<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
Quarterly Report Under Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended July 31, 1998 Commission File No. 0-14234
KINGS ROAD ENTERTAINMENT, INC.
(Name of small business issuer in its charter)
Delaware 95-3587522
(State or other jurisdiction (I.R.S. Employer
of incorporation) Identification No.)
1901 Avenue of the Stars, Suite 1545
Los Angeles, California 90067
(Address of principal executive office)
Issuer's telephone number: (310) 552-0057
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
As of September 11, 1998 the registrant had 1,911,748 shares of its common stock
outstanding.
Transitional Small Business Disclosure Format: YES [ ] NO [X]
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
KINGS ROAD ENTERTAINMENT, INC.
BALANCE SHEET
(UNAUDITED)
<TABLE>
<CAPTION>
AS OF
JULY 31, 1998
-------------
<S> <C>
ASSETS
Cash and Cash Equivalents $ 191,888
Marketable Securities, at market value 2,420,547
Accounts Receivable, net of allowance of $10,000 456,900
Film Costs, net of amortization of $168,252,173 295,666
Prepaid Expenses 41,947
Fixed Assets 15,643
Other Assets 2,500
-----------
TOTAL ASSETS $ 3,425,091
===========
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Accounts Payable $ 203,643
Accrued Expenses 33,160
Deferred Revenue 8,400
-----------
TOTAL LIABILITIES 245,203
COMMITMENTS AND CONTINGENCIES 0
SHAREHOLDERS' EQUITY
Common Stock, $.01 par value, 12,000,000 shares
authorized, 1,911,748 shares issued and outstanding 51,040
Additional Paid-In Capital 21,085,278
Deficit (17,956,430)
------------
TOTAL SHAREHOLDERS' EQUITY 3,179,888
-----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 3,425,091
===========
</TABLE>
The accompanying notes are an integral part of this balance sheet.
2
<PAGE> 3
KINGS ROAD ENTERTAINMENT, INC.
STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JULY 31,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
REVENUES
Feature Films $ 149,917 $ 357,915
Interest Income 32,247 60,306
----------- -----------
182,164 418,221
COSTS AND EXPENSES
Costs Related to Revenue 7,357 36,507
Selling Expenses 8,465 4,002
General & Administrative Expenses 145,263 263,269
----------- -----------
161,085 303,778
----------- -----------
INCOME BEFORE INCOME TAXES 21,079 114,443
Provision for Income Taxes (19,114) 97
----------- -----------
NET INCOME $ 40,193 $ 114,346
=========== ===========
Net Income Per Share - Basic $ 0.02 $ 0.06
=========== ===========
Weighted Average Number of Common
Shares - Basic 1,911,748 1,824,988
=========== ===========
Net Income Per Share - Diluted $ 0.02 $ 0.06
=========== ===========
Weighted Average Number of Common Shares
and Common Share Equivalents - Diluted 1,935,446 1,831,240
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
KINGS ROAD ENTERTAINMENT, INC.
STATEMENTS OF SHAREHOLDERS' EQUITY
(UNAUDITED)
<TABLE>
<CAPTION>
Common Common Additional Retained Total
Stock Stock Paid-In Earnings/ Shareholders'
Shares Amount Capital (Deficit) Equity
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance,
April 30, 1997 1,706,581 $ 45,716 $ 24,902,177 ($18,035,440) $ 6,912,453
Exercise of
Stock Options 205,167 5,324 139,797 -- 145,121
Distribution to
Shareholders -- -- (3,956,696) -- (3,956,696)
Net Income -- -- -- 38,817 38,817
------------ ------------ ------------ ------------ ------------
Balance,
April 30, 1998 1,911,748 51,040 21,085,278 (17,996,623) 3,139,695
Net Income -- -- -- 40,193 40,193
------------ ------------ ------------ ------------ ------------
Balance,
July 31, 1998 1,911,748 $ 51,040 $ 21,085,278 ($17,956,430) $ 3,179,888
============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
KINGS ROAD ENTERTAINMENT, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED JULY 31,
-----------------------------
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 40,193 $ 114,346
Adjustments to reconcile Net Income to
Net Cash Provided by Operating Activities:
Depreciation and Amortization 9,420 38,806
Change in Assets and Liabilities:
(Increase)/Decrease in Accounts Receivable (83,437) 23,072
Decrease/(Increase) in Prepaid Expenses 5,894 (27,896)
(Decrease)/Increase in Accounts Payable (29,524) 7,141
Increase in Accrued Expenses 18,160 0
Decrease in Income Taxes Payable 0 (3,482)
(Decrease)/Increase in Deferred Revenue (1,200) 6,655
----------- -----------
NET CASH AND CASH EQUIVALENTS (USED IN)/
PROVIDED BY OPERATING ACTIVITIES (40,494) 158,642
CASH FLOWS FROM INVESTING ACTIVITIES:
(Purchase)/Sale of Marketable Securities (2,420,547) 3,833,845
(Purchase)/Disposal of Fixed Assets (3,222) 114
Gross Additions to Film Cost (2,349) (75,837)
----------- -----------
NET CASH AND CASH EQUIVALENTS (USED IN)/
PROVIDED BY INVESTING ACTIVITIES (2,426,118) 3,758,122
CASH FLOWS FROM FINANCING ACTIVITIES:
Exercise of Stock Options 0 145,121
Distribution to Shareholders 0 (3,956,696)
----------- -----------
NET CASH AND CASH EQUIVALENTS
USED IN FINANCING ACTIVITIES 0 (3,811,575)
----------- -----------
NET (DECREASE)/INCREASE IN CASH
AND CASH EQUIVALENTS (2,466,612) 105,189
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 2,658,500 248,204
----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 191,888 $ 353,393
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
KINGS ROAD ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial statements.
Accordingly, they do not include all of the information and disclosures required
for annual financial statements. These financial statements should be read in
conjunction with the financial statements and related footnotes for the year
ended April 30, 1998, included in the Kings Road Entertainment, Inc. ("Company"
or "Registrant") annual report on Form 10-KSB for that period.
In the opinion of the Company's management, all adjustments (consisting of
normal recurring accruals) necessary to present fairly the Company's financial
position as of July 31, 1998 and the results of operation and cash flows for the
three months ended July 31, 1998 and 1997 have been included.
The results of operations for the three month period ended July 31, 1998 are not
necessarily indicative of the results to be expected for the full fiscal year.
For further information, refer to the financial statements and footnotes thereto
included in the Company's annual report on Form 10-KSB for the year ended April
30, 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
The Company has adopted Statement of Financial Accounting Standard No. 128,
Earnings Per Share ("SFAS No. 128"), which became effective for financial
statements issued for periods ending after December 15, 1997. In accordance with
SFAS No. 128, prior year earnings per share ("EPS") amounts have been restated.
SFAS No. 128 was issued to simplify the standards for calculating EPS previously
set forth in Accounting Principles Board No. 15, Earnings Per Share. SFAS No.
128 replaces the presentation of primary EPS with basic EPS. The new rules also
require dual presentation of basic and diluted EPS on the face of the statements
of income.
In April 1998, the Company effected a 1-for-3 reverse stock split for
shareholders of record on April 17, 1998. All share and per share data in the
financial statements reflect the reverse stock split for all periods presented.
NOTE B - MARKETABLE SECURITIES
In accordance with Statement of Financial Accounting Standard No. 115,
Accounting for Certain Investments in Debt and Equity Securities, the Company
determines the classification of marketable securities at the time of purchase
and reevaluates such designation at each balance sheet. Marketable securities
have been classified as available for sale and are stated at market value. It is
currently the Company's policy to purchase only U.S. Government securities with
maturities less than one year.
6
<PAGE> 7
KINGS ROAD ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE C - FILM COSTS
Film costs consist of:
<TABLE>
<CAPTION>
As Of
July 31, 1998
-------------
<S> <C>
Released Films, less amortization $202,660
Films in Production 0
Films in Development 93,006
--------
$295,666
========
</TABLE>
NOTE D - LITIGATION AND CONTINGENCIES
In the ordinary course of business, the Company has or may become involved in
disputes or litigation. On the basis of information available to it, management
believes such contingencies will not have a materially adverse impact on the
Company's financial position or results of operations.
NOTE E - STOCK OPTIONS
During the quarter ended July 31, 1998, the Company adopted the 1998 Stock
Option Plan ("1998 Plan") which provides for the grant of options to purchase up
to 400,000 shares of the Company's common stock. The 1998 Plan replaced the
Company's 1987 Non-qualified Stock Option Plan that had expired. Options to
purchase up to 66,667 shares were granted during the quarter ended July 31, 1998
to the Company's Chief Executive Officer at an exercise price of $1.22 per share
that expire on June 3, 2003. Options to purchase up to 34,000 shares were
granted during the quarter ended July 31, 1998 to the Company's Chief Financial
Officer at an exercise price of $1.22 per share that expire on May 11, 2003. No
other options were outstanding at July 31, 1998.
The Company has elected to follow Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB 25"), and related interpretations
in accounting for its employee stock options because the alternative fair value
accounting method provided for under Statement of Financial Accounting Standards
No. 123, Accounting for Stock-Based Compensation, requires the use of valuation
models that were not developed for use in valuing employee stock options. Under
APB 25, because the exercise price of the Company's employee stock options
equals the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
Pro forma information regarding net income and earnings per share under the fair
value accounting method for the quarters ended July 31, 1998 and 1997 has not
been presented as the amounts are immaterial.
7
<PAGE> 8
KINGS ROAD ENTERTAINMENT, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE F - INCOME TAXES
A reconciliation of the provision for income taxes to the expected income tax
expense at the statutory federal tax rate of 34% is as follows:
<TABLE>
<CAPTION>
Quarter Ending Quarter Ending
July 31, 1998 July 31, 1997
-------------- --------------
<S> <C> <C>
Computed Expected Tax at Statutory $7,167 $38,878
Rate
State and Local Taxes 0 0
Benefit of Prior Years Amended Returns (19,286) 0
Foreign Taxes 172 97
Valuation Allowance (7,167) (38,878)
------- -------
($19,114) $ 97
======= =======
</TABLE>
The Company filed amended federal and state tax returns for the fiscal years
ended April 30, 1997 and 1996 that resulted in a reduction in income tax expense
of $19,286 recorded during the quarter ended July 31, 1998.
For federal income tax purposes, the Company has available investment tax
credits of approximately $2,166,000 after being reduced by 35% as a result of
the Tax Reform Act of 1986 (expiring between 2000 and 2002) and net operating
loss carryforwards of approximately $16,626,000 (expiring between 2001 and 2007)
to offset future income tax liabilities.
Deferred tax assets result from temporary differences between financial and tax
accounting in the recognition of revenue and expenses. Temporary differences and
carryforwards which give rise to deferred tax assets are as follows:
<TABLE>
<CAPTION>
As Of
July 31, 1998
-------------
<S> <C>
Deferred Revenue $ 4,000
Film Cost Amortization 18,000
Net Operating Loss Carryforwards 6,650,000
Investment Tax Credit Carryforwards 2,166,000
Foreign Tax Credit Carryforwards 400,000
----------
9,238,000
Valuation Allowance (9,238,000)
----------
$ 0
==========
</TABLE>
A valuation allowance of $9,238,000 has been recorded to offset the net deferred
tax assets due to the uncertainty of realizing the benefits of the tax assets in
the future.
8
<PAGE> 9
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL POSITION AND
RESULTS OF OPERATIONS
RECENT DEVELOPMENTS
Subsequent to the fiscal year ended April 30, 1995, the Company has not
produced any new films and has derived revenues almost exclusively from the
exploitation of films produced prior to April 30, 1995. Following the death on
October 4, 1996 of Mr. Stephen Friedman, the Company's founder and then Chairman
of the Board of Directors and Chief Executive Officer, the Company has explored
various business options, including, among other things, the liquidation of the
Company, the sale of the Company as a going concern to an outside party, the
sale of substantially all of the assets of the Company to an outside party and
the issuance of shares of common stock to an outside party which would provide a
new source of financing for the Company. From January through May 1997, the
Company had discussions with over twenty outside parties which expressed varying
degrees of interest in acquiring all or part of the Company or in supplying
additional capital in return for an equity interest in the Company.
On December 11, 1997, the Company entered into an agreement with the
Morgan Kent Group, Inc. ("Morgan Kent") pursuant to which the Company was to
issue a number of shares of the Company's common stock to Morgan Kent sufficient
to give Morgan Kent approximately 53% of the outstanding shares of common stock
on the date of such issuance in exchange for a purchase price of $2,967,738.
Contingent upon consummation of the transaction with Morgan Kent, the Company
planned to make a cash distribution to shareholders (not including Morgan Kent)
of approximately $1.26 per share. The agreement between the Company and Morgan
Kent was terminated on June 3, 1998 and the planned cash distribution was
canceled.
On June 30, 1998, the Company announced that it was again seeking
acquisition and merger proposals for the Company. All of the plans and
strategies of the Company are subject to the outcome of any such proposals.
RESULTS OF OPERATIONS
For the quarter ended July 31, 1998 feature film revenues were
approximately $150,000 as compared to approximately $358,000 for the quarter
ended July 31, 1997. The substantial decrease in feature film revenues of
approximately 58% results primarily from the fact that the Company has not
produced any new films since the fiscal year ended April 30, 1995. Until such
time as the Company either produces new films or develops and implements a new
overall strategic plan, the Company expects that its feature film revenues will
continue to decline. Interest income decreased to approximately $32,000 for the
quarter ended July 31, 1998 from approximately $60,000 during the same quarter
last year, reflecting the decrease in marketable securities held during the
quarter ended July 31, 1998 versus the same period last year.
Costs related to revenue as a percentage of feature film revenues
decreased to approximately 5% for the quarter ended July 31, 1998 from
approximately 10% for the quarter ended July 31, 1997. This decrease results
from the fact that a significant portion of the costs associated with the
Company's films have previously been amortized. Kickboxer II and Creator, for
example, generated significant revenues during the quarter with little or no
amortization of costs associated with those revenues. Selling expenses increased
to approximately $8,000 during the quarter ended July 31, 1998 versus
approximately $4,000 during the same quarter last year.
General and administrative costs decreased by approximately 45% to
approximately $145,000 during the quarter ended July 31, 1998 versus
approximately $263,000 during the
9
<PAGE> 10
same period last year. This decrease results primarily from a substantial
decrease of approximately $103,000 in legal expenditures due to the prior
resolution in December 1997 and April 1998 of certain litigation involving the
Company.
Net income decreased to approximately $40,000 for the quarter ended July
31, 1998 versus approximately $114,000 for the quarter ended July 31, 1997
reflecting lower feature film revenues and interest income. During the quarters
ended July 31, 1998 and 1997, the Company had no significant provision for
income taxes due to the utilization of net operating loss carryforwards.
LIQUIDITY AND CAPITAL RESOURCES
The production of motion pictures requires substantial capital. In
producing a motion picture, the Company may expend substantial sums for both the
production and distribution of a picture, before that film generates any
revenues. In many instances the Company may obtain advances or guarantees from
its distributors but these advances and guarantees generally may defray only a
portion of a film's cost. The Company's principal source of working capital
during the quarter ended July 31, 1998 was motion picture licensing income.
Except for the financing of film production costs, management believes that its
existing cash resources will be sufficient to fund its ongoing operations.
For the quarter ended July 31, 1998, the Company's net cash flow used in
its operating activities was approximately $40,000, a decrease of approximately
$199,000 as compared to approximately $159,000 of net cash flow provided by
operating activities during the quarter ended July 31, 1997. During the quarter
ended July 31, 1997, the Company used cash flow, primarily generated by the sale
of marketable securities, to make a cash distribution to shareholders of
approximately $3,957,000 on June 27, 1997. As of July 31, 1998, the Company had
cash, cash equivalents and marketable securities of approximately $2,612,000 as
compared to approximately $2,487,000 as of July 31, 1997.
FUTURE COMMITMENTS
The Company has no material commitments for capital expenditures. The
Company will evaluate the adequacy of and need for capital resources once a
final strategic plan has been developed. (SEE "RECENT DEVELOPMENTS").
FORWARD-LOOKING STATEMENTS
The foregoing discussion, as well as the other sections of this
Quarterly Report on Form 10-QSB, contains forward-looking statements that
reflect the Company's current views with respect to future events and financial
results. Forward-looking statements usually include the verbs "anticipates,"
believes," "estimates," "expects," "intends," "plans," "projects," "understands"
and other verbs suggesting uncertainty. The Company reminds shareholders that
forward-looking statements are merely predictions and therefore inherently
subject to uncertainties and other factors which could cause the actual results
to differ materially from the forward-looking statements. Potential factors that
could affect forward-looking statements include, among other things, the
Company's ability to identify, produce and complete film projects that are
successful in the marketplace, to arrange financing, distribution and promotion
for these projects on favorable terms in various markets and to attract and
retain qualified personnel. In addition, the Company is currently seeking merger
and acquisition proposals for the Company and its plans, strategies and future
results are subject to the outcome of any such proposals.
10
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
In the ordinary course of business, the Company has or may become
involved in disputes or litigation. On the basis of information available to it,
management believes such contingencies will not have a materially adverse impact
on the Company's financial position or results of operations.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS (NUMBERED IN ACCORDANCE WITH ITEM 601 OF REGULATION S-B)
--------
<TABLE>
<S> <C>
3.1 Restated Certificate of Incorporation of Registrant. (1)
3.2 Bylaws of Registrant. (2)
10.1 1998 Stock Option Plan. (1)
10.2 Grant of Nonqualified Stock Option dated as of July 15, 1998 by the
Registrant to Kenneth Aguado. (1)
10.3 Grant of Nonqualified Stock Option dated as of July 15, 1998 by the
Registrant to Christopher Trunkey. (3)
10.4 Employment Agreement effective as of May 11, 1998 between the
Registrant and Christopher Trunkey. (3)
27 Financial Data Schedule. (3)
</TABLE>
---------------
(1) Incorporated by reference to Form 10-KSB for the fiscal year ended
April 30, 1998.
(2) Incorporated by reference to Form 10-K for the fiscal year ended
April 30, 1988.
(3) Filed electronically with Securities and Exchange Commission,
omitted in copies distributed to shareholders or other persons.
(b) FORMS 8-K
None.
(c) SEE (a) ABOVE
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: September 11, 1998 KINGS ROAD ENTERTAINMENT, INC.
By: /s/ Christopher M. Trunkey
--------------------------
Christopher M. Trunkey,
Chief Financial Officer
12
<PAGE> 1
EXHIBIT 10.3
GRANT OF NONQUALIFIED STOCK OPTION
(EMPLOYEE)
To: Christopher Trunkey ("OPTIONEE")
From: Kings Road Entertainment, Inc.
As you probably know, Kings Road Entertainment, Inc. (our "COMPANY")
has adopted a 1998 Stock Option Plan (the "PLAN") under which the Company can
grant options to purchase shares of Company's Common Stock (the "COMMON STOCK").
We are pleased to inform you that our Board of Directors (the "BOARD") has
decided to grant you an option under the Plan (your "OPTION").
Your Option will be governed by the Plan, the attached Standard Terms
and Conditions (the "TERMS") and the following specific provisions (which are
subject to adjustment under the Plan and the Terms):
The "DATE OF GRANT" for your Option for vesting purposes is: July 15,
1998.
The "EXPIRATION DATE" of your Option is: May 11, 2003.
The "NUMBER OF SHARES" covered by your Option is: 34,000.
The "EXERCISE PRICE" per share for your Option is: $1 7/32
VESTING. Your Option cannot be exercised before May 11, 1999. At any
time on or after May 11, 1999, but before May 11, 2000, the maximum number of
shares you may purchase or have purchased under this Option is fifty percent
(50%) of the Number of Shares; on or after May 11, 2000, you may purchase or
have purchased all of the Number of Shares. Of course, you can never exercise
the Option for more than the Number of Shares or after the Expiration Date (in
each case as adjusted under the Terms and the Plan).
1
<PAGE> 2
Please review the Plan and the Terms carefully, as they control your
rights under your Option. Then sign and return (and if you are married, have
your spouse sign) one copy of this letter.
We appreciate your continuing efforts on behalf of the Company.
Very truly yours,
Kings Road Entertainment, Inc.
/s/ Kenneth I. Aguado
-----------------------------------
By: Kenneth I. Aguado
Its: Chief Executive Officer
I hereby accept this Option and have reviewed the Plan and the Terms.
/s/ Christopher M. Trunkey
-----------------------------------
"Optionee"
I agree to be bound by all of the terms and conditions of the Option, including
those set forth in the Plan and the Terms.
Optionee's Spouse
/s/ Kelly Trunkey
-----------------------------------
Name: Kelly Trunkey
THE OPTION AND ANY SHARES ISSUABLE UNDER IT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 NOR REGISTERED OR QUALIFIED UNDER ANY STATE SECURITIES
LAWS. NO REGULATORY AGENCY HAS PASSED ON THE FAIRNESS OF THE ISSUANCE OF THESE
SECURITIES.
2
<PAGE> 3
STANDARD TERMS AND CONDITIONS
These Standard Terms and Conditions are attached to a letter (the "OPTION
LETTER") from Kings Road Entertainment, Inc. granting an Option to you, and are
intended to govern that Option. All capitalized terms not specifically defined
in these Standard Terms and Conditions have the meanings set forth in the Option
Letter or in the Company's 1998 Stock Option Plan.
1. OPTION. You may exercise the Option to buy all or any part of any
Number of Shares of Common Stock which are then exercisable at the Exercise
Price per share until the Expiration Date. This Option is not intended to
qualify as an "incentive stock option" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "CODE").
2. MANNER OF EXERCISE. This Option may be exercised only (i) during your
lifetime, by you; (ii) to the extent permitted by the Committee, by your spouse
if your spouse obtained the Option pursuant to a qualified domestic relations
order as defined by the Code or Title I of ERISA, or the rules thereunder
("QUALIFIED DOMESTIC RELATIONS ORDER"); and (iii) after your death, by your
transferees by will or the laws of descent or distribution. To exercise this
Option, you must provide the Company with (a) a written notice of exercise,
specifying the number of shares to be purchased and (b) the full purchase price
of the shares to be purchased solely (i) in cash or by check payable to the
order of the Company or (ii) by delivery of shares of Common Stock of the
Company previously purchased on the open market or acquired more than six months
previously through exercise of a stock option, and in your possession, valued at
fair market value. This Option may not be exercised for a fraction of a share
and no partial exercise of this Option may be for less than (a) one hundred
(100) shares or (b) the total number of shares then eligible for exercise, if
less than one hundred (100) shares.
3. FAIR MARKET VALUE OF COMMON STOCK. The fair market value of a share
of Common Stock shall be determined for purposes of this Option by reference to
the closing price on the principal stock exchange on which such shares are then
listed or, if the shares are not then listed on a stock exchange, by reference
to the closing price (if approved for quotation on the NASDAQ National Market)
or the mean between the bid and asked price (if other over-the-counter issue) of
a share as supplied by the National Association of Securities Dealers, Inc.
through NASDAQ (or its successor in function), in each case as reported by The
Wall Street Journal, for the business day immediately preceding the date on
which the option is exercised (or, if for any reason no such price is available,
in such other manner as the Committee may deem appropriate to reflect the then
fair market value thereof).
4. TERMINATION OF SERVICE; DEATH OR PERMANENT DISABILITY. The Expiration
Date is the earlier of (i) the date set out in the Option Letter or (ii) the
expiration of a period following the time you cease (whether voluntarily or
involuntarily) to be an employee of the Company or its subsidiaries, which
period will be (a) three (3) months if you ceased to be an employee for any
reason other than your death or "permanent disability" (within the meaning of
Section 22(e)(3) of the Code), or (b) twelve (12) months if you die or becomes
"permanently disabled" while you are an employee of the Company or one of its
subsidiaries. Any options not exercisable on the date that you cease to be an
employee (whether voluntarily or involuntarily) will be
1
<PAGE> 4
of no further force or effect. After the Expiration Date, the Option will expire
and be void and of no further force or effect.
5. SHARES TO BE ISSUED IN COMPLIANCE WITH APPLICABLE LAWS AND EXCHANGE
RULES. By accepting the Option, you represent and agree, for yourself and any
person entitled to exercise this Option, that none of the shares purchased on
exercise of the Option will be acquired with a view to any sale, transfer or
distribution in violation of the Securities Act of 1933, as amended (the
"SECURITIES ACT"), and the rules and regulations promulgated thereunder, any
applicable state "blue sky" laws or any applicable foreign laws. If required by
the Committee at the time the Option is exercised, the person entitled to
exercise the Option shall furnish evidence satisfactory to the Company to such
effect (including a written representation and an indemnification of the Company
in the event of any violation of any applicable laws). The Company does not have
to issue any shares on the exercise of this Option if there has not been full
compliance with all applicable requirements of the Securities Act (whether by
registration or satisfaction of exemption conditions), all applicable listing
requirements of any national securities exchange on which shares of the same
class are then listed and any other requirements of law or of any regulatory
bodies having jurisdiction over such issuance.
6. WITHHOLDING OF TAXES. Upon the exercise of this Option, the Company
may require the person entitled to exercise it to pay the Company the amount of
any taxes which the Company is required to withhold with respect to the
exercise.
7. NO ASSIGNMENT OR TRANSFER. This Option and all other rights and
privileges granted hereby[, and any securities issued on exercise (the "STOCK")]
shall not be transferred, either voluntarily or by operation of law except (i)
by will or the laws of descent and distribution or (ii) pursuant to a Qualified
Domestic Relations Order to the extent permitted by the Committee. If there is
any other attempt to transfer this Option or any other right or privilege
granted hereby, this Option and all rights and privileges granted hereby shall
immediately become null and void and be of no further force or effect.
8. ADJUSTMENT FOR REORGANIZATIONS, STOCK SPLITS, ETC. If the outstanding
shares of Common Stock of the Company (or any other class of shares or
securities which shall have become issuable upon the exercise of this Option
pursuant to this sentence) are increased or decreased or changed into or
exchanged for a different number or kind of shares or securities of the Company
through reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction, an appropriate
and proportionate adjustment shall be made in the Number of Shares, without
change in the aggregate purchase price applicable to the unexercised portion of
this Option, but with a corresponding adjustment in the price for each share or
other unit of any security covered by this Option.
Upon the dissolution or liquidation of the Company, or upon a
reorganization, merger or consolidation of the Company with one or more
corporations as a result of which the Company is not the surviving corporation,
or upon a sale of substantially all the property or more than fifty percent
(50%) of the then outstanding stock of the Company to another corporation, this
Option shall terminate; provided, however, that notwithstanding the foregoing,
the Committee shall provide in writing in connection with such transaction for
the appropriate satisfaction of this Option by one or more of the
2
<PAGE> 5
following alternatives (separately or in combinations): (i) for the Option to
become immediately exercisable notwithstanding the vesting provisions; (ii) for
the assumption by the successor corporation of this Option or the substitution
by such corporation therefor of a new option covering the stock of the successor
corporation or its subsidiaries with appropriate adjustments as to the number
and kind of shares and prices; (iii) for the continuance of the Plan by such
successor corporation in which event the Plan and this Option shall continue in
the manner and under the terms so provided; or (iv) for the payment in cash or
stock in lieu of and in complete satisfaction of this Option.
Adjustments under this Section 8 will be made by the Committee and its
determination as to what adjustments to make will be final, binding and
conclusive. No fractional shares of stock shall be issued under this Option on
any such adjustment.
9. PARTICIPATION IN OTHER COMPANY PLANS. The grant of this Option will
not affect any right you might otherwise have to participate in and receive
benefits under the then current provisions of any pension, insurance, or profit
sharing program of the Company or of any subsidiary of the Company.
10. NOT AN EMPLOYMENT OR SERVICE CONTRACT. Nothing in this Option is to
be construed as an agreement, express or implied, by the Company or any of its
subsidiaries to employ you or contract for your services, nor will it restrict
the Company's or such subsidiary's right to discharge you or cease contracting
for your services or to modify, extend or otherwise affect in any manner
whatsoever, the terms of any employment agreement or contract for services which
may exist between you and the Company or any of its subsidiaries.
11. NO RIGHTS AS A STOCKHOLDER UNTIL ISSUANCE OF STOCK CERTIFICATE.
Neither you nor any other person legally entitled to exercise this Option will
be entitled to any of the rights or privileges of a stockholder of the Company
with respect to any shares issuable upon any exercise of this Option unless and
until a certificate or certificates representing the shares shall have been
actually issued and delivered.
12. AGREEMENT SUBJECT TO STOCK OPTION PLAN. This Option is subject to,
and the Company and you agree to be bound by, all of the terms and conditions of
the Plan, as it may be amended from time to time in accordance with its terms.
No amendment to the Plan will adversely affect your rights under this Option in
a material manner without your prior written consent.
13. GOVERNING LAW. The interpretation, performance and enforcement of
this Agreement shall be governed by the internal substantive laws of the State
of Delaware, without regard to the conflict of laws provisions of that or any
other State. The Option can only be amended in a writing executed by a duly
authorized Executive Officer of the Company.
3
<PAGE> 1
EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made as of April 17, 1998, and is effective as of the
11th day of May, 1998 (the "Effective Date"), by and between KINGS ROAD
ENTERTAINMENT, INC., a Delaware corporation (herein referred to as the
"Company"), and you, CHRISTOPHER TRUNKEY.
In consideration of the mutual covenants, terms and conditions set
forth herein, you and the Company agree as follows:
1. The Company hereby employs you pursuant and subject to the terms,
conditions and provisions of this Agreement. You hereby accept such employment
and agree to render your services exclusively to the Company as provided herein,
where and when required by the Company (presently in Los Angeles, California),
all of which services shall be performed conscientiously and to the full extent
of your ability. You further agree to abide by all rules, regulations and
policies of the Company.
2. Your title and position with the Company shall be Senior Vice
President and Chief Financial and Administrative Officer.
3. You shall report to the Company's chief executive officer, currently
Kenneth Aguado, or to any other chief executive or operating officer who may be
employed by the Company during the Term. Any conflict between divisions of
responsibility between you and any other employee shall be resolved by the chief
executive officer.
4. The services to be rendered by you hereunder shall include, without
limitation, all services customarily rendered by persons engaged in the same
capacity or in a similar capacity in the entertainment industry, and such other
services as may be requested by the Company from time to time hereunder. Your
services shall be exclusive to the Company during the Term of this Agreement.
5. The Term of your employment by the Company under this Agreement
shall commence as of the Effective Date and (unless earlier terminated pursuant
to this Agreement) shall continue thereafter through May 5, 2000 (the "Term").
6. (a) As full consideration for all services to be rendered by you
pursuant hereto, and for all rights and interests herein granted by you to the
Company, and provided that you are not in breach or default of this Agreement
and that you have kept and performed all of your obligations hereunder, and
subject to the terms and conditions hereof, you shall be entitled to receive a
base salary in an amount equal to One Hundred Ten Thousand ($110,000) commencing
on the Effective Date and continuing through May 5, 1999. Commencing May 6, 1999
and continuing through the end of the Term, you shall be entitled to receive a
base salary in an amount equal to One Hundred Twenty Thousand ($120,000).
(b) Such compensation shall be paid in accordance with the
Company's normal payroll practices. The Company may make such deductions,
withholdings or payments from any sum payable to you pursuant to this Agreement
as are required by any applicable law, rule or regulation for taxes or similar
charges. Compensation payments made to you by the Company or any affiliate of
the Company shall be deemed made pursuant to this Agreement and any compensation
paid to you from and after the Effective Date of this Agreement shall be
1
<PAGE> 2
deemed to have been paid hereunder.
7. In addition to the base salary set forth in Paragraph 6, you shall
be entitled to receive 34,000 stock options at the current market price on the
date of grant. Your interest in such options shall vest as follows: (i) 50% on
May 11, 1999; and (ii) 50% on May 11, 2000. Such options shall have a five (5)
year term commencing on the Effective Date and shall be subject in all respects
to the Kings Road Stock Option Plan.
8. In addition to the base salary set forth in Paragraph 6, you shall
be eligible to receive such bonus compensation as the Company may elect to award
to you, if any, in the Company's sole and absolute discretion. Nothing in this
Paragraph 8 shall require or otherwise obligate the Company to pay you a bonus.
9. You represent and warrant that you are free to enter into the
Agreement and to grant the rights and interests to the Company that you purport
to grant thereunder and that there are no agreements or arrangements in effect,
whether written or oral, which could prevent you from rendering exclusive
services to the Company during the Term, and that you have not made and will not
make any commitment or do any act in conflict with the Agreement.
10. On the condition that you are not in breach or default of the
Agreement, the Company shall reimburse you for all of your reasonable expenses
incurred while employed and performing your duties under and in accordance with
the terms and conditions of the Agreement, subject to your full accounting
therefor and your providing the Company with appropriate documentation,
including without limitation receipts, for all such expenses in the manner
required pursuant to Company's policies and procedures and the Internal Revenue
Code, and subject to the Company's prior approval.
11. You and the Company agree that the services to be rendered by you
pursuant to the Agreement, and the rights and interests granted by you to the
Company pursuant to the Agreement, are of a special, unique, extraordinary and
intellectual character, which gives them a peculiar value, the loss of which
cannot be reasonably or adequately compensated in damages in any action at law,
and that a breach by you of any of the terms of the Agreement will cause the
Company great and irreparable injury and damage. You hereby expressly agree that
the Company shall be entitled to the remedies of injunction, specific
performance and other equitable relief to prevent a breach of the Agreement by
you. This provision shall not, however, be construed as a waiver of any of the
rights which the Company may have hereunder, at law, for damages, or otherwise.
12. (a) In the event that (i) you become incapacitated or prevented
from fully rendering your services hereunder by reason of your illness, mental,
physical or other disability, and such incapacity or inability shall continue
for sixty (60) consecutive days during any period of the Term; or (ii) the
Company's normal operations are prevented or interrupted because of force
majeure events or any other cause beyond the Company's sole control (e.g., any
labor dispute, strike, fire, war, civil disturbance, act of God, governmental
action or proceeding or any event sufficient to excuse performance as a matter
of law), and such prevention or interruption shall continue for sixty (60)
consecutive days during any period of the Term; then the Company shall have the
right to terminate your employment under the Agreement immediately upon the
expiration of said six (6)-week period without any further liability or
obligation to you hereunder except for any accrued compensation payable to you
as of the date of such termination (such a termination herein referred to as a
termination "For Disability or Force Majeure").
2
<PAGE> 3
(b) In the event you, at any time, breach any provision of the
Agreement, fail, refuse or neglect (other than by reason of any above-referenced
disability or incapacity) to perform fully your obligations hereunder, or engage
or participate in any serious or willful misconduct in connection with any of
your obligations under the Agreement, the Company shall have the right to
terminate your employment under the Agreement at any time thereafter (such a
termination herein referred to as a termination "For Cause"). In the event of
any termination For Cause, you shall be entitled to receive only accrued
compensation payable to you as of the date of such termination, without regard
to any other compensation, benefits or perquisites.
(c) In addition to the right to terminate For Cause or For
Disability or Force Majeure, the Company shall have the right to terminate your
employment under the Agreement at any time for any reason, upon thirty (30)
days' notice to you (such a termination herein referred to as a termination
"Without Cause"); provided, however, that if termination of your employment is a
termination Without Cause, you shall continue to be entitled only to your base
annual compensation under Paragraph 6 of the Agreement subject to your
obligation to use your best efforts to find other suitable employment promptly,
at which time all your rights under the Agreement shall terminate, including
without limitation the right to receive compensation. During the time that you
are seeking other employment as a result of termination Without Cause, you agree
to report fully to the Company every three weeks regarding your efforts to
obtain other suitable employment, and the Company hereby reserves the right to
discontinue all payments to you under the Agreement, but no earlier than sixty
(60) days following such termination, if it reasonably determines that you are
not using your best efforts promptly to find such other suitable employment.
(d) Any termination under this Paragraph 12 shall not be
deemed to be a waiver by the Company of any of the Company's rights or remedies
otherwise available to the Company hereunder, at law, in equity or otherwise.
13. You shall not enter into any contracts or make any commitments on
behalf of the Company outside of the ordinary course of your duties and services
in the ordinary course of the Company's business nor for an amount in excess of
such limits as may be specified by the Company without the prior written
approval and consent of the Company in accordance with the standard practices
and operating procedures thereof.
14. During the Term hereof you shall be entitled to:
(a) The Company's basic health and life insurance benefits
generally available to other senior executives of the Company, including any
applicable major medical insurance benefits, subject to compliance with
provisions relating to eligibility or qualification; and
(b) Three (3) weeks vacation with pay and normal and customary
holidays in accordance with the Company's policy for vacations and holidays for
senior executives of the Company.
(c) To participate in any Company retirement or similar
benefit plan available to Company's senior executives, including, without
limitation, the Company's IRA plan, subject to all terms and conditions of any
such plan.
3
<PAGE> 4
For the purpose of determining your length of service with the Company with
respect to the applicable provisions of any benefit to which you may be entitled
hereunder (except with respect to stock options and the vesting provisions
thereof), such determination shall include your previous term of employment with
the Company from May 9, 1994 through March 31, 1998.
15. The Company may secure in its own name or otherwise, and at its own
expense, life, health, accident and other insurance covering you or you and
others, and you shall not have any right, title or interest in or to such
insurance other than as expressly provided herein. You agree to assist the
Company in procuring such insurance by submitting to the usual and customary
medical and other examinations to be conducted by such physician(s) as the
Company or such insurance company may designate and by signing such applications
and other written instruments as may be required by the insurance companies to
which application is made for such insurance.
16. During the Term, you shall not directly or indirectly compete or
interfere with the actual or contemplated businesses or activities of the
Company. In this regard, during the Term, you shall not, without the prior
written consent of the Company, (a) while actually employed by the Company
hereunder, become an officer, employee, consultant, agent, partner (other than a
limited partner) or director of any other business enterprise; and (b) while not
actually employed by the Company hereunder, become an officer, employee,
consultant, agent, partner (other than a limited partner) or director of any
other business enterprise engaged in any of the actual or contemplated
businesses or activities of the Company.
17. You agree that you will not, during the Term or thereafter,
disclose to any other person or entity the terms or conditions of the Agreement
(including the financial terms thereof) and shall not directly or indirectly
issue or permit the issuance of any publicity whatsoever regarding, or grant any
interview or make any statements concerning, the Company's engagement of you
hereunder without the prior written consent of the Company.
18. The primary place of your employment under the Agreement shall be
the Los Angeles Metropolitan Area. You shall make such trips away from the
County of Los Angeles as requested by the Company or as may be required for the
conduct of your duties under the Agreement.
19. The Company hereby represents and warrants that it has obtained all
approvals necessary to enter into this Agreement.
20. The Agreement shall be governed by, and construed in accordance
with, the laws of the State of California applicable to contracts entered into
and fully performed therein.
21. The Company shall have the right to assign or otherwise delegate
the Agreement or any of its rights or obligations thereunder, in whole or in
part, to any person or entity. Without limiting the generality of the foregoing,
the Company shall have the right to license, delegate, lend or otherwise
transfer any of its rights to any or all of your services under the Agreement to
any person, company or other entity controlling, controlled by, or under common
control with the Company, and you agree to render such services required under
the Agreement for such person, company or other entity as part of the services
to be rendered under the Agreement for no additional compensation other than as
provided for in this Agreement. You shall not have any right to assign, delegate
or otherwise transfer any duty or obligation to be performed by you hereunder to
any person or entity, nor to assign or transfer any rights hereunder.
4
<PAGE> 5
22. All notices which either party is required or may desire to give to
the other party under or in connection with the Agreement shall be sufficient if
given by addressing the same to the respective party at the address set forth
below or at such other place as may be designated by the respective party:
To Company: Kings Road Entertainment, Inc.
1901 Avenue of the Stars
Los Angeles, California 90067
Attention: Kenneth Aguado
with a copy to
Manatt, Phelps & Phillips, LLP
11355 West Olympic Boulevard
Los Angeles, California 90064
Attention: Laurence Marks, Esq. or
Roger Armstrong, Esq.
To You: Christopher Trunkey
27156 Baxard Place
Valencia, CA 91354
When notices addressed as required by this Paragraph 21 shall be hand delivered,
telexed, or deposited, postage prepaid, registered or certified mail, in the
United States mail, or delivered to a telegraph office, toll prepaid, the
Company or you, as appropriate, shall be deemed to have delivered such notice.
23. If the compensation provided by the Agreement shall exceed the
amount permitted by any present or future law or governmental order or
regulation, such stated compensation shall be reduced, while such limitation is
in effect, to the amount which is so permitted. The payment of such reduced
compensation shall be deemed to constitute full performance by the Company of
its obligations hereunder with respect to compensation for such period;
provided, however, that the Company shall pay you the aggregate amount of such
reduction if and when such payment becomes permissible at law.
24. You agree to execute and deliver to the Company such further
documents and instruments as the Company may desire to further evidence,
effectuate or protect the Company's rights hereunder. The Agreement may be
modified only by a written instrument duly executed by each of the parties
thereto. No person has any authority on behalf of the Company to make any
representation or promise not set forth in the Agreement, and you hereby
represent and warrant that the Agreement has not been executed in reliance upon
any representation or promise except those contained therein. No waiver by the
Company of any default or other breach of the Agreement shall be deemed to be a
waiver of any preceding or succeeding breach or default.
25. Concurrently with your execution and delivery to Company of this
Agreement, you shall execute and deliver to the Company an Employee
Confidentiality Agreement in the form of Exhibit A attached hereto.
26. This Agreement supersedes all, prior or contemporaneous agreements,
whether
5
<PAGE> 6
oral or written, between the parties hereto concerning the subject matter
hereof, and constitutes the valid, binding and entire agreement between the
parties with respect thereto, enforceable in accordance with its terms.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
KINGS ROAD ENTERTAINMENT, INC.
By /s/ Kenneth Aguado
--------------------------------
Ken Aguado, CEO
ACCEPTED AND AGREED TO:
/s/Christopher M. Trunkey
- -----------------------------------
Christopher Trunkey
Social Security Number: ###-##-####
6
<PAGE> 7
EXHIBIT A
EMPLOYEE CONFIDENTIALITY AGREEMENT
In consideration of my employment, or my continued employment,
as the case may be, by Kings Road Entertainment, Inc., or by any direct or
indirect subsidiary or affiliate of Kings Road Entertainment, Inc. (such
employer for the purposes of this Employee Confidentiality Agreement being
hereinafter referred to as the "Company"), I agree with the Company as follows:
As long as I shall remain in the employ of the Company I shall
devote my whole time and ability to the service of the Company in my employment
capacity, as the Company shall from time to time direct, and I shall perform my
duties faithfully and diligently. Further, I shall abide by all rules,
regulations and policies of the Company (including without limitation those
contained in the Company's current employee manual as it may hereafter be
modified, supplemented or replaced), and I acknowledge that I am familiar with
the same.
I shall not, during my employment by the Company or
thereafter, use or disclose to others without the prior written consent of the
Company, any trade or business secrets, secret "know-how", confidential, secret,
technical, financial or proprietary information or other nonpublic information
relative to the business or activities of the Company, obtained by me while in
the employ of the Company or otherwise. Upon leaving the employ of the Company,
I shall not take with me any confidential, secret, technical, financial or
proprietary data, drawings, documents or information obtained by me as the
result of my employment, or any reproductions thereof. All such items and all
copies thereof, including without limitation all memoranda, notes, records and
other documents related to the actual or contemplated business or activities of
the Company that were made or compiled by me, or made available to me during the
term of my employment by the Company, shall be and remain the Company's
property, and I shall surrender the same to the Company on the termination of my
employment by the Company, or at any other time on request.
I acknowledge and agree that I am the Company's employee for
hire. In this regard, all right, title and interest of every kind and nature
whatsoever, whether now known or unknown, in and to any property (intellectual
or otherwise), including without limitation any inventions, patents, trademarks,
copyrights, films, scripts, ideas, writings and discoveries, invented, created,
written, developed, furnished, produced, disclosed or acquired by me, alone or
in collaboration with others, during the term of my employment by the Company or
within the one (l)-year period thereafter (qualified by the last sentence of
this paragraph), but excluding such musical or literary works created solely by
me and which are not created as "works made for hire" for Company or which are
not specifically licensed to or acquired by the Company, which property relates
to or may be useful in connection with the actual or contemplated business or
activities of the Company, shall be and remain, as between myself and the
Company, the sole and exclusive property of the Company for any and all purposes
and uses whatsoever (including any of my right, title and interest in and to any
domestic or foreign applications for patent or trademark, as well as any
divisions, continuations reissues, revivals, renewals or extensions thereof),
and to the extent protectible under copyright law, shall be deemed for such
purposes as works made for hire for the Company. I acknowledge and agree that I
shall disclose all of the foregoing to the Company immediately upon the
discovery, invention, creation, etc. thereof and that I shall have no right,
title or interest of any kind or nature in or to any of the foregoing or in or
to any results or proceeds therefrom. I further agree
1
<PAGE> 8
that I will, at the Company's request, whether during or subsequent to my
employment by the Company, do any and all acts, and execute and deliver to the
Company (in form satisfactory to the Company) such instruments or documents, as
may be deemed by the Company as necessary or desirable to evidence, effectuate,
secure, maintain or establish the terms of this agreement or the Company's
ownership of any of the foregoing, all without charge; but notwithstanding that
no such instruments or documents are executed, the Company, as my employer,
shall be deemed the owner thereof immediately upon the discovery, invention,
creation, etc. thereof. Except as otherwise specifically provided above
regarding certain musical or literary works created solely by me, any invention,
patent, trademark or other property relating to the Company's actual or
contemplated business or activities, that is discovered, invented, created, etc.
by me, alone or in collaboration with others, within one (1) year after the
termination of my employment by the Company for any reason, shall be deemed to
be within the provisions of this paragraph, unless I can prove that the same was
conceived and made following said termination.
Attached is a list of my existing trademark, copyright and/or
patent applications and unpatented inventions made prior to my employment by the
Company, which I agree is a complete list and which I desire to remove from the
operation of this agreement.
I agree that the Company shall be entitled to injunctive or
other appropriate equitable relief to prevent or remedy my proposed,
anticipatory or actual breach of the terms of this agreement including, without
limitation, the disclosure of any information, data, documents or other
materials covered by the terms of this agreement.
This agreement shall inure to the benefit of the Company, its
subsidiaries, affiliates, allied companies, successors and assigns or the
nominees of the Company; and I specifically agree to execute any and all
documents considered necessary or desirable to assign, transfer, sustain or
maintain inventions, discoveries, applications, copyrights, trademarks or
patents, both in the United States and in foreign countries.
IN WITNESS WHEREOF, I have hereunto signed my name as of the
date of the Employment Agreement to which this document is attached and
effective as of the Effective Date (as defined in the Employment Agreement).
/s/Christopher M. Trunkey
-----------------------------------
Christopher Trunkey
Witness: /s/Jonah Hodge
-----------------------
ACCEPTED:
Kings Road Entertainment, Inc.
/s/Kenneth Aguado
- -------------------------
By: Kenneth Aguado
Its: CEO
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JULY 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JUL-31-1998
<CASH> 191,888
<SECURITIES> 2,420,547
<RECEIVABLES> 466,900
<ALLOWANCES> (10,000)
<INVENTORY> 295,666
<CURRENT-ASSETS> 3,365,001
<PP&E> 236,290
<DEPRECIATION> (220,647)
<TOTAL-ASSETS> 3,425,091
<CURRENT-LIABILITIES> 236,803
<BONDS> 0
0
0
<COMMON> 21,136,318
<OTHER-SE> (17,956,430)
<TOTAL-LIABILITY-AND-EQUITY> 3,425,091
<SALES> 149,917
<TOTAL-REVENUES> 182,164
<CGS> 7,357
<TOTAL-COSTS> 161,085
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 21,079
<INCOME-TAX> (19,114)
<INCOME-CONTINUING> 40,193
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,193
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
