<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM lO-K
[X] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the Fiscal Year Commission File No.
Ended December 31, 1994 0-17349
VENTURA ENTERTAINMENT GROUP LTD.
(Exact name of registrant as specified in its charter)
Delaware 95-4165135
- - - ------------------------------- --------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
11466 San Vicente Boulevard, Los Angeles, California 90049
(Address of principal executive offices) (Zip Code)
Registrant's area code and telephone number: (310) 820-0607
Securities registered pursuant to Section 12(b) of the Act: None Securities
registered pursuant to Section 12(g) of the Act:
Common Stock, $.001 par value, Class C Warrants, Class D Warrants,
(title of class)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the proceeding 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 _____
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-X is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [ ]
Number of Pages:
Exhibit Index Page:
[Cover page 1 of 2 pages]
SHARES OUTSTANDING AS OF MARCH 23, 1995
The aggregate market value of the voting stock held by nonaffiliates of the
Registrant based upon the average of the closing bid and asked prices of such
stock as of March 23, 1994 as reported on the National Association of Securities
Dealers Automated Quotation System was $14,312,110.
As of April 6, 1995, there were 9,917,501 shares of common stock outstanding. In
addition there were 699,957 Class C Warrants, and 699,957 Class D Warrants
outstanding as of April 6, 1995.
DOCUMENTS INCORPORATED BY REFERENCE
Current Report on Form 8-K dated March 23, 1995, is incorporated by reference
into Part IV of this Annual Report on Form 10-K.
<PAGE>
PART I
ITEM 1. BUSINESS
General
Ventura Entertainment Group Ltd. ("Ventura" or the "Company") is a
diversified broadcast, marketing and corporate communications services company.
As of December 30, 1994, the Company acquired 80% of Soundview Media Investment,
Inc., ("Soundview"), a development stage company established for the purpose of
acquiring broadcast properties. (See Business - Broadcast.) In November 1994 the
Company acquired a 51% interest in Greenwich Entertainment Group, Inc., a
development stage company in the out-of-home motion simulation entertainment
business. The Company was incorporated under the laws of the State of Delaware
on May 16, 1988.
The Company is engaged in the business of marketing corporate services,
owning broadcasting properties and marketing events. The Company provides
related corporate services including creating and managing corporate
sponsorships, specialty video productions, corporate promotions including
product placement, facilities and production design, and the distribution of
television programs.
The Company's principal office is located at 11466 San Vicente
Boulevard, Los Angeles, California 90049. Its telephone number is (310)
820-0607. In addition to the principal office, the Company has primary offices
in New York City and Charlotte, North Carolina. The New York office is located
at 345 Park Avenue South, New York, New York 10010, and its telephone number is
(212) 685-0666 . The Charlotte office is located at 147 N. Harbor Road,
Davidson, North Carolina 28036, and its telephone number is (704) 896-0200.
Plan of Recapitalization and Change of Management
On July 25, 1994, the shareholders of Ventura approved a Plan of
Recapitalization ("Recapitalization") whereby Ventura's common shareholders
received an aggregate of 700,000 Units . Each Unit consisted of three and
one-half shares of Common Stock; one Class C Warrant; one Class D Warrant; and
one right to receive five shares (aggregate - 3,500,000 shares) of common stock
of the Producers Entertainment Group Ltd. ("Producers") owned by Ventura. The
Recapitalization also included an effective l-for-4 reverse stock split and
therefore, all references to shares of Common Stock herein have been adjusted to
give effect to the l-for-4 reverse stock split. Each Class C Warrant entitles
the holder thereof to purchase one share of Common Stock at a price of $3.50 per
share until July 25, 1997. Each Class D Warrant entitles the holder thereof to
purchase one share of Common Stock at a price of $5.00 per share until July 25,
1997.
-1-
<PAGE>
As a result of the Recapitalization, the 100 shares of Series A
Preferred Stock that were issued by Ventura for EMC were converted into 966,666
shares of Common Stock and each of the 180 outstanding shares of Series B
Preferred Stock became convertible into 11,111 shares of Common Stock (aggregate
- - - - 1,999,980 shares) and were subsequently converted, including accrued interest,
into 2,291,977 shares of Common Stock. The Company's Certificate of
Incorporation was also amended to authorize 5,000,000 shares of $.001 par value
preferred stock.
In connection with the Recapitalization, new officers and directors of
the Company were elected. See "Item 10. Directors and Executive Officers."
History
Effective with the Recapitalization the Company changed its business
focus to marketing, corporate communications services, and broadcasting. The
Company has developed its business to date through the acquisition of several
small entities.
Broadcast
In December 1994 the Company acquired 80% of Soundview, a development
stage company with purchase agreements for the pending acquisition of two
network affiliated television stations located in the southeast. The purchase of
the ABC affiliate in Montgomery, Alabama was finalized April 11, 1995. The
purchase agreement for the NBC affiliate in Tallahassee, Florida has been
extended pending consumation of Soundview's financing package.
Also, in November 1994 the Company signed a letter of intent to
purchase American Communications and Television, Inc., owner of WTGS FOX Channel
28, Hilton Head/Savannah, Georgia from Trivest Financial Services, Inc.,
(Trivest). The final purchase agreement was signed March 10, 1995 subject to FCC
approval and the Company's ability to obtain financing. Also, in March 1995 the
Company signed a letter of intent to purchase the FOX affiliates in Spokane,
Washington, Yakima, Washington and Medford, Oregon. These six stations will form
the base of the Company's broadcast division which the Company intends to expand
to twelve stations in the next two years, subject to finding stations which meet
its business and acquisition criteria and the Company's ability to obtain
necessary financing.
Marketing and Corporate Communications Services
As of August 1, 1994, the Company acquired Kaleidoscope and its
subsidiaries, Kaleidoscope Holdings, Inc. ("KHI"), Kaleidoscope Entertainment,
Inc. ("Entertainment"), Lifestyle Marketing Group, Inc. ("LMG"), and People &
Properties, Inc.("P&P"), (collectively referred to as "Kaleidoscope").
Kaleidoscope is in the business of event management; productions; promotions and
corporate sponsorships; and distribution of television programs. Prior to the
acquisition of Kaleidoscope, the principal business of the Company was to
provide corporate sponsorship services to companies, including promotions,
product placements, event marketing and speciality video production through
Entertainment Marketing Corporation, ("EMC"), acquired in March 1993.
-2-
<PAGE>
Earlier History
In October 1992, Ventura entered into a non-binding letter of intent
with Mr. Floyd W. Kephart who, at that time, was the sole shareholder of EMC.
This non-binding letter of intent contemplated, among other things, the private
placement of shares of Ventura's preferred stock, the acquisition of certain
television advertising time and the acquisition of EMC. The letter of intent
also contemplated that, upon the completion of these transactions, Ventura would
submit a Plan of Recapitalization to its shareholders which would, among other
things, enable Ventura's shareholders to directly own Ventura's common stock
interest in two partially owned publicly traded companies, The Producers
Entertainment Group (Producers) and Harmony Holdings, Inc. (Harmony). The
contemplated transactions were subject to further discussions between Ventura
and Mr. Kephart and other conditions including the execution of definitive
agreements, receipt of legal and tax opinions and compliance with regulatory
requirements. These discussions resulted in certain modifications to the
original terms of the non-binding letter of intent including the retention of
the Harmony shares by Ventura.
In 1993 and 1992 Ventura sold 130 shares of its Series B Preferred
Stock ("Series B Stock") for $1,300,000 ($10,000 per share), acquired television
advertising time and EMC. The television advertising time was acquired for 50
shares of Ventura's Series B Preferred Stock and a cash payment of $100,000. As
of March 31, 1993, EMC was acquired in exchange for 100 shares of Ventura's
Series A Preferred Stock ("Series A Stock"). As a result of the
Recapitalization, each share of Series B Stock became convertible into 11,111
shares of Common Stock (aggregate 1,999,980 shares) and the Series A Stock was
automatically converted into 966,666 shares of Common Stock. In March 1995 all
of the Series B Preferred Stock had been converted.
Business - Broadcasting
The Company's overall business strategy is to become a vertically
integrated television company capable of developing and distributing television
programming based on sports and other sponsored events and capable of capturing
a larger measure of revenue than otherwise would be attained. The Company's
current goal is to acquire up to twelve network-affiliated television stations
in the television markets ranking between 50 and 125 DMA in the United States,
the maximum currently permitted under law. Under appropriate circumstances, the
Company may also consider acquisitions of television stations not meeting these
criteria. The Company's management continuously evaluates various television
broadcasting properties for possible acquisition and frequently engages in
discussions with persons having an interest in such properties. There are
existing agreements with regard to the acquisition of six television stations
("Stations").
As an integrated enterprise, the Company will attempt (1) to capture a
larger portion of the revenue currently generated by the broadcast television
industry through its relationship with its corporate clients utilizing its
managed events and related promotions; (2) to lessen the financial risk
associated with the operation of local television stations through access to
lower cost programming resulting from television programs which it produces or
syndicates; and (3) to increase its flexibility, both financially and
operationally, to take advantage of new potential revenue streams and
-3-
<PAGE>
methods of operation as they become available in the evolving television
industry, including but not limited to, providing time for short and long form
infomercials.
The Company hopes to create additional value for its shareholders by
utilizing its corporate relationships and by adhering to the business strategy
described above. There can be no assurance, however, that any significant
relationships will be effectively utilized, and the Company's business strategy
is subject to review and change at any time. If the Company does acquire the
television broadcasting properties as outlined above, the Company will incur
substantial additional indebtedness. Moreover, while several of the Company's
competitors in the entertainment industry possess operations that are, to a
certain extent, integrated, the Company believes that the integration of a
marketing, and a distribution company coupled with broadcast stations under a
single corporate structure represents, as yet, an unproven approach. The Company
believes that this approach may result in benefits and synergies to the combined
enterprise, but there can be no assurance that such benefits and synergies can
be realized by the Company.
Television Broadcasting Industry Overview. The United States television
market, the largest in the world, is primarily served by three distribution
channels: (1) the National Networks: ABC, CBS, NBC and Fox; (2) independent
commercial television stations; and (3) cable (including pay cable). The United
States television market is comprised of 1,518 stations: 559 commercial VHF-TV,
594 commercial UHF-TV, 123 educational VHF-TV and 242 educational UHF-TV. The
three major networks, ABC, CBS and NBC, each of which has approximately 200
affiliated stations, and the recently formed Fox network, which has
approximately 140 affiliates, dominate the commercial markets. The major
networks provide their affiliates with approximately 22 hours of prime time
programming per week, as well as with a substantial amount of programming for
other time periods, including news and sports. Fox provides its affiliates with
approximately 15 hours of prime time programming per week, is not currently
providing news and provides only a very limited amount of programming for time
periods other than prime time except for NFL football. Network affiliates
broadcast the networks' programming and national commercials in return for
payments by the network's. This relationship results in the network being able
to reach virtually all of the significant television markets in the United
States. Cable services are generally classified as being either basic cable
(advertiser-supported) or pay-per-view. The most successful cable networks each
can reach more than one-half of United States television households.
Revenues of television stations are derived primarily from (i) national
spot advertising, which consists of advertising time sold to national and
regional advertisers (47.5%); (ii) local advertising, which consists of
advertising time sold to local advertisers (45%); and (iii) network compensation
payments, which are made by a network to an affiliated station in consideration
for its broadcasting of network commercial programs (7.5%). Advertising rates
are related to the population and number of television receivers located in the
area served by a station; the demographic characteristics of such population; as
well as the audience's aceptance of a station's programming as reflected in
surveys by independent rating services. Many national spot and local advertising
contracts are short-term and revenues from such contracts are sensitive to
changes in prevailing economic conditions.
-4-
<PAGE>
In 1994, television advertising revenues exceeded 33 billion dollars
for all television, an increase over 1993. Television advertising revenues for
1994 included significant political or advertising revenues that were not
generated in 1993. Industry analysts expect 1995 television advertising revenues
to be between 4% to 6% above 1994, with most of the increase coming in fourth
quarter 1995 as general economic conditions improve and national spot
advertising shows some signs of resurgence.
A slowdown in the growth of television industry advertising revenues
has been prevalent since 1986 and is due to several factors. These include a
general decline in viewing shares garnered by over-the-air television stations
due to increased competition from alternative viewing sources, especially cable
television, the general economic slowdown and a resulting excess of available
advertising time in many television markets. Revenues of network affiliated
stations have been particularly affected by the increased programming choices
provided to viewers by cable television operators. The networks' decreased
market share from 85% of prime time TV households in 1980 to a projected 65% in
1995, has adversely impacted advertising revenues of affiliated stations. In
addition, decreased network profits have caused the networks to signifiantly
reduce the compensation fees they pay to affiliated stations.
During the past several years, there has been growth in the number of
programming, entertainment and video distribution systems, such as cable
television, satellite master antenna systems, multipoint distribution services,
syndicated and pay television, pay-per-view interactive video and video cassette
rentals. Many of these alternative program sources have expanded their channel
or programming capacity. These additional program services compete with
broadcast television stations for viewing shares since the customer is offered
more viewing alternatives.
Several new technologies in their developmental stages are expected to
provide competitive video program services, such as: distribution of programming
on demand by telephone companies; "wireless cable" and direct broadcasting
satellite systems, including Ku-band high frequency satellite transmission to
smaller-sized receiving dishes; digital video compression, which may enable many
video distribution media to substantially increase channel capacity; and high
definition television ("HDTV") capable of transmitting television pictures with
higher resolution, truer color and wider aspect ratios. At this time, it cannot
be determined what impact these developing technologies will have on the
television broadcast industry.
The FCC regulates television stations under the Communications Act of
1934, as amended (the "Communications Act") which, together with FCC rules and
policies thereunder, govern the issuance, renewal and assignment of licenses,
technical operations and, to a limited extent, program, employment and
commercial practices. Television broadcast station licenses are issued for a
maximum term of five years and are renewable upon application for additional
five-year terms. Renewal applications are granted without hearing if the
licensee's qualifications are not materially challenged either by a third party
or the FCC and if no competing applications for the same license are filed.
Under FCC policies, a timely filed renewal permits the licensee to
continue operating the station until such time as the application may be denied,
and such denial becomes final.
-5-
<PAGE>
On October 5, 1992, Congress enacted the Cable Television Consumer
Protection and Competition Act of 1992 (the "CPCA"), which proposed to
substantially increase regulation of cable television and requires the FCC to
conduct rule-making proceedings which may have a significant impact upon the
environment in which the Stations compete. Television broadcasters generally
have been supportive of cable regulation to balance the current economic and
competitive advantages enjoyed by the cable industry. The Company is unable to
predict at this time the ultimate impact of these developments on its television
broadcast operations.
Other issues of significance to the television broadcast industry which
are expected to be considered by Congress or the FCC include:
o Fin Syn rules - On April 1, 1993, the FCC substantially relaxed its
financial interest and network syndication rules, which had been
established in 1970 to bar television networks from having a financial
interest in ownership or distribution of television programs. Effective
June 5, 1993, all of the former restrictions were eliminated except
with respect to active domestic syndication by existing television
networks. The remaining restriction is scheduled to expire two years
after the lifting of certain court consent decrees which essentially
replicate the FCC's 1970 rules, and from which the networks have sought
relief. The relevant decrees were lifted on November 8, 1993, however,
the FCC has agreed to accept arguments for and against the rules and
suggested that the remaining rules could be eliminated before they are
scheduled to "sunset" in November 1995. The ultimate effect of these
rules and developments upon the Company's operations cannot be
predicted.
o Multiple ownership, duopoly and cable cross-ownership rules - On June
12, 1992, the FCC released a Notice of Proposed Rule Making to consider
a relaxation of the national ownership rules which currently limit a
television broadcaster to the ownership of 12 television stations or
25% of national audience; the duopoly rules which prohibit a television
broadcaster from owning two or more television stations in the same
market; one-to-a-market rules which limit common ownership of radio and
television stations in the same market; the network-cable cross
ownership restrictions which currently prohibit common ownership of a
broadcast network and cable television systems, and the rule which
prohibits commonly owned "dual networks" which operate simultaneously
and serve substantially similar areas. Currently, the FCC may waive its
one-to-a-market rule in certain well-served major metropolitan markets,
or under certain circumstances, if a proposed sale is necessary to
avoid loss of a station's broadcasting service. The Company is unable
to predict the ultimate outcome of possible relaxation of these FCC
rules and the impact on its television broadcast operations.
-6-
<PAGE>
o HDTV - An FCC task force is currently evaluating several HDTV systems
that would enhance the quality of television transmission and
reception. The FCC has already determined that each existing television
station will be allowed three years from the FCC's adoption of an HDTV
system and HDTV spectrum allocation plan to apply for an additional UHF
channel for HDTV broadcasting and another three years to construct an
HDTV facility. The FCC has determined that HDTV will be a digital
system, incompatible with current television transmitters and
receivers. Each licensed station will ultimately be required to forfeit
its existing channel at the conclusion of a mandatory conversion period
to HDTV broadcasting, which the FCC expects to occur by 2008. It is
also possible that technology may permit enhanced picture quality of
current systems. The Company is unable to predict at this time the
impact of such possible technical changes in its television broadcast
operations or the financial requirements to convert to HDTV
broadcasting.
o Political advertising - In response to ongoing and threatened
litigation on behalf of certain political candidates against
broadcasters over alleged violations of political advertising rules,
the FCC took action in 1991 to clarify its political advertising rules.
The requirement to charge political candidates the lowest rate charged
other advertisers for advertising spots was modified to permit numerous
categories of fixed and preemptible time for purposes of determining
lowest unit price. The FCC also has asserted exclusive jurisdiction
over political advertising complaints.
o Copyright reform - Certain members of Congress have expressed an
interest in reviewing cable television's compulsory copyright license,
which currently permits cable television systems to carry the signals
of local broadcasters for free and to carry broadcast signals
originating from other markets at a relatively inexpensive percent of
their gross basic service revenues. The Motion Picture Association of
America and some major league sports organizations advocate elimination
of cable television's compulsory copyright license and requiring cable
television systems to negotiate in the open marketplace with copyright
holders for the right to broadcast their copyrighted programs including
television stations' locally originated programming. In addition, some
proposals advocate that local television broadcasters should be
compensated for packaging and compiling the programming they telecast
in which the copyrights are owned by others in addition to receiving
compensation for copyrights they hold for locally originatd
programming. The Company is unable to predict at this time the ultimate
outcome of a possible modification or repeal of the compulsory
copyright license and the impact on its television broadcast
operations.
-7-
<PAGE>
o Program length commercials - The CPCA required the FCC to determine,
regardless of prior proceedings, whether stations that are
predominantly utilized for the transmission of sales presentations or
program length commercials (commonly known as "home shopping") are
serving the public interest. In response, the FCC found that such
stations indeed serve the public interest. On October 7, 1993, on its
own motion, citing Congressional debates on the CPCA which reflected a
more general concern with the issue of commercialization in
broadcasting, the FCC issued a Notice of Inquiry to consider
reestablishing limits on the amount of commercial matter that a
television station can broadcast. Among the options being considered
are limitations imposed on an hourly basis which would preclude the
broadcasting of infomercials, or limitations based upon longer periods
of time that would permit at least some such broadcasts. The Company is
unable to predict at this time the ultimate outcome of this inquiry,
however if enacted the Company believes it would have a negative impact
upon its television broadcast operations.
o Beer and wine advertising - In 1984, the United States Supreme Court
let stand a Mississippi ban upon broadcast and print alcoholic beverage
advertising. In 1985, Congressional hearings were held on proposed
federal restrictions on beer and wine advertising, but resulted in no
legislation. In 1993, legislation was introduced in both the House and
Senate to require five rotating messages on the danger of drinking to
be included in all beer and wine commercials. Broadcasters generally
oppose such an approach, which they believe would strongly discourage
alcoholic beverage advertising. The Company is unable to predict at
this time the ultimate outcome of this proposed legislation or its
impact upon its television broadcast operations.
o State service taxes - In 1987, Florida imposed a 5% tax upon various
types of service income, including advertising. In the face of
significant threats to cancel business conducted within the State, the
tax was repealed in 1988. Several states have explored the imposition
of similar taxes in recent years, but have ben discouraged from doing
so, in part reacting to the Florida experience. It is possible that
such taxes could be enacted in states in which the Company owns
Stations or conducts other business. The Company is unable to predict
the impact of such taxes upon its operations.
o The Chairman of the FCC has proposed a plan which, if adopted, would
required broadcasters to air more children's programming. The proposed
plan would allow broadcasters to pay other stations to produce or
broadcast some of the shows as an option. Under a 1990 law broadcasters
are required to air programs that educate and inform children but there
are no requirements for a minimum amount of such programming. The FCC
determines at license renewal time whether a station has met its
obligations. The Company is unable to predict the outcome of this
proposed plan or its impact upon its television operations.
-8-
<PAGE>
Business - Marketing and Corporate Communications Services
The Company is a provider of various services to major corporations
whose media, marketing and promotional plans require identification with the
"feel good" industries of sports, education and entertainment.
The services provided by the Company are usually pursuant to exclusive
contracts directly with a corporate client. The Company will normally receive
compensation based upon a monthly retainer; reimbursement of expenses; and
either a success fee or participating interest in the program, project, event or
promotion. It is the goal of the Company to acquire or own programming and
events in conjunction with corporations which are committed to long term
indentification with selected sport events, educational programs or
entertainment markets.
The corporate communication services provided by the Company include
corporate management and media consulting; event sponsorship and management;
corporate video production and distribution; facilities design; event
production; corporate presentations including trade shows, product
introductions, conferences, seminars and training programs; event promotions and
product placement in film and television.
The Company is recognized as a leader in media consulting, sponsorships
and promotions relating to motor sports, golf, and the Olympics (as well as
lighting and production design of corporate events).
Currently the Company is providing services to General Motors, General
Motors Credit Card, Proctor & Gamble, Coca Cola, Mobil, Citigo, Ralston Purina,
Pennzoil, AT&T, Cigna, Metropolitan Life, JVC, Hitachi, Sony, Parke Davis,
General Mills and Reckitt & Coleman. The Company is serving as the exclusive
Olympic marketing consultant for the 1996 Olympics for Xerox, York
International, Cox Communications, General Motors, and the Champion Products and
Coach Leatherware divisions of Sara Lee.
The Company directly competes with other entities that provide
lifestyle and sports marketing; advertising and media consulting; educational
programming and distribution; lighting and facility design; video production and
distribution; event management and sponsorship. While some of its competitors
are larger and have greater resources, management believes the Company has
certain competitive advantages resulting from its recognized leadership position
in motor sports, golf, the Olympics, lighting and production design as well as
media consulting. In addition the Company does not know of any competitor that
can provide the scope of corporate communication services represented by the
Company. Management does not believe that any company commands a significant
portion of the $4.2 billion corporate sponsorship market.
The Company has developed its current business through the acquisition
of small privately owned service companies including EMC and Kaleidoscope. It is
the intent of management to build its business based on competitive growth.
-9-
<PAGE>
Management believes it can improve its broadcast operations by
enhancing revenues and decreasing individual station programming costs through
the corporate communication services business. It is believed this can be
accomplished through the utilization of event programming, promotions and video
distribution opportunities available to the company as a result of its corporate
communication services activities. The company intends to explore these avenues
of revenue enhancement and cost or programming reductions upon its acquisition
of each television station.
Media and Marketing
During 1993 and 1994, the Company acquired certain television
advertising time from Trivest in exchange for 50 shares of Series B Preferred
Stock and a cash payment of $100,000. The advertising time is for the
Savannah/Hilton Head television station (WTGS) and expires in March 1997. The
Company has the right to either utilize this television advertising time itself
or assign, sell and/or barter it to others. The spots are for various times
throughout the day and are available for each day of the week. As part of the
agreement to purchase WTGS, Trivest will substitute its note for the balance of
unused time as of the closing date or provide substitute time acceptable to the
Company.
The Company may barter either media time, services and/or products of a
corporation in exchange for its agreement to provide media and marketing
services. In 1994, the Company, together with an unaffiliated third party,
entered into an agreement to provide certain media time to a vehicle
manufacturer. In connection with this agreement, the manufacturer transferred
certain vehicles to the Company which were subsequently sold for approximately
$2,484,000. The manufacturer also agreed to pay approximately $2,000,000 to the
Company as the media time is used. The Company is committed to acquire the media
time based on a media plan to be provided by the manufacturer. To date, the
manufacturer has not provided the Company with its media plan, accordingly, the
Company has made no commitments to acquire any additional media time beyond the
approximately $70,000 expended. The amended agreement with the unaffiliated
third party provides for a cash payment of $400,000 and the payment of an
additional amount of up to $200,000 based on the payments to be received from
the vehicle manufacturer. In connection with this agreement, the Company issued
this third party a five year option to purchase 25,000 shares of Common Stock at
a price of $2.50 per share. The $400,000 payment has been reflected as an
expense in the accompanying consolidated financial statements.
Foreign Bank Financing
In August 1994, the Company borrowed $2,750,000 from a foreign bank
pursuant to a 8% convertible debenture due January 2, 2001. The registration of
the underlying 1,100,000 common shares was completed in early 1995 and the
debentures were converted by the bank in March 1995. The Company transferred
284,000 shares of Harmony and issued 190,000 shares of Common Stock to the bank
as a result of the conversion and the penalty payment required by the agreement.
-10-
<PAGE>
Competition
The Company competes with numerous other companies in all aspects of
its operations. Many of these other companies are much larger than the Company
and have substantially greater resources than the Company.
Employees
The Company employs 93 persons on a full-time basis. The Company does
not anticipate any material change in the number of its full-time employees in
the near future. None of the Company's employees are represented by a labor
union and the Company believes that it has good relationships with its
employees.
ITEM 2. PROPERTY
The principal office of the Company is located at 11466 San Vicente
Boulevard, Los Angeles, California and consists of approximately 7,000 square
feet. The lease for these premises expires on July 13, 1997. The Company also
leases a 6,300 square foot office/warehouse in North Hollywood, California under
a lease that expires on January 31, 1996, a 5,800 square foot office in
Davidson, North Carolina under a lease that expires on May 31, 1995. The
Company's office located at 345 Park Avenue South, New York, New York consists
of approximately 22,000 square foot. The lease for these premises expires on
October 31, 2002.
The Company believes that its current facilities are sufficient for its
needs for the foreseeable future.
ITEM 3. LEGAL PROCEEDINGS
An action entitled Steve Zackary v. Arthur Mogull, et. al. was
commenced in the Los Angeles Superior Court on February 25, 1994 against the
Company, its wholly owned inactive subsidiary Ventura Music Group Ltd. ("VMG")
and other individual and corporate defendants. In his complaint, the plaintiff
alleges, among other things, breach of contract, intentional and negligent
misrepresentation, intentional and negligent infliction of emotional distress
and seeks unspecified damages. All of these claims arose from a series of what
the plaintiff describes as employment or settlement agreements between himself
and defendant Arthur Mogull dated between August 23, 1990 and August 22, 1991.
The Company denies any liability and is vigorously contesting this matter.
Management believes that the ultimate outcome of this matter will not have a
material adverse effect on the Company.
In its normal course of business, the Company is involved in various
claims and legal actions. Management believes that the ultimate outcome of these
matters, either individually or in the aggregate, will not have a material
adverse effect on the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
-11-
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's Common Stock is traded on NASDAQ. The following table
sets forth the high and low bid price per share of the Common Stock for the
years ended December 31 as adjusted for the 1-for-4 reverse split effected in
July 1994 as a result of the approval of The Plan of Recapitalization.
<TABLE>
<CAPTION>
High Low
Bid Bid
<S> <C> <C> <C>
Quarter Ended
1992:
March 31, 1992 1.75 1.25
June 30, 1992 3.75 1.125
September 30, 1992 4.36 2.00
December 31, 1991 4.50 2.75
1993:
March 31, 1993 5.25 3.25
June 30, 1993 6.50 4.00
September 30, 1993 5.50 4.50
December 31, 1993 5.50 3.50
1994:
March 31, 1994 4.63 3.50
June 30, 1994 5.75 3.375
September 30, 1994 3.00 1.19
December 31, 1994 3.47 1.50
1995:
March 31, 1995 3.125 2.125
</TABLE>
On April 6, 1995, the closing bid and asked prices of the Common Stock
were $2-3/8 and $2-7/16, respectively. On such date there were 138 holders of
record of the Common Stock.
The Company has never declared or paid cash dividends on its Common
Stock. The current policy of the Board of Directors is to retain earnings, if
any, to provide for the growth of the Company. Consequently, no cash dividends
are expected to be paid in the foreseeable future.
In view of the effects on the Company as a result of the
Recapitalization, including the distribution of the Producers shares and the
conversion of the Series A Stock into 966,666 shares of Common Stock, the
foregoing prices prior to the Recapitalization are not necessarily indicative of
the market prices of the Company's Common Stock had the Recapitalization been
approved as of such dates.
-12-
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial data of the Company is set forth below
(000's omitted except for per share data). This selected financial data should
be read in conjunction with Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the audited financial
statements included elsewhere herein.
Statement of Operations Data (1):
<TABLE>
<CAPTION>
Year ended December 31, (2)
-----------------------------------------------------------------------------
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
(Not reported on)
<S> <C> <C> <C> <C> <C>
Revenues $ 5,796 $ 1,571 $ 183 $ 610 $ 2,669
Operating expenses (10,766) (4,276) (1298) (4,098) (5,340)
--------- --------- --------- --------- ---------
Operating loss (4,970) (2,705) (1115) (3,488) (2,671)
---------
Other income
(expense), net (146) (4,595) (206) (75) (492)
--------- --------- --------- --------- ---------
(Loss) from continuing operations
(5,116) (7,300) (1321) (3,563) (3,163)
Income (loss) from discontinued
operations (1,893) (3,525) 862 (867) (2,682)
--------- --------- --------- --------- ---------
Net (loss) (7,009) (10,825) (459) (4,430) (5,845)
Dividend requirement
of Preferred Stock (193) (143) -- -- --
Net (loss) applicable
to common
shareholders $ (7,201) $ (10,968) $ (459) $ (4,430) $ (5,845)
========= ========= ========= ========= =========
(Loss) per share (3)
Continuing operations $ (1.44) $ (3.37) $ (.61) $ (1.64) $ (1.71)
Discontinued operations (.52) (1.60) .40 (.40) 1.44
--------- --------- --------- --------- ---------
Net (loss) $ (1.96) $ (4.97) $ (.21) $ (2.04) $ (3.15)
========= ========= ========= ========= =========
Weighted average
shares
outstanding (3) 3,673 2,207 2,150 2,168 1,854
</TABLE>
-13-
<PAGE>
(1) During the year ended December 31, 1994, the Company sold or
distributed all the remaining shares of Producers. In addition, the
Company sold all but 284,000 shares of Harmony. The remaining Harmony
shares were transferred to the lender as required to fulfill an
obligation to the holders of the convertible debentures converted in
March 1995. In addition, the Company discontinued all direct marketing
and related production activities during December 1994. Consequently,
all revenues and costs associated with such activities, including
Harmony and Producers, are reflected in the accompanying statements of
operations as discontinued operations.
(2) As of December 31, 1994, the Company changed its fiscal year from June
30 to the calendar year and has restated prior periods on that basis.
As a result of accounting for Harmony and Producers as discontinued
operations, a balance sheet as of December 31, 1990 on that basis was
not available. A balance sheet at June 30, 1991 is presented.
(3) Share data has been adjusted for the approximate one-for-four reverse
stock split effected as a result of the Recapitalization in July 1994.
(4) The operations of all acquired entities have been included from the
date of each acquisition: EMC since March 1993; Kaleidoscope since
August 1, 1994; and Soundview since December 30, 1994.
-14-
<PAGE>
Balance Sheet Data:
<TABLE>
<CAPTION>
December 31, June 30,
-------------------------------------------------------- ----------
1994 1993 1992 1991 1991
(Not reported on)
<S> <C> <C> <C> <C> <C>
ASSETS
Cash $ 3,439 $ 515 $ 197 $ 57 $ 424
Accounts receivable 1,369 29 496 642
Expenditures billable to clients 780
Advances to employees 94
Prepaid expenses and
other 327
-------- -------- -------- -------- --------
Total current assets 6,010 515 226 553 1,086
Television advertising time 475 2,000
Cost of broadcast acquisition
in process 497
Film costs, net 1,425 2,025 2,115
Fixed assets, net 392 88 60 139 162
Investment in Harmony
and Producers 4,027 5,244 6,190 5,170
Assets held for sale -0- -0- 5,800 5,800 5,800
Other assets 967 696 146 95 132
Goodwill 5,990
-------- -------- -------- -------- --------
Total Assets $ 14,331 $ 7,326 $ 20,993 $ 14,802 $ 14,444
======== ======== ======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ 935 $ 315 $ 2,136 2,149 $ 2,257
Accounts payable and accrued expenses
2,114 727 410 495 421
Advances from clients 1,311
Current portion of long-
term debt 213 350
Deferred revenue 2,440
-------- -------- -------- -------- --------
Total current liabilities 7,012 1,392 2,546 2,644 2,678
Long term debt 4,543 86
Unamortized rent abatement 404
Redeemable preferred
stock of subsidiary 950
Minority interests (18)
Net shareholders' equity 1,440 5,848 10,356 12,158 11,766
-------- -------- -------- -------- --------
Total Liabilities and Shareholders'
Equity $ 14,331 $ 7,326 $ 20,993 $ 14,802 $ 14,444
======== ======== ======== ======== ========
</TABLE>
-15-
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
The Company is engaged in the business of owning broadcasting
properties, marketing events, obtaining corporate sponsorships, creating and
managing corporate promotions, product placements and the distribution of
television programs. The Company conducts its operations through its
wholly-owned subsidiaries, EMC and Kaleidoscope and its 80% owned subsidary
Soundview. The Company intends to recommend a change in the Company's name to
its shareholders at its annual meeting. Subsequent to the change of the name,
management intends to conduct its operations through five divisions and to
eliminate its operating subsidiaries.
As of December 30, 1994 the Company acquired 80% of Soundview Media
Investments Inc. a development stage company established for the purpose of
acquiring broadcast properties.
As of August 1, 1994 the Company acquired Kaleidoscope and as of March
31, 1993, the Company acquired EMC, in transactions accounted for as purchases.
Accordingly, the accounts of EMC and Kaleidoscope have been included in the
Company's consolidated financial statements since such dates.
During the year ended December 31, 1994, the Company sold or
distributed all the remaining shares of Producers. In addition, in December 1994
the Company sold all but 284,000 shares of Harmony. The remaining Harmony shares
were required to fulfill an obligation to the holders of the convertible
debentures converted in March 1995. In addition, the Company discontinued all
other direct marketing and related production activities during December 1994.
Consequently, all revenues and costs associated with such activities, including
Harmony and Producers, are reflected in the accompanying statements of
operations as discontinued operations.
Results of Operations
Year Ended December 31, 1994 as Compared to Year Ended December 31, 1993
Revenues for the year ended December 31, 1994 were $5,796,297 as
compared to $1,570,721 for the year ended December 31, 1993, an increase of
$4,225,576. The acquisition of Kaleidoscope as of August 1, 1994 accounts for
$3,730,863 of this increase. Ventura acquired EMC as of March 31, 1993 and its
results of operations have been included in the Company's consolidated financial
statements since that date. Accordingly, EMC's revenues have been included for
twelve months in 1994 as compared to nine months in 1993, accounting for the
balance of the increase in 1994 revenue. During 1994, the Company expanded its
business to include corporate promotion, product placement and event marketing,
in addition to its corporate sponsorship activities. The Company expects that
the continued expansion of these activities will result in increased levels of
revenues in future years.
-16-
<PAGE>
Operating expenses for the year ended December 31, 1994 were
$10,766,535 as compared to $4,275,442 for the year ended December 31, 1993 or an
increase of $6,491,093. Of this increase, $4,061,729 was due to the inclusion of
Kaleidoscope for five months in 1994. The balance of the increase related to the
inclusion of EMC for a full year in 1994 versus nine months in 1993, costs
related to contracts purchased of $1,341,294, expenses relating to the
Recapitalization which was approved by the Company's shareholders on July 25,
1994, and expenses relating to the development and expansion of the Company's
business. These expenses included additional personnel, advertising costs,
promotional expenses and related items.
Other income (expense) consists of the following:
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------
1994 1993
---- ----
<S> <C> <C>
Interest expense $ (56,682) $ (88,951)
Loss on return of television
advertising time (75,000)
Loss on Studio -- (3,830,000)
Settlement of lawsuit -- (676,000)
Minority interests in operation of a subsidary 84,648
Amortization of goodwill (89,349)
Other expenses 9,475
---------------------------
$ (145,855) $(4,594,951)
---------------------------
---------------------------
</TABLE>
Interest expense in 1994 primarily relates to borrowings by the Company from
Harmony, an officer and the Kaleidoscope notes payable for five months. The loss
on return of television time represents the cash portion of the amount paid for
the television advertising time that was returned to the seller. Minority
interests in operations of a subsidiary relate to the operating expenses of
Greenwich Entertainment shared by the 49% minority shareholders since
acquisition in November 1994.
During 1994, the Company disposed of the balance of its interest in Harmony and
Producers and discontinued all direct marketing and related production
activities. Consequently, all revenues and costs associated with these
activities are reflected as discontinued operations. In 1994 this includes a
gain on sale of Harmony and Producers' shares of $848,195, the Company's equity
in the net loss of Harmony and Proucers of $1,333,947, and internal net costs
incurred in direct marketing and related production of $1,095,061. For the year
ended December 31, 1993, the discontinued operations included a gain on sale of
Harmony and Producers' shares of $1,187,913 and a gain on sale of tax loss carry
forwards to Harmony of $456,765, offset by a share of operating losses of
$3,626,292, a write-off of film costs of $1,425,125, and other net direct
marketing and related production expenses of $118,166.
-17-
<PAGE>
Year Ended December 31, 1993 as Compared to Year Ended December 31, 1992
Revenues for the year ended December 31, 1993 were $1,590,721 as
compared to $182,796 for the year ended December 31, 1992. Revenues for 1993
consisted of revenues of EMC that were earned since its acquisition as of March
31, 1993. Revenues of EMC consist of fees earned with respect to corporate
sponsorship management. The Company did not receive any revenues from completed
projects during 1993. During 1992, the Company received $120,000 of revenues
from the licensing of its completed projects and recorded $90,000 in related
amortization expense. The balance of the revenue came from rental of the Studio.
Operating expenses for the year ended December 31, 1993 were $4,393,603
as compared to $946,072 for the year ended December 31, 1992, an increase of
$3,447,531. This increase was primarily due to matters relating to the
Recapitalization and the inclusion of EMC from March 31, 1993.
Other income (expense) consists of the following:
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------
1993 1992
-------------------------------
<S> <C> <C>
Interest expense - net $ (88,951) $ (211,866)
Loss on Studio (3,830,000) --
Settlement of lawsuit (676,000) --
Other expense (6,000)
-------------------------------
Other income (expense), net $(4,594,951) $ (205,866)
-------------------------------
-------------------------------
</TABLE>
Interest expense primarily relates to interest on the mortgage on the
Studio. Subsequent to December 31, 1992, the Studio was returned to the mortgage
holder in lieu of foreclosure. During 1993, the Company and Producers agreed to
settle a lawsuit and to issue securities with a value of $500,000 and $400,000,
respectively.
The discontinued operations amount for the year ended December 31, 1992
includes, a $370,934 gain on the sale of shares of Harmony and Producers and
$490,656 representing the Company's share of their income, and $351,480 due to
the write-down of film costs.
Due to the uncertainty regarding amounts to be received from its
completed projects in the future, the Company wrote off the $1,425,125
unamortized balance of film costs as film amortization during 1993 which is
included in discontinued operations. Also during 1993, the Company and Harmony
agreed to exchange all amounts owed by the Company to Harmony in the approximate
amount of $457,000 for the additional future tax benefits to be received by
Harmony as a result of Harmony's inclusion in the Company's 1990 and 1991
consolidated federal income tax returns.
-18-
<PAGE>
Liquidity and Capital Resources
As of December 31, 1994, the Company had cash of $3,439,459, total
current assets of $6,090,605 and current liabilities of $7,012,315 or a working
capital deficiency of $921,710. Included in current liabilities is $2,413,000 of
deferred revenue which will be recognized upon the utilization of media time to
be acquired by the Company in connection with a barter advertising agreement.
See "Item 1. Business - Barter Advertising."
The Company's operations during 1994 and 1993 used cash of $6,500,000
which has been primarily financed by proceeds received from sales of its
securities ($1,395,00), sales of Producers and Harmony common stock
($4,555,000), loans from a foreign bank and private placement of convertible
debentures ($3,690,000). Such proceeds, net of repayments aggregated
approximately $9,500,000. In connection with the Recapitalization, the shares of
Producers that were owned by the Company were distributed to the Company's
shareholders. Of the 1,484,000 shares of Harmony common stock owned by the
Company, 1,200,000 shares have been sold in December 1994 for $2,520,000.
In August 1994, the Company borrowed $2,750,000 from a foreign bank
pursuant to a note with principal due on January 2, 2001. The note was converted
into 1,100,000 shares of the Company's common stock in March 1995.
(See "Item 1. Business - Foreign Bank Borrowing.")
The Company's barter agreement with a vehicle manufacturer obligates it
to acquire certain media time to be used by this manufacturer. Upon its
utilization of this advertising time, the vehicle manufacturer has agreed to pay
the Company an additional $2,000,000. To the extent that these future payments
are less than the cost of the media time to be acquired, the Company will be
required to utilize its resources.
Pursuant to employment agreements, certain of the executive officers
and other key employees of the Company are entitled to minimum base compensation
aggregating approximately $2,035,000 for the year ending December 31, 1995. The
Company's leases and other commitments provide for minimum annual payments of
approximately $750,000.
In connection with the acquisition of Kaleidoscope, the Company
guaranteed an aggregate of $750,000 of Kaleidoscope's debt due to one of
Kaleidoscope's former shareholders. The Company has also agreed to obtain
releases on behalf of this shareholder from approximately $1,251,000 of debt
guaranteed by him. The Company has not obtained such releases and the former
shareholder has issued notice to the Company regarding this failure. The Company
has not made any other arrangements for sources of external financing, such as
bank lines of credit. The Company has no commitments for capital expenditures.
-19-
<PAGE>
For the years ended December 31, 1994 and 1993, the Company incurred an
aggregate operating loss of approximately $7,700,000 and interest expenses
aggregating approximately $146,000. A substantial portion of this operating loss
was related to matters in connection with the Recapitalization. Since October
1992, when the Company entered into the non-binding letter of intent with Mr.
Kephart, and March 31, 1993, when the Company acquired EMC, the Company has
expended funds on the development of its present business. The Company believes
that it could not fully exploit its current business and enter into additional
agreements until the Recapitalization was approved by the Company's shareholders
and the uncertainties relating thereto were removed. The Recapitalization was
approved by the Company's shareholders on July 25, 1994. Subsequently, the
Company, among other things, completed a long-term borrowing of $2,750,000 from
a foreign bank which was converted to common equity in March 1995; completed the
placement of $1,100,000 in convertible debt; sold Harmony shares for $2,520,000;
and acquired Kaleidoscope and Soundview. In addition, the Company has definitive
plans to acquire six television stations, and in a related transaction to these
acquisitions the Company has proposed debt financing of $25,000,000. Management
believes it will be necessary to raise additional equity and/or to obtain
additional financing to complete the proposed acquisitions and implement its
business plan. Management believes that the actions being taken, when complete,
will enable the Company to substantially increase its revenues and operate on a
positive cash flow basis.
If the Company does not operate on a positive cash flow basis and its
present resources are not sufficient to absorb any cash losses, the Company will
need to obtain financing through the debt or equity markets. In order to fulfill
its overall plan and its financial obligations, the Company is pursuing several
financing alternatives. However, there can be no assurance that any financing
will occur. The independent auditors report indicates that they believe there is
sufficient reason to have substantial doubt about the Company's ability to
continue as a going concern. The Company could also use the proceeds from the
exercise of its Class C Warrants and Class D Warrants to fund any cash
requirement. However, there can be no assurance that any of these warrants will
be exercised. Management believes that the Company will be able to meet its cash
obligations for at least the next twelve months.
Inflation
Inflation has not had a significant effect on the Company.
Recent Accounting Pronouncements
As of July 1, 1993, the Company adopted the provisions of Financial
Accounting Standards Board Statement No. 109 "Accounting for Income Taxes". The
adoption of SFAS No. 109 did not have an effect on the Company's financial
statements.
-20-
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements have been included herein under Item
14 (a)(1).
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH
ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE
On October 25, 1994, the Company with the approval of the Audit
Committee, advised Kellogg & Andelson that it was dismissing such accounting
firm, and was retaining the accounting firm of BDO Seidman as auditors for the
next fiscal period. The decision to retain BDO Seidman was based upon a need for
an accounting firm with a national presences and was not motivated by any
disagreements between the Company and Kellogg & Andelson concerning any
accounting matters. During the entire period of their engagement (September 22,
1992, to October 25, 1994), there have been no disagreements with Kellogg &
Andelson relative to accounting principles or practices, financial statement
disclosure, auditing scope or procedures, which if not resolved to Kellogg &
Andelson's satisfaction, would have resulted in a reference to the subject
matters of the disagreement, in connection with its report. Kellogg & Andelson
reports on the Company's financial statements have not contained an adverse
opinion or a disclaimer of opinion, nor were the opinions qualified or modified
as to uncertainty, audit scope, or accounting principles, nor were there any
events of the type requiring disclosure under Item 304(a)(1)(v) of Regulation
S-K.
On October 25, 1994, the Company informed BDO Seidman that they had
been appointed as the Company's certifying accounting firm for the current
fiscal year. During the last two years, the Company has not consulted BDO
Seidman concerning any matter.
On July 27, 1992, the Company terminated Coopers & Lybrand as its
independent auditors because it did not believe that it had received sufficient
or timely advice from them. The Company reported that it had a disagreement with
Coopers & Lybrand regarding the calculation of the amount of income to be
realized on a transaction. The decision to terminate Coopers & Lybrand was
approved by the Board of Directors of the Company.
The Company was subsequently provided with a copy of a letter from
Coopers & Lybrand dated August 17, 1992 wherein Coopers & Lybrand agreed that
there was a disagreement regarding the calculation of the amount of income to be
realized and disagreed with the Company's statement that it did not receive
sufficient or timely advice from them.
Coopers & Lybrand has not advised the Company that this disagreement,
if not resolved to its satisfaction, would have caused them to make reference
thereto in their report on the consolidated financial statements of the Company
for the year ended June 30, 1992. The audit report of Coopers & Lybrand for the
year ended June 30, 1991 did not contain any adverse opinion or disclaimer of
opinion, and was not qualified or modified as to uncertainty, audit scope, or
accounting procedures.
-21-
<PAGE>
The disagreement related to the computation of the amount of the gain
realized by the Company as a result of the initial public offering of securities
by Harmony which occurred in November 1991. Prior to filing its Form 10-Q for
the quarter ended December 31, 1991, the Company computed the amount of the gain
realized as approximately $1,767,000.
Subsequent to filing its December 31, 1991 Form 10-Q, the Company
received a memorandum from Coopers & Lybrand which calculated the amount of gain
to be realized in a different manner than the Company's computation. The
calculation provided by Coopers & Lybrand resulted in the amount of gain to be
realized of approximately $537,000. The Company advised Coopers & Lybrand that
it did not agree with its computation of the gain to be realized.
In connection with its dismissal of Coopers & Lybrand, the Company
reported that it would review the computation of the gain realized on Harmony's
initial public offering with its new independent auditors, when engaged.
In connection with the filing of the Company's proxy material relating
to The Plan of Recapitalization, this gain was recomputed to be $143,641.
On September 25, 1992, the Company engaged Kellogg & Andelson as its
independent auditors. In connection with the engagement of Kellogg & Andelson,
neither the Company nor anyone acting on its behalf, consulted Kellogg &
Andelson as to the application of accounting principles to a specified
transaction either completed or proposed, or the type of opinion that might be
rendered on the Company's consolidated financial statements.
In connection with its engagement of Kellogg & Andelson, the Company
authorized Kellogg & Andelson to communicate directly with Coopers & Lybrand, if
they so desired, with respect to this disagreement. The Company did not place
any limitation on Coopers & Lybrand to respond fully if so requested by Kellogg
& Andelson.
-22-
<PAGE>
PART III
MANAGEMENT
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each
of the current directors, executive officers and other key employees of the
Company.
Name Age Position With Company
---- --- ---------------------
Floyd Kephart 52 Chairman, Chief Executive Officer and
Director
Ray Volpe 55 President, Co-Chief Executive Officer and
Director
Carleton Burtt 60 Chief Operating Officer
David Ward 56 Chief Financial Officer and Treasurer
Harvey Bibicoff 55 Director*
Gary Horowitz 58 Director
Gary Teel 43 Executive Vice President
Donald B. Lifton 55 Corporate Secretary
Bruce Albert 54 Assistant Secretary
Coy Eklund 79 Director
Frank A. Woods 52 Director
William D. Eberle 71 Director
Bennett Smith 35 President of Soundview Media Investment, Inc.
and Director
Don Dixon 48 President, CEO, Lifestyle Marketing Group, Inc.
Tony Andrea 50 President, CEO, People & Properties, Inc.
* Mr. Bibicoff resigned from the Board effective April 5, 1995.
Directors are elected to an annual term that expires at the Company's
annual meeting of stockholders. The present directors were elected on July 25,
1994 or appointed by the Board on October 31, 1994. There are no family
relationships between any of the officers and directors.
-23-
<PAGE>
Floyd Kephart has been Chairman, Chief Executive Officer and a director
of Ventura since July 25, 1994. Mr. Kephart served as a consultant to the
Company and as the Chief Executive Officer of a Company subsidiary from July 1,
1992 to July, 1994. He has been the President of EMC since 1988. Mr. Kephart was
formerly President of Sports News Network, a sports data base company. He has
served as a member of the Board of Directors and CEO of several public
companies, including McDowell Corporation and Southern States Corporation.
Ray Volpe has been President, Co-Chief Executive Officer and a director
of Ventura since July 25, 1994. Mr. Volpe has been a founder and/or senior
partner of Kaleidoscope Entertainment, Sports Marketing International and People
& Properties, Inc., since 1986. Prior to forming these companies, Mr. Volpe was
a founder and President from 1982-1985 of Ohlmeyer Communications Companies
which specialized in entertainment, sports and advertising. Mr. Volpe served as
the first Commissioner of the Ladies' Professional Golf Association from 1975 to
1982. Mr. Volpe also serves as television programming and media consultant to
General Motors Corporation and as event marketing consultant to Buick Motor
Division.
Carleton Burtt became Chief Operating Officer on March 7, 1995. Mr.
Burtt, since 1991, has served and continues to serve as President of Trivest
Financial Services Corp., the parent of American Communications & Television
Inc., the owner of the license of WTGS-TV, Channel 28 in Hilton Head/Savannah.
Prior to joining Trivest he was an independent financial advisor and trustee.
David Ward became Chief Financial Officer and Treasurer on October 27,
1994. Since September 1, 1993 Mr. Ward has been a financial consultant; prior to
that date he was a senior partner at Deloitte & Touche. During 1983-1984 he
served as the Chief Operating Officer of Sotheby's Holdings Inc. the
international auction house.
Harvey Bibicoff was an executive officer and a director of the Company
from its inception. Mr. Bibicoff is also an officer and director of Harmony and
prior to March 1995 was an officer and director of Producers. Mr. Bibicoff is
the sole shareholder and president of Bibicoff & Associates, Inc., a corporation
that has a non-compete agreement with the Company. Mr. Bibicoff resigned from
the Board effective April 5, 1995.
Donald Lifton became Corporate Secretary on October 27, 1994. Mr.
Lifton operates a private merchant banking and financial consulting firm, Lifton
& Company. He was a founding partner of a Detroit area law firm.
Gary Horowitz has been a director of Ventura since July 25, 1994. Mr.
Horowitz has been a director of Harmony since March 1992 and has been President,
Chief Executive Officer and Chief Financial Officer of Harmony since July 31,
1993. Previously, he served as a director of L.A. Weekly since 1986 and its
Chief Executive Officer since January 1990. Mr. Horowitz spent nearly 30 years
directly involved in the field of commercial production. He became President of
Jenkins, Covington, Newman, Inc. in 1980, a television commercial production
organization. In 1976 he co-founded Communications Group West where he acted as
media director for several political campaigns and produced television
commercials.
-24-
<PAGE>
Gary Teel has been Executive Vice President since April 1993. For the
past five years prior thereto he served as President of Entertainment
Placements, Inc. (formerly known as Premier Entertainment Services), a company
specializing in the placement of identifiable products in motion pictures and
television programs.
Bruce Albert has been Assistant Secretary of Ventura since August 1,
1994 and has been an Executive Vice President and Chief Operating Officer of
Kaleidoscope since January 1, 1993. From March 1992 to January 1, 1993, Mr.
Albert was a Director of Strategic Planning of Kaleidoscope. Prior to joining
Kaleidoscope, Mr. Albert was a Managing Director at Lord, Geller, Federico,
Einstein and a Partner, Executive Vice President and Chief Operating Officer of
Lord, Einstein and O'Neil from 1985 to March 1992. Mr. Albert was employed as
Corporate Senior Vice President by the marketing communications firm of Doyle
Dane Bernbach from 1964-1985, where he managed accounts such as General Foods,
Sara Lee and Heinz.
Coy Eklund, has been a director of Ventura since July 25, 1994. Mr.
Eklund has served as Chief Executive Officer and Chairman of the Board of
Trivest Financial Services Corp. since 1988. Prior thereto, he served as Chief
Executive Officer and Chairman of the Board of Directors of The Equitable Life
Assurance Society of the United States. He has served on the Boards of Directors
of Bendix Corporation, Burroughs Inc. and Chase Manhattan Bank. He also served
as a member of the Grace Commission, the President's Commission on Executive
Exchange, the President's Council for International Youth Exchange and Grand
Central Art Galleries. For several years, Mr. Eklund was a board member of the
National Urban League and, for a period of five years, served as National
Chairman of the National Urban League.
Frank A. Woods, has been a director of Ventura since July 25, 1994. Mr.
Woods, has been Chairman of the Board of Woods Group and MediaOne, Inc., both of
which are merchant banking firms, since 1991. From 1984 to 1991, Mr. Woods was
President, Chief Executive Officer and a member of the Board of Directors of
Sungroup, Inc., an owner and operator of radio stations primarily in Texas,
Louisiana, Florida and Nebraska. For the past five years, as a specialist in the
communications field and an attorney, Mr. Woods has served as a member of the
Boards of Directors of several public companies including Townsend Broadcasting
Corporation and Tennessee Valley Broadcasting Corporation.
William Eberle became a director of Ventura on October 31, 1994. Mr.
Eberle is currently Chairman of the Board of both Showscan Entertainment, Inc.
(the leading worldwide provider of motion simulator equipment for out-of-home
entertainment venues) and Manchester Associates (a venture capital and
international consulting firm), and is of Counsel to the law firm Kaye, Scholer,
Fierman, Hays & Handler. Mr. Eberle is the former Chairman and CEO of American
Standard, and a former Vice President of Boise Cascade. Mr. Eberle was United
States Trade Representative with rank of Ambassador from 1971 to 1975.
-25-
<PAGE>
Bennett Smith became a director on October 31, 1994. Mr. Smith is the
President and CEO of Soundview Media Investment, Inc., a Ventura subsidary.
Prior to Soundview, Smith was President, CEO and co-owner of New Vision
Communications, a broadcasting company which owns eight network affiliate
television stations. Smith previously held the offices of Vice President and
Secretary of Clear Channel Communications, a publicly traded broadcasting
company which owns and operates 12 television stations and 36 radio stations.
Don Dixon has been the President of Lifestyle Marketing Group since he
founded it in partnership with Saatchi & Saatchi PLC in 1985. Mr. Dixon has
extensive Olympic-related promotional and marketing experience working with the
United States Olympic Committee, the International Olympic Committee, and the
Los Angeles, Calgary, Seoul and Barcelona Olympic Organizing Committees.
Tony Andrea is the founder, CEO and President of People & Properties,
Inc., a sports marketing and television packaging agency started in 1975. Prior
to that date he was director of advertising and promotion for the National
Hockey League.
The Delaware Supreme Court has held that directors' duty of care to a
corporation and its stockholders requires the exercise of an informed business
judgment. Having become informed of a11 material information reasonably
available to them, directors must act with requisite care in the discharge of
their duties. The Delaware General Corporation Law permits a corporation through
its Certificate of Incorporation to exonerate its directors from personal
liability to the corporation or its stockholders for monetary damages for breach
of fiduciary duty of care as a director, with certain exceptions. The exceptions
include a breach of the director's duty of loyalty, acts or omissions not in
good faith or which involve intentional misconduct or knowing violations of law,
improper declarations of dividends, and transactions from which the directors
derived an improper personal benefit. The Company's Certificate of Incorporation
exonerates its directors, acting in such capacity, from monetary liability to
the extent permitted by this statutory provision. The limitation of liability
provision does not eliminate a stockholder's right to seek nonmonetary,
equitable remedies such as injunction or rescission to redress an action taken
by directors. However, as a practical matter, equitable remedies may not be
available in all situations and there may be instances in which no effective
remedy is available.
The Company understands that it is the position of the Securities and
Exchange Commission that insofar as the foregoing provisions may be invoked to
disclaim liability for damages arising under the Securities Act of 1933, the
provision is against public policy as expressed in the Act and is therefore
unenforceable.
-26-
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
------------------- ------
(a) (b) (c) (d) (e) (g)
Name and Calendar Options/
Principal Year Salary Bonus Other (3) SARs
Position Ended $ $ $ #
- - - -------- ----- - - - -
<S> <C> <C> <C> <C> <C>
Floyd Kephart, 1994 237,301 -0- 1,800 -0-
Chairman and 1993 180,000 -0- -0- -0-
Chief Executive 1992 -0- -0- -0- -0-
Officer
Ray Volpe, 1994(2) 134,000 -0- 11,882 -0-
President and 1993 -0- -0- -0- -0-
Co-CEO 1992 -0- -0- -0- -0-
Harvey Bibicoff, 1994(1) 68,750 -0- 3,125 275,000
Ex-Chairman of the 1993 -0- -0- -0- 150,000
Board and Chief 1992 -0- -0- -0- -0-
Executive Officer
Gary Teel, 1994 150,000 -0- -0- -0-
Executive Vice 1993 100,000 -0- -0- -0-
President 1992 -0- -0- -0- -0-
Don Dixon, 1994(2) 114,583 -0- 5,537 -0-
President, CEO - 1993 -0- -0- -0- -0-
Lifestyle Mktg. 1992 -0- -0- -0- -0-
Tony Andrea, 1994(2) 104,167 -0 6.463 -0-
President, CEO 1993 -0- -0- -0- -0-
People&Properties 1992 -0- -0- -0- -0-
Bruce Albert, 1994(2) 62,500 -0- 3,520 -0-
Assistant 1993 -0- -0- -0- -0-
Secretary 1992 -0- -0- -0- -0-
- - - -------------------------------------
</TABLE>
(1) Represents amounts paid from August 1, 1994 to December 31, 1994 to Bibicoff
& Associates under a non-compete agreement. Mr. Bibicoff resigned as a Director
effective April 5, 1995.
(2) Represents compensation since the acquisition of Kaleidoscope as of August
1, 1994.
(3) Represents automobile allowances, club memberships, and premiums on life
insurance not owned by the company.
-27-
<PAGE>
OPTION/SAR GRANTS TABLE
There were Stock Option Grants during the year ended December 31, 1994
to five non-executive members of the Board of Directors for 25,000 shares each
and 250,000 shares pursuant to a non-compete agreement with Mr. Bibicoff. In
addition stock options for 25,000 were granted to an unaffiliated third party.
All grants were at $2.50 a share. At December 31, 1994 all 400,000 stock options
referred to above were outstanding.
In January 1995, the Board of Directors approved the granting of stock
options for 550,000 shares to management personnel and for 100,000 shares to a
consultant, all at $2.50 a share.
All options referred to above were issued at a price which was at or
above the market price at date of grant.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
Aggregated Options/SAR Exercises in Fiscal Year Ended December 31 1994 and
Fiscal Year-End Option/SAR Value
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of
Unexercised
Number of In-the-Money
Options/SARs Options/SARs
Shares Value at FY-End (#) at FY-End ($)
Name Acquired Realized Exercisable (E) Unexercisable (UE)
- - - ---- -------- -------- --------------- ------------- ----
<S> <C> <C> <C> <C> <C>
Harvey
Bibicoff 150,000 $169,688 275,000 -0-
</TABLE>
LONG-TERM INCENTIVE AWARDS TABLE
There were no long-term incentive awards granted during the year ended
December 31, 1994.
-28-
<PAGE>
Employment Agreements
Floyd W. Kephart
On January 10, 1995 the Board of Directors approved an Employment
Agreement with Mr. Kephart outlining the terms of his employment as Chairman and
Chief Executive Officer. The Employment Agreement is for an initial term
expiring December 31, 2000, with automatic three year extensions unless prior
written notice of termination is given by either party. Mr. Kephart's annual
salary was fixed at $360,000, and he is eligible to receive a bonus, at the
discretion of the Board of Directors. Mr. Kephart was awarded options to
purchase 350,000 shares of the Company's common stock at $2.50 per share, which
vested immediately and expire on the earlier of October 15, 2004, or the fifth
anniversary of the termination of Mr. Kephart's employment. Mr. Kephart may
require the Company to repurchase all vested options at a price equal to the
difference between the exercise price of the options and the market price of the
Company's stock and Mr. Kephart will continue to receive payments under the
Employment Agreement. Mr. Kephart may not, while employed by the Company or for
a period of one year thereafter, if he voluntarily terminates his employment,
become involved in any entity which competes with the Company.
Ray Volpe
Mr. Volpe is employed by the Company pursuant to an agreement dated
July 1, 1994, which expires on June 30, 2001. The agreement provides for annual
base compensation of $300,000 and he will be reimbursed for reasonable business
expenses in an amount not to exceed $25,000. This agreement is cancelable by the
Company in the event of Mr. Volpe's death, incapacity or for cause. In the event
of a change of control, as defined in the agreement, and the agreement is
terminated, or Mr. Volpe has suffered a substantial diminution in his duties, he
shall be entitled to receive compensation equal to twice his annual compensation
for the remaining term of the agreement.
Harvey Bibicoff
Mr. Bibicoff was not compensated for his services as an executive
officer of Ventura during the years ended December 31, 1992, 1993 and 1994. On
August 1, 1994, as amended on April 5, 1995, the Company entered into a
non-compete agreement with Bibicoff & Associates, Inc., a corporation owned by
Mr. Bibicoff, and Mr. Bibicoff. The agreement provides for annual fees of
$165,000 to July 31, 1999. In connection with this agreement, Mr. Bibicoff was
granted a five year option to purchase 250,000 shares of the Company's Common
Stock at a price of $2.50 per share. Mr. Bibicoff resigned as an officer in
October, 1994 and as a director effective April 5, 1995.
-29-
<PAGE>
David H. Ward
On January 10, 1995, the Board of Directors approved an Employment
Agreement with Mr. Ward containing the terms of his employment as Chief
Financial Officer. The Employment Agreement is for a term of one year and will
be automatically extended for successive one year periods unless prior written
notice of termination is given by either party. Mr. Ward's annual salary was
fixed at $175,000. Mr. Ward is also provided with an automobile allowance, and,
at the discretion of the Board of Directors, may be awarded a bonus. Mr. Ward
was awarded options to purchase 100,000 shares of the Company's common stock at
$2.50 per share.
Donald B. Lifton
On October 15, 1994, the Company entered into an Independent Consulting
Agreement ("Agreement") with Mr. Lifton, outlining the terms of his engagement
as the Corporate Secretary and a business consultant. Mr. Lifton is not an
employee of the Company, but rather provides services as an independent
contractor. The Agreement expires on December 31, 1995 and will be automatically
renewed for successive one year periods unless prior written notice of
termination is given. Mr. Lifton's compensation was set at a rate of $6,250 per
month through December 31, 1995; during this same period, Mr. Lifton will accrue
an additional $6,250 per month. If the Company obtains commitments for financing
in excess of $10 million prior to December 31, 1995, Mr. Lifton will receive the
amount accrued. Subsequent to December 31, 1995, Mr. Lifton is entitled to
$12,500 per month. Mr. Lifton was awarded options to purchase 100,000 shares of
the Company's common stock at $2.50 per share.
Don Dixon
Mr. Dixon is employed by the Company pursuant to an agreement dated
July 1, 1994, which expires on June 30, 1999. The agreement provides for annual
base compensation of $275,000, and he will be reimbursed for reasonable business
expenses in an amount not to exceed $25,000. This agreement is cancelable by the
Company in the event of Mr. Dixon's death, incapacity, or for cause. In the
event of a change of control, as defined in the agreement, and the agreement is
terminated, or Mr. Dixon has suffered a substantial diminution in his duties, he
shall be entitled to receive compensation equal to twice his annual compensation
for the remaining term of the agreement.
Tony Andrea
Mr. Andrea is employed by the Company pursuant to an agreement dated
July 1, 1994, which expires on June 30, 1999. The agreement provides for annual
base compensation of $250,000, and he will be reimbursed for reasonable business
expenses in an amount not to exceed $10,000. This agreement is cancelable by the
Company in the event of Mr. Andrea's death, incapacity, or for cause. In the
event of a change of control, as defined in the agreement, and the agreement is
terminated, or Mr. Andrea has suffered a substantial diminution in his duties,
he shall be entitled to receive compensation equal to twice his annual
compensation for the remaining term of the agreement.
-30-
<PAGE>
Bruce Albert
Mr. Albert is employed by the Company pursuant to an agreement dated
July 1, 1994, which expires on June 30, 1999. The agreement provides for annual
base compensation of $175,000 and a $10,000 annual non-accountable expense
allowance. This agreement is cancelable by the Company in the event of Mr.
Albert's death, incapacity or for cause. In the event of a change of control, as
defined in the agreement, and the agreement is terminated, or Mr. Albert has
suffered a substantial diminution in his duties, he shall be entitled to receive
compensation equal to twice his annual compensation for the remaining term of
the agreement.
Bennett Smith
Soundview entered into an employment agreement with Bennett Smith
effective November 4, 1994 and expiring on October 31, 1999. The agreement is
guaranteed by the Company and provides for annual base compensation of $200,000.
The agreement terminates upon the death or disability of Mr. Smith and is
cancelable by the Company for cause.
Stock Option Plan
The Company's Stock Option Plan (the "Option Plan") provides that a
total of 1,000,000 shares of Common Stock may be issued under the Option Plan.
Pursuant to the Option Plan, the Company may grant "incentive stock
options" within the meaning of Section 422A of the Internal Revenue Code of
1986, as amended ("incentive stock options") as well as non-incentive stock
options to salaried employees. The Option Plan provides for administration by
the Board of Directors of the Company or by a Committee of the Board of
Directors which selects the optionees, authorizes the grant of options and
determines the exercise price of the options. Currently, the Board of Directors
administers the Option Plan and Board members are eligible for grants under the
Option Plan. The exercise price of each incentive stock option granted under the
Option Plan must be at least 100% of the fair market value per share of the
Common Stock as determined by the Board of Directors on the date of the grant.
Each incentive stock option may be exercisable for a period, as determined by
the Board of Directors, but not in excess of ten years from the date of grant.
The exercise price of all options granted under the Option Plan to stockholders
possessing more than 10% of the total combined voting power of all classes of
stock of the Company must be not less than 110% of the fair market value of the
Common Stock on the date of grant and such options may be exercisable for a
period not in excess of five years from the date of grant.
Incentive stock options granted under the Option Plan are
non-transferable, except upon death, by will or by operation of the laws of
descent and distribution, and may be exercised during the employee's lifetime
only by the optionee. There is no limit on the number of shares with respect to
which options may be granted under the Option Plan to any participating
employee. However, under the terms of the Option Plan, the aggregate fair market
value of the stock with respect to which incentive stock options are exercisable
for the first time by an employee during any calendar year (under all such plans
of the Company and any parent and subsidiary corporations of the Company) may
not exceed $100,000.
-31-
<PAGE>
Options granted under the Option Plan may be exercised within twelve
months after the date of an optionee's termination of employment by reason of
his death or disability, or within six months after the date of termination by
reason of retirement or voluntary termination approved by the Board of
Directors, but only to the extent the option was otherwise exercisable at the
date of termination. In the event an optionee's employment is terminated for any
reason other than death or disability, or retirement or voluntary termination
approved by the Board of Directors, such optionee's option shall terminate
thirty days after the date of such termination.
The Option Plan expires on May 7, 2000, unless terminated earlier by
the Board of Directors. The Option Plan is subject to amendment by the Board of
Directors without stockholder approval, except that no amendment which increases
the maximum aggregate number of shares which may be issued under the Option Plan
for changes the class of employees who are eligible to participate in the Option
Plan would be allowed without the approval of the stockholders of the Company.
At December 31, 1994, there were no outstanding stock options under the
Option Plan.
Compensation of Directors
No fees are paid to members of the Board of Directors of the Company
for their services as members of the Board of Director's. During 1994
non-executive members of the Board of Directors were each granted options to
purchase 25,000 shares at $2.50 per share. It is the policy of the Company to
reimburse directors or reasonable travel and lodging expenses incurred in
attending meetings of the Board of Directors.
-32-
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of April 6, 1995, the Company had 9,917,501 shares of Common Stock
outstanding. The following table sets forth the number of shares of Common Stock
of the Company beneficially owned as of such date by: (i) each person who
beneficially owns more than five percent of the Company's Common Stock; (ii)
each of the officers and directors of the Company; and (iii) all officers and
directors of the Company as a group. Except as noted, the person named has sole
voting and dispositive power over the total number of shares beneficially owned.
<TABLE>
<CAPTION>
Amount and
Nature of Percent of
Name and Address Beneficial Outstanding
of Beneficial Owner Ownership Common Stock
- - - ------------------- ---------- ------------
<S> <C> <C>
Floyd Kephart 1,166,666 (1) 11.4%
11466 San Vicente Blvd.
Los Angeles, CA 90049
Ray Volpe 557,331 (7) 5.6%
345 Park Avenue South
New York, NY 10010
Bennett Smith 505,000 (8) 5.1%
1101 Gulf Breeze Parkway #207
Gulf Breeze, FL 32561
William Eberle 26,578 (3) *
One Cranberry Hill
Lexington, MA 02173
Coy Eklund 153,147 (5)(2) 1.3%
787 Seventh Ave., Suite 38C
New York, NY 10019
Gary Horowitz 25,000 (3) *
2921 West Alameda Ave.
Burbank, CA 91505
-33-
<PAGE>
Frank A. Woods 25,000 (3) *
631 Second Avenue South
Nashville, TN 37201
Bruce Albert 63,991 (7) *
345 Park Avenue South
New York, NY 10010
Tony Andrea 236,886 (7) 2.4%
345 Park Avenue South
New York, NY 10010
Brian Brady 320,000 (8) 3.2%
2178 Commons Parkway
Okemos, MI 48864
Carleton Burtt 262,500 (9)(2) 2.6%
345 Park Avenue South
New York, NY 10010
Don Dixon 570,588 (7) 5.7%
345 Park Avenue South
New York, NY 10010
Donald B. Lifton 100,000 (9) 1.0%
1198 Charrington
Bloomfield Hills, MI 48301
Gary Teel 20,879 (4) *
11466 San Vicente Blvd.
Los Angeles, CA 90049
David Ward 100,000 (9) 1.0%
345 Park Avenue South
New York, NY 10010
Trivest Financial
Services, Inc. 640,734 (6) 6.5%
787 Seventh Avenue, Suite 38C
New York, NY 10019
All officers and
directors as a group
(17 persons) 4,189,152 (8) 42.2%
</TABLE>
* Less than 1%
- - - ------------------------------------
-34-
<PAGE>
(1) Includes 350,000 shares of common stock that are issuable upon the
exercise of stock options granted in 1995.
(2) Does not include 640,734 shares of Common Stock issued to Trivest upon
the conversion of shares of Series B Preferred Stock. Mr. Eklund is the
Chairman of the Board and Chief Executive Officer of Trivest and Mr.
Burtt is President of Trivest. However, Mr. Eklund and Mr. Burtt
disclaim beneficial ownership of the shares owned by Trivest.
(3) Represents shares of Common Stock issuable upon the exercise of stock
options granted in 1994. Mr. Eberle also owns 1,189 common shares and
389 Class D Warrants.
(4) Represents shares of Common Stock issued in connection with the
acquisition of product placement contracts by the Company.
(5) Represents 128,147 shares of Common Stock issued upon the conversion of
shares of Series B Preferred Stock and 25,000 shares of Common Stock
issuable upon the exercise of stock options.
(6) Represents shares of Common Stock issued upon the conversion of shares
of Series B Preferred Stock.
(7) Represents shares of Common Stock issued in connection with the
acquisition of Kaleidoscope.
(8) Represents shares of Common Stock issued in connection with the
acquisition of Soundview.
(9) Represents shares of Common Stock issuable upon the exercise of stock
options granted in 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 14, 1994 the Company sold 1,200,000 shares of Harmony
Holdings, Inc. to Harvey Bibicoff, a director, for $2,520,000. Of this amount,
$2.4 million was cash and the remaining $120,000 a one year note.
During 1994 the Company invested $255,000 for 51% of Greenwich
Entertainment. Mr. William Eberle, through a controlled corporation, owns 19.6%
of Greenwich Entertainment. Also during 1994 the Company purchased 80% of
Soundview Media Investment Inc. Mr. Smith and Mr. Brady own 10.1% and 6.4% of
Soundview respectively.
-35-
<PAGE>
In May 1994, the Company returned $1,500,000 of the $2,000,000 of
advertising time to Trivest in exchange for 150 of the 200 shares of Series B
Preferred Stock issued by the Company to Trivest in the original acquisition of
the advertising time. Trivest did not agree to return any part of the $100,000
cash payment. Trivest did agree to waive all accrued but unpaid dividends with
respect to the 150 shares of Series B Stock that were returned. Trivest
indirectly owns a majority interest in the television station that will provide
the remaining advertising time. Mr. Coy Eklund, who was elected a director of
Ventura on July 25, 1994 and was a nominee for director at the time of this
exchange, is Chief Executive Officer and Chairman of the Board of Trivest. In
November 1994 the Company signed a letter of intent to purchase from Trivest all
the shares of American Communications and Television, Inc., owner of WTGS FOX
Channel 28, Hilton Head/Savannah Georgia, the station referred to above. A
purchase agreement was signed in March 1995 with the only contingency relating
to FCC approval. Also in March 1995 Carleton Burtt became Chief Operating
Officer of the Company. Since 1991 he has served as President of Trivest and
will continue to hold that position.
In February 1994, the Company entered into a $700,000 revolving line of
credit with Harmony Holdings which was collateralized by a receivable of the
Company's. In August 1994, the balance of $522,000 was paid in full.
During the year ended December 31, 1993, Mr. Bibicoff made loans
aggregating $1,422,00 to the Company pursuant to unsecured promissory notes
which bore interest at 10%. The balance due at December 31, 1993 of $315,000, as
well as the net borrowings in 1994 of $15,000 were repaid by August 1994 from
the net proceeds received from the Company's foreign bank loan.
In connection with the Recapitalization, Ventura acquired all the
capital stock of EMC from Floyd Kephart in exchange for 100 shares of Series A
Stock. Upon the approval of the Plan of Recapitalization, the Series A Stock was
automatically converted into 966,666 shares of Common Stock.
During the year ended December 31, 1994, the Company acquired certain
contracts relating to its product placement business from Mr. Gary Teel and two
other employees of the Company. In exchange for these contracts, the Company
paid $360,000 and issued 201,465 shares of Common Stock
-36-
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD.
AND SUBSIDIARIES
Index to Financial Statements
<TABLE>
<S> <C>
Report of Independent Auditors..............................................F- 2
Consolidated Balance Sheets - December 31, 1994 and
December 31,1993.......................................................F- 3
Consolidated Statements of Operations - Years ended
December 31, 1994, 1993, and 1992......................................F- 4
Consolidated Statements of Shareholders' Equity -
Three years ended December 31, 1994....................................F- 5
Consolidated Statements of Cash Flows - Years ended
December 31, 1994, 1993, and 1992......................................F- 6
Notes to Consolidated Financial Statements........................F- 7 to F - 20
</TABLE>
All schedules are omitted because the information is included in the
consolidated financial statements or notes thereto or is not applicable.
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
BDO SEIDMAN
Board of Directors,
Ventura Entertainment Group Ltd.
We have audited the accompanying consolidated balance sheet of Ventura
Entertainment Group Ltd. and subsidiaries as of December 31, 1994 and 1993,
and the related consolidated statements of operations, shareholders' equity
and cash flows for each of the three years in the period ended December 31,
1994. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statement referred to above present
fairly, in all material respects, the consolidated financial position of
Ventura Entertainment Group Ltd. and subsidiaries at December 31, 1994 and
1993, and consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As
discussed in the Note 2 to the consolidated financial statements, the
company has negative working capital at December 31, 1994, negative cash
flows and operating losses from operations for the year ended December 31,
1994, and anticipates that negative cash flows from operations will
continue. These factors raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these
matters are also described in Note 2. The consolidated financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
/s/ BDO Seidman
BDO Seidman
Los Angeles, California
April 14, 1995
F-2
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31
----------------------
1994 1993
---- ----
<S> <C> <C>
Current Assets:
Cash ..................................................................... $ 3,439,459 $ 514,872
Accounts Receivable ...................................................... 1,369,786
Expenditures billable to clients ......................................... 780,008
Advances employees ....................................................... 94,178
Prepaid expenses and other ............................................... 327,174
------------ ------------
Total current assets .................................................. 6,010,605 514,872
Television advertising time .................................................... 474,705 2,000,000
Equipment, at cost, less accumulated depreciation .............................. 391,722 88,185
Cost of broadcast acquisitions in process ...................................... 497,403
Investment in Harmony and Producers ............................................ 4,027,424
Deferred financing costs ....................................................... 741,884
Other assets, net .............................................................. 224,848 695,845
Goodwill ....................................................................... 5,989,877
------------ ------------
Total Assets .......................................................... $ 14,331,044 $ 7,326,326
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses .................................... $ 2,113,520 $ 727,460
Notes payable ............................................................ 935,000 315,000
Current portion of long-term debt ........................................ 212,690 350,000
Advances from clients .................................................... 1,311,092
Deferred revenues ........................................................ 2,440,013
------------ ------------
Total current liabilities ............................................. 7,012,315 1,392,460
Long-term debt ................................................................. 1,792,688 85,800
Unamortized portion of rent abatement .......................................... 403,666
Redeemable preferred stock of subsidiary ....................................... 950,000
Convertible debentures due 2001 ................................................ 2,750,000
Minority interest .............................................................. (17,862)
Shareholders' Equity:
Preferred stock:
Series A .............................................................. 500
Series B .............................................................. 1 1,650
Common stock ............................................................. 7,708 4,966
Additional paid-in capital ............................................... 3,881,957 28,581,502
Accumulated deficit ...................................................... 0 (22,740,552)
Accumulated deficit since July 25, 1994 .................................. (2,449,429) 0
------------ ------------
Total shareholders' equity ............................................ 1,440,237 5,848,066
------------ ------------
Total Liabilities and Shareholders' Equity ............................ $ 14,331,044 $ 7,326,326
============ =============
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
F-3
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Revenues ....................................................................... $ 5,796,297 $ 1,570,721 $ 182,790
Operating expenses ............................................................. (10,766,535) (4,275,442) (1,297,552)
------------ ------------ -----------
Operating (loss) ............................................................... (4,970,238) (2,704,721) (1,114,762)
Other income (expense):
Interest expense, net ......................................................... (56,682) (88,951) (211,866)
Loss on Studio ................................................................. (3,830,000)
Loss on return of television advertising time
(75,000)
Settlement of lawsuit .......................................................... (676,000)
Minority interest in operations of subsidiary
84,648
Amortization of goodwill ....................................................... (89,349)
Other expense .................................................................. (9,475) 6,000
------------ ------------ -----------
(145,858) (4,594,951) (205,866)
------------ ------------ -----------
(Loss) from continuing operations .............................................. (5,116,096) (7,299,672) (1,320,628)
(Loss) income from discontinued operations
(1,892,514) (3,524,900) 861,590
------------ ------------ -----------
Net (loss) ..................................................................... (7,008,610) (10,824,572) (459,038)
Dividend requirement of
Preferred Stock ........................................................... (192,813) (143,000)
------------ ------------ -----------
Net (loss) applicable to common shareholders $ (7,201,423) $(10,967,572) $ (459,038)
============ ============ ===========
Net (loss) per share
From continuing operations ................................................... (1.44) (3.37) (.61)
From discontinued operations ................................................. (.52) (1.60) .40
------------ ------------ -----------
Net (loss) per share ........................................................... $ (1.96) $ (4.97) $ (.21)
============ ============ ===========
Weighted average number
of common shares outstanding .............................................. 3,673,101 2,207,188 2,150,000
============ ============ ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-4
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Three Years Ended December 31, 1994
<TABLE>
<CAPTION>
Additional Net
Preferred Paid-in Accumulated Shareholders'
Stock Shares Amount Capital Deficit Equity
----- ------ ------ ------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1992 ................ 2,150,000 $ 4,451 $ 21,842,866 $(11,456,942) $ 10,390,375
Sale of Series B Preferred Stock .......... $ 265 529,735 530,000
Transfer of assets to Producers ........... (248,520) (248,520)
Gain on issuance of shares by Harmony ..... 143,641 143,641
Net (loss) ................................ (459,038) (459,038)
------------ --------- ------------ ------------ ------------ -----------
Balance at December 31, 1992 .............. 265 2,150,000 4,451 22,267,722 (11,915,980) 10,356,458
Exercise of stock options ................. 128,750 515 296,985 297,500
Sale of Series B Preferred Stock for cash . 385 769,615 770,000
Issuance of Series B Preferred Stock
for television advertising time ......... 1,000 1,899,000 1,900,000
Acquisition of EMC ........................ 500 500
Equity adjustment of Harmony .............. (124,000) (124,000)
Settlement of lawsuit ..................... 676,000 676,000
Gain on issuance of shares
by Harmony and Producers ................ 2,796,180 2,796,180
Net (loss) ................................ (10,824,572) (10,824,572)
------------ --------- ------------ ------------ ------------ -----------
Balance at December 31, 1993 .............. 2,150 2,278,750 4,966 28,581,502 (22,740,552) 5,848,066
Gain on issuance of shares
by Harmony and Producers ................ 654,014 654,014
Exercise of stock options ................. 171,250 685 326,815 327,500
Return of television advertising time ..... (750) (1,424,250) (1,425,000)
Shares issued for contracts ............... 201,465 201 549,799 550,000
Effect of pooling of interest by Producers (620,516) (620,516)
Effect of subchapter S election of company
acquired by Producers in pooling of ..... (1,203,510) 1,203,510
interests
Net (loss) for the period ended July 25, .. (4,559,181) (4,559,181)
Adjustments resulting from Recapitalization
treated as a quasi-reorganization ...... (899) (175) (3201) (23,771,511) 23,775,611
Distribution of Producers shares .......... (3,448,137) 2,941,128 (507,009)
Conversion of Series A Preferred .......... (500) 966,666 967 (467)
------------ --------- ------------ ------------ ------------ -----------
Balance at July 25, 1994, date of
Recapitalization ........................ 1 3,617,956 3,618 264,255 0 267,874
Conversion of Series B Preferred .......... 1,523,096 1,523 (1,523)
Acquisition of Kaleidoscope ............... 1,428,796 1,429 1,763,946 1,765,375
Acquisition of Soundview .................. 1,000,000 1,000 1,436,500 1,437,500
Gain on issuance of shares by Harmony ..... 63,722 63,722
Shares issued for services ................ 138,455 138 195,057 195,195
Value of warrants issued for services ..... 160,000 160,000
Net (loss) for period July 25-Dec. 31,1994 (2,449,429) (2,449,429)
------------ --------- ------------ ------------ ------------ -----------
Balance at December 31, 1994 .............. $ 1 7,708,303 $ 7,708 $ 3,881,957 $ (2,449,429) $ 1,440,237
============ ========= ============ ============ ============ ===========
</TABLE>
Shares of Preferred Stock Outstanding:
<TABLE>
<CAPTION>
December 31,
------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Series A Preferred Stock .................... 0 100 0
Series B Preferred Stock .................... 60 330 53
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-5
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
-----------------------------------
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net (loss) ............................................... $(7,008,610) $(10,824,572) $ (459,038)
Adjustments to reconcile net (loss) to net
cash (used in) operating activities:
Discontinued operations .............................. 485,752 3,406,739 (861,590)
Depreciation and amortization ........................ 305,583 78,959
Loss on return of advertising time ................... 75,000
Loss on Studio ....................................... 3,830,000
Settlement of lawsuit ................................ 676,000
Rent abatement ....................................... 64,337
Minority interest in loss of subsidiary .............. (84,648)
Issuance of warrants & shares for contracts & services 716,875
Changes in assets and liabilities:
Decrease (increase) in accounts receivable ....... (282,123) 28,739 467,695
Increase in expenditures billable to clients ..... 122,322
(Increase) decrease in prepaid expenses and other (48,482)
(Increase) decrease in other assets .............. 324,183 (57,275) (51,960)
Increase (decrease) in accounts payable and
accrued expenses .............................. (499,581) 105,326 (85,129)
Increase (decrease) in advances from clients ..... (270,590)
Increase (decrease) in deferred revenue .......... 2,440,013
----------- ------------ -----------
Net cash (used in) operating activities .............. (3,659,969) (2,835,043) (911,063)
----------- ------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash received in acquisitions ........................ 504,748 78,933
Cash paid for television advertising time ............ (100,000)
Purchases of equipment ............................... (184,531) (11,225)
(Increase) in notes receivable ....................... (70,000)
----------- ------------ -----------
Net cash provided by (used in) investing activities .. 250,217 (32,292) 0
----------- ------------ -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sales of common stock .................. 327,500 297,500
Proceeds from sales of Series B Preferred Stock ...... 770,000 530,000
Proceeds from borrowings ............................. 5,577,097 210,000
Repayments of borrowings ............................. (2,218,740) (12,946)
Proceeds from sales of stock of Harmony and Producers 2,648,482 1,907,365 534,364
----------- ------------ -----------
Net cash provided by financing activities ............ 6,334,339 3,184,865 1,051,418
----------- ------------ -----------
Net increase in cash ................................. 2,924,587 317,530 140,355
Cash at beginning of year ................................ 514,872 197,342 56,987
----------- ------------ -----------
Cash at end of year ...................................... $ 3,439,459 $ 514,872 $ 197,342
=========== ============ ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest ............................... $ 87,000 $ 168,000 $ 182,000
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
F-6
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
Organization and Business
Ventura Entertainment Group Ltd. (the "Company") was
incorporated under the laws of the State of Delaware on
November 17, 1987. The Company's operations are conducted
through its wholly owned subsidiaries, Entertainment Marketing
Corporation of America, ("EMC") and Kaleidoscope
Entertainment, Inc., Lifestyle Marketing Group, Inc. and
Peoples and Properties, Inc., (collectively "Kaleidoscope"),
as well as its 80% owned subsidiary, Soundview Media
Investments, Inc. (Soundview). Unless the context indicates
otherwise, the term "Company" includes Ventura Entertainment
Group Ltd. and all subsidiaries. The Company is a diversified
broadcast, marketing, and corporate communications services
company. It is in the process of building a communications
company based on the ownership of broadcast properties and
supported through the development, acquisition, and sales of
programming and related media services.
Plan of Recapitalization
On July 25, 1994, the shareholders of the Company approved a
Plan of Recapitalization ("Recapitalization). In connection
with the Recapitalization, the Company's common shareholders
received an aggregate of 700,000 Units. Each Unit consisted of
three and one-half shares of the Company's common stock; one
Class C Warrant; one Class D Warrant; and one right to receive
five shares (aggregate 3,500,000 shares) of common stock of
The Producers Entertainment Group ("Producers") owned by the
Company. The Recapitalization also included an approximate
l-for-4 reverse stock split. Each Class C Warrant entitles the
holder thereof to purchase one share of common stock at a
price of $3.50 per share until July 25, 1997. Each Class D
Warrant entitles the holder thereof to purchase one share of
common stock at a price of $5.00 per share until July 25,
1997. The Class C and Class D Warrants are redeemable at any
time by the Company upon 30 days' notice to the holders
thereof at a price of $.001 each.
As a result of the Recapitalization, the 100 shares of Series
A Preferred Stock that were issued by the Company for EMC were
converted into 966,666 shares of common stock and each of the
180 outstanding share of Series B Preferred Stock became
convertible into 11,111 shares of common stock (aggregate -
1,999,980 shares). Subsequent to July 25, 1994, all Series B
Preferred shares including accrued interest were converted
into 2,291,977 shares of common stock. The Company's
Certificate of Incorporation was also amended to authorize
5,000,000 shares of $.001 par value preferred stock. The
Company also paid a financial advisor a $50,000 fee and issued
to this financial advisor an aggregate of 160,000 warrants on
terms substantially the same as the Class C Warrants.
For financial reporting purposes, the Recapitalization is
reflected as a quasi-reorganization and the accumulated
deficit at the date of the recapitalization was charged
against paid-in capital.
F-7
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
------------------------------------------------------
Principles of Consolidation
The accompanying consolidated financial statements include the
accounts of the Company and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated in
consolidation. The Company changed its fiscal year for
reporting purposes from one ending on June 30 to the claendar
year ending December 31. All Information in these financial
statements are presented based on the December 31 year end.
The acquisitions described in Note 3 have all been accounted
for as purchases and consequently their operations have been
included from the respective date of each acquisition.
Discontinued Operations
During the year ended December 31, 1994, the Company sold or
distributed all the remaining shares of Producers. In
addition, the Company sold all but 284,000 shares of Harmony
Holdings Inc. ("Harmony"). The remaining Harmony shares were
transferred to a lender as required to fulfill an obligation
to the holders of the convertible debentures converted in
March 1995. In addition, the Company discontinued all other
direct marketing and related production activities during
December 1994. Consequently, all revenues and costs associated
with such activities, including Harmony and Producers, are
reflected in the accompanying statements of operations as
discontinued operations. (See Note 11)
Licensing and Rights and Amortization
Amortization of acquired licensing and rights related to films
is charged to operations on an individual-film basis in a
ratio that the current year's revenue bears to management's
estimate of total revenues (current and future years) from all
sources. When estimates of total revenues indicate that such
revenues will be less than the carrying amount of the related
licensing and rights, the applicable loss is recognized
currently. In December 1994 the Company charged the balance of
$395,000 to expense as part of discontinued operations.
Deferred Financing Costs
Cost associated with financing transactions such as legal or
brokerage costs are capitalized and amortized over the term of
the particular financing. Unamortized costs relating to debt
obligations that are extinguished by conversion to equity are
charged to paid-in capital at the time of conversion. The
Convertible Debentures due 2001 contained a pre-conversion
penalty that required the transfer of Harmony shares in March
1995. The carryiung value of these Harmony shares was
classified as dererred financing costs as of December 31,
1994.
F-8
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
------------------------------------------------------
Barter Advertising
In 1994, the Company, together with an unaffiliated third
party, entered into an agreement to provide certain media time
to a vehicle manufacturer. In connection with this agreement,
the manufacturer transferred certain vehicles to the Company
which were subsequently sold for approximately $2,484,000. The
Company is committed to acquire the media time based on a
media plan to be provided by the manufacturer. To date, this
manufacturer has not provided the Company with its media plan
and, accordingly, except for approximately $70,000 expended on
media time the Company has made no commitments to acquire any
additional media time. The manufacturer also agreed to pay
approximately $2,000,000 to the Company as the media time is
used. Included in deferred revenue at December 31, 1994 is
$2,413,000 of the proceeds received from the sale of the
vehicles. Such revenues will be recognized as the media time
is acquired by the Company. The Company's amended agreement
with the unaffiliated third party provided for a cash payment
of $400,000 and the payment of additional amounts of up to
$200,000 based on the payments to be received from the vehicle
manufacturer. In connection with this agreement, the Company
issued this third party a five year option to purchase 25,000
shares of the Company's common stock at a price of $2.50 per
share. The $400,000 payment has been included in operating
expense in the accompanying December 31, 1994 consolidated
financial statements.
Income Taxes
Effective July 1, 1993 the Company adopted the Financial
Accounting Standards Board Statement of Financial Accounting
Standards ("SFAS") No. 109 "Accounting for Income Taxes". SFAS
109 requires a company to recognize deferred tax liabilities
and assets for the expected future tax consequences of events
that have been recognized in company's financial statements or
tax returns. Under this method, deferred tax liabilities and
assets are determined based on the difference between the
financial statement carrying amounts and tax bases of assets
and liabilities using enacted tax rates in effect in the years
in which the differences are expected to reverse. The Company
has not recognized the benefit of any net operating loss
carryforwards as a result of adopting SFAS 109 and the effect
of the aforementioned implementation has been determined by
management to be immaterial.
Sales of Stock by Harmony and Producers
At the time Harmony or Producers sold their stock to unrelated
parties the Company's ownership interest in each company
decreased. The difference between the Company's ownership
interest in each company's equity as a result of such issuance
is recorded as an adjustment of additional paid-in capital.
F-9
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
------------------------------------------------------
Sales of Stock of Harmony and Producers
When the Company sells shares of Harmony or Producers, the
gain on these sales is measured by the difference between the
net cash proceeds received and the Company's carrying amount
of the shares sold using the equity method of accounting.
These gains are included in operations at the time that the
shares are sold and reflected as part of discontinued
operations in the accompanying financial statements.
Cash and Cash Equivalents
Cash and cash equivalents include money market funds and
certificates of deposit with a maturity of initial three
months or less.
Equipment and Depreciation
Purchases of equipment are capitalized. Maintenance and
repairs are expensed. Upon the disposition of equipment, the
applicable cost and accumulated depreciation are removed from
the accounts and any gains or losses are included in
operations. Depreciation of equipment is provided on the
straight-line method based on the estimated useful lives of
the related assets (generally 3 to 5 years).
Loss on Studio
The Company's wholly owned subsidiary, Ventura Media Center
Ltd. ("Center") owned a film and television production
facility located in Orem, Utah, which was held for sale and
leased to others. During the year ended December 31, 1993,
Center agreed to return this facility to the mortgage holder
and accordingly, the carrying amount and the related mortgage
were written off in the year ended December 31, 1993. The
Company is not directly or contingently liable for the
mortgage on this facility or any other debts of Center.
Goodwill
The excess of the fair value of the consideration given, over
the fair value of the net assets received as part of an
acquisition accounted for as a purchase, is shown as goodwill.
When shares of the Company's Common Stock are part of the
consideration, such shares may be valued based on a discount
from the quoted market value. In determining whether a
discount is appropriate, management considers whether the
shares are currently registered, whether the Company is
committed to future registration, and whether the shares are
to be held by an "insider" with restrictions on subsequent
sale. In the Kaleidoscope and Soundview acquisitions,
1,428,796 and 1,000,000 shares were issued respectively and
recorded at approximately 50% of the quoted market value at
date of issue. All such shares were unregistered and are held
by executives of the Company or minority shareholders of
Soundview.
This goodwill is being amortized over twenty years.
F-10
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
------------------------------------------------------
Reverse Stock Split
In connection with the approval of the Recapitalization, an
approximate one-for-four reverse split of the Company's common
stock was effective. The effects of this reverse split have
been retroactively reflected in the accompanying consolidated
financial statements and notes.
(Loss) Per Share
(Loss) per share is based on the weighted average number of
common shares outstanding during the periods after giving
effect (in 1994 and 1993) to the dividend requirement of the
Series B Preferred Stock. Outstanding warrants and options are
not included in per share calculations because the effects of
their inclusion would be anti-dilutive.
NOTE 2 - LIQUIDITY AND CAPITAL RESOURCES
-------------------------------
The accompanying consolidated financial statements have been
prepared in conformity with generally accepted accounting
principles, which contemplates the continuation of the Company
as a going concern including the realization of assets and
liquidation of liabilities in the ordinary course of business.
As of December 31, 1994, the Company had cash of $3,439,459,
total current assets of $6,090,605 and current liabilities of
$7,012,315 or a working capital deficiency of $921,710.
Included in current liabilities is $2,413,000 of deferred
revenue which will be recognized upon the utilization of media
time to be acquired by the Company in connection with a barter
advertising agreement. See "Item 1. Business - Barter
Advertising."
The Company's operations during 1994 and 1993 used cash of
$6,500,000 which has been primarily financed by proceeds
received from sales of its securities ($1,395,00), sales of
Producers and Harmony common stock ($4,555,000), loans from a
foreign bank and private placement of convertible debentures
($3,690,000). Such proceeds, net of repayments aggregated
approximately $9,500,000. In connection with the
Recapitalization, the shares of Producers that were owned by
the Company were distributed to the Company's shareholders. Of
the 1,484,000 shares of Harmony common stock owned by the
Company, 1,200,000 shares have been sold in December 1994 for
$2,520,000.
F-11
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 2 - LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
-------------------------------------------
Management believes that a substantial portion of the
Company's operating losses was related to matters in
connection with the Recapitalization which was approved by the
Company's shareholders on July 25, 1994. The Company has also
expended substantial sums on the development and expansion of
its current business. Management believes that the Company
could not fully exploit its current business and enter into
additional agreement until the Recapitalization was approved
by the Company's shareholders and the uncertainties relating
thereto were removed. Subsequent to this approval, the
Company, among other things, completed a long-term borrowing
of $2,750,000 from a foreign bank which was converted to
common equity in March 1995; completed the placement of
$1,100,000 in convertible debt; sold Harmony shares for
$2,520,000; and acquired Kaleidoscope and Soundview. In
addition, the Company has definitive plans to acquire six
television stations, and in a related transaction to these
acquisitions the Company has proposed financing of
$25,000,000. Management believes it will be necessary to raise
additional equity and/or to obtain additional financing to
complete the proposed acquisitions and implement its business
plan. Management believes that the actions being taken, when
complete, will enable the Company to substantially increase
its revenues and operate on a positive cash flow basis.
If the Company does not operate on a positive cash flow basis
and its present resources are not sufficient to absorb any
cash losses, the Company will need to obtain financing through
the debt or equity markets. In order to fulfill its overall
plan and its financial obligations, the Company is pursuing
several financing alternatives. However, there can be no
assurance that any financing will occur. The Company could
also use the proceeds from the exercise of its Class C
Warrants and Class D Warrants to fund any cash requirement.
However, there can be no assurance that any of these warrants
will be exercised. Management believes that the Company will
be able to meet its cash obligations for at least the next
twelve months.
NOTE 3 - ACQUISITIONS
------------
Broadcasting
As of December 30, 1994 the Company acquired 80% of Soundview
in exchange for one million Ventura common shares. Soundview
had purchase agreements pending for the acquisition of two
network-affiliated television stations, WHOA-TV, the ABC
affiliate in Montgomery, Alabama for $8,500,000 (subject to
potential future reductions) and WYWC-TV, the NBC affiliate in
Tallahassee, Florida for $5,500,000. In addition, in November
1994, the Company signed a letter of intent to purchase
WTGS-TV the Fox affiliate in Savannah, Georgia for 2,875,000
shares of common stock. The purchase agreement on WTGS-TV was
signed on March 10, 1995 subject to FCC approval and the
Company's ability to obtain financing.
The purchase of WHOA-TV Montgomery was completed on April 11,
1995 and the closing of the purchase of WTWC-TV Tallahassee
was extended pending final documentation and funding. In March
1995, Soundview signed a letter of intent to buy the Fox
affiliates in Spokane, Washington, Yakima, Washington and
Medford, Oregon for $16,400,000 cash, 1,283,000 shares of
Ventura common stock and assumption of debt.
F-12
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 3 - ACQUISITIONS - CONTINUED
------------------------
Kaleidoscope
As of August 1, 1994, the Company acquired Kaleidoscope which
is in the business of event management; productions;
promotions and corporate sponsorships; and producing and
distributing television programs. In exchange for all of the
stock of Kaleidoscope, the Company issued 1,428,796 shares of
common stock.
In connection with the transaction, Kaleidoscope issued a
$500,000 note to a prior shareholder in addition to a LMG note
of $250,000 to the same shareholder. The Company has
guaranteed both of these notes and has pledged the stock of
Kaleidoscope as collateral. The Company has also agreed to
secure, by May 1, 1995, releases on behalf of this shareholder
from his guarantee of $935,000 bank loans, $221,000 letter of
credit and a $106,000 bank loan made to an unrelated party. If
the Company does not secure such releases, the shareholder has
the right to reacquire the shares of P&P and LMG that were
sold to Kaleidoscope and $1,371,416 of advances made to P&P.
If the Company had acquired Kaleidoscope as of January 1, 1993
the Statement of Operations would have been as follows: (in
thousands)
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Revenues .............. $14,567 $12,341
Net (loss) ............ (7,640) (12,842)
====== =======
(Loss) per share ...... $(1.70) $ (3.53)
</TABLE>
Earlier Acquisition
As of March 31, 1993, the Company acquired EMC in exchange for
100 shares of Series A Preferred Stock which were valued at
their aggregate par value of $500. The assets and liabilities
of EMC have been recorded at their fair market values as of
the date of acquisition. The $500 aggregate par value of the
Series A Preferred Stock plus the $85,937 net shareholder's
equity of EMC at March 3l, 1993, has been recorded as
licensing and rights. Prior to March 31, 1993, the operations
of EMC were not significant.
F-13
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - TELEVISION ADVERTISING TIME
---------------------------
In March 1993, the Company acquired certain television
advertising time in exchange for 200 shares of its Series B
Preferred Stock and a cash payment of $100,000 (see Note 9).
This television advertising time was valued at $2,000,000 and
consisted of commercial spots on certain television stations
that could be used in 30 second, 60 second or 90 second
segments through December 1997. The Company has the right to
assign, sell and/or barter this television advertising time to
others. During the year ended December 31, 1994, the Company
returned $1,500,000 of the $2,000,000 of advertising time in
exchange for 150 of the 200 shares of Series B Preferred Stock
originally issued by the Company. The seller did not agree to
return any part of the $100,000 cash payment. The seller did
agree to waive all accrued but unpaid dividends with respect
to the 150 shares of Series B Preferred Stock that were
returned. The adjustment for the return reduced the television
advertising time by $1,500,000. The Series B Preferred Stock
and additional paid-in capital were reduced by an aggregate of
$1,425,000 and $75,000 was charged to operations.
NOTE 5 - NOTES PAYABLE
-------------
The note payable to bank at December 31, 1994 represents
amounts due a New York bank by two subsidiaries and guaranteed
by a prior shareholder of a Kaleidoscope. The weighted average
interest rate was 9.45% in 1994. The company is obligated to
secure the release of this guarantee by May 1, 1995, the
current due date of the notes. The balance of $315,000 at
December 31, 1993 represents amounts due an officer bearing
interest at 10% which was repaid in August 1994.
NOTE 6 - LONG-TERM DEBT
--------------
<TABLE>
<CAPTION>
December 31
---------------
1994 1993
---- ----
<S> <C> <C>
Convertible debentures due 1996 ..................... $1,100,000
Note payable due 1999, payable $8,333 monthly plus
interest at 7% ................................. 475,000
Note payable due 1998 payable $20,833 quarterly with
interest at 7% ................................. 250,000
Capitalized lease due 1997 payable $2,926 monthly
including interest at 7.2% ..................... 94,579
Note payable to bank assumed by EMC payable quarterly
with interest at bank's index rate plus 1.5% ... $275,000
Note payable due quarterly with interest at 10% .... 75,000
Other debt, due on demand .......................... 85,800 85,800
---------- --------
2,005,379 435,800
Amount due in one year ............................. 212,690 350,000
---------- --------
Total Long-Term Debt ............................... $1,792,689 $ 85,800
========== ========
</TABLE>
F-14
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Convertible Debentures due 1996 have interest at 8%, and
are convertible, including interest, at $2.50 a share at the
option of the holder. The Company can force conversion if the
share price is $5.00 a share for a specified period. The
holders also received 220,000 warrants to purchase shares at
$3.50 for five years.
Maturities on long-term debt for the next five years are as
follows:
<TABLE>
<S> <C>
1995 ............... $212,690
1996 ............... $1,315,000
1997 ............... $217,000
1998 ............... $100,000
1999 ............... $75,000
</TABLE>
NOTE 7 - REDEEMABLE PREFERRED STOCK OF SUBSIDIARY
----------------------------------------
The Company's 80% owned subsidiary, Soundview, has issued
Redeemable Preferred Stock amounting to $950,000. Such stock
has no dividends rights but has preferred liquidation rights.
The Company has agreed to redeem these shares prior to
November 7, 1996.
NOTE 8 - CONVERTIBLE DEBENTURES DUE 2001
-------------------------------
The Convertible Debentures due 2001 related to borrowings from
a foreign bank. The entire amount was converted to 1,100,000
shares of common in March 1995. The Company transferred
284,000 shares of Harmony to the bank and issued 190,000
shares of the Company's common stock as a result of the
conversion and the penalty payment required by the agreement.
NOTE 9 - SHAREHOLDERS' EQUITY
--------------------
In connection with the approval of the Recapitalization (see
Note 1), the Company's Certificate of Incorporation was
amended to authorize 5,000,000 shares of $.001 par value
preferred stock. Prior to that time the Company's Certificate
of Incorporation authorized 1,000 shares of preferred stock,
$5 par value per share.
The Company's Certificate of Incorporation also authorized
25,000,000 share of common stock, .001 par value per share. As
of December 31, 1994 and 1993 there were 7,708,303 and
2,278,750 shares of common stock outstanding, respectively.
During the year ended December 31, 1993, the Company issued
100 shares of its Series A Preferred Stock in exchange for
EMC. The Series A Preferred Stock was entitled to one vote per
share and was not entitled to dividends. Upon the approval of
the Recapitalization (See Note 1), the Series A Preferred
Stock was converted into 966,666 shares of common stock.
F-15
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9 - SHAREHOLDERS' EQUITY - CONTINUED
--------------------------------
During the years ended December 31, 1993 and 1992, the Company
sold 130 shares of its Series B Preferred Stock at a price of
$10,000 per share. The Company also issued 200 shares of
Series B Preferred Stock (which were valued at $1,900,000) in
connection with its acquisition of certain television
advertising time. In connection with the return of certain of
this advertising time (see Note 4), 150 of these shares were
returned to the Company and canceled. The Series B Preferred
Stock is nonvoting. Holders of the Series B Preferred Stock
were entitled to cumulative dividends of 8% or $800 per annum
commencing on June 15, 1993. Upon the approval of the
Recapitalization (see Note 1), each share of Series B
Preferred Stock became convertible into 11,111 shares of the
Company's common stock. Subsequent to July 24 but prior to
December 31, 1994, 120 shares of Series B Preferred Stock
(including accrued dividends) were converted into 1,523,096
shares of common stock. Subsequent to December 31, 1994, the
remaining 60 shares of Series B Preferred Stock were converted
into 768,881 shares of common stock.
In connection with the exchange of benefits to be received
from the additional tax loss carryforwards received from the
Company, Harmony charged the portion previously represented by
the $325,000 nonrecourse obligation to its equity. The Company
has reflected its portion of this charge ($124,000) as a
reduction of additional paid-in capital in 1993.
During the year ended December 31, 1994, Producers acquired a
Company in a transaction which was accounted for as a pooling
of interests. Accordingly, Producers has retroactively
restated its financial statements to include the accounts of
this company. The Company's proportionate share of this
transaction has been recorded by the Company as a charge to
accumulated deficit. The company acquired by Producers had
elected to be taxed as a Subchapter S corporation under the
provisions of the Internal Revenue Code and applicable state
tax regulations. The amount of losses recorded by this
company's shareholders has been recorded by Producers as a
reduction of additional paid-in capital with a corresponding
decrease in Producers' accumulated deficit. The Company has
recorded its proportionate share of this adjustment in the
same manner as Producers. This adjustment had no effect on net
shareholders' equity.
In connection with the acquisition of Kaleidoscope and
Soundview (see Note 3 Acquisitions) the company issued
1,428,796 and 1,000,000 shares respectively.
During the year ended December 31, 1994, the Company acquired
certain contracts. As part of the purchase price, the Company
agreed to issue 201,465 shares of its common stock. In
addition in 1994 the Company issued 93,000 shares for services
valued at $195,195 and 45,445 shares in settlement of a
lawsuit recorded in 1993.
F-16
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
DISCONTINUED OPERATIONS
NOTE 10 - STOCK OPTIONS
Pursuant to the Company's stock option plan the Company may
issue options to officers and key employees to purchase an
aggregate of 1,550,000 shares of common stock. The Company may
also issue non-qualified options. During the year ended
December 31, 1994, the Company issued 171,250 shares of its
common stock upon the exercise of stock options and received
proceeds of $327,500.
In addition, during the year the Company issued 125,000 stock
options to non-executive board members and 250,000 to a
director as part of a noncompete contract. An additional
25,000 options were issued in relation to the barter agreement
discussed in Note 1. All options were at $2.50 a share and
none were exercised.
In January 1995 the Board of Directors approved the issuance
of stock options for 550,000 shares to management personnel
and for 100,000 shares to a consultant, all at $2.50 a share.
All options were issued at a price which was at or above the
market price at date of grant.
NOTE 11 - DISCONTINUED OPERATIONS
The following is the detailed amounts included in discontinued operations:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Gain on sale of shares of
Harmony & Producers ........... $ 848,195 $ 1,187,913 $370,934
Equity in net loss of
Harmony & Producers ........... ($1,333,947) ($3,626,292) $490,656
Gain on sale of tax loss
carryforward to
Harmony ....................... $ 456,765
Write down of film costs ........ ($1,425,125)
Direct marketing &
related production costs ...... ($1,406,762) ($ 118,161)
----------- ----------- --------
($1,892,514) ($3,524,900) $861,590
</TABLE>
Accrued expenses at December 31, 1994 include $150,000 of accrued termination
and costs related to direct marketing. There were no assets at December 31, 1994
related to the discontinued operations.
NOTE 12 - INCOME TAXES
At December 31, 1994, the Company had unused federal and state
net operating loss carryforwards which, at a minimum, are
estimated to be approximately $7 million for federal purposes
and $3.5 million for state purposes, expiring in various
amounts through 2009. However, ultimate realization of these
net operating loss carryforwards is dependent upon the
Company's future taxable income and may be limited by
appropriate regulations. Consequently the recorded amount of
such loss carryover benefits, aggregating $2.7 million, has
been fully reserved.
F-17
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - RELATED PARTY TRANSACTIONS
On December 14, 1994, the Company sold 1,200,000 shares of
Harmony Holdings, Inc. to Harvey Bibicoff, a director, for
$2,400,000 cash and a one-year note for $120,000.
During 1994 the Company signed a letter of intent to purchase
WTGS FOX Channel 28 in Hilton Head/Savannah from Trivest
Financial Services, Inc. for 2,875,000 shares of common stock.
On March 10, 1995, a definitive agreement was signed subject
to FCC approval. Mr. Coy Eklund, a director, is Chairman and
CEO of Trivest and Mr. Carleton Burtt, the Company's COO, is
President of Trivest. In addition, Mr. Frank Woods, a
director, is Chairman of the Board of Media One, Inc., a
merchant banking firm which will earn a fee when the
transaction is closed.
The Company's television advertising time was acquired from a
company of which a director of the Company is an officer and
director. In exchange for such television time, the Company
issued 200 shares of its Series B Preferred Stock which were
valued at $1,900,000 and made a cash payment of $100,000.
During the year ended December 31, 1994, the Company returned
a portion of this television advertising time to the seller in
exchange for 150 shares of the Series B Preferred Stock
originally issued (see Note 7).
In connection with the Recapitalization, Ventura acquired all
the capital stock of EMC from Floyd Kephart in exchange for
100 shares of Series A Stock. Upon the approval of the Plan of
Recapitalization, the Series A Stock was automatically
converted into 966,666 shares of Common Stock.
During the year ended December 31, 1994, the Comapny acquired
certain contracts relating to its product placement business
from Mr. Gary Teel and two other employees of the Company. In
exchange for these contracts, the Comapny paid $360,000 and
issued 201,465 shares of Common Stock.
In February 1994, the Company entered into a $700,000
revolving line of credit with Harmony which was collateralized
by a receivable of the company's. All of the Company's loans
from Harmony were repaid in August 1994 from the net proceeds
of the Company's foreign bank loan.
During the year ended December 31, 1993, the Company borrowed
$1,422,000 from an officer at 10% interest. The unpaid balance
at December 31, 1993 of $215,000 as well as the net borrowings
in 1994 of $15,000 were repaid in August 1994 from the net
proceeds of the Company's foreign bank loan.
During the years ended December 31, 1992 and 1993, the Company
sold 130 shares of its Series B Preferred Stock at $10,000 per
share. A company owned by the brother of one of the Company's
officers purchased 10 of these shares for $100,000.
F-18
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 13 - RELATED PARTY TRANSACTIONS (Continued)
During the year ended December 31, 1992, the Company
transferred one of its completed television series to
Producers in exchange for 150,000 shares of Producers' common
stock and a warrant to purchase 750,000 shares of Producers'
common stock at a price of $5.50 per share which warrant
expired in July 1993. Producers has also agreed to pay the
Company 10% of its profits from this series up to a maximum of
$100,000. No amounts were earned pursuant to this provision
through December 31, 1994. No gain or loss was recorded on
this transaction and the portion of the Company's historical
carrying amount of this series attributable to the minority
shareholders of Producers ($248,520) has been charged to
additional paid-in capital.
NOTE 14 - COMMITMENTS
The Company has entered into agreements (including agreements
entered into subsequent to December 31, 1994), which expire
through 2001 for the services of certain officers and others.
These agreements are multi-year and provide for aggregate
annual compensation of approximately $2,035,000. Certain of
these agreements provide for payments in the event of death or
disability of these individuals. Certain of these agreements
also provide for additional compensation based on operating
results and under certain circumstances in the event of a
change in control of the Company. During the year ended
December 31, 1994, no additional compensation was earned
pursuant to the terms of these agreements.
The Company leases various facilities under operating leases.
Future minimum lease payments for the years ending December 31
are as follows: 1995-$736,300; 1996-$688,600; 1997-$587,300;
1998-$444,800 and 1999-$463,200.
The Company had rent expense of $495,143 in 1994, $284,485 in
1993 and $97,020 in 1992.
NOTE 15 - SETTLEMENT OF LAWSUIT
During 1993, the Company and Producers were parties to an
action which claimed, among other things, certain violations
of federal securities laws. This action was purportedly
brought as a class action on behalf of purchasers of equity
securities of the Company and Producers. The Company denied
any wrong doing and the Company and Producers settled this
lawsuit. The Company issued to the plaintiff 45,455 shares of
its common stock and 412,371 stock purchase warrants having an
aggregate value of $500,000. Producers issued to the plaintiff
warrants to purchase its common stock having an aggregate
value of $400,000. The effects of this settlement agreement,
consisting of the Company's $500,000 settlement plus the
Company's $176,000 share of the Producers' settlement, have
been reflected in the consolidated financial statements as a
charge to operations and a corresponding increase to
additional paid-in capital in the year ended December 31,
1993.
In its normal course of business, the Comapny is involved in
various vlaims and legal actions. Management believes that the
ultimate outcome of these matters, either individually or in
the aggregate, will not have a material adverse effect on the
Company.
F-19
<PAGE>
VENTURA ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 16 - CONCENTRATION OF CREDIT RISK
Financial instruments that potentially subject the Company to
significant concentrations of credit risk primarily consist of
cash. The Company places its cash with high credit quality
financial institutions or in high quality short-term
investments. At times the cash in any one bank may exceed the
FDIC $100,000 limit.
NOTE 17 - SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND
-------------------------------------------------
FINANCIAL ACTIVITIES
--------------------
In March 1993, the Company issued 100 shares of Series A
Preferred Stock in exchange for EMC (see Note 3). In March
1993, the Company issued 200 shares of Series B Preferred
Stock in connection with its acquisition of television
advertising time (see Note 4). In April 1994, the Company
agreed to issue shares of common stock in connection with the
acquisition of certain contracts (see Note 9). In August 1994,
the Company agreed to issue shares for the acquisition of
Kaleidoscope and in December 1994 for the acquisition of
Soundview (see Note 3).
NOTE 18 QUARTERLY DATA (Unaudited)
A summary of operations by quarter for the past two years is
presented in the following table (in thousands except per
share amounts)
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
1994 Quarter Quarter Quarter Quarter
- - - ---- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues ........................... $ 631 $ 2,218 $ 1,979 $ 2,713
------- ------- ------- -------
Operating (loss) from continuing
operation ........................ (697) (1,728) (1,151) (1,540)
(Loss) from discontinued operation . (291) (1,513) (175) 399
------- ------- ------- -------
Net (loss) ......................... (988) (3,241) (1,326) (1,141)
======= ======= ======= =======
(Loss) per share ................... $ (.46) $ (1.35) $ (.34) $ (.20)
1993
- - - ----
Revenues ........................... $ 118 $ 258 $ 539 $ 655
------- ------- ------- -------
Operating (loss) from continuing
operation ........................ (398) (5,700) (613) (589)
(Loss) from discontinued operation . (743) (2,598) (163) (20)
------- ------- ------- -------
Net (loss) ......................... (1,141) (8,298) (776) (609)
======= ======= ======= =======
(Loss) per share ................... $ (.53) $ (3.86) $ (.37) $ (.30)
</TABLE>
F-20
<PAGE>
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:
VENTURA ENTERTAINMENT GROUP LTD.
Date: April 17, 1995 By s/b Floyd W. Kephart
--------------------
Floyd W. Kephart, Chairman and
Chief Executive Officer
(Principal Executive Officer)
Date: April 17, 1995 By s/b David H. Ward
-----------------
David H. Ward, Chief Financial Officer
and Treasurer
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
- - - --------- ----- ----
<S> <C> <C>
s/b Floyd W. Kephart Director April 17, 1995
- - - --------------------
Floyd W. Kephart
s/b Ray Volpe Director April 17, 1995
- - - --------------------
Ray Volpe
s/b Gary Horowitz Director April 17, 1995
- - - --------------------
Gary Horowitz
s/b Coy Eklund Director April 17, 1995
- - - --------------------
Coy Eklund
s/b Frank A. Woods Director April 17, 1995
- - - ------------------
Frank A. Woods
s/b Bennett Smith Director April 17, 1995
- - - ------------------
Bennett Smith
s/b William D. Eberle Director April 17, 1995
- - - ---------------------
William D. Eberle
</TABLE>
<PAGE>
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND
REPORTS ON FORM 8-K
(a) (1) and (2) Financial Statements and Schedules
The financial statements of the Company listed on the Index to
Financial Statements of this Annual Report on Form 10-K are filed as a
part hereof.
(b) Reports and Form 8-K
The following reports on Form 8-K were filed during the last
quarter of the period covered by this report:
(1) October 1, 1994 regarding purchase of Kaleidoscope
(2) October 25, 1994 regarding change of independent accountants
(3) January 10, 1995 regarding change of year end
(4) March 23, 1995 regarding acquisition of American
Communications and Television, Inc.
(c) Exhibits
The following exhibits required by Item 601 of Regulation S-K
are filed herewith or are incorporated by reference.
Exhibit
Number Description
3.6.1 Restated By laws of Registrant. (1)
3.7 Form of Restated Certificate of Incorporation (1)
4. Warrant Agreement (including Form of Class C and Class D Warrants) (1)
5. Opinion of Cooper & Dempsey, P.C. (1)
7. Opinion of Richards, Layton & Finger (1)
8. Opinion of Greenebaum Doll & McDonald (1)
10.17 Form of Shareholders Trust Agreement (1)
10.18 Office lease for Los Angeles, California premises (1)
10.19 Office lease for Nashville, Tennessee premises (1)
10.20 Office lease for Davidson, North Carolina premises
10.21 Office lease for North Hollywood, California premises (1)
10.22 Employment Agreement dated May 1, 1993 between Gary Teel and Ventura
Media Group Ltd. (1)
10.22.1 Employment Agreement dated as of April 1, 1994 between Gary Teel and
Ventura Media Group Ltd. (3)
10.24.1 Amendment No. 1 to Stock Exchange Agreement between Registrant and
Floyd W. Kephart (1)
10.26 Agreement dated April 1, 1994 between Gary Teel, Michael Nusinow and
Tony Engedal and Ventura Entertainment Group, Ltd. (3)
10.27 Personal Services Agreement dated July 1, 1994 between Ray Volpe and
Ventura Entertainment Group, Ltd. (2)
10.28 Personal Services Agreement dated July 1, 1994 between Bruce Albert and
Ventura Entertainment Group, Ltd. (2)
10.29 Consulting Agreement dated August 1, 1994 between Bibicoff &
Associates, Inc. and Ventura Entertainment Group, Ltd. (3)
10.30 Personal Services Agreement dated August 1, 1994 between Don Dixon and
Ventura Entertainment Group Ltd. (2)
<PAGE>
10.31 Personal Services Agreement dated July 1, 1994 between Tony Andrea and
Ventura Entertainment Group Ltd. (2)
10.32 Personal Services Agreement dated July 1, 1994 between Edd Griles and
Ventura Entertainment Group Ltd. (2)
10.33 Stock Exchange Agreement dated August 1, 1994 between Ray Volpe,
Tony Andrea, Edd Griles, Bruce Albert and Don Dixon and Ventura
Entertainment Group, Ltd. (2)
10.31 Stock Purchase Agreement dated August 1, 1994 by and among Peter
Chapman, Kaleidoscope Acquisition Corp. and Ventura Entertainment
Group, Ltd.
10.32 Promissory Note dated August , 1994 executed by Kaleidoscope
Acquisition Corp. in the original amount of $500,000 in favor of Peter
Chapman (2)
10.33 Promissory Note dated August , 1994 executed by Lifestyle
Marketing Group, Inc. in the original principal amount of $250,000
in favor of Peter Chapman (2)
10.34 Guaranty dated August , 1994 executed by Ventura Entertainment
Group Ltd. in favor of Peter Chapman (2)
10.35 Pledge and Security Agreement dated as of August 1, 1994 by
Kaleidoscope Acquisition Corp. and Peter Chapman (2)
10.36 Pledge and Security Agreement dated as of August 1, 1994 by Ventura
Entertainment Group Ltd. and Peter Chapman (2)
10.37 Note Purchase, Paying and Conversion Agency Agreement dated August 8,
1994 between Banco del Gottardo and Ventura Entertainment Group, Ltd.
10.38 Agreement dated September 30, 1994 between The Lakeside Group, Ltd.
and Ventura Entertainment Group, Ltd. (3)
10.39 Agreement dated September 30, 1994 between an automotive manufacturer
and Ventura Entertainment Group Ltd. (6)
10.40 Letter from Kellogg & Adelson regarding change of independent
accountants dated October 31, 1994 (4).
10.41 Independent Consulting Agreement between Donald Lifton and Ventura
Entertainment Group Ltd. dated October 15, 1994 (6).
10.42 Employment agreement between Soundview Media Investments Inc. and
Bennett Smith dated November 4, 1994 and guaranteed by Ventura
Entertainment Group Ltd. (6)
10.43 Stock Exchange Agreement between Soundview Media Investments Inc.
and Ventura Entertainment Group Ltd. dated November 9, 1994 (6).
10.44 Asset Purchase Agreement between Thomas M. Duddy, Receiver for Holt-
Robinson Television, Inc. and Soundview Media Investments Inc. dated
July 29, 1994 (6).
10.45 Agreement and Plan of Reorganization between Soundview Television of
Montgomery Inc., Frey Communications South Inc., Michael M. Sanders,
WHOA-TV Inc., Frey Communications Corporation, etc. dated June 20,
1994. (6)
10.46 Employment Agreement between David Ward and Ventura Entertainment
Group Ltd. approved by the Board of Directors on January 10, 1995. (6).
10.47 Employment Agreement between Floyd W. Kephart and Ventura Entertainment
Group Ltd. approved by the Board of Directors on January 10, 1995 (6).
<PAGE>
10.48 Agreement and Plan of Reorganization between Ventura Entertainment
Group Ltd., Soundview Media Investments, Inc., American Communications
and Television, Inc. and Trivest Financial Services Corp. dated
March 10, 1995 (5).
10.49 Amendment dated as of March 31, 1995 to Consulting Agreement between
Ventura Entertainment Group Ltd. and Bibicoff & Associates Inc. (6).
22 Subsidiaries of the Company (6)
- - - --------------------------
(1) Incorporated herein by reference to Registrant's registration statement
on Form S-4 declared effective on June 9, 1994 (File No. 33-63834).
(2) Incorporated by reference to Registrant's current Report on Form 8-K
dated October 1, 1994.
(3) Incorporated by reference to Registrant's current Report on Form 10-K
dated October 12, 1994.
(4) Incorporated by reference to Registrant's current Report on Form 8-K
dated October 25, 1994.
(5) Incorporated by reference to Registrant's current Report on Form 8-K
dated March 23, 1995.
(6) Filed herewith
Exhibit 10.39
BARTER SALES AGREEMENT
THIS AGREEMENT (the "Agreement") is made and entered into as of the
date last written below by and between The Lakeside Group, Inc., a New York
corporation ("Lakeside"), Ventura Entertainment Group Ltd., a Delaware
corporation ("Ventura") and _______________ ________________ , a New Jersey
corporation doing business as __________________ ________ _______ .
RECITALS
A. ___________ is the United States importer, distributor and seller at
wholesale of ______________ brand motor vehicles. _________ advertises such
motor vehicles extensively through a variety of media.
B. Lakeside and Ventura are engaged, among other things, in the business of
trading and advertising media time and space for merchandise, including motor
vehicles. Lakeside and Ventura have proposed to __________ that ________ trade
motor vehicles for advertising media, and have represented to ___________ that
they have the expertise necessary to effect the transaction contemplated in this
Agreement.
NOW, THEREFORE, Lakeside, Ventura and ___________ agree as follows:
1. Vehicles . _________ will make available Two Hundred Twelve (212) 1993 model
year EuroVan GL motor vehicles ("Vehicle[s]") under this Agreement. Each Vehicle
will be new and never titled with only normal transit, processing and delivery
mileage. The Vehicles will be equipped as set forth on the annexed Exhibit A.
The agreed value to Lakeside and Ventura of each such Vehicle will be as set
forth on Exhibit A, regardless of the actual Manufacturer's Suggested Retail
Price of any particular Vehicle.
2. Additional Consideration to Lakeside and Ventura . In addition to the
Vehicles, in consideration of the goods and services Lakeside and Ventura are to
provide __________ hereunder, ____________ shall pay Lakeside and Ventura
approximately Two Million United States Dollars (US $2,000,000.00), depending
upon media actually used as set forth below. ___________ shall pay such amount
in installments, as follows. Upon the delivery of each Media Vendor Commitment
Letter as specified in Paragraph 9 hereof, _______ will pay Lakeside and Ventura
an amount computed thusly: the total value of the media committed to in such
Media Vendor Commitment Letter, times the percentage of that type media for
which _____ has agreed to pay in cash as outlined in Exhibit B, times one half.
__________ shall pay the remaining one-half of its cash payment obligation upon
__________ placement of media and acknowledgment by the media supplier of such
placement. The actual amount of the additional compensation to Lakeside and
Ventura shall be adjusted in accordance with the media payment schedule annexed
hereto on Exhibit B based on __________ actual media usage.
3. Vehicle Deliveries . Vehicles will be delivered from time to time by ________
subject to orders by Lakeside or Ventura or their designees. Lakeside and
Ventura will notify ______ from time to time, but in any event within 90 days
after the execution of this Agreement by all parties, of the identities of the
purchasers and end users of the Vehicles. _________ will deliver the requested
Vehicles within 60 days after such notification by Lakeside, and after the
provision to _______ by Lakeside and Ventura of Media Vendor
1
<PAGE>
Commitment Letters as described in this Agreement in amounts at least equal to
the value of the Vehicles contained in each notification.
4. Retailers . _________ has informed Lakeside and Ventura, and Lakeside and
Ventura understand, acknowledge and agree, that _____ can sell Vehicles only to
entities which are authorized retailers of ______ pursuant to then-current
_________ Dealer Agreements ("Retailers"). __________ will endeavor to secure
the cooperation of Retailers in effecting the transactions contemplated by this
Agreement. ________ will endeavor to arrange for the delivery of each vehicle to
and through the Retailer located closest to the location of each end user
designated by Lakeside and Ventura, or to a different Retailer if designated by
Lakeside and Ventura or such end user, assuming in each case such Retailer is
willing and able to effect such transaction. Lakeside and Ventura understand,
acknowledge and agree, however, that each Retailer is an independent business
not affiliated with ______ and ________ cannot compel the participation by any
Retailer in the transactions contemplated by this Agreement. In the event the
Retailer closest to or designated by any End User is unwilling or unable to
effect such a transaction, _______ may designate another reasonably convenient
Retailer in ________ discretion.
5. Terms of Payment and Delivery . _______ terms of payment and delivery, as
between _____ and participating Retailers, shall be as set forth in the
then-current __________ Dealer Agreement. _______ shall provide in respect of
each Vehicle a Manufacturer's Certificate of Origin in favor of the respective
Retailer, sufficient to allow the Retailer to apply for title and registration
of such Vehicle in the name of the respective end user. Vehicles will be
delivered to end users free and clear of all liens and encumbrances except those
arising in respect of the end user. _______ will bear the expense of
pre-delivery inspection for Vehicles. Costs of title, registration,
Retailer-installed accessories and like items shall be the responsibility of
Lakeside and Ventura or their end users. Each Vehicle shall be covered by
applicable manufacturer's and distributor's new vehicle limited warranties. TO
THE EXTENT PERMITTED BY LAW, __________ HEREBY DISCLAIMS ALL OTHER WARRANTIES,
EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OR MERCHANTABILITY OR OF
FITNESS FOR ANY PARTICULAR PURPOSE, and Lakeside and Ventura in all their
dealings will conduct themselves so as not to create any such warranties.
6. Exports Prohibited . _______ hereby informs Lakeside and Ventura that ______
is authorized to distribute Vehicles only within the 50 United States, and that
it is ________ policy not to distribute any vehicles for ultimate sale or use
outside the 50 United States. Lakeside and Ventura hereby agree to use all
reasonable efforts to assure that all end users for Vehicles are bona fide
residents of the United States and that no Vehicle will be exported by Lakeside,
Ventura or to their knowledge any end user. In the event that ______ finds any
Vehicle to have been exported, ________ shall have the right to terminate this
Agreement immediately for cause.
7. Approval of End Users . Lakeside and Ventura agree that the end users of
Vehicles will in all cases require the prior written approval of _______ which
shall not unreasonably be withheld or delayed. _____ has been advised that
Holiday Inns, whether corporate or licensee locations, may be an end user of
some of or all the Vehicles, and ____ hereby approves such end user.
8. Media Credits by Lakeside and Ventura . Immediately upon the execution
of this Agreement by both parties, Lakeside and Ventura shall establish upon
their books an obligation to create media fulfillment credits in the aggregate
value of Six Million Six Thousand Eight Hundred United States Dollars (US
$6,006,800.00). The aggregate value
-2-
<PAGE>
of the media fulfillment credits shall be adjusted in accordance with the
media payment schedule annexed hereto as Exhibit B based on ______ actual media
usage.
9. Security for Lakeside and Ventura Commitments . From time to time within 90
days after the execution of this Agreement by all parties, Lakeside and Ventura
shall provide to _______ in form acceptable to _______ , Media Vendor Commitment
Letters ("Commitments"). Such Commitments may be provided in whole at one time
or in parts from time to time. Media vendors shall include suppliers of space
and time of the following types: national magazine; national broadcast and cable
television; spot television in major metropolitan markets; newspaper; and
ScreenVision. Each Commitment shall represent that the respective media vendor
shall have reserved irrevocably an aggregate value of media time or space for
usage by ________. Each Commitment shall provide that such media time is fully
paid and that ______ shall have no responsibility to the respective media
supplier, and that ____ shall be treated in all respects as a cash customer, who
shall benefit from terms and conditions no less favorable than such media
supplier's published terms and conditions for any other purchaser who has
negotiated for an equivalent amount of media time or space, including, without
limitation, rights to make-goods and similar benefits. Media credits shall be
usable by _____ immediately upon the issuance of Commitments. Each Commitment
shall provide that it is irrevocable during its stated term, which shall in no
event be less than one year. Lakeside and Ventura agree to use their best
efforts to cause any Commitment which is unused at the time of its expiration to
be extended for an additional period of time.
10. Media Purchases . Lakeside and Ventura shall use their best efforts to
negotiate for the most favorable rate for _____ and acceptable to the media
seller for similarly situated purchasers of an equivalent amount of media time
or space, and shall be fully responsible for purchasing and paying in full for
all media space and time. ______ shall, in cooperation with _______ advertising
agency of record, _______________________, promptly develop and deliver to
Lakeside and Ventura ________ media plan. Lakeside and Ventura will acquire
media acceptable to _________ and consistent with _________ media plan, pursuant
to written instructions from______ or BWC to Lakeside and Ventura from time to
time, which instructions shall be consistent with such media plan. ______ shall
also, in a timely fashion, deliver production materials as called for in the
rate cards for the media purchased by Lakeside and Ventura for _______.
11. Term; Termination . This Agreement shall remain in effect until the later of
(a) _______ delivery of all Vehicles or (b) the usage by ______ of all media
credits provided hereunder. This Agreement may be terminated earlier for cause,
upon material breach by either party, upon 30 days' notice as provided herein,
unless within such notice period such breach is cured to the complete
satisfaction of the non-breaching party.
12. Indemnification . _________ hereby agrees that it will indemnify, defend and
hold Lakeside and Ventura harmless from and against any claim for breach of
warranty, property damage or personal injury arising or alleged to arise solely
out of any design or manufacturing defect in any Vehicle, provided Lakeside and
Ventura promptly notify _____ of the assertion of any such action and cooperates
fully in the defense of such action. Lakeside and Ventura hereby agree that they
will indemnify, defend and hold _____ harmless from and against any claim, cost,
loss or damage ______ may suffer as a result of the breach by Lakeside or
Ventura of their obligations to the various media suppliers in connection with
any media purchased for ________ hereunder; as a result of any misrepresentation
to any end user of ________ obligations hereunder; or as a result of any breach
of any warranty or representation to _____ in this Agreement. The duty of
Lakeside and Ventura to indemnify, defend and hold _______ harmless under this
paragraph shall be joint and several.
-3-
<PAGE>
13. Lakeside and Ventura Not Agents . Lakeside and Ventura will conduct all
their activities for their own account and on their own behalf. Lakeside and
Ventura have no power or authority to act for ________. Lakeside and Ventura are
not distributors, dealers or retailers of _____. Lakeside and Ventura warrant
and represent that they each have any and all licenses necessary for the
performance of their obligations under this Agreement.
14. Amendments . This Agreement may not be varied, modified or amended
except by an express instrument in writing to that effect signed on behalf of
all parties.
15. Entire Agreement . This Agreement is the entire agreement among
__________ , Lakeside and Ventura. No representations or statements other than
those expressly set forth or referred to herein were made or relied upon in
entering into this Agreement.
16. Assignment . No part of this Agreement nor any interest in this
Agreement may be transferred by any party without the prior written consent of
the other parties.
17. Notices . All notices required or permitted to be given hereunder shall be
by certified mail with written receipt requested; by hand delivery; or by
overnight express service having reliable means of confirming delivery; and in
each case shall be deemed given when received. Notices to _________ shall be
addressed to Vice President, __________ __________ _______ ,________ ______
______ . Notices to Lakeside shall be addressed to Mr. Fred B. Tarter, The
Lakeside Group, Inc., 210 E. 39th Street, New York, New York 10016. Notices to
Ventura shall be addressed to President, Ventura Entertainment Group Ltd., 11466
San Vincente Boulevard, Los Angeles, California 90049.
18. Waivers . The waiver by either party of any breach or violation of or
default under any provision of this Agreement will not operate as a waiver of
such provision or of any subsequent breach or violation thereof of default
thereunder.
19. Authority . Each party has the full power and all necessary authority,
whether governmental, corporate or otherwise, to execute, deliver and perform
all its obligations under this Agreement.
20. Governing Law . This Agreement shall be governed by and construed in
accordance with the laws of the State of New York (without giving effect to
conflict of laws provisions). All disputes arising hereunder shall be
adjudicated in the state or Federal courts of Michigan sitting in Oakland County
or the Eastern District, respectively, and the parties hereto consent to the
jurisdiction and venue of such courts.
21. Force Majeure . No party shall be liable hereunder to any other party if
such party is unable to carry out any of its material obligations hereunder by
reason of acts of God, labor or material shortages, fires, explosions, breakdown
of facilities, strikes or other causes which are unforeseeable and beyond such
party's control. In such event, the obligations of such party shall be suspended
during the continuance of such event.
IN WITNESS WHEREOF Lakeside, Ventura and ________ have executed this
Agreement as of the date last written below.
THE LAKESIDE GROUP, INC. ______________________________
By:______________________________ By:______________________________
-4-
<PAGE>
Title: __________________________ Title: __________________________
Date: ___________________________ Date: ___________________________
VENTURA ENTERTAINMENT GROUP LTD.
By:______________________________
Title: __________________________
Date: ___________________________
-5-
<PAGE>
EXHIBIT A
QTY. VEHICLE CURRENTLY IN STOCK PRICE
__________ AUTOMATIC TRANSMISSION, CONVENIENCE GROUP*
7 As Above $18,700
93 With Left Sliding Window $18,900
6 With ABS Brakes $19,400
34 With Left Sliding Window and ABS Brakes $19,600
- - - --
140
__________ SPEED MANUAL TRANSMISSION, CONVENIENCE GROUP*
7 As Above $17,800
48 With Left Sliding Window $18,000
17 With Left Sliding Window and ABS Brakes $18,700
- - - --
72
212
- - - ---
*The Convenience Group includes power front door windows, power central
locking, and cruise control. Some vehicles will be equipped with
metallic paint.
-6-
<PAGE>
EXHIBIT B
The additional consideration paid by _______ to Lakeside and Ventura
pursuant to Paragraph 2 of the Agreement shall be calculated in accordance with
the following media payment schedule and shall be based on the actual mix of
media used by_________ :
National Broadcast Media: 25% cash
National Magazine Media: 33-1/3% cash
Local Broadcast Media: 25% cash
Local Newspaper Media: 33-1/3% cash
ScreenVision: 25% cash
In the event that the cash portion of _________ media plan and actual
mix of media use is greater or less than $2,000,000, the additional
consideration paid by ________ to Lakeside and Ventura (and the aggregate value
of the media fulfillment credits in Paragraph 8 of the Agreement) shall be
adjusted accordingly, and ______ shall pay any such additional amount to
Lakeside and Ventura, or Lakeside and Ventura shall refund ________ for any
excess payment, as the case mat be, in each case promptly after the calculation
of the additional consideration . Lakeside and Ventura shall be jointly and
severally responsible for their performance of these obligations.
-7-
Exhibit 10.41
INDEPENDENT CONSULTING AGREEMENT
This Agreement entered into as of October 15, 1994, by and between
VENTURA ENTERTAINMENT GROUP, LTD., a Delaware corporation, with its principal
place of business at 11466 San Vicente Boulevard, Los Angeles, California or any
successor ("Ventura"), and DONALD B. LIFTON, whose address is 1198 Charrington,
Bloomfield Hills, Michigan 48301 ("Lifton").
In consideration of the mutual premises hereinafter set forth, the parties agree
as follows:
1. Engagement. This Agreement calls for the performance of the services
of Lifton as an Independent Contractor. Lifton has not been hired with the
intent that he will render legal services or advice and such legal services or
advice are not within the scope of Lifton's duties. During the term of this
agreement, Lifton agrees to provide services to Ventura as Corporate secretary
and business consultant. Lifton will not be considered an employee of Ventura
for any purpose. Ventura will provide Lifton with necessary and suitable office
space, together with secretarial services, equipped with equipment necessary and
incidental to the effective rendering of services to Ventura and to other
parties, or, at Ventura's option, shall reimburse Lifton for all of such office
expenses.
2. Services. Lifton agrees to devote a portion of his time, attention,
skill, energies, and creative efforts to the business of Ventura, not to exceed
an average of 80 hours per month. The parties agree Lifton may engage in other
activities for compensation during the term of this Agreement.
3. Lifton's Discretion. Lifton agrees to furnish Ventura such
cooperation as is reasonably requested by Ventura toward a good-faith effort to
complete those specific projects or tasks as the parties mutually agree to
undertake. Ventura recognizes, Lifton assumes and retains full responsibility
and discretion concerning his hours, methods, techniques, procedures, and
independent judgment in undertaking and completion of such projects.
4. Compensation.
(a) Ventura agrees to pay Lifton $6,250.00 on the 15th day of each
month from October 1994 through December 1995. Ventura shall accrue for
Lifton an additional $6,250.00 per month. If, prior to December 31,
1995, Ventura obtains commitments for equity or debt totaling at least
$10,000,000.00, Ventura shall pay all such accrued additional
compensation to Lifton upon Ventura's closing on such commitments
totally at least $10,000,000.00, and shall thereafter pay to Lifton
$12,500.00 per month during the remaining term (including extended
term(s) of this Agreement). Lifton shall also be entitled to
participate in any and all benefits from time to time afforded to
senior officers of Ventura, except those benefits which may be offered
only to employees, such as pension plans and other similar employee
fringe benefit plan, provided that benefits afforded to Lifton may
1
<PAGE>
be reduced at such time and in such manner as generally applicable to
senior officers of Ventura.
(b) In addition to the foregoing, and subject to the terms and
conditions set forth herein, Ventura grants to Lifton a non-qualified
option to purchase up to 100,000 shares of Ventura's common stock,
$.001 per value (the "Shares"), such option to be exercisable as
follows and to be nontransferable except as provided in subsection (v)
below:
(i) Lifton shall have the option to purchase from Ventura a
maximum of 100,000 shares for a total purchase price equal to the
Exercise Price per Share, payable as provided in subsection (iv)
below. Options covering 25,000 shares shall vest immediately. The
remaining 75,000 options shall vest on the earliest to occur of the
following events: (A) December 31, 1995; (B) an Acceleration Event;
(C) when Ventura closes or obtains commitments by December 31, 1995
for equity or debt of at least $10,000,000.00 or (D) when Ventura
acquires at least 51% of the voting common stock of Modern Talking
Pictures. Lifton may exercise such options from time to time but
before October 15, 1999 by delivering written notices of Lifton's
exercise of the option to Ventura, to the attention of the Chairman
of the Board, which notices shall include the number of Shares for
which Lifton is then exercising his option.
(ii) An Acceleration Event shall occur if at any time during the
term of this Agreement Ventura shall (aa) consolidate with or merge
into another corporation and Ventura or a subsidiary of Ventura
shall not be the surviving corporation, (bb) have a majority of its
common stock, $.001 par value, sold in a single transaction or in a
series of transactions, the result of which is to consolidate the
ownership of such stock in a single person or group of persons
acting in concert, (cc) have all of its common stock, $.001 par
value, held by Unaffiliated Shareholders sold in a single
transaction or a series of transactions, the result of which is to
consolidate the ownership of such stock in a single person or group
of persons acting in concert, (dd) convey all, or substantially all,
of its assets to another corporation, entity, or person, the
ownership of which is not substantially similar to that of Ventura
prior to such conveyance, or (ee) if Floyd W. Kephart ceases to be
the Chief Executive Officer of Employer.
The term "Unaffiliated Shareholder," as used herein, shall mean a
Shareholder who is not an officer, director or employee of Ventura
or any entity the beneficial interests of which are held by any
director, officer or employee of Ventura.
(iii) Notwithstanding the foregoing, if Lifton dies or suffers a
disability, as defined in subsection (vi) all unvested options shall
vest.
(iv) Lifton's written notice of exercise of an option shall be
accomplished by either a check for the total purchase price, by
Lifton's written instruction to deduct from the Shares then
otherwise purchased the least number of Shares needed to meet or
exceed the total purchase price or by a stock certificate
representing Shares already in Lifton's possession, assuming such
Shares are valued at the Per Share Trading Price hereinafter
defined. The Per Share Trading Price means the closing bid price on
the last business day before the written notice of exercise is given
as reported in
2
<PAGE>
the Wall Street Journal on NASDAQ or any other public stock exchange
wherever Shares are currently listed.
(v) Lifton may transfer any option granted under this Section
2(c) to Lifton's spouse or children, or to a trust for the benefit
of Lifton, Lifton's spouse and/or Lifton's children; provided,
however, that such transferee shall be able to exercise such option
only if and when Lifton could have exercised such option and any
Shares acquired upon exercise of such transferred option shall be
subject to the same limitations or restrictions that would have
applied had Lifton exercised such option. The payment provisions of
subsection (iv) shall also apply to such transfers.
Subject to the foregoing, these options shall be non-transferable
by Lifton, either voluntarily or by operation of law, otherwise than
by will or the laws of descent and distribution and shall be
exercisable during the option holder's lifetime only by the option
holder, regardless of any community property interest therein of the
spouse of the option holder, or such spouse's successors in
interest. If the spouse of the option holder shall have acquired a
community property interest in such option, the option holder, or
the option holder's permitted successors in interest may exercise
the option on behalf of the spouse of the option holder or such
spouse's successors in interest.
(vi) For purposes of this Agreement, Lifton shall be considered
"disabled" if as a result of physical or mental injury or impairment
Lifton cannot adequately perform the duties required under Section 2
of this Agreement and if the Board of Directors, based upon the
independent medical advice of a physician selected by the Board,
determines that such inability to perform can be expected to
continue for at least one year.
(vii) In the event of any change in the Shares of Ventura by
reason of any stock dividend, recapitalization, reorganization,
merger, consolidation, split-up, combination or exchange of Shares,
or of any similar change affecting Shares, the number of Shares
subject to the option provided in Section 4(c) and their purchase
price per Share shall be appropriately adjusted consistent with such
change in such manner as the Board of Directors may deem equitable
to prevent dilution of at least 1% or an enlargement of the rights
granted to Lifton under Section 4(c). Any adjustment so made shall
be final and binding upon Lifton. This provision shall not apply to
any dilution caused by this Agreement.
In the event the Company sells or offers to sell Shares at a
price below the Exercise Price, the Exercise Price shall be adapted
downward to such offering or sales price as to all then unexercised
options.
(viii) Lifton hereby represents and warrants that if and when
Lifton purchases all or any portion of the Shares, such purchase
will be for Lifton's own account and solely for investment and not
with a view toward resale or other distribution. Lifton acknowledges
and agrees that some or all of the Shares have not been and will not
be registered under the Securities Act of 1933, as amended (the
"Act"), or under the securities laws of any state, and may not be
sold, assigned, transferred or otherwise disposed of (except, to the
extent permitted by applicable securities laws, to any trust in
which Lifton is the grantor and sole beneficiary during his
3
<PAGE>
lifetime and/or to any direct family members and/or to Lifton's
spouse) unless the Shares have been registered and qualified under
the Act and any applicable state's securities law, or unless an
exemption from such registration or qualification is available.
Lifton further acknowledges that some or all of the Shares may
constitute "restricted securities" within the meaning of Rule 144
promulgated by the Securities and Exchange Commission and the Shares
may not be sold, assigned, transferred or otherwise disposed of
except and unless all conditions set forth in Rule 144 are satisfied
or unless an exemption from registration under the Act is otherwise
available.
The certificates representing some or all of the Shares may
contain the following legend:
"The shares evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the
"Act"), or under the laws of any state, any may not be sold,
assigned, transferred or otherwise disposed of unless such shares
have been registered or qualified under the Act and any
applicable state's securities law, or unless an exemption from
such registration or qualification is available."
After endorsement, the certificates representing the Shares shall
be delivered to Lifton, who shall, subject to the terms of this
Agreement, be entitled to exercise all rights of ownership of such
Shares. Certificates representing Shares not bearing a legend shall
be delivered to Lifton in exchange for the certificates bearing
legends as and when, from time to time, Ventura receives an opinion
of its counsel to the effect that such legends may be removed, which
opinion Ventura agrees to seek in good faith if so requested by
Lifton.
Lifton represents and warrants to Ventura that he will cooperate
fully with Ventura in the preparation and filing of any and all
documents necessary to be filed with the Securities and Exchange
Commission pursuant to its rules.
Ventura represents and warrants that it will file any and all
documents necessary to be filed with the Securities and Exchange
Commission pursuant to its rules.
(ix) The Exercise Price per Share for each option shall equal
$2.50.
(c) Ventura shall reimburse Lifton for 50% of all reasonable
expenses associated with Lifton's current New York City residence
accruing after the effective date of this Agreement. If and when
Ventura acquires control of Modern Talking Pictures, Ventura agrees to
reimburse Lifton for 100% of all reasonable (in the judgment of
Ventura) expenses associated with Lifton's current New York City
residence.
(d) Anything in this Agreement to the contrary notwithstanding, in
the event that Ventura's regularly retained firm of independent
certified public accountant ("CPA's") shall determine (as hereinafter
described) that any payment or distribution by Ventura to or for the
benefit of Lifton except that relating to options
4
<PAGE>
granted under Section 4(b) of this Agreement (whether paid of payable
or distributed or distributable pursuant to the terms of this Agreement
or otherwise) (a "Payment") would be nondeductible by Ventura for
Federal income tax purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then the aggregate
present value of amounts payable or distributable to or for the benefit
of Lifton pursuant to this Agreement (such payments or distributions
pursuant to this Agreement are hereinafter referred to as "Agreement
Payments") shall be reduced (but not below zero) to the Reduced Amount.
For purposes of this paragraph, the "Reduced Amount" shall be an amount
expressed in present value which maximizes the aggregate present value
of Agreement Payments without causing any Payment to be nondeductible
by Ventura because of said Section 280G of the Code. With respect to
any "excess Parachute Payment" within the meaning of Section 280G(b)(2)
of the Code, subject to the tax (the "Excise Tax") imposed by Section
4999 of the Code, Ventura shall pay to Lifton an additional amount
equal to the Excise Tax payable by Lifton.
Lifton shall elect which and how much of the Agreement Payments
shall be eliminated or reduced (as long as after such election the
aggregate present value of the Agreement Payments equals the Reduced
Amount) and shall notify Lifton promptly of such election. For purposes
of this paragraph, present value shall be determined in accordance with
Section 280G(d)(4) of the Code. All determinations made by the CPA's
under this paragraph shall be binding upon the Ventura and Lifton
(absent fraud, willful misconduct or demonstrable mistake in
calculation, but not in judgment) and shall be made within 60 days of a
termination of employment of Lifton. As promptly as practicable
following such determination and the elections hereunder, Ventura shall
pay to or distribute to or for the benefit of Lifton such amounts as
are then due to Lifton under this Agreement and shall promptly pay to
or distribute for the benefit of Lifton in the future such amounts as
become due to Lifton under this Agreement.
As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the CPA's
hereunder, it is possible that Agreement Payments may be made by
Ventura which should not have been made ("Overpayment") or that
additional Agreement Payments which will have not been made by Ventura
could have been made ("Underpayment"), in each case, consistent with
the calculation of the Reduced Amount hereunder. In the event that the
CPA's based upon the assertion of a deficiency by the Internal Revenue
Service against Ventura or Lifton which the CPA's believe has a high
probability of success, determine that an Overpayment has been made,
any such Overpayment shall be treated for all purposes as a loan to
Lifton which Lifton shall repay to Ventura together with interest at
the applicable Federal rate provided for in Section 7872(f)(2) of the
Code; provided, however, that no amount shall be payable by Lifton to
Ventura if and to the extent such payment would not reduce the amount
which is subject to taxation under Section 4999 of the Code. In the
event that the CPA's, based upon controlling precedent, determine that
an Underpayment has occurred, any such Underpayment shall be promptly
paid by Ventura to or for the benefit of Lifton together with interest
at the applicable Federal rate provided for in Section 7872(f)(2)(A) of
the Code.
5. Death, Disability, Termination of Relationship, Acceleration Event.
Upon the occurrence of any of the following events:
(a) Lifton's death or disability;
5
<PAGE>
(b) Lifton's ceasing to be a consultant for Ventura;
(c) An Acceleration Event of Ventura coupled with the termination of
this consulting arrangement.
Lifton shall be entitled to continue to receive the options and
benefits specified in Section 4 at the level at the date of the first to occur
of the events specified in this Section 5 for a period of 12 months after the
occurrence of such events.
In the event of Lifton's death during the term of this Agreement,
Ventura shall continue to pay and provide to Lifton's spouse all health care and
insurance benefits provided to Lifton for a period of one year following
Lifton's death.
Ventura shall be entitled to purchase life and disability insurance
policies to fund the obligations set forth above. Lifton agrees to fully
cooperate with Ventura in securing and maintaining such policies.
6. Taxes. Lifton agrees to furnish Ventura with his employer
Identification Number of Social Security Number for purposes of filing Form
1099. Lifton agrees that he is responsible for, payment of any self-employment,
income or other taxes arising from this Agreement.
7. Expenses. Lifton shall be reimbursed by Ventura for Lifton's
reasonable traveling, entertainment and other incidental expenses incurred on
business of Ventura upon the submission by Lifton of such vouchers and other
proof and when approved in accordance with the practice now existing at Ventura
or in accordance with such practice as it may hereafter be changed and uniformly
applied to senior officers of Ventura. 8. Non-Disclosure of Third-Party
Information. Lifton shall not disclose to Ventura nor use in the performance of
Lifton's services for Ventura any information that Lifton knows to be the
confidential property of a third party.
9. Confidentiality. During and after the term of Lifton's services,
Lifton agrees to keep and maintain all details of the business or affairs of
Ventura, including but not limited to all trade secrets, confidential and shall
make no use of such except in the performance of Lifton's service for Ventura.
10. Term and Termination. This Agreement shall commence on the date
hereof and shall continue until December 31, 1995. Thereafter, the term of the
Agreement shall be automatically extended for successive one year periods unless
a 90 day written notice is given by Ventura or Lifton at least 90 days prior to
the expiration of the term of this agreement of his or its intention to cancel
the Agreement at the end of its initial or extended terms Notwithstanding any
thing herein to the contrary, Lifton may terminate this Agreement at any time
for any reason whatsoever without further obligation to Ventura, except for
those obligations stated herein to survive termination of this Agreement, upon
90 days written notice of his intention to do so to Ventura.
11. Delivery of Documents After Termination. Upon termination of
Lifton's services by either party for any reason, Lifton hereby agrees to return
to Ventura any and all books, records, reports, notes, and materials of any
nature or kind whatsoever furnished to Lifton, or developed by Lifton, which
relate directly or indirectly to the business of Ventura.
6
<PAGE>
12. Independent Contractor Relationship. Any other provision of this
Agreement to the contrary notwithstanding, this Agreement does not constitute a
hiring by either party nor does it constitute a contract of employment. The
parties' intention is that Lifton be an independent contractor and not an
employee of Ventura, and that Lifton retain sole and absolute discretion and
judgment in the manner and means of carrying out his consulting activities. This
Agreement shall not be construed as a partnership and neither party hereto shall
be liable for any obligations incurred by the other party except as expressly
provided herein. Unless otherwise required by applicable law, Ventura shall not
withhold from Lifton's compensation any amounts for social security or federal
or state income taxes. Lifton recognizes that it is his legal responsibility to
pay all applicable federal and state income taxes (including estimated taxes),
social security and all applicable federal and state self-employment taxes.
13. Best Efforts. Lifton agrees that he shall devote his best efforts,
energies and skills to the discharge of his duties and responsibilities
hereunder.
14. Remedies. The parties hereto shall have all remedies at law or in
equity to enforce the terms and obligations arising hereunder, including the
right to injunctive relief. In the event of any legal action to interpret or
enforce this Agreement, the prevailing party, as determined by the court, shall
be entitled to recover judgment form the unsuccessful party for its costs and
reasonable attorney fees, as determined by the court.
15. Notices. All notices, requests, demands and other communications
hereunder shall be delivered personally or sent by certified or registered mail,
postage paid, addressed to Ventura at:
11466 San Vicente Boulevard
Los Angeles, California 90025
and addressed to Lifton at:
1198 Charrington
Bloomfield Hills, Michigan 48301
or at such other address as Ventura of Lifton may furnish the other in writing.
Notices shall be deemed effective on receipt.
16. Binding Effect. The terms, covenants and provisions hereof shall
extend to and be binding upon the parties hereto, their heirs, personal
representative, assigns and successors in interest.
17. Non-Waiver. Waiver of a breach of any provision of this Agreement
shall not operate or be construed as a waiver of any subsequent breach.
18. Entire Agreement. This instrument contains the entire agreement of
the parties. It may be changed only by an agreement in writing signed by the
party against which the enforcement of any waiver, change, modification,
extension or discharge is sought.
19. Paragraph Headings. The paragraph headings of the Agreement are for
convenience of reference only and shall not limit or define the text thereof.
20. Severability. In the event that any one or more of the provisions
of this Agreement shall be invalid, illegal or unenforceable in any respect, the
validity, legality and
7
<PAGE>
enforceability of the remaining provisions contained herein shall not in any way
be affected thereby.
21. Governing Law. This Agreement shall be governed by the laws of the
State of California. The invalidity of any provision hereof shall not invalidate
any other provision hereof.
22. Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof, including in particular any controversy
relating to Section 4, shall be settled by arbitration in Los Angeles County,
California in accordance with the laws of the State of California by three
arbitrators, one of whom shall be appointed by Ventura, one by Lifton and the
third of whom shall be appointed by the first two arbitrators. The arbitration
shall be conducted in accordance with the Commercial Arbitration Rules of the
American Arbitration Association except as hereinabove provided. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. In the event Lifton shall retain legal counsel and/or
incur other costs and expenses in connection with enforcement of any of Lifton's
rights under this Agreement, Lifton shall not be entitled to recover from
Ventura any attorneys fees, costs or expenses in connection with the enforcement
of such rights (including enforcement of any arbitration award in court) unless
the arbitration award shall exceed by more than 10% of Ventura's final offer.
Any notice preliminary to or in conjunction with or incident to such
arbitration proceeding may be sent to Lifton or to the Board of the Company by
registered or certified mail, and personal service is hereby waived. Lifton
shall not institute a civil action with regard to any claim or controversy
arising out of or relating to this Agreement until such time as the arbitration
proceedings has been completed.
IN WITNESS WHEREOF, the parties hereto have signed this Agreement the
day and year first above written.
VENTURA ENTERTAINMENT GROUP, LTD.
By __________________________________
Floyd W. Kephart
Chairman and CEO
___________________________________
Donald B. Lifton
8
<PAGE>
Exhibit 10.42
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (hereinafter referred to as the "Agreement")
is made and entered into effective the 4th day of November, 1994, by and between
SOUNDVIEW MEDIA INVESTMENTS, INC., a Florida corporation ("Company"), VENTURA
ENTERTAINMENT GROUP, LTD., a Delaware corporation ("VEG") and BENNETT S. SMITH
("Employee") for the following uses and purposes:
R E C I T A L S
This employment agreement is executed simultaneously with the execution
of a Stock Exchange Agreement to which VEG, the Company, Employee, Brian W.
Brady, Richard S. Incandela, Trustee for the Trust of Richard S.
Incandela, dated 9/15/91, and Lance Judd are parties.
This Agreement is not, however, considered part of the consideration
for the stock exchange, but rather, is executed to protect and safeguard the
goodwill of Soundview Media Investments, Inc.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, and intending to be
legally bound, the parties agree as follows:
1. Employment and Duties. The Company hereby employs Employee as
President and Chief Executive Officer of SOUNDVIEW MEDIA INVESTMENTS, INC., and
Employee hereby accepts such employment. Employee shall be responsible for the
general management of the affairs of the Company and shall report directly to
the Company's Board of Directors. Employee agrees to devote his entire working
time and energy to the performance of his duties under this agreement. Employee
agrees that he will not, directly or indirectly, engage in the management of any
business, profession, or occupation that would interfere with the fulfillment of
his responsibilities to the Company. It is specifically agreed and understood
that Employee shall be based in Gulf Breeze, Florida throughout the term of this
Agreement and any renewal and/or extension thereof.
2. Term. The term of this employment contract shall be for a period of
five (5) years ending October 31, 1999.
3. Base Salary. As compensation for the satisfactory performance of the
services by Employee, Company shall pay Employee $200,000 per annum, payable in
equal semi-monthly installments. For so long as Employee is President and Chief
Executive Officer of the Company, such salary shall be reviewed by the Board of
1
<PAGE>
Directors of the Company, solely for the purpose of increasing said salary, no
less frequently than annually.
4. Incentive Compensation. In addition to the base salary set forth in
Section 3 above, Employee shall receive incentive compensation, if any, to be
determined by the Company's Board of Directors annually throughout the term of
this Agreement and any renewal and/or extension thereof. It is understood,
however, that the Board of Directors may annually determine that no incentive
compensation shall be paid to Employee, in the event Employee's performance does
not warrant such incentive compensation pursuant to the terms of a mutually
agreed upon incentive plan to be approved annually by the Company's Board of
Directors.
5. Company Benefit Plans. Employee shall be entitled to participate in
any 401k, pension, profit-sharing, savings and other retirement plans, and
medical, dental, hospitalization, life and disability insurance plans currently
offered, or which may be instituted by the Company or VEG during the term of
this Agreement ("Company Plans") not otherwise provided under this Agreement.
With respect to Employee's participation in the aforementioned medical, dental,
hospitalization, life and disability insurance plans, the cost and all related
expenses thereto shall be borne by the Company or VEG.
6. Leave/Vacation. The Employee shall be entitled to four (4) weeks of
leave/vacation each year without an adjustment in earnings. All leave/vacation
shall be taken at a time that will not unnecessarily interrupt or reduce the
business of the Company. Leave must be taken during each year and may not be
accumulated.
7. Reimbursement of Expenses. The Company shall reimburse the Employee
for any expenses reasonably incurred furthering the business of the Company,
including attendance at conventions and meetings and travel and entertainment
expenses. The employee shall be paid a reasonable car allowance, not to exceed
five hundred dollars ($500) per month.
8. Termination for Cause. Company shall have the right to terminate
this Agreement immediately for cause (as hereinafter defined) and the Employee
shall not be entitled to receive any further salary or employee benefits under
this agreement, but shall be entitled to receive accrued but unpaid salary under
Paragraph three (3) and accrued but unpaid bonuses and benefits described in
Paragraphs four (4) and five (5).
Any accrued but unpaid salary, incentive compensation or benefits due
the Employee after termination of employment under this paragraph shall be paid
within thirty (30) days after the effective date of termination. The effective
date of termination for all purposes of this Agreement shall be the date of the
written notice.
2
<PAGE>
"Cause" shall be defined as: (i) gross neglect or willful misconduct in
carrying out Employee's duties under this Agreement; (ii) conviction of a
felony; (iii) breach of Employee's fiduciary duties to Company; (iv) failure of
Employee to comply with any reasonable request of the Board of Directors of the
Company after thirty (30) days written notice and an opportunity to cure within
said 30-day period; or (v) the inability of the Company to meet its financial
obligations of corporate overhead and debt service; after notice and reasonable
opportunity to cure such financial obligations.
A "breach of Employee's fiduciary duties to the Company" shall not have
occurred without first obtaining an adjudication from a trial court that such
breach occurred and said adjudication is upheld on appeal.
9. Termination Without Cause. Company shall have the right to terminate
this Agreement at any time without cause upon thirty (30) days' written notice
to Employee, subject however, to the following: Employee shall be paid any
incentive compensation due Employee at the date of termination, within thirty
(30) days of such termination, and Employee shall continue to receive base
salary and benefits to which Employee is entitled under this Agreement for the
balance of the term of this Agreement.
10. Termination by Employee. Employee may terminate this contract after
providing the Company ninety (90) days' written notice. In the event of
termination by the Employee, the Company shall pay the Employee his salary
through the effective date of such termination and he shall receive such
incentive compensation as described in Paragraph four (4). Employee shall also
be entitled to receive any and all accrued benefits due under Paragraph five
(5).
11. Covenant Not to Compete. In the event Employee terminates his
employment with the Company pursuant to the terms of Paragraph 10 above,
Employee agrees that he will not become affiliated in any capacity (including
owner, officer, director, consultant or employee) for a period of one (1) year
from date of such termination with any television station within the "Prohibited
Territory." The "Prohibited Territory" shall mean any television markets as of
the date of such termination (a) in which the Company owns or controls a
television station and (b) in which the Company has executed a binding and
definitive agreement for the acquisition of a television station.
12. Reasonableness of Restrictions. Employee acknowledges that he has
carefully read and considered the provisions of Paragraph 11 hereof, and, having
done so, agrees that the restrictions set forth in such Paragraph 11 (including
but not limited to, the time period of restriction and the geographical areas of
restriction set forth in Paragraph 11 hereof) are fair and
3
<PAGE>
reasonable and are reasonably required for the protection of the interests of
the corporation, its officers, directors and employees.
13. Death of the Employee. This Agreement shall terminate in the event
of Employee's death.
In the event Employee dies while still in the active employment of the
Company, the Company shall pay to the Employee's beneficiary or beneficiaries,
within thirty (30) days after the date of death of the Employee, any and all
accrued base salary and a pro rata portion of the incentive compensation
determined under Paragraph four (4), calculated to the date of death. Nothing
herein shall be in lieu of, but shall be in addition to, all pension or profit
sharing plan and insurance benefits accruing under any such programs instituted
by the Company in which the Employee is a participant as described in Paragraph
five (5).
The Employee may designate one or more beneficiaries to receive the
payment of sums hereunder upon or following his death by a writing filed with
the Company, and may change any beneficiary or beneficiaries from time to time
by subsequent writing filed with the Company. If for any reason there is no
valid designation of a beneficiary in effect at the time of the death of the
Employee, the Company shall make any payment due hereunder to the Employee's
widow, if she shall be living at the time such payment falls due; and if she
shall not be then living, to or for the benefit of the Employee's lineal
descendants living at the time such payment falls due, per stirpes; and if no
widow or lineal descendants be living at the time such payment falls due, then
such payment shall be made to the personal representative of the estate of the
Employee.
14. Disability of Employee. Upon total disability of the Employee (as
defined herein), this Agreement shall terminate and the Company shall pay to the
Employee or his designated beneficiary any accrued but unpaid salary and
incentive compensation due under Paragraphs three (3) and four (4) and the value
of all benefits described in Paragraph five (5) through the date of such
termination, provided, however, it is specifically agreed that any such proceeds
from any benefits described in Paragraph five (5) survive the termination date.
Such payment will be made to the Employee or his designated beneficiary within
thirty (30) days after the total disability of the Employee.
"Total disability" of the Employee shall be defined as (i) the
inability by Employee, for a period of one hundred and eighty (180) consecutive
days or 180 days during any 210 day period, because of his physical or mental
incapacity, to substantially perform his duties hereunder and if at the end of
that period, a physician, selected by the Company and approved by the Employee,
certifies that it appears likely that the Employee will be unable to
substantially perform his duties for an indefinite additional period of time
because of such physical or mental incapacity or
4
<PAGE>
(ii) a court of competent jurisdiction shall appoint a guardian for the
Employee.
15. VEG's Guaranty. VEG hereby agrees to unconditionally guarantee any
and all obligations of the Company under this employment agreement.
16. Notices. All notices, requests, demands and other communications
required or desired to be given hereunder shall be in writing and shall be
deemed to have been duly given if delivered personally with receipt acknowledged
or sent by registered or certified mail, postage prepaid and return receipt
requested, to the respective addresses of the parties set forth below, or to
such other addresses as may be specified by either party in a notice given as
provided:
If to the Company: SOUNDVIEW MEDIA INVESTMENTS, INC.
1101 Gulf Breeze Parkway
Suite 201
Gulf Breeze, FL 32561
If to VEG: VENTURA ENTERTAINMENT GROUP, INC.
11466 San Vicente Boulevard
Los Angeles, CA 90049
ATTN: Floyd W. Kephart
With copy to: Robert D. Hart, Jr.
Clark, Partington, Hart, Larry,
Bond, Stackhouse & Stone
125 West Romana Street
Pensacola, FL 32501
If to Employee: Bennett S. Smith
1101 Gulf Breeze Parkway
Suite 201
Gulf Breeze, FL 32561
17. Entire Agreement. This Agreement contains the entire understanding
between the parties, and the Agreement cannot be changed or terminated orally.
18. Severability. The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the validity or enforceability of
any other terms or provisions, and this Agreement shall be construed in all
respects as if the invalidity or unenforceable term or provision were omitted.
19. Assignment. The rights and obligations of the Company under this
agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company.
20. Waiver. A waiver by either party of any term or condition of the
Agreement in any instance shall not be construed as a waiver of such term or
condition in the future, or as a waiver of any other term or condition. All
remedies, rights and obligations contained in the Agreement shall be cumulative
and none
5
<PAGE>
of them shall be in limitation of any other remedy, right or obligation of
either party.
21. Applicable Law. This Agreement shall be construed in accordance
with the laws of the State of Florida and is subject to the terms of all
licenses now and hereafter held by Company and all applicable federal, state and
municipal laws, ordinances and regulations now and hereafter in force.
IN WITNESS WHEREOF, the parties have executed this Employment Contract
on the dates shown below.
EMPLOYEE:
BENNETT S. SMITH
-------------------------
BENNETT S. SMITH
11/9/94
-------------------------
Date
COMPANY:
SOUNDVIEW MEDIA INVESTMENTS, INC.
By: BENNETT S. SMITH
-----------------------
Its President
DATE: 11/9/94
----------------------
VEG:
VENTURA ENTERTAINMENT GROUP, INC.
By: FLOYD W. RADIN
-------------------------
Its CEO
DATE: 11/9/94
-----------------------
6
<PAGE>
EXHIBIT 10.43
STOCK EXCHANGE AGREEMENT
THIS STOCK EXCHANGE AGREEMENT is entered into as of the 9th day of
November, 1994 by and among VENTURA ENTERTAINMENT GROUP LTD., a Delaware
corporation ('VEG'), SOUNDVIEW MEDIA INVESTMENTS, INC., a Florida corporation
('Soundview'), and the following persons (collectively known as the 'Founders'):
Richard S. Incandela and Sharon Sue Incandela, Co-trustees of the RICHARD S.
INCANDELA TRUST dated 9/15/91 ('Trust'), BENNETT S. SMITH ('Smith'), BRIAN W.
BRADY ('Brady'), and LANCE JUDD ('Judd') with respect to the following facts:
R E C I T A L S
A. VEG desires to acquire from Founders 80% of the issued and outstanding
shares of common stock of Soundview in exchange for ONE MILLION SHARES
(1,000,000) of common stock of VEG, which represents 13% of the issued and
outstanding shares of common stock of VEG.
B. As a result of this exchange, the Founders shall continue to own, in the
aggregate, 20% of Soundview while also owning, in the aggregate, 13% of the
common stock of VEG.
C. The Board of Directors of Soundview and VEG have approved the
acquisition of the stock of VEG in exchange for the stock of Soundview
('Acquisition').
D. For federal income tax purposes, it is intended that the Acquisition
shall qualify as a reorganization within the definition of Section 368(a)(1)(B)
of the Internal Revenue Code, as amended.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby mutually acknowledged, and intending to be legally bound, the parties
agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms shall have
the following meanings:
1.1 'FCC.' The term 'FCC' shall mean the Federal Communications
Commission.
1.2 'FCC's Initial Grant.' The first grant of the FCC consenting to the
transfer of control of Soundview to VEG.
1.3 'Closing Date.' The date on which this Agreement is executed and all
deliveries required under this Agreement are made.
<PAGE>
1.4 'Final Closing Date.' The date upon which the FCC's Initial Grant is
received.
2. STOCK EXCHANGED.
2.1 Stock Exchanged. Upon the terms and conditions set forth herein,
Founders agree to exchange 80% of their shares of Common Stock of Soundview
('Soundview Common Stock') as of the Closing Date in exchange for 1,000,000
shares of Common Stock of VEG ('VEG Common Stock'). Founders and VEG shall each
transfer such shares of Common Stock of the other, free and clear of all liens,
encumbrances, claims and restrictions except restrictions imposed hereunder and
under federal and state securities laws.
2.2 Piggyback Registration Rights With Respect to VEG Common Stock. VEG
agrees to register the VEG Common Stock on the next registration statement filed
by VEG under the Securities Act of 1933, as amended on which such Common Stock
can be registered. No later than 30 days prior to the filing of such
registration statement, VEG shall provide the holders of the VEG Common Stock
notice of VEG's intention to file such registration statement. If such
registration statement is filed as part of an underwritten public offering of
securities of VEG and the underwriter refuses to allow the registration of the
VEG Common Stock, VEG may postpone the registration of such Common Stock until
it files its next registration statement that satisfies the conditions set forth
above. VEG shall bear the costs of registering such Common Stock except any
discounts, commissions or fees of underwriters, selling brokers or similar
security industry professionals. Such discounts, commissions and fees shall be
borne by the sellers of the VEG Common Stock.
2.3 Issuance of Additional Shares. The agreement that Founders will own
20% of the capital stock of Soundview is based on the assumption that Soundview,
or one of its subsidiaries, will have filed an application with the Federal
Communications Commission for the acquisition of four television stations,
wherever situated, on or before the second anniversary from the date of
termination of the Escrow Agreement described in Section 14 and acquired at
least four such stations within thirty six (36) months after the termination of
the Escrow Agreement. A television station shall be deemed to have been acquired
during such periods even though such station is subsequently sold during such
period; provided the proceeds from such sale are deposited into the general
funds of Soundview, or one of its affiliates. These acquisitions can be
structured as an asset purchase, stock purchase, or stock exchange. In the event
Soundview does not acquire at least four such television stations within the
time period described above, each Founder shall transfer the following number of
shares of Soundview Common Stock to VEG for each station less than four that is
acquired:
-2-
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMMON STOCK TO
NAME OF STOCKHOLDER BE ISSUED TO VEG
- - - ---------------------------------------- ------------------
<S> <C>
Bennett S. Smith 25,250
Brian W. Brady 16,000
The Trust 8,250
Lance Judd 500
</TABLE>
The parties hereto acknowledge and agree that WTWC-TV, WTGS-TV, and WHOA-TV
shall be counted toward the 'four' television stations described above if those
stations are acquired by Soundview within the periods described above.
2.4 Preferred Stock. The preferred shares of Soundview that are owned by
the Trust and Smith shall remain outstanding after the Closing Date. VEG agrees
to cause Soundview to redeem the Preferred Stock owned by the Trust and Smith
pursuant to the terms of their respective stock purchase agreements within 24
months after the Final Closing Date. VEG also agrees to comply with the
commitments of Soundview set forth in the Incandela and Smith Stock Purchase
Agreements, as amended.
2.5 Investment Intent of the Founders. Each Founder represents and
warrants the following:
2.5.1 I have such knowledge and experience in financial and business
matters as to be able to evaluate the merits and risks of an investment in VEG.
2.5.2 I am able now to bear the economic risks of an investment in
VEG.
2.5.3 I have had the opportunity to ask questions of and receive
answers from representatives of VEG concerning the terms and conditions of the
VEG Common Stock and to obtain any additional information necessary to verify
the accuracy of the information furnished to me concerning VEG. In evaluating
the suitability of this investment, I have not relied upon any representations
or other information whether oral or written) other than as contained in this
Agreement.
2.5.4 I am acquiring the VEG Common Stock for my own account for
investment purposes only and not as a nominee or agent for any other person and
not with the view to, or for resale in connection with, any distribution of any
part of the VEG Common Stock.
2.5.5 I have been informed that the offer of the VEG Common Stock is
being made pursuant to the exemption from the registration requirements of the
Securities Act of 1933 ('Act') afforded by Section 4(2) thereof and Regulation D
promulgated thereunder, relating to transactions by an issuer not involving any
public offering, and that, consequently, the materials relating to said offer
have not been subject to the
-3-
<PAGE>
review and comment of the staff of the Securities and Exchange Commission or the
National Association of Securities Dealers, Inc.
2.5.6 I understand that I must bear the economic risks of my
investment for an indefinite period because the VEG Common Stock has not been
registered under the Act or any applicable state securities laws and, therefore,
the VEG Common Stock may not be sold or otherwise transferred by me unless the
VEG Common Stock is registered or qualified under the Act and applicable state
securities laws or an exemption from such registration or qualification is
available.
2.6 Investment Intent of VEG. VEG represents and warrants the following:
2.6.1 VEG has such knowledge and experience in financial and business
matters as to be able to evaluate the merits and risks of an investment in
Soundview.
2.6.2 VEG is able to bear the economic risks of its investment in
Soundview.
2.6.3 VEG has had the opportunity to ask questions of and receive
answers from representatives of Soundview concerning the terms and conditions of
the Soundview Common Stock and to obtain any additional information necessary to
verify the accuracy of the information furnished to VEG concerning Soundview. In
evaluating the suitability of this investment, VEG has not relied upon any
representations or other information (whether oral or written) other than as
contained in this Agreement.
2.6.4 VEG is acquiring the Soundview Common Stock for its own account
for investment purposes only and not as a nominee or agent for any other person
and not with the view to, or for resale in connection with, any distribution of
any part of the Soundview Common Stock.
2.6.5 VEG has been informed that the offer of the Soundview Common
Stock is being made pursuant to the exemption from the registration requirements
of the Act afforded by Section 4(2) thereof and Regulation D promulgated
thereunder, relating to transactions by an issuer not involving any public
offering, and that, consequently, the materials relating to said offer have not
been subject to the review and comment of the staff of the Securities and
Exchange Commission or the National Association of Securities Dealers, Inc.
2.6.6 VEG understands that it must bear the economic risks of its
investment for an indefinite period because the Soundview Common Stock has not
been registered under the Act or any applicable state securities laws and,
therefore, the Common Stock may not be sold or otherwise transferred by VEG
unless the Soundview Common Stock is registered or qualified
-4-
<PAGE>
under the Act and applicable state securities laws or an exemption from such
registration or qualification is available.
2.7 Founders' Percentage Interest in VEG. VEG represents to Founders
that the VEG stock issued to Founders represents 13% of the issued and
outstanding common stock of VEG, including the issuance of the shares to the
Founders. VEG also agrees that if VEG issues additional shares of common stock
for cash, Founders shall have the option to acquire shares from that additional
offering in an amount sufficient to provide a percentage ownership in VEG equal
to that percentage owned at Final Closing, subject to dilution of such
percentage by: (a) existing conversion rights with respect to outstanding
preferred stock of VEG and the exercise of outstanding options and warrants of
VEG; and (b) shares issued by VEG subsequent to the date hereof to acquire
stock or assets of other companies. Within a Reasonable time prior to making
such offer of additional shares, VEG will give Founders notice of its intent to
issue additional shares, and Founders shall have five (5) days within which to
commit to purchase additional shares to maintain their percentage interest. If
Founders do not exercise their option right at the time of the first offering of
VEG after the Final Closing Date, they shall nevertheless continue to have the
right to acquire shares sufficient to maintain their percentage interest in any
such subsequent offering, but the percentage interest which they are entitled to
maintain shall be their percentage interest diluted as described above and by
any prior stock offerings in which Founders did not participate.
3. EMPLOYMENT AGREEMENTS. The following people ('Executives') shall be
employed by Soundview in the following positions pursuant to Employment
Agreements in the form attached, as Exhibits 3A and 3B.
<TABLE>
<CAPTION>
Name Position
- - - ------------------------------------- --------------------------------------------------------------------------
<S> <C>
Bennett S. Smith President and Chief Executive Officer
Brian W. Brady Executive Vice President
</TABLE>
4. WORKING CAPITAL. VEG and Soundview shall use their best efforts to
obtain the working capital that is required for Soundview to complete its
current broadcast station plans as set forth in Exhibit 4.
The parties hereto also understand and agree that Soundview has pending
sales of radio properties, the profits from which the parties agree shall be
retained in Soundview as operating capital.
5. BOARD OF DIRECTORS REPRESENTATION. Founders will be entitled to nominate
one member of Management's slate of the Board of Directors of VEG for as long as
VEG continues to own 80% of the issued and outstanding stock of Soundview, or
for as long as Founders own at least 50% of VEG stock acquired by them
-5-
<PAGE>
pursuant to the terms of this Agreement. The Board of Directors of Soundview
shall, from the Final Closing Date, consist of seven directors, four of whom
shall be designated by VEG and three of whom shall be designated by the
Founders.
6. SAVANNAH TELEVISION. Soundview and VEG agree to determine as soon as
possible whether or not they will acquire WTGS-TV in Hardeesville/Savannah.
7. REPRESENTATIONS AND WARRANTIES OF FOUNDERS.
The Founders jointly and severally represent and warrant to VEG that:
7.1 Corporate Status. Soundview is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, has
all requisite power and authority to enter into this Agreement and own, hold,
lease or operate its properties and assets and to carry on its business as it is
being conducted, and is duly qualified and in good standing in each jurisdiction
in which the nature of its properties, assets or business requires such
qualification. Soundview has no subsidiaries or direct or indirect interest in
any firm, corporation, partnership, association or other business except for the
companies listed on Schedule 7.lA. True and complete copies of the Articles of
Incorporation and By-laws of Soundview are attached hereto as Exhibits 7.lB and
7.lC.
7.2 Stock of Soundview. Soundview has no outstanding options, warrants,
convertible securities or other instruments of any character or nature (either
firm or conditional) under which Soundview is or may be obligated to issue any
equity securities of any kind or any securities or obligations convertible into
or exchangeable for any equity securities. The Founders are the legal and
beneficial owners of all of the issued and outstanding common stock and the
Trust and Smith are the legal and beneficial owners of all of the issued and
outstanding preferred stock of Soundview, i.e. 1,000,000 shares of Common Stock
and 950,000 shares of Preferred Stock. No other party has any right to assert an
interest, inchoate or otherwise, in any shares of capital stock of Soundview or
in the ownership of Soundview and there are no outstanding preemptive rights,
rights of first refusal or similar rights relating to the capital stock of
Soundview.
7.3 Undisclosed Liabilities and Obligations. Soundview is a development
stage company and has not commenced operations. As a result, Soundview has no
assets, liabilities, commitments, contracts, either oral or written, except as
set forth on Exhibit 7.3.
7.4 Compliance with Law or Other Covenants. The business and operations
of Soundview have been and are being conducted in accordance with all applicable
federal, state and local laws, rules and regulations and all restrictive
covenants
-6-
<PAGE>
applicable thereto, including but not limited to, laws and regulations with
respect to all material environment, employment and employment practices, wages
and hours, occupational safety, health and welfare conditions and civil rights.
Soundview possesses all registrations, licenses or permits required by Soundview
to operate its business lawfully in the manner now conducted and such
registrations, licenses or permits are in full force and effect. Soundview has
no reason to believe any of its registrations, licenses or permits will be
revoked, suspended, canceled or withdrawn. Soundview is not conducting its
business or Operations in a manner which violates any of the terms or conditions
under which any such registrations, licenses, and permits were granted.
7.5 Disputes and Litigation. Soundview does not have any claim or
dispute against or with any firm or other person and there is no litigation,
proceeding, arbitration, or governmental investigation pending or to the best
knowledge of Soundview, threatened against or affecting Soundview's business,
properties or assets or against the directors or officers of Soundview in
connection with its affairs. Soundview is not subject to any judgment, order,
writ, injunction or decree of any court or governmental agency in which relief
is sought against Soundview.
7.6 No Defaults. Neither the execution of this Agreement nor the
consummation of the transactions contemplated herein (a) violates or contravenes
any provision of law or regulation of any agency, government or private
regulatory body, or any order, writ, judgment or injunction or any provision of
the Articles of Incorporation or By-laws of Soundview; (b) constitutes a breach
(with or without notice or lapse of time) or conflicts with or entitles any
party to terminate any term or provision of any contract or commitment,
including but not limited to, any loan or credit agreement, deed of trust,
mortgage, lease or other agreement or instrument to which Soundview is a party
or by which Soundview or any of its properties, assets or rights are bound or
affected or (c) does or will result in the creation or imposition of any lien,
encumbrance, charge, equity or restriction of any nature whatsoever in favor of
any third party upon any assets of Soundview or (d) violates or results in the
modification, revocation, or suspension of any license, permit or other
registration of Soundview.
7.7 Authorization. Upon execution, this Agreement shall constitute a
legal and valid obligation of Soundview enforceable against Soundview in
accordance with its terms except insofar as enforceability may be limited by
bankruptcy, insolvency, reorganization or similar laws affecting the rights of
creditors generally. Except as provided in paragraph 14, no authorization or
approval of or exemption of or filing or registration with any court,
governmental agency, private regulatory body, or any party to any contract,
agreement, lease, or other agreement or instrument to which Soundview is bound
or by which any of its properties, assets or rights are bound or
-7-
<PAGE>
affected is necessary to authorize the execution or consummation of this
Agreement by Soundview. All corporate or other acts and proceedings required for
the authorization, execution and delivery of this Agreement by Soundview have
been lawfully and validly taken or will have been so taken prior to the Closing
Date.
7.8 Survival. Each representation and warranty by Soundview shall be
true as the Closing Date and shall survive the Closing and any audit or
investigation by VEG for a period of two years after the Closing.
8. REPRESENTATIONS AND WARRANTIES OF VEG.
VEG represents and warrants that:
8.1 Corporate Status. VEG is a corporation duly organized, validly
existing and in good standing under the laws of its state of incorporation, has
all requisite power and authority to enter into this Agreement and own, hold,
lease or operate its properties and assets and to carry on its business as it is
now being conducted and is duly qualified and in good standing in each
jurisdiction in which the nature of its properties, assets or business requires
such qualification.
8.2 Compliance with Law or Other Covenants. The business and operations
of VEG have been and are being conducted in all material respects in accordance
with all applicable federal, state and local laws, rules and regulations and all
restrictive covenants applicable thereto, including but not limited to, laws and
regulations with respect to all material environment, employment and employment
practices, wages and hours, occupational safety, health and welfare conditions
and civil rights. VEG possesses all material registrations, licenses or permits
required by VEG to operate its business lawfully in the manner now conducted and
such registrations, licenses or permits are in full force and effect. VEG has no
reason to believe any of its registrations, licenses or permits will be revoked,
suspended, canceled, or withdrawn. VEG is not conducting its business or
operations in a manner which violates any of the terms or conditions under which
any such registrations, licenses, and permits were granted.
8.3 Disputes and Litigation. VEG does not have any claim or dispute
against or with any firm or other person and there is no litigation, proceeding,
arbitration, or governmental investigation pending or to the best knowledge of
VEG, threatened against or affecting VEG's business, properties or assets or
against the directors or officers of VEG in connection with its affairs. VEG is
not subject to any judgment, order, writ, injunction or decree of any court or
governmental agency in which relief is sought against VEG.
8.4 No Defaults. Neither the execution of this Agreement nor the
consummation of the transactions contemplated
-8-
<PAGE>
herein (a) violates or contravenes any provision of law or regulation of any
agency, government or private regulatory body, or any order, writ, judgment or
injunction or any provision of the Certificate of Incorporation or ~y-laws of
VEG; (b) constitutes a breach (with or without notice or lapse of time) or
conflicts with or entitles any party to terminate any term or provision of any
contract or commitment, including but not limited to, any loan or credit
agreement, deed of trust, mortgage, lease or other agreement or instrument to
which VEG is a party or by which VEG or any of its properties, assets or rights
are bound or affected or (c) does or will result in the creation or imposition
of any lien, encumbrance, charge, equity or restriction of any nature whatsoever
in favor of any third party upon any assets of VEG or (d) violates or results in
the modification, revocation, or suspension of any license, permit or other
registration of VEG.
8.5 Authorization. Upon execution, this Agreement shall constitute a
legal and valid obligation of VEG enforceable against VEG in accordance with its
terms except insofar as enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally. No
authorization or approval of or exemption of or filing or registration with any
court, governmental agency, private regulatory body, or any party to any
contract, agreement, lease, or other agreement or instrument to which VEG is
bound or by which any of its properties, assets or rights are bound or affected
is necessary to authorize the execution or consummation of this Agreement by
VEG. All corporate or other acts and proceedings required for the authorization,
execution and delivery of this Agreement by VEG have been lawfully and validly
taken or will have been so taken prior to the Closing Date.
8.6 SEC Reports. VEG has delivered to Soundview true and complete copies
of certain reports and statements filed by VEG with the Securities and Exchange
Commission (the 'Commission'), including without limitation, the Form 10-K for
the year ended June 30, 1994 (the '1994 10-K'). The financial statements
contained in the 1994 10-K (collectively, the 'VEG Financial Statements')
present fairly in all material respects the financial condition and results of
operation of VEG as at and for the periods specified therein, and were prepared
in accordance with the books and records of VEG and the financial statements in
the 1994 10-K were prepared in accordance with generally accepted accounting
principles consistently applied throughout such periods and with prior periods.
8.7 Survival. Each representation and warranty of VEG shall be true as
of the Closing Date and shall survive the Closing and any audit or investigation
by the Founders for a period of two years.
-9-
<PAGE>
9. CONDITIONS TO OBLIGATIONS OF THE FOUNDERS.
Unless waived by the Founders in writing, the obligations of the
Founders hereunder are subject to the satisfaction on or prior to the Closing
Date, of all of the following conditions:
9.1 Truth and Accuracy of Representations and Warranties. The truth and
accuracy, in all material respects, of all representations by VEG contained in
this Agreement as of the date of this Agreement.
9.2 Corporate Resolutions. VEG's delivery to the Founders of copies of
resolutions or consents of the Board of Directors of VEG, appropriately
certified by its secretary, authorizing the execution, and delivery of this
Agreement and the consummation of the transactions contemplated herein.
9.3 Employment Agreements. Soundview's execution and delivery of
employment agreements with the Executives on terms and conditions that are
acceptable to VEG, Soundview, and the executives.
9.4 Pending Litigation. There shall not be in effect on the Closing Date
any statute, rule, regulation, decree, executive order, preliminary or permanent
injunction or other order issued, promulgated or enacted by any federal, state,
local or foreign government, governmental or regulatory authority or court which
declares this Agreement invalid in any respect or prevents the consummation of
the transactions contemplated hereby, and no action or proceeding before any
federal, state, local or foreign court or governmental or regulatory authority
shall have been instituted or threatened by any federal, state, local or foreign
government or governmental or regulatory authority, or by any other person,
entity or organization which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement or any term or provision hereof.
9.5 Shareholders Voting Agreement. Floyd Kephart and the Founders shall
have entered into an agreement in the form attached hereto as Exhibit 9.5.
10. CONDITIONS TO OBLIGATIONS OF VEG.
Unless waived by VEG in writing, the obligations of VEG hereunder are
subject to the satisfaction on or prior to the Closing Date, of all of the
following conditions:
10.1 Truth and Accuracy of Representation and Warranties. The truth and
accuracy in all material respects of all representations by the Founders
contained in this Agreement as of the date of this Agreement.
-10-
<PAGE>
10.2 Consents. The delivery by the Founders to VEG on the Closing Date,
of consents to the transfer of such contracts, licenses, commitments and orders
of Soundview as are required to consummate the transactions contemplated hereby
in the opinion of counsel to VEG.
10.3 Corporate Resolutions. The delivery by the Founders to VEG of copies
of resolutions or consents of the Board of Directors of Soundview appropriately
certified by its secretary, authorizing the execution, delivery and consummation
of this Agreement.
10.4 Pending Litigation. There shall not be in effect on the Closing Date
any statute, rule, regulation, decree, executive order, preliminary or permanent
injunction or other order issued, promulgated or enacted by any federal, state,
local or foreign government, governmental or regulatory authority or court which
declares this Agreement invalid in any respect or prevents the consummation of
the transactions contemplated hereby, and no action or proceeding before any
federal, state, local or foreign court or governmental or regulatory authority
shall have been instituted or threatened by any federal, state, local or foreign
government or governmental or regulatory authority, or by any other person,
entity or organization which seeks to prevent or delay the consummation of the
transactions contemplated by this Agreement or which challenges the validity or
enforceability of this Agreement or any term or provision hereof.
10.5 Employment Agreements. The execution and delivery of employment
agreements between Soundview and the Executives on terms and conditions that are
acceptable to VEG, Soundview, and the Executives.
10.6 Outstanding Indebtedness or Commitments of Soundview. Soundview
shall not have indebtedness or commitments to pay a cash purchase price in
excess of $13,250,000 in the aggregate relating to the acquisition of WTWC-TV in
Tallahassee, Florida and WHOA-TV in Montgomery, Alabama.
10.7 Shareholders Voting Agreement. Floyd Kephart and the Founders shall
have entered into a Shareholders Voting Agreement in the form attached hereto as
Exhibit 9.5.
11. INDEMNITY.
11.1 Founder's Indemnity. For a period of two years after
the Closing Date, the Founders shall jointly and severally indemnify, hold
harmless, reimburse and defend VEG and its officers and directors at all times
against any and all claims, expenses, liabilities, losses or damages (including
reasonable legal fees and costs) of any nature, incurred by or imposed upon VEG
which results, arises out of or is based upon (a) any misrepresentation by the
Founders or breach of any warranty by the Founders in this Agreement or in any
Exhibit or Schedule
-11-
<PAGE>
attached hereto; or (b) any breach or default in performance by Soundview or the
Founders of any covenant to be performed by it hereunder.
11.2 VEG's Indemnity. For a period of two years after the Closing Date,
VEG shall indemnify, hold harmless, reimburse and defend Soundview and its
officers and directors (including the Founders) at all times against any and all
claims, expenses, liabilities, losses or damages (including reasonable legal
fees) of any nature, incurred by or imposed upon the Founders which results,
arises out of or is based upon (a) any misrepresentation by VEG or breach of any
warranty by VEG in this Agreement or in any Exhibit or Schedule attached hereto;
or (b) any breach or default in performance by VEG of any covenant to be
performed by VEG.
12. LIMITATION ON TRANSFER OF SHARES OF SOUNDVIEW.
12.1 General. The shares of capital stock of Soundview ('Soundview
Shares') that are owned by VEG or the Founders ('Stockholders') hereto shall not
be voluntarily or involuntarily assigned, conveyed, transferred, sold, disposed
of, pledged, or hypothecated, whether by operation of law or otherwise (all of
which are herein referred to as a 'Transfer'), except as provided in Sections
12.2 and 12.3.
12.2 Permitted Transfers. Any Stockholder may Transfer Soundview Shares
to another Stockholder or to a related party or entity; provided such transferee
satisfies the conditions set forth in this Section 12. The term 'related party
or entity' as used herein shall mean the spouse of Messrs. Smith, Brady, or
Judd, or any child of Messrs. Smith, Brady, or Judd, a trust for the benefit of
Messrs. Smith, Brady, or Judd, or a spouse or child of Messrs. Smith, Brady, or
Judd, or another legal entity in which a Stockholder owns a majority equity
interest. In addition, any Stockholder may sell Soundview Shares to the public
in accordance with federal and all applicable state blue sky laws.
12.3 Prohibition on Sale by Founders. The Founders shall not sell any of
their shares of Common Stock of Soundview until four television stations are
acquired as provided in Section 2.3 above.
12.4 Right of First Refusal.
12.4.1 Subject to Section 12.3, if any Stockholder ('Offeror') wishes
to Transfer (other than a Permitted Transfer pursuant to Section 12.2 above) any
or all of its Soundview Shares ('Offered Shares') to a third party, the Offeror
shall first give written notice of such intention to the other Stockholders
('Offeree'), setting forth the terms of such Transfer, including but not limited
to, the consideration to be received by the Offeror, the name of the proposed
transferee, and the proposed closing date, which date shall not be less than
-12-
<PAGE>
thirty (30) days from the date such written notice is sent to the Offeree ('Sale
Notice'). The Offerees shall have the first option to purchase all and only all
of the Offered Shares on the terms set forth in the Sale Notice. If the Offerees
wish to purchase all the Offered Shares, the Offerees shall, within seven (7)
days of receipt of the Sale Notice, give the Offeror written notice of the
Offerees' election to purchase all the Offered Shares on the terms set forth in
the Sale Notice, except that the closing shall occur in accordance with Section
12.5 hereof. The Offerees shall decide among themselves as to the number of
Offered Shares to be purchased by each Offeree. In the absence of such
agreement, each Offeree shall purchase that number of Offered Shares that the
number of Soundview Shares owned by such Offeree bears to the total number of
such Shares owned by all Offerees.
12.4.2 If the Offerees do not give the Offeror written notice of
their election to purchase the Offered Shares within such seven (7) day period
or if the Offerees do not satisfy all the terms of the purchase of the Offered
Shares set forth in the Sale Notice within fifteen (15) days of receipt of the
Sale Notice, the Offeror shall then be released from Offeror's duty to sell the
Offered Shares to the Offerees and the Offeror may then Transfer the Offered
Shares to the proposed transferee on the terms set forth in the Sale Notice. If
within ninety (90) days after the expiration of the Offerees' option to purchase
the Offered Shares, the Offeror fails to complete the Transfer of the Offered
Shares to the proposed transferee on the terms set forth in the Sale Notice, the
Offeror shall, before any other attempt to Transfer the Offered Shares, give the
Offerees a new Sale Notice in accordance with the requirements stated above and
the foregoing procedure for Transfer shall again be followed.
12.5 Closing. The closing of any purchase and sale pursuant to this
Section 12 shall be held (i) within fifteen (15) days after the delivery of Sale
Notice and (ii) at the offices of Soundview or such other place as is agreed
upon by the selling and purchasing parties. At the Closing, the selling
Stockholder shall assign to the purchasing party the Offered Shares being sold
free and clear of all liens and encumbrances and the purchasing party shall pay
the purchase price for the Offered Shares by cashier's or certified check or,
and the parties shall execute all documents that may be reasonably necessary to
effectuate the sale and transfer of the Offered Shares.
12.6 Legend. Soundview shall place on the certificate representing the
Soundview Shares, a legend containing the following language:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND
MAY NOT BE SOLD OR TRANSFERRED UNLESS SUCH SECURITIES ARE SUBSEQUENTLY
REGISTERED OR QUALIFIED UNDER SUCH ACT AND APPLICABLE STATE LAW OR THE
CORPORATION RECEIVES AN
-13-
<PAGE>
OPINION OF COUNSEL REASONABLY ACCEPTABLE TO THE CORPORATION STATING THAT SUCH
SALE OR TRANSFER IS EXEMPT FROM SUCH REGISTRATION AND QUALIFICATION REQUIREMENTS
THEREUNDER. ANY SALE, TRANSFER OR HYPOTHECATION OF THE SHARES REPRESENTED BY
THIS CERTIFICATE IS RESTRICTED BY THE PROVISION OF SECTION 12 OF THE STOCK
EXCHANGE AGREEMENT ('AGREEMENT') DATED NOVEMBER 9, 1994, A COPY OF WHICH MAY BE
INSPECTED AT THE PRINCIPAL OFFICE OF THE CORPORATION, AND ALL OF THE PROVISIONS
OF WHICH ARE INCORPORATED HEREIN. THE AGREEMENT PROVIDES, AMONG OTHER THINGS
THAT IN CERTAIN CIRCUMSTANCES, THE OTHER HOLDERS OF SHARES OF THE CORPORATION
HAVE RIGHTS OF FIRST REFUSAL IN THE EVENT OF ANY PROPOSED TRANSFER OF THE SHARES
REPRESENTED BY THIS CERTIFICATE.'
A copy of this Agreement shall be delivered to the Secretary of the Corporation
and shall be shown by the Secretary to any person making inquiry about it.
13. CLOSING.
13.1 Time and Place. The closing hereunder shall take place on or before
November 8, 1994, or on such other date as may be mutually agreed upon in
writing between the parties.
13.2 Conditions. In the event that there is a failure of any condition
set forth in Sections 11 or 12 hereof, the party for whose benefit the condition
exists may elect to proceed with the Closing to the extent performance is
tendered and seek indemnification or exercise any other rights or remedies
accruing to such party.
14. FCC APPROVAL.
14.1 FCC Consent to Transfer of Control. Notwithstanding anything herein
to the contrary, the terms and conditions of this Agreement are subject to and
conditioned upon receipt of the FCC's Initial Grant.
14.2 Application for Consent; Cooperation of the Parties. Soundview and
VEG shall within fifteen (15) days of the execution of this Agreement file an
application ('Application') seeking FCC consent to the transfer of control of
Soundview to VEG. The parties shall promptly and diligently file and
expeditiously prosecute all necessary amendments, briefs, pleadings, documents,
and supporting data to that Application, and take all such actions and give all
such notices as may be required or requested by the FCC or as may be appropriate
in an effort to expedite the approval by the FCC of the Application, provided,
however, that no party shall be required to (a) comply with a condition imposed
on it as the result of a circumstance the existence of which does constitute a
breach by such party of its representations, warranties, or covenants hereunder,
or (b) to comply with any condition which would have a material
-14-
<PAGE>
adverse effect upon it; provided, however, that a condition requiring either
party to file periodic reports with the FCC concerning affirmative action and
equal employment opportunity shall not be deemed to have a material adverse
effect on either party. In the event of the filing of any protest, petition to
deny, petition for reconsideration, or appeal of the FCC's consent and approval,
or other action seeking review or reconsideration of such consent and approval,
the parties mutually agree that any such filing or action will be vigorously
opposed by each of them.
14.3 Control. Prior to the Final Closing Date, VEG shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operations of Soundview or to vote the stock issued pursuant to this
Agreement.
14.4 Escrow Agreement. The shares exchanged pursuant to the terms of
this Agreement shall be held in escrow pursuant to the terms of the Escrow
Agreement attached as Exhibit 14, which agreement provides that the shares shall
be distributed from escrow upon receipt of the FCC's Initial Grant.
14.5 Conduct Pending FCC Approval. Soundview covenants and agrees,
except as otherwise contemplated or permitted by this Agreement, from and after
the execution and delivery of this Agreement and until the Final Closing Date
or the termination of this Agreement, whichever shall first occur, to operate in
the ordinary course of its business and shall not take any actions outside the
ordinary course of its business without the prior written consent of VEG.
Without limiting the generality of the foregoing, Soundview shall use its best
efforts (i) to preserve its existing licenses, permits, rights and privileges
pertinent to its business; (ii) to preserve intact its business organizations
and keep available its present employees, and preserve its goodwill and
relationship with customers and others with whom it deals, and to continue to
develop its business. Soundview shall not, without the prior written consent of
VEG, (i) sell, lease, or otherwise dispose of or mortgage, pledge or subject to
lien or to any other encumbrance (other than the lien of taxes not yet payable)
any of its assets, tangible or intangible; (ii) acquire any assets or
properties; (iii)make any loans, advances or capital contributions to or
investments in any person or entity; (iv) increase the compensation payable or
to become payable by Soundview to any of its officers or employees except for
normal periodic increases in the ordinary course of business that are made in
accordance with established compensation policies of Soundview; or (v) create,
incur or assume any indebtedness for borrowed money. This covenant does not,
however, provide VEG with any additional rights of rescission or termination of
this Agreement or right to terminate the escrow.
14.6 LIQUIDATED DAMAGES. PRIOR TO ENTERING INTO THIS TRANSACTION, THE
PARTIES HAYE BEEN CONCERNED WITH THE FACT THAT SUBSTANTIAL DAMAGES WILL BE
SUFFERED BY EACH PARTY IN THE EVENT
-15-
<PAGE>
THE OTHER PARTY OR PARTIES SHALL BREACH THEIR OBLIGATIONS TO EXCHANGE THE STOCK
UNDER THIS AGREEMENT. IT IS REALIZED BY THE PARTIES THAT IT WOULD BE EXTREMELY
DIFFICULT AND IMPRACTICABLE, IF NOT IMPOSSIBLE, TO ASCERTAIN WITH ANY DEGREE OF
CERTAINTY THE AMOUNT OF DAMAGES WHICH WOULD BE SUFFERED BY THE NON-BREACHING
PARTY IN THE EVENT THE OTHER PARTY OR PARTIES BREACH THEIR OBLIGATIONS TO
EXCHANGE THE STOCK HEREUNDER. THE PARTIES, HAVING MADE DILIGENT BUT UNSUCCESSFUL
ATTEMPTS TO ASCERTAIN THE ACTUAL COMPENSATORY DAMAGES THE NON-BREACHING PARTY
WOULD SUFFER IN SUCH EVENT HEREBY AGREE THAT THE REASONABLE ESTIMATE OF SAID
DAMAGES WOULD BE $150,000 IN THE EVENT VEG BREACHES ITS OBLIGATIONS TO EXCHANGE
THE STOCK HEREUNDER AND SOUNDVIEW SHALL, BE ENTITLED TO SUCH SUM AS LIQUIDATED
DAMAGES.
14.7 Effect of Termination. If this Agreement is terminated, it shall
become null and void and of no further force or effect, except with respect to
Section 14 and the liquidated damages clause set forth above.
15. CONFIDENTIAL INFORMATION.
Each party hereto shall insure that all confidential information which such
party or any of its respective officers, directors, employees, attorneys,
agents, investment bankers, or accountants may now possess or may hereafter
create or obtain relating to the financial condition, results of operations,
business, properties, assets, liabilities, or future prospects of the other
party, any affiliate of the other party, or any customer or supplier of such
other party or any such affiliate shall not be published, disclosed, or made
accessible by any of them to any other person or entity at any time or used by
any of them, in each case without the prior written consent of the other party
or parties; provided, however, that the restrictions of this sentence shall not
apply (a) as may otherwise be required by law, (b) as may be necessary or
appropriate in connection with the enforcement of this Agreement, or (c) to the
extent such information shall have otherwise become publicly available. Each
party hereto shall, and shall cause all of such other persons and entities who
received confidential data from it to deliver to the other party or parties all
tangible evidence of such confidential information to which the restrictions of
the foregoing sentence apply at such time as this Agreement is terminated.
16. MISCELLANEOUS.
16.1 Notices. Any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing and
shall be validly given or made to another party if given by personal delivery,
messenger, overnight courier (such as Federal Express) telex, facsimile,
telegram or if deposited in the United States mail, certified or registered,
postage prepaid, return receipt requested. If such notice, demand or other
communication be given by personal delivery, messenger, overnight courier,
telex, facsimile, telegram, service shall be conclusively deemed made at the
time of receipt. If
-16-
<PAGE>
such notice, demand or other communication be given by mail, such notice shall
be conclusively deemed given forty-eight (48) hours after the deposit thereof in
the United States mail addressed to the party to whom such notice, demand or
other communication is to be given as hereinafter set forth:
<TABLE>
<S> <C>
If to the Founders Soundview Media Investments, Inc.
or Soundview: 1101 Gulf Breeze Parkway
Suite 207
Gulf Breeze, Florida 32561
Attn: Bennett S. Smith
With a copy to: Clark, Partington, Hart, Larry,
Bond, Stackhouse & Stone
Suite 800
One Pensacola Plaza
125 West Romana Street
Pensacola, Florida 32591-3010
Attn: Robert D. Hart, Jr.
If to VEG: Ventura Entertainment Group Ltd.
11466 San Vicente Blvd.
Los Angeles, CA 90049
Attn: Floyd W. Kephart
</TABLE>
Any party hereto may change its address for the purpose of receiving notices,
demands and other communications as herein provided by a written notice given in
the manner aforesaid to the other party or parties hereto.
16.2 Modifications or Amendments. No amendment, change or modification
of this document shall be valid unless in writing and signed by all of the
parties hereto.
16.3 Waiver. No reliance upon or waiver of one or more provisions of
this Agreement shall constitute a waiver of any other provisions hereof.
16.4 Assignment. VEG may assign its rights hereunder to a wholly-owned
subsidiary of VEG; provided however, such assiqnment shall not relieve VEG of
its obligations hereunder.
16.5 Successors and Assigns. All of the terms and provisions contained
herein shall inure to the benefit of and shall be binding upon the parties
hereto and their respective heirs, personal representatives, successors and
assigns.
16.6 Separate Counterparts. This document may be executed in one or
more separate counterparts, each of which, when so executed, shall be deemed to
be an original. Such counterparts shall, together, constitute and shall be one
and the same instrument.
-17-
<PAGE>
16.7 Further Assurances. Each of the parties hereto shall execute and
deliver any and all additional papers, documents, and other assurances, and
shall do any and all acts and things reasonably necessary in connection with the
performance of their obligations hereunder and to carry out the intent of the
parties hereto.
16.8 Enforceability. It is agreed that the rights granted to the parties
hereunder are of a special and unique kind and character and that, if there is a
breach by any party of any material provision of this document, the other party
or parties would not have any adequate remedy at law. It is expressly agreed,
therefore, that the rights of the parties hereunder may be enforced by an action
for specific performance and such other equitable relief as is provided under
the applicable laws.
16.9 Attorney's Fees and Costs. In the event any action is instituted by
a party hereto to enforce any of the terms or provisions hereof, the prevailing
party in such action shall be entitled to such reasonable attorneys' fees, costs
and expenses as may be fixed by the Court.
16.10 Applicable Law and Severability. This document shall, in all
respects, be governed by the laws of the State of Florida applicable to
agreements executed and to be wholly performed within the State of Florida.
Nothing contained herein shall be construed so as to require the commission of
any act contrary to law, and wherever there is any conflict between any
provision contained herein and any present or future statute, law, ordinance or
regulation contrary to which the parties have no legal right to contract, the
latter shall prevail but the provision of this document which is affected shall
be curtailed and limited only to the extent necessary to bring it within the
requirements of the law.
16.11 Brokerage Fees. VEG agrees to pay the brokerage fee owed to Media
One, Inc. in the event the transactions contemplated herein are consummated.
Soundview and VEG represent a warranty to the other that no party other than
Media One is entitled to a brokerage commission by reason of the transactions
contemplated herein.
16.12 Entire Agreement. This document, together with any related
documents referred to in this Agreement, constitutes the entire understanding
and agreement of the parties with respect to the subject matter of this
Agreement, and any and all prior agreements, understandings or representations
are hereby terminated and canceled in their entirety.
-18-
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed on the day and year first above written.
<TABLE>
<S> <C>
SOUNDVIEW MEDIA INVESTMENTS, VENTURA ENTERTAINMENT GROUP,
INC., a Florida corporation LTD., a Delaware corporation
By: Bennett S. Smith By: Floyd Kephart
- - - ----------------------------------------------------- -----------------------------------------------------
Bennett S. Smith, Floyd Kephart,
President and Chief Chairman of the Board and
Executive Officer Co-Chief Executive Officer
BENNETT S. SMITH BRIAN W. BRADY
- - - ---------------------------------------------------- -----------------------------------------------------
BENNETT S. SMITH BRIAN W. BRADY
SHARON SUE INCANDELA, RICHARD S. INCANDELA
- - - ----------------------------------------------------- -----------------------------------------------------
SHARON SUE INCANDELA, RICHARD S. INCANDELA
Co-trustee of the Richard S. Co-trustee of the Richard S.
Incendela Trust dated 9/15/91 Incendela Trust dated 9/15/91
LANCE JUDD
-----------------------------------------------------
LANCE JUDD
</TABLE>
-19-
ADDENDUM TO STOCK EXCHANGE AGREEMENT AND ESCROW AGREEMENT
THIS IS AN ADDENDUM to the Stock Exchange Agreement and Escrow Agreement entered
into as of the 9th day of November, 1994, by and among VENTURA ENTERTAINMENT
GROUP LTD., a Delaware corporation ('VEG'), SOUNDVIEW MEDIA INVESTMENTS, INC., a
Florida corporation ('Soundview'), and the following persons (collectively known
as the 'Founders'): Richard S. Incandela and Sharon Sue Incandela, Co-trustees
of the RICHARD S. INCANDELA TRUST dated 9/15/91 ('Trust'), BENNETT S. SMITH
('Smith'), BRIAN W. BRADY ('Brady'), and LANCE JUDD ('Judd'), executed for the
following uses and purposes:
I. Paragraph A of the Recitals of the Stock Exchange Agreement is hereby amended
and restated to read as follows:
VEG desires to acquire from Founders 80% of the issued and outstanding
shares of common and preferred stock of Soundview in exchange for ONE
MILLION SHARES (1,000,000) of common stock of VEG, which represents 13% of
the issued and outstanding shares of common stock of VEG.
II. Section 2.1 of the stock Exchange Agreement is hereby amended and restated
to read as follows:
2.1 Stock Exchanged. Upon the terms and conditions set forth herein,
Founders agree to exchange 80% of their shares of Common Stock of Soundview
('Soundview Common Stock') and 80% of their shares of Preferred Stock of
Soundview ('Soundview Preferred Stock') as of the Closing Date in exchange
for 1,000,000 shares of Common Stock of VEG ('VEG Common Stock') Founders
and VEG shall each transfer such shares of Common and Preferred Stock of
the other, free and clear of all liens, encumbrances, claims and
restrictions except restrictions imposed hereunder and under federal and
state securities laws.
III. The first paragraph of the Recitals of the Escrow Agreement is hereby
amended and restated to read as follows: .
Soundview and VEG (collectively, the 'Parties') have entered into a
Stock Exchange Agreement dated the 9th day of November, 1994 (the
'Agreement'), pursuant to which the Founders have agreed to exchange eighty
percent (80%) of their Soundview common and preferred stock for thirteen
percent (13%) of the common stock of VEG, and VEG has agreed to
exchange thirteen percent (13%) of its issued and outstanding common stock
for eighty percent (80%) of the common and preferred stock owned by the
Founders (the VEG and Soundview stock issued pursuant to the Agreement
shall collectively be known as the 'Stock Certificates').
This Addendum to stock Exchange Agreement and Escrow Agreement is executed
effective as of the Closing Date.
<TABLE>
<S> <C>
SOUNDVIEW MEDIA INVESTMENTS, VENTURA ENTERTAINMENT GROUP,
INC., a Florida corporation LTD., a Delaware corporation
By: Bennett S. Smith By: Floyd Kephart
- - - ------------------------------------------------------ ------------------------------------------------------
Bennett S. Smith, Floyd Kephart,
President and Chief Chairman of the Board and
Executive Officer Co-Chief Executive Officer
BENNETT S. SMITH BRIAN W. BRADY
- - - ------------------------------------------------------ ------------------------------------------------------
BENNETT S. SMITH BRIAN W. BRADY
SHARON SUE INCANDELA, RICHARD S. INCANDELA
- - - ------------------------------------------------------ ------------------------------------------------------
SHARON SUE INCANDELA, RICHARD S. INCANDELA
Co-trustee of the Richard S. Co-trustee of the Richard S.
Incendela Trust dated 9/15/91 Incendela Trust dated 9/15/91
LANCE JUDD
ESCROW AGENT: ------------------------------------------------------
LANCE JUDD
By: ROBERT D. HART, JR.
- - - ------------------------------------------------------
ROBERT D. HART, JR.
</TABLE>
<PAGE>
Exhibit 10.44
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is made and entered
into this ___ day of July, 1994, by and between THOMAS M. DUDDY, Receiver for
HOLT-ROBINSON TELEVISION, INC. ("HRTV"), a Florida corporation and HOLT-ROBINSON
COMMUNICATIONS CORPORATION ("HRCC"), an Alabama corporation duly appointed
pursuant to a court order dated July 30, 1992 ("Seller") and SOUNDVIEW MEDIA
INVESTMENTS, INC., a Florida corporation ("Buyer") for the following uses and
purposes:
RECITALS:
The assets of HRTV and HRCC were placed into the custody and control of
Seller by order of the United States District Court, District of Arizona (the
"Court") dated July 30, 1992 ("Court Order");
Seller took exclusive control, possession and custody of all of the
personal property of HRTV and HRCC and their respective broadcasting businesses
and is operating the broadcasting businesses of HRTV and HRCC. Subsequent to
taking possession and control of the assets, and pursuant to the Court Order,
Seller had the necessary licenses transferred from HRTV and HRCC to himself;
THOMAS M. DUDDY is now the licensee of radio and television broadcast stations
WHHY-AM, WHHY-FM, AND WTWC-TV (collectively known as the "Stations");
Seller desires to sell to Buyer, and Buyer desires to purchase from
Seller, all of the property and other assets in Seller's possession and/or owned
by Seller which are used and usable in connection with the operation of the
Stations, except for certain assets specifically excluded herein; and
Buyer and Seller mutually agree that in order to consummate said sale
and purchase, the consent of the Court and the Federal Communications Commission
("FCC") must be first obtained; and
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, and intending to be
legally bound, the parties agree as follows:
ARTICLE 1 - DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.1. "Final." The term "Final" shall mean that action shall have been
taken by the FCC which shall not have been reversed,
<PAGE>
stayed, enjoined, set aside, annulled or suspended; with respect to which no
timely request for stay, petition for rehearing, appeal or certiorari or sua
sponte action of the FCC with comparable effect shall be pending; and as to
which the time for filing any such request, petition, appeal, certiorari or for
the taking of any such sua sponte action by the FCC shall have expired or
otherwise terminated.
1.2. "Final Consent." An FCC public notice announcing FCC consent as to
which the time for seeking or filing a request for administrative or judicial
review or reconsideration has expired without any such action or filing seeking
review or reconsideration having been made, or, in the event of such action or
filing, the FCC consent has been reaffirmed or upheld and the time for seeking
further administrative or judicial review with respect thereto has expired
without any request or action for such further review having been filed or made.
1.3. "Closing Date." 10:00 a.m. local time at the place and on the date
established in Article 7 of this Agreement for the closing of the transaction
contemplated herein.
1.4. "FCC Authorizations." The licenses, permits, or other
authorizations issued by the FCC in connection with the Stations and owned by
Seller as described in Schedule 1.4 and renewals thereof.
1.5. "Authorizations." All of Seller's governmental licenses, permits,
authorizations, franchises or certificates of compliance issued in connection
with the Stations described in Schedule 1.5 hereto other than the FCC
Authorizations.
ARTICLE 2 - SALE AND PURCHASE OF ASSETS
2.1. Stations' Assets. On the Closing Date, Seller will sell, transfer,
assign, convey and deliver or cause to be sold, transferred, assigned, conveyed
and delivered to Buyer by instruments of conveyance in form satisfactory to
Buyer and Seller, and Buyer will accept, all of the assets and rights of every
kind and nature (tangible and intangible, real, personal, and mixed), wherever
situated, used or intended for use in the operation of the Stations (except the
Excluded Assets defined in Section 2.2 hereinbelow), (hereinafter referred to as
the "Assets"), including, without limitation, the following:
2.1.1. The furniture, fixtures, machinery, equipment, supplies, spare
parts, inventory, and all other tangible personal property owned and used in the
operation of the Stations, as described in Schedule 2.1.1, together with any
replacements thereof or additions thereto made between the date hereof and the
Closing Date, less any items used, consumed, or expended in the ordinary
2
<PAGE>
course of business between the date hereof and the Closing Date which are
replaced by items of similar value and utility;
2.1.2. Only those contracts, agreements, leases and commitments of
Seller which Buyer has accepted and are listed on Schedule 2.1.2;
2.1.3. Goodwill and going-concern value, as well as the patents,
copyrights, trademarks, service marks, and trade names, jingles, visual
materials, logos, computer programs, and other tangible and intangible rights,
including any and all rights to the call letters "WHHY-AM," "WHHY-FM" and
"WTWC-TV" owned by Seller and used or useful in connection with the Stations and
listed on Schedule 2.1.3;
2.1.4. The FCC Authorizations listed on Schedule 1.4 and the
Authorizations listed on Schedule 1.5;
2.1.5. All real property interests, including but not limited to land,
leaseholds, licenses, rights-of-way and any improvements thereon, owned by
Seller, HRTV and HRCC specified in Schedules 2.1.5;
2.1.6. All of Seller's interest in Montgomery Tower Partners, an
Alabama limited partnership; and
2.1.7. All other things used in the operation of the Stations,
including but not limited to logs, reports, the public inspection file, books,
records, tapes, recordings, and supplies on hand.
2.2. Excluded Assets. Notwithstanding Section 2.1 hereinabove, Seller
is not selling, transferring or conveying to Buyer any of the following assets,
collectively referred to herein as the "Excluded Assets":
2.2.1. accounts receivables and notes receivable pertaining to the
Stations or their operations;
2.2.2. cash on hand or money on deposit in HRTV and/or HRCC and/or
Seller's accounts, or notes payable to either HRTV, HRCC or Seller;
2.2.3. minute books, stock books, shareholder lists and similar
corporate records of HRTV or HRCC;
2.2.4. pension, profit sharing and savings plans and trusts and any
assets thereof;
2.2.5. any and all claims, known or unknown against the officers,
directors, shareholders, employees or agents of HRTV and/or HRCC; and
3
<PAGE>
2.2.6. a vacant, ten acre plot of land known as the "Redland Road
Property" that is adjacent to the property used by WHHY-AM and WHHY-FM in
Montgomery.
2.3. Records. On the Closing Date, Seller shall deliver to Buyer all
operating and maintenance logs and FCC records and reports relating to the
operation of the Stations in his possession on such date.
2.4. Buyer's Assumption of Certain Future Obligations. On the Closing
Date, Buyer will assume only the obligations of Seller which are listed on
Schedules 2.1.2; provided, however, that Buyer shall assume such obligations of
Seller not listed on Schedule 2.1.2 for which Seller obtains Buyer's written
approval prior to the Closing Date. Seller shall execute and deliver to Buyer,
and Buyer shall accept and execute where necessary, all documents and
instruments as may be required by this Agreement and which Seller or Buyer may
reasonably request to effectuate such assumption of future obligations.
ARTICLE 3 - PURCHASE PRICE;
COVENANTS PENDING CLOSING; ADJUSTMENTS
3.1. Purchase Price. The purchase price for the Assets that are the
subject of this Agreement is SEVEN MILLION ONE HUNDRED THOUSAND DOLLARS
($7,100,000) ("Purchase Price").
3.2. Payment Terms. Buyer shall pay, or cause to be paid, to Seller, on
the Closing Date, in cash or in immediately available federal reserve funds, the
purchase price described in Section 3.1.
3.3. Adjustments. Operation of the Stations and the income and expenses
attributable thereto up through the Closing Date shall be for the account of
Seller and thereafter for the account of Buyer. Items including, but not limited
to, employee salaries, accrued vacation, leave and other fringe benefits, power
and utilities charges, personal property taxes, prepaid operating expenses,
deposits, insurance, rents and payments pertaining to the leases and contracts
being assigned hereunder (including any contracts for the sale of time for cash,
trade or barter so assigned) shall be prorated between Seller and Buyer as of
the Closing Date in accordance with generally accepted accounting principles,
using the accrual method of accounting, consistently applied. Such proration
shall adjust for contracts or leases that do not reflect an equal rate of
compensation over the entire term thereof, including, but not limited to,
frequency and volume discounts, rebates or allowances to advertisers (or their
agencies). The proration and adjustments hereunder shall be made and paid,
insofar as feasible, on the Closing Date with a final settlement thirty (30)
days after the Closing Date.
4
<PAGE>
3.4. Expenses. Each party shall be responsible for its own expenses in
connection with the transactions contemplated by this Agreement, including,
without limitation, the preparation of this Agreement and the preparation and
prosecution of the application filed with the FCC pursuant to Section 5.2 of
this Agreement. Seller shall pay all sales, use, transfer, recordation and
documentary taxes and fees arising out of the transfer of the Assets pursuant to
this Agreement. Buyer shall be responsible for the premium associated with the
title insurance as described in paragraph 4.2.10. The parties agree to share
equally the costs associated with an FCC hearing, if any.
3.5. Allocation of Purchase Price. Buyer and Seller agree to allocate
the Purchase Price for federal income tax purposes among the Assets in
accordance with Section 1060 of the Internal Revenue Code of 1986, as amended,
and any related Treasury Regulations issued thereunder in the manner set forth
in Schedule 3.5. Buyer and Seller agree to file Form 8594 and any required
supplemental forms with the Internal Revenue Service when due.
3.6. Escrow Agreement and Deposit. Within three (3) business days after
the execution of this Agreement, Buyer will deliver One Hundred Thousand Dollars
($100,000) (the "Escrow Deposit"), to an escrow agent mutually agreed upon by
the parties (the "Escrow Agent"). The Escrow Deposit shall be held by the Escrow
Agent in accordance with the terms of an escrow agreement of even date herewith
in the form of Exhibit A (the "Escrow Agreement"). At the Closing, the Escrow
Deposit, with all accrued interest, if any, will be refunded to Buyer or its
designee. In the event that the Closing does not take place in accordance with
the terms of this Agreement, the Escrow Deposit and/or any accrued interest will
be retained by Seller or returned to Buyer in accordance with the terms and
conditions set forth in the Escrow Agreement.
3.7. Access to Facilities, Files and Records. At the reasonable request
of Buyer and upon reasonable advance notice, Seller shall from time to time give
or cause to be given to the officers, accountants, counsel, consultants and
representatives of Buyer: (a) full access during normal business hours to all
facilities, properties, accounts, books, deeds, title papers, insurance
policies, licenses, agreements, contracts, commitments, records and files of
every character, equipment, machinery, fixtures, furniture, vehicles, notes and
accounts payable and receivable of Seller with respect to the Stations; and (b)
all such other information concerning the affairs of the Stations as Buyer may
reasonably request. Any investigation or examination by Buyer in connection with
the foregoing shall not in any way diminish or obviate any representations or
warranties of Seller made in this Agreement or the Schedules attached, or in
connection herewith or therewith. Seller shall cause its accountants and any
agent of Seller in possession of Seller's books and records to cooperate with
Buyer's requests for information pursuant to this Agreement.
5
<PAGE>
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES
4.1. Buyer. Buyer represents and warrants to Seller as follows:
4.1.1. Organization and Capitalization of Buyer. Buyer is a corporation
duly organized validly existing, and in good standing under the laws of Florida.
4.1.2. Due Authorization by Buyer. The execution and delivery of this
Agreement and the performance of the transactions contemplated hereby have been
duly authorized and approved by the Board of Directors of Buyer; Buyer has full
corporate power to enter into and perform this Agreement and the transactions
contemplated hereby; and this Agreement constitutes a valid and binding
agreement of Buyer enforceable in accordance with its terms.
4.1.3. Restrictive Documents. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
conflict or be inconsistent with or result in the termination of or result in
any breach of or constitute a default under the terms of any indenture,
mortgage, deed of trust, covenant, agreement, or other instrument to which Buyer
is a party or to which any of its property is subject.
4.1.4. Corporate Assets to Close. To the best of Buyer's knowledge,
Buyer will have sufficient resources to close the transaction and fulfill the
obligations contemplated under this Agreement and to pay the Purchase Price as
outlined in Paragraph 3.1 on the Closing Date.
4.1.5. Qualification as a Broadcast Licensee. Buyer, to the best of its
knowledge, is qualified under the Communications Act of 1934, as amended, and
the existing rules, regulations and policies of the FCC to hold the FCC
Authorizations respecting the Stations.
4.1.6. Litigation. Except as set forth on Schedule 4.1.6, there is no
litigation, proceeding, or governmental investigation pending, or threatened in
any court, arbitration board, administrative agency, or tribunal, against or
relating to Buyer that might adversely affect the Assets, or the operation of
the Stations, or that would prevent or impede the consummation of this Agreement
by Buyer, nor does Buyer know of, any basis for such litigation, proceeding, or
investigation, and the execution and performance of this Agreement by Buyer will
not result in the default by Buyer in respect of any judgment, order, writ,
injunction, decree, rule, or regulation of any court or administrative agency
which could have a material adverse effect on the operation of the Stations or
on the Assets.
6
<PAGE>
4.2. Seller. Seller, to the best of his knowledge and having made no
independent investigation, represents and warrants to Buyer in Sections 4.2.1
through 4.2.20, as follows:
4.2.1. Authority. Seller has full power and authority to possess the
assets and to carry on the operation of the Stations pursuant to a court order
issued by Judge Stephen M. McNamee, United States District Judge of the United
States District Court, District of Arizona, on July 29, 1992.
4.2.2. Court Approval. Seller shall make application for an order
specifically providing Seller with the necessary approval and authority to
execute and deliver this Agreement and to perform the transactions contemplated
by this Agreement (the "Court Order"); subject to entry of such a final,
nonappealable Court Order, this Agreement will constitute a valid and binding
agreement of Seller, enforceable in accordance with its terms.
4.2.3. Restrictive Documents. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby will not
give to others any interests or rights, or conflict or be inconsistent with, or
result in the termination or cancellation of, or result in any breach of, or
constitute a default under the terms of any indenture, mortgage, deed of trust,
covenant, agreement, or other instrument to which Seller, HRTV and/or HRCC is a
party or to which any of the Stations' assets is subject.
4.2.4. Title to Assets. Seller, on the Closing Date, will have the
authority to transfer good and marketable title to all of the Assets, free and
clear of all debts, mortgages, liens, security interests, and encumbrances,
which would impair such marketability, except as expressly set forth on Schedule
4.2.4.
4.2.5. Tangible Broadcast Assets. Schedule 2.1.1 contains a complete
list or description of all tangible and physical assets owned by Seller and/or
are in Seller's custody and control, relative to the Stations or its operations.
The tangible assets shown on Schedule 2.1.1 will on the Closing Date be in at
least as good condition as at present, reasonable wear and tear excepted, and
will be as required for the Stations to be operated in accordance with its FCC
Authorizations. The Stations' FCC Authorizations are, and on the Closing Date
will be, in full force and effect.
4.2.6. Contracts. Except as set forth on Schedule 4.2.6, each of the
contracts, leases or agreements listed on Schedules 2.1.2 and 2.1.5 is valid and
binding. Seller, HRTV and/or HRCC is not in default in any material respect
under any such contract, lease or agreement, except as may be provided on
7
<PAGE>
Schedule 4.2.6, and no event has occurred which with the passage of time or
giving of notice or both would constitute such a default by Seller, HRTV and/or
HRCC, result in the loss of material rights or result in the creation of any
lien, charge or encumbrance thereunder or pursuant thereto. True and complete
copies of all of the contracts listed on Schedules 2.1.2 and 2.1.5 have been
delivered to Buyer.
4.2.7. Authorizations.
(a) All licenses, permits, authorizations, franchises, certificates of
compliance, and consents of governmental bodies, including, without limitation,
the Authorizations and the FCC Authorizations, used in the operation of the
Stations as they are now being operated are detailed in Schedules 1.4 and 1.5
and are in full force and effect. No condition exists or event has occurred that
permits, or after notice or lapse of time, or both, would permit, the revocation
or termination of any such license, permit, consent, franchise, or authorization
(other than pursuant to their express expiration date) or the imposition of any
restriction or limitation upon the operation of the Stations as now conducted.
(b) From the date hereof until the Closing Date, Seller will not, with
actual knowledge, engage in or permit any activity that would jeopardize any of
the Authorizations or the FCC Authorizations.
4.2.8. Litigation. Except as set forth on Schedule 4.2.8, there is no
notice of violation or order, or any material complaint, objection, petition to
deny or opposition issued by or filed with the FCC or any other governmental
authority and there is no litigation, proceeding (other than rulemaking
proceedings of general applicability), or governmental investigation pending, or
threatened in any court, arbitration board, administrative agency, or tribunal,
against or relating to Seller, HRTV and/or HRCC that might adversely affect the
Assets, the FCC Authorizations, the Authorizations, or the operation of the
Stations, or that would prevent or impede the consummation of this Agreement by
Seller, nor does Seller know of, any basis for such litigation, proceeding, or
investigation, and the execution and performance of this Agreement by Seller
will not result in the default by Seller in respect of any judgment, order,
writ, injunction, decree, rule, or regulation of any court or administrative
agency which could have a material adverse effect on the operation of the
Stations or on the Assets.
4.2.9. Insurance. Schedule 4.2.9 is a true, correct, and complete list
of all insurance policies owned by or in the custody and control of Seller on
the date of this Agreement which relate to the Assets or the Stations. Seller
shall continue at least equivalent coverage in force between the date of this
Agreement and the Closing Date.
8
<PAGE>
4.2.10. Real Property.
(a) Schedules 2.1.2 and 2.1.5 contain descriptions of all real property
owned or leased by Seller, HRTV and/or HRCC and used or held for use in
connection with the business and operations of the Stations and leases or
licenses or other rights to possession of any real property so used or held.
(b) Seller's interests, which include those of HRTV and/or HRCC, in
Real Property are as follows: (i) Seller has fee simple title to the Real
Property described on Schedule 2.1.5 as being so owned (the "Owned Property");
and (ii) Seller leases, as a tenant, the premises described on Schedule 2.1.2 as
being so leased. As to the Owned Property, Seller has good, valid and marketable
fee simple title to such premises and all buildings, towers, antennae,
improvements and fixtures thereon, free and clear of all mortgages, liens,
claims, encumbrances, leases, title exceptions and rights of others, except as
listed on Schedule 4.2.10. Except as listed on such Schedules, the Real Property
and all of the buildings, towers, antennae, fixtures and improvements owned or
leased by Seller are in good operating condition and repair, reasonable wear and
tear excepted, fully comply with applicable zoning laws and the building,
health, fire and environmental protection codes of all applicable governmental
jurisdictions, have no structural defects, and do not require any repairs other
than normal routine maintenance to maintain them in good condition and repair.
Included as part of Schedule 4.2.10 is a copy of all title insurance policies in
favor of Seller or any mortgagee of Seller applicable to the Real Property.
(c) Title Insurance.
(i) Subject to the rights set forth in paragraph (iii) below, Buyer
shall have ten (10) working days from and after Seller delivers to Buyer the
legal description for all real property listed on Schedule 2.1.5 within which to
examine the title to the Real Property and to give notice to Seller in writing
of any defects in or encumbrances upon the Real Property, which are unacceptable
to Buyer (the aforesaid defects and encumbrances hereinafter called "Title
Defects"). In the event Buyer notifies Seller of any Title Defects within the
aforesaid 10 day period, Seller shall elect to either: (A) provide written
assurances to Buyer of their ability to cure such Title Defects on or before
Closing with such assurances being given to Buyer within five (5) calendar days
of the receipt by Seller of notice of the Title Defects and Seller shall then
satisfy and eliminate the Title Defects on or before Closing; in the event a
title defect is discovered and Seller is unable to cure such defect before the
FCC issues its Final Order, the parties agree to extend the Closing Date up to
as many as sixty (60) days; this extension, however, will not extend beyond the
time period outlined in Section 5.5; or (B) cancel this Agreement.
9
<PAGE>
(ii) In the event Buyer either does not notify Seller of any Title
Defects as provided in Subparagraph (i) above, or does not notify Seller of the
acceptability of the title to the Property, within the ten (10) day review
period, then Buyer shall be deemed to have accepted Seller's title to the
Property.
(iii) In the event Seller does not satisfy all Title Defects prior to
Closing after electing to do as provided in subparagraph (i) above, then Buyer
shall elect either: (A) not to close the transaction contemplated hereby, in
which event the Escrow Deposit shall be delivered by Escrow Agent to Buyer
within 5 calendar days, and, except for the indemnity provisions hereof, this
Agreement shall be void and of no further force and effect; or (B) to close the
transaction contemplated hereby without regard to such unsatisfied Title Defects
and without reduction in the Purchase Price, in which event the transaction
contemplated hereby shall be closed in accordance with its terms.
(d) The leases listed in Schedules 2.1.2 and 2.1.5 constitute all the
real property leases to which Seller is a party (either as lessor or lessee) and
which are required in the conduct of the business of the Stations as they are
presently being conducted. True and complete copies of such leases and all
amendments thereto and modifications thereof are included in such Schedules. All
buildings, structures, improvements, fixtures, and appurtenances are in good
maintenance, operating condition, and repair; are reasonably adequate and
suitable for the purposes for which they are presently being used; and conform
to all applicable laws, ordinances, and regulations.
(e) With respect to the leases of real property listed in Schedules
2.1.2 and 2.1.5, Seller has good title to its leasehold interest in such real
property, free and clear of all liens, claims, and encumbrances, except as
specifically stated in Schedule 4.2.10 and with respect to each such lease,
except as otherwise disclosed in Schedule 4.2.10 the leases are in full force
and effect, valid, binding and enforceable in accordance with their respective
terms, and all accrued and currently payable rents and other payments required
by such leases have been paid.
4.2.11. Environmental Matters.
(a) Compliance with Law. Except as listed and described on Schedule
4.2.11 to this Agreement: (x) all activities of the Stations or of Seller with
respect to the Stations, whether at or upon the Real Property since Seller's
acquisition or lease of the Real Property, and (y) all activities of those
parties in possession or ownership of the Real Property prior to Seller's
possession and/or ownership of the Real Property have been and are being
conducted in compliance with all applicable federal, state and local statutes,
ordinances, rules, regulations and orders, as well as all applicable
requirements of common law.
10
<PAGE>
(b) Site Contamination. No hazardous substance as defined in the
Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C.
9601-9657, as amended by The Superfund Amendments and Reauthorization Act of
1986, Pub. L. No. 99-499, 100 Stat. 1613 (Oct. 17, 1986), nor any petroleum
product as defined in Title I to the Resource Conservation and Recovery Act, 42
U.S.C. 6991-6991(i), nor any hazardous substance or pollutant regulated by
Alabama or Florida law, is present in any medium in the operations of the
Stations or the operations of Seller with respect to the Stations or the
Seller's operations at the Real Property in such a manner as may require
remediation under any applicable law.
(c) Other Hazardous or Toxic Materials. Except as listed and described
on Schedule 4.2.11:
(i) No polychlorinated biphenyls or substances containing
polychlorinated biphenyls are present on the Real Property; and
(ii) No asbestos or materials containing asbestos are present in the
operations of the Stations and/or on the Real Property.
(d) No Notice of Lack of Compliance with Environmental Statutes.
Neither Seller nor the Stations has been notified by any governmental authority
of any violation by Seller or the Stations of any environmental statute.
Schedule 4.2.11 includes a correct and complete list of all of Seller's and the
Stations' registrations with, licenses from, or permits issued by governmental
agencies or authorities pursuant to environmental, health and safety laws. All
such registrations, licenses or permits are in full force and effect.
(e) Buyer's Investigation.
(i) Seller acknowledges that Buyer may commission an investigation of:
(A) Seller's compliance with environmental statutes; (B) the presence of
hazardous substances at the Real Property; or (C) the presence in the operations
of the Stations and/or on the Real Property of materials which are the subject
of Section 4.2.11(c).
(ii) Seller will comply with any reasonable request for information
made by Buyer or its agents in connection with any such investigation. Any
response to any such request for information will be complete and correct.
(iii) Seller will assist Buyer or its agents in obtaining any records
pertaining to the operations of the Stations, the Real Property or Seller, in
connection with such an investigation.
11
<PAGE>
(iv) Subject to (v) below, Seller will afford Buyer or its agents
access to all operations of the Stations, including without limitation all areas
of the Real Property, at reasonable times and in a reasonable manner in
connection with any such investigation.
(v) Buyer agrees to notify Seller when Buyer or its agents desire to
visit the premises of the stations, and to coordinate such visits pursuant to
this Section 4.2.11(e) or pursuant to Section 5.4.2 with Seller. Buyer also
agrees to conduct such investigation within forty-five (45) days of execution of
this Agreement.
(vi) Should Buyer commission such an investigation, such investigation
will have no effect upon the representations or warranties made by Seller to
Buyer under this Section 4.2.11.
(vii) Buyer agrees to share the results of any investigation with
Seller.
(f) Contamination Found.
(i) In the event Buyer discovers environmental contamination during its
investigation, Seller shall be afforded the opportunity to clean up any such
contamination. Upon receipt of Buyer's prior written consent, the parties agree
to extend the Closing Date (to provide Seller adequate time to cure any
environmental problems) up to 60 days but not beyond the period outlined in
Section 5.5.
(ii) In the event the clean up costs of the environmental contamination
exceed $25,000.00, Buyer, at Buyer's sole option (a) may choose to close anyway;
or (b) choose to terminate the Agreement pursuant to Article 8.
4.2.12. Contracts, Leases, Agreements and Other Commitments. Neither
the Stations, Seller, HRTV nor HRCC with respect to the Stations are parties to
or bound by any written, oral or implied contract, agreement, lease, power of
attorney, guaranty, surety arrangement or other commitment, including but not
limited to any contract or agreement for the purchase or sale of merchandise,
programming or advertising time on the Stations or for the rendition of
services, except for the Contracts listed on Schedule 2.1.2 and except for: (a)
any written contract and commitment involving less than $1,000 for the purchase
or sale of goods, supplies, equipment, capital assets, products or services; (b)
any service contracts terminable by Seller on no more than 10 days notice; and
(c) any written contracts and commitments
12
<PAGE>
involving less than $1,000 entered into in the ordinary and usual course of
business from the date hereof until the Closing Date. Seller has made available
to Buyer or its representatives complete and correct copies of all Contracts
known to Seller providing for payments to or by the Stations or by Seller with
respect to the Stations in excess of $1,000. Notwithstanding the foregoing
provisions of this Section, the aggregate value of all Contracts providing for
payments to or by the Stations or by Seller with respect to the Stations which
are not listed on Schedule 2.1.2 does not exceed $10,000.
4.2.13. Employees. Except as listed on Exhibit 4.2.13, all employees of
the Stations are employees-at-will. Seller is not engaged in any unfair labor
practice or other unlawful employment practice, and there are no unfair labor
practice charges or other employee related complaints, grievances or
arbitrations, against Seller, HRTV or HRCC, pending before the National Labor
Relations Board, the Equal Opportunity Commission, or any other federal, state,
local or other governmental authority by or concerning the Stations' employees.
4.2.14. Compliance with Laws. Seller has filed with the FCC and all
other governmental authorities having jurisdiction over the Stations all
material reports, applications, documents, instruments, and other information
required to be filed, and will continue to make such filings through the Closing
Date.
4.2.15. Restriction of Operations. The execution and delivery of this
Agreement by Seller and the transactions provided for herein do not require the
consent, approval, or authorization of or filing with any person or public
authority, other than the United States District Court, District of Arizona and
the consent of the FCC described in this Agreement, and will not, subject to
obtaining such FCC consent, violate any law, statute, regulation, injunction,
order, or decree of any governmental authority or court.
4.2.16. Condition of Equipment. The equipment listed on Schedule 2.1.1
comprises all the equipment necessary to operate the Stations, and it is
presently being operated in accordance with the license for the Stations and the
FCC's rules and regulations. From the date hereof until the Closing Date, the
Stations and their equipment will be operated and maintained in accordance with
good engineering practices and in compliance with all applicable FCC rules and
regulations.
4.2.17. Patents, Trademarks, Etc. Schedule 2.1.3 contains a true and
complete listing of all trademarks, tradenames, service marks, franchises,
copyrights, and applications therefor, owned or licensed by or registered in the
name of Seller, HRTV and/or HRCC, and used or held for use in the business and
operations of the Stations, other than the Authorizations and the
13
<PAGE>
FCC Authorizations. All of Seller's rights, which include the rights of HRTV and
HRCC, in the items listed in Schedule 2.1.3 are transferable to Buyer by the
sole act and deed of Seller, upon receipt of the court approval described above.
Except as set forth on Schedule 4.2.17, Seller owns, or is licensed to use, all
trademarks, tradenames, service marks, franchises, copyrights, jingles, and
other intangible property rights listed in Schedule 2.1.3.
4.2.18. Taxes. As of the date of this Agreement and as of the Closing
Date, all tax returns and reports of Seller, HRTV and HRCC required to be filed
have been filed, except as disclosed on Schedule 4.2.18; and all taxes,
assessments, and other governmental charges upon Seller or upon any of his
properties have been paid or adequate provision therefor has been made; and
Buyer will not be subject to any transferee liability for any taxes imposed on
but unpaid by Seller. No assessments for additional federal, state, or local
taxes have been made or threatened against the Seller for any year which have
not been satisfied or adequate provision therefor has not been made.
4.2.19. Bulk Sales Compliance. Buyer hereby waives compliance by
Seller, if necessary, with the provisions of the Bulk Sales Law of any state and
any similar law or requirement, and Seller warrants and agrees to pay and
discharge when due all claims of creditors, made within six (6) months of the
Closing Date, which could be asserted against Buyer by reason of such
non-compliance to the extent that such liabilities are not specifically assumed
by Buyer under this Agreement. Seller hereby indemnifies and agrees to hold
Buyer harmless from, against and in respect of (and shall on demand reimburse
Buyer for) any loss, liability, cost or expense, including, without limitation,
attorneys' fees, suffered or incurred by Buyer by reason of the failure of
Seller to pay or discharge such claims, if any.
4.2.20. Disclosures. None of the foregoing representations or
warranties, and no statement made in any document, certificate, or schedule
furnished by Seller in connection with or attached to this Agreement, contains
an untrue statement of a material fact or omits to state any material fact
necessary to make such representation, warranty, or statement not misleading to
a prospective purchaser.
ARTICLE 5 - FCC MATTERS
5.1. FCC Consent. Notwithstanding anything herein to the contrary, the
terms and conditions of this Agreement are subject to and conditioned upon the
FCC granting all licenses, approvals and authorizations contemplated by this
Agreement and that all such licenses, approvals and authorizations shall have
become Final prior to the Closing Date.
14
<PAGE>
5.2. Application for FCC Consent.
5.2.1. Buyer. As promptly as practicable after the date of this
Agreement, and in no event later than fifteen (15) calendar days after receipt
of the Court Order described in Paragraph 4.2.2, Buyer will complete and deliver
to Seller a fully executed copy of a substantially complete application to the
FCC requesting the FCC's written consent to the assignment of the FCC
Authorizations to Buyer and to the consummation of the transactions contemplated
by this Agreement. Buyer will diligently take, or cooperate in the taking of,
all steps that are reasonably necessary, proper or desirable to expedite the
preparation of such application and its prosecution to a favorable conclusion.
Buyer will promptly provide Seller with copies of any pleading, order or other
document served on it relating to such application.
5.2.2. Seller. As promptly as practicable after the date of this
Agreement, and in no event later than thirty (30) calendar days after receipt of
the Court Order described in Paragraph 4.2.2, Seller shall file an application
(after receiving Buyer's portion of such application pursuant to Section 5.2.1)
with the FCC requesting the FCC's written consent to the assignment of the FCC
Authorizations to Buyer and to the consummation of the transactions contemplated
by this Agreement. Seller shall diligently take all steps that are reasonably
necessary, proper or desirable to expedite the preparation of such application
and his prosecution to a favorable conclusion. Seller shall promptly provide
Buyer with a copy of any pleading, order or other document served on Seller
relating to such application. Seller shall furnish all information required by
the FCC and shall be represented at all meetings or hearings scheduled to
consider such application.
5.3. Operation of the Stations Before Closing. Between the date of this
Agreement and the Closing Date, Seller will continue to operate the Stations in
the public interest, convenience, and necessity, and will file with the FCC all
documents required to be filed in connection with the operation of the Stations.
5.4. Control and Access.
5.4.1. Control. Prior to the Closing Date, Buyer shall not directly or
indirectly control, supervise, or direct, or attempt to control, supervise, or
direct, the operations of the Stations. Such operations shall be the sole
responsibility of and in the complete discretion of Seller prior to the Closing
Date.
5.4.2. Access. Subject to Section 4.2.11(e)(v), during normal business
hours, Buyer or Buyer's agent shall be permitted to inspect all equipment and
facilities of the Stations from the date hereof through the Closing Date. Seller
undertakes to extend full cooperation to Buyer or Buyer's agent, including such
access to the
15
<PAGE>
equipment and to logs pertaining thereto at such time or times as Buyer or
Buyer's agent shall reasonably request.
5.5. Time For Final Consent. If no Final Consent is secured with
respect to the Application so that this Agreement may be consummated in
accordance with its terms and conditions on or before six (6) months after the
date the Application is accepted for filing, then this Agreement may be
terminated by either Seller or Buyer, provided that the terminating party is not
then in breach of this Agreement, whereupon the Deposit shall be returned within
ten (10) days after such termination as follows:
a) In the event the Final Consent is not given for any reason that is
determined by the FCC or the parties, to be the Buyer's omission,
misstatement or misrepresentation, the deposit shall be retained by
Seller and Buyer shall have no rights thereto;
b) In the event the Final Consent is not given for any reason that is
determined by the FCC or the parties, to be the Seller's omission,
misstatement or misrepresentation, the deposit shall be returned to
Buyer and Seller shall have no rights thereto;
c) In the event the Final Consent is not given and the parties are
unable to determine that the Final Consent was not given because of
the actions or omissions of one of the parties, the Escrow Deposit
shall be returned to Buyer and Seller shall have no rights thereto.
ARTICLE 6 - RISK OF LOSS AND INDEMNIFICATION
6.1. Risk of Loss. The risk of loss or damage to the Assets shall be on
Seller at all times prior to the Closing Date, and thereafter said risk shall be
Buyer's. If loss or damage to the Assets occurs, Seller shall have the option
(i) to repair or cause to be repaired and to restore the Assets to their
condition prior to any such loss or damage, or (ii) subject to the agreement of
Buyer, to reduce the Purchase Price by the amount of insurance proceeds received
in connection with such loss or damage. In the event of any such loss or damage,
Seller shall notify Buyer of same in writing immediately, specifying with
particularity the loss or damage incurred, the cause thereof, if known or
reasonably ascertainable and the insurance coverage. The proceeds of any claim
for any loss payable under any insurance policy with respect thereto shall, at
the option of Seller, be used to repair, replace or restore any such property to
its former condition subject to the conditions stated below. If Seller has
notified Buyer that it elects to repair, replace or restore the damaged Assets
and those assets are not completely repaired, replaced or restored on or
16
<PAGE>
before the Closing Date specified in Section 1.3, the Buyer, at its sole option,
may: (a) postpone the Closing until such time as the property has been
completely repaired, replaced or restored and, if necessary, the parties shall
join in an application or applications requesting the Commission to extend the
effective period of its consent to the assignment application; (b) consummate
the Closing and accept the property in its then condition, in which event Seller
shall assign to Buyer all proceeds of insurance covering the property involved;
or (c) rescind this Agreement and declare it of no further force and effect, if
such repairs, replacements or restorations are not complete within ninety (90)
days after the original Closing Date specified in Section 1.3 above.
6.2. Indemnification by Seller. Seller, to the extent of the Assets
owned by Seller and/or in Seller's possession and control, in his capacity as
Receiver, hereby agrees to indemnify and hold Buyer and Buyer's successors and
assigns harmless, for the period of the applicable statute of limitations,
against:
6.2.1. Any and all claims, liabilities, and obligations of any kind or
nature, contingent or otherwise, including but not limited to any transferee
liability arising from or relating to the operation of the Stations prior to the
Closing Date or arising or required to be performed prior to the Closing Date
under any lease, contract, or agreement assumed by Buyer hereunder, except as
otherwise expressly provided in this Agreement;
6.2.2. Any and all actions, suits, proceedings, damages, assessments,
judgments, costs, and expenses, including but not limited to reasonable
attorneys' fees, incurred by Buyer as a result of Seller's failure or refusal to
defend or to compromise any claim incident to the foregoing provisions of this
Section 6.2.
6.2.3. If any claim or liability shall be asserted against Buyer which
would give rise to a claim by Buyer against Seller for indemnification under the
provisions of this Section 6.2, Buyer shall promptly notify Seller in writing of
the same and Seller shall be entitled at its own expense to compromise or to
defend any such claim on behalf of Buyer.
6.3. Indemnification by Buyer. Buyer agrees to indemnify and hold
Seller harmless, for the period of the applicable statute of limitations,
against:
6.3.1. Any and all claims, liabilities, and obligations of any kind or
nature, contingent or otherwise, arising from or relating to the operation of
the Stations subsequent to the Closing Date or arising or required to be
performed subsequent to the Closing Date under any lease, contract, or agreement
assumed by Buyer hereunder, except as otherwise expressly provided in this
Agreement;
17
<PAGE>
6.3.2. Any and all damage or deficiency resulting from any material
misrepresentation, material breach of warranty, or material nonfulfillment of
any agreement or obligation assumed or required to be assumed by Buyer under
this Agreement, or from any misrepresentation in or omission from any
certificate or other instrument furnished to Seller pursuant to this Agreement
or furnished to Seller by Buyer or Buyer's agents in connection with any of the
transactions contemplated hereby; and
6.3.3. Any and all actions, suits, proceedings, damages, assessments,
judgments, costs, and expenses, including but not limited to reasonable
attorneys' fees, incurred by Seller as the result of Buyer's failure or refusal
to defend or to compromise any claim incident to any of the foregoing provisions
of this Section 6.3.
6.3.4. If any claim or liability shall be asserted against Seller which
would give rise to a claim by Seller against Buyer for indemnification under the
provisions of this Section 6.3, Seller shall promptly notify Buyer in writing of
the same and Buyer shall be entitled at its own expense to compromise or to
defend any such claim.
ARTICLE 7
CLOSING DATE; CONDITIONS TO CLOSING; CLOSING DOCUMENTS
7.1. Closing Date. The closing of the transaction hereby contemplated
(the "Closing") shall be held at the offices of Squire, Sanders & Dempsey, 40
North Central Avenue, Suite 2700, Phoenix, Arizona or at such other location as
the parties may agree upon, on a mutually agreeable date no later than ten (10)
days immediately following the satisfaction or waiver of the last of the
conditions required to be satisfied or waived pursuant to Article 7 (the
"Closing Date").
7.2. Conditions to Obligations of Seller. The following are conditions
precedent to Seller's obligations to close, any or all of which, except Section
7.2.3 hereof, may be waived in writing by Seller:
7.2.1. Representations and Warranties to be True. The representations
and warranties of Buyer contained herein shall be true in all material respects
as of and at the Closing Date as though made on such date. Buyer shall have
performed and complied with all obligations and covenants required by this
Agreement to be performed or complied with by Buyer on or prior to the Closing
Date.
7.2.2. Closing Documents. Buyer shall have delivered to Seller the
Closing Documents described in Section 7.5 of this Agreement.
18
<PAGE>
7.2.3. Final Consent. The FCC shall have granted its Final Consent to
the Application.
7.2.4. Court Approval. The Court shall have provided Seller with the
necessary authority and approval to consummate the transactions contemplated by
this Agreement.
7.2.5. Litigation. Buyer shall not be subject to any restraining order
or injunction restraining or prohibiting the consummation of the transactions
contemplated hereby, and no action or proceeding shall have been instituted and
remain pending before a court or other governmental body to prohibit such
transactions, nor shall any governmental agency have notified either party to
this Agreement that the consummation of the transactions contemplated hereby
would constitute a violation of applicable laws.
7.2.6. Consents Obtained. All authorizations, consents, approvals,
permits, and clearances that are necessary to Buyer's consummation of the
transactions contemplated by the Agreement shall have been obtained.
7.2.7. Corporate Resolutions. Buyer shall have delivered to Seller on
or before the Closing Date a duly authenticated copy of Buyer's corporate
resolutions adopted by its shareholders and directors authorizing the execution
of this Agreement.
7.2.8. Purchase Price. Buyer shall have delivered the Purchase Price as
described in Paragraph 3.2.
7.2.9. Opinion of Buyer's Counsel. Buyer shall have furnished Seller
with a favorable opinion, dated the Closing Date, of Clark, Partington, Hart,
Larry, Bond, Stackhouse & Stone, counsel for Buyer, in form and substance
satisfactory to counsel for Seller, that:
(a) Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of Florida.
(b) The execution and delivery of this Agreement and the performance of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action of Buyer, and this Agreement constitutes a legal, valid, and
binding obligation of Buyer.
(c) The performance of this Agreement by Buyer will not result in a
breach of or any default under any agreement to which Buyer is a party and of
which counsel for Buyer has knowledge.
19
<PAGE>
7.2.10. FCC Final Consent to Application. The FCC shall have granted
the application of Buyer and Seller, as amended, and such actions shall have
become a Final Consent.
7.3. Conditions to Obligations of Buyer. The following are conditions
precedent to Buyer's obligation to close, any or all of which, except Section
7.3.3 hereof may be waived in writing by Buyer:
7.3.1. Representations and Warranties to be True. The representations
and warranties of Seller contained herein shall be true in all material respects
as of and on the Closing Date as though made on such date. Seller shall have
performed and complied with all obligations and covenants required by this
Agreement to be performed or complied with by Seller on or prior to the Closing
Date.
7.3.2. Closing Documents. Seller shall have delivered to Buyer the
Closing Documents described in Section 7.4 of this Agreement.
7.3.3. Final Consent. The FCC shall have granted its Final Consent to
the Application.
7.3.4. Litigation. Seller shall not be subject to any restraining order
or injunction restraining or prohibiting the consummation of the transactions
contemplated hereby, and no action or proceeding shall have been instituted and
remain pending before a court or other governmental body to prohibit such
transactions, nor shall any governmental agency have notified Seller that the
consummation of the transactions contemplated hereby would constitute a
violation of applicable laws.
7.3.5. Consents Obtained. All authorizations, consents, approvals,
permits, and clearances that are necessary to Seller's consummation of the
transactions contemplated by this Agreement, including but not limited to
approval by the Court authorizing the Seller to transfer all of the property of
the broadcasting businesses, both real and personal.
7.3.6. No Material Adverse Changes. There shall not have been any
material adverse change in the Assets since the date of this Agreement.
7.3.7. FCC Final Consent to Application. The FCC shall have granted the
application of Buyer and such actions shall have become a Final Consent.
7.3.8. Indemnity Agreement from Greyhound Financial Corporation.
Greyhound Financial Corporation shall have executed an indemnity agreement
indemnifying and holding Buyer harmless from
20
<PAGE>
any claims arising from or related to any unpaid taxes disclosed on Schedule
4.2.18.
7.3.9. Title Insurance. Buyer shall receive an owner's policy or
policies of title insurance issued by a title insurance company acceptable to
Buyer, issued in the name of Buyer, insuring unto Buyer fee simple title to the
real property to be conveyed to Buyer, in the amount allocated to such asset
pursuant to the terms of this Agreement, containing only the exceptions as are
approved by the Buyer, in its sole discretion ("approved title exceptions"), and
further containing the standard title exceptions normally set forth in a title
insurance commitment, each of which shall be deleted at or prior to Closing.
7.4. Closing Documents - Deliveries by Seller. The following documents
are required to be delivered to Buyer by Seller on the Closing Date:
7.4.1. Bills of sale and assignments in form satisfactory to Buyer and
Seller, dated the Closing Date, executed by Seller, conveying to Buyer all of
Seller's right, title, and interest in and to all the Assets other than the FCC
Authorizations.
7.4.2. An assignment in form satisfactory to Buyer and Seller, dated
the Closing Date, executed by Seller, conveying to Buyer all of Seller's right,
title, and interest in and to the FCC Authorizations.
7.4.3. Assignments to Buyer of all leases to the real property
described in Schedules 2.1.2 and 2.1.5 and instruments conveying to Buyer all
real property interests, if any, described in Schedule 2.1.5.
7.4.4. All necessary consents to assignments of the Assets.
7.4.5. The logs and records referred to in Section 2.3 of this
Agreement.
7.4.6. Such other documents as may reasonably be requested by Buyer's
counsel not later than fifteen (15) days before the Closing Date; such documents
shall be presented by the preparer to the other party, no later than five (5)
days before the Closing Date.
7.5. Closing Documents - Deliveries by Buyer. The following are
required to be delivered to Seller by Buyer on the Closing Date:
7.5.1. A certificate, dated as of the Closing Date, signed by Buyer
stating that the representations and warranties of
21
<PAGE>
Buyer set forth in this Agreement and in the other instruments delivered by
Buyer to Seller in connection with this Agreement are true and correct as of the
Closing Date.
7.5.2. The Purchase Price in accordance with Section 3.1 of this
Agreement.
7.5.3. An Opinion of Buyer's Counsel in accordance with Section 7.2.9
hereof.
7.5.4. Such other documents as may reasonably be requested by Seller's
counsel.
ARTICLE 8 - TERMINATION
8.1. Seller's Right to Terminate. In addition to Seller's right to
terminate this Agreement in accordance with Section 5.5 above, Seller may in his
discretion terminate this Agreement in the event of a material breach by Buyer
prior to the Closing Date of any term or condition of this Agreement or any
representation or warranty contained herein, and the continuance of said breach
without cure for a period of thirty (30) consecutive days following the date on
which Seller shall have delivered to Buyer written notice of the specific nature
of such breach. In the event of a breach by Buyer of this Agreement, Seller
shall be entitled to specific performance of this Agreement in addition to all
other remedies available to Seller pursuant to this Agreement, the Escrow
Agreement or in law or equity.
8.2. Buyer's Right to Terminate. In addition to Buyer's right to
terminate this Agreement in accordance with Sections 4.2.11 and 5.5 above, Buyer
may in its discretion terminate this Agreement without cost, penalty, or
liability on Buyer's part of any kind in the event of a material breach by
Seller prior to the Closing Date of any term or condition of this Agreement or
any representation or warranty contained herein, and the continuance of said
breach without cure for a period of thirty (30) consecutive days following the
date on which Buyer shall have delivered to Seller written notice of the
specific nature of such breach, whereupon the Deposit shall be returned to Buyer
within ten (10) days of such termination. Furthermore, in the event of a breach
by Seller of this Agreement, Buyer shall be entitled to specific performance of
this Agreement in addition to all other remedies available to Buyer pursuant to
this Agreement, the Escrow Agreement or in law or equity.
ARTICLE 9 - MISCELLANEOUS
9.1. Collection of Accounts Receivable. Buyer shall, for a period of
six (6) months after the Closing Date, be exclusively
22
<PAGE>
responsible for the collection of all accounts receivable of the Stations
existing as of the Closing Date and arising out of the conduct of the business
of the Stations prior to the Closing Date. Buyer shall diligently and
continuously make all reasonable efforts to collect such accounts receivable.
Buyer shall not be required to remit collected sums to Seller until thirty (30)
days after the end of the month in which Buyer receives payment.
9.2. Brokers. Pre-approved fees or brokerage commissions due H.B. La
Rue Media Brokers shall be paid by Buyer.
9.3. Notices. All notices and communications hereunder or with respect
hereto shall be deemed to have been duly given when actually delivered to the
addressee, or five (5) days after being mailed via first class, certified,
United States mail, postage prepaid, return receipt requested, addressed as
follows:
If to Seller to:
Thomas M. Duddy, Receiver
101 South 5th Street Suite 1920
Louisville, KY 40202
With copy to:
Mark A. Nadeau
Norman C. Storey
SQUIRE, SANDERS & DEMPSEY
40 North Central Avenue
Suite 2700
Phoenix, AZ 85004
If to Buyer:
Bennett S. Smith
SOUNDVIEW MEDIA INVESTMENTS, INC.
1101 Gulf Breeze Parkway
Suite 207
Gulf Breeze, FL 32561
With copy to:
Robert D. Hart, Jr.
CLARK, PARTINGTON, HART, LARRY, BOND,
STACKHOUSE & STONE
P.O. Box 13010
Pensacola, FL 32591
Provided, however, that if any party has designated a different address by
written notice to the other parties pursuant to this Section 9.3, then to the
last address so designated.
23
<PAGE>
9.4. Assignment. Buyer may freely assign any or all of its rights or
delegate any of its duties hereunder to any directly or indirectly affiliated
entity or person.
9.5. Entire Agreement. This Agreement, including the schedules and
exhibits, and the Escrow Agreement, set forth the entire understanding of the
parties at the time of execution and delivery hereof, and all prior agreements
among them with respect to the subject matter hereof shall be of no further
force or effect. The first page of each schedule hereto has been initialled for
identification by both Buyer and Seller.
9.6. Headings. The headings in this Agreement are inserted for
convenience only and shall not be deemed to constitute a part of this Agreement.
9.7. Survival. The representations and warranties set forth in this
Agreement and in the other instruments delivered hereunder shall survive the
Closing and the consummation of the transactions contemplated herein.
9.8. Waiver. The waiver by any party of any matter provided for herein
shall not be deemed to be a waiver of any other such matter.
9.9. Counterparts. More than one counterpart of this Agreement may be
executed by the parties and each fully executed counterpart shall be deemed an
original.
9.10. Governing Law. This Agreement shall be construed in accordance
with and be governed by the laws of Arizona without giving effect to its
principles of conflicts of laws.
9.11. Best Efforts. Seller and Buyer agree to use their best efforts in
the performance and fulfillment of all terms and conditions of the Agreement and
in filing the Application for the FCC's consent to the transaction contemplated
herein, and agree to execute such other and further documents as may be
reasonably required to carry out their intent.
9.12. Attorneys' Fees. In the event of commencement of suit by either
party to enforce the provisions of this Agreement, the prevailing party shall be
entitled to receive attorneys' fees and costs as the court in which suit is
brought may adjudge reasonable in addition to all other relief granted.
9.13. Limitation on Receiver's Liability. Any liability which may arise
as a consequence of the execution of this Agreement by Receiver shall be a
liability of the receivership and not a personal liability of Receiver or his
agent. Notwithstanding anything to the contrary set forth in this Agreement,
there shall be absolutely no personal liability on the part of Receiver with
24
<PAGE>
respect to any of the terms, covenants, representations, warranties or other
provisions of this Agreement and Buyer shall look solely to the assets of the
receivership, if any, for the satisfaction of each and every remedy of Buyer for
any breach of the foregoing by Receiver. This exculpation shall be absolute and
without any exception whatsoever, and no property or assets of Receiver other
than the assets of the receivership shall be subject to levy, execution, or
other enforceable procedure for the satisfaction of Buyer's remedies.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
SELLER:
THOMAS M. DUDDY, Receiver
-------------------------------
THOMAS M. DUDDY, Receiver
BUYER:
SOUNDVIEW MEDIA INVESTMENTS, INC.
By: BENNETT S. SMITH
_______________________
Its President
<PAGE>
Exhibit 10.45
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of July 25, 1994, by and
between SOUNDVIEW TELEVISION OF MONTGOMERY, INC., a Florida corporation
("Soundview"), FREY COMMUNICATIONS SOUTH, INC., a Florida corporation ("Frey"),
MICHAEL M. SANDERS, ("Sanders") general manager of WHOA-TV (the "Station"),
WHOA-TV, INC., a Florida corporation and FREY COMMUNICATIONS CORPORATION, a
Florida corporation ("FC"), JOSEPH D. TYDINGS, a single man, ANN DECKER, a
married woman, MEDIA INTERNATIONAL, INC., a Nevada corporation, and MONTGOMERY
TV 32 INVESTORS, LTD., an Alabama limited partnership (collectively known as the
"Shareholders").
RECITALS:
Frey is the limited and general partner of a Maryland limited
partnership, Montgomery, Alabama Channel 32 Operating L.P. ("Partnership").
Partnership owns all of the assets used and useful in the operation of
the Station, except for the license issued by the Federal Communications
Commission.
The above referenced license is owned by WHOA-TV, Inc., the only
shareholder of which is the Partnership.
The Boards of Directors of Soundview and Frey have approved the
acquisition of the stock of Frey in exchange for stock of Soundview
("Acquisition").
For federal income tax purposes, it is intended that the Acquisition
shall qualify as a reorganization within the definition of Section 368(a)(1)(B)
of the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and of other good and valuable consideration, the receipt and
sufficiency of which are hereby mutually acknowledged, and intending to be
legally bound, the parties agree as follows:
I. DEFINITIONS
As used in this Agreement, the following terms shall have the following
meanings:
1.01 "FCC's Order." An order of the FCC consenting to the assignment to
Soundview of the FCC Authorizations (defined below) for the Station.
1.02 "Final Consent." An FCC public notice announcing FCC consent as to
which the time for seeking or filing a request for
<PAGE>
administrative or judicial review or reconsideration has expired without any
such action or filing seeking review or reconsideration having been made, or, in
the event of such action or filing, the FCC consent has been reaffirmed or
upheld and the time for seeking further administrative or judicial review with
respect thereto has expired without any request or action for such further
review having been filed or made.
1.03 "Closing Date." 10:00 a.m. local time at the place and on the date
established in Section VII of this Agreement for the closing of the transaction
contemplated herein.
1.04 "FCC Authorizations." The licenses, permits, or other
authorizations issued by the FCC in connection with the Station and owned by
Frey or its affiliates as described in Schedule 1.04 (attached hereto) and
renewals thereof.
1.05 "Authorizations." All of Frey's governmental licenses, permits,
authorizations, franchises or certificates of compliance issued in connection
with the Station described in Schedule 1.05 hereto other than the FCC
Authorizations.
II. EXCHANGE OF SHARES
2.01 Exchange of Soundview Shares.
2.01.1 Pursuant to Florida Statutes, Chapter 607, the Board of
Directors of both Soundview and Frey have adopted and recommended for approval
to the shareholders of each corporation a share exchange plan. Certified copies
of the minutes of those meetings are or prior to Closing will be attached as
Exhibits N1 and N2. The shareholders of each corporation have approved the share
exchange plan. Certified copies of the minutes of those meetings are or prior to
Closing will be attached as Exhibits P1 and P2.
2.01.2 Each of the shareholders of Frey agrees to surrender at Closing
all of their Frey common stock (par value $0.10), and all their non-voting
preferred stock (par value _____) (collectively the "Shares") to Soundview, in
exchange for Class A, Class B, and Class C common stock of Soundview and
possibly, as provided in Exhibit 2.01, shares of voting common stock of an
Affiliate (as defined in 2.01). The number of shares of each class of such stock
to be exchanged for the Frey stock shall be calculated pursuant to the formula
("Conversion Ratio") shown on Schedule 2.01. Soundview and the shares of common
stock of the Affiliate, if applicable, which are to be exchanged for the Frey
stock are referred to as the "Exchange Shares."
2
<PAGE>
2.01.3 From and after the Closing Date, the Shares shall only represent
the right to receive the appropriate number of Exchange Shares as determined
under Schedule 2.01.
2.02 Issuance of Soundview Shares. The Exchange Shares shall be issued
in the names shown on the stock transfer ledger of Frey as of the date of this
Agreement; provided, however, that FC shall have the right to distribute its
stock in Frey to its shareholders after the date of execution of the Agreement,
but prior to Closing. Any distribution of FC's stock in Frey, shall be expressly
subject to the obligation of FC's shareholders to perform at Closing FC's
obligations set forth in the Agreement; further provided, however, that only FC
shall be required to execute any closing certificate, and no other shareholders
of Frey shall be required to execute such certificate. The Exchange Shares shall
be issued on the date of Closing.
2.03 Financial Statements. Frey, at its expense, shall provide
Soundview with a financial statement for the Partnership, Frey and WHOA-TV, Inc.
(in a form acceptable to Soundview) ("Financial Statements") prepared as of a
date within thirty (30) days of Closing in accordance with generally accepted
accounting principles and on a consistent basis. The Financial Statements shall
be prepared prior to the Closing Date. The Financial Statements will reflect and
confirm certain minimum net worth, working capital, and other financial data
heretofore furnished to Soundview.
III. EMPLOYMENT OF SANDERS
3.01 Employment Agreement. At Closing, Soundview and Sanders shall
execute an employment agreement("Employment Agreement"). The Employment
Agreement shall be substantially in the form attached as Schedule 3.01, with
such additional terms and conditions as may be mutually agreed to by the various
parties.
IV. REPRESENTATIONS AND WARRANTIES
4.01 Representations and Warranties of Shareholders and Frey. Frey and
Shareholders, which for the purposes of the representations and warranties made
in this Section IV include only FC and Media International, Inc. ("Shareholders"
for the purpose of this Section IV shall not include Joseph D. Tydings, Ann
Decker, or any of the shareholders of FC) represent and warrant as follows:
4.01.1 Ownership. As of the date hereof, shareholders are FC, Joseph
Tydings, Ann Decker, Media International, Inc., and Montgomery T.V. 32
Investors, Ltd., and on the Closing Date shall be, the owners, beneficially and
of record, of One Thousand Six Hundred Twenty Five (1625) shares of the common
3
<PAGE>
stock and Three Hundred Seventy Five (375) shares of non-voting preferred stock
of Frey and such shares, constituting all of the outstanding shares of Frey, are
free and clear of all liens, encumbrances, restrictions, equities, and claims
whatsoever, except for a pledge thereof to U.S. Concord, Inc.; and at the
Closing Date, the above-listed shareholders will have good and marketable title
thereto, and the full right, power, and authority to sell, assign, transfer and
deliver their shares of common stock to Soundview in accordance with this
Agreement, subject to the release by U.S. Concord, Inc. of its pledge.
4.01.2 Organization, Standing and Power. Frey is a corporation duly
organized, validly existing, and in good standing under the laws of Florida, and
has all requisite corporate power and authority to own, lease, and operate its
properties and to carry on its business as now being conducted. Frey is not
required to be licensed, qualified, or authorized as a foreign corporation in
any jurisdiction. Complete and correct copies of the Articles of Incorporation
and bylaws of Frey will be delivered to Soundview together with all amendments
to either. Frey's minute book contains a complete and accurate record of all
meetings and other corporate action of its Directors and Shareholders (including
committees of its Board of Directors).
4.01.3 Subsidiaries. Frey has no subsidiaries. The only asset of
WHOA-TV, Inc. is the FCC license shown on Exhibit 1.04. The only shareholder of
WHOA-TV, Inc. is the Partnership, the only general and limited partners of which
are Frey. The Partnerships's stock in WHOA-TV, Inc. is subject to a pledge to
U.S. Concord, Inc. Beginning with this paragraph and throughout this entire
Section IV, "Frey" shall refer to Frey Communications South, Inc., WHOA-TV,
Inc., and Montgomery, Alabama Channel 32 Operating L.P. In certain paragraphs,
the list of parties constituting "Frey" for this Section IV shall be shown
instead of using the defined term. In no way does this listing of entities limit
or negate the use of the term "Frey" as defined above in any paragraph in this
Section IV.
4.01.4 Competing Business. Frey does not have any direct or indirect
interest in any corporation or business which is involved in any way with,
competes with, or conducts any business similar to any business conducted by
Frey.
4.01.5 Execution, Delivery, and Performance of Agreement and Authority.
Except as disclosed in Schedule 4.01.5, neither the execution, delivery nor
performance of this Agreement by Frey or the Shareholders will, with or without
the giving of notice or the passage of time, conflict with, result in a default
or loss of rights under, or result on the creation of any lien, charge, or
encumbrance pursuant to any law, rule, or regulation applicable to Frey, any
provision of its Articles of Incorporation, as amended, or bylaws, as amended,
or any franchise, mortgage, or
4
<PAGE>
deed of trust, lease, license, agreement, understanding, order, judgment, or
decree to which Frey or the Shareholders are a party, or by which either of them
or the property of either of them may be bound. Frey and the Shareholders have
full power and authority to execute and deliver and to carry out the
transactions contemplated by this Agreement, and all proceedings required to be
taken by them or either of them to authorize the execution, delivery, and
performance of this Agreement and all transactions contemplated herein have been
or prior to the Closing Date will be properly taken.
4.01.6 Capital Structure and Ownership of Shares. The authorized
capital stock of Frey consists of One Thousand Six Hundred Twenty Five (1625)
shares of common stock, of which One Thousand Six Hundred Twenty Five (1625)
shares are issued and outstanding and Three Hundred Seventy Five (375) shares of
non-voting preferred stock of which Three Hundred Seventy Five (375) are issued
and outstanding. All of the shares are duly authorized and validly issued and
are fully paid and nonassessable.
4.01.7 No Rights to Additional Issues. There are no other authorized or
outstanding equity securities of Frey of any class, kind, or character, and
there are no outstanding subscriptions, options, warrants, rights, or
privileges (preemptive or contractual), convertible securities, or other
arrangements or commitments of any nature whatsoever which obligate Frey to
issue or to transfer any shares of its capital stock or other securities.
4.01.8 Financial Statements. In addition to the Financial Statements,
Frey will deliver to Soundview additional financial statements of Frey, the
Partnership, and WHOA-TV, Inc., as requested, which will be correct and complete
in all material respects and will have been prepared in accordance with
generally accepted accounting principles, consistently applied, and fairly
represent the financial position of Frey at the respective dates thereof and the
results of its operations for the respective periods then ended, subject, in the
case of statements for a period of less than a full fiscal year, normal year end
adjustments.
4.01.9 Material Changes. Since March 31, 1994, the date of the
financial statements provided pursuant to Subsection 2.03, there has been no
material adverse change in the condition, financial or otherwise, of Frey, the
Partnership, or WHOA-TV, Inc. as reflected therein, and since the date of such
statements, neither the business nor the properties or assets of Frey, the
Partnership, or WHOA-TV, Inc. have been substantially affected adversely in any
way as a result of fire, explosion, strike, or slowdown of workmen, flood,
drought, embargo, imposition of governmental restriction, or act of God.
4.01.10 Exhibits. Attached and made a part hereof are Exhibits, dated
as of the date shown on each, as follows:
5
<PAGE>
Exhibit A is a list of all tangible personal property now owned by or
leased to Frey.
Exhibit B is a list of all real property now owned by or leased to
Frey.
Exhibit C is a description of all liens, mortgages, charges, and
encumbrances that are outstanding on the date hereof with respect to any of the
properties and assets of Frey.
Exhibit D is a list of all leases wherein Frey is either Lessor or
Lessee.
Exhibit E is a list of all other material written or oral contracts,
commitments, agreements, and other contractual obligations to which Frey is a
party (for all purposes of this Agreement, any contract, commitment, agreement,
or obligation is deemed material if it provides for payment or performance by
either party thereto of an aggregate value in excess of $2,000.00, and if it is
not cancelable upon sixty (60) days or less notice).
Exhibit F is a list of all insurance policies carried by Frey.
Exhibit G is a description of all bonus, pension, profit sharing,
retirement, stock purchase, stock option, hospitalization, insurance, and other
executive or employee compensation or benefit plans to which Frey is a party.
Exhibit H is a list of all notes receivable of Frey.
Exhibit I is a list of all accounts receivable of Frey showing the
payor, the amounts due and an aging analysis thereof. Exhibit J is a list of all
actions, suits, or proceedings at law pending, or to Frey's knowledge,
threatened, or affecting Frey.
Exhibit K is a list of all trademarks, trade names, and copyrights of
Frey.
Exhibit L is a list and copies of all FCC licenses, authorizations and
permits.
Exhibit M is a list and copies of all authorizations, permits and
licenses of Frey other than those issued by the FCC.
Exhibits N1 and N2 are certified copies of the meeting minutes of the
Board of Directors of Soundview and Frey, respectively, adopting and
recommending for approval a share exchange plan.
6
<PAGE>
Exhibits P1 and P2 are certified copies of the meeting minutes of the
shareholders of Soundview and Frey, respectively, approving the share exchange
plan.
4.01.11 Absence of Undisclosed Liabilities. Except to the extent
reflected in the attached Exhibits, or as shown on the financial statements,
books and records of Frey, Frey has no liabilities, absolute or to the knowledge
of Frey or the Shareholders, contingent, including, without limitation, tax
liabilities, except forward obligations under purchase orders, programming
contracts, contracts with advertisers, supply contracts, sales contracts and
other obligations incurred in the ordinary course of business, and forward
obligations under leases and contracts listed or referred to in Exhibits B, C,
D, and E, hereof. On the Closing Date, no liability of Frey not shown or
provided for in the financial statements and the books and records of Frey will
exist, except those obligations incurred in the ordinary course of business
since the date of the latest Financial Statements described in Subsection 4.01.8
and with respect to operations of Frey since that date, and forward obligations
under leases and contracts listed or referred to in Exhibits B, C, D, and E,
hereof.
Furthermore, the Shareholders do not know or have any reasonable
grounds to know any basis for the assertion against Frey of any liability or
obligation as of the Closing Date of any nature or in any amount not fully
reflected in this Agreement, the financial statements, and the books and records
of Frey, the Partnership and WHOA-TV, Inc., and the Exhibits attached hereto.
4.01.12 Contracts, etc. Except as disclosed in the Financial
Statements, its books and records, and Exhibits B, C, D, and E, attached, Frey
is not a party to or bound by, and none of its properties is subject to any
lease, contract, agreement, mortgage, deed of trust, loan agreement, credit
agreement, undertaking, or other commitment of a material nature. All contracts
and other agreements of Frey are in full force and effect and valid and binding;
and Frey has performed all the obligations required to be performed by it
thereunder, to date, and Frey does not have any knowledge that any other parties
thereto are in default under any thereof.
Except for contracts listed in the attached Exhibits, Frey is not a
party to any contract, written or oral, including (but not limited to) contracts
such as the following:
(i) any employment agreement that is not terminable on thirty (30) days
notice;
(ii) any contract with any labor union or other person, firm, or
corporation with respect to the terms or conditions of employment of Frey;
7
<PAGE>
(iii) any distributor or dealer sales or purchase contract that is not
terminable by its terms on thirty (30) days nor less notice;
(iv) any continuing contracts for the future purchase of materials,
supplies, or equipment except for contracts for the purchase of normal operating
inventories which contracts may be terminated on notice of sixty (60) days or
less;
(v) any commitment for capital expenditures.
4.01.13 Title to Properties and Assets. Frey has good title to or a
valid Lessee's interest in all of its properties and assets, real and personal,
tangible and intangible, including, without limitation, all rights to the call
letters WHOA-TV, and all logos, trade names, trademarks, etc., associated with
such name, if any; all properties and assets reflected in the attached Exhibits
and the financial statements; and all properties and assets acquired thereafter
(except assets sold in the ordinary course of business subsequent to the date of
said Financial Statement). Except as specifically set forth in the attached
Exhibits, or as reflected in the financial statements, such properties and
assets are not subject to any mortgage, pledge, lien, security interest,
encumbrance, restriction, lease, license, easement, charge, liability, or claim
of any nature whatsoever, direct or indirect, whether accrued, absolute,
contingent, or otherwise.
4.01.14 Environmental Waste and Hazardous Substances. Frey and the
Shareholders represent and warrant that to their knowledge no portion of the
leased real property utilized by Frey consists of filled land nor to their
knowledge contains any hazardous wastes, hazardous substances, hazardous
materials, toxic substances, hazardous air pollutants or toxic pollutants, as
those terms are used in the Resource Conservation and Recovery Act, the
Comprehensive Environmental Response, Compensation and Liability Act, the
Hazardous Materials Transportation Act, the Toxic Substances Control Act, the
Clean Air Act, and the Clean Water Act, and in any amendments thereto, or in any
regulations promulgated pursuant to thereto, or in any applicable state or local
law, regulation, or ordinance. Frey and the Shareholders also warrant and
represent that to their knowledge no employee or agent of Frey has committed any
act or omission which could result in Frey being held liable or responsible for
any violation of any of the aforementioned laws or Acts.
4.01.15 Bank Accounts, Etc.. Frey will furnish to Soundview a list of
all bank accounts, cash management accounts, investment accounts, and safe
deposit boxes presently maintained by Frey, the names of all persons authorized
to draw thereon or who have access thereto, and all powers of attorney presently
in effect granted by Frey to any person, firm or corporation, and all
certificates of deposit owned by Frey.
8
<PAGE>
4.01.16 Insurance. Policies of fire, liability, worker's compensation,
and other forms of insurance maintained by Frey will be furnished to Soundview
as requested and as listed on the Schedule of Insurance (Exhibit F) annexed
hereto. All premiums have been currently paid on such policies and all policies
will be maintained and, if necessary, renewed through the date of Closing.
4.01.17 Litigation. Except as shown on Exhibit J, attached, there are
no claims, legal actions, suits, arbitrations, governmental investigations, or
other legal or administrative proceedings pending or threatened against or
relating to Frey or any of its properties, assets or business, or against the
Shareholders as to which Frey or the shareholders have actual notice which would
affect Shareholder's right, title, or interest in or to the Shares, or the right
to transfer the Shares, or the transactions contemplated by this Agreement. Frey
is not in default with respect to any judgment, order, or decree of any court,
governmental agency, or instrumentality, and has not to its knowledge violated
any law or regulation material to its business or activities.
4.01.18 Accounts Receivable. To the best of Frey's knowledge, all
accounts receivable of Frey shown on Exhibit I, attached, have been collected or
are collectible in the amounts at which they are carried on the books of Frey,
subject to Frey's normal reserves for uncollectible accounts.
4.01.19 Effect of Agreement. The terms and conditions of this Agreement
and all other instruments and agreements to be delivered by the Shareholders
and/or Frey to Soundview pursuant to the terms of this Agreement are valid,
binding, and enforceable against the Shareholders and/or Frey.
4.01.20 Employee Plans. Except as herein disclosed, Frey is not a party
to any executive or employee's compensation plan or agreement or compensatory
plan or agreement with any independent contractor or employees or agents of
Frey, including, without limitation, any bonus, stock purchase, stock option,
profit sharing, pension, savings, retirement or similar plan, qualified or
unqualified, for officers, employees, or independent contractors of Frey.
4.01.21 Changes Since Most Current Financial Statements. Since March
31, 1994, there has been:
(a) no material adverse change in the condition (financial or
otherwise), assets, liabilities, capitalization, or business of Frey, the
Partnership, or WHOA-TV, Inc., except losses occurring in the ordinary course of
business which have been explained to Soundview;
9
<PAGE>
(b) no damage, destruction, or loss (whether or not recovered by
insurance) adversely affecting Frey, the Partnership or WHOA-TV, Inc.'s
properties or financial condition;
(c) no dividend or other distributions declared, paid, or made on any
Shares;
(d) except as agreed by the parties, no direct or indirect redemption,
purchase, or other acquisition by Frey of any Shares; and
(e) except as agreed by the parties, no increase in the rate of
compensation payable or to become payable to any of its officers or other
employees of Frey, the Partnership, or WHOA-TV, Inc.
4.01.22 Tax Matters and Returns. Frey, the Partnership, and WHOA-TV,
Inc. have filed timely and in correct form or prior to closing will file in
correct form, all income tax returns and reports (including state and federal
income tax returns for the year ended December 31, 1993) and all sales, payroll,
licenses, franchise, intangibles, real and personal property tax returns
required to be filed, and all taxes shown by such returns or claimed by any
taxing authority to be due and payable have been or shall be duly paid by Frey.
There are no agreements, waivers, or other arrangements providing for extensions
of time with respect to the assessment or collection of any unpaid tax of Frey,
the Partnership or WHOA-TV, Inc. There are no investigations or claims now
pending against Frey, the Partnership or WHOA-TV, Inc. with respect to any
unpaid tax or any matters under discussion with any federal, state, or local
authority relating to any amount of unpaid taxes. There are no known liabilities
to any federal, state, or local authority relating to any amount of unpaid taxes
relative to Frey, the Partnership or WHOA-TV, Inc..
4.01.23 Labor Issues. No strike, picketing, or similar action is
pending or threatened against Frey by its employees or any labor union. Frey is
not engaged in any unfair labor practices in connection with the operation of
the business. Frey has not had any solicitation by any labor organization within
the preceding three (3) years. Frey does not have any obligation under any
collective bargaining agreement or any other contract with a labor union.
4.01.24 OSHA. Frey has not received any notice of any violations under
the Occupational Safety and Health Act of 1970, and has no knowledge or any
violations thereunder.
4.01.25 Licenses, Patents, Etc..
(a) Frey is not in default, to the extent that its operations will be
affected adversely, under any license,
10
<PAGE>
permit, order, authorization, grant, contract, agreement, or other document,
order, or regulation to which it is a party or by which it is bound. To the best
of its knowledge, Frey has complied in all material respects with all applicable
statutes and regulations of any governmental authority having jurisdiction over
it or that are applicable to its business.
(b) In the conduct of its business during the preceding three (3) years
and as now operated, Frey has not infringed upon any United States or foreign
patents of others. Frey owns or possesses adequate licenses or other rights to
use all trademarks, trade names, and copyrights that are utilized in the conduct
of the business it now operates and has not received any notice of conflict with
asserted rights of others that remain in effect.
(c) The trademarks, trademark rights, trade names, trade name rights,
and copyrights listed and identified in Exhibit K, attached, are owned by Frey
and no rights have been granted to others with respect thereto, except as set
forth in Exhibit K.
4.01.26 Verity. Frey and the Shareholders have disclosed to Soundview
all facts material to the assets and business of Frey, other than facts which
Frey and the Shareholders do not know or have reason to know. No representation
or warranty by the Shareholders and/or Frey made herein nor any statement or
certificate furnished or to be furnished to Soundview pursuant hereto or in
connection with the transactions contemplated hereby, contains or to the
knowledge of the Shareholders will contain any untrue statement of a material
fact, or omits or will omit to state a material fact necessary to make the
statements contained herein or therein not misleading.
4.01.27 Employee Loans. There are no loans or other obligations payable
to officers, directors, employees, shareholders or former shareholders of Frey
not disclosed on Exhibit E.
4.01.28 Goodwill. Except as otherwise requested by Soundview, the
Shareholders will cause Frey to use all reasonable efforts to preserve Frey's
business organization intact; to keep available to Frey services of its present
employees; and to preserve for Frey the goodwill of its suppliers, customers,
and others having business relations with Frey.
4.01.29 Compliance. To the best knowledge of Frey and the Shareholders,
neither the execution and delivery of this Agreement nor any instrument or
agreement to be delivered by the Shareholders and/or Frey to Soundview at the
Closing, pursuant to this Agreement nor the compliance with the terms and
provisions thereof by the Shareholders and/or Frey, will result in the breach
11
<PAGE>
of any applicable statute or regulation promulgated thereunder, or any
administrative or court order or decree applicable to Frey, the Partnership or
WHOA-TV, Inc.; nor will such compliance conflict with or result in the breach of
any of the terms, conditions, or provisions of the Articles of Incorporation or
bylaws of Frey, as amended, or any agreement or other instrument to which the
Shareholders and/or Frey are parties, or by which the Shareholders and/or Frey
are or may be bound, or constitute an event of default thereunder, or with the
lapse of time or the giving of notice or both constitute an event of default
thereunder, provided that prior to Closing, U.S. Concord, Inc. and Concord
Commercial Corporation consent in writing to the transactions contemplated
herein and release the pledged stock of the Shares.
4.01.30 Due Performance. Frey is not in default or in violation of its
Articles of Incorporation or bylaws or any agreement, lease, mortgage, note,
bond, indenture, license, or other documents or undertaking, oral or written, to
which it is a party or by which it is bound, or by which it or any of its
properties or assets may be materially affected. Frey is not in violation or
default of any order, writ, rule, regulation, injunction, or decree of any
court, administrative agency, or governmental body of which it has notice. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not result in any of the violations or
defaults referred to in this Subsection, subject, however, to obtaining U.S.
Concord, Inc. and Concord Commercial Corporation's consent to the transactions.
4.01.31 Authority. Frey and each of its officers, employees, and sales
associates possess all necessary rights, privileges, membership, licenses,
franchises, permits, and other authorization necessary to carry on the business
of Frey in all places where such business is now being conducted. Neither the
Shareholders nor Frey has been denied admission to conduct any type of business
in any jurisdiction in which it is not presently conducting its business, or had
a license or qualification to conduct is business in any jurisdiction revoked or
suspended. To the best of their knowledge, the Shareholders, Frey nor any of its
officers, employees, and sales associates is in violation of any applicable law,
statute, ordinance, rule, etc., of any governmental instrumentality, or court in
connection with the business of Frey.
4.01.32 Documents Furnished. Frey has delivered or will deliver to
Soundview all instruments and accounts representing outstanding indebtedness of
or held by Frey for money borrowed, and all credit agreements and letters of
credit, and lists of creditors, all customer contracts, and all permits and
licenses held by Frey or any of its officers, employees, and sales associates
with respect to the business of Frey.
12
<PAGE>
4.01.33 Restriction of Operations. The execution and delivery of this
Agreement by the Shareholders and the transactions provided for herein do not
require the consent, approval, or authorization of or filing with any person or
public authority, other than U.S. Concord, Inc., Concord Commercial Corporation
and Frey's Board of Directors and stockholders and the consent of the FCC
described herein, and will not, subject to obtaining such FCC consent, violate
any law, statute, regulation, injunction, order, or decree of any governmental
authority or court. Subject to securing the consent of U.S. Concord, Inc.,
Concord Commercial Corporation, corporate approval and FCC consent, the
execution and delivery of this Agreement by the Shareholders and the
consummation of the transactions provided for herein will not give to others any
interests or rights, including but not limited to rights of termination or
cancellation, in or with respect to any material property, asset, mortgage,
lease, note, bond, indenture, commitment, contract, agreement, license, or other
instrument or right of Frey or the Shareholders.
4.01.34 Condition of Equipment. The equipment which Frey now has
comprises the equipment it employs to operate the Station, and it is presently
being operated in accordance with the license for the Station and the FCC's
rules and regulations. From the date hereof until the Closing Date, the Station
and its equipment will be operated and maintained in accordance with good
engineering practices and in compliance with all material FCC rules and
regulations.
4.01.35 Disclosures. None of the foregoing representations or
warranties, and no statement made in any document, certificate, or schedule
furnished by the Shareholders and/or Frey in connection with or attached to this
Agreement, contains an untrue statement of a material fact or omits to state any
material fact necessary to make such representation, warranty, or statement not
misleading to a prospective purchaser.
4.01.36 Affiliated Group. Frey nor WHOA-TV, Inc. have ever been a
member of an "affiliated group" within the meaning of Section 1504(a) of the
Code during any part of any consolidated return year within any part of which
year any corporation other than Frey or WHOA-TV, Inc. was also a member of such
affiliated group.
4.02 Representations and Warranties of Soundview.
4.02.1 Power and Authority. Soundview represents and warrants to Frey
and the Shareholders that Soundview has full power in accordance with the law to
execute and perform this Agreement, and such execution and performance does not
conflict with any contract to which Soundview is a party or to which it is
subject.
13
<PAGE>
4.02.2 Articles and Bylaws. Prior to Closing, Soundview will deliver to
Frey certified copies of its Articles of Incorporation and bylaws. The
authorized capital stock of Soundview shall consist of _______ shares of Class A
voting common stock, _______ shares of Class B voting common stock, and _______
shares of Class C voting common stock, of which _______ shares of Class A,
_______ shares of Class B common stock, and ______ shares of Class C common
stock shall at Closing be issued and outstanding. The relative rights and
preferences of the Class A, Class B and Class C stock are set out in the
Articles of Incorporation and Section V.
4.02.3 Qualification as a Broadcast Licensee. Soundview, to the best of
its knowledge, is qualified under the Communications Act of 1934, as amended,
and the existing rules, regulations and policies of the FCC to hold the FCC
Authorizations respecting the Station.
V. DESCRIPTION OF STOCK AND WARRANTS
5.01 Class A Common Stock. The Shareholders shall receive the number of
shares of Soundview's Class A common stock determined using the Conversion
Ratio. The Class A common stock shall have the following preferences,
limitations and rights:
The Class A common stockholders are entitled to one (1) vote per share
with respect to all matters voted upon by the stockholders. The Class A common
stockholders shall also have dividend and liquidation rights. The Class A common
shares issued to the Shareholders shall not be subject to dilution.
5.02 Class B Common Stock. The Shareholders shall receive the number of
Soundview's Class B common stock determined using the Conversion Ratio. The
Class B common stock shall have the following preferences, limitations and
rights:
The Class B common stockholders are entitled to one (1) vote per share
with respect to all matters voted upon by the stockholders. The Class B
shareholders shall have the right to redeem their Class B stock pursuant to the
Conversion Ratio at Exhibit 2.01. The Class B common stockholders shall also
have dividend and liquidation rights. The Class B common stockholders shall not
be subject to dilution.
5.03 Class C Common Stock. The shareholders shall receive the number of
shares of Soundview's Class C common stock determined using the Conversion
Ratio. The Class C common stock shall have the following preferences,
limitations and rights:
The Class C common stockholders shall be entitled to one (1) vote per
share with respect to all matters voted upon by the
14
<PAGE>
stockholders. The Class C common stockholders shall also have dividend and
liquidation rights. The Class C common shares issued to the Shareholders shall
not be subject to dilution.
5.04 Legend on Class A Common Stock, Class B Common Stock and Class C
Common Stock Certificates. The Class A common, Class B common and Class C common
stock shall bear the following legend:
The shares evidenced by this certificate have not been registered under the
Securities Act of 1933 (the "Act"), as amended, and have been acquired by the
Issuee solely for investment purposes. Said shares may not be sold or trans-
ferred unless (a) they have been registered under said Act, or (b) the Company
is presented with either a written opinion of counsel or a "no-action" letter
from the Securities and Exchange Commission, in either case, in form and
substance reasonably acceptable to the Company, to the effect that such
registration is not required under the circumstances of such sale or transfer.
VI. FCC MATTERS
6.0 FCC Consent. Notwithstanding anything herein to the contrary, the
terms and conditions of this Agreement are subject to and conditioned upon the
FCC granting all licenses, approvals and authorizations contemplated by this
Agreement and that all such licenses, approvals and authorizations shall have
become Final prior to the Closing Date.
6.02 Application for FCC Consent.
6.02.1 Soundview. As promptly as practicable after the date of this
Agreement, and in no event later than 15 calendar days after the date of this
Agreement, Soundview will complete and deliver to Frey a fully executed copy of
a substantially complete application to the FCC requesting the FCC's written
consent to the assignment of the FCC Authorizations to Soundview and to the
consummation of the transactions contemplated by this Agreement. Soundview shall
bear the cost of the FCC filing fee associated with the FCC Application, and
will forward the fee along with its portion of the Application. Soundview will
diligently take, or cooperate in the taking of, all steps that are necessary,
proper or desirable to expedite the preparation of such application and its
prosecution to a favorable conclusion. Soundview will promptly provide WHOA-TV,
Inc. with copies of any pleading, order or other document served on it relating
to such application.
6.02.2 WHOA-TV. As promptly as practicable after the date of this
Agreement, and in no event later than 15 calendar days after the date of this
Agreement, Frey shall file an application (the "Application") (after receiving
Soundview's
15
<PAGE>
portion of such application pursuant to Section 6.02.1) with the FCC requesting
the FCC's written consent to the transfer of control of the FCC Authorizations
to Soundview and to the consummation of the transactions contemplated by this
Agreement. Frey shall diligently take all steps that are necessary, proper or
desirable to expedite the preparation of the Application and its prosecution to
a favorable conclusion. Frey shall promptly provide Soundview with a copy of any
pleading, order or other document served on Frey relating to the Application.
Frey shall furnish all information required by the FCC and shall be represented
at all meetings or hearings scheduled to consider the Application.
6.03 Operation of the Station Before Closing. Between the date of this
Agreement and the Closing Date, Frey and WHOA-TV, Inc. will continue to operate
the Station in the public interest, convenience, and necessity, and will file
with the FCC all documents required to be filed in connection with the operation
of the Station.
6.04 Control and Access.
6.04.1 Control. Prior to the Closing Date, Soundview shall not directly
or indirectly control, supervise, or direct, or attempt to control, supervise,
or direct, the operations of the Stations. Such operations shall be the sole
responsibility of and in the complete discretion of Frey and WHOA-TV, Inc. prior
to the Closing Date.
6.04.2 Access. It is agreed that, during normal business hours,
Soundview or Soundview's agent shall be permitted to inspect all equipment and
facilities of the Station from the date hereof through the Closing Date. Frey
and WHOA-TV, Inc. undertakes to extend full cooperation to Soundview or
Soundview's agent, including such access to the equipment and to logs pertaining
thereto at such time or times as Soundview or Soundview's agent shall reasonably
request.
6.05 Time For Final Consent. If no Final Consent is secured with
respect to the Application so that this Agreement may be consummated in
accordance with its terms and conditions on or before six (6) months after the
date the Application is accepted for filing, then this Agreement may be
terminated by either the Shareholders, Frey, or Soundview.
VII. CLOSING
7.01 Deliveries at Closing. At the Closing, on the Closing Date, Frey
shall deliver to Soundview and receipt of these documents shall be a condition
precedent to Soundview's obligation to close:
16
<PAGE>
(i) certificates for the Shares in negotiable form and any assignments
or other instruments which may be necessary, desirable, or appropriate in order
to transfer and assign all the Shares to Soundview, including but not limited to
a plan of share exchange executed by Frey, all in form satisfactory to
Soundview's counsel, with any applicable transfer tax stamps attached;
(ii) the minute books, stock books, and seals of Frey;
(iii) all other books, accounts, correspondence, and records;
(iv) Certificate of Good Standing of Frey, as of the latest practicable
date prior to Closing; and
(v) the keys and all other indicia of possession of the assets of Frey.
7.02 Meeting of Board of Directors of Frey. Frey shall:
(i) cause the duly authorized representatives of Frey to be present at
the Closing in order that the Shares being exchanged hereunder may be
immediately transferred to and issued pursuant to Paragraph 2.01; and
(ii) deliver to Soundview written resignations of all officers and
directors of Frey and cause a meeting of the board of Directors of Frey to be
held upon due notice or waiver thereof, at which the resignations of the
respective officers and directors of Frey shall be accepted, effective
immediately, and the vacancies created by such resignations thereupon shall be
filled by the persons designated by Soundview.
7.03 Meeting of Board of Directors of Soundview. Soundview shall cause
the duly authorized representatives of Soundview to be present at the Closing in
order that the Exchange Shares being exchanged hereunder may be immediately
transferred to and issued pursuant to Paragraph 2.01.
VIII. CONDUCT OF BUSINESS PRIOR TO CLOSING
Frey covenants, from the date hereof until the Closing Date, that Frey
shall, at all times, conduct its business in the usual and ordinary course, and
shall not, without the written consent of Soundview:
(a) purchase, sell, or otherwise dispose of any property or services of
any kind whatsoever, other than purchases and sales in the ordinary course of
business;
17
<PAGE>
(b) mortgage, pledge, create security interests in, or otherwise
encumber any of its properties or assets;
(c) make or incur any unusual or long-term capital commitment or
expenditure;
(d) grant any increase in salary or other increase in compensation or
pay any bonus to any of its officers, directors or employees;
(e) declare or pay any dividend or make any other distributions to its
shareholders;
(f) reveal to third persons any trade secrets, customer lists, or other
confidential or proprietary information, or act otherwise in any manner which
may materially and adversely affect the rights, interests, assets, or business
of Frey;
(g) issue or sell any additional shares of stock or other securities,
or grant any rights to subscribe for or to purchase, or any options or warrants
for the purchase of any additional shares of stock or other securities;
(h) make or agree to make any contributions to any pension plan or
trust for the benefit of its employees;
(i) make any change in Frey's Articles of Incorporation or bylaws;
(j) purchase or redeem any of its stock or declare or make any payment
or distribution to any of its shareholders;
(k) cancel any debts or claims, except in the ordinary course of
business, and in any event not in an amount which is, in the aggregate,
material;
(l) enter into or give any promise, assurance, or guarantee of the
payment, discharge, or fulfillment of any undertaking or promise made by any
person, firm or corporation; or
(m) sell or knowingly dispose or otherwise divest itself of the
ownership, possession, custody, and control of any corporate books or records of
any nature that in accordance with sound business practice are retained for a
period of time after their use, creation, or receipt.
18
<PAGE>
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SOUNDVIEW
Soundview's obligations under this Agreement are subject to the
fulfillment prior to or at the Closing of each of the following conditions:
9.01 Representations and Warranties True at Closing. The
representations and warranties of the Shareholders and Frey contained in this
Agreement shall be true at the time of Closing, as though such representations
and warranties were made at such time.
9.02 Performance. Shareholders and Frey shall have performed and
complied with all agreements and conditions required by this Agreement to be
performed or complied with prior to or at the Closing.
9.03 Opinion of FC's and Frey's Counsel. Soundview shall have received
an opinion of FC's and Frey's attorney, dated the Closing Date, in form and
substance satisfactory to Soundview and its counsel, to the effect that:
(a) Frey is a corporation duly organized and existing and in good
standing under the laws of the State of Florida. Frey has the corporate power to
own its properties and assets and to carry on its business as now conducted, and
is duly qualified to do business, and is in good standing in every jurisdiction
in which the nature of its business makes such qualification necessary;
(b) the authorized and the issued and outstanding Shares of Frey are as
set forth herein and all issued and outstanding Shares are fully paid and
nonassessable;
(c) each of the certificates evidencing any part of the Shares being
exchanged hereunder that is delivered to Soundview at the Closing is in proper
form for transfer to Soundview; and
9.04 Review by Soundview's Counsel. All legal proceedings in connection
with the consummation of the transactions contemplated by this Agreement,
including the forms of all documents of transfer and assignment, other
documents, legal matters, opinions, and procedure in connection therewith, shall
have been approved in form and substance by counsel for Soundview, which
approval shall not be unreasonably withheld.
9.05 Final Consent. The FCC shall have granted its Final Consent to the
Application.
9.06 Consents Obtained. Soundview shall have obtained all
authorizations, consents, approvals, permits, and clearances
19
<PAGE>
that are necessary to consummate the transaction contemplated by the Agreement,
including but not limited to the unanimous approval of Shareholders as required
by Florida Statute 607.1103.
9.07 Litigation. Soundview shall not be subject to any restraining
order or injunction restraining or prohibiting the consummation of the
transaction contemplated hereby, and no action or proceeding shall have been
instituted and remain pending before a court or other governmental body to
prohibit such transaction, nor shall any governmental agency have notified
either party to this Agreement that the consummation of the transaction
contemplated hereby would constitute a violation of applicable laws.
9.08 No Material Adverse Changes. There shall not have been any
material adverse change in the assets of the Station since the date of this
Agreement.
9.09 Agreement from Frey Shareholders. Pursuant to Section 2.02 of this
Agreement, FC may have distributed its Frey stock to its shareholders. Soundview
shall have received an executed agreement from the FC shareholders, who received
stock in Frey after execution of this Agreement, that they agree to transfer and
deliver to Soundview at the Closing the shares held by them and deliver the
Certificates therefor pursuant to Section 7.01(i) and otherwise perform all
obligations imposed on Frey under Section 2.01 hereof.
X. CONDITIONS PRECEDENT TO OBLIGATIONS
OF THE SHAREHOLDERS AND FREY
The obligations of Shareholders and Frey under this Agreement are
subject to Soundview having performed and complied with all terms, covenants,
and conditions of this agreement to be performed or complied with by Soundview
on or before the Closing date.
(a) Final Consent. The FCC shall have granted its Final Consent to the
Application.
(b) Litigation. Frey nor the Shareholders shall be subject to any
restraining order or injunction restraining or prohibiting the consummation of
the transaction contemplated hereby, and no action or proceeding shall have been
instituted and remain pending before a court or other governmental body to
prohibit such transaction, nor shall any governmental agency have notified Frey
or the Shareholders that the consummation of the transaction contemplated hereby
would constitute a violation of applicable laws.
(c) Consents Obtained. Frey, the Shareholders and WHOA-TV, Inc. shall
have obtained all authorizations, consents,
20
<PAGE>
approvals, permits, and clearances that are necessary to consummate the
transaction contemplated by this Agreement, including but not limited to the
written consent of U.S. Concord and Concord Commercial Corporation to the
transaction, and unanimous approval of Shareholders as required by Florida
Statutes, Chapter 607.
XI. INDEMNIFICATION
11.01 FC's Indemnification. Except as otherwise specifically provided
herein, all representations, warranties, and agreements made by any party hereto
shall survive the closing as provided in Section 13.06 and any investigation at
any time made by or on behalf of the other party. FC shall indemnify, defend,
and hold harmless Frey and Soundview from and against and in respect of:
(a) all demands, claims, actions, or causes of action, assessments,
losses, damages, liabilities, costs and reasonable expenses, including, without
limitation, interest, penalties, and reasonable attorney's fees and expenses
(collectively "claims"), asserted against or imposed upon or incurred by
Soundview or Frey resulting from or by reason of any breach of any
representation or warranty of the Shareholders contained in or made pursuant to
this agreement, or resulting from any tax claim asserted against Soundview or
Frey with respect to any taxes, penalties, or interest relating to the ownership
or operation of Frey through the closing date.
(b) any and all liabilities of Frey of every kind and description,
absolute and contingent, including without being limited to counsel fees in
connection with any action, claim, or proceeding related to such liabilities
which shall arise or result from any breach of the representations and
warranties of the Shareholders set forth herein.
(c) any and all losses, damages, costs, and expenses incurred by
Soundview by reason of a breach of any of the representations or warranties of
the Shareholders in or pursuant to this agreement.
(d) any and all actions of any nature, suits, costs, expenses, damages,
and liabilities, including attorney's fees, arising out of, connected with, or
resulting from any claims that WHOA-TV, Inc., Frey or the Partnership, any of
their employees or agents violated any law or regulation concerning the control
or discharge of any hazardous wastes, hazardous substances, hazardous materials,
toxic substances, hazardous air pollutants, or toxic pollutants, as those terms
are used in the laws and regulations set forth in Subsection 4.01.14 above.
21
<PAGE>
11.02 Notification. Soundview shall promptly notify FC in writing of
all matters which may give rise to the right to indemnification hereunder, and
FC shall have the right to settle; provided, however, that Soundview shall have
the right fully to participate in such settlement or defense. If FC refuses or
fails to contest any claim relating to an indemnifiable matter, Soundview may,
without waiving its rights to indemnification hereunder, contest or settle such
claim. FC shall keep Soundview informed of all settlement negotiations and of
the progress of any litigation.
11.03 Amount. If any of the representations and warranties made by FC
in or pursuant to this Agreement shall be determined to be untrue, then FC shall
pay to Soundview an amount equal to the amount which it would cost at the time
the untruth is discovered to put Soundview or Frey in the position it would have
been in if the representation or warranty had been true. These rights of
Soundview are cumulative and without prejudice to any other remedies that it may
have against the Shareholders.
XII. TERMINATION
12.01. The Shareholder's Right to Terminate. In addition to the
Shareholders' right to terminate pursuant to Section 6.05, the Shareholders may,
in their discretion, terminate this Agreement without cost, penalty, or
liability on the shareholders' part of any kind in the event of a material
breach by Soundview prior to the Closing Date of any term or condition of this
Agreement or any representation or warranty contained herein, and the
continuance of said breach without cure for a period of thirty (30) consecutive
days following the date on which the Shareholders shall have delivered to
Soundview written notice of such breach. The rights conferred by the above
sentence may not be exercised unless the Shareholders have given Soundview
thirty (30) days written notice of the specific nature of the breach and
Soundview has failed to correct it within that period.
12.02. Soundview's Right to Terminate. In addition to Soundview's right
to terminate pursuant to Sections 2.03 and 6.05, Soundview may, in its
discretion, terminate this Agreement without cost, penalty, or liability on
Soundview's part of any kind in the event of a material breach by the
Shareholders, Frey or WHOA-TV, Inc. prior to the Closing Date of any term or
condition of this Agreement or any representation or warranty contained herein,
and the continuance of said breach without cure for a period of thirty (30)
consecutive days following the date on which Soundview shall have delivered
written notice of such breach to the appropriate party. In the event of a breach
by the Shareholders, Frey, and/or WHOA-TV, Inc. of this Agreement, Soundview
shall be entitled to specific performance of this Agreement in addition to all
other remedies available to Soundview in law or equity.
22
<PAGE>
XIII. MISCELLANEOUS
13.01 Expenses. Up to Fifty Thousand Dollars ($50,000) of the costs and
expenses incurred by the Shareholders in connection with this Agreement and the
transactions contemplated herein, including, without limitation, all
accountants' and counsel fees, and transfer taxes shall be paid prior to or at
Closing by Frey or the Partnership. All expenses of the Shareholders in excess
of such amount shall be paid by the Shareholders. Soundview shall pay its
expenses and costs in connection with this Agreement and the transactions
contemplated hereby. None of the expenses and costs of the Shareholders shall be
paid out of the properties and assets of Frey.
13.02 Additional Acts and Instruments. The Shareholders, at any time
and from time to time after the Closing Date, upon request of Soundview, will
do, execute, acknowledge, and deliver all such further acts, deeds, assignments,
transfers, conveyances, powers of attorney, and assurances as may be required to
convey, transfer to, and vest in Soundview, and to protect the right, title,
interest in, and enjoyment of the Shares intended to be assigned, transferred,
and conveyed pursuant to this Agreement.
13.03 Publicity. All press releases and other publicity and
communications relating to the transactions contemplated by this Agreement and
the method of release thereof shall require the approval of the Shareholders and
Soundview if released prior to the Closing Date. After the Closing Date, the
Shareholders shall not authorize any press release or other publicity and
communications relating to the transactions contemplated by this Agreement.
13.04 Notices. All notices and communications hereunder or with respect
hereto shall be deemed to have been duly given when actually delivered to the
addressee, or five (5) days after being mailed via first class certified United
States mail, postage prepaid, addressed as follows:
If to Frey, the Shareholders
and/or W c/o Louis Frey, Jr. c/o Louis Frey, Jr.
LOWNDES, DROSDICK, DOSTER,
KANTOR & REED, P.A.
215 North Eola Drive
Post Office Box 2809
Orlando, FL 32802-2809
23
<PAGE>
With copy to: Loran A. Johnson, Esq.
Julia L. Frey, Esq.
LOWNDES, DROSDICK, DOSTER,
KANTOR & REED, P.A.
215 North Eola Drive
Post Office Box 2809
Orlando, FL 32802-2809
If to Soundview: Bennett S. Smith
SOUNDVIEW MEDIA
INVESTMENTS, INC.
1101 Gulf Breeze Parkway
Suite 207
Gulf Breeze, FL 32561
With copy to: Robert D. Hart, Jr., Esq.
Julia B. Walker, Esq.
CLARK, PARTINGTON, HART, LARRY,
BOND, STACKHOUSE & STONE
Suite 800, One Pensacola Plaza
125 West Romana Street
Post Office Box 13010
Pensacola, Florida 32591-3010
Provided, however, that if any party has designated a different address by
written notice to the other parties pursuant to this Section 13.04, then to the
last address so designated.
13.05 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
13.06 Survival. The representations and warranties set forth in this
Agreement and in other instruments delivered hereunder shall survive the Closing
for so long as there is Class B stock to be redeemed by Soundview.
13.07 Counterparts. This Agreement may be executed simultaneously in
one or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument.
13.08 Benefit. All the terms of this Agreement shall be binding upon
and inure to the benefit of and be enforceable by the parties and their
respective heirs, legal representatives, successor, and assigns.
13.09 Assignment. Soundview shall have the right to assign this
Agreement to any other person, firm, or corporation with the
24
<PAGE>
prior written consent of the Shareholders; said consent will not be unreasonably
withheld.
13.10 Captions. Captions and descriptive headings used in this
Agreement are for convenience in reference only, and shall not control or affect
the meaning or construction of any provision hereof.
13.11 Risk of Loss. Frey assumes all risk of destruction, loss, or
damage due to fire or other casualty up to the Closing Date. In the event of
fire or other accident or casualty prior to Closing, Soundview shall have the
option of rescinding this Agreement or going forward with the Agreement with an
adjustment in the Conversion Ratio in proportion to the damage, to the extent
such damage is not covered by collectible insurance, and if the parties are
unable to agree on the amount of the adjustment, the dispute may be determined
by arbitration.
13.12 Entire Agreement. This Agreement, including the supplements and
exhibits and other writings referred to herein or delivered pursuant hereto
which form a part hereof, contains the entire understanding of the parties
hereto in respect of the subject matter contained herein. There are no
restrictions, promises, warranties, covenants, or undertakings other than those
expressly set forth herein or therein. This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter. This Agreement may be amended only by a written instrument duly executed
by the parties hereto or their respective successors or assigns. Any condition
to a party's obligations hereunder may be waived by such party.
IN WITNESS WHEREOF, the Shareholders, Frey, Sanders and Soundview have
executed the Agreement on the dates set forth below
25
<PAGE>
and the later of such dates shall be the Effective Date for purposes of this
Agreement.
<TABLE>
<S> <C>
FREY:
FREY COMMUNICATIONS SOUTH, INC.
Date: 6/15/94 [SIGNED]
_____________________________ _______________________________
SOUNDVIEW:
SOUNDVIEW TELEVISION OF
MONTGOMERY, INC.
Date: _____________________________ __________________________________
SHAREHOLDERS:
FREY COMMUNICATIONS CORPORATION
Date: 6/15/94 [SIGNED]
_______________________________ By:______________________________
Its President
MEDIA INTERNATIONAL, INC.
Date: ______________________________ By:______________________________
Its President
Date: ______________________________ __________________________________
ANN DECKER
Date: ______________________________ __________________________________
JOSEPH D. TYDINGS
MONTGOMERY TV 32 INVESTORS, LTD.
Date: ______________________________ By:_______________________________
Its General Partner
</TABLE>
26
<PAGE>
and the later of such dates shall be the Effective Date for purposes of this
Agreement.
<TABLE>
<S> <C>
FREY:
FREY COMMUNICATIONS SOUTH, INC.
Date:
_____________________________ _______________________________
SOUNDVIEW:
SOUNDVIEW TELEVISION OF
MONTGOMERY, INC.
Date: _____________________________ ________________________________
SHAREHOLDERS:
FREY COMMUNICATIONS CORPORATION
Date:_______________________________ By:______________________________
Its President
MEDIA INTERNATIONAL, INC.
6/20/1994 [SIGNED]
Date: ______________________________ By:______________________________
Its President
Date: ______________________________ __________________________________
ANN DECKER
Date: ______________________________ __________________________________
JOSEPH D. TYDINGS
MONTGOMERY TV 32 INVESTORS, LTD.
Date: ______________________________ By:_______________________________
Its General Partner
</TABLE>
26
<PAGE>
and the later of such dates shall be the Effective Date for purposes of this
Agreement.
<TABLE>
<S> <C>
FREY:
FREY COMMUNICATIONS SOUTH, INC.
Date:
_____________________________ _______________________________
SOUNDVIEW:
SOUNDVIEW TELEVISION OF
MONTGOMERY, INC.
Date: _____________________________ _______________________________
SHAREHOLDERS:
FREY COMMUNICATIONS CORPORATION
Date:
_______________________________ By:______________________________
Its President
MEDIA INTERNATIONAL, INC.
Date: ______________________________ By:______________________________
Its President
ANN DECKER
Date: ______________________________ __________________________________
ANN DECKER
JOSEPH D. TYDINGS
Date: ______________________________ __________________________________
JOSEPH D. TYDINGS
MONTGOMERY TV 32 INVESTORS, LTD.
Date: ______________________________ By:_______________________________
Its General Partner
</TABLE>
26
<PAGE>
and the later of such dates shall be the Effective Date for purposes of this
Agreement.
<TABLE>
<S> <C>
FREY:
FREY COMMUNICATIONS SOUTH, INC.
Date: 6/15/94
_____________________________ ________________________________
SOUNDVIEW:
SOUNDVIEW TELEVISION OF
MONTGOMERY, INC.
Date: _____________________________ ________________________________
SHAREHOLDERS:
FREY COMMUNICATIONS CORPORATION
Date:
_______________________________ By:______________________________
Its President
MEDIA INTERNATIONAL, INC.
20 June 1994
Date: ______________________________ By:______________________________
Its President
Date: ______________________________ __________________________________
ANN DECKER
Date: ______________________________ __________________________________
JOSEPH D. TYDINGS
MONTGOMERY TV 32 INVESTORS, LTD.
6/20/94 [SIGNED]
Date: ______________________________ By:_______________________________
Its General Partner
</TABLE>
26
<PAGE>
Exhibit 10.46
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of the 15th day of October, 1994, between
VENTURA ENTERTAINMENT GROUP, LTD., a Delaware corporation, whose address is
11466 San Vicente Boulevard, Los Angeles, California 90049 and any successor
("Employer") and DAVID H. WARD ("Employee"), whose address is 78 Christmas Tree
Lane, Southport, Connecticut 06490.
W I T N E S S E T H:
WHEREAS, Employer desires to employ Employee, upon the terms and
subject to the conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, Employer and Employee hereby
covenant and agree as follows:
1. TERM OF EMPLOYMENT. Employer hereby employs Employee and Employee
hereby accepts employment from Employer upon the terms and conditions
hereinafter set forth. The term of this Agreement shall begin on the effective
date hereof and shall continue in force for a period of one (1) year unless
terminated in accordance with Section 7 hereof. Thereafter, the term of the
Agreement shall be automatically extended for successive one year periods unless
prior written notice of at least 90 days is given by one party to the other of
his or its intention to cancel the Agreement at the end of its initial or, as
the case may be, extended term.
2. COMPENSATION AND FRINGE BENEFITS.
(a) Employer shall pay Employee and Employee shall accept from Employer
as full compensation for all services rendered by Employee to Employer in any
capacity whatsoever an annual salary of One Hundred Seventy-Five Thousand and
00/100 Dollars ($175,000.00), payable in substantially equal installments not
less frequently than monthly, plus bonuses, if any. Such bonuses, if any, shall
be determined by the Employer's Board of Directors, in its sole discretion, from
time to time.
(b) During the term of this Agreement, Employee shall, except to the
extent not available due to Employee's noninsurability (at a reasonable cost) or
to nondiscrimination provisions under applicable law, be entitled
-1-
<PAGE>
to participate in any and all benefits from time to time afforded to senior
management employees of Employer, including, by way of example and not of
limitation, health, accident, hospitalization, disability and life insurance
programs, pension plan and other similar employee fringe benefit plans;
provided, however, that the benefits afforded to Employee may be reduced at such
time and in such manner as generally applicable to senior management employees
of Employer.
(c) In addition to the foregoing, and subject to the terms and
conditions set forth herein, Employer grants to Employee a non-qualified option
to purchase up to 100,000 shares of Employer's common stock, $.001 par value
(the "Shares"), such option to be exercisable as follows and nontransferable
except as provided in subsection (v) below:
(i) Employee shall have the option to purchase from the
Employer a maximum of 100,000 Shares for a total purchase price equal
to the Exercise Price per Share, payable as provided in subsection (iv)
below. Options covering 50,000 Shares shall vest immediately.
Thereafter, options covering 5,000 Shares shall vest on the 15th day of
each month commencing December 15, 1994 and continuing through
September 15, 1995. Employee may exercise such options from time to
time but before October 15, 1999, by delivering written notices of
Employee's exercise of the option to the Employer, to the attention of
the Chairman of the Board, which notices shall include the number of
Shares for which Employee is then exercising his option.
(ii) An Acceleration Event shall occur if at any time during
the term of this Agreement the Employer shall (aa) consolidate with or
merge into another corporation and the Employer or a subsidiary of
Employer shall not be the surviving corporation, (bb) have a majority
of its Shares, sold in a single transaction or in a series of
transactions, the result of which is to consolidate the ownership of
such stock in a single person or group of persons acting in concert,
(cc) have a majority of its Shares, held by Unaffiliated Shareholders
sold in a single transaction or a series of transactions, the result of
which is to consolidate the ownership of such stock in a single person
or group of persons acting in concert, (dd) convey all, or
substantially all, of its assets to another corporation, entity, or
person, the ownership of which is not substantially similar to that of
the Employer prior to such conveyance, or (ee) if Floyd W. Kephart
ceases to be the Chief Executive Officer of Employer.
-2-
<PAGE>
If an Acceleration Event occurs, all unvested options shall
vest.
The term "Unaffiliated Shareholder," as used herein, shall
mean a Shareholder who is not an officer, director or employee of
Employer or any entity the beneficial interests of which are held by
any director, officer or employee of Employer.
(iii) Notwithstanding the foregoing, if (aa) the Employer
terminates the employment of Employee for Cause (as defined in Section
7 hereof), or (bb) the Employee terminates his employment hereunder
(except for a termination by Employee for any of the reasons provided
in Section 2(h)(ii) hereto), the options granted under Section 2(c)
shall immediately become null and void, except with respect to that
portion of the options granted hereunder which have already been
properly exercised. If Employee dies or suffers a disability, as
defined in subsection (vi) all unvested options shall vest. If
Employee's employment hereunder is terminated by Employer other than
for Cause, then Employee shall continue to be entitled to exercise the
options as provided in this paragraph 2(c).
(iv) During Employee's employment by Employer, Employee's
written notice of exercise of an option shall be accompanied by a check
for the total purchase price If Employee is no longer employed by
Employer, Employee's written notice of exercise of an option shall be
accompanied by either a check for the total purchase price, by
Employee's written instruction to deduct from the Shares then otherwise
purchased the least number of Shares needed to meet or exceed the total
purchase price or by a stock certificate representing Shares already in
Employee's possession, assuming such Shares are valued at the Per Share
Trading Price hereinafter defined. The Per Share Trading Price means
the cling bid price on the last business day before the written notice
of exercise is given as reported in the Wall Street Journal on NASDAQ
or any public stock exchange wherever Shares are currently listed.
(v) The Employee may transfer any option granted under this
Section 2(c) to Employee's spouse or children, or to a trust for the
benefit of Employee, Employee's spouse and/or Employee's children;
provided, however, that such transferee shall be able to exercise such
option only if an when Employee could have exercised such an option and
any Shares acquired upon exercise of such transferred option shall be
subject to the same limitations or
-3-
<PAGE>
restrictions that would have applied had Employee exercised such
option. The payment provisions of subsection (iv) shall also apply to
such transfers.
Subject to the foregoing, these options shall be
non-transfer-able by the Employee, either voluntarily or by operation
of law, otherwise than by will or the laws of descent and distribution
and shall be exercisable during the option holder's lifetime only by
the option holder, regardless of any community property interest
therein of the spouse of the option holder, or such spouse's successors
in interest. If the spouse of the option holder shall have acquired a
community property interest in such option, the option holder, or the
option holder's permitted successors in interest may exercise the
option on behalf of the spouse of the option holder or such spouse's
successors in interest.
(vi) For purposes of this Agreement, Employee shall be
considered "disabled" if as a result of physical or mental injury or
impairment Employee cannot adequately perform the duties required under
Section 3 of this Agreement and if the Board of Directors, based upon
the independent medical advice of a physician selected by the Board,
determines that such inability to perform can be expected to continue
for at least one year.
(vii) If, following an Acceleration Event, Employer shall
terminate Employee's employment other than for Cause, or Employee shall
terminate his employment for any of the reasons provided in Section
2(h)(ii), Employee shall not be required to mitigate the amount of any
payment or benefit provided for in this Agreement by seeking other
employment or otherwise.
(d) Employer shall have the right to require Employee to pay to
Employer, in addition to the full purchase price of Shares acquired by exercise
of any option, an amount sufficient to satisfy any federal, state or local tax
withholding requirements prior to the delivery of any Shares hereunder, or to
retain an appropriate number of Shares valued at the Par Share Trading Price
necessary to satisfy such withholding obligation.
(e) In the event of any change in the Shares of the Employer by reason
of any stock dividend, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of Shares, or of any similar change affecting
Shares, the number of Shares subject to the option provided in Section 2(c) and
their purchase price per Share shall be
-4-
<PAGE>
appropriately adjusted consistent with such change in such manner as the Board
of Directors may deem equitable to prevent dilution or enlargement of the rights
granted to Employee under Section 2(c). Any adjustment so made shall be final
and binding upon Employee. This provision shall not apply to any dilution caused
by this Agreement.
In the event the Company sells or offers to sell Shares at a price
below the Exercise Price, the Exercise Price shall be adjusted downward to such
offering or sales price as to all then unexercised options.
(f) Employee hereby represents and warrants that if and when Employee
purchases all or any portion of the Shares, such purchase will be for Employee's
own account and solely for investment and not with a view toward resale or other
distribution. Employee acknowledges and agrees that some of all of the Shares
have not been and will not be registered under the Securities Act of 1933, as
amended (the "Act"), or under the securities laws of any state, and may not be
sold, assigned, transferred or otherwise disposed of (except, to the extent
permitted by applicable securities laws, to any trust in which Employee is the
grantor and sole beneficiary during his lifetime and/or to any direct family
members and/or to Employee's spouse) unless the Shares have been registered and
qualified under the Act and any applicable state's securities law, or unless an
exemption from such registration or qualification is available.
Employee further acknowledges that some or all of the Shares may
constitute "restricted securities" within the meaning of Rule 144 promulgated by
the Securities and Exchange Commission and the Shares may not be sold, assigned,
transferred or otherwise disposed of except and unless all conditions set forth
in Rule 144 are satisfied or unless an exemption from registration under the Act
is otherwise available.
The certificates representing some or all of the Shares may contain the
following legend:
"The shares evidenced by this certificate have not been registered
under the Securities Act of 1933, as amended ("the Act"), or under the
laws of any state, and may not be sold, assigned, transferred or
otherwise disposed of unless such shares have been registered or
qualified under the Act and any applicable state's securities law, or
unless an exemption from such registration or qualification is
available."
-5-
<PAGE>
After endorsement, the certificates representing the Shares shall be
delivered to Employee, who shall, subject to the terms of this Agreement, be
entitled to exercise all rights of ownership of such Shares. Certificates
representing Shares not bearing a legend shall be delivered to Employee in
exchange for the certificates bearing legends as and when, from time to time,
the Employer receives an opinion of its counsel to the effect that such legends
may be removed, which opinion Employer agrees to seek in good faith if so
requested by Employee.
(g) The Exercise Price per Share for each option shall equal $2.50.
(h) Employee shall not be deemed to have terminated his employment with
Employer within the meaning of Section 2(c)(iii)(bb) in the following instances:
(i) in the case of any leave of absence approved by the
Employer;
(ii) in case of resignation by Employee any time following any
Acceleration Event (A) there is in Employee's reasonable judgment a
significant change in the nature or scope of Employee's authorities or
duties from those obtaining immediately prior to such Acceleration
Event, (B) based on a reasonable determination by Employee that as a
result of an Acceleration Event and a change of circumstances
thereafter significantly affecting his position he is unable to
exercise the authorities, powers, function or duties attached to his
position, (C) there is a reduction in the base compensation of Employee
from his Compensation immediately prior to such Acceleration Event; or
(D) there is imposed upon Employee a requirement that Employee perform
his duties on more than an occasional basis (in the reasonable judgment
of Employee) at places more than forty (40) miles distant from 345 Park
Avenue South, New York, New York 10010 without his written consent.
3. DUTIES. Employee shall serve Employer as its Chief Financial Officer
and shall report to the Chairman and to the Chief Executive Officer of Employer.
Employee shall perform for Employer such duties as may be reasonably assigned to
Employee from time to time by the Chairman and Chief Executive Officer of
Employer and are normally attendant to the office of Chief Financial Officer.
Until termination of this Agreement, Employee shall devote Employee's entire
time, energies and attention to the business and affairs of Employer, except
-6-
<PAGE>
during usual vacation periods; provided, however, Employee may devote such
reasonable time and attention to the management of Employee's assets and
investments as will not interfere with Employee's duties hereunder, including
Employee's noncompetition obligations pursuant to Section 8 hereof. The Employee
shall be entitled to a private office at the Employer's New York City office and
a secretary and such other accommodations as shall be suitable to the character
of the Employee's position with the Employer for the performance of his duties
hereunder.
4. REIMBURSEMENT OF EXPENSES. Employee shall be reimbursed by Employer
for Employee's reasonable traveling expenses, entertainment and other incidental
expenses incurred on business of Employer upon the submission by Employee of
such vouchers and other proof and when approved in accordance with the practice
now existing at Employer or in accordance with such practice as it may hereafter
be changed and uniformly applied to officers of Employer.
The Company shall provide either a top of the line domestic model
automobile for Employee's use in accordance with the Company's standard
policies, or, at Employer's option, a monthly automobile allowance sufficient
for Employee to lease a top of the line domestic model automobile, together with
reimbursement of automobile expenses provided the expenses do not exceed those
associated with a top of the line domestic model automobile.
5. VACATIONS. Employee shall be entitled to four (4) weeks or such
longer period as may be approved by the Board of Directors from time to time of
vacation during each year of this Agreement during which vacation periods the
compensation of Employee shall be paid in full.
6. DISCLOSURE OF INFORMATION. Employee agrees that, during the period
of Employee's employment hereunder or at any time thereafter, Employee will not
divulge to any other Person any details of the business or affairs of Employer,
including but not limited to information about costs, purchasing, profits, gross
margins, financial statements, markets or any customer or advertising lists; any
information, knowledge or data of a technical nature, including but not limited
to methods, know-how, processes, discoveries, machines, inventions or research
projects; any information, knowledge or data relating to future developments,
including but not limited to research and development of future marketing or
merchandising; or any and all other trade secrets of Employer which may be
imparted to Employee; provided that the foregoing shall not apply to information
regarding the industry which is generally known to executives
-7-
<PAGE>
of Employee's level in the industry or which is already in the public domain
or which hereafter becomes part of the public domain through no action of fault
of Employee.
Upon termination of the employment of Employee hereunder, Employee will
deliver to Employer any and all drawings, blueprints, manuals, sketches,
letters, computer printouts, discs, software, and related items, formulae,
memoranda, documents, lists, papers, notes, reports and similar materials, and
all copies, extracts and derivatives thereof, relating in any way to the
business of Employer and in any way obtained by Employee, and will deliver any
and all other property of Employer possession of or under the control of
Employee. Notwithstanding the foregoing, at any time after the termination of
the employment of Employee, Employee shall be entitled to access to or to make
copies of any materials delivered to Employer pursuant to the preceding sentence
for the sole purpose of establishing his rights, duties, benefits or obligations
due to or from Employer, and Employee warrants that he will not utilize such
materials to compete with Employer in violation of paragraph 8 of this
Agreement.
7. TERMINATION OF EMPLOYMENT.
(a) Employer may terminate the employment of Employee at any time
whether for Cause (as the term "Cause" is defined in this Section 7) or
otherwise upon written notice of termination to Employee. If Employer terminates
the employment of Employee for Cause, Employer shall not be obligated to make
any further payments to Employee, whether via salary, bonus, stock options or
otherwise.
Termination for Cause shall mean termination because:
(i) Employee shall have breached any material provision of
this Agreement or, after receiving written notice of breach from
Employer, again breached any other provision of this Agreement or any
other material written rules, regulations or policies of the Employer
now existing or hereafter arising which are uniformly applied to all
employees of Employer or which rules, regulations and policies are
promulgated for general application to officers or directors of
Employer;
(ii) Employee shall have been repeatedly or habitually
intoxicated or under the influence of drugs while on the premises of
Employer or while performing his duties hereunder, after receiving
-8-
<PAGE>
written notice thereof from Employer, and after Employer has provided,
at its cost, reasonable rehabilitation services for Employee, such that
Employer determines in good faith that Employee is impaired in
performing his duties required under this Agreement;
(iii) Employee shall have been convicted of a felony under
state or federal law; or shall have committed a crime involving moral
turpitude;
(iv) Employee shall have embezzled any property belonging to
Employer such that he may be subject to criminal prosecution therefore
or Employee shall have intentionally and materially injured Employer or
the property of Employer.
(b) If Employer terminates the employment of Employee during the
initial term of this Agreement other than for Cause, or if Employee resigns for
a reason specified in Section 2(h)(ii), Employer shall continue to pay and
provide Employee with the benefits provided in Section 2(a) and 2(b) of this
Agreement as well as a private office and secretary for 90 days following
termination of employment. If Employer terminates the employment of Employee
after the initial term of this Agreement other than for Cause, or if Employee
resigns for a reason specified in Section 2(h)(ii), Employer shall continue to
pay and provide Employee the benefits provided in Section 2(a) and 2(b) of this
Agreement as well as a private office and secretary for one year following
termination of employment. In either event, Employee shall continue to be
subject to the provisions of Section 8 of this Agreement so long as such
payments are made in the manner and amount and at the times, required by this
Agreement. If Employee's employment is terminated by death, Employer shall
continue to pay and provide to Employee's spouse all health care and insurance
benefits provided to Employee for a period of one year following Employee's
death.
(c) The employment of Employee and Employer's obligations hereunder
shall terminate automatically upon (i) the death or disability of Employee, (ii)
Employee resigning or otherwise terminating his employment except as provided in
paragraph 2(h)(ii), (iii) the termination of Employee's employment by Employer
for cause, or (iv) the expiration of the term of this Agreement; provided,
however, that the representations contained in paragraph 9 and all continuing
obligations and representations of Employee, including without limitation those
contained in paragraphs 6, 8 and 9 hereof, shall survive the termination of this
Agreement and shall continue to be binding, and further provided that any
potential obligation
-9-
<PAGE>
of the Employer with respect to the options granted and already exercised shall
be subject to the limitations of Section 2(c)(iii).
(d) Anything in this Agreement to the contrary, notwithstanding, in the
event that the Employer's regularly retained firm of independent certified
public accountants ("CPA's) shall determine (as hereinafter described) that any
payment or distribution by the Employer to or for the benefit of the Employee,
except that relating to options granted under Section 2(c) of this Agreement,
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise) (a "Payment") would be nondeductible by the
employer for Federal income tax purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the "Code"), then the aggregate present value
of amounts payable or distributable to or for the benefit of the Employee
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as "Agreement Payments") shall be reduced
(but not below zero) to the Reduced Amount. For purposes of this paragraph, the
"Reduced Amount" shall be an amount expressed in present value which maximizes
the aggregate present value of Agreement Payments without causing any Payment to
be nondeductible by the Employer because of said Section 280G of the Code. With
respect to any "Excess Parachute Payments" within the meaning of Section
280G(b)(2) of the Code subject to the tax (the "Excise Tax") imposed by Section
4999 of the Code, Employer shall pay to Employee as an additional amount equal
to the Excise Tax payable by Employee.
The Employer shall elect which and how much of the Agreement Payments
shall be eliminated of reduced (as long as after such election the aggregate
present value of the Agreement Payments equals the Reduced Amount) and shall
notify the employee promptly of such election. For purposes of this paragraph,
present value shall be determined in accordance with Section 280G(d)(4) of the
Code. All determinations made by the CPA's under this paragraph shall be binding
upon the Employer and Employee (absent fraud, willful misconduct of demonstrable
mistake in calculation, but not in judgment) and shall be made within 60 days of
a termination of employment of the Employee. As promptly as practicable
following such determination and the elections hereunder, the Employer shall pay
to or distribute to or for the benefit of the Employee such amounts as are then
due to the Employee under this Agreement and shall promptly pay to or distribute
for the benefit of the Employee in the future such amounts as become due to this
Employee under this Agreement.
-10-
<PAGE>
As a result of the uncertainty in the application of Section 280G of
the Code at the time of the initial determination by the CPA's hereunder, it is
possible that Agreement Payments may be made by the Employer which should not
have been made ("Overpayment") or that additional Agreement Payments which will
have not been made by the Employer could have been made ("Underpayment"), in
each case, consistent with the calculation of the Reduced Amount hereunder. In
the event that the CPA's, based upon the assertion of a deficiency by the
Internal Revenue Service against the Employer or the Employee which the CPA's
believe has a high probability of success, determine that an Overpayment has
been made, any such Overpayment shall be treated for all purposes as a loan to
Employee which the Employee shall repay to the Employer together with interest
at the applicable Federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by the Employee to the
Employer if and to the extent such payment would not reduce the amount which is
subject to taxation under Section 4999 of the Code. In the event that the CPA's,
based upon controlling precedent, determine that an Underpayment has occurred,
any such Underpayment shall be promptly paid by the Employer to or for the
benefit of the Employee together with interest at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code.
8. NONCOMPETITION AGREEMENT
(a) employee agrees that he will not, without the prior written consent
of Employer as provided by paragraph 10 hereof, Compete (as hereinafter defined)
with Employer while he is an Employee and, if Employee voluntarily leaves the
employ of Employer other than for a reason specified in subsection 2(h)(ii)
above, for a period of one year thereafter.
(b) For the purposes of this Agreement, employee shall be deemed to
Compete with Employer if Employee:
(i) Competes directly with Employer;
(ii) Is or becomes financially or beneficially interested in
any Person who or which competes with the business of Employer and
which Person conducts Ten Million and 00/100 Dollars ($10,000,000.00)
or more of its Gross Sales in the Prohibited Territory; provided,
however, that ownership of not more than one percent (l%) of any class
of securities traded over-the-counter or through a stock exchange shall
not violate this paragraph 8(b)(ii; or
-11-
<PAGE>
(iii) Acts, directly or indirectly as a broker, consultant,
agent, salesman, officer, director or employee or in any other capacity
for or on behalf of any Person who or which competes with Employer.
(c) For the purposes of this Agreement, the following words shall have
the following meaning, respectively:
(i) "Person" means, when not modified by qualifying or
limiting words, a person, natural or corporate, or other legal entity.
(ii) "Compete" means the manufacture, assembly, purchase,
sale, lease or distribution within the Prohibited Territory of (A) any
service, article or product (individually or as a group) which at any
time prior to the date of this Agreement, Employer shall have
manufactured, assembled, purchased, sold, leased and/or distributed as
a material part of Employer's business, or (B) any service, product or
article (individually or as a group) which is similar, related or
equivalent to any service, product or article which is a material part
of Employer's business described in clause (A) immediately above, or
(C) any other service, product or article (individually or as a group)
of any kindred or cognate kind of character which, at any time after
the date hereof through the date Employee's employment shall be
terminated, Employer shall manufacture, assemble, purchase, sell, lease
and/or distribute as a material part of Employer's business. Provided,
however, the term "compete" shall not pertain to any service, article
or product (individually or as a group) which, during the term of this
paragraph 8, Employer has discontinued.
(iii) "Prohibited Territory" means the United States of
America.
(d) Employee hereby acknowledges to and agrees with Employer that
Employer's remedy at law for any breach by Employee of his several promises,
covenants and undertakings set forth in Sections 6, 8 and 9 is inadequate and
that, in addition to money damages for any such breach, Employer shall be
entitled to injunctive relief against any such breach.
(e) Employee acknowledge that, without limitation, a violation of
Sections 6, 8 or 9 will constitute a material breach of this Agreement.
-12-
<PAGE>
(f) The provisions of this Section shall not apply after an
Acceleration Event or if Employee's employment is terminated by the Employer
other than for Cause or if Employee resigns for a reason specified in Section
2(h)(ii).
(g) Nothing in this Section shall prohibit Employee from investing in
or exploring opportunities which do not Compete with Employer.
9. REPRESENTATIONS AND WARRANTIES
(a) Employee represents and warrants to Employer that he will cooperate
fully with Employer in the preparation and filing of any and all documents
necessary to be filed with the Securities and Exchange Commission pursuant to
its rules.
(b) Employer represents and warrants that it will file any and all
documents necessary to be filed with the Securities and Exchange Commission
pursuant to its rules.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be duly given when
personally delivered to an officer of Employer (other than Employee) or
personally delivered to Employee, as appropriate, or when delivered by
registered or certified mail, postage prepaid, to the address set forth above
for each party respectively, or to such other address as the respective party
may by notice direct.
11. ENTIRE AGREEMENT. This Agreement contains the entire agreement of
the parties hereto with respect to the subject matter hereof and supersedes all
other agreements, written or otherwise. This Agreement may not be changed or
extended (including additions and deletions) orally or otherwise, except by an
agreement or consent in writing signed by both parties hereto. Such writing may
only be signed on behalf of Employer by its Chairman of the Board of Chief
Executive Officer.
12. SUCCESSORS AND ASSIGNS. The duties and obligations of Employee
under this Agreement are personal unto Employee and may not be assigned or
otherwise transferred, but the rights of Employee under this Agreement shall
inure to the benefit of Employee, his heirs, executors, administrators, personal
representatives, successors and assigns but shall not be transferable prior to
Employee's death, upon which event such rights maybe transferred by will or by
intestate succession. The right and
-13-
<PAGE>
duties of Employer under this Agreement shall be binding upon and inure to the
benefit of Employer's successors and assigns.
13. ENFORCEABILITY. If any term or provision of this Agreement, or the
application thereof to any circumstances, shall, to any extent and for any
reason, be held invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to circumstances other than those to
which it is held to be invalid or unenforceable, shall not be affected thereby
and shall be construed as if such invalid or unenforceable term or provision had
never been contained herein, and each term and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law. If any portion
of this Agreement is held to be excessively broad as to time, duration,
geographical scope, activity or subject, it shall be construed by limiting or
reducing the provision as required so that the provision as limited or reduced
is enforceable under applicable law.
14. GOVERNING LAW. All rights under this Agreement shall be governed by
and construed in accordance with the laws of California, and the Employer shall
be liable to account only in courts located in Los Angeles County, California.
15. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof, including in particular any controversy
relating to paragraphs 2(c)(ii) or 2(h), shall be settled by arbitration in Los
Angeles County, California in accordance with the laws of the State of
California by three arbitrators, one of whom shall be appointed by the Employer,
one by the Employee (or in the event of his prior death, his beneficiary(s)),
and the third of whom shall be appointed by the first two arbitrators. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association except as hereinabove provided.
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. In the event the Employee or his beneficiary shall
retain legal counsel and/or incur other costs and expenses in connection with
enforcement of any of the Employee's rights under this Agreement, the Employee
or beneficiary(s) shall not be entitled to recover from the Employer any
attorneys fees, costs or expenses in connection with the enforcement of such
rights (including enforcement of any arbitration award in court), unless the
arbitration award shall exceed by more than 10% of the Employer's final offer.
-14-
<PAGE>
Any notice preliminary to or in conjunction with or incident to such
arbitration proceeding may be sent to the Employee or to the Chairman of the
Board of the Employer by registered or certified mail, and personal service is
hereby waived. The Employee or his beneficiary(s) shall not institute a civil
action with regard to any claim or controversy arising out of or relating to
this Agreement until such time as the arbitration proceedings has been
completed.
IN WITNESS WHEREOF, the parties hereto have cause of this Agreement to
be executed as of the day and year first above written.
WITNESS: VENTURA ENTERTAINMENT GROUP, LTD.
- - - ----------------------- By ----------------------------------
Floyd W. Kephart
Chairman and CEO
EMPLOYEE:
- - - ----------------------- -------------------------------------
David H. Ward
-15-
<PAGE>
EXHIBIT 10.47
EMPLOYMENT AGREEMENT
AGREEMENT, effective as of the 15th day of October, 1994, between VENTURA
ENTERTAINMENT GROUP, LTD., a Delaware corporation, whose address is 11466 San
Vicente Boulevard, Los Angeles, California 90049 and any successor ('Employer')
and FLOYD W. KEPHART ('Employee'), whose address is ---------------------------.
WITNESSETH:
WHEREAS, Employer desires to employ Employee, upon the terms and subject to
the conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter contained, Employer and Employee hereby covenant and
agree as follows:
1. TERM OF EMPLOYMENT.
(a) Employer hereby employs Employee and Employee hereby accepts employment
from Employer upon the terms and conditions hereinafter set forth. The term of
this Agreement shall begin on the effective date hereof and shall continue in
force for an initial period ending December 31, 2000 unless terminated in
accordance with Section 7 hereof. Thereafter, the term of the Agreement shall be
automatically extended for successive 3 year periods unless prior written notice
of at least 180 days is given by one party to the other of his or its intention
to cancel the Agreement at the end of its initial or, as the case may be,
extended term.
(b) If as of December 31, 1997, Employer is not at a break-even cash flow
or Employer's Profit and Loss Statement is not positive for its fiscal year
ending December 31, 1997, the Board of Directors of Employer and Employee
mutually agree to enter into good faith negotiations concerning the terms and
conditions of this Agreement. Unless the Employer and Employee reach a new
agreement concerning Employee's employment by Employer, this Agreement shall
remain in full force and effect.
2. COMPENSATION AND FRINGE BENEFITS.
(a) Employer shall pay Employee and Employee shall accept from Employer as
full compensation for all services rendered by Employee to Employer in any
capacity whatsoever an annual salary of Three Hundred Sixty Thousand and 00/100
Dollars ($360,000.00), payable in substantially equal installments not less
frequently than monthly, plus bonuses, if any. Such bonuses, if any, shall be
determined by the Employer's Board of Directors, in its sole discretion, from
time to time.
(b) During the term of this Agreement, Employee shall, except to the extent
not available (at a reasonable cost) due to Employee's noninsurability or to
nondiscrimination
<PAGE>
provisions under applicable law, be entitled to participate in any and all
benefits from time to time afforded to senior management employees of Employer,
including, by way of example and not of limitation, health, accident,
hospitalization, disability and life insurance programs, pension plan and other
similar employee fringe benefit plans; provided, however, that the benefits
afforded to Employee may be reduced at such time and in such manner as generally
applicable to senior management employees of Employer.
(c) In addition to the foregoing, and subject to the terms and conditions set
forth herein, Employer grants to Employee a non-qualified option to purchase up
to 350,000 shares of Employer's common stock, $.001 par value (the 'Shares'),
such option to be exercisable as follows and nontransferable except as provided
in subsection (v) below:
(i) Employee shall have the option to purchase from the Employer a
maximum of 350,000 Shares for a total purchase price equal to the Exercise
Price per Share, payable as provided in subsection (iv) below. Options
covering all 350,000 shares shall vest immediately. Employee may exercise
such options from time to time but before October 15, 2004 or the fifth
anniversary of the termination of Employee's employment, whichever occurs
first, by delivering written notices of Employee's exercise of the option
to the Employer, to the attention of the Chairman of the Compensation
Committee, which notices shall include the number of Shares for which
Employee is then exercising his option.
(ii) An Acceleration Event shall occur if at any time during the term
of this Agreement the Employer shall (aa) consolidate with or merge into
another corporation and the Employer or a subsidiary of Employer shall not
be the surviving corporation, (bb) have a majority of its Shares, sold in a
single transaction or in a series of transactions, the result of which is
to consolidate the ownership of such stock in a single person or group of
persons acting in concert, (cc) have a majority of its Shares, held by
Unaffiliated Shareholders sold in a single transaction or a series of
transactions, the result of which is to consolidate the ownership of such
stock in a single person or group of persons acting in concert, (dd) convey
all, or substantially all, of its assets to another corporation, entity, or
person, the ownership of which is not substantially similar to that of the
Employer prior to such conveyance or (ee) have a Board of Directors
comprised of persons, a majority of whom are not Directors of the Employer
on the date hereof.
The term 'Unaffiliated Shareholder,' as used herein, shall mean a
Shareholder who is not an officer, director or employee of Employer or any
entity the beneficial interests of which are held by any director, officer
or employee of Employer.
(iii) Notwithstanding the foregoing, if (aa) the Employer terminates
the employment of Employee for Cause (as defined in Section 7 hereof), or
(bb) the Employee terminates his employment hereunder (except for a
termination by Employee for any of the reasons provided in Section 2(h)(ii)
hereof), the options granted under Section 2(c) shall immediately become
null and void, except with respect to that portion of the options granted
hereunder which have already been properly exercised. If Employee dies or
suffers a disability, as defined in subsection (vi) all unvested options
2
<PAGE>
shall vest. If Employee's employment hereunder is terminated by Employer
other than for Cause, then Employee shall continue to be entitled to
exercise the options as provided in this paragraph 2(c).
(iv) Employee's written notice of exercise of an option shall be
accompanied by a check for the total purchase price. If Employee is no
longer employed by Employer, Employee's written notice of exercise of an
option shall be accompanied by either a check for the total purchase price,
by Employee's written instruction to deduct from the Shares then otherwise
purchased the least number of Shares needed to meet or exceed the total
purchase price or by a stock certificate representing Shares already in
Employee's possession, assuming such Shares are valued at the Per Share
Trading Price hereinafter defined. The Per Share Trading Price means the
closing bid price on the last business day before the written notice of
exercise is given as reported in the Wall Street Journal on NASDAQ or any
public stock exchange wherever Shares are currently listed.
(v) The Employee may transfer any option granted under this Section
2(c) to Employee's spouse or children, or to a trust for the benefit of
Employee, Employee's spouse and/or Employee's children; provided, however,
that such transferee shall be able to exercise such option only if and when
Employee could have exercised such option and any Shares acquired upon
exercise of such transferred option shall be subject to the same
limitations or restrictions that would have applied had Employee exercised
such option. The payment provisions of subsection (iv) shall also apply to
such transfers.
Subject to the foregoing, these options shall be non-transferable by
the Employee, either voluntarily or by operation of law, otherwise than by
will or the laws of descent and distribution and shall be exercisable
during the option holder's lifetime only by the option holder, regardless
of any community property interest therein of the spouse of the option
holder, or such spouse's successors in interest. If the spouse of the
option holder shall have acquired a community property interest in such
option, the option holder, or the option holder's permitted successors in
interest, may exercise the option on behalf of the spouse of the option
holder or such spouse's successors in interest.
(vi) For purposes of this Agreement, Employee shall be considered
'disabled' if as a result of physical or mental injury or impairment
Employee cannot adequately perform the duties required under Section 3 of
this Agreement and if the Board of Directors, based upon the independent
medical advice of a physician selected by the Board, determines that such
inability to perform can be expected to continue for at least one year.
(vii) If, following an Acceleration Event, Employer shall terminate
Employee's employment other than for Cause, or Employee shall terminate his
employment for any of the reasons provided in Section 2(h)(ii), Employee
shall not be required to mitigate the amount of any payment or benefit
provided for in this Agreement by seeking other employment or otherwise.
3
<PAGE>
(d) Employer shall have the right to require Employee to pay to Employer,
in addition to the full purchase price of Shares acquired by exercise of any
option, an amount sufficient to satisfy any federal, state or local tax
withholding requirements prior to the delivery of any Shares hereunder, or to
retain an appropriate number of Shares, valued at the Per Share Trading Price,
necessary to satisfy such withholding obligation.
(e) In the event of any change in the Shares of the Employer by reason of
any stock dividend, recapitalization, reorganization, merger, consolidation,
split-up, combination or exchange of Shares or of any similar change affecting
Shares, the number of Shares subject to the option provided in Section 2(c) and
their purchase price per Share shall be appropriately adjusted consistent with
such change in such manner as the Board of Directors may deem equitable to
prevent dilution or enlargement of the rights granted to Employee under Section
2(c). Any adjustment so made shall be final and binding upon Employee. This
provision shall not apply to any dilution caused by this Agreement.
In the event the Company sells or offers to sell Shares at a price below
the Exercise Price, the Exercise Price shall be adjusted downward to such
offering or sales price as to all then unexercised options.
In no event shall the number of Employee's options and shares acquired by
option be less than 5% of all issued and outstanding Shares of Employer. If such
options and option Shares do fall below 5%, Employer agrees to promptly grant
sufficient additional options to bring Employee's options and option Shares up
to 5% of all issued and outstanding Shares of Employer. Such options shall
immediately vest and shall have an Exercise Price equal to the Per Share Trading
Price on the date of grant of the option Shares.
(f) Employee hereby represents and warrants that if and when Employee
purchases all or any portion of the Shares, such purchase will be for Employee's
own account and solely for investment and not with a view toward resale or other
distribution. Employee acknowledges and agrees that some or all of the Shares
have not been and will not be registered under the Securities Act of 1933, as
amended (the 'Act'), or under the securities laws of any state, and may not be
sold, assigned, transferred or otherwise disposed of (except, to the extent
permitted by applicable securities laws, to any trust in which Employee is the
grantor and sole beneficiary during his lifetime and/or to any direct family
members and/or to Employee's spouse) unless the Shares have been registered and
qualified under the Act and any applicable state's securities law, or unless an
exemption from such registration or qualification is available.
Employee further acknowledges that some or all of the Shares may constitute
'restricted securities' within the meaning of Rule 144 promulgated by the
Securities and Exchange Commission and the Shares may not be sold, assigned,
transferred or otherwise disposed of except and unless all conditions set forth
in Rule 144 are satisfied or unless an exemption from registration under the Act
is otherwise available.
The certificates representing some or all of the Shares may contain the
following legend:
4
'The shares evidenced by this certificate have not been registered under
the Securities Act of 1933, as amended (the 'Act'), or under the laws of
any state and may not be sold, assigned, transferred or otherwise disposed
of unless such shares have been registered or qualified under the Act and
any applicable state's securities law, or unless an exemption from such
registration or qualification is available.'
After endorsement, the certificates representing the Shares shall be
delivered to Employee, who shall, subject to the terms of this Agreement, be
entitled to exercise all rights of ownership of such Shares. Certificates
representing Shares not bearing a legend shall be delivered to Employee in
exchange for the certificates bearing legends as and when, from time to time,
the Employer receives an opinion of its counsel to the effect that such legends
may be removed, which opinion Employer agrees to seek in good faith if so
requested by Employee.
(g) The Exercise Price per Share for each option initially granted under
Subsection 2(c) shall equal $2.50.
(h) Employee shall not be deemed to have terminated his employment with
Employer within the meaning of Section 2(c)(iii)(bb) in the following instances:
(i) in the case of any leave of absence approved by the Employer;
(ii) in case of resignation by Employee any time following any
Acceleration Event or, if (A) there is in Employee's reasonable judgment a
significant change in the nature or scope of Employee's authorities or
duties from those obtaining immediately prior to such Acceleration Event,
(B) based on a reasonable determination by Employee that as a result of an
Acceleration Event and a change of circumstances thereafter significantly
affecting his position he is unable to exercise the authorities, powers,
function or duties attached to his position, (C) there is a reduction in
the base compensation of Employee from his compensation immediately prior
to such Acceleration Event; or (D) there is imposed upon Employee a
requirement that Employee move his principal office out of the Los Angeles,
California area.
If Employee is removed as Chairman or Chief Executive Officer by the
Board of Directors of Employer or shareholders of Employer, other than for
Cause, Employee will have the right, exercisable at any time and upon
10-day's notice to Employer, to require Employer to repurchase all
outstanding vested options by paying to Employee the Spread Amount. For
purposes of this Agreement, the Spread Amount shall mean the difference
between the Exercise Price per Share and the Per Share Trading Price on
the date notice is given by Employee multiplied by the number of
outstanding vested options.
3. DUTIES. Employee shall serve Employer as its Chairman and Chief
Executive Officer and shall report to the Board of Directors of Employer.
Employee shall perform for Employer such duties as may be reasonably assigned to
Employee from time to time by the Board of Directors and are normally attendant
to the office of Chief Executive Officer. Until termination of this Agreement,
Employee shall devote Employee's entire time, energies and
5
attention to the business and affairs of Employer, except during usual vacation
periods; provided, however, Employee may devote such reasonable time and
attention to the management of Employee's assets and investments as will not
interfere with Employee's duties hereunder including Employee's noncompetition
obligations pursuant to Section 8 hereof. The Employee shall be entitled to a
private office and a secretary and such other accommodations as shall be
suitable to the character of the Employee's position with the Employer for the
performance of his duties hereunder.
4. REIMBURSEMENT OF EXPENSES. Employee shall be reimbursed by Employer for
Employee's reasonable traveling, entertainment and other incidental expenses
incurred on business of Employer upon the submission by Employee of such
vouchers and other proof and when approved in accordance with the practice now
existing at Employer or in accordance with such practice as it may hereafter be
changed and uniformly applied to officers of Employer.
Employer shall provide either a top of the lime domestic model automobile
for Employee's use in accordance with the Employer's standard policies, or, at
Employer's option, a monthly automobile allowance sufficient for Employee to
lease a top of the line domestic model authomobile, together with reimbursement
of automobile expenses provided the expenses do not exceed those associated with
a top of the line domestic model automobile. If Employer is providing such an
automobile to Employee at the termination of this Agreement, Employee shall have
the right to purchase said automobile at the termination of this Agreement for
$1.00.
Employer shall reimburse to Employee Employee's initiation fees, dues and
reasonable expenses for private clubs, provided such expenses are deemed
necessary and appropriate by Employee to properly perform his function as Chief
Executive Officer.
5. VACATIONS. Employee shall be entitled to four (4) weeks or such longer
period as may be approved by the Board of Directors from time to time of
vacation during each year of this Agreement during which vacation periods the
compensation of Employee shall be paid in full.
6. DISCLOSURE OF INFORMATION. Employee agrees that, during the period of
Employee's employment hereunder or at any time thereafter, Employee will not
divulge to any other Person any details of the business or affairs of Employer,
including but not limited to information about costs, purchasing, profits, gross
margins, financial statements, markets or any customer or advertising lists; any
information, knowledge or data of a technical nature, including but not limited
to methods, know-how, processes, discoveries, machines, inventions or research
projects; any information, knowledge or data relating to future developments,
including but not limited to research and development or future marketing or
merchandising, or any and all other trade secrets of Employer which may be
imparted to Employee; provided that the foregoing shall not apply to information
regarding the industry which is generally known to executives of Employee's
level in the industry or which is already in the public domain or which
hereafter becomes part of the public domain through no action or fault of
Employee.
6
<PAGE>
Upon termination of the employment of Employee hereunder, Employee will
deliver to Employer any and all drawings, blueprints, manuals, sketches,
letters, computer printouts, discs, software, and related items, formulae,
memoranda, documents, lists, papers, notes, reports and similar materials, and
all copies, extracts and derivatives thereof, relating in any way to the
business of Employer and in any way obtained by Employee, and will deliver any
and all other property of Employer in the possession of or under the control of
Employee. Notwithstanding the foregoing, at any time after the termination of
the employment of Employee, Employee shall be entitled to access to or to make
copies of any materials delivered to Employer pursuant to the preceding sentence
for the sole purpose of establishing his rights, duties, benefits or obligations
due to or from Employer, and Employee warrants that he will not utilize such
materials to compete with Employer in violation of paragraph 8 of this
Agreement.
7. TERMINATION OF EMPLOYMENT.
(a) Employer may terminate the employment of employee at any time whether
for Cause (as the term 'Cause' is defined in this Section 7) or otherwise upon
written notice of termination to Employee. If Employer terminates the employment
of Employee for Cause, Employer shall not be obligated to make any further
payments to Employee, whether via salary, bonus, stock options or otherwise.
Termination for Cause shall mean termination because:
(i) Employee shall have breached any material provision of this
Agreement or, after receiving written notice of breach from Employer, again
breached any other provision of this Agreement or any other material
written rules, regulations or policies of the employer now existing or
hereafter arising which are uniformly applied to all employees of Employer
or which rules, regulations and policies are promulgated for general
application to officers or directors of Employer;
(ii) Employee shall have been repeatedly or habitually intoxicated or
under the influence of drugs while on the premises of Employer or while
performing his duties hereunder, after receiving written notice thereof
from Employer, and after Employer has provided, at its cost, reasonable
rehabilitation services for Employee, such that Employer determines in good
faith that Employee is impaired in performing his duties required under
this Agreement;
(iii) Employee shall have been convicted of a felony under state or
federal law; or shall have committed a crime involving moral turpitude;
(iv) Employee shall have embezzled any property belonging to Employer
such that he may be subject to criminal prosecution therefor or Employee
shall have intentionally and materially injured Employer or the property of
Employer.
(b) If Employer terminates the employment of Employee other than for Cause,
or if Employee resigns for a reason specified in Section 2(h)(ii), Employer
shall continue to pay and provide Employee the benefits provided in Sections
2(a) and 2(b) of this Agreement as well
7
as a private office and secretary for one year following termination of
employment, or for remaining term of this Agreement, whichever is greater and
Employee shall continue to be subject to the provisions of Section 8 of this
Agreement so long as such payments are made in the manner, and amount, at the
times, required by this Agreement. If Employee's employment is terminated by
death, Employer shall continue to pay and provide to Employee's spouse all
health care and insurance benefits provided to Employee for a period of one year
following Employee's death.
(c) The employment of Employee and Employer's obligations hereunder shall
terminate automatically upon (i) the death or disability of Employee, (ii)
Employee resigning or otherwise terminating his employment except as provided in
paragraph 2(h)(ii), (iii) the termination of Employee's employment by Employer
for Cause, or (iv) the expiration of the term of this Agreement;
provided, however, that the representations contained in paragraph 9 and all
continuing obligations and representations of Employee, including without
limitation those contained in paragraphs 6, 8 and 9 hereof, shall survive the
termination of this Agreement and shall continue to be binding, and further
provided that any potential obligation of the Employer with respect to the
options granted and already exercised shall be subject to the limitations of
Section 2(c)(iii).
(d) Anything in this Agreement to the contrary, notwithstanding, in the
event that the Employer's regularly retained firm of independent certified
public accountants ('CPAs') shall determine (as hereinafter described) that any
payment or distribution by the Employer to or for the benefit of the Employee,
except that relating to options granted under Section 2(c) of this Agreement
(whether paid or payable or distributed or distributable pursuant to the terms
of this Agreement or otherwise) (a 'Payment') would be nondeductible by the
Employer for Federal income tax purposes because of Section 280G of the Internal
Revenue Code of 1986, as amended (the 'Code'), then the aggregate present value
of amounts payable or distributable to or for the the benefit of the Employee
pursuant to this Agreement (such payments or distributions pursuant to this
Agreement are hereinafter referred to as 'Agreement Payments') shall be reduced
(but not below zero) to the Reduced Amount. For purposes of this paragraph, the
'Reduced Amount' shall be an amount expressed in present value which maximizes
the aggregate present value of Agreement Payments without causing any Payment to
be nondeductible by the Employer because of said Section 280G of the Code.
With respect to any 'Excess Parachute Payments' within the meaning of Section
280G(b)(2) of the Code subject to the tax (the 'Excise Tax') imposed by Section
4999 of the Code, Employer shall pay to Employee an additional amount equal to
the Excise Tax payable by Employee.
The Employer shall elect which and how much of the Agreement Payments shall
be eliminated or reduced (as long as after such election the aggregate present
value of the Agreement Payments equals the Reduced Amount) and shall notify the
Employee promptly of such election. For purposes of this paragraph, present
value shall be determined in accordance with Section 280G(d)(4) of the Code. All
determinations made by the CPAs under this paragraph shall be binding upon the
Employer and Employee (absent fraud, wilful misconduct or demonstrable mistake
in calculation, but not in judgment) and shall be made within 60 days of a
termination of employment of the Employee. As promptly as practicable following
such determination and the elections hereunder, the Employer shall pay to or
distribute to or for the
8
<PAGE>
benefit of the Employee such amounts as are then due to the Employee under this
Agreement and shall promptly pay to or distribute for the benefit of the
Employee in the future such amounts as become due to this Employee under this
Agreement.
As a result of the uncertainty in the application of Section 280G of the
Code at the time of the initial determination by the CPAs hereunder, it is
possible that Agreement Payments may be made by the Employer which should not
have been made ('Overpayment') or that additional Agreement Payments which will
have not been made by the Employer could have been made ('Underpayment'), in
each case, consistent with the calculation of the Reduced Amount hereunder. In
the event that the CPAs, based upon the assertion of a deficiency by the
Internal Revenue Service against the Employer or the Employee which the CPAs
believe has a high probability of success, determine that an Overpayment has
been made, any such Overpayment shall be treated for all purposes as a loan to
Employee which the Employee shall repay to the Employer together with interest
at the applicable Federal rate provided for in Section 7872(f)(2) of the Code;
provided, however, that no amount shall be payable by the Employee to the
Employer if and to the extent such payment would not reduce the amount which is
subject to taxation under Section 4999 of the Code. In the event that the CPAs,
based upon controlling precedent, determine that an Underpayment has occurred,
any such Underpayment shall be promptly paid by the Employer to or for the
benefit of the Employee together with interest at the applicable Federal rate
provided for in Section 7872(f)(2)(A) of the Code.
8. NONCOMPETITION AGREEMENT.
(a) Employee agrees that he will not, without the prior written consent of
Employer as provided by paragraph 10 hereof, Compete (as hereinafter defined)
with Employer while he is an Employee and, if Employee voluntarily leaves the
employ of Employer other than for a reason specified in subsection 2(h)(ii)
above, for a period of one year thereafter.
(b) For the purposes of this Agreement, Employee shall be deemed to Compete
with Employer if Employee:
(i) Competes directly with Employer;
(ii) Is or becomes financially or beneficially interested in any
Person who or which competes with the business of Employer and which Person
conducts Ten Million and 00/100 Dollars ($10,000,000.00) or more of its
Gross Sales in the Prohibited Territory; provided, however, that ownership
of not more than one percent (1%) of any class of securities traded
over-the-counter or through a stock exchange shall not violate this
paragraph 8(b)(ii); or
(iii) Acts, directly or indirectly as a broker, consultant, agent,
salesman, officer, director or employee or in any other capacity for or on
behalf of any Person who or which competes with Employer.
(c) For the purposes of this Agreement, the following words shall have the
following meanings, respectively:
9
<PAGE>
(i) 'Person' means, when not modified by qualifying or limiting words,
a person, natural or corporate, or other legal entity.
(ii) 'Compete' means the manufacture, assembly, purchase, sale, lease
or distribution within the Prohibited Territory of (A) any service, article
or product (individually or as a group) which at any time prior to the date
of this Agreement, Employer shall have manufactured, assembled, purchased,
sold, leased and/or distributed as a material part of Employer's business,
or (B) any service, product or article (individually or as group) which is
similar, related or equivalent to any service, product or article which is
a material part of Employer's business described in clause (A) immediately
above, or (C) any other service, product or article (individually or as a
group) of any kindred or cognate kind of character which, at any time after
the date hereof through the date Employee's employment shall be terminated,
Employer shall manufacture, assemble, purchase, sell, lease and/or
distribute as a material part of Employer's business. Provided, however,
the term 'compete' shall not pertain to any service, article or product
(individually or as a group) which, during the term of this paragraph 8,
Employer has discontinued.
(iii) 'Prohibited Territory' means the United States of America.
(d) Employee hereby acknowledges to and agrees with Employer that
Employer's remedy at law for any breach by Employee of his several promises,
covenants and undertakings set forth in Sections 6, 8 and 9 is inadequate and
that, in addition to money damages for any such breach, Employer shall be
entitled to injunctive relief against any such breach.
(e) Employee acknowledges that, without limitation, a violation of Sections
6, 8 or 9 will constitute a material breach of this Agreement.
(f) The provisions of this Section shall not apply after an Acceleration
Event, if Employee's employment is terminated by the Employer other than for
Cause or if Employee resigns for a reason specified in Section 2(h)(ii).
(g) Nothing in this Section shall prohibit Employee from investing in or
exploring opportunities which do not Compete with Employer.
9. REPRESENTATIONS AND WARRANTIES
(a) Employee represents and warrants to Employer that he will cooperate
fully with Employer in the preparation and filing of any and all documents
necessary to be filed with the Securities and Exchange Commission pursuant to
its rules.
(b) Employer represents and warrants that it will file any and all
documents necessary to be filed with the Securities and Exchange Commission
pursuant to its rules.
10. NOTICES. Any notice required or permitted to be given under this
Agreement shall be in writing and shall be deemed to be duly given when
personally delivered to an officer
10
<PAGE>
of Employer (other then Employee) or personally delivered to Employee,
as appropriate, or when delivered by registered or certified mail, postage
prepaid, to the address set forth above for each party respectively, or to such
other address as the respective party may be notice direct.
11. ENTIRE AGREEMENT. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
other agreements, written or otherwise. This Agreement may not be changed or
extended (including additions and deletions) orally or otherwise, except by an
agreement or consent in writing signed by both parties hereto. Such writing may
only be signed on behalf of Employer by its Board.
12. SUCCESSORS AND ASSIGNS. The duties and obligations of Employee under
this Agreement are personal unto Employee and may not be assigned or otherwise
transferred, but the rights of Employee under this Agreement shall inure to the
benefit of Employee, his heirs, executors, administrators, personal
representatives, successors and assigns. Employee may assign his right to
receive payments under Section 2(a) and his right to receive stock options under
Section 2(c) to Artists and Entertainment, Inc., a Turks and Caicos corporation.
The rights and duties of Employer under this Agreement shall be binding upon and
insure to the benefit of Employer's successors and assigns.
13. ENFORCEABILITY. If any term of provision of this Agreement, or the
application thereof to any circumstances, shall, to any extent and for any
reason, be held invalid or unenforceable, the remainder of this Agreement, or
the application of such term or provision to circumstances other than those to
which it is held to be invalid or unenforceable, shall not be affected thereby
and shall be construed as if such invalid or unenforceable term or provision had
never been contained herein, and each term and provision of this Agreement shall
be valid and enforceable to the fullest extent permitted by law. If any portion
of this Agreement is held to be excessively broad as to time, duration,
geographical scope, activity or subject, it shall be construed by limiting or
reducing the provision as required so that the provision as limited or reduced
is enforceable under applicable law.
14. GOVERNING LAW. All rights under this Agreement shall be governed by and
construed in accordance with the laws of California, and the Employer shall be
liable to account only in courts located in Los Angeles County, California.
15. ARBITRATION. Any controversy or claim arising out of or relating to
this Agreement or the breach thereof, including in particular any controversy
relating to paragraphs 2(c)(ii) or 2(h), shall be settled by arbitration in Los
Angeles County, California in accordance with the laws of the State of
California by three arbitrators, one of whom shall be appointed by the Employer,
one by the Employee (or in the event of his prior death, his beneficiary(s)),
and the third of whom shall be appointed by the first two arbitrators. The
arbitration shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association except as hereinabove provided.
Judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. In the event the Employee or his beneficary shall
enforcement of any of the Employee's rights under this Agreement, the Employee
or beneficiary(s) shall not be entitled to recover from the Employer any
attorneys fees, costs or
11
<PAGE>
expenses in connection with the enforcement of such
rights (including enforcement of any arbitration award in court) unless the
arbitration award shall exceed by more than 10% of the Employer's final offer.
Any notice preliminary to or in conjunction with or incident to such
arbitration proceeding may be sent to the Employee or to the Board of the
Employer by registered or certified mail, and personal service is hereby waived.
The Employee or his beneficiary(s) shall not institute a civil action with
regard to any claim or controversy arising out of or relating to this Agreement
until such time as the arbitration proceedings has been completed.
IN WITNESS WHEREOF, the parties hereto have cause of this Agreement to be
executed as of the day and year first above written.
<TABLE>
<S> <C>
WITNESS: VENTURA ENTERTAINMENT GROUP, LTD.
.................................................. By ........................................................
.................................................. Its .......................................................
EMPLOYEE
.................................................. ............................................................
.................................................. Floyd W. Kephart
</TABLE>
12
<PAGE>
EXHIBIT 10.49
AMENDMENT TO CONSULTING AGREEMENT
THIS AMENDMENT TO CONSULTING AGREEMENT dated as of March 31, 1995, by and
between (i) VENTURA ENTERTAINMENT GROUP LTD., a Delaware corporation ('Company')
and (ii) BIBICOFF & ASSOCIATES, INC. ('Consultant').
WITNESSETH
A. Pursuant to that certain Consulting Agreement dated as of August 1, 1994
(the 'Original Agreement'), the Company engaged Consultant to act as a
consultant to the Board of Directors of the Company.
B. The parties now desire to amend the Consulting Agreement as hereinafter
provided.
FOR GOOD AND VALUABLE CONSIDERATION, the receipt of which is hereby
acknowledged, the parties hereto do hereby agree as follows:
1. The terms of the Original Agreement are hereby amended by the terms of
this Amendment. The term 'Agreement', wherever used in the Original Agreement or
this Amendment, means the Original Agreement as amended by this Amendment.
2. Paragraph 1 of the Original Agreement is hereby deleted in its entirety
and replaced with the following:
1. Non-Compete . For the Term, neither Consultant nor Harvey Bibicoff
shall, within any state that the Company or the Company's affiliates are
currently operating, directly or indirectly engage as an Owner in business
which is in direct competition with the Company; provided, however, that
nothing contained herein shall in any manner restrict or inhibit the
ability of Consultant or Harvey Bibicoff, either directly or indirectly as
an individual, shareholder, director, officer, employee or agent of Harmony
Holdings, Inc., or any of its subsidiaries or affiliates (collectively,
'Harmony'), to engage in any of the business currently, or which may be,
conducted by Harmony, nor shall anything contained herein restrict or
inhibit the ability of Consultant or Harvey Bibicoff to render consulting
services to any party.
3. Paragraph 2 of the Original Agreement is hereby deleted in its entirety.
4. Paragraph 3 of the Original Agreement is hereby modified and restated in
its entirety as follows:
-1-
<PAGE>
3. TERM. The term of this Agreement ('Term') shall commence on August
1, 1994, and shall expire on July 31, 1999 ('Termination Date'). As used
herein 'Term Year' shall mean each period during the Term commencing on
August 1 and ending on July 31.
5. Paragraph 4 of the Original Agreement is hereby modified by deleting
Paragraph 4.1 thereof and replacing it with the following:
4.1 Fixed Fee. Fixed annual non-compete fee of $165,000 for each Term
Year, payable in equal semi-monthly installments. Beginning in the second
Term Year and for each subsequent Term Year, the fixed annual non-compete
fee shall be increased by the increase in the Consumer Price Index or 4.5%,
whichever is lower.
6. Paragraph 4.3 of the Original Agreement is hereby deleted in its
entirety.
7. Paragraph 5 of the Original Agreement is hereby deleted in its entirety.
8. Except as specifically amended hereby, all of the terms and conditions
of the Original Agreement are hereby incorporated herein by reference and shall
remain in full force and effect, and each of the parties hereto hereby reaffirm
and confirm all of the terms and provisions of the Original Agreement as amended
hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment to
Consulting Agreement as of the day, month and year first above written.
VENTURA ENTERTAINMENT GROUP LTD.
By: .................................
Title: ..............................
(the 'Company')
BIBICOFF & ASSOCIATES, INC.
By: .................................
Title: ..............................
('Bibicoff')
The undersigned, Harvey Bibicoff, joins herein for the purposes of agreeing
to the terms of Paragraph 2 hereof.
......................................
HARVEY BIBICOFF
-2-
Exhibit 22
SUBSIDIARIES: Tax ID Number
Ventura Media Center, Ltd. 95-4233203
Ventura Media Group Ltd. 95-4233206
Entertainment Marketing Corporation
of America 75-2233444
Ventura Music Group, Ltd. 95-4246821
Sports Management Group Inc. 62-1244158
Crosstown Productions Inc. 95-4205015
Institute of Self-Improvement 95-4480298
Kaleidoscope Acquisition Corp. 95-4476868
Kaleidoscope Holdings Corp. 13-3653238
Kaleidoscope Entertainment Inc. 13-3628950
People and Properties 13-2822440
Lifestyle Marketing Group 13-3653239
Kaleidoscope Television Inc. 13-3782360
Entertainment Placements Inc. 94-4224147
Address:
For all of the above corporations, address is the same as the parent:
11466 San Vicente Blvd.
Los Angeles, CA 90049
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-01-1994
<PERIOD-END> Dec-31-1994
<CASH> 3,439
<SECURITIES> 0
<RECEIVABLES> 2,150
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 6,011
<PP&E> 392
<DEPRECIATION> 0
<TOTAL-ASSETS> 14,331
<CURRENT-LIABILITIES> 7,012
<BONDS> 4,543
<COMMON> 8
950
0
<OTHER-SE> 1,432
<TOTAL-LIABILITY-AND-EQUITY> 14,331
<SALES> 5,796
<TOTAL-REVENUES> 5,796
<CGS> 10,766
<TOTAL-COSTS> 10,766
<OTHER-EXPENSES> 89
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57
<INCOME-PRETAX> (5,116)
<INCOME-TAX> 0
<INCOME-CONTINUING> (5,116)
<DISCONTINUED> (1,893)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,009)
<EPS-PRIMARY> (1.96)
<EPS-DILUTED> (1.96)
</TABLE>
