<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
____________________
FORM 10-QSB
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934.
____________________
For Quarter Ended March 31, 1995 Commission file number 0-18410
-------------- -------
THE PRODUCERS ENTERTAINMENT GROUP LTD.
---------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 95-4233050
---------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9150 Wilshire Boulevard, Suite 205, Beverly Hills, CA 90212
---------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (310) 285-0400
Not Applicable
- ----------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock - May 10, 1995 - 10,266,334
----------------------------------------
<PAGE> 2
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, June 30,
1995 1994
---------- ----------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,323,138 $ 964,387
Notes and accounts receivable 1,444,497 1,390,030
Receivables from related parties 85,985 458,294
Film costs, net 1,926,291 4,610,704
Fixed assets, net 87,236 93,914
Other assets 271,001 89,399
---------- ----------
$5,138,148 $7,606,728
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Notes payable $ - $ 588,750
Accounts payable and accrued expenses 864,526 1,348,950
Dividend payable 126,350 -
Deferred participations based on
estimated revenues 600,000 800,000
Deferred revenue 139,000 3,466,901
---------- ----------
Total liabilities 1,729,876 6,204,601
---------- ----------
Shareholders' equity:
Preferred Stock, $.001 par value.
Authorized 10,000,000 shares;
Issued 1,000,000 shares - Series A 1,000 -
Common stock, $.001 par value.
Authorized 50,000,000 shares;
issued 11,388,770 and 10,808,833
shares 11,379 10,809
Additional paid-in capital 15,321,224 10,543,302
Accumulated deficit (10,915,139) (8,141,792)
---------- ----------
4,418,464 2,412,319
Treasury stock 1,122,436 shares,
at cost (1,010,192) (1,010,192)
---------- ----------
Net shareholders' equity 3,408,272 1,402,127
---------- ----------
$5,138,148 $7,606,728
========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
2
<PAGE> 3
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended March 31,
----------------------------
1995 1994
----------- -----------
Note (2)
<S> <C> <C>
Revenues $ 4,971,334 $10,573,969
----------- -----------
Film amortization 2,808,752 2,272,723
Costs related to revenues - 5,608,000
----------- -----------
2,808,752 7,880,723
----------- -----------
2,162,582 2,693,246
Write down of film costs to net
realizable values 937,298 28,391
General and administrative
expenses 3,660,150 5,211,296
----------- -----------
Operating (loss) (2,434,866) (2,546,441)
Interest income 28,260 84,058
Interest and financing expense (296,741) (129,939)
Provision for note receivable (270,000) -
Reduction in deferred
participations 200,000 -
Settlement of lawsuit - (400,000)
----------- -----------
Net (loss) (2,773,347) (2,992,322)
Dividend requirement of Series A
Preferred Stock (126,350) -
----------- -----------
Net (loss) applicable to common
shareholders $(2,899,697) $(2,992,322)
=========== ===========
Net (loss) per common share $(.29) $(.32)
===== =====
Average common shares outstanding 9,930,777 9,272,913
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
3
<PAGE> 4
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------
1995 1994
---- ----
Note (2)
<S> <C> <C>
Revenues $ 322,846 $ 2,564,280
----------- -----------
Film amortization 502,018 1,263,806
Costs related to revenues - 130,000
----------- -----------
502,018 1,393,806
----------- -----------
(179,172) 1,170,474
Write down of film costs to net
realizable values 937,298 28,391
General and administrative expenses 1,703,368 1,998,077
----------- -----------
Operating (loss) (2,819,838) (855,994)
Interest income 14,820 17,612
Interest and financing expense - (94,481)
Provision for note receivable (270,000) -
Reduction in deferred participations 200,000 -
----------- -----------
Net (loss) (2,875,018) (932,863)
Dividend requirement of Series A
Preferred Stock (106,250) -
----------- -----------
Net (loss) applicable to common
shareholders $(2,981,268) $ (932,863)
=========== ===========
Net (loss) per share $(.29) $(.10)
=========== ===========
Average common shares outstanding 10,266,334 9,309,288
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE> 5
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Series A
Prefer- Additional
red Common Paid-In Treasury
Stock Stock Capital Deficit Stock Net
------ ------ ---------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1994 $ - 10,809 10,543,302 (8,141,792) (1,010,192) 1,402,127
Sale of Units in
public offering 1,000 4,175,467 4,176,467
Issuance of shares
for interest 266 274,734 275,000
Exercise of stock
options 304 454,071 454,375
Dividend on Series
A preferred stock (126,350) (126,350)
Net (loss) (2,773,347) (2,773,347)
------ ------ ---------- ----------- ---------- ---------
Balance,
March 31, 1995 $1,000 11,379 15,321,224 (10,915,139) (1,010,192) 3,408,272
====== ====== ========== =========== ========== =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE> 6
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine months ended March 31,
------------------------------
1995 1994
---- ----
Note (2)
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(2,773,347) $(2,992,322)
Net loss of DSL duplicated - 398,200
Adjustments to reconcile net (loss) to net
cash provided by (used in) operating
activities:
Depreciation and amortization 2,825,343 2,308,780
Allowance for amounts receivable 270,000 -
Reduction in deferred participations (200,000)
Write down of film costs 937,298 -
Issuance of shares of stock for interest 275,000 -
Settlement of lawsuit - 400,000
Changes in assets and liabilities:
Decrease (increase) in receivables 334,117 (50,488)
(Increase) decrease in other assets (2,472) 75,048
(Decrease) in accounts payable and
accrued expenses (484,424) (326,756)
(Decrease) increase in deferred revenues (3,327,901) 973,150
----------- -----------
Net cash provided by (used in) operating
activities (2,146,386) 785,612
----------- -----------
Cash flows from investing activities:
Additions to film costs (1,240,767) (3,083,621)
Capital expenditures (9,913) (10,417)
Increase in due from related parties (286,275) (2,689)
----------- -----------
Net cash (used in) investing activities (1,536,955) (3,096,727)
----------- -----------
Cash flows from financing activities:
Sale of units in public offering 4,176,467 -
Borrowings (repayments), net (588,750) 157,500
Proceeds from exercise of stock options 454,375 1,323,718
----------- -----------
Net cash provided by financing activities 4,042,092 1,418,218
----------- -----------
Net increase (decrease) in cash 358,751 (829,897)
Cash at beginning of period 964,387 4,774,565
----------- -----------
Cash at end of period $ 1,323,138 $ 3,944,668
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE> 7
THE PRODUCERS ENTERTAINMENT GROUP LTD. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 1995
(1) Basis of Presentation
The financial information included herein is unaudited; however, such
information reflects all adjustments (consisting solely of normal recurring
accruals) which are, in the opinion of management, necessary to present fairly
the results of operations for the periods presented.
The information contained in this Form 10-QSB Should be read in conjunction
with the audited financial statements filed as part of the Company's Annual
Report on Form 10-K for the fiscal year ended June 30, 1994.
(2) Restatement of Prior Year
In May 1994, the Company acquired all of the capital stock of DSL
Productions, Inc. and its affiliates ("DSL") in a transaction accounted for as
a pooling of interests. Accordingly, the Company's financial statements for the
nine and three months ended March 31, 1994 have been restated to include the
accounts of DSL.
Reconciliation of amounts previously reported:
<TABLE>
<CAPTION>
Nine months Three months
Ended March 31, 1994
--------------------------
<S> <C> <C>
Revenues:
As previously reported $ 6,532,874 $ 316,450
Revenues of DSL 4,041,095 2,247,830
----------- ----------
Revenues as restated $10,573,969 $2,564,280
=========== ==========
Net (loss):
As previously reported $(2,064,622) $ (641,003)
Net (loss) of DSL (927,700) (291,860)
----------- ----------
Net (loss) as restated $(2,992,322) $ (932,863)
=========== ==========
</TABLE>
(3) Agreement With Former President of DSL
As of February 27, 1995, the Company entered into an agreement with the
former President of DSL which resulted in the termination of the employment
agreement with this individual. This employment agreement was for a five year
period that commenced on May 19, 1994 and provided for annual base compensation
of $350,000, a monthly automobile allowance of $1,250 and an annual bonus based
on DSL's pre-tax earnings. The Company also transferred certain of its projects
in development to a new corporation ("DEG") in exchange for a 19.9% ownership
interest in DEG. The remaining 80.1% of DEG
7
<PAGE> 8
is owned by the former President of DSL. The Company will receive 5% of the
gross revenues (as defined) from DEG's exploitation of these transferred
projects. The carrying amount of these transferred projects (approximately
$179,000) is included in other assets. The Company has also agreed to transfer
to DEG one of its projects in production upon its completion in exchange for 5%
of future gross revenues, as defined, from the exploitation of this project.
The Company retained all of its interest in its and DSL's completed projects.
In December 1994 the Company made a $270,000 loan to the former President of
DSL pursuant to its guarantee. The loan was made from the proceeds of the
Company's December 1994 public offering and is represented by a promissory note
which bears interest at prime plus 1% and is due on December 31, 1997. This
note is a nonrecourse obligation and is secured by stock options previously
granted to this individual which entitle him to purchase an aggregate of
400,000 shares of the Company's common stock through December 31, 1997 at a
price of $2.72 per share. Due to the market price of the Company's common
stock being substantially below the exercise price of the stock options
securing the note, the Company has established an allowance for the entire
amount of this note.
(4) Film Costs
The Company has revised its estimates of future gross revenues relating to
its completed projects and its plans to use its projects in development. The
adjustment of amortization of completed projects as a result of these revised
estimates and the reduction in the carrying amounts of the Company's completed
projects and projects in development has been reflected during the quarter
ended March 31, 1995.
(5) Deferred Participations Based on Estimated Future Revenues
The Company has agreed to pay the former owner of DSL up to a maximum of
$800,000 solely from a portion of revenues, as defined, from certain of DSL's
projects as such revenues are received. Based on estimates of revenues from
these projects, the Company has determined that the aggregate of these payments
will not exceed $600,000. Accordingly, the Company has adjusted its previously
recorded deferred liability to the amount it estimates will be paid in the
future. In the event that payments made exceed the Company's estimate, any
additional payments will be charged to operations when the related revenues are
earned.
(6) Debt Financing
In October 1994, the Company completed the sale of $1,100,000 principal
amount of 7% subordinated notes. The notes were repaid
8
<PAGE> 9
upon the closing of the Company's December 1994 public offering. See Note (7).
In accordance with the terms of these notes, upon repayment, the noteholders
were issued an aggregate of 276,437 shares of the Company's common stock with a
market value equal to 25% of the principal amount of the notes ($275,000). This
amount has been included in the accompanying condensed consolidated financial
statements as a charge to interest and financing expense with a corresponding
increase to common stock and additional paid-in capital.
(7) Public Offering of Securities
In December 1994, the Company completed a public offering of its securities.
The Company sold 1,000,000 Units for net proceeds (after deducting underwriting
commissions and related expenses) of approximately $4,176,000. Each Unit
consists of one share of Series A 8.5% Convertible Preferred Stock ("Class A
Stock") and one Class B Warrant. Each share of Class A Stock has a liquidating
preference of $5 (aggregate - $5,000,000), is convertible into one share of
common stock (aggregate - 5,000,000 shares) at any time and is entitled to
quarterly dividends at the annual rate of $.425 (aggregate - $425,000). At the
Company's option, dividends on the Class A Stock may be paid either in cash or
in shares of common stock valued at the then market price. On March 24, 1995,
the Company declared the first quarterly dividend on the Class A Stock.
This dividend was subsequently paid in cash and has been recorded at March 31,
1995 as a charge to additional paid-in capital.
Each Class B Warrant is exercisable for one share of common stock at a price
of $2.00 through December 1997. The Company may redeem the Class B Warrants at
a price of $.01 each if the defined market price of the Company's common stock
is at least $2.60 per share. Of the net proceeds received from this offering,
$1,150,000 was used to repay the 7% subordinated notes including interest;
$580,000 was used to pay the obligation to the former owner of DSL; $270,000
was used to repay a loan on behalf of the former President of DSL; and the
balance was added to the Company's working capital.
(8) Exercise of Stock Options
During the nine months ended March 31, 1995, the Company issued 303,500
shares of its common stock upon the exercise of stock options and received
aggregate proceeds of $454,375.
(9) Employment Agreements
The Company has entered into a consulting agreement with its former Chairman
of the Board whereby this individual will serve as
9
<PAGE> 10
a consultant to the Company through June 30, 1999 for annual compensation of
$80,000 and an annual bonus of not less than 2% of qualified financings, as
defined. The Company also granted this individual a four year stock option to
purchase 300,000 shares of common stock at a price of $1.00 per share. In
connection with this agreement, the Company's then existing employment
agreement with this individual was cancelled. This agreement would have
expired on June 30, 1996 and provided for annual base compensation of $225,000,
a monthly automobile allowance of $750 and 2 1/2% of the Company's annual
pre-tax income.
(10) (Loss) Per Common Share
(Loss) per common share has been computed after deducting (in 1995) the
dividend requirement of the Series A Preferred Stock from net (loss) and is
based on the weighted average number of common shares outstanding during the
periods. The assumed conversion of the Series A Preferred Stock has not been
included because the effect of such conversion would be anti-dilutive.
(11) Legal Matters
The Company was a party to an action which claimed, among other things,
certain violations of securities laws. The Company had agreed to settle this
lawsuit, subject to court approval, by issuing to the plaintiffs stock purchase
warrants with an aggregate value of $400,000. The effects of this settlement
have been reflected in the accompanying 1993 condensed consolidated financial
statements. As of January 30, 1995, the Company issued an aggregate of 711,111
Class C Warrants in settlement of this lawsuit. Each Class C Warrant is
exercisable for one share of common stock at a price of $4.00 through April 13,
1996.
10
<PAGE> 11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The amount of revenues earned by the Company in any one period is dependent
on, among other things, the number of projects completed during any such period
and the distribution of completed projects. Revenues from producers and other
fees are primarily dependent on the number of projects being produced and the
agreements relating to such projects. Accordingly, the amount of revenues
earned by the Company in any period are not necessarily indicative of future
revenues.
NINE MONTHS ENDED MARCH 31, 1995 AS COMPARED TO NINE MONTHS ENDED MARCH 31,
1994
Revenues for the nine months ended March 31, 1995 included approximately
$3,607,000 of revenues from Future Quest, which is airing on PBS, and fees from
the series Dave's World, which is airing on CBS, revenues from other completed
projects and personal management fees. Revenues for the nine months ended March
31, 1994 included $5,478,000 received from the Company's made-for-television
movie, Against the Wall, which aired on HBO, fees from Dave's World,
distribution fees, personal management fees and revenues from completed
projects. Amortization of film costs for the nine months ended March 31, 1995
and 1994 was $2,808,752 and $2,272,723, respectively using the individual film
forecast method. Costs related to revenues in fiscal 1993 consist of amounts
expended on Against the Wall.
The Company has revised its estimates of future gross revenues relating to
its completed projects and its plans to use its projects in development. The
reduction in the carrying amounts of the Company's completed projects and
projects in development of $937,298 has been reflected during the March 31,
1995 quarter.
General and administrative expenses for the nine months ended March 31, 1995
were $3,660,150 as compared to $5,211,296 for the nine months ended March 31,
1994. The decrease in operating expenses was primarily attributable to amounts
paid to the former owner of DSL in fiscal 1994 and reductions in expenses of
the Company's personnel management subsidiary. Pursuant to certain employment
agreements, the Company is obligated to pay additional compensation based on,
among other things, profits on projects produced and producers' fees. For the
nine months ended March 31, 1995, no additional compensation was earned based
on these provisions. The termination of certain employment agreements has
reduced the Company's annual compensation payments by approximately $519,000
per year. The full effects of such reduction will be recognized commencing with
the last quarter of fiscal 1995.
The decrease in interest income was primarily due to a reduction in funds
available for investment and lower interest rates. Interest and financing
expense for fiscal 1994 primarily consists of interest paid on the Company's 7%
subordinated notes
11
<PAGE> 12
including $275,000 representing the market value of the shares of common stock
issued to the noteholders upon the repayment of the notes.
THREE MONTHS ENDED MARCH 31, 1995 AS COMPARED TO THREE MONTHS ENDED MARCH 31,
1994
Revenues for the three months ended March 31, 1995 primarily consisted of
revenues from completed projects, fees from Dave's World, and personal
management fees. Revenues for the three months ended March 31, 1994 included
$5,478,000 received from Against the Wall, fees from Dave's World, distribution
fees, personal management fees and revenues from completed projects.
Amortization of film costs for the three months ended March 31, 1995 and 1994
was $502,018 and $1,263,806, respectively using the individual film forecast
method. The adjustment in amortization of film costs resulting from revised
estimates of future gross revenues has been reflected in the March 31, 1995
quarter.
General and administrative expenses for the three months ended March 31, 1995
were $1,703,368 as compared to $1,998,077 for the three months ended March 31,
1994. The decrease in operating expenses was primarily attributable to amounts
paid to the former owner of DSL in fiscal 1994 and reductions in expenses of
the Company's personnel management subsidiary. The full effects of the
termination of certain employment agreements will be recognized commencing with
the last quarter of fiscal 1995.
The decrease in interest income was primarily due to a reduction in funds
available for investment. During the quarter ended March 31, 1995, the Company
did not have any interest bearing debt and did not incur any interest expense.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1995, the Company had cash and cash equivalents of
$1,323,138. In December 1994, the Company completed a public offering of its
securities, receiving net proceeds of $4,176,467. Of these net proceeds,
$1,150,000 was used to repay the Company's 7% subordinated loans including
interest, make the guaranteed debt repayment to one of the former owners of DSL
of $580,000; and make the payment of a loan guaranteed by the Company made by
one of the former owners of DSL to the then President of DSL in the amount of
$270,000. The balance of these net proceeds (approximately $2,176,000) was
added to working capital.
In connection with the agreement with the former President of DSL, the
Company transferred certain projects in progress to DSL Entertainment Group,
Inc. ("DEG"), a corporation formed by the former President of DSL. The Company
owns 19.9% of DEG. The Company will receive 5% of the gross revenues, as
defined, from the
12
<PAGE> 13
exploitation of these transferred projects by DEG. The Company will not incur
any costs in connection with the receipt of its portion of these future gross
revenues.
The Company's cash receipts are principally derived from exhibition and
distribution of its completed projects, producers fees and personal management
fees. These cash receipts are affected by various factors including the timing
of the completion, exhibition and distribution of its completed projects and
the number of projects produced. Therefore, the Company is unable to accurately
predict the level or timing of its future cash receipts.
The Company's cash commitments for the next twelve months include
compensation to its officers and others of approximately $1,542,000 and minimum
office rent of $229,000 (aggregate - approximately $1,771,000). The Company
also incurs overhead and other costs such as salaries, related benefits, office
expenses, professional fees and similar expenses. For the nine months ended
March 31, 1995, general and administrative expenses, which includes
compensation and rent, aggregated approximately $3,569,000. As a result of the
termination of certain employment agreements, the Company expects that the
level of its future general and administrative expenses will decline from prior
levels. The Company also expends funds on the production and development of
projects.
Dividends on the Company's Series A Preferred Stock, which was sold in the
December 1994 public offering, aggregate $425,000 annually and, at the
Company's option, may be paid in shares of the Company's common stock. The
first dividend on these shares was declared in March 1995 and subsequently
paid in cash. The Company has agreed to pay a maximum of $800,000 to the former
owner of DSL solely out of revenues, as defined, from certain television
programs. These payments will not have a negative effect on the Company's
future cash flow because no payments will be made in excess of the related
revenues received.
The Company has no arrangements for external sources of liquidity such as
bank lines of credit and has no material commitments for capital expenditures.
Management believes that the Company's present and future resources will be
sufficient for its needs for at least the next twelve months.
13
<PAGE> 14
PART II -- OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
(a) Exhibits:
<S> <C>
4.1 Class C Warrant Agreement dated as of January 30, 1995(1)
10.1 Agreement of Restructuring and Settlement dated February 27, 1995 among
Drew Levin, The Producers Entertainment Group Ltd. and DSL Productions
Inc.(2)
10.2 First Amended Agreement of Restructuring and Settlement dated as of
February 27, 1995 among Drew Levin, The Producers Entertainment Group
Ltd. and DSL Productions Inc.(1)
10.3 Consulting Agreement dated February 27, 1995 between Bibicoff &
Associates and The Producers Entertainment Group Ltd.(2)
10.4 Letter Agreement dated as of March 10, 1995 between The Producers
Entertainment Group Ltd. and Jonathan Stanton Company(1)
- ---------------------
(1) Filed herewith.
(2) Incorporated by reference to Registrant's Current Report on Form 8-K
dated February 27, 1995.
(b) Reports on Form 8-K
Report on Form 8-K dated February 27, 1995.
</TABLE>
14
<PAGE> 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
THE PRODUCERS ENTERTAINMENT GROUP LTD.
Date: May 10, 1995 /s/ Irwin Meyer
-------------------------
President
15
<PAGE> 1
EXHIBIT 4.1
WARRANT AGREEMENT made as of January 30, 1995 between The Producers
Entertainment Group Ltd., a Delaware corporation with offices at 9150 Wilshire
Blvd., Beverly Hills, California 90212 (herein called the "Company") and
OTR/California Stock Transfer Corp. with offices at 1130 Southwest Morrison
#250, Portland, Oregon 92705 (herein called the "Warrant Agent").
WHEREAS the Company has determined to issue and deliver up to 711,111
Class C Common Stock Purchase Warrants (hereinafter called the "Warrants")
evidencing the right of the holders hereof to purchase an aggregate of 711,111
shares of common stock $.001 par value of the Company (hereinafter called the
"Common stock"); and
WHEREAS the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange, redemption and exercise of the
Warrants; and
WHEREAS the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing to so act, in connection with the
issuance, registration, transfer, exchange, redemption and exercise of the
Warrants; and
WHEREAS the Company desires to provide for the form and provisions of
the Warrants, the terms upon which they shall be issued and exercised, and the
respective rights, limitation of
<PAGE> 2
rights, and immunities of the Company, the Warrant Agent, and the holders of
the Warrants; and
WHEREAS all acts and things have been done and performed which are
necessary to make the Warrants, when executed on behalf of the Company and
countersigned by or on behalf of the Warrant Agent, as provided herein, the
valid, binding and legal obligation of the Company, and to authorize the
execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual agreements herein
contained, the parties hereto agree as follows:
ARTICLE I
Appointment of Warrant Agent
The Company hereby appoints the Warrant Agent to act as agent for the
Company for the Warrants, and the Warrant Agent hereby accepts such appointment
and agrees to perform the same in accordance with the terms and conditions set
forth in this Agreement.
-2-
<PAGE> 3
ARTICLE II
Warrants, Form of Warrants, Execution,
Countersignature and Registration of Warrants
A. Form of Warrant. Each Warrant shall be issued in registered
form only, shall be in substantially the form of Exhibit A, hereto, shall be
signed by, or bear the facsimile signature of, the President and Secretary of
the Company and shall bear a facsimile of the Company's seal. In the event the
person whose facsimile signature has been placed upon any Warrant shall have
ceased to be President or Secretary of the Company before such Warrant is
issued, it may be issued with the same effect as if he had not ceased to be
such at the date of issuance. No Warrant may be exercised until it has been
countersigned by the Warrant Agent as provided in Section C of this Article II.
B. Warrant Valid Only if Countersigned. Unless and until
countersigned by the Warrant Agent pursuant to this Agreement, a Warrant shall
be invalid and of no effect.
C. Countersignature. The Warrant Agent shall countersign a
Warrant only upon the occurrence of either of the following events:
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1) if the Warrant is to be issued in exchange or substitution for
one or more previously countersigned Warrants, as hereinafter
provided, or
2) if the Company instructs the Warrant Agent to do so.
D. Registration. The Warrant Agent shall maintain books (the
"Warrant Register") for the registration of original issuance and the
registration of transfer of the Warrants. Upon the initial issuance of the
Warrants, the Warrant Agent shall issue and register the Warrants in the names
of the respective holders hereof in such denominations and otherwise in
accordance with instructions delivered to the Warrant Agent by the Company.
Prior to due presentment for registration or transfer of any Warrant,
the Company and the Warrant Agent may deem and treat the person in whose name
such Warrant shall be registered upon the Warrant Register (the "Registered
Holder") as the absolute owner of such Warrant and of each Warrant represented
thereby (notwithstanding any notation of ownership or other writing on the
Warrant certificate made by anyone other than the Company or the Warrant
Agent), for the purpose of any exercise thereof, and for all other purposes,
and neither the Company nor the Warrant Agent shall be affected by any notice
to the contrary.
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ARTICLE III
Term and Exercise of Warrants
A. Warrant Price. Each Warrant shall, when countersigned by the
Warrant Agent, entitle the registered holder thereof, subject to the provisions
of such Warrant and of this Warrant Agreement, to purchase from the Company one
share of Common Stock at the price of $4.00 per share, subject to the
adjustments provided in Article IV hereof. The term "Warrant Price" as used in
this Warrant Agreement refers to the price per share at which Common Stock may
be purchased at the time a Warrant is exercised.
B. Duration of Warrants. A Warrant may be exercised only during
the period (the "Exercise Period") commencing on the date hereof and ending on
or before a date which is the sooner of (i) April 13, 1996 (the "Expiration
Date") or (ii) the date fixed for redemption of such Warrant as provided in
Article VI of this Warrant Agreement (the "Expiration Date"). Each Warrant not
exercised on or before the Expiration Date shall become void, and all rights
thereunder and all rights in respect thereof under this Warrant Agreement shall
cease at the close of business on the Expiration Date. The Company in its sole
discretion may
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extend the duration of the Warrants by delaying the Expiration Date.
C. Exercise of Warrants.
1) A Warrant, when countersigned by the Warrant Agent,
may be exercised by the registered holder thereof by
surrendering it, at the office of the Warrant Agent,
or at the office of its successor as Warrant Agent
with the subscription form, as set forth in the
Warrant and in substantially the form of Exhibit A
hereto, duly executed, and by paying in full, in
lawful money of the United States, in cash, good
certified check or good bank draft payable to the
order of the Company, the Warrant Price for each full
share of Common Stock as to which the Warrant is
exercised and any and all applicable taxes due in
connection with the exercise of the Warrant, the
exchange of the Warrant for the Common Stock, and the
issuance of the Common Stock.
2) As soon as practicable after the exercise of any
Warrant, the Company shall issue to the registered
holder of such Warrant a
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certificate or certificates for the number of full
shares of Common Stock to which he is entitled,
registered in such name or names as may be directed
by him, and if such Warrant shall not have been
exercised in full, a new countersigned Warrant for
the number of shares as to which such Warrant shall
not have been exercised.
3) All shares of Common Stock issued upon the proper
exercise of a Warrant in conformity with this Warrant
Agreement shall be validly issued.
4) Each person in whose name any such certificate for
shares of Common Stock is issued shall for all
purposes be deemed to have become the holder of
record of such shares on the date on which the
Warrant was surrendered and payment of the Warrant
Price was made, irrespective of the date of delivery
of such certificate, except that, if the date of such
surrender and payment is a date when the stock
transfer books of the Company are closed, such person
shall be deemed to have become the holder of such
shares at the close of business on the next
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succeeding date on which the stock transfer books are
open.
ARTICLE IV
Adjustments
A. Stock dividends - Split-ups. If after the date hereof, and
subject to the provisions of Section D of this Article IV below, the number of
outstanding shares of Common Stock is increased by a stock dividend payable in
shares of Common Stock or by a split-up of shares of Common Stock or other
similar event, then, on the date following the date fixed for the determination
of holders of Common Stock entitled to receive such stock dividend or split-up,
the number of shares issuable on exercise of each Warrant shall be increased in
proportion to such increase in outstanding shares and the then applicable
Warrant Price shall be correspondingly decreased.
B. Aggregation of Shares. If after the date hereof, and subject
to the provisions of Section D of this Article IV, the number of outstanding
shares of Common Stock is decreased by a consolidation, combination or
reclassification of shares of Common Stock or other similar event, then, after
the effective date of such consolidation, combination or reclassification, the
number of shares issuable on exercise of each Warrant shall be decreased in
proportion to such decrease in outstanding shares
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and the then applicable Warrant Price shall be correspondingly increased.
C. Reorganization, etc. If after the date hereof any capital
reorganization or reclassification of the Common Stock of the Company, or
consolidation or merger of the Company with another corporation, or the sale of
all or substantially all of its assets to another corporation or other similar
event shall be effected, then, as a condition of such reorganization,
reclassification, consolidation, merger, or sale, lawful and fair provision
shall be made whereby the Warrant holders shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions specified
in the Warrants and in lieu of the shares of Common Stock of the Company
immediately theretofore purchasable and receivable upon the exercise of the
rights represented thereby, such shares of stock, securities, or assets as may
be issued or payable with respect to or in exchange for a number of outstanding
shares of such Common Stock equal to the number of shares of such stock
immediately theretofore purchasable and receivable upon the exercise of the
rights represented by the Warrants had such reorganization, reclassification,
consolidation, merger, or sale not taken place, and in such event appropriate
provision shall be made with respect to the rights and interests of the Warrant
holders to the end that the provisions hereof (including, without limitation,
provisions for adjustments of the Warrant Price and of the number of shares
purchasable upon the exercise of the Warrants) shall
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thereafter be applicable, as nearly as may be in relation to any share of
stock, securities, or assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any such consolidation, merger, or sale unless
prior to the consummation thereof the successor corporation (if other than the
Company) resulting from such consolidation or merger, or the corporation
purchasing such assets, shall assume by written instrument executed and
delivered to the Warrant Agent the obligation to deliver to the Warrant holders
such shares of stock, securities, or assets as, in accordance with the
foregoing provisions, such holders may be entitled to purchase.
D. Notices of Changes in Warrant. Upon every adjustment of the
Warrant Price or the number of shares issuable on exercise of a Warrant, the
Company shall give written notice thereof to the Warrant Agent, which notice
shall state the Warrant Price resulting from such adjustment and the increase
or decrease, if any, in the number of shares purchasable at such price upon the
exercise of a Warrant, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based. Upon the
occurrence of any event specified in Sections A, B, or C of this Article IV,
then, in any such event, the Company shall give written notice in the manner
set forth above of the record date for such dividend, distribution, or
subscription rights, or the effective date of such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding up or issuance. Such notice
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shall also specify the date as of which the holders of the Common Stock of
record shall participate in such dividend, distribution, or subscription
rights, or shall be entitled to exchange their Common Stock for stock,
securities, or other assets deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
winding up or issuance. Failure to give such notice, or any defect therein
shall not affect the legality or validity of such event.
E. No Fractional Shares. Notwithstanding any provision contained
in this Warrant Agreement to the contrary, the Company shall not issue
fractional shares upon exercise of the Warrants. If, by reason of any
adjustment made pursuant to this Article IV, the holder of any Warrant would be
entitled, upon the exercise of such Warrant, to receive a fractional interest
in a share, the Company shall, upon such exercise round off the fraction to the
nearest full shares and issue in lieu of cash the additional shares.
F. Form of Warrant. The form of Warrant need not be changed
because of any adjustment pursuant to this Article IV, and Warrants issued
after such adjustment may state the Purchase Price and the same number of
shares as is stated in the Warrants initially issued pursuant to this Warrant
Agreement. However, the Company may at any time in its sole discretion make
any change in the form of Warrant that the Company may deemed appropriate and
that does not affect the substance thereof, and
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any Warrant thereafter issued or countersigned, whether in exchange or
substitution for an outstanding Warrant or otherwise, may be in the form as so
changed.
ARTICLE V
Transfer and Exchange of Warrants
The Warrant Agent shall register the transfer, from time to time, of
any outstanding Warrant upon the Warrant Register, upon surrender of such
Warrant for transfer, properly endorsed with signature properly guaranteed and
accompanied by appropriate instruction for a transfer. Upon any such transfer,
a new Warrant representing an equal aggregate number of Warrants shall be
cancelled by the Warrant Agent. The Warrant so cancelled shall be delivered by
the Warrant Agent to the Company from time to time upon request.
Warrants may be surrendered to the Warrant Agent, together with a
written request for exchange, and thereupon the Warrant Agent shall issue in
exchange therefor one or more new Warrants as requested by the registered
holder of the Warrants so surrendered, representing an equal aggregate number
of Warrants provided, however, that in the event that a Warrant surrendered for
transfer bears a restrictive legend, the Warrant Agent shall not cancel such
Warrant and issue new Warrants in exchange therefor until the Warrant Agent has
received an opinion of
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counsel for the Company stating that such transfer may be made and indicating
whether the new Warrants must also bear a restrictive legend.
The Warrant Agent shall not be required to effect any registration of
transfer or exchange which will result in the issuance of a warrant certificate
for a fraction of a Warrant.
No service charge shall be made for any exchange or registration of
transfer of Warrants.
The Warrant Agent is hereby authorized to countersign and to deliver,
in accordance with the terms of this Agreement, the Warrants required to be
issued pursuant to the provisions hereof, and the Company, whenever required by
the Warrant Agent, will supply the Warrant Agent with Warrants duly executed on
behalf of the Company for such purpose.
ARTICLE VI
Redemption
A. Redemption. The Warrants may be redeemed prior to the
Expiration Date, at the option of the Company as a whole at the office of the
Warrant Agent, upon the notice referred to in Section B of this Article VI, at
the price of $.01 per Warrant (the "Redemption Price"), provided that the
average "closing sale
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price" of the Common Stock has been at least $5.00 per share for the twenty
(20) trading days ending on the third day prior to the date on which notice is
given. The "closing sales price" shall mean the average of the closing bid
and asked price of the Common Stock as quoted by The NASDAQ Small Cap Market
or the closing sales price of such Common Stock if the principal market on
which such stock is traded is a stock exchange or The NASDAQ National Market
System. The Company may also redeem the Warrants at any other time with the
consent of the Underwriters.
B. Date Fixed for, and Notice of, Redemption. In the event the
Company shall elect to redeem all or any part of the Warrants, the Company
shall fix a date for the redemption. Notice of redemption shall be mailed by
the Company not later than the 30th day before the date fixed for redemption to
the registered holders of the Warrants to be redeemed at their last address as
they shall appear on the registration books.
C. Exercise after Notice of Redemption. The Warrants may be
exercised in accordance with Article III of this Warrant Agreement at any time
after notice of redemption shall have been given by the Company pursuant to
Section B of this Article VI and prior to the date fixed for redemption.
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ARTICLE VII
Other Provisions Relating to Right of Holders of Warrants
A. No Rights as Stockholder Conferred by Warrants. A Warrant
does not entitle the registered holder thereof to any of the rights of a
stockholder of the Company, including, without limitation, the right to receive
dividends, or other distributions, exercise any preemptive rights to vote or to
consent or to receive notice as shareholders in respect of the meetings or
shareholders or the election of directors of the Company or any other matter.
B. Lost, Stolen, Mutilated, or Destroyed Warrants. If any
Warrant is lost, stolen, mutilated, or destroyed, the Company and the Warrant
Agent may on such terms as to indemnify or otherwise as they may in their
discretion impose (which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination, tenor, and date
as the Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant
shall constitute an original contractual obligation of the Company, whether or
not the allegedly lost, stolen, mutilated, or destroyed Warrant shall be at any
time enforceable by anyone.
C. Reservation of Common Stock. The Company shall at all times
reserve and keep available a number of its authorized
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but unissued shares of Common Stock that will be sufficient to permit the
exercise in full of all outstanding Warrants issued pursuant to this Warrant
Agreement.
ARTICLE VIII
Concerning the Warrant Agent and Other Matters
A. Payment of Taxes. The Company will from time to time promptly
pay all taxes and charges that may be imposed upon the Company or the Warrant
Agent in respect of the issuance or delivery of shares of Common Stock upon the
exercise of Warrants, but the Company shall not be obligated to pay any
transfer taxes in respect of the Warrants or such shares.
B. Resignation, consolidation, or Merger of Warrant Agent.
(1) The Warrant Agent, or any successor to it hereafter appointed,
may resign its duties and be discharged from all further
duties and liabilities hereunder after giving sixty (60) days'
notice in writing to the Company. If the office of the
Warrant Agent becomes vacant by resignation or incapacity to
act or otherwise, the Company shall
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appoint in writing a successor Warrant Agent in place of the
Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after it has been
notified in writing of such resignation or incapacity by the
Warrant Agent or by the holder of a Warrant (who shall, with
such notice, submit his Warrant for inspection by the
Company), then the holder of any Warrant may apply to any
court of applicable jurisdiction for the appointment of a
successor Warrant Agent. Any successor Warrant Agent, whether
appointed by the Company or by such court, shall be authorized
to exercise corporate trust powers and subject to supervision
or examination by federal and state authority. After
appointment, any successor Warrant Agent shall be vested with
all the authority, powers, rights, immunities, duties and
obligations of its predecessor Warrant Agent with like effect
as if originally named as Warrant Agent hereunder, without any
further act or deed; but if for any reason it becomes
necessary or appropriate, the predecessor Warrant Agent shall
execute and deliver, at the expense of the Company, an
instrument transferring to such successor Warrant Agent all
the authority, powers, and rights of such predecessor Warrant
Agent hereunder; and upon
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request of any successor Warrant Agent the Company shall make,
execute, acknowledge, and deliver any and all instruments in
writing for more fully and effectually vesting in an
confirming to such successor Warrant Agent all such authority,
powers, rights, immunities, duties and obligations.
(2) In the event a successor Warrant Agent shall be appointed, the
Company shall give notice thereof to the predecessor Warrant
Agent and the Transfer Agent for the Common Stock not later
than the effective date of any such appointment.
(3) Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated or any corporation resulting
from any merger or consolidation to which the Warrant Agent
shall be a party shall be the successor Warrant Agent under
this Agreement without any further act.
C. Fees and Expenses of Warrant Agent.
(1) The Company agrees to pay the Warrant Agent
reasonable remuneration for its services as such Warrant Agent
hereunder and will reimburse the Warrant Agent upon demand for
all expenditures
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that the Warrant Agent may reasonably incur in the execution
of its duties hereunder.
(2) The Company agrees to perform, execute, acknowledge,
and deliver or cause to be performed, executed, acknowledged,
and delivered all such further and other acts, instruments,
and assurances as may reasonably be required by the Warrant
Agent for the carrying out or performing of the provisions of
this Warrant Agreement.
D. Liability of Warrant Agent.
(1) Whenever in the performance of its duties under this
Warrant Agreement the Warrant Agent shall deem it necessary or
desirable that any fact or matter be proved or established by
the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof
be herein specifically prescribed) may be deemed to be
conclusively provided and established by a statement signed by
the President of the Company and delivered to the Warrant
Agent. The Warrant Agent may rely upon such statement for any
action taken or suffered in good faith by it pursuant to this
provision of this Warrant Agreement.
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(2) The Warrant Agent shall be liable hereunder only for
its own gross negligence, willful misconduct or bad faith.
The Company agrees to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments,
costs and reasonable counsel fees, for anything done or
omitted by the Warrant Agent in the execution of this Warrant
Agreement except as a result of the Warrant Agent's gross
negligence, willful misconduct, or bad faith.
(3) The Warrant Agent shall have no responsibility with
respect to the validity of this Warrant Agreement or with
respect to the validity or execution of any Warrant (except
its countersignature thereof); nor shall it be responsible for
any breach by the Company of any covenant or condition
contained in this Warrant Agreement or in any Warrant; nor
shall it be responsible to make any adjustments required under
the provisions of Article III or responsible for the manner,
method, or amount of any such adjustment or the ascertaining
of the existence of facts that would require any such
adjustment; nor shall it by any act hereunder be deemed to
make any representation or warranty as to the authorization or
reservation of any shares of
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Common Stock to be issued pursuant to this Warrant Agreement
or any Warrant or as to whether any shares of Common Stock
will when issued be validly issued and fully paid and
nonassessable.
E. Acceptance of Agency. The Warrant Agent hereby accepts the
agency established by this Warrant Agreement and agrees to perform the same
upon the terms and conditions herein set forth and among other things, shall
account promptly to the Company with respect to Warrants exercised and
concurrently account for, and pay to the Company, all moneys received by the
Warrant Agent for the purchase of shares of the Company's Common Stock through
the exercise of Warrants.
ARTICLE IX
Miscellaneous Provisions
A. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns.
B. Notices. Any notice, statement or demand authorized by this
Warrant Agreement to be given or made by the Warrant Agent or by the holder of
any Warrant to or on the Company shall be sufficiently given or made if sent by
certified
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mail, postage prepaid, addressed (until another address is filed in writing by
the Company with the Warrant Agent), as follows:
The Producers Entertainment Group Ltd.
9150 Wilshire Blvd.
Beverly Hills, California 90212
Attn: Harvey Bibicoff
with a copy to:
Dempsey & Cross, P.C.
1925 Century Park East,
Suite 2350
Los Angeles, California 90067
Attn: Michael A. Cross, Esq.
Any notice, statement or demand authorized by this Warrant Agreement to be
given or made by the holder of any Warrant or by the Company to or on the
Warrant Agent shall be sufficiently given or made if sent by certified mail,
postage prepaid, addressed (until another address is filed in writing by the
Warrant Agent with the Company), as follows:
OTR/California Stock Transfer
1130 Southwest Morrison, #250
Portland, Oregon 92705
C. Applicable Law. The validity, interpretation, and performance
of this Warrant Agreement and of the Warrants shall be governed in all respects
by the laws of the State of California.
D. Persons having rights under this Agreement. Nothing in this
Warrant Agreement expressed and nothing that may be implied from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or
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corporation other than the parties hereto and the registered holders of the
Warrants and for the purposes set forth in Paragraph B of Article II hereof,
and Paragraph A of Article VI hereof, Meyerson, any right, remedy, or claim
under or by reasons of this Warrant Agreement or of any covenant, condition,
stipulation, promise or agreement hereof. All covenants, conditions,
stipulations, promises and agreements contained in this Warrant Agreement shall
be for the sole and exclusive benefit of the parties hereto and their
successors and assigns and of the registered holder of the Warrants.
E. Examination of Warrant Agreement. A copy of this Warrant
Agreement shall be available at all reasonable times at the office of the
Warrant Agent, for inspection by the registered holder of any Warrant. The
Warrant Agent may require any such holder to submit his Warrant for inspection
by it.
F. Counterparts, This Warrant Agreement may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and same instrument.
G. Effect of Headings. The Article and Section headings herein
are for convenience only and are not part of this Warrant Agreement and shall
not affect the interpretation thereof.
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IN WITNESS WHEREOF, this Warrant Agreement has been duly executed by
the parties hereto under their respective corporate seals as of the day and
year first above written.
Corporate seal
Attest: THE PRODUCERS ENTERTAINMENT
GROUP LTD.,
a Delaware corporation
____________________________________ ______________________________________
Terri MacInnis, Assistant Harvey Bibicoff,
Secretary Chairman of the Board
Corporate seal
Attest: OTR/CALIFORNIA STOCK TRANSFER
____________________________________ By: __________________________________
Officer
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<PAGE> 1
EXHIBIT 10.2
FIRST AMENDED
AGREEMENT OF RESTRUCTURING
AND
SETTLEMENT
This First Amended Agreement of Restructuring and Settlement
("Agreement") replaces and supersedes in its entirety the Agreement of
Restructuring and Settlement made and entered into as of February 27, 1995,
among Drew S. Levin, an individual ("Levin"), The Producers Entertainment Group
Ltd., a Delaware corporation ("TPEG") and the TPEG subsidiary now known as DSL
Productions Inc., a Delaware corporation and its affiliates (collectively
"DSL") with respect to the following facts:
RECITALS
On May 19, 1994, TPEG acquired DSL. TPEG and DSL are engaged in the
acquisition, development, production and distribution of dramatic, documentary,
instructional and comedy series, as well as movies for television and feature
films.
As of May 19, 1994, Levin and DSL Productions Inc. entered into an
employment agreement ("Employment Agreement") pursuant to which Levin was
employed as President and Chief Executive Officer of DSL Productions Inc., on
the terms and conditions set forth therein. Since May 19, 1994, Levin and DSL
Productions, Inc. entered into a further agreement by which DSL Productions,
Inc. agreed to pay Levin's compensation under the Employment Agreement to DSL
Entertainment, Inc., Levin agreed to provide his services through that company
and Levin agreed to look solely and only to DSL Entertainment, Inc. for payment
of his compensation under the Employment Agreement.
The parties agree that in the interests of TPEG and its shareholders,
DSL should be restructured and the Employment Agreement terminated, that the
parties should release each other from certain claims, duties and obligations
and that the parties should enter into a further business relationship, all as
set forth herein. Therefore, as of April 20, 1995, the parties replace that
certain Agreement of Restructuring and Settlement entered into as of February
27, 1995, with this Agreement, which supersedes in all respects the Agreement
of Restructuring and Settlement entered into as of February 27, 1995.
AGREEMENT
1. On each of the 15th of February, March and April, 1995, DSL
paid DSL Entertainment, Inc. one-third of the sum of $91,250.00 for the
services of Levin, the total of $91,250.00 being in complete, final and full
settlement of all compensation that would be due and owing to Levin under the
Employment Agreement from February 15, 1995, forward. Levin acknowledges and
agrees that TPEG's total payment of $91,250.00 to DSL Entertainment, Inc. was
in complete, final and full satisfaction of,
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<PAGE> 2
and discharged, any and all obligations TPEG had to Levin under the Employment
Agreement, whether for compensation or otherwise. Subject only to the
exceptions set forth in this Agreement, as of February 27, 1995, the Employment
Agreement was terminated, and is of no further force or effect, and no party
thereto owes any duty or obligation thereunder to any other party thereto other
than specifically referred to herein.
2. On February 27, 1995, at his own expense Levin formed a new
corporation under California law known as DSL Entertainment Group, Inc.
("DEG"), Federal Tax ID number 95-4519215, for the purpose of developing,
producing, marketing, distributing and otherwise exploiting television programs
and other entertainment properties. Pursuant to the Agreement of Restructuring
and Settlement entered into as February 27, 1995, TPEG lent DEG the sum of
$151,870.15, to be repaid with interest at a variable rate calculated monthly,
equal to the Bank of America Prime Rate plus 2%, on the sooner of May 15, 1997,
or DEG obtaining additional Capitalization. DEG repaid TPEG, or caused TPEG to
be repaid, in full on April 21,1995, Levin was issued 801 of DEG's 1,000
authorized shares of stock, TPEG was issued 199 of DEG's authorized shares of
stock, an Investors' Agreement and a Shareholders' Agreement were agreed to, it
was agreed the authorized and issued shares of DEG stock would bear a legend
restricting transfer, it was agreed the DEG Articles of Incorporation would be
amended and it was agreed DEG's then sole shareholder and director would adopt
certain resolutions. Attached hereto as Exhibits "A," "B," "C," "D," "E,"
"F," "G," "H," "I," "J" and "K," respectively, are copies of the Articles of
Incorporation, Certificate of Amendment of Articles of Incorporation, Written
Consent of Sole Director, Shareholders Agreement, Written Consent of Sole
Director in Lieu of First Meeting, By-laws, Notice of Transaction, Investor
Representation Letters, Certificate of Secretary, Levin Share Certificate and
TPEG Share Certificate, none of which shall be changed or modified in any way
without TPEG's express written permission.
During its first year of operation, beginning with March, 1995, DEG
shall provide TPEG on a monthly basis its internal operating statements,
consisting of a balance sheet and income statement specifically listing each
item of income, and shall provide on a quarterly basis its profit and loss
statement. The monthly statements shall be delivered to TPEG within fifteen
(15) calendar days of the last calendar day of the month being reported on.
The quarterly statements shall be delivered to TPEG within twenty (20) calendar
days of the last calendar day of the quarter being reported on. Thereafter,
all such operating statements shall be delivered to TPEG quarterly, also within
twenty (20) calendar days of the last calendar day of the quarter being
reported on.. DEG shall provide TPEG annual financial statements approved by a
certified public accountant. These shall be delivered to TPEG within ninety
(90) calendar days of the last calendar day of the year being reported on.
3. TPEG's shares of DEG common stock shall have full piggyback
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<PAGE> 3
rights, so that in the event of any registration of any securities by DEG for
sale to the public, TPEG's shares of DEG common stock shall be registered and
thereby made salable to the public, also, all at DEG's expense and without
expense to TPEG. TPEG agrees that in the event of a public offering, its
common stock in DEG, which is required to be registered as part of this
transaction, will be subject to a 180 day lockup, or lockup of any shorter
duration applicable to shares of DEG stock now or hereafter owned by Levin, to
be set forth in the standard lockup agreement normally and reasonably required
by DEG's underwriters.
4. Beginning February 15, 1995, and continuing through May 15,
1995, TPEG shall provide to DEG office space in its office suite at 9150
Wilshire Boulevard, Suite 205, Beverly Hills, California 90212-3414, and use of
telephones, fax machines, office equipment and furniture, for a fee of $6,000
per month, payable $3,000 on the 15th of February, March and April, 1995. The
telephone and fax costs are not to exceed $2,000 per month. If they do, the
excess is due and payable by DEG to TPEG within ten (10) calendar days of
presentation of the bills to DEG. The remaining rent of $3,000 per month shall
be added to the principal of the loan referred to in paragraph 2, above, and
shall be paid as additional principal, plus interest, as provided in paragraph
2. DEG shall establish its own vendor accounts for all services other than
telephones and faxes, and shall be solely responsible for paying all such
vendors. Levin shall personally guarantee all of the payment obligations of
DEG as set forth in this paragraph 4. Any breach by DEG of its obligations or
by Levin on his guaranty shall be a default on all of their other obligations
referred to in this Agreement. The parties to this Agreement acknowledge DEG
failed to make its February 15, March 15 and April 15 rent payments to TPEG,
and that the $9,000 in rent that was to be paid in February, March and April
shall be added to the sum deemed to have been disbursed by TPEG pursuant to the
loan obligation created by paragraph 2 of this Agreement.
5. TPEG represents and warrants it is the sole and only owner of
a television series commonly known as "Simply Style," and that it has not
encumbered or hypothecated all or any of its rights in or to the series.
The parties acknowledge Levin has formed Simply Style Productions,
Inc., a California corporation Federal ID No. 95-4516533, for the purpose of
accepting the assignment of rights referred to in this paragraph 5.
Immediately following receipt by TPEG from The Learning Channel of the
entire first cycle license fee (currently in the sum of $813,423.00) for
"Simply Style, " the receipt by TPEG from Unapix of its entire distribution
advance (currently in the sum of $135,000.00) for "Simply Style," the receipt
by TPEG from The Learning Channel and Unapix of written confirmation that
delivery of each and every delivery element of the initial sixty (60) episodes
of "Simply Style" has been made as required by all agreements governing or
relating to those episodes and the receipt by TPEG from The Learning Channel
and Unapix of their written confirmation that the performance of Simply Style
Productions, Inc. in producing the initial sixty (60) episodes of "Simply
Style" was of sufficient quality to induce them to contract directly with
Simply Style
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Productions, Inc. to produce additional episodes of "Simply Style," sequels of
"Simply Style" or other exploitations of "Simply Style," and to release TPEG
from any and all further or other obligations relating to "Simply Style" TPEG
shall assign to Simply Style Productions, Inc., by a form attached as Exhibit
"L," all right, title and interest in and to "Simply Style." In exchange for
this assignment, Simply Style Productions, Inc., shall assign to TPEG in
perpetuity five percent (5%) of the gross revenues from any and all advances,
guarantees, royalties, pre-sales, sales, license fees, distribution fees
(excluding only fees of unrelated third party distributors), delivery fees or
payments, barter fees or payments, merchandising revenues and any and all other
revenue or consideration of any kind derived from or realized from the
production, exhibition, licensing or other exploitation or turning to account
or profit (collectively "Gross Revenues") of any or all of the rights in or to
"Simply Style" all without deduction of any kind, received by or credited to
DEG, Simply Style Productions, Inc., its or their affiliates, Levin, or any
other business entity in which Levin has or had any interest or from which he
derives any benefit, consideration, expense, income, reimbursement or payment
of any kind or description. For the purposes of "Simply Style," only, there
shall be excluded from Gross Revenues the $813,423.00 in first cycle license
fees due from The Learning Channel.
Until the effective date of TPEG's assignment to Simply Style
Productions, Inc., pursuant to Exhibit "L," TPEG shall receive all income and
revenue derived from, relating to or as a result of "Simply Style." Simply
Style Productions, Inc. has no right to participate in or receive any of that
income or revenue.
TPEG's 5% of Gross Revenues in "Simply Style," and repayment of the
principal and interest on the "Simply Style" production loan shall be noticed,
perfected or secured, as the case may be, by UCC-1s and copyright mortgages
perfecting liens on " Simply Style, " all in a form to be prepared by TPEG and
executed by or on behalf of Simply Style Productions, Inc., concurrent with the
execution of this Agreement. Simply Style Productions, Inc., may not and will
not assign "Simply Style" or any of the rights thereto or therein to any other
person or entity without TPEG's prior written approval, and in no event until
such time, if ever, that TPEG releases the last of the UCC-1s and reconveys the
last of the copyright mortgages. Levin shall personally guaranty this promise
of Simply Style Productions, Inc. DEG shall give a corporate guaranty of this
promise. Any breach of this promise or guaranty shall be a default of all
other obligations of Simply Style Productions, Inc., DEG and Levin referred to
in this Agreement. When the last of the UCC-1s is released and the last of the
copyright mortgages or liens reconveyed, the series may then be assigned
freely, without restriction by this Agreement.
As additional security for repayment, Simply Style Productions, Inc.,
shall sign irrevocable instructions to all distributors or licensees of "Simply
Style," including but not limited to The Learning Channel and Unapix, directing
that any and all payments they make for any or all rights in or to " Simply
Style, " including but not limited to first cycle license fees or distribution
advances, shall be made directly to TPEG, and not to Simply Style Productions,
Inc., DEG or any other entity or person, until TPEG has been
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paid all sums of principal plus interest due it under this paragraph 5, and
TPEG has delivered a written and signed release of such irrevocable
instructions. This written release shall not release TPEG's right to direct
payment from distributors, including but not limited to The Learning Channel
and Unapix, of TPEG's five percent (5%) participation in Gross Revenue, which
right shall not be terminable for any reason.
TPEG has agreed to lend to Simply Style Productions, Inc., the cost of
producing the first 60 episodes of "Simply Style," repayment of principal and
interest on which loan shall be guaranteed by DEG and Levin. Any such loan or
loans may be extended on condition that DEG as guaranteed by Levin, Simply
Style Productions, Inc., its assignee or affiliate, shall assign to TPEG as
additional security for repayment of principal and interest all "Simply Style"
Gross Revenue without deduction, from which TPEG shall deduct until it is paid
in full all principal on any production loan or loans, with interest thereon at
the Bank of America Prime Rate plus 2% and on condition that Simply Style
Productions, Inc., render weekly production and cost reports to TPEG in a
format and with such detail as directed by TPEG and on condition that Simply
Style Productions, Inc., advise TPEG of delivery of each episode with delivery
to be confirmed in writing by The Learning Channel and Unapix Entertainment.
Simply Style Productions, Inc. hereby grants to TPEG a first priority security
interest in any and all rights to "Simply Style" which security interest will
be noticed, perfected or secured by UCC-1s and copyright mortgages or liens,
all in a form to be prepared by TPEG and signed by Simply Style Productions,
Inc.
To the extent it has any interest therein, Simply Style Productions,
Inc., assigns as additional security for repayment of principal and interest on
the production loan referred to above, the first cycle license fees of
$813,423.00 payable to TPEG pursuant to and under that certain license
agreement between TPEG and The Learning Channel entered into and dated as of
October 25, 1994, and the distribution advance of $135,000 payable to DEG
pursuant to and under that certain distribution agreement (now in draft form)
between TPEG and Unapix Entertainment to be entered into and dated as of
February 6, 1995. These assigned funds will be held by TPEG in a separate,
segregated interest bearing account, and used by TPEG to pay actual costs of
production without any payment by TPEG for any charge by Simply Style
Productions, Inc., DEG or any other person or entity for administration or
management, and without any payment by TPEG for any charge for any services of
Levin. If after Simply Style Productions, Inc. advises TPEG that it believes
production of the initial sixty episodes of "Simply Style" are complete there
are any funds left over from the Learning Channel or Unapix advances, those
funds shall be held by TPEG until Simply Style Productions, Inc. has made
complete, full and accepted delivery of the initial 60 episodes of "Simply
Style" to The Learning Channel and Unapix , which acceptance shall be
established only by written confirmation of same delivered to TPEG by The
Learning Channel and Unapix, respectively. Pending delivery of such written
acceptances, TPEG shall receive and hold any and all "Simply Style" Gross
Revenue from The Learning Channel, Unapix or any other source, and shall pay
over to Simply Style Productions, Inc. its share of Gross Revenue only upon
TPEG's receipt of such written acceptances, and only after it has been paid its
5% participation in Gross Revenue without deduction and been repaid
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principal with interest on any production loan or loans and on the loan
referred to in paragraph 2 of this Agreement.
The $135,000 Unapix distribution advance is part of Gross Revenue
realized from "Simply Style" subject to all charges, liens and participations
set forth in this paragraph 5.
A cash flow schedule for production of "Simply Style" is attached.
TPEG's production loan funding commitment is to be in accordance with that
schedule. TPEG's production loan commitment requires it to fund in the last
full calendar week of the applicable calendar month the amount shown on the
schedule, although if TPEG elects to fund more often than monthly it shall not
be required to fund more in any applicable calendar month than the sum shown on
the schedule. If the cost of production in any of the calendar months
February, March, April or May, 1995 exceeds one hundred ten percent (110%) of
the total budgeted cash flow amount for that month as shown on the attached
schedule, TPEG shall have the right to take over production of "Simply Style"
to the exclusion of Simply Style Productions, Inc., and complete production and
delivery. In the event of any such takeover, Simply Style Productions, Inc.,
will pay, and Levin personally guarantees Simply Style Productions, Inc., will
pay to TPEG, any sum TPEG has to pay in excess of the $813,423.00 first cycle
license fee paid by the Learning Channel plus the $135,000 Unapix distribution
advance, less any payments made to James Coane under paragraph 18 of this
Agreement, as required by the Learning Channel or Unapix to complete production
and delivery of "Simply Style." In the event of any such takeover, TPEG shall
have the right to foreclose on its security interests as noticed or evidenced
by its UCC-1 and copyright mortgages and liens, and become owner of "Simply
Style" and all the rights therein or thereto.
Any breach by Simply Style Productions, Inc., of any of its promises,
or by DEG or Levin of any of their guarantees as referred to in this paragraph
5 shall be defaults by each of them of all of their other obligations referred
to in this Agreement.
All further obligations in connection with the development or
production of all 60 episodes of "Simply Style" including but not limited to
the development, production, financing, insurance, delivery to and acceptance
by The Learning Channel and Unapix of all 60 episodes of the series are
obligations of Simply Style Productions, Inc., which shall be personally
guaranteed by Levin in a guaranty in the form attached as Exhibit "M" and
guaranteed by DEG in a corporate guaranty in the form attached as Exhibit "N."
Simply Style Productions, Inc., shall assume and be solely responsible for all
obligations of the license and distribution agreements with The Learning
Channel and Unapix, including but not limited to development, production,
financing, insurance and delivery, and The Learning Channel and Unapix
Entertainment shall give TPEG a novation by which they agree to look solely and
only to Simply Style Productions, Inc. The parties acknowledge the novations
might not be given until delivery of all 60 episodes, and, indeed, might not be
given at all. No transfer of any rights in or to "Simply Style" is required to
be made, no security interest noticed or evidenced by any UCC-1 is required to
be released and no copyright mortgage or lien is required to be
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reconveyed unless and until the novations are given.
Simply Style Productions, Inc., shall have all AFTRA and other guild
and union responsibilities in connection with the series.
Leah Feldon's agreement and all of the obligations of DSL thereunder
shall be assigned to Simply Style, Inc. and as a condition of TPEG making the
loan referred to in paragraph 2 of this Agreement, she shall release DSL from
further liability under her employment agreement.
Simply Style Productions, Inc. shall account to and pay TPEG any part
of its Gross Revenue participation that is not paid direct, on a monthly basis
during the first year following delivery of the first episode of the series,
and quarterly thereafter.
TPEG's 5% participation in Gross Revenues without deduction shall be
paid to and taken by TPEG before Gross Revenues are used to repay TPEG
principal with interest on any production loan or other loans it makes, so that
TPEG's 5% participation is in 100% of Gross Revenue without deduction, and
repayment of principal and interest on the production or other loan is taken
from the remaining 95% of Gross Revenue, also without deduction.
6. TPEG or DSL, as the case may be, own the projects in
development listed on the first amended Exhibit "O," copy attached. TPEG, DSL
and Levin warrant and represent they have not given, made or permitted any
assignments or hypothecations of all or any of the rights in or to all or any
of the projects in development. In exchange for TPEG retaining 5% of the Gross
Revenue without deduction, derived from all or any part of the projects in
development, or the proprietary rights therein, TPEG or DSL, as the case may
be, shall assign any and all rights in the projects in development (excepting
only "Laurie Cooks Light & Easy," dealt with separately below) to DEG or its
designee on the execution and delivery to TPEG by the assignee of UCC-1s,
copyright mortgages or other lien documents in a form to be prepared by TPEG
evidencing or giving notice of the securing of its participation in Gross
Revenues.
Notwithstanding anything to the contrary in this Agreement, in
exchange for TPEG retaining 5% of the Gross Revenue without deduction derived
from the exercise, exploitation or other turning to account of the rights
described in this grammatical paragraph, on the execution by DEG or other
assignee of UCC-1s, copyright mortgages or other lien documents evidencing or
giving notice of the securing of TPEG's participation in Gross Revenue, TPEG
shall assign to DEG or its designee the right to develop or license, and sell
by infomercials of not less than 30 minutes' length or by direct marketing,
cooking utensils, pots, pans, cookbooks, cooking clothes, foodstuffs, spices,
additives and cooking implements under or bearing the name "Laurie Grad,"
"Laurie Cooks Light & Easy," "Laurie Grad Cooks" or "Laurie Cooks." Without in
any way negating or limiting the generality of the restricted transfer of the
rights set forth in this grammatical paragraph, examples of what is not
transferred include
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any rights in or relating to the "Laurie Cooks Light & Easy" series, additional
episodes of the series, videocassettes or disks, computer or laser disks, audio
cassettes or disks, books, newspaper or magazine columns, computer on-line or
internet services or features, calendars, posters or any other right to use all
or any of the name or likeness of Laurie Grad. Direct marketing as referred to
herein is limited and restricted to direct-to-consumer mail and point-of-sale
advertisements. Other than the aforementioned infomercial and direct marketing
rights, DEG or its designee are not to advertise the products in any way
without TPEG's prior written permission, which may be withheld for any reason,
whether reasonable or unreasonable.
Notwithstanding anything to the contrary in this paragraph 6, TPEG's
participation in Gross Revenues from the Mary Lou Retton and Victoria Jackson
projects listed on Exhibit "O" shall be two and one-half percent (2 1/2%) until
DEG has recouped its actual cost of production net of financing charges or
costs, and net of any overhead charges by DEG. Once DEG has recouped its
actual costs of production as defined herein, TPEG shall receive all of any
advance, guarantee, licensing fee or other consideration paid for all or any
rights in these projects until it has received a total of five percent (5%) of
Gross Revenue, after which TPEG shall receive five percent (5%) of Gross
Revenues.
In the event the development projects entitled "Hercules" or "Captain
Blood" are licensed for domestic broadcast over a free, over-the- air US
television network, currently consisting of CBS, NBC, ABC, Fox, UPN and the
Warner Bros Network, there shall be excluded from Gross Revenues for those
projects, only, any license fee paid by CBS, NBC, ABC or for the first two
domestic runs, or by UPN or the Warner Bros. Network for the domestic runs
initially licensed. All other revenues, foreign or otherwise, shall be treated
as Gross Revenues for the purpose of this paragraph 6.
DEG and its designee shall account to and pay TPEG separately with
respect to each of the projects in development on a monthly basis during the
first year after receipt by DEG or its designee of its first revenue on each
such project, and quarterly thereafter.
7. TPEG has an overall agreement with Stockton Briggle
Productions, Inc. ("Briggle"). Briggle has developed a project currently
entitled "Desperate Search: The Mike Balcom Story" which project is owned by
TPEG. In consideration of TPEG assigning to DEG all of its right, title and
interest in and to this project, and in consideration of TPEG assigning to DEG
all of its rights in the overall agreement with Briggle, DEG shall assume all
of TPEG's obligations to Briggle, including but not limited to TPEG's
obligation to pay Briggle a continuing guarantee, and shall obtain a novation
from Briggle by which Briggle agrees to look solely to DEG and not to TPEG
under the overall agreement. The sole exception shall be Stockton Briggle's
continuing obligation to render services to TPEG, whether those services are
rendered directly or through Briggle, in the event the project known as
"Helpless" goes into production. Stockton Briggle's obligation shall be set
forth in a separate agreement to be negotiated
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and entered into with TPEG including, among other terms, that during
development no other services are to interfere with his development obligation
to TPEG. During post-production he is to be non-exclusive but first priority
to TPEG, and during preproduction, and production, until delivery of the
picture to the network, he is to be exclusive to TPEG, provided during the
exclusive period he may render development services to DEG provided the
rendering of those services does not interfere with his preproduction and
production obligations to TPEG. The delivery of this separate agreement to
TPEG is a condition to TPEG's obligation to make the loan referred to in
paragraph 2 of this Agreement.
In further consideration of TPEG's agreements to assign as set forth
in this paragraph 7, TPEG shall retain 5% of the Gross Revenues without
deduction of or from "Desperate Search: The Mike Balcom Story" excluding only
the initial domestic run license fee paid by a free, over-the-air US television
network currently consisting of CBS, NBC, ABC, FOX, UPN and the Warner Bros.
Network. All other revenues, foreign or otherwise, shall be treated as Gross
Revenues for the purpose of this paragraph 7. TPEG's Gross Revenue
participation shall be secured by UCC-1s and copyright mortgages or liens.
In further consideration of TPEG's agreements to assign as set forth
in this paragraph 7, TPEG shall have the unrestricted right to the return of
the money advanced by it to ABC in connection with "Desperate Search: The Mike
Balcom Story," and which is has asked or will ask ABC to repay.
8. DEG shall have the sole and exclusive right to act as TPEG's
agent in soliciting and securing sponsors or underwriters in connection with
the exhibition or other exploitation by PBS of that certain series known as
"Home Green Home." TPEG's appointment of DEG as its agent shall be in the
form attached as Exhibit "P," shall be for this series only and shall terminate
on the sooner of 75 days before the initial broadcast of the initial episode
without sponsors or underwriters having been secured, or in the event sponsors
or underwriters are secured, the final broadcast of the final episode at the
end of PBS's last run of the last episode of the series during the initial
license period, on which any sponsor or underwriter procured by DEG
participates. In the event that DEG secures sponsors or underwriters, DEG
shall be entitled to receive from TPEG 50 % of TPEG's actual receipts from such
sponsors or underwriters without deduction for DEG fees or expenses, after
deduction by TPEG of the cost of integrating sponsorship or underwriting spots
into the episodes.
In addition, if DEG has obtained sponsors or underwriters at least 75
days before the initial broadcast of the initial episode, DEG shall have the
sole and exclusive right to act as TPEG's agent with respect to exploiting
TPEG's merchandising and direct marketing rights, at a commission of 50 % of
the net proceeds actually received by TPEG in connection with or as a result of
such exploitation. DEG's appointment as TPEG's agent for this purpose shall be
in the form attached as Exhibit "Q."
In the event DEG secures sponsors or underwriters for each episode
during
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the initial license period of "Home Green Home" on PBS, DEG shall have the
first opportunity to negotiate with TPEG to participate as sales agent on the
same basis as set forth herein for further episodes or remakes. This first
right to negotiate is not to be construed or taken as a guarantee, promise or
commitment that DEG will be allowed by TPEG to participate in any further
episodes or remakes, but only that the parties shall negotiate with one another
on that subject before TPEG negotiates with anyone else.
Any and all agreements for sponsorship, underwriting, merchandising or
marketing must be approved in advance in writing by TPEG. Any and all payments
made by any such sponsor or underwriter, or in connection with or for any such
merchandising or marketing efforts or rights, shall be made directly to TPEG by
the sponsor, underwriter or acquirer of rights, without deduction, and shall
not be made to or through DEG or any other intermediary. TPEG shall then
account and pay to DEG as set forth in this paragraph 8.
TPEG shall account and pay monthly during the first year beginning
with the first run, and quarterly thereafter. If there are no Gross Revenues
for six (6) consecutive months, TPEG thereafter is required to report and pay
on a semi-annual basis, only.
9. At the time Levin and TPEG signed the Employment Agreement,
and as part of the Employment Agreement, Levin was granted options to purchase
400,000 shares of TPEG Common Stock at an exercise price of $2.70 per share.
Levin's options to purchase these 400,000 shares vested as of May 19, 1994. As
of May 19, 1994, pursuant to the Employment Agreement, TPEG lent Levin the sum
of $270,000. As partial security for repayment of the $270,000 loan, Levin
gave TPEG a Collateral Assignment and Stock Pledge Agreement, creating in TPEG
a secured interest in Levin's options to purchase the 400,000 shares of TPEG
stock at $2.70 per share. Notwithstanding that the Company's stock option
plan requires a departing employee exercise his or her options to buy TPEG
stock no later than 90 days after his or her departure from the Company, TPEG
and Levin agree that TPEG shall extend to December 31, 1997 Levin's time to
exercise his options to buy the 400,000 shares of Company stock. TPEG and
Levin acknowledge and agree that the Company's security interest in Levin's
options as set forth in the Collateral Assignment and Stock Pledge Agreement
remains in full force and effect, and shall remain in full force and effect
until December 31, 1997. Levin and TPEG acknowledge and agree that if the
price of a share of TPEG common stock rises above Levin's $2.70 per share
exercise price at any time before December 31, 1997, TPEG shall have the right
to require Levin to exercise the options so that TPEG may repay itself all or
part of the $270,000 lent to Levin, plus interest, and repay itself the other
sums referred to in this Agreement, and that if Levin fails or refuses to
exercise his options, TPEG may do it in his name. If at the time of any
exercise of these options to purchase 400,000 shares of TPEG stock, any sum of
principal or interest referred to in this Agreement is unpaid, TPEG shall have
the right to apply all proceeds from the sale of the shares of stock that
exceed the amount needed
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to repay itself the $270,000 principal plus interest thereon, to pay itself
unpaid principal and interest on the other money obligations referred to in
this Agreement, even if not yet due. After repayment to TPEG out of the
proceeds of the sale of the stock of any and all sums referred to in this
Agreement, any money left over from the sale of the stock shall go 50% to TPEG
and 50% to Levin.
10. Levin acknowledges that it is an important consideration to
TPEG, that he enter into and do business through DEG and its affiliates,
including but not limited to Simply Style Productions, Inc., that he do
business through those companies for a reasonable period of time and that
during that time he do business through no other company or companies, through
no other partnership and for or through no other business entity. Levin
warrants and represents to TPEG and DSL that he acknowledges and understands
the importance to TPEG and DSL that he do business only through DEG and its
affiliates, or Simply Style Productions, Inc. If at any time before December
31, 1995, that TPEG is still owed any performance under this Agreement by
Levin, by DEG, by any of DEG's affiliates or by Simply Style Productions, Inc.,
Levin ceases or stops doing business through those companies, or Levin does
business through any other company, partnership or business entity without the
prior written permission of TPEG, all of the obligations that Levin, DEG or its
affiliates or Simply Style Productions, Inc. owe to TPEG or DSL, as the case
may be, including but not limited to the obligation to repay loans, shall be
accelerated, any money owed shall become immediately due and payable and all
projects, properties or rights referred to in this Agreement shall revert to
TPEG.
11. As a condition to TPEG's obligation to release its security
interests in Levin's home and its security interests in Levin's stock in DEG,
Levin shall furnish to TPEG releases signed by all employees of DSL who are to
become employees of DEG or its affiliates, and by all employees of Briggle,
releasing TPEG from any and all claims for compensation, wages or expense
reimbursements. The sole exception to the complete release to be provided by
Stockton Briggle shall be his continuing obligation to provide services in the
event the project known as "Helpless" goes into production.
12. In the event "Helpless" is produced TPEG shall use its best
efforts to obtain network or buyer approval to accord Levin a complimentary
credit as Executive Producer, and if approval is given the credit shall be
accorded, although Levin acknowledges he shall play no further part in the
development or production of the project, and he agrees he will attend no
development, production or other meetings on the project. In the event
"Desperate Search: The Mike Balcom Story" is produced, DEG shall use its best
efforts to obtain network or buyer approval to accord Harvey Bibicoff a credit
as Executive Producer, and if approval is given the credit shall be accorded,
although Bibicoff acknowledges he shall play no further part in the development
or production of the project, and he agrees he will attend no development,
production or other meetings on the project. Levin and TPEG acknowledge that
he, DEG and TPEG will use their best efforts to obtain separate or shared
corporate credits on each project. TPEG and Levin acknowledge that actually
obtaining any credit referred to in this
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paragraph 14 is subject to the approvals of third parties, such as networks or
other buyers over whom he, DEG and TPEG have no authority or control, and that
the granting of such credits is not guaranteed.
13. As set forth in more detail in the Sales Agency Agreement
attached to this Agreement as Exhibit "R," DEG shall have the right for one
year from the date of this Agreement to act as TPEG's worldwide sales
representative on all projects set forth in the text of the Sales Agency
Agreement, for fifteen percent (15%) of the domestic license fees and fifteen
(15 %) of the foreign license fees paid by any network or other buyer. As set
forth in more detail in Exhibit "R" DEG has no authority to accept any sale or
license proposal without TPEG's prior written approval, DEG is to pay all of
its own costs and expenses as sales agent, except those approved in writing by
TPEG before they are incurred, TPEG shall provide certain product reels and
advertising materials and pay certain direct expenses of or related to
distribution, DEG has the right to extend the Sales Agency Agreement for one
year providing it is not in breach of the Sales Agency Agreement or this
Agreement and providing the Sales Agency Agreement has not been terminated,
such right to extend to be exercised within thirty (30) calendar days before
the end of the first year TPEG shall account and pay to DEG monthly. Any sale
or license of any right or rights in or to any of the projects listed in
Exhibit "R" made or entered into on or before February 27, 1995, shall not be
the subject of a commission by DEG under this paragraph 15 or the Sales Agency
Agreement, or otherwise the subject of any commission, sales fee or expense
claim by DEG or Levin. Any and all payments made for the distribution, license
or purchase of any right or rights in or to any of the projects listed on
Exhibit "R" shall be made directly to TPEG by the distributor, licensee or
buyer and shall not be made to or through DEG or any other intermediary. TPEG
shall then account and pay to DEG as provided in this paragraph 13 and the
Sales Agency Agreement.
14. TPEG, Levin and others are defendants in that certain lawsuit
known as "DSL Entertainment, A Joint Venture, a California joint venture,
Plaintiff, vs. DSL Production, Inc., a California corporation, et. al." Los
Angeles County Superior Court Case No. BC 113578 (the "Kagan Lawsuit"). TPEG
has paid to defend all defendants, including Levin, in the Kagan Lawsuit. TPEG
is willing to continue paying its attorneys to defend Levin and all other
defendants in the Kagan Lawsuit, on condition that Levin cooperate in full with
defense counsel and TPEG in defending the Kagan Lawsuit, on condition that if
any judgment is entered against Levin only in the Kagan Lawsuit he shall pay
all of such judgment, on condition that he shall pay any judgment in the Kagan
Lawsuit against him for punitive damages, on condition that if any judgment in
the Kagan Lawsuit, is entered against TPEG only, or against any combination of
TPEG, DSL and Levin jointly, TPEG shall pay the first $80,000 of any such
judgment, Levin shall pay the first $12,500 of any such judgment that exceeds
$80,000, TPEG shall pay the next $12,500 of any such judgment that exceeds
$80,000 , and Levin and TPEG each shall pay one-half of any such judgment that
exceeds $105,000 and on condition that if Levin decides he wants separate
counsel, Levin shall pay all of the fees and costs for such counsel and TPEG
shall have no responsibility therefore notwithstanding any argument or claim of
Levin that that he was entitled by contract or law to be defended,
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indemnified or held harmless by TPEG or DSL, all of which arguments or claims
are waived by Levin. TPEG agrees to use its best efforts to settle the Kagan
Lawsuit. Any settlement of the Kagan Lawsuit shall be paid by the parties to
this Agreement as though the settlement was a judgment against TPEG, only, with
the same payment sharing as set forth in this paragraph 14.
If TPEG realizes any money over and above principal and interest on
the $270,000 loan extended to Levin pursuant to the Employment Agreement,
repayment of which is referred to in Paragraph 9 of this Agreement, that excess
shall be first applied to satisfy or make reimbursement for payments in
satisfaction of any judgment that has been entered in the Kagan Lawsuit in
excess of $30,000, shall then be applied to reimburse TPEG for its fees and
costs incurred in defending the Kagan Lawsuit, and thereafter shall be applied
to the balance of the money obligations owed to TPEG under this Agreement.
TPEG, DSL and Levin acknowledge they have been represented in the
Kagan Lawsuit by Dempsey & Cross, P.C., pursuant to a written waiver of any
conflict of interest claim. TPEG, DSL and Levin acknowledge that Dempsey &
Cross, P.C., acting solely and only as counsel for TPEG and DSL, have prepared
this Agreement, and that at all times in connection with this Agreement Dempsey
& Cross, P.C., have acted as counsel to and represented TPEG and DSL, and not
Levin.
At all times until April 17, 1995, in connection with this Agreement,
Levin was advised and represented by counsel of his own choosing, Steven M.
Katleman and Joel L. McKuin of Weissman, Wolff, Bergman, Coleman & Silverman.
Since then, Levin has been advised and represented by other counsel of his own
choosing, Eric Elias. Levin warrants represents that he has fully consulted
with Messrs. Katleman, McKuin and Elias concerning this Agreement, and all of
its terms and conditions and that he fully understands its terms and
conditions.
TPEG, DSL and Levin, having been fully advised by their own counsel,
expressly waive any claim of any conflict of interest, breach of the duty of
loyalty or otherwise based on Dempsey & Cross, P.C., having prepared this
Agreement or acted as counsel to and represented TPEG and DSL.
TPEG, DSL and Levin acknowledge that Weissmann, Wolff, Bergman,
Coleman & Silverman previously represented DSL in connection with television
production matters and that in connection with this transaction such firm acted
as counsel to and represented Levin only, and not TPEG or DSL. At all times in
connection with the Agreement, TPEG and DSL have been advised and represented
by counsel of their own choosing, Michael Dempsey of Dempsey & Cross, P.C. Mr.
Dempsey drafted this Agreement. TPEG and DSL, having been fully advised by
their own counsel, expressly waive any claim of any conflict of interest,
breach of the duty of loyalty or otherwise based on Weissmann, Wolff, Bergman,
Coleman & Silverman's having acted as counsel to and represented Levin.
13
<PAGE> 14
15. TPEG shall give notice of any default under this Agreement by
delivery of written notice to Levin, which shall be deemed service of the
notice on the defaulting party. The defaulting party shall then have fifteen
(15) business days to cure the default, excepting only matters relating to
"Simply Style," as to which the cure period is ten (10) calendar days.
16. The parties acknowledge that James Coane, currently a
development/production executive at DSL, intends and plans to follow Levin to
DEG. The parties also acknowledge that Coane's continuing services are
important to the ability of the parties to produce and deliver "Simply Style."
Levin shall deliver to TPEG a letter signed by Coane by which Coane promises
that if he quits working for DEG or Simply Style Productions, Inc. before
completion and delivery of the initial 60 episodes of "Simply Style" he will
finish his duties in connection with those episodes at the same rate of
compensation, to be paid by TPEG out of the $55,000. Because of the need to
insure that Coane is paid, TPEG shall hold $55,000 in a separate, interest
bearing escrow account for the purpose of insuring payment of Coane's salary
until "Simply Style" is delivered to the Learning Channel and Unapix. If DEG
misses any paychecks to Coane before delivery, TPEG shall pay Coane out of the
$55,000. If Coane has been paid by DEG through delivery of "Simply Style",
TPEG shall release the $55,000 to DEG. The parties acknowledge that out of the
remaining $165,500, only $135,500 shall be delivered by TPEG to DEG on the day
the balance would be funded under this Agreement. The $30,000 that remains
shall be deposited by TPEG into the escrow account and used for security to pay
Coane's salary, as set forth in this paragraph 16. The remaining $25,000 of
the $55,000 in Coane salary security shall be taken by TPEG from the $135,000
Unapix advance on its licensing fee for "Simply Style."
17. Each party has not heretofore assigned, transferred, or
granted, or purported to assign, transfer, or grant, any of the rights referred
to herein. Without in any way limiting the generality of the preceding
sentence or of any other part or term of this Agreement, the parties, and each
of them, warrant and represent that no one else is required to consent to or
approve this Agreement or any part hereof or term herein, and that if any such
consent or approval is required, it has been asked for and given.
18. This Agreement is freely and voluntarily executed by the
undersigned. The undersigned, in executing this Agreement, do not rely on any
inducements, promises, or representations made by any party hereto, or their
representatives or attorneys, except and unless expressly contained herein.
The undersigned have read this Agreement and had the terms used herein, and the
consequences thereof, explained by their attorney. The undersigned represent
and warrant that they have been represented by counsel of their own choice
throughout all negotiations which preceded this Agreement and that they have
executed this Agreement with the consent and advice of said legal counsel.
19. This Agreement shall be governed by the laws of the State of
California.
14
<PAGE> 15
20. The undersigned represent and warrant that all necessary
corporate and partnership authorizations and approvals have been obtained for
this Agreement.
21. This Agreement may be executed in counterparts, and when each
party has signed and delivered at least one such counterpart, each counterpart
shall be deemed an original, and, when taken together with other signed
counterparts, shall constitute one Agreement, which shall be binding upon and
effective as to all parties.
22. This Agreement is deemed to have been made and entered into as
of February 27, 1995, in Los Angeles, California and is effective as of that
date.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the 27th day of February, 1995.
DREW S. LEVIN THE PRODUCERS ENTERTAINMENT
GROUP LTD
____________________________________ ______________________________________
BY: IRWIN MEYER
ITS CHAIRMAN
DSL PRODUCTIONS, INC.
____________________________________ ______________________________________
BY: IRWIN MEYER
ITS CHAIRMAN
15
<PAGE> 16
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
A Promissory Note signed by DEG (Agreement Section 2, 5)
B Continuing Guaranty by Drew Levin (Agreement Section 2, 5)
C Second Deed of Trust and Assignment of Rents (Agreement Section 2, 5)
Written Agreement between TPEG and DEG Restricting dilution and subordination (Agreement Section 3)
D Assignment of all right, title and interest in and to Simply Style (Agreement Section 5)
Assignment by simply Style Productions, Inc. to TPEG of 5% of Gross Revenue in "Simply Style" (Agreement
Section 5)
UCC-1s, and copyright mortgages and liens (Agreement Section 5)
Continuing Guaranty by Levin (Agreement Section 5)
Corporate Guaranty by DEG (Agreement Section 5)
"Simply Style" cash flow schedule (Agreement Section 5)
E Continuing Guaranty by Levin (Agreement Section 2, 5)
F Continuing Guaranty by DEG (Agreement Section 2, 5)
Leah Feldon release (Agreement Section 5)
G Projects in development (Agreement Section 6)
UCC-1s and copyright mortgages or liens (Agreement Section 6)
Stockton Briggle Novation (Agreement Section 7)
Stockton Briggle new agreement with TPEG (Agreement Section 7)
UCC-1s and copyright mortgages and liens (Agreement Section 7)
H TPEG's appointment of DEG as its agent (Agreement Section 8)
I DEG's appointment as TPEG's sales agent (Agreement Section 8)
</TABLE>
16
<PAGE> 17
<TABLE>
<S> <C>
J Security Instrument - UCC-1 (Agreement Section 9)
K Security Instrument copyright mortgage or lien (Agreement Section 9)
L Levin's personal charges on TPEG's corporate credit card (Agreement Section 12)
M Releases of employees of DSL (Agreement Section 13)
N Releases of employees of Briggle (Agreement Section 13)
O TPEG's appointment of DEG as its agent (Agreement 15)
</TABLE>
17
<PAGE> 1
EXHIBIT 10.4
[NELSON, GUGGENHEIM, FELKER & LEVINE LETTERHEAD]
as of March 10, 1995
(Revised: 3/29/95; 4/06/95)
Arthur Bernstein
The Producers Entertainment Group
9150 Wilshire Boulevard
Suite 205
Beverly Hills, California 90212
Re: Jonathan Axelrod -- The Producers Entertainment
Group, Ltd. -- Employment Agreement
Dear Arthur:
Reference is made to the Employment Agreement dated June 5, 1992 between The
Producers Entertainment Group, Ltd. ("TPEG") and Jonathan Stanton Company
("JSC"), as the same has hereto been, or may hereafter be, amended
(collectively the "Employment Agreement"). This will confirm that for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, TPEG and JSC have agreed to amend the Employment Agreement as
follows:
1. Subject to JSC not being in default under the Employment
Agreement, TPEG hereby agrees to pay, and, as applicable, shall cause the
TPEG-related entity(ies) (including without limitation Out of Pocket Pictures,
Inc.) to agree to pay, to JSC one percent (1%) of the CBS Entertainment
"Profits" from the exploitation of the television series "Dave's World"
("Series") (i.e., 1 of the "AGR" points accruing to Out of Pocket Pictures,
Inc. as a venturer of Oakhurst Entertainment pursuant to the Oakhurst
Entertainment/CBS Entertainment agreement dated as of August 20, 1992 is hereby
assigned to JSC). TPEG shall exercise, and shall cause the applicable
TPEG-related entity(ies) (including without limitation Out of Pocket Pictures,
Inc.) to exercise, best efforts to arrange with CBS Entertainment for the
direct accounting and payment to
<PAGE> 2
Letter to Arthur Bernstein
Re: Jonathan Axelrod
as of March 10, 1995 (Revised: 3/29/95; 4/06/95)
Page 2
JSC with respect to such one percent (1%) of the "Profits" from the Series upon
the expiration of the Term of the Employment Agreement (i.e., prior to such
expiration TPEG would account to JSC, and following expiration CBS
Entertainment would account directly to JSC with respect to such 1% assuming
CBS Entertainment agrees to do so; otherwise, TPEG would continue to account to
JSC). Notwithstanding anything contained herein to the contrary, JSC shall be
responsible for the applicable Rothman Agency commission with respect to the
one percent (1%) being assigned to and actually received by JSC hereunder.
2. Subject to JSC not being in default under the Employment
Agreement, TPEG hereby agrees to pay to JSC fifteen percent (15%) of TPEG's
share of the "Profits" as set forth in that certain deal letter dated January
31, 1993 (revised as of October 17, 1994) (the "Commitment Agreement") between
TPEG and Pinneo Hill Productions, on the one hand, and CBS Entertainment, a
division of CBS, Inc., on the other hand, in connection with projects and
series arising under the Axelrod/Widdoes Commitment (e.g., if TPEG's share of
the "Profits" is 10% of AGR in connection with a project under the Commitment
Agreement, then, subject to paragraph 4. below, JSC shall be entitled to 1.5%
of AGR in connection with such project). TPEG shall exercise best efforts to
arrange with CBS Entertainment for the direct accounting and payment to JSC
with respect to JSC's applicable share of "Profits" as set forth in this
paragraph 2 upon the expiration of the Term of the Employment Agreement.
Notwithstanding anything contained herein to the contrary, JSC shall be
responsible for the applicable Rothman Agency commission with respect to the
share of "Profits" being assigned to and actually received by JSC hereunder.
Notwithstanding anything contained herein to the contrary, should TPEG not vest
its otherwise full applicable share of the "Profits" in connection with a
project under the Commitment Agreement on account of a default directly arising
from the actions or omissions of Jonathan Axelrod, then JSC shall not be
entitled to its otherwise applicable 15% of TPEG's share of the "Profits" only
with respect to such particular project (i.e., the foregoing limitation with
respect to such particular project affected by the Jonathan Axelrod caused
default and shall not affect JSC's entitlement to a share of
<PAGE> 3
Letter to Arthur Bernstein
Re: Jonathan Axelrod
as of March 10, 1995 (Revised: 3/29/95; 4/06/95)
Page 3
"Profits" with respect to any other projects under the Commitment Agreement,
any Other Projects, or the Series).
3. Subject to JSC not being in default under the Employment
Agreement, TPEG hereby agrees to pay to JSC fifteen percent (15%) of TPEG's
share of contingent compensation (whether in the form of net profits, adjusted
gross receipts, modified adjusted gross receipts, gross receipts, advances, or
otherwise) in connection all other projects (e.g., series, MOW, mini-series,
features, etc.), other than those covered in paragraphs 1. and 2. above,
(collectively "Other Projects") for which TPEG furnishes the producing and/or
consulting services of Jonathan Axelrod during the Term of the Employment
Agreement (e.g., JSC shall be entitled to 15% of TPEG's applicable
share of adjusted gross receipts in connection with the TriStar/"Darling"
project; 15% of TPEG's applicable share of the back-end participation in
connection with the "A Day With ..." project; etc.). "Other Projects" shall
include without limitation third party financed projects, TPEG financed
projects, and projects where TPEG, by virtue of providing Jonathan Axelrod's
producing or consulting services, becomes part of the "packaging" entity.
Notwithstanding anything contained herein to the contrary, consulting services
pursuant to this paragraph shall mean consulting services for which a specific
line item fee is included in the production budget of the applicable project.
The foregoing shall not apply to Other Projects which have already completed
production on or before the date hereof. TPEG shall exercise best efforts to
arrange with the applicable third party for the direct accounting and payment
to JSC with respect to JSC's applicable share of contingent compensation as set
forth in this paragraph 3 upon the expiration of the Term of the Employment
Agreement. Notwithstanding anything contained herein to the contrary, JSC
shall be responsible for the applicable Rothman Agency commission with respect
to the share of contingent compensation being assigned to and actually received
by JSC hereunder. Notwithstanding anything contained herein to the contrary,
should TPEG not vest its otherwise full applicable share of the "Profits" in
connection with Other Projects under the Commitment Agreement on account of a
default directly arising from the actions or omissions of Jonathan Axelrod,
then JSC shall not be entitled to its otherwise applicable 15% of TPEG's
<PAGE> 4
Letter to Arthur Bernstein
Re: Jonathan Axelrod
as of March 10, 1995 (Revised: 3/29/95; 4/06/95)
Page 4
share of the "Profits" only with respect to such particular project (i.e., the
foregoing limitation shall only apply with respect to the particular Other
Project affected by the Jonathan Axelrod caused default and shall not affect
JSC's entitlement to a share of "Profits" with respect to any other projects
under the Commitment Agreement, any Other Projects, or the Series).
4. Nothing contained in this March 10, 1995 amendment letter
shall be deemed to contradict the terms and conditions and/or reduce the
benefits accruing to JSC as set forth in that certain 3-page February 1, 1994
amendment letter to the Employment Agreement. Without limiting the foregoing,
the provisions of paragraph 3. of such February 1, 1994 amendment letter shall
remain unchanged (i.e., paragraph 3. shall continue to govern the parties'
split of fees and profits based on whether accrual of the applicable fees or
profits occurred during or after the Term, with the specified split of
contingent compensation applying to TPEG's "net" share of contingent
compensation after first taking into account the provisions of this March 10,
1995 amendment letter). By way of example, if TPEG is entitled to receive 20%
of the adjusted gross receipts on a series covered by paragraph 2. above, 15%
of which vests in the first year of the series (which is the last year of the
Term of the Employment Agreement) and 5% of which vests in the second year
(which occurs following the expiration of the Term of the Employment
Agreement), then as between JSC and TPEG, TPEG will be entitled to receive a
total of 14.025% and JSC 5.975%, with TPEG's aforesaid share being calculated
as follows: 12.75% for the first year (i.e., 15% minus 2.25% which represents
JSC's 15% share thereof in accordance with the terms of this March 10, 1995
amendment letter), plus 1.275% for the second year (i.e., 30% of 4.25%, with
such 4.25% representing the TPEG 85% share of the overall 5% accruing for the
second year).
5. Subject to JSC not being in default under the Employment
Agreement, should TPEG at any time during the Term of the Employment Agreement
offer to adjust and/or modify and/or improve in any manner (collectively the
"Improvement") any of the stock options and/or stock warrants that it has
<PAGE> 5
Letter to Arthur Bernstein
Re: Jonathan Axelrod
as of March 10, 1995 (Revised: 3/29/95; 4/06/95)
Page 5
granted to Irwin Meyer (including any entity owned or controlled by Irwin
Meyer) and/or to any other TPEG employee, TPEG shall offer the same Improvement
with respect to all Options heretofore and hereafter granted to JSC and/or
Jonathan Axelrod pursuant to the Employment Agreement.
6. Paragraph 3.1 of the Employment Agreement (at page 2 of the
June 5, 1992 letter agreement) with respect to JSC's entitlement "to an amount
equal to two and one-half percent (2-1/2%) of the pre-tax net income earned by
Company for each fiscal year" is hereby deemed deleted in its entirety from the
Employment Agreement.
7. Subject to JSC not being in default under the Employment
Agreement, during the Term of the Employment Agreement in connection with the
Series, projects under the Commitment Agreement, and Other Projects, TPEG and
JSC agree to exercise best efforts to cause the applicable third party
financier/studio to place on-screen two (2) separate production-type credits,
one for Jonathan Axelrod (and Jamie Widdoes, if applicable) and one for TPEG,
with the TPEG card following the Axelrod card; provided, however, if the
applicable third party financier/studio refuses to grant two (2) separate cards
as aforesaid, then the parties agree to share one (1) production-type credit
along the lines as currently appearing on the Series. Without limiting the
foregoing and notwithstanding anything contained in other agreements between
the parties and other related parties (i.e., James Widdoes) to the contrary,
there shall be no restriction on the Axelrod production-type credit containing
Jonathan Axelrod's name or any portion or transposition thereof or his likeness
(e.g., the credit "Axelrod/Widdoes" is now acceptable).
Except as specifically set forth herein above, the Employment Agreement remains
in full force and effect in accordance with its terms. Kindly confirm TPEG's
and Out of Pocket Pictures,
<PAGE> 6
Letter to Arthur Bernstein
Re: Jonathan Axelrod
as of March 10, 1995 (Revised: 3/29/95; 4/06/95)
Page 6
Inc.'s agreement to the foregoing by executing this letter where indicated
below.
Best regards,
Sincerely,
/s/ JARED E. LEVINE
JARED E. LEVINE
JEL:mlp
ACCEPTED AND AGREED TO:
THE PRODUCERS ENTERTAINMENT GROUP, LTD.
By: /s/ Date: 4/7/95
-------------------------------- --------------------------------
JONATHAN STANTON COMPANY
By: /s/ JONATHAN AXELROD Date: 4/7/95
-------------------------------- --------------------------------
/s/ JONATHAN AXELROD
- ------------------------------------
JONATHAN AXELROD
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the undersigned company agrees to be bound by the terms
and conditions set forth above as applicable to it (e.g., paragraph 1).
OUT OF POCKET PICTURES, INC.
By: /s/ ? Date: 4/7/95
-------------------------------- --------------------------------
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) THE
FINANCIAL STATEMENTS CONTAINED IN THE COMPANY'S FORM 10-Q SB FOR THE QUARTER
ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B)
FINANCIAL STATEMENTS AND NOTES THERETO.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUL-01-1994
<PERIOD-END> MAR-31-1995
<EXCHANGE-RATE> 1
<CASH> 1,323,138
<SECURITIES> 0
<RECEIVABLES> 1,530,402
<ALLOWANCES> 0
<INVENTORY> 1,926,291
<CURRENT-ASSETS> 0
<PP&E> 87,236
<DEPRECIATION> 0
<TOTAL-ASSETS> 5,138,148
<CURRENT-LIABILITIES> 990,876
<BONDS> 600,000
<COMMON> 11,379
0
1,000
<OTHER-SE> 3,395,893
<TOTAL-LIABILITY-AND-EQUITY> 5,138,148
<SALES> 4,971,334
<TOTAL-REVENUES> 4,971,334
<CGS> 2,808,752
<TOTAL-COSTS> 4,971,334
<OTHER-EXPENSES> 4,597,448
<LOSS-PROVISION> 270,000
<INTEREST-EXPENSE> 296,741
<INCOME-PRETAX> (2,773,347)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2,773,347)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,773,347)
<EPS-PRIMARY> (.29)
<EPS-DILUTED> (.29)
</TABLE>
