All such material is to be stored by
PC, on its own behalf, until such time as PC deems
its usefulness to have expired, whereupon PC will
either destroy the unused material or will return the
unused material to Producer, at Producer's option.
(d) T.V. Coverage: Access to one copy of original audio
recordings of replacement dialogue ("TV ADR"),
recorded by the original cast, to be used for the
replacement of profane language which exists in the
final soundtrack of the Picture, to be delivered to
PC on 1/4-inch audiotape or on magnetic film; also,
any alternate TV picture coverage photographed for
inclusion in re-edited censored versions of the
Picture, to be delivered on 35mm original negative,
corresponding 35mm daily prints and corresponding
1/4-inch or magnetic film audio. TV coverage is to be
sufficient to enable PC to meet applicable commercial
broadcast standards.
(e) Editor's Script Notes ("Lined Script"): A copy of the
final shooting script, marked with slate and take
numbers used in photographing each script scene,
indicating the portion of each script scene covered
by each slate and take number, with notations as to
camera movement, lens used, etc.).
(f) Intentionally Deleted.
12. List of Scenes for Stock Footage (Deliver to Post
Production):
If any stock footage is used for either Picture, delivery of a
list of all scenes and legal contracts explaining all rights
and uses of such footage.
* 13. Music Masters/Tracks/Dubbing Set-Up Sheets:
(a) If applicable, if the Agreement to which this
Schedule is attached provides for PC ownership and/or
control of any soundtrack phonorecord rights,
delivery of an original and a 1st generation copy of
uncut original multitrack music masters in the form
in which they were recorded or, at
<PAGE>
PC's election, a first generation copy thereof of
selected takes of each musical sequence of the
Picture, regardless of whether such selected takes
are in the Picture; if PC does not have ownership
and/or control of any soundtrack phonorecord rights,
PC shall have access to such uncut original
multitrack music matters (Deliver to Music
Department);
(b) If applicable, access to synchronized magnetic tracks
of music, sound effects and dialogue, as set up for
dubbing (Deliver to Post Production);
(c) Intentionally deleted.
(d) Copies of music dubbing set-up sheets (i.e., all "cue
sheets" and music logs) (Deliver to Music
Department).
All music recorded in connection with the Picture but not
delivered under this paragraph must be delivered under
Paragraph 14 below.
* 14. Music Score/Music Cue Sheets (Deliver to Music Department):
(a) If applicable, one (1) copy of the manuscript of the
music score, and (if reasonably requested by PC)
access to the original manuscript of the music score,
if PC acquires any copyright and/or administration of
any music publication rights, otherwise a copy; and
(b) One (1) copy of the cue sheet of the music recorded
and included in the Picture (by reel position,
sequence titles, &/or by titles of compositions,
including the timing, use, composer and publisher on
each piece of music).
* 15. Final Shooting Script (Deliver to Post Production):
One (1) copy of the final shooting script of the Picture.
16. Combined Continuity/Spotting Script (Deliver to Post
Production)
One (1) copy of the Dialogue Cutting Continuity, being an
accurate transcript of dialogue and description of action of
the Picture as finally edited for release, conforming to the
format of release scripts used by PC, from which such scripts
may be printed.
* 17. Stills (Deliver to Advertising and Publicity):
Access to all approved original black and white negatives and
color transparencies, suitable for use in the preparation of
advertising, exploitation and publicity material for the
Picture.
<PAGE>
* 18. Trailer Materials (Deliver to Post Production):
(a) Intentionally deleted.
(b) Intentionally deleted.
(c) 1/4" analog and/or DAT copy of entire music score
including any songs written and produced for the
Picture, and trailers thereof if original music; A
3/4" analog and/or DAT copy of the entire music score
of the Picture; and
(d) Intentionally deleted.
B. Intentionally deleted.
C. Miscellaneous:
1. Wherever the words "negative(s)", "print(s)" or any other
words referring to any facilities or materials, shall appear
in this Agreement such words shall be deemed to include both
photographic and magnetic film.
2. In positive composite release prints, no A-reel shall exceed
nine hundred fifty (950) linear feet, exclusive of leaders,
and no B-reel shall exceed nine hundred sixty (960) linear
feet, exclusive of leaders, and no combination of units to be
mounted on one (I) standard two thousand (2,000) foot reel
shall exceed one thousand nine hundred fifty (1 ,950) linear
feet, including leaders.
3. Whenever PC requires access to elements, it also has the right
to remove the elements to a facility of its own choosing upon
reasonable notice for a period of not more than thirty days.
D. Other Delivery Items:
The following items are to be delivered on or before signature of the
Agreement to which this Exhibit is attached:
1. One copy of the PC-approved shooting script, signed by
Producer (Deliver to Post Production).
2. Two (2) duplicate originals (duly notarized) of the Short Form
Assignment (in the form attached to the Agreement as Exhibit
"B" and incorporated herein by this reference) (Deliver to
Legal Department). The following items are to be delivered on
or before the Delivery Date:
<PAGE>
* 3. A list of the names and addresses of all laboratories used and
to be used for production and post-production of the Picture
(including without limitation sound labs, optical labs,
special effects labs, etc.), and a list of all physical
elements of the Picture in the possession of each such
laboratory and all other information as set forth in Exhibit
"DS-l" which is attached hereto and incorporated herein by
this reference (Deliver to Post Production);
4. A complete list, verified as true and accurate by Producer, of
all actors (including stuntmen, on camera singers, airplane
pilots and puppeteers), screenplay writers, composers,
musicians, orchestrators, copyists, master recording
producers, directors and other personnel appearing in or
rendering services in connection with the Picture in respect
of whom residual payments will be payable under collective
bargaining agreements in connection with such services
(Deliver to Legal Department), together with:
(a) their respective social security numbers, addresses,
W-4 and INS Form 1-9 information and industry-man
numbers;
(b) their respective individual cash compensation (not
including living or travel expenses) and evidence of
payment in full;
(c) for all actors, the number of days worked or
guaranteed, whichever is greater;
(d) the total amount of all compensation paid to each
class or group of personnel;
(e) a statement as to whether or not each such person is
subject to any union, guild or federation agreement
to which Producer is a party and the name of such
union, guild or federation, along with evidence, to
the extent applicable, that such persons were
employed and fully paid at not less than union, guild
or federation scale; and
(f) any other information with respect to such personnel
which PC may require, including but not limited to
information regarding deferred compensation and
percentage of gross receipts or net profits payable
to any particular person or persons.
5. All agreements and written documents relating to the
acquisition of all rights (and reflecting a complete chain of
title) in connection with the Picture (including without
limitation Certificates of Authorship relating to the story
and screenplay) are to be delivered to PC concurrently with
the signing of this agreement, if not heretofore so delivered
(Deliver to Legal Department);
6. Intentionally deleted.
<PAGE>
7. All agreements and other documents relating to music rights
(and evidence of payment in full with respect to all such
documents), including without limitation all
composer/songwriter agreements; recording artist/master
recording producer agreements; copies of any applicable union
or guild agreements and session reports; Day Player Vocalists
Agreements; master use licenses; synchronization and
performing licenses; film clips (including music soundtrack
portions thereof); Certificates of Authorship; and phonorecord
agreement if done by Producer (Deliver to Music Department);
8. Access to (and copies of, upon PC's request) all other
agreements and documents relating to the Picture; e.g.,
employment agreements, clearances, releases and location
agreements (and evidence of payment in full with respect
thereto) (Deliver to Legal Department);
9. Agreements (or certified credit excerpts therefrom) in
connection with all personnel connected with the Picture who
are entitled to screen and/or advertising credits, a separate
statement summarizing all screen and advertising credits in
such form and containing such information as PC may require,
and a hard copy of the on-screen credits (main and end titled)
(Deliver to Legal Department);
10. If applicable, evidence that an IATSE Seal (or other similar
seal) is required and may appear in the screen credits of the
Picture and that all guild personnel were employed and fully
paid at not less than applicable guild scale (Deliver to Legal
Department);
11. Intentionally deleted.
12. Documents assigning to PC all of Producer's rights, if any, in
and to the MPAA title registration (Deliver to Legal
Department);
13. Intentionally deleted.
14. If applicable, if the United States tax laws are amended to
make the following provisions applicable to the Picture, and
at PC's reasonable request: Pursuant to the requirements of
Section 48(k) of the United States Internal Revenue Code of 1
986, as amended ("Code"), two (2) copies of a statement signed
by Producer addressed to the District Director, Internal
Revenue Service, 1 35 High Street, Hartford, Connecticut,
06103, which contains the following information or any other
information which PC may reasonably require (Deliver to Legal
Department):
(a) a statement describing the nature and amount of each
item incurred in producing the Picture qualifying as
United States production costs within the meaning of
Internal Revenue Code Section 48(k);
<PAGE>
(b) a statement specifying the nature and purchase price
of any "part" within the meaning of Treas. Reg.
Section 1 .48-8(a)1 of the Picture sold prior to PC's
acquisition of its interest in the Picture, or an
acknowledgment that PC's acquisition of its
qualifying ownership interest preceded the sale of
any other "part" of the Picture to other parties; and
(c) an acknowledgment that the Picture was not placed in
service prior to PC's acquisition of its ownership
interest.
Notwithstanding the foregoing, nothing in this Paragraph shall
be construed to permit Producer to exploit the Picture (or any
part thereof) as set forth in this Paragraph unless the
Agreement to which this exhibit is attached expressly permits
such exploitation by Producer;
15. Certificates of insurance and a copy of the errors & omissions
insurance policy, as may be required by the Agreement to which
this Delivery Schedule is attached (Deliver to Legal
Department).
16. If applicable, documents evidencing termination of any
security interest(s) affecting PC's rights (Deliver to Legal
Department).
E. Place of Delivery:
1. Delivery of the Picture shall consist of (i) Producer making
physical delivery, at the sole cost and expense of Producer,
of the items required be delivered to PC as set forth herein
or (ii) Producer providing access to those items to which PC
requires access as set forth herein, which such access is
guaranteed by a laboratory letter in the form attached to the
Agreement as Exhibit "C", subject only to the changes, if any,
that may be mutually agreed upon in writing after good faith
negotiations. Delivery shall be made to such locations as
hereinafter designated or as PC shall designate. Delivery of
the Picture shall be accompanied by a list showing which items
are in which containers. The Legal Department must be copied
on all transmittal letters for Delivery Items.
A. "Post Production:" Paramount Classics, 5555 Melrose
Avenue, Hollywood, CA 90038, Attn: Georgian
Theodoris.
B. "Advertising and Publicity:" Paramount Classics, 5555
Melrose Avenue, Hollywood, CA 90038, Attn: Georgian
Theodoris.
C. "Legal Department:" Motion Picture Legal, 5555
Melrose Avenue, Hollywood, CA 90038, Attn: Robyn
Martin.
D. "Music Department;" 5555 Melrose Avenue, Hollywood,
CA 90038, Attn: Linda Springer.
<PAGE>
2. All delivery items under this schedule shall be delivered in
form and substance (both technically and for technical
aesthetics) satisfactory to PC, in its sole judgment, and
delivery thereof shall not be deemed complete with respect to
each such item until PC has received all of the foregoing in
accordance herewith.
<PAGE>
EXHIBIT "DS-l"
1. NAME OF PICTURE:
2. ORIGINAL FORMAT: (Circle as Applicable)
(a) 35mm (b) 16mm
(c) Super35mm (d) Superl6mm (e) Other
3. PROJECTION FORMAT: (Circle as Applicable)
(a) Color (b) Black & White
4. GAUGE: (Circle as Applicable)
(a) 35mm (b) 16mm
5. ASPECT RATIO: (Circle as Applicable)
(a) 1:1:33 (b) 1:1:66
(c) 1:1:85 (d) 1:2:35, scope
6. OPTICAL SOUND FORMAT: (Circle as Applicable)
(a) Mono (b) Dolby A
(c) Dolby SR (d) Dolby Digital (SRD) (e) Other
7. RUNNING TIME:
8. FILM STOCK: (Circle as Applicable)
(a) Eastman Kodak (b) Fuji
(c) Agfa (d) Other
9. FILM LAB:
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10. SOUND LAB:
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11. SUBTITLING COMPANY(if applicable):
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12. OTHER TECHNICAL SPECIFICATIONS:
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13. MONTH AND YEAR OF COMPLETION:
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14. DATE AND PLACE OF FIRST PERFORMANCE:
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15. PRIOR FILM FESTIVALS:
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16. FOREIGN AND/OR DOMESTIC SALES REPRESENTATIVE:
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<PAGE>
EXHIBIT "C"
TO:
------------------------
Re: "BRIDE OF THE WIND"
Laboratory Agreement
To Whom It May Concern:
The undersigned, Alma U.K. Production, Limited ("Producer") the
producer of the motion picture described herein has granted Paramount
Classics, a division of Paramount Pictures Corporation, ("PC") under
agreement dated as of November 17, 1999 (the "Agreement"), certain rights,
title and interest in and to the feature motion picture tentatively entitled
"BRIDE OF THE WIND" (the "Picture") as more specifically provided and subject
to the terms of said Agreement. Producer has arranged to send or will be
sending to you ("Laboratory") certain negatives, prints, soundtracks, and
other properties and materials (hereinafter called "Picture Property") in
connection with or relating to the above Picture which, when accepted by
Laboratory, shall be held by Laboratory in the name of Producer as bailee for
PC and Producer.
1. From the date upon which the Picture Property is delivered to
Laboratory, Producer does hereby appoint Laboratory as bailee of such
property and such Picture Property as may come into Laboratory's possession
thereafter, and Laboratory does hereby agree to act as such bailee in
accordance with the terms and conditions herein provided.
2. Laboratory does hereby agree to retain and hold in its Laboratory
located at ________________________ all of the Picture Property in the name
of and for the sole and exclusive use of PC and to hold and dispose of same
pursuant to PC's orders and instructions. Laboratory shall keep the original
negatives of the Picture in film vaults separate from and at a reasonable
distance from protective duplicating materials (whether protective master,
fine grains, duplicate negatives or otherwise) to afford protection against
any loss or damage, whether by fire or other disaster or otherwise.
Laboratory shall keep PC and Producer advised in writing of the actual
location of the film vaults at Laboratory's premises where all such Picture
Property is kept, including advice as to separate film vaults utilized by
Laboratory for the original negatives and protective materials as aforesaid.
3. Except as set forth in Paragraph 4 below, Laboratory shall not
permit anyone other than PC to have access to and/or remove the Picture
Property, shall not remove the Picture Property and shall not fill any orders
with respect to the Picture Property except for PC.
4. All materials and services which Laboratory may supply or furnish
to Producer are to be paid for solely by Producer, and PC shall not be
concerned with or responsible for any credit arrangements which Laboratory
may make with Producer. Moreover, Laboratory agrees not to look and will not
look to PC nor assert any claim or lien, statutory or otherwise, against PC
or PC's property or the Picture Property held by Laboratory by reason of any
work, labor, service or
<PAGE>
material which Laboratory performs or furnishes to Producer or for any
obligation of Producer. All materials and services which Laboratory may
supply or furnish to PC are to be paid for solely by PC, and Producer shall
not be concerned with or responsible for any credit arrangements which
Laboratory may make with PC. Moreover, Laboratory agrees not to look and will
not look to Producer nor assert any claim or lien, statutory or otherwise,
against Producer or Producer's property or the Picture Property held by
Laboratory by any reason of work, labor, service or material which Laboratory
performs or furnishes to PC for any obligation of PC.
5. Nothing herein contained shall be deemed or construed to affect
or impair any of the obligations of the parties hereto to each other under
any other agreements between the parties hereto.
6. The agreements and authorizations contained in this letter shall
be irrevocable from the date hereof, and Laboratory is hereby authorized to
act on same.
Very truly yours,
ALMA U.K. PRODUCTION, LIMITED
By: /s/ Leon Morgan
Its: Director
AGREED TO:
[LABORATORY]
By
-----------------------------
Its
PARAMOUNT CLASSICS, a division of PARAMOUNT PICTURES CORPORATION
By
-----------------------------
Its
<PAGE>
EXHIBIT 6.35
As of November 17, 1999
1st Mr. Inc.
c/o Total Film Group Inc.
9107 Wilshire Blvd., Suite #475
Beverly Hills, CA 90210
Attn: Gerald Green
Re: "MY FIRST MISTER"
Gentlemen:
This letter confirms the agreement between Paramount Classics ("PC"), a
division of Paramount Pictures Corporation, and 1st Mr. Inc. ("Producer") in
connection with the motion picture currently entitled "MY FIRST MISTER" (the
"Picture"). The material terms and conditions are as follows:
1. Conditions Precedent: PC shall have no obligation under this Agreement
until PC has received (in form and substance satisfactory to PC) and
approved the complete chain-of- title for the Picture. The parties
shall have no obligations under this Agreement with respect to the
Picture, if Producer does not complete the Picture.
2. Territory: United States and Canada (excluding French language rights
in Canada), as customarily defined by PC, all on a fully-crossed basis.
For avoidance of doubt, PC shall have the right to distribute the
English language version of the Picture throughout Canada.
3. Term: 17 years. PC shall have a first negotiation on all post-term
distribution and other rights granted to PC.
4. Rights: Subject to the reserved rights and the terms hereof, Producer
hereby grants to PC exclusively, during the Term in the Territory, all
rights of every kind, in and relating to the Picture including, without
limitation, the exclusive right to distribute, exhibit, reissue,
advertise, promote or otherwise exploit the Picture, in all media
(other than non- theatrical), in all versions and all languages, by any
and every means and devices now known or hereafter devised. Producer
hereby grants PC a first position security interest in the Picture to
secure PC's rights subject to customary financier requirements.
Producer shall sign appropriate documentation to further evidence the
above.
Remake, sequel, and television production rights are reserved to
Producer, and no such rights shall be exploited prior to the expiration
of two (2) years after the initial general theatrical release of the
Picture in the Territory. Non-theatrical, soundtrack album, music
publishing, print publishing, and merchandising rights are reserved to
Producer. PC shall have a right of first negotiation with respect to
merchandising rights. If no agreement is reached within 15 business
days after PC receives a notice from Producer that it intends to
<PAGE>
dispose the merchandising rights, Producer shall be free to negotiate
elsewhere with respect to the merchandising rights.
5. Advance/P&A: For avoidance of doubt, Producer is entitled to no advance
and no funding of P&A. Producer shall provide up to Ten Million Dollars
($10,000,000) in P&A. If PC is required to expend any P&A sums to be
provided by Producer hereunder, Producer shall advance such sums to PC,
in accordance with a mutually agreed upon schedule, for each Picture.
Provided that Producer provides the P&A, PC shall have the obligation
to release the Picture theatrically in accordance with the P&A provided
by Producer. PC shall efforts to release the Picture in all other
media.
6. Distribution Fees: Continuing 12 1/2% fee for theatrical,
home video,
Continuing 15% fee for all forms of
television;
7. Application of Gross Receipts: PC shall receive, on a continuing basis,
its distribution fee, and its distribution costs (including video costs
and Residual payments), all in accordance with PC's customary
definition. Thereafter, the balance of proceeds shall be remitted to
Producer. PC shall have the right to incur reasonable and customary
direct (but not overhead) distribution costs, including video costs,
but not including P&A costs, without the approval of Producer.
8. Delivery: Producer shall provide PC with delivery (satisfactory to PC)
of those Mandatory Delivery Items specified in the delivery schedule
attached hereto on or before a date to be mutually approved by both
parties (the "Mandatory Delivery Date"). Producer shall provide PC with
delivery (satisfactory to PC) of the balance of the items, including
documents, specified in the delivery schedule attached hereto on or
before a date to be mutually approved by both parties. In order to
assist PC in preparing marketing materials for the Picture, Producer
shall use reasonable efforts to provide PC with access to any materials
requested by PC before the Mandatory Delivery Date.
9. Home Video: One hundred percent (100%) of revenues received by PC (or
its home video subsidiary) in connection with the home video
exploitation of the Picture shall be included in the gross receipts of
the Picture and such revenues shall be subject to the Distribution Fee
as set forth in Paragraph 6 above. Producer shall have mutual approval
with PC as to the home video release, campaign, and budget.
10. Participations and Residuals: Producer shall be responsible for all
third party participations and deferments. PC shall advance collective
bargaining payments and guild and union residuals (collectively
"Residuals") in the Territory during the Term, provided Producer
advises PC in writing with all information necessary to make such
Residual payments prior to delivery of the Picture to PC. PC shall be
entitled to recoup any such Residual payments as distribution costs
under Paragraph 7. With respect to such Residual payments and provided
that Producer has provided PC with the information as set forth above,
PC shall sign customary guild distributor assumption agreements.
<PAGE>
11. Picture Elements: The Picture, as delivered, shall have a running time
between 85-120 minutes, shall not exceed a "R" rating, and shall
substantially conform to the screenplays reviewed by Ruth Vitale and
David Dinerstein.
12. Marketing Materials/Media Buy: Producer shall directly place the media
buys through Western Media in consultation with PC. Producer, through
Total Creative, Inc., shall create the marketing materials for the
Picture, in consultation with PC. Producer may (but shall not be
obligated to) purchase prints through PC, and if it purchases prints
through PC, it shall receive the benefits of PC pricing and rebates to
the extent such priding and rebates are made available to other
producers which are wholly financing production and providing all
domestic P&A.
13. Budget Minimums: The aggregate all-in "Negative Cost" (i.e., the total
of all amounts paid to bona fide third parties for the financing and
production of the motion picture) of the Picture shall not be less than
Seven Million Dollars ($7,000,000).
14. Cutting and Editing. Provided that the Picture is delivered to PC in
accordance with Paragraph 11 of this Agreement, PC shall have the right
to cut or edit the Picture only to cause the Picture to comply with
standards and practices (broadcast, airline and otherwise), commercial
breaks, potential or actual legal claims, censorship, rating (as set
forth above), television, non-theatrical and panning and scanning
requirements in the Territory. With respect to such cuts or edits,
subject to PC's release exigencies and budgetary requirements, the
director of the Picture ("Director") shall be given the first
opportunity to physically make such cuts or edits, provided that
Director notifies PC within five (5) business days after receipt of
PC's notice that Director is ready, willing and able to make the
required cuts or edits as and when required by PC. PC shall use
reasonable efforts to notify its third party licensees of the foregoing
cutting and editing rights; provided that no third party failure nor
any casual or inadvertent failure by PC to comply with the immediately
preceding sentence shall constitute a breach or default of this
Agreement.
15. Holdbacks: Producer shall comply with PC's customary holdbacks,
including without limitation, with respect to Mexican and
French-language Canadian pay, free, and basic television.
16. Option on Next Picture: PC shall have the exclusive, irrevocable option
to distribute the next motion picture produced by Producer (or any
subsidiary of Producer) which Producer intends to release on a
rent-a-system basis, on the terms set forth herein. Such option may be
exercisable not later than seventy-two hours after Producer submits the
screenplay to PC.
17. Representations and Warranties: Producer represents and warrants that
it has the full right, power and authority to enter into this agreement
and to grant PC all the Rights herein granted.
<PAGE>
18. Short Form Assignment: Producer shall deliver to PC the Short Form
Assignment, attached hereto and incorporated herein, signed and
notarized on its behalf.
19. Further Agreements: PC agrees to enter into customary bank/other
financier and completion bond documentation, subject to PC' s
reasonable and customary requirements in connection therewith. PC shall
act in good faith and in a timely manner so as not to frustrate
Producer's timely financing arrangements. The balance of the terms
applicable to this agreement shall be negotiated in good faith in
accordance with PC's customary parameters. Unless or until execution of
the Binding Term Sheet, this letter agreement shall be the final and
binding understanding between the parties and shall be governed by the
laws of the state of California, U.S., as though it had been fully
negotiated and signed in that jurisdiction.
Best regards.
Sincerely,
/s/ Karen Magid, on behalf of,
Paramount Classics, a division of Paramount Pictures Corporation
ACCEPTED AND AGREED:
1st Mr. Inc
By: /s/ Gerald Green
Its: President
<PAGE>
SHORT FORM ASSIGNMENT
As of November 17, 1999
KNOW ALL MEN BY THESE PRESENTS that, pursuant to and subject to an agreement
("Agreement") dated November 17, 1999 between Paramount Classics, a division
of Paramount Pictures Corporation ("PC") and 1st Mr. Inc. ("Producer"), the
following shall apply with respect to that certain motion picture presently
entitled "MY FIRST MISTER" (the "Picture").
Subject to the terms of the aforesaid Agreement, and for good and valuable
consideration, receipt of which is hereby acknowledged, Producer hereby
irrevocably grants and assigns to PC, its successors and assigns, for the
"Term" (as defined in the Agreement) and throughout the "PC Territory" (as
defined in the Agreement) under copyright (including all extended and renewal
terms thereof), and without limitation, the sole and exclusive distribution
rights in and to the Picture and all other exploitation rights, other than
the reserved rights as specified in the Agreement, with respect thereto, in
any and all media and by any and all means (whether now known or hereafter
devised), subject to and in accordance with all of the terms and conditions
of said Agreement.
1st Mr. Inc.
By: /s/ Gerald Green
Its: President
<PAGE>
STATE OF CALIFORNIA
COUNTY OF LOS ANGELES
On Nov. 17, 1999, before me, Madeleine Ali, a Notary Public,
personall appeared Gerald Green.
X personally known to me, OR
proved to me on the basis of satisfactory evidence
to be the person(s) whose name(s) is/are subscribed to the within instrument,
and acknowledged that he/she/they executed the same in his/her/their
authorized capacity(ies), and that by his/her/their signature(s) on the
instrument the person(s) or the entity upon behalf of which the person(s)
acted, executed the instrument.
WITNESS my hand and seal.
/s/ Madeleine Lena Ali
Signature of Notary
OPTIONAL SECTION:
CAPACITY CLAIMED BY SIGNER:
__ Individual __ Trustee
__ Corporate Officer(s) __ Guardian/Conservator
__ Partner(s) __ Other
__ Attorney-in-fact
SIGNER IS REPRESENTING:
(Self or name of person(s) or entity[ies])
- ------------------------------------------------------------------------------
This certificate must be attached TITLE OF DOCUMENT
to the document described at right: ----------------------
NUMBER OF PAGES
------------------------
DATE OF DOCUMENT
-----------------------
SIGNER(S) OTHER THAN
-------------------
NAMED ABOVE
----------------------------
<PAGE>
DELIVERY SCHEDULE
Schedule of delivery items under agreement (the "Agreement") dated as of
November 1 7, 1999 between PARAMOUNT CLASSICS ("PC"), a division of Paramount
Pictures Corporation, a Delaware corporation and 1st Mr. Inc. ("Producer"),
relating to the proposed feature-length theatrical motion picture entitled
"MY FIRST MISTER" (the "Picture"). The items below marked with an asterisk
are Mandatory Delivery Items and must be delivered to PC on or before the
Mandatory Delivery Date as set forth in the Agreement.
A. If the picture shall be in standard color:
1. Original Picture and Soundtrack Negative (Deliver to
Post Production):
* (a) Original Picture Negative: The original first-class
completely edited color 35mm picture negative, fully
timed (access to which is guaranteed by a laboratory
letter in the form attached to the Agreement as
Exhibit "C", subject only to the changes, if any,
that may be mutually agreed upon in writing after
good faith negotiations, shall be deemed satisfactory
delivery of this item); and
* (b) Original Optical Soundtrack Negative: Access to the
original and delivery of one copy of a first-class
completely edited 35mm synchronizing optical
soundtrack negative (including combined dialogue,
sound effects and music) on estar base stock made
from the original magnetic soundtrack described in
Paragraph 5 below (access to which is guaranteed by a
laboratory letter in the form attached to the
Agreement as Exhibit "C" shall be deemed satisfactory
delivery of this item).
The elements listed in subparagraphs (a) and (b) above are to
be without scratches or injury, so that clear first-class
composite positive prints can be made therefrom in order to
properly exhibit and perform the Picture, and in order to
properly reproduce the recorded sound of the Picture and the
musical compositions included in the score thereof in
synchronism with the photographic action of the Picture.
* 2. Interpositive (Deliver to Post Production):
One technically first class 35mm interpositive of the Picture.
The Interpositives shall be fully cut, main and end titled,
edited and assembled and conformed in all respects to the
composite answer print, and original negative. The
Interpositive must be manufactured in first generation from
the original picture negative after the answer print has been
manufactured. The interpositive to be exact duplicate of
Original Negative.
* 3. Internegative (Deliver to Post Production):
<PAGE>
One technically first class 35mm Estar Internegatives of the
Picture, made from the first generation Interpositive
manufactured from the original negative, from which positive
release prints of the Picture can be struck.
The internegative to be struck from Item A2.
* 4. Check Print (Deliver to Post Production):
One complete, final, technically first class composite 35mm
prints of the Picture, fully color corrected to release print
standards fully cut, main and end titled, edited, scored and
assembled and conformed in all respects to the answer print.
The check print will be struck from Items A3 and A4.
5. Intentionally Deleted.
* 6. Answer Print (Deliver to Post Production):
A first-class completely edited 35mm composite answer print
from the original negative, fully timed and color-corrected,
made from the items in Paragraphs 1(a) and (b) above.
* 7. Textless Backgrounds & Overlays: Titles and Texted Scenes
(Deliver to Post Production):
Delivery of the master negative, a corresponding daily print,
and one (1) set of first-class completely edited color 35mm
Interpositives (or fine grains if the Picture is produced in
black-and-white) made from the original camera Negative of the
following:
(a) If the titles are shot over the Picture (i.e., not if
they are shot over black) all main title and end
title textless backgrounds, without lettering; and
(b) If the titles are shot over the Picture (i.e., not if
they are shot over black) textless backgrounds,
without lettering of any forewords and/or other
scenes carrying superimposed titles.
* 8. Original Magnetic Soundtrack (Deliver to Post
Production):
Access to the original and delivery of one copy of the
original monaural master track (whether the Picture is
recorded using a monaural or stereo format) on 35mm magnetic
film on which are recorded three separate signals, one
including all dialogue, one including all sound effects and
one including all music, each in synchronization with the
others and all in synchronization with the Original Picture
Negative (described in Paragraph A.1.(a) above.
<PAGE>
If the Picture is (or shall be) recorded in four or six track
stereo, in addition to the above monaural split dialogue,
music, effects master, the following items must also be
delivered (all items must be in synchronization with the
Original Picture Negative):
(a) Access to the original and delivery of one copy of
the final 35mm magnetic two track stereo matrixed
Print Master and if there is a digital mix, then
delivery of the 6 track digital print master;
(b) Access to the final 35mm magnetic four track or six
track stereo dialogue stem;
(c) Access to the final 35mm magnetic four track or six
track stereo music stem;
(d) Access to the final 35mm four track or six track
stereo sound effects stem; and
(e) Access to the original and delivery of one copy of
the final 35mm four and two track music and effects
stereo master, formatted with music and effects
married into the left, center, right and surround
channels and if there is a digital mix, then delivery
of the 6 track digital music and effects master.
* 9. Video Elements (Deliver to Post Production):
(a) Either
(i) A first-class Dl format videotape in
525/NTSC of the final version of the Picture
which shall be either the original film to
tape transfer master or a first generation
dub from such master in the following
formats: Full Frame, Letterbox (in the same
aspect ratio as the original Theatrical
presentation), and 16X9 (in the same aspect
ratio as the original Theatrical
presentation.
The audio for the above referenced NTSC and
PAL masters should be as follows:
Channel 1 -- English Composite Stereo Left
Channel 2 -- English Composite Stereo Right
Channel 3 -- Fully Filled Music and Effects
Stereo Left
Channel 4 -- Fully Filled Music and Effects
Stereo Right
All video masters must have drop frame
timecode with the program starting at
01:00:00:00. All master tapes must have one
minute of color bars and 1000 Hz. tone, ten
seconds of slate indicating the
<PAGE>
name and date of the production, the running
length and whether the textless elements
(see below) are included at the end of the
program. Technically, the program must
adhere to SMPTE specifications.
or
(ii) A first-class high definition D5 format
videotape of the final version of the
picture which shall be either the original
film to tape transfer master or a first
generation dub from such master in the
following formats: 4X3 Full Frame and 16x9
(in the same aspect ratio as the original
theatrical presentation)
The audio for the above referenced D5
masters should be as follows:
Channel 1 -- English Composite Stereo Left
Channel 2 -- English Composite Stereo Right
Channel 3 -- Fully Filled Music and Effects
Stereo Left
Channel 4 -- Fully Filled Music and Effects
Stereo Right
All video masters must be recorded at 59.94.
All master tapes must have one minute of
color bars and 1000 Hz. tone, ten seconds of
slate indicating the name and date of the
production, the running length and whether
the textless elements (see below) are
included at the end of the program.
Technically, the program must adhere to
SMPTE specifications.
(b) Either together with Item 9(a), or separately, a
first-class videotape in the identical format as
supplied under Item 9(a) containing the textless
backgrounds of the Main and End titles of the Picture
as well as textless backgrounds for any other scenes
over which subtitles, location titles, or other
printing appears in the final version of the Picture.
(c) One copy of the final Master Video Technical
Evaluation report as created by any pre-approved lab
for each video master delivered. Should the
evaluation prove that any of the master videotapes
are not of acceptable quality, it is the producer's
responsibility to repair any faults listed on the
evaluation report. This evaluation report must be
submitted prior to final acceptance. If there are any
faults not corrected, a written explanation
accompanying the evaluation must be accepted by PC.
10. Subtitling Disk and Spotting List for English Subtitles
(Deliver to Post Production):
<PAGE>
If the Picture is not an English language picture, one
subtitling disk and spotting list for English subtitles.
Access to any available French and/or Spanish subtitles.
11. Cutting Materials (Deliver to Post Production):
(a) Intentionally deleted.
(b) Intentionally deleted.
(c) Trims and Outtakes: Access to all unused takes and
trims and all other film picture and soundtrack
material produced for or used in the process of
preparing the Picture, whether or not actually used
in the Picture. All such material is to be stored by
PC, on its own behalf, until such time as PC deems
its usefulness to have expired, whereupon PC will
either destroy the unused material or will return the
unused material to Producer, at Producer's option.
(d) T.V. Coverage: Access to one copy of original audio
recordings of replacement dialogue ("TV ADR"),
recorded by the original cast, to be used for the
replacement of profane language which exists in the
final soundtrack of the Picture, to be delivered to
PC on 1/4-inch audiotape or on magnetic film; also,
any alternate TV picture coverage photographed for
inclusion in re-edited censored versions of the
Picture, to be delivered on 35mm original negative,
corresponding 35mm daily prints and corresponding
1/4-inch or magnetic film audio. TV coverage is to be
sufficient to enable PC to meet applicable commercial
broadcast standards.
(e) Editor's Script Notes ("Lined Script"): A copy of the
final shooting script, marked with slate and take
numbers used in photographing each script scene,
indicating the portion of each script scene covered
by each slate and take number, with notations as to
camera movement, lens used, etc.).
(f) Intentionally Deleted.
12. List of Scenes for Stock Footage (Deliver to Post
Production):
If any stock footage is used for either Picture, delivery of a
list of all scenes and legal contracts explaining all rights
and uses of such footage.
* 13. Music Masters/Tracks/Dubbing Set-Up Sheets:
(a) If applicable, if the Agreement to which this
Schedule is attached provides for PC ownership and/or
control of any soundtrack phonorecord rights,
delivery of an original and a 1st generation copy of
uncut original multitrack music masters in the form
in which they were recorded or, at
<PAGE>
PC's election, a first generation copy thereof of
selected takes of each musical sequence of the
Picture, regardless of whether such selected takes
are in the Picture; if PC does not have ownership
and/or control of any soundtrack phonorecord rights,
PC shall have access to such uncut original
multitrack music matters (Deliver to Music
Department);
(b) If applicable, access to synchronized magnetic tracks
of music, sound effects and dialogue, as set up for
dubbing (Deliver to Post Production);
(c) Intentionally deleted.
(d) Copies of music dubbing set-up sheets (i.e., all "cue
sheets" and music logs) (Deliver to Music
Department).
All music recorded in connection with the Picture but not
delivered under this paragraph must be delivered under
Paragraph 14 below.
* 14. Music Score/Music Cue Sheets (Deliver to Music
Department):
(a) If applicable, one (1) copy of the manuscript of the
music score, and (if reasonably requested by PC)
access to the original manuscript of the music score,
if PC acquires any copyright and/or administration of
any music publication rights, otherwise a copy; and
(b) One (1) copy of the cue sheet of the music recorded
and included in the Picture (by reel position,
sequence titles, &/or by titles of compositions,
including the timing, use, composer and publisher on
each piece of music).
* 15. Final Shooting Script (Deliver to Post Production):
One (1) copy of the final shooting script of the
Picture.
16. Combined Continuity/Spotting Script (Deliver to Post
Production)
One (1) copy of the Dialogue Cutting Continuity, being an
accurate transcript of dialogue and description of action of
the Picture as finally edited for release, conforming to the
format of release scripts used by PC, from which such scripts
may be printed.
* 17. Stills (Deliver to Advertising and Publicity):
Access to all approved original black and white negatives and
color transparencies, suitable for use in the preparation of
advertising, exploitation and publicity material for the
Picture.
<PAGE>
* 18. Trailer Materials (Deliver to Post Production):
(a) Intentionally deleted.
(b) Intentionally deleted.
(c) 1/4" analog and/or DAT copy of entire music score
including any songs written and produced for the
Picture, and trailers thereof if original music; A
3/4" analog and/or DAT copy of the entire music score
of the Picture; and
(d) Intentionally deleted.
B. Intentionally deleted.
C. Miscellaneous:
1. Wherever the words "negative(s)", "print(s)" or any other
words referring to any facilities or materials, shall appear
in this Agreement such words shall be deemed to include both
photographic and magnetic film.
2. In positive composite release prints, no A-reel shall exceed
nine hundred fifty (950) linear feet, exclusive of leaders,
and no B-reel shall exceed nine hundred sixty (960) linear
feet, exclusive of leaders, and no combination of units to be
mounted on one (I) standard two thousand (2,000) foot reel
shall exceed one thousand nine hundred fifty (1 ,950) linear
feet, including leaders.
3. Whenever PC requires access to elements, it also has the right
to remove the elements to a facility of its own choosing upon
reasonable notice for a period of not more than thirty days.
D. Other Delivery Items:
The following items are to be delivered on or before signature of the
Agreement to which this Exhibit is attached:
1. One copy of the PC-approved shooting script, signed by
Producer (Deliver to Post Production).
2. Two (2) duplicate originals (duly notarized) of the Short Form
Assignment (in the form attached to the Agreement as Exhibit
"B" and incorporated herein by this reference) (Deliver to
Legal Department). The following items are to be delivered on
or before the Delivery Date:
<PAGE>
* 3. A list of the names and addresses of all laboratories used and
to be used for production and post-production of the Picture
(including without limitation sound labs, optical labs,
special effects labs, etc.), and a list of all physical
elements of the Picture in the possession of each such
laboratory and all other information as set forth in Exhibit
"DS-l" which is attached hereto and incorporated herein by
this reference (Deliver to Post Production);
4. A complete list, verified as true and accurate by Producer, of
all actors (including stuntmen, on camera singers, airplane
pilots and puppeteers), screenplay writers, composers,
musicians, orchestrators, copyists, master recording
producers, directors and other personnel appearing in or
rendering services in connection with the Picture in respect
of whom residual payments will be payable under collective
bargaining agreements in connection with such services
(Deliver to Legal Department), together with:
(a) their respective social security numbers, addresses,
W-4 and INS Form 1-9 information and industry-man
numbers;
(b) their respective individual cash compensation (not
including living or travel expenses) and evidence of
payment in full;
(c) for all actors, the number of days worked or
guaranteed, whichever is greater;
(d) the total amount of all compensation paid to each
class or group of personnel;
(e) a statement as to whether or not each such person is
subject to any union, guild or federation agreement
to which Producer is a party and the name of such
union, guild or federation, along with evidence, to
the extent applicable, that such persons were
employed and fully paid at not less than union, guild
or federation scale; and
(f) any other information with respect to such personnel
which PC may require, including but not limited to
information regarding deferred compensation and
percentage of gross receipts or net profits payable
to any particular person or persons.
5. All agreements and written documents relating to the
acquisition of all rights (and reflecting a complete chain of
title) in connection with the Picture (including without
limitation Certificates of Authorship relating to the story
and screenplay) are to be delivered to PC concurrently with
the signing of this agreement, if not heretofore so delivered
(Deliver to Legal Department);
6. Intentionally deleted.
<PAGE>
7. All agreements and other documents relating to music rights
(and evidence of payment in full with respect to all such
documents), including without limitation all
composer/songwriter agreements; recording artist/master
recording producer agreements; copies of any applicable union
or guild agreements and session reports; Day Player Vocalists
Agreements; master use licenses; synchronization and
performing licenses; film clips (including music soundtrack
portions thereof); Certificates of Authorship; and phonorecord
agreement if done by Producer (Deliver to Music Department);
8. Access to (and copies of, upon PC's request) all other
agreements and documents relating to the Picture; e.g.,
employment agreements, clearances, releases and location
agreements (and evidence of payment in full with respect
thereto) (Deliver to Legal Department);
9. Agreements (or certified credit excerpts therefrom) in
connection with all personnel connected with the Picture who
are entitled to screen and/or advertising credits, a separate
statement summarizing all screen and advertising credits in
such form and containing such information as PC may require,
and a hard copy of the on-screen credits (main and end titled)
(Deliver to Legal Department);
10. If applicable, evidence that an IATSE Seal (or other similar
seal) is required and may appear in the screen credits of the
Picture and that all guild personnel were employed and fully
paid at not less than applicable guild scale (Deliver to Legal
Department);
11. Intentionally deleted.
12. Documents assigning to PC all of Producer's rights, if any, in
and to the MPAA title registration (Deliver to Legal
Department);
13. Intentionally deleted.
14. If applicable, if the United States tax laws are amended to
make the following provisions applicable to the Picture, and
at PC's reasonable request: Pursuant to the requirements of
Section 48(k) of the United States Internal Revenue Code of 1
986, as amended ("Code"), two (2) copies of a statement signed
by Producer addressed to the District Director, Internal
Revenue Service, 1 35 High Street, Hartford, Connecticut,
06103, which contains the following information or any other
information which PC may reasonably require (Deliver to Legal
Department):
(a) a statement describing the nature and amount of each
item incurred in producing the Picture qualifying as
United States production costs within the meaning of
Internal Revenue Code Section 48(k);
<PAGE>
(b) a statement specifying the nature and purchase price
of any "part" within the meaning of Treas. Reg.
Section 1 .48-8(a)1 of the Picture sold prior to PC's
acquisition of its interest in the Picture, or an
acknowledgment that PC's acquisition of its
qualifying ownership interest preceded the sale of
any other "part" of the Picture to other parties; and
(c) an acknowledgment that the Picture was not placed in
service prior to PC's acquisition of its ownership
interest.
Notwithstanding the foregoing, nothing in this Paragraph shall
be construed to permit Producer to exploit the Picture (or any
part thereof) as set forth in this Paragraph unless the
Agreement to which this exhibit is attached expressly permits
such exploitation by Producer;
15. Certificates of insurance and a copy of the errors & omissions
insurance policy, as may be required by the Agreement to which
this Delivery Schedule is attached (Deliver to Legal
Department).
16. If applicable, documents evidencing termination of any
security interest(s) affecting PC's rights (Deliver to Legal
Department).
E. Place of Delivery:
1. Delivery of the Picture shall consist of (i) Producer making
physical delivery, at the sole cost and expense of Producer,
of the items required be delivered to PC as set forth herein
or (ii) Producer providing access to those items to which PC
requires access as set forth herein, which such access is
guaranteed by a laboratory letter in the form attached to the
Agreement as Exhibit "C", subject only to the changes, if any,
that may be mutually agreed upon in writing after good faith
negotiations. Delivery shall be made to such locations as
hereinafter designated or as PC shall designate. Delivery of
the Picture shall be accompanied by a list showing which items
are in which containers. The Legal Department must be copied
on all transmittal letters for Delivery Items.
A. "Post Production:" Paramount Classics, 5555 Melrose
Avenue, Hollywood, CA 90038, Attn: Georgian
Theodoris.
B. "Advertising and Publicity:" Paramount Classics, 5555
Melrose Avenue, Hollywood, CA 90038, Attn: Georgian
Theodoris.
C. "Legal Department:" Motion Picture Legal, 5555
Melrose Avenue, Hollywood, CA 90038, Attn: Robyn
Martin.
D. "Music Department;" 5555 Melrose Avenue, Hollywood,
CA 90038, Attn: Linda Springer.
<PAGE>
2. All delivery items under this schedule shall be delivered in
form and substance (both technically and for technical
aesthetics) satisfactory to PC, in its sole judgment, and
delivery thereof shall not be deemed complete with respect to
each such item until PC has received all of the foregoing in
accordance herewith.
<PAGE>
EXHIBIT "DS-l"
1. NAME OF PICTURE:
------------------------------------------------------
2. ORIGINAL FORMAT: (Circle as Applicable)
(a) 35mm (b) 16mm
(c) Super35mm (d) Superl6mm (e) Other
3. PROJECTION FORMAT: (Circle as Applicable)
(a) Color (b) Black & White
4. GAUGE: (Circle as Applicable)
(a) 35mm (b) 16mm
5. ASPECT RATIO: (Circle as Applicable)
(a) 1:1:33 (b) 1:1:66
(c) 1:1:85 (d) 1:2:35, scope
6. OPTICAL SOUND FORMAT: (Circle as Applicable)
(a) Mono (b) Dolby A
(c) Dolby SR (d) Dolby Digital (SRD) (e) Other
7. RUNNING TIME:
---------------------------------------------------------
8. FILM STOCK: (Circle as Applicable)
(a) Eastman Kodak (b) Fuji
(c) Agfa (d) Other
9. FILM LAB:
-------------------------------------------------------------
10. SOUND LAB:
------------------------------------------------------------
11. SUBTITLING COMPANY(if applicable):
------------------------------------
12. OTHER TECHNICAL SPECIFICATIONS:
---------------------------------------
13. MONTH AND YEAR OF COMPLETION:
-----------------------------------------
14. DATE AND PLACE OF FIRST PERFORMANCE:
----------------------------------
15. PRIOR FILM FESTIVALS:
-------------------------------------------------
16. FOREIGN AND/OR DOMESTIC SALES REPRESENTATIVE:
-------------------------
<PAGE>
EXHIBIT "C"
TO:
-----------------------
Re: "MY FIRST MISTER"
Laboratory Agreement
To Whom It May Concern:
The undersigned, 1st Mr. Inc. ("Producer") the producer of the
motion picture described herein has granted Paramount Classics, a division of
Paramount Pictures Corporation, ("PC") under agreement dated as of November
17, 1999 (the "Agreement"), certain rights, title and interest in and to the
feature motion picture tentatively entitled "MY FIRST MISTER" (the "Picture")
as more specifically provided and subject to the terms of said Agreement.
Producer has arranged to send or will be sending to you ("Laboratory")
certain negatives, prints, soundtracks, and other properties and materials
(hereinafter called "Picture Property") in connection with or relating to the
above Picture which, when accepted by Laboratory, shall be held by Laboratory
in the name of Producer as bailee for PC and Producer.
1. From the date upon which the Picture Property is delivered to
Laboratory, Producer does hereby appoint Laboratory as bailee of such
property and such Picture Property as may come into Laboratory's possession
thereafter, and Laboratory does hereby agree to act as such bailee in
accordance with the terms and conditions herein provided.
2. Laboratory does hereby agree to retain and hold in its Laboratory
located at ________________________ all of the Picture Property in the name
of and for the sole and exclusive use of PC and to hold and dispose of same
pursuant to PC's orders and instructions. Laboratory shall keep the original
negatives of the Picture in film vaults separate from and at a reasonable
distance from protective duplicating materials (whether protective master,
fine grains, duplicate negatives or otherwise) to afford protection against
any loss or damage, whether by fire or other disaster or otherwise.
Laboratory shall keep PC and Producer advised in writing of the actual
location of the film vaults at Laboratory's premises where all such Picture
Property is kept, including advice as to separate film vaults utilized by
Laboratory for the original negatives and protective materials as aforesaid.
3. Except as set forth in Paragraph 4 below, Laboratory shall not
permit anyone other than PC to have access to and/or remove the Picture
Property, shall not remove the Picture Property and shall not fill any orders
with respect to the Picture Property except for PC.
4. All materials and services which Laboratory may supply or furnish
to Producer are to be paid for solely by Producer, and PC shall not be
concerned with or responsible for any credit arrangements which Laboratory
may make with Producer. Moreover, Laboratory agrees not to look and will not
look to PC nor assert any claim or lien, statutory or otherwise, against PC
or PC's property or the Picture Property held by Laboratory by reason of any
work, labor, service or
<PAGE>
material which Laboratory performs or furnishes to Producer or for any
obligation of Producer. All materials and services which Laboratory may
supply or furnish to PC are to be paid for solely by PC, and Producer shall
not be concerned with or responsible for any credit arrangements which
Laboratory may make with PC. Moreover, Laboratory agrees not to look and will
not look to Producer nor assert any claim or lien, statutory or otherwise,
against Producer or Producer's property or the Picture Property held by
Laboratory by any reason of work, labor, service or material which Laboratory
performs or furnishes to PC for any obligation of PC.
5. Nothing herein contained shall be deemed or construed to affect
or impair any of the obligations of the parties hereto to each other under
any other agreements between the parties hereto.
6. The agreements and authorizations contained in this letter shall
be irrevocable from the date hereof, and Laboratory is hereby authorized to
act on same.
Very truly yours,
1ST MR. INC.
By:
Its:
AGREED TO:
[LABORATORY]
By
----------------------------
Its
PARAMOUNT CLASSICS, a division of PARAMOUNT PICTURES CORPORATION
By
----------------------------
Its
<PAGE>
EXHIBIT 6.36
CONSULTING AGREEMENT
This Consulting Agreement (this "Agreement") is made as of this 19th day of
November 1999, by and between Total Film Group (the "Company") and JBRG
Consultants.
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledge, the parties hereto agree as follows:
1. Engagement. The Company hereby engages JBRG Consultants as an
independent contractor and consultant to provide financial services to
the Company, and JBRG Consultants has agreed to provide these services
to the Company, subject to the terms and conditions described in this
Agreement JBRG Consultants is not a broker dealer as defined under
federal or state law and will not provide any services requiring
registration as such.
2. Term. The term of this Agreement shall commence on 19th November 1999
and run until terminated at the discretion of either party to this
agreement. The Agreement may be terminated by the Company immediately
upon notice in the case of the commission of and act of actual fraud by
JBRG Consultants in the course of its activities hereunder or the
declaration of bankruptcy by JBRG Consultants. JBRG Consultants may
terminate the Agreement immediately upon notice in the case of
commission of an act of actual fraud by the Company or the declaration
of bankruptcy by the Company. Termination of this Agreement shall not
terminate any obligations that the parties may have under the Warrant
(as defined below).
3. Services. The services (the "Services") to be provided by JBRG
Consultants shall consist of an equity financing to be provided by J.L.
DeVore & Associates, Inc. and JBRG Consultants and it's investors.
4. Costs. The Company will be responsible for all of its costs and
expenses in regards to this transaction and JBRG Consultants shall
submit costs incurred to the Company for pre-approval prior to the
incursion of such costs on behalf of the Company.
5. Compensation for Services. The Company will pay JBRG Consultants a fee
in warrants and cash. Simultaneously with the funding of this
Agreement, in whole or in part, the Company will grant, execute and
deliver to JBRG Consultants the Warrant in the proper form as written
by Counsel for the Company and approved by JBRG Consultants. The cash
fee shall be 10% of the amount of the funds provided (subject to final
terms and conditions of the financing). The warrant fee shall also be
10% of the amount of the funds provided (subject to final terms and
conditions of the financing) and be issued at an exercise price of
$4.125 per warrant, good for three years from the execution of this
agreement. The warrants shall be considered as compensation for
services and will have priority registration tights and/or piggyback
registration rights as normally attach to compensation warrants.
<PAGE>
6. Additional Obligations of the Company. The Company agrees that, in
connection with this agreement, it will indemnify JBRG Consultants from
all claims, liability, costs or other expenses incurred (including
reasonable attorneys' fees) by JBRG Consultants as a result of any
inaccurate or misleading information concerning the Company provided by
the Company or any of its officers or directors to JBRG Consultants or
as a result of any breach by the Company of any of the terms and
conditions of this Agreement or commission of acts illegal under
securities laws by the Company or its officers or directors.
7. Independent Contractor. JBRG Consultants is an independent contractor
responsible for compensation of its agents, employees and
representatives, as well as all applicable withholdings and taxes
(including unemployment compensation) and all workers compensation
insurance.
8. Assignment. The rights and obligations of each party to this agreement
may not be assigned without the prior written consent of the other
party.
9. Entire Agreement. This Agreement, together with the Warrant (provided
and prepared by the Company), contains the entire agreement of the
Company and JBRG Consultants and supersedes any prior agreements
between them. This Agreement may not be modified or extended except in
writing signed by both parties.
10. California Law. This agreement shall be governed by and constructed in
accordance with California law.
11. Arbitration and Waiver of Jury Trial. Any dispute based upon or arising
out of this letter agreement shall be subject to binding arbitration to
be held in Los Angeles County, California before a retired California
Superior Court judge. Judgment on the arbitrator's award shall be final
and binding, and may be entered in any competent court. As a practical
matter, by agreeing to arbitrate all parties are waiving jury trail.
12. Attorneys' Fees. The prevailing party in any arbitration or litigation
arising out of or relating to this letter agreement shall be entitled
to recover all attorneys' fees and all costs (whether or not such costs
arc recoverable pursuant to the California Code or Civil Procedure) as
may be incurred in connection with either obtaining or collecting any
judgment and/or arbitration award, in addition to any other relief to
which that party may be entitled.
13. Counterparts. This agreement may be executed in counterparts, each of
which when so executed shall be deemed to be original and all of which
taken together shall constitute on and the same Agreement.
14. Due Authority. By signing below, the signatories warrant that they have
the authority to execute this Agreement on behalf of the party
indicated and all actions necessary to authorize the execution of this
Agreement have been taken.
<PAGE>
15. Not Exclusive. This agreement and the Other Agreements arc not
exclusive. JBRG Consultants may engage in activities of the type
contemplated hereunder with other firms and Company may engage in
activities of the type contemplated hereunder with other financial
firms.
16. Notices. All notices or other communications required hereunder shall
be in writing and addressed as follows.
If to Jacques L. DeVore or Stan Berk: If to Company:
J.L. DeVore & Associates, Inc. __________________________
429 Santa Monica Blvd., Suite 510 __________________________
Santa Monica, CA 90401 __________________________
Attention:________________
Either party may change the address for notifications and other communications
by notifying the other party in writing.
17. No Agency. Nothing herein shall cause JBRG Consultants or the Company
to be an agent, partner, joint venture or affiliate of the other.
18. Beneficiaries. Except as expressly provided for herein, no parties or
persons except the signatories and their affiliates, successors or
assigns, are beneficiaries of this Agreement.
19. Construction. If any provision of this Agreement shall be deemed void,
invalid or unenforceable for any reason, the remainder of the Agreement
shall remain valid and enforceable and the provision declared invalid
or unenforceable shall remain valid and enforceable to the extent
allowed by law and shall be enforced in accordance with the intent
of the parties, as expressed in this Agreement, to the fullest
extent allowed.
By execution below, the parties hereby enter this Agreement as of the date set
forth above
AGREED TO AND ACCEPTED:
JBRG Consultants Total Film Group
By /s/ Jacques L. DeVore By (signature): /s/ Gerald Green
Printed Name: Gerald Green
By: /s/ Stan Berk Title: President
<PAGE>
[LETTERHEAD]
MILLER, KAPLAN, ARASE & CO., LLP
ACCOUNTANTS' CONSENT
We hereby consent to the use of our audit report of Total Film Group, Inc. and
subsidiaries dated September 29, 1999, except for Note 4, which is as of
January 14, 2000, for the years ended June 30, 1999 and 1998, to be used in
the Company's registration statement on Form 10-SB.
/s/ Miller, Kaplan, Arase & Co., LLP
Miller, Kaplan, Arase & Co., LLP
March 28, 2000
North Hollywood, California
