<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From _______ to _______
Commission File No. 0-18954
COMMUNICATIONS AND ENTERTAINMENT CORP.
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Nevada 95-4269048
- ------------------------ -------------------------
(State or other juris- (I.R.S. Employer
diction of incorporation Identification No.)
or organization)
1900 Avenue Of The Stars, Suite 615, Los Angeles, CA 90067
- ------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone No., including area code (310) 556-3656
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 preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to the filing
requirement for at least 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, par value $.01 per share --
2,284,189 outstanding shares as of May 10, 1996.
<PAGE>
COMMUNICATIONS AND ENTERTAINMENT CORP.
INDEX
Page
----
Part I - Financial Information
Consolidated Statements of Financial Condition 1
as of March 31, 1996 and June 30, 1995
Consolidated Statements of Operations 2
for the Nine and Three Month Periods Ended
March 31, 1996 and 1995
Consolidated Statements of Cash Flows 3
for the Nine Month Periods Ended
March 31, 1996 and 1995
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
Part II - Other Information 11
Signatures 13
<PAGE>
COMMUNICATIONS AND ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31,
1996 June 30, 1995
------------ -------------
<S> <C> <C>
ASSETS:
Cash and equivalents $878,340 $43,491
Funds held in joint venture accounts -- 3,836,732
Accounts receivable, net 764,008 524,510
Film costs, net 1,049,523 10,655,863
Other assets 34,459 17,702
------------ -------------
$2,726,330 $15,078,298
------------ -------------
------------ -------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
LIABILITIES:
Accounts payable and accrued expenses $1,077,344 $1,280,455
Due to producers and participants 3,560,102 11,119,560
Deferred revenues -- 520,000
Notes and loans payable 491,500 179,000
------------ -------------
Total liabilities 5,128,946 13,099,015
------------ -------------
SHAREHOLDERS' EQUITY:
Preferred stock, par value $.10;
Authorized - 10,000,000 shares
Issued - none
Class A Stock, par value $.01:
Authorized - 10,000,000 shares
Issued - none
Common stock, par value $.01;
Authorized - 6,666,666 and
40,000,000 shares
Issued -2,284,189 and 13,693,218
shares 22,842 136,932
Capital in excess of par value 25,682,817 25,568,727
Accumulated deficit (28,108,275) (23,726,376)
------------ -------------
Total shareholders' equity (2,402,616) 1,979,283
------------ -------------
$2,726,330 $15,078,298
------------ -------------
------------ -------------
</TABLE>
The accompanying notes are an integral part of these statements.
-1-
<PAGE>
COMMUNICATIONS AND ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Nine Months For the Three Months
Ended March 31, Ended March 31,
-------------------------- --------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
REVENUES: $744,374 $648,580 $636,352 $41,418
------------ ------------ ------------ ------------
EXPENSES:
Costs related to revenues 795,618 1,901,007 636,423 331,099
Loss on sale of joint
venture interests 3,262,478 -- 186,415 --
Selling, general and
administrative expenses 1,009,795 3,235,489 280,107 1,244,603
------------ ------------ ------------ ------------
5,067,891 5,136,496 1,102,945 1,575,702
------------ ------------ ------------ ------------
Operating loss (4,323,517) (4,487,916) (466,593) (1,534,284)
OTHER INCOME (EXPENSES):
Interest income 1,212 74,304 157 11,487
Interest expense (59,594) (12,835) (24,674) (2,685)
------------ ------------ ------------ ------------
Loss from continuing
operations (4,381,899) (4,426,447) (491,110) (1,525,482)
Loss from discontinued
operations -- (64,605) -- --
------------ ------------ ------------ ------------
Net loss ($4,381,899) ($4,491,052) ($491,110) ($1,525,482)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Net loss per share * ($1.92) ($1.91) ($0.22) ($0.65)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
Weighted average common
shares outstanding* 2,282,294 2,348,037 2,282,484 2,348,037
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
* Weighted average shares outstanding and loss per share for all periods
presented have been adjusted to reflect the effect of a one-for-six
reverse stock split on March 18, 1996.
The accompanying notes are an integral part of these statements.
-2-
<PAGE>
COMMUNICATIONS AND ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
For the Nine Months
Ended March 31,
----------------------------
1996 1995
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss from continuing operations ($4,381,899) ($4,426,447)
Adjustments to reconcile net income
to net cash provided by (used in)
operating activities:
Amortization of film costs 3,815,641 1,463,611
Other depreciation and amortization 28,439 187,219
Equity in loss of subsidiary held for sale -- 64,605
Issuance of shares of subsidiary
in payment of legal fees -- 155,905
Decrease (increase) in assets:
Funds held in joint venture accounts 3,836,732 (377,469)
Accounts receivable, net (239,498) 9,001,350
Film costs 5,790,699 712
Other 2,616 159,299
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (203,111) (269,647)
Due to producers and participants (7,559,458) (5,819,409)
Deferred revenues (520,000) (459,291)
------------- -------------
Net cash provided by (used in)
continuing operations 570,161 (319,562)
------------- -------------
Net loss from discontinued operations -- (64,605)
------------- -------------
Net provided by (used in) operations 570,161 (384,167)
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Loans relating to lending activities -- 393,588
Acquisition of fixed assets (5,312) (10,633)
Investment in Global Intellicom, Inc. -- (1,049,002)
------------- -------------
Net cash used in investing
activities (5,312) (666,047)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from the sale of
Senior Notes 270,000 --
------------- -------------
Net cash provided by
financing activities 270,000 --
------------- -------------
Net increase (decrease) in cash and equivalents 834,849 (1,050,214)
Cash and equivalents at beginning of period 43,491 1,446,069
------------- -------------
Cash and equivalents at end of period $878,340 $395,855
------------- -------------
------------- -------------
</TABLE>
The accompanying notes are an integral part of these statements.
-3-
<PAGE>
COMMUNICATIONS AND ENTERTAINMENT CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
For the Nine Months
Ended March 31,
----------------------
1996 1995
---------- ----------
<S> <C> <C>
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for-
Interest $10,778 $12,835
---------- ----------
---------- ----------
Income taxes -- $3,200
---------- ----------
---------- ----------
Non Cash Investing and Financing Activities:
Dividend of shares of Global Intellicom, Inc. ($507,114)
----------
----------
Receipt of film assets in settlement of loans
receivable from ATC II, Inc. $393,588
----------
----------
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
COMMUNICATIONS AND ENTERTAINMENT CORP.
Notes to Consolidated Financial Statements
MARCH 31, 1996
1. - BASIS OF FINANCIAL STATEMENT PREPARATION:
The Consolidated Financial Statements for Communications and
Entertainment Corp. and subsidiaries (collectively, the "Company")
included herein have been prepared by the Company, without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant
to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not
misleading. These financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1995.
In the opinion of management, the accompanying unaudited financial
statements contain all adjustments, consisting only of normal
recurring adjustments, necessary to present fairly (a) the financial
position as of March 31, 1996, (b) the results of operations for the
nine and three month periods ended March 31, 1996 and 1995 and (c)
cash flows for the nine month periods ended March 31, 1996 and 1995.
2. - SALE OF JOINT VENTURE ASSETS:
As of January 2, 1996, the Company entered into an agreement (the
"Agreement") with Regency International Pictures, B.V, its joint
venture partner, to sell its interest in the related joint ventures
through which it held approximately 50% ownership interests in four
theatrical motion pictures, entitled "Q & A," "Switch," "Guilty By
Suspicion" and "This Boy's Life." Pursuant to the Agreement, the
Company received $1,000,000 on January 23, 1996 and $500,000 on
February 14, 1996, in exchange for all of its interest in the net
assets and obligations of the joint ventures. In addition, the
Company retained a contingent interest in certain receivables, not to
exceed $212,500, and a contingent interest in future revenues from the
pictures.
Results of operations reflect write-downs of approximately $3,076,000
and $186,000 for the quarters ended December 31, 1995 and March 31,
1996, respectively, in the carrying value of the Company's interest in
the films as a result of the consummation of the transaction.
-5-
<PAGE>
Had the transaction been completed as of July 1, 1994, the proforma
effect on operations for the fiscal year ended June 30, 1995 would
have been a reduction in revenues of approximately $775,000 and an
increase in the loss from continuing operations of approximately
$48,000. The proforma effect on operations for the nine month period
ended March 31, 1996 would have been a decrease in revenues of
approximately $61,000 and a decrease in loss from continuing
operations of approximately $3,231,000, because of the aforementioned
write-downs recorded in the period.
3. - NOTES AND LOANS PAYABLE:
In August and October 1995, the Company received net proceeds of
$219,250 and $50,750, respectively, from the private placement of an
aggregate of $312,500 principal amount of 12% Senior Unsecured
Promissory Notes (the "Notes"). The Notes are repayable with interest
on the earlier of (a) the closing of a public offering of the
Company's equity securities from which the Company receives gross
proceeds of at least $10,000,000 or (b) one year from the issuance
date. The Company also granted to the purchasers of the Notes an
aggregate of 26,042 warrants (the "Warrants"), 20,833 of which are
exercisable at $2.832 per share and 5,208 of which are exercisable at
$2.370 per share (after giving effect to the Reverse Stock Split).
Each of the Warrants is exercisable at any time beginning one year
after the date of issuance and expiring four years after the date of
issuance.
4. - SHAREHOLDERS' EQUITY:
On March 6, 1996 the Board of Directors of the Company approved a one-
for-six reverse stock split (the "Reverse Stock Split") of the
outstanding shares of the Company's Common Stock (the "Common Stock").
The Reverse Stock Split was effective as of March 18, 1996 (the
"Record Date"). On the Record Date, each six shares of the Company's
then outstanding Common Stock (the "Old Common Stock") were
automatically converted into one share of new Common Stock, par value
$.01 per share (the "New Common Stock").
No fractional shares of New Common Stock will be issued. Rather,
holders of Old Common Stock who are entitled to receive fractional
shares of New Common Stock will be rounded up the to the nearest whole
share of New Common Stock.
The Reverse Stock Split resulted in a net reduction of 11,408,973 in
the number of Common Shares outstanding, including 1,995 shares
issuable due to the rounding up of fractional shares.
-6-
<PAGE>
Except for the number of shares of Common Stock outstanding after the
Reverse Stock Split, the Old Common Stock and the New Common Stock are
identical.
For comparative purposes, the number of weighted average common shares
outstanding and loss per share reported in the accompanying
consolidated statements of operations, and share date included in the
notes to consolidated financial statements, have been adjusted the
reflect the effect of the Reverse Stock Split for all periods
presented.
5. - LEGAL PROCEEDINGS:
In connection with an action brought by the landlord for the premises
formerly occupied by the Company's subsidiary, Odyssey Entertainment,
Ltd. ("Odyssey"), the parties entered into a settlement agreement
under which Odyssey was required to pay the landlord $125,000 by
October 1, 1995. The payment was made in February 1996. The
settlement did not have a material impact on the Company's financial
condition or results of operations.
In January 1996, and action was filed against the Company in which the
plaintiff seeks damages in the amount of $33,849.98 for legal services
rendered. The complaint was served on the Company on April 30, 1996;
the Company has not yet filed an Answer.
In March 1996, an action was filed against the Company in which the
plaintiff claims that she is due $17,920.49 pursuant to a promissory
note previously issue to her. The Company has filed a cross-claim
seeking offsets against the amount due and other damages.
On or about March 25, 1996, a class action complaint was filed against
the Company. The complaint seeks damages in connection with the
Company's treatment in its financial statements of the disposition of
its subsidiary, Double Helix Films, Inc., in June 1991. The complaint
seeks unspecified damages on behalf of all persons who purchased
shares of the Company's common stock from and after June 1992. The
Company has not yet been served with the compliant in this action.
-7-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
NINE AND THREE MONTHS ENDED MARCH 31, 1996 AND 1995
Revenues for the nine and three month periods ended March 31, 1996 (the
"1996 Nine and Three Month Periods") increased to $744,374 and $636,352,
respectively, from $648,580 and $41,418 for the respective nine and three month
periods ended March 31, 1995 (the "1995 Nine and Three Month Periods"). Revenues
for all periods presented reflect the continued licensing of rights in the
Company's library of feature films. There were no films which became available
for delivery in either of the relevant 1996 or 1995 Periods, partly due to the
unavailability of financing to acquire rights to new film projects. Since the
change in control and the election of a new Board, the new management has been
focused on repairing and restructuring the operations of the Company with
significantly reduced personnel and is just now beginning to accelerate its
acquisition of new films. The increases in revenues for the current periods
resulted from the aggressive marketing of the films at recent international film
markets through a joint venture between the Company and Film Bridge
International.
Costs related to revenues increased to $4,058,096 and $822,838 for the 1996
Nine and Three Month Periods, respectively, from $1,901,007 and $331,099 for the
comparable 1995 Nine and Three Month Periods. The increases are primarily due
to write-downs in the second and third quarters of approximately $3,076,000 and
$186,000, respectively, in the carrying value of the Company's joint venture
interest in four theatrical motion pictures as a result of the sale of the joint
venture interests in January 1996. Costs related to revenues for the 1995 Nine
and Three Month Periods exceeded revenues for such periods due to the write-offs
of approximately $394,000 of film assets acquired in settlement of loans
receivable from ATC II, Inc., $540,000 of uncollectible receivables from foreign
sub-distributors, $212,000 of costs relating to film development projects sold
or abandoned, and $160,000 of unrecoverable distribution costs associated with
the settlement of the litigation with Home Box Office, Inc.
As of January 2, 1996, the Company entered into an agreement with its joint
venture partner to sell its related joint ventures through which it held
approximately 50% ownership interests in four theatrical motion pictures. As a
result of the sale, the assets and obligations of the joint ventures, heretofore
included in the consolidated financial statements of the Company, were
eliminated, including approximately $3,485,000 of funds held in joint venture
accounts, net film costs of approximately $6,051,000, payable due to producers
and participants of approximately $7,244,000, deferred income of $520,000 and
other net obligations of approximately $86,000.
-8-
<PAGE>
Selling, general and administrative expenses decreased $2,225,694 (69%) to
$1,009,795 for the 1996 Nine Month Period from $3,235,489 for the comparable
1995 Period. For the 1996 Three Month Period such expenses decreased 77% to
$280,107 from $1,244,603 for the 1993 Three Month Period. The reductions in
expenses is a direct result of new management's efforts to eliminate unnecessary
overhead. Expenses for the 1996 Periods reflect significant decreases in
personnel and related expenses, rent (due to the closure of the New York office
and the relocation of the Los Angeles office) and professional fees.
The decrease in interest income for the 1996 Periods is due to a reduction
in the average available cash balances.
Interest expense increased to $59,594 and $24,674 for the 1996 Nine and
Three Month Periods, respectively, from $12,835 and $2,685 for the comparable
1995 Nine and Three Month Periods. The increased interest resulted from the
private placement sale of an aggregate of $312,500 principal amount of 12%
Senior Unsecured Promissory Notes in August and October 1995.
The Company did not recognize any tax benefits related to its losses from
operations for the 1996 and 1995 Periods due to its inability to carry-back such
losses to prior years.
As of March 31, 1996, the Company had a federal net operating loss
carryforward, for tax purposes, of approximately $26,200,000, expiring through
2010, available to be used to reduce future tax liability. Due to limitations
imposed by the Internal Revenue Service, the utilization of approximately
$4,900,000 of these net operating losses will be limited to approximately
$350,000 per year.
The Company's principal activities have been the acquisition of rights in
either completed or incomplete motion pictures and the licensing of these rights
to sub-distributors in foreign countries. As of March 31, 1996, the Company had
agreements with sub-distributors of approximately $252,000 that had not been
recognized in the statement of operations.
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 1996, the Company held approximately $878,000 of cash and
equivalents.
In many instances, the Company acquires the rights to motion picture and
television productions prior to their completion. As a result, typically there
is a substantial delay between the time the Company enters into distribution
agreements with producers and sub-distribution agreements with foreign sub-
distributors and the time it recognizes revenues and generates cash from each
production. New management has implemented plans to acquire rights in film
libraries and in completed films, which will involve shorter periods of time for
the recognition of revenues and the
-9-
<PAGE>
generation of cash, although the overall revenues that may be generated from
library films is generally less than that for new films.
As of March 31, 1996, the Company had an outstanding commitment of
approximately $2.7 million for the acquisition of rights relating to a film
project, which obligation is included in the consolidated statement of financial
condition. The Company is presently in negotiation with the producer of the film
with regard to the amount due to the producer and with regard to the Company's
rights to continue distribution of the film.
In the past, the Company has been dependent on obtaining outside financing
to acquire distribution rights to films. New management intends to reduce the
Company's reliance on outside financing by placing more emphasis on acquiring
distribution rights through arrangements which require lower or no advance
payments. The Company presently lacks adequate capitalization to acquire higher-
budget foreign theatrical distribution rights and is presently limited to
projects where it can guarantee foreign sales revenues instead of advancing the
funds to complete the production of films.
The newly-elected Board of Directors and newly-appointed management have
taken initial steps to recapitalize the Company. The first step in
recapitalizing the Company began with the completion of bridge loans in August
and October 1995 from which the Company received net proceeds of $219,250 and
$50,750, respectively. In January 1996, the Company completed the sale of its
interests in four joint ventures and received $1,500,000 in cash. The Company
is also actively exploring strategic partners for joint ventures, mergers or
acquisitions, and has retained the services of Ocean Capital Corp. as its
financial advisor in this regard. This strategy will enable the Company to
increase its level of participation in the international film and television
markets.
The Company had no material commitments for capital expenditures as of
March 31, 1996.
-10-
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
In connection with the action entitled WRC PROPERTIES, INC. V.
ODYSSEY ENTERTAINMENT, LTD. AND DOES 1 TO 10, the parties entered into
a settlement agreement under which Odyssey was required to pay the
plaintiff $125,000 by October 1, 1995. The payment was made in
February 1996. The settlement did not have a material impact on the
Company's financial condition or results of operations.
On or about January 23, 1996, an action was filed in the Los Angeles
Superior Court entitled, GREENBERG, GLUSKER, FIELDS, CLAMAN &
MACHTINGER V. ODYSSEY DISTRIBUTORS LTD., ODYSSEY ENTERTAINMENT LTD.
AND COMMUNICATIONS AND ENTERTAINMENT CORPORATION, in which the
plaintiff seeks damages in the amount of $33,849.98 for legal services
rendered to the Company and its subsidiaries. The complaint was
served on the Company on April 30, 1996; the Company has not yet
filed an Answer in this action.
On or about March 12, 1996, an action was filed in Los Angeles
Municipal Court entitled JUDY HART V. ODYSSEY DISTRIBUTORS, LTD. The
plaintiff is claiming that she is due $17,920.49 pursuant to a
promissory note previously issued to her by the Company. The Company
has filed a cross-claim against the plaintiff seeking offsets against
the amount due and other damages.
On or about March 25, 1996, a class action complaint was filed in Los
Angeles Superior Court entitled DENNIS BLEWITT V. N. NORMAN MULLER,
JERRY MINSKY, DORIAN INDUSTRIES, INC. AND COMMUNICATIONS AND
ENTERTAINMENT CORPORATION. The complaint seeks damages in connection
with the Company's treatment in its financial statements of the
disposition of its subsidiary, Double Helix Films, Inc., in June
1991. The complaint seeks unspecified damages on behalf of all
persons who purchased shares of the Company's common stock from and
after June 1992. The Company has not yet been served with the
complaint in this action.
ITEM 5. OTHER INFORMATION
On May 1, 1996, The Nasdaq Stock Market, Inc. ("Nasdaq") notified
the Company that its shares of Common Stock, $.01 par value, were
being deleted from Nasdaq's SmallCap Market, effective on May 2, 1996,
because the Company did not maintain a combined capital and surplus of
$1,000,000, as required by Section 1(c)(3) of Schedule D of the NASD
By-Laws. The Company's shares are now traded in the over-the-counter
market on the OTC Bulletin Board.
-11-
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) 10.50 Agreement, dated March 6, 1996, between Communications
and Entertainment Corp. and its wholly-owned
subsidiary, Odyssey Distributors, Ltd.
10.51 Severance and Consulting Agreement, dated March 26,
1996, between the Company and Shane O'Neil, and related
modifying agreement dated March 28, 1996
10.52 Common Stock Purchase Warrant, dated March 6, 1996,
between the Company and G & H Media, Ltd. (assignee of
Stephen R. Greenwald)
10.53 Common Stock Purchase Warrant, dated March 6, 1996,
between the Company and Lawrence Schneider
10.54 Common Stock Purchase Warrant, dated March 6, 1996,
between the Company and Ira N. Smith
(b) None
PART II - ITEMS 2 THROUGH 4 ARE NOT APPLICABLE.
-12-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COMMUNICATIONS AND ENTERTAINMENT CORP.
By: Stephen R. Greenwald
-----------------------------------------
Stephen R. Greenwald
Chief Executive Officer
By: Jay Behling
-----------------------------------------
Jay Behling
Chief Financial Officer
DATED: May 14, 1996
-13-
<PAGE>
EXHIBIT INDEX
Exhibit # Description Page #
--------- ----------- ------
10.50 Agreement, dated March 6, 1996,
between Communications and
Entertainment Corp. and its
wholly-owned subsidiary, Odyssey
Distributors, Ltd.
10.51 Severance and Consulting Agreement,
dated March 26, 1996, between the
Company and Shane O'Neil, and
related modifying agreement dated
March 28, 1996
10.52 Common Stock Purchase Warrant,
dated March 6, 1996, between the
Company and G & H Media, Ltd.
(Assignee of Stephen R. Greenwald)
10.53 Common Stock Purchase Warrant,
dated March 6, 1996, between the
Company and Lawrence Schneider
10.54 Common Stock Purchase Warrant,
dated March 6, 1996, between the
Company and Ira N. Smith
-14-
<PAGE>
AGREEMENT EXHIBIT 10.50
AGREEMENT made this 6th day of March, 1996, by and between
Communications and Entertainment Corp., a Nevada corporation having a principal
place of business at 1900 Avenue of the Stars, Los Angeles, California 90067
("ComEnt"), and Odyssey Distributors, Ltd., a California corporation having a
principal place of business at 1900 Avenue of the Stars, Los Angeles, California
90067 ("Odyssey").
WITNESSETH
WHEREAS, Odyssey is a wholly owned subsidiary of Odyssey Entertainment
Ltd. which, in turn, is a wholly owned subsidiary of ComEnt; and
WHEREAS, Odyssey holds or owns distribution rights to certain motion
pictures and films, all as more specifically set forth in the Financial
Summaries set forth as Schedule A attached hereto ("Motion Picture Rights"); and
WHEREAS, the Board of Directors of ComEnt has determined that it is in
the best interests of ComEnt and its subsidiaries to consolidate all assets and
operations of the group into a single corporation; and
WHEREAS, Odyssey has agreed to transfer, sell and assign all of its
Motion Picture Rights to ComEnt in exchange for newly issued shares of the
common stock of ComEnt.
NOW, THEREFORE, the parties hereto agree as follows:
1. SALE OF MOTION PICTURE RIGHTS. Simultaneously with the execution
and delivery of this Agreement, Odyssey hereby sells, transfers and assigns to
ComEnt all of its right, title and interest in and to the Motion Picture Rights,
including all accounts receivable in connection therewith, subject, however, to
all third party residuals and participation rights in connection therewith which
accrue after the date hereof from events or transactions arising after the date
hereof (collectively, "Future Residuals"). ComEnt hereby accepts the assignment
of the Motion Picture Rights and agrees to assume and be responsible for all
Future Residuals, it being understood and agreed, however, that under no
circumstances shall ComEnt be responsible in any manner whatsoever for any
liabilities or obligations of Odyssey either existing on the date hereof or
arising after the date hereof based
1
<PAGE>
on events or transactions which occurred prior to the date hereof, whether
such liabilities and obligations are known or unknown, fixed or contingent,
liquidated or unliquidated, choate or inchoate on the date hereof. Odyssey
hereby delivers to ComEnt all documents, contracts and agreements relating
to, or used in connection with, the Motion Picture Rights, all of which are
in full force and effect.
2. VALUATION OF RIGHTS. For purposes of closing the transactions
contemplated by this Agreement, the parties hereto agree that the Motion Picture
Rights shall have a preliminary valuation of $500,000 (the "Preliminary
Valuation"). The Preliminary Valuation shall be adjusted, upward or downward,
within sixty days after the execution and delivery of this Agreement based upon
the results of an independent valuation of the Motion Picture Rights prepared by
an appraiser mutually agreed to by the parties (the "Final Appraisal").
3. ISSUANCE OF SHARES. Based on the Preliminary Valuation, ComEnt
agrees to issue to Odyssey 2,000,000 unregistered shares of the Company's Common
Stock (the "Shares"), valued for purposes of this Agreement at $.25 per share,
representing approximately a 20% discount off the closing bid price ($.3125 per
share) of the Company's Common Stock on the NASDAQ Small Cap Market at the close
of business on March 5, 1996. The Shares shall be held in escrow by counsel to
ComEnt until such time as the Final Appraisal is completed. In the event the
Final Appraisal exceeds the Preliminary Valuation (the "Excess"), counsel shall
deliver the Shares to Odyssey, together with an additional amount of shares of
ComEnt equal in number to four (4) times the amount of the Excess. In the event
the Final Appraisal is less than the Preliminary Valuation, then counsel shall
deliver to Odyssey an amount of shares of ComEnt equal in number to four (4)
times the amount determined by the Final Appraisal, and the additional shares
originally issued pursuant to the Preliminary Valuation shall be returned to the
treasury of ComEnt.
4. REVERSE STOCK SPLIT. The parties hereto acknowledge that the Board
of Directors of ComEnt has declared a reverse one-for-six stock split of the
company's Common Stock, effective March 18, 1996. Accordingly, any shares to be
issued to Odyssey pursuant to Section 3 of the Agreement shall be divided by six
in accordance with the terms of such reverse stock split.
5. RESTRICTED NATURE OF THE SHARES. Odyssey acknowledges that the
shares to be issued by ComEnt pursuant to the provisions of Section 3 of this
Agreement will not be registered under any federal or state securities laws and
therefore may not be re-sold by Odyssey unless registered under all appropriate
securities laws
2
<PAGE>
or re-sold pursuant to an exemption from such registration requirements.
Odyssey further represents and warrants to ComEnt that it will be acquiring
such shares for investment purposes only without a view to the resale or
distribution thereof. Odyssey agrees that such shares will bear an
appropriate legend restricting transferability under federal and state
securities laws.
6. BINDING NATURE OF AGREEMENT. The parties hereto agree that this
Agreement shall be binding upon, and shall inure to the benefit of, the parties
hereto and their respective successors and assigns.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
Communications and Entertainment Corp.
by: Stephen R. Greenwald
-----------------------------------
Stephen R. Greenwald, CEO
Odyssey Distributors, Ltd.
by: Ira N. Smith
-----------------------------------
Ira N. Smith, Chairman
3
<PAGE>
AGREEMENT EXHIBIT 10.51
AGREEMENT made this 26th day of March, 1996, by and between
Communications and Entertainment Corp., a Nevada corporation having a principal
place of business at 1900 Avenue of the Stars, Los Angeles, California 90067
(the "Company"), and Shane O'Neil, having a place of business at 595 Madison
Avenue, New York, New York 10022 ("Executive").
WHEREAS, Executive's employment with the Company has been terminated,
and the Company and Executive desire to enter into this settlement and release
agreement.
NOW, THEREFORE, the parties hereto agree as follows:
1. Executive's employment with the Company is hereby terminated,
effective as of March 26, 1996. All Company benefits to which Executive was
theretofore entitled shall terminate as of such date, except as otherwise
specifically stated herein.
2. Executive shall be paid severance pay in an amount equal to three
months' basic salary (at the rate of $14,583.33 per month), payable during the
three month period commencing April 1, 1996 in accordance with the regular
payroll practices of the Company (the "Severance Payment Period"), plus warrants
to purchase 15,000 shares of the Company's Common Stock at an exercise price of
$1.50 per share. Such warrants shall be exercisable for a period of 3 years from
the date hereof and shall include standard anti-dilution protection.
3. Except with respect to the Company's undertaking to make severance
payments to Executive as provided in Section 2 hereof, Executive shall and does
hereby RELEASE AND FOREVER DISCHARGE THE COMPANY, its subsidiaries and
affiliates, and all of the Company's present and former employees, officers,
servants, agents, stockholders and directors from any and all claims, demands,
actions or causes of action on account of, arising out of or in any way
connected with (a) Executive's employment with the Company, (b) the termination
of Executive's employment with the Company, (c) all matters alleged or which
could have been alleged in a charge or complaint against the Company, (d) any
and all claims relating to the conduct of any employee, officer, director, or
agent of the Company, and (e) any and all matters, transactions or things
occurring prior to the date hereof, including any and all possible claims, known
or unknown, which could have been asserted against the Company or the Company's
employees, agents, officers, stockholders or directors.
1
<PAGE>
4. The release contained in Section 3 hereof includes, but is not
limited to, any claims arising under federal, state or local laws relating to
employment discrimination, including any claims of discrimination based on age,
disability, handicap, national origin, race, religion or sex, any claims arising
out of any legal restrictions on an employer's right to terminate its employees,
and any claims arising under any other federal, state or local discrimination or
employment related law, rule or regulation.
5. In consideration of the severance payments set forth in Section 2
hereof, Executive agrees that he will not divulge to any other entity or person,
either during the Severance Payment Period or at any time thereafter, any
confidential, trade secret or proprietary information concerning the Company,
its affiliates, or their respective businesses or operations, including any
information regarding personal matters of any directors, officers, employees or
agents of the Company. Executive also agrees that he will not make, write,
publish, produce or in any way participate in placing into the public domain any
statement, opinion or information with respect to any of the foregoing, or any
statement or communication which reflects adversely upon, casts in a negative
light, or would reasonably impair the reputation or best interests of the
Company, its products or services, or any of its directors, officers, employees
or agents, except in each case information which is required to be disclosed by
operation of law.
6. Executive agrees to be reasonably cooperative with the Company with
respect to (i) effecting a smooth transition of all matters Executive was
working on or handling for the Company at the time of his termination, including
delivering to the Company any and all materials, documents, notes or memoranda
relating to the foregoing, and (ii) assisting the Company in any ongoing or
future litigation or legal proceedings involving the Company with respect to any
matters with which Executive is familiar or has knowledge or information of.
7. The parties agree that this Agreement is solely for the purpose of
settlement and does not constitute, and shall not be construed to be, an
admission of any sort on the part of any of the parties hereto.
8. Each of the covenants herein contained shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective heirs,
legal representatives, successors and assigns.
9. This Agreement shall be governed by the laws of the State of New
York applicable to contracts made and to be entirely
2
<PAGE>
performed in such State.
10. This Agreement represents the entire agreement between the parties
with respect to the subject matter hereof. If any portion of this Agreement
should be, for any reason, not enforceable, the parties agree that the remaining
portion or portions should continue to be enforceable.
11. Executive agrees and understands that this Agreement is
confidential, and he shall not communicate, display or otherwise reveal any of
the contents of this Agreement except by written consent of the Company.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date and year first above written.
Shane O'Neil
------------------------------------------
Shane O'Neil
Communications and Entertainment Corp.
By: Stephen R. Greenwald
------------------------------------------
Stephen R. Greenwald, CEO
3
<PAGE>
March 28, 1996
Communications and Entertainment Corp.
380 Lexington Ave.
New York, New York 10168
Gentlemen:
Reference is made to that certain Agreement between us, dated March 26,
1996 (the "Agreement"), regarding the termination of my employment with
Communications and Entertainment Corp. (the "Company"). We have mutually agreed
to amend the Agreement as follows:
1. Paragraph 2 of the Agreement is amended to provide that the only
severance Executive shall be entitled to receive are the 15,000 stock purchase
warrants referenced in Paragraph 2. Executive hereby assigns such warrants to
Cerberus, Inc., a corporation wholly owned by Executive ("Cerberus"). The
reference to severance pay in an amount equal to three months' basic salary is
hereby deleted from Paragraph 2.
2. A new paragraph 12 is added to the Agreement as follows:
"12. The Company hereby agrees to retain the services of Cerberus as a
consultant to the Company ("Consultant"), and Consultant hereby agrees to render
consulting services to the Company, for a three month period commencing April 1,
1996. In consideration of such services, Consultant shall be paid at the rate of
$14,583.33 per month, payable semi-monthly during the three month term.
Consultant shall render consulting services to the Company in the areas of
production, distribution, administration and such other areas as Consultant and
the Company shall mutually agree upon. Such services shall be rendered at such
times as shall be mutually convenient to the parties."
3. Except as modified herein, the parties hereto confirm that the Agreement
shall remain in full force and effect in accordance with its original terms.
Shane O'Neil
--------------------------------
Shane O'Neil
ACCEPTED AND AGREED:
Communications and Entertainment Corp.
by: Stephen R. Greenwald
---------------------------------------
Stephen R. Greenwald, CEO
4
<PAGE>
EXHIBIT 10.52
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT
WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO SUCH SECURITIES, OR
(ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY
UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO
COMMUNICATIONS AND ENTERTAINMENT CORP. (THE "COMPANY"), OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR OTHER STATE SECURITIES LAW.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON MARCH 5, 2001.
COMMUNICATIONS AND ENTERTAINMENT CORP.
COMMON STOCK
PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3
1,200,000 Warrants
(Subject to a Reverse Stock Split and Other Adjustments
As Provided in Section 5 Hereof)
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by COMMUNICATIONS AND ENTERTAINMENT CORP., a Nevada
corporation (the "Company"), G&H Media, Ltd. is hereby granted the right to
purchase, at the initial exercise price of $.3125 per share (subject to a
reverse stock split and other adjustments as provided in Section 5 hereof), at
any time from March 6, 1996 until 5:00 P.M. New York City time on March 5,
2001, 1,200,000 shares (the "Shares") of the Company's Common Stock, par value
$.01 per share (the "Common Stock").
Each Common Stock Purchase Warrant (the "Warrant") initially is exercisable
at a price of $.3125 per Share payable in cash or by certified or official bank
check in New York Clearing House funds, subject to adjustments as provided in
Section 5 hereof. Upon surrender of this Warrant at the offices of the Company,
with the annexed Subscription Form duly executed, together with payment of the
Purchase Price (as hereinafter defined) for the Shares purchased, the registered
holder of this Warrant (the "Holder") shall be entitled to receive a certificate
or certificates for the Shares so purchased.
1
<PAGE>
1. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are exercisable at the
option of the Holder, in whole or in part (but not as to fractional shares
underlying this Warrant), during the period in which this Warrant may be
exercised as set forth above. In the case of the purchase of fewer than all the
Shares purchasable under this Warrant, the Company shall cancel this Warrant
upon the surrender hereof and shall execute and deliver to the Holder a new
Warrant of like tenor for the balance of the Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES.
Upon the exercise of this Warrant and payment in full for the Shares, the
issuance of a certificate or certificates for Shares underlying this Warrant
shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or (subject to the Provisions of Section 3.1
hereof) in such names as may be directed by, the Holder; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the shares underlying this
Warrant shall be executed by the manual or facsimile signature of the Chairman
or the Chief Executive Officer, and the President or the Secretary of the
Company holding office at the time such Shares are issued.
3. RESTRICTION ON TRANSFER.
Neither this Warrant nor any Share issuable upon exercise hereof has been
registered under the Securities Act of 1933, as amended (the "Act"), and none of
such securities may be offered, sold, pledged, hypothecated, assigned or
transferred except (i) pursuant to a registration statement under the Act which
has become effective and is current with respect to such securities or (ii)
pursuant to a specific exemption from registration under the Act but only upon a
Holder hereof having first obtained the written opinion of counsel to the
Company, or other counsel reasonably acceptable to the Company, that the
proposed disposition is consistent with all applicable provisions of the Act as
well as any applicable "Blue Sky" or other state securities law. Upon exercise,
in part or in whole, of this Warrant, each certificate issued representing the
Shares underlying this Warrant shall bear a legend to the foregoing effect.
2
<PAGE>
4. PRICE.
4.1 INITIAL AND ADJUSTED PURCHASE PRICE. The initial Purchase Price shall
be $.3125 per share. The adjusted Purchase Price shall be the price which shall
result from time to time from any and all adjustments of the initial Purchase
Price in accordance with the provisions of Section 5 hereof.
4.2 PURCHASE PRICE. The term "Purchase Price" herein shall mean the initial
purchase price per Share or the adjusted purchase price per share, depending
upon the context.
5. ADJUSTMENTS OF PURCHASE PRICE AND NUMBER OF SHARES.
In the event that, prior to the issuance by the Company of all of the
Shares issuable upon exercise of this Warrant, there shall be any change in the
outstanding Common Stock by reason of the declaration of stock dividends, or
through a recapitalization resulting from stock splits or combinations, without
the payment to the Company of any compensation therefor in money, services or
property, the remaining Shares still subject to this Warrant and the Purchase
Price thereof shall be appropriately adjusted (but without regard to fractions)
by the Board of Directors of the Company to reflect such change. The Holder of
this Warrant acknowledges that the Board of Directors of the Company declared a
reverse one-for-six split of the Company's Common Stock, par value $.01 per
Share, effective March 18, 1996. If the date of issuance of this Warrant is
prior to March 18, 1996, then upon the effective date of such reverse stock
split, the number of Shares subject to this Warrant shall be divided by six and
the exercise price shall be multiplied by six.
6. MERGER OR CONSOLIDATION.
In case of any consolidation of the Company with, or merger of the Company
with or into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), the corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the Holder
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of his Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger
by a Holder of the number of shares of Common Stock for which his Warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for the adjustments
which shall be identical to the adjustments provided in Section 5. The above
provisions of this Section 6 shall similarly apply to successive consolidations
or mergers.
3
<PAGE>
7. EXCHANGE OR REPLACEMENT OF WARRANT.
This Warrant is exchangeable without expense, upon the surrender hereof by
the registered Holder at the principal executive office of the Company, for a
new Warrant of like tenor and date representing in the aggregate the right to
purchase the same number of Shares as are purchasable hereunder in such
denominations as shall be designated by the Holder hereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonable satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
8. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intention
of the parties that all fractional interests shall be eliminated.
9. RESERVATION OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant, such number of Shares as shall be issuable upon the exercise
hereof. The Company covenants and agrees that, upon the exercise of this Warrant
and payment of the Purchase Price therefor, all Shares issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable.
10. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company.
4
<PAGE>
11. NOTICES.
All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be personally delivered,
telegraphed or sent by certified, registered, or express mail, postage prepaid,
and shall be deemed given when so delivered personally, telegraphed or, if
mailed, five days after the date of deposit in the United States mails, as
follows:
(a) If to the Company, to:
Communications and Entertainment Corp.
380 Lexington Avenue, Suite 2500
New York, New York 10019
Attn: Stephen R. Greenwald, CEO
With a copy to:
Howard J. Kerker, Esq.
45 West 45th Street
New York, New York 10036
(b) If to the registered Holder, to the address of such Holder as shown on
the books of the Company.
12. SUCCESSORS.
All covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors and assigns.
13. HEADINGS.
The headings in this Warrant are inserted for purposes of convenience only
and shall have no substantive effect.
14. LAW GOVERNING.
This Warrant is delivered in the State of New York and shall be construed
and enforced in accordance with, and governed by, the laws of the State of New
York, without giving effect to conflicts of laws principles. Each of the Company
and the Holder hereby agrees that any dispute or controversy arising out of this
Warrant shall be adjudicated in a court located in New York City, and hereby
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York, New York and of the federal
courts in the Southern District of New York, and irrevocably waives
5
<PAGE>
any objection each now or hereafter may have respecting the venue of such
action or proceeding brought in such a court or respecting the fact that such
court is an inconvenient forum, and consents to the service of process in any
such action or proceeding by means of registered or certified mail, return
receipt requested.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
corporate name by a duly authorized officer and has caused its corporate seal to
be affixed hereto on the date first above written.
Dated: March 6, 1996
COMMUNICATIONS AND ENTERTAINMENT CORP.
By: Stephen R. Greenwald
------------------------------------------
Stephen R. Greenwald
Title: Chief Executive Officer
6
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in Order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase _______________ Shares represented by this Warrant in accordance with
the conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
Date:
---------------------------------
--------------------------------------
(Signature)
--------------------------------------
(Print Name)
--------------------------------------
(Social Security Number or
Taxpayer's Identification
Number)
7
<PAGE>
EXHIBIT 10.53
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT
WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO SUCH SECURITIES, OR
(ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY
UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO
COMMUNICATIONS AND ENTERTAINMENT CORP. (THE "COMPANY"), OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR OTHER STATE SECURITIES LAW.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON MARCH 5, 2001.
COMMUNICATIONS AND ENTERTAINMENT CORP.
COMMON STOCK
PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3
1,200,000 Warrants
(Subject to a Reverse Stock Split and Other Adjustments
As Provided in Section 5 Hereof)
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by COMMUNICATIONS AND ENTERTAINMENT CORP., a Nevada
corporation (the "Company"), Lawrence Schneider is hereby granted the right to
purchase, at the initial exercise price of $.3125 per share (subject to a
reverse stock split and other adjustments as provided in Section 5 hereof), at
any time from March 6, 1996 until 5:00 P.M. New York City time on March 5,
2001, 1,200,000 shares (the "Shares") of the Company's Common Stock, par value
$.01 per share (the "Common Stock").
Each Common Stock Purchase Warrant (the "Warrant") initially is exercisable
at a price of $.3125 per Share payable in cash or by certified or official bank
check in New York Clearing House funds, subject to adjustments as provided in
Section 5 hereof. Upon surrender of this Warrant at the offices of the Company,
with the annexed Subscription Form duly executed, together with payment of the
Purchase Price (as hereinafter defined) for the Shares purchased, the registered
holder of this Warrant (the "Holder") shall be entitled to receive a certificate
or certificates for the Shares so purchased.
1
<PAGE>
1. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are exercisable at the
option of the Holder, in whole or in part (but not as to fractional shares
underlying this Warrant), during the period in which this Warrant may be
exercised as set forth above. In the case of the purchase of fewer than all the
Shares purchasable under this Warrant, the Company shall cancel this Warrant
upon the surrender hereof and shall execute and deliver to the Holder a new
Warrant of like tenor for the balance of the Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES.
Upon the exercise of this Warrant and payment in full for the Shares, the
issuance of a certificate or certificates for Shares underlying this Warrant
shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or (subject to the Provisions of Section 3.1
hereof) in such names as may be directed by, the Holder; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the shares underlying this
Warrant shall be executed by the manual or facsimile signature of the Chairman
or the Chief Executive Officer, and the President or the Secretary of the
Company holding office at the time such Shares are issued.
3. RESTRICTION ON TRANSFER.
Neither this Warrant nor any Share issuable upon exercise hereof has been
registered under the Securities Act of 1933, as amended (the "Act"), and none of
such securities may be offered, sold, pledged, hypothecated, assigned or
transferred except (i) pursuant to a registration statement under the Act which
has become effective and is current with respect to such securities or (ii)
pursuant to a specific exemption from registration under the Act but only upon a
Holder hereof having first obtained the written opinion of counsel to the
Company, or other counsel reasonably acceptable to the Company, that the
proposed disposition is consistent with all applicable provisions of the Act as
well as any applicable "Blue Sky" or other state securities law. Upon exercise,
in part or in whole, of this Warrant, each certificate issued representing the
Shares underlying this Warrant shall bear a legend to the foregoing effect.
2
<PAGE>
4. PRICE.
4.1 INITIAL AND ADJUSTED PURCHASE PRICE. The initial Purchase Price shall
be $.3125 per share. The adjusted Purchase Price shall be the price which shall
result from time to time from any and all adjustments of the initial Purchase
Price in accordance with the provisions of Section 5 hereof.
4.2 PURCHASE PRICE. The term "Purchase Price" herein shall mean the initial
purchase price per Share or the adjusted purchase price per share, depending
upon the context.
5. ADJUSTMENTS OF PURCHASE PRICE AND NUMBER OF SHARES.
In the event that, prior to the issuance by the Company of all of the
Shares issuable upon exercise of this Warrant, there shall be any change in the
outstanding Common Stock by reason of the declaration of stock dividends, or
through a recapitalization resulting from stock splits or combinations, without
the payment to the Company of any compensation therefor in money, services or
property, the remaining Shares still subject to this Warrant and the Purchase
Price thereof shall be appropriately adjusted (but without regard to fractions)
by the Board of Directors of the Company to reflect such change. The Holder of
this Warrant acknowledges that the Board of Directors of the Company declared a
reverse one-for-six split of the Company's Common Stock, par value $.01 per
Share, effective March 18, 1996. If the date of issuance of this Warrant is
prior to March 18, 1996, then upon the effective date of such reverse stock
split, the number of Shares subject to this Warrant shall be divided by six and
the exercise price shall be multiplied by six.
6. MERGER OR CONSOLIDATION.
In case of any consolidation of the Company with, or merger of the Company
with or into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), the corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the Holder
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of his Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger
by a Holder of the number of shares of Common Stock for which his Warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for the adjustments
which shall be identical to the adjustments provided in Section 5. The above
provisions of this Section 6 shall similarly apply to successive consolidations
or mergers.
3
<PAGE>
7. EXCHANGE OR REPLACEMENT OF WARRANT.
This Warrant is exchangeable without expense, upon the surrender hereof by
the registered Holder at the principal executive office of the Company, for a
new Warrant of like tenor and date representing in the aggregate the right to
purchase the same number of Shares as are purchasable hereunder in such
denominations as shall be designated by the Holder hereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonable satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
8. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intention
of the parties that all fractional interests shall be eliminated.
9. RESERVATION OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant, such number of Shares as shall be issuable upon the exercise
hereof. The Company covenants and agrees that, upon the exercise of this Warrant
and payment of the Purchase Price therefor, all Shares issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable.
10. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company.
4
<PAGE>
11. NOTICES.
All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be personally delivered,
telegraphed or sent by certified, registered, or express mail, postage prepaid,
and shall be deemed given when so delivered personally, telegraphed or, if
mailed, five days after the date of deposit in the United States mails, as
follows:
(a) If to the Company, to:
Communications and Entertainment Corp.
380 Lexington Avenue, Suite 2500
New York, New York 10019
Attn: Stephen R. Greenwald, CEO
With a copy to:
Howard J. Kerker, Esq.
45 West 45th Street
New York, New York 10036
(b) If to the registered Holder, to the address of such Holder as shown on
the books of the Company.
12. SUCCESSORS.
All covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors and assigns.
13. HEADINGS.
The headings in this Warrant are inserted for purposes of convenience only
and shall have no substantive effect.
14. LAW GOVERNING.
This Warrant is delivered in the State of New York and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, without giving effect to conflicts of laws principles.
Each of the Company and the Holder hereby agrees that any dispute or
controversy arising out of this Warrant shall be adjudicated in a court
located in New York City, and hereby submits to the exclusive jurisdiction of
the courts of the State of New York located in New York, New York and of the
federal courts in the Southern District of New York, and irrevocably waives
5
<PAGE>
any objection each now or hereafter may have respecting the venue of such
action or proceeding brought in such a court or respecting the fact that such
court is an inconvenient forum, and consents to the service of process in any
such action or proceeding by means of registered or certified mail, return
receipt requested.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
corporate name by a duly authorized officer and has caused its corporate seal to
be affixed hereto on the date first above written.
Dated: March 6, 1996
COMMUNICATIONS AND ENTERTAINMENT CORP.
By: Stephen R. Greenwald
----------------------------------------------
Stephen R. Greenwald
Title: Chief Executive Officer
6
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in Order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase _______________ Shares represented by this Warrant in accordance with
the conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
Date:
---------------------------
-----------------------------------------
(Signature)
-----------------------------------------
(Print Name)
-----------------------------------------
(Social Security Number or
Taxpayer's Identification
Number)
7
<PAGE>
EXHIBIT 10.54
THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), AND THEY MAY NOT BE OFFERED, SOLD, PLEDGED, HYPOTHECATED, ASSIGNED
OR TRANSFERRED EXCEPT (i) PURSUANT TO A REGISTRATION STATEMENT UNDER THE ACT
WHICH HAS BECOME EFFECTIVE AND IS CURRENT WITH RESPECT TO SUCH SECURITIES, OR
(ii) PURSUANT TO A SPECIFIC EXEMPTION FROM REGISTRATION UNDER THE ACT BUT ONLY
UPON A HOLDER HEREOF FIRST HAVING OBTAINED THE WRITTEN OPINION OF COUNSEL TO
COMMUNICATIONS AND ENTERTAINMENT CORP. (THE "COMPANY"), OR OTHER COUNSEL
REASONABLY ACCEPTABLE TO THE COMPANY, THAT THE PROPOSED DISPOSITION IS
CONSISTENT WITH ALL APPLICABLE PROVISIONS OF THE ACT AS WELL AS ANY APPLICABLE
"BLUE SKY" OR OTHER STATE SECURITIES LAW.
VOID AFTER 5:00 P.M. NEW YORK CITY TIME ON MARCH 5, 2001.
COMMUNICATIONS AND ENTERTAINMENT CORP.
COMMON STOCK
PURCHASE WARRANT
The Transferability of this Warrant is
Restricted as Provided in Section 3
1,200,000 Warrants
(Subject to a Reverse Stock Split and Other Adjustments
As Provided in Section 5 Hereof)
For good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged by COMMUNICATIONS AND ENTERTAINMENT CORP., a Nevada
corporation (the "Company"), Ira N. Smith is hereby granted the right to
purchase, at the initial exercise price of $.3125 per share (subject to a
reverse stock split and other adjustments as provided in Section 5 hereof), at
any time from March 6, 1996 until 5:00 P.M. New York City time on March 5,
2001, 1,200,000 shares (the "Shares") of the Company's Common Stock, par value
$.01 per share (the "Common Stock").
Each Common Stock Purchase Warrant (the "Warrant") initially is exercisable
at a price of $.3125 per Share payable in cash or by certified or official bank
check in New York Clearing House funds, subject to adjustments as provided in
Section 5 hereof. Upon surrender of this Warrant at the offices of the Company,
with the annexed Subscription Form duly executed, together with payment of the
Purchase Price (as hereinafter defined) for the Shares purchased, the registered
holder of this Warrant (the "Holder") shall be entitled to receive a certificate
or certificates for the Shares so purchased.
1
<PAGE>
1. EXERCISE OF WARRANT.
The purchase rights represented by this Warrant are exercisable at the
option of the Holder, in whole or in part (but not as to fractional shares
underlying this Warrant), during the period in which this Warrant may be
exercised as set forth above. In the case of the purchase of fewer than all the
Shares purchasable under this Warrant, the Company shall cancel this Warrant
upon the surrender hereof and shall execute and deliver to the Holder a new
Warrant of like tenor for the balance of the Shares purchasable hereunder.
2. ISSUANCE OF CERTIFICATES.
Upon the exercise of this Warrant and payment in full for the Shares, the
issuance of a certificate or certificates for Shares underlying this Warrant
shall be made forthwith (and in any event within five (5) business days
thereafter) without charge to the Holder including, without limitation, any tax
which may be payable in respect of the issuance thereof, and such certificates
shall be issued in the name of, or (subject to the Provisions of Section 3.1
hereof) in such names as may be directed by, the Holder; provided, however, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name other than that of the Holder and the Company shall not be required to
issue or deliver such certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid. The certificates representing the shares underlying this
Warrant shall be executed by the manual or facsimile signature of the Chairman
or the Chief Executive Officer, and the President or the Secretary of the
Company holding office at the time such Shares are issued.
3. RESTRICTION ON TRANSFER.
Neither this Warrant nor any Share issuable upon exercise hereof has been
registered under the Securities Act of 1933, as amended (the "Act"), and none of
such securities may be offered, sold, pledged, hypothecated, assigned or
transferred except (i) pursuant to a registration statement under the Act which
has become effective and is current with respect to such securities or (ii)
pursuant to a specific exemption from registration under the Act. Further, this
Warrant is non-transferable and non-assignable by the Holder hereof, except in
the event of the death of Holder, and any attempted transfer or assignment of
this Warrant, whether by Holder or by a third party, and whether voluntary,
involuntary or otherwise by operation of law (except upon the death of Holder),
shall be null and void and of absolutely no force and effect.
2
<PAGE>
4. PRICE.
4.1 INITIAL AND ADJUSTED PURCHASE PRICE. The initial Purchase Price shall
be $.3125 per share. The adjusted Purchase Price shall be the price which shall
result from time to time from any and all adjustments of the initial Purchase
Price in accordance with the provisions of Section 5 hereof.
4.2 PURCHASE PRICE. The term "Purchase Price" herein shall mean the initial
purchase price per Share or the adjusted purchase price per share, depending
upon the context.
5. ADJUSTMENTS OF PURCHASE PRICE AND NUMBER OF SHARES.
In the event that, prior to the issuance by the Company of all of the
Shares issuable upon exercise of this Warrant, there shall be any change in the
outstanding Common Stock by reason of the declaration of stock dividends, or
through a recapitalization resulting from stock splits or combinations, without
the payment to the Company of any compensation therefor in money, services or
property, the remaining Shares still subject to this Warrant and the Purchase
Price thereof shall be appropriately adjusted (but without regard to fractions)
by the Board of Directors of the Company to reflect such change. The Holder of
this Warrant acknowledges that the Board of Directors of the Company declared a
reverse one-for-six split of the Company's Common Stock, par value $.01 per
Share, effective March 18, 1996. If the date of issuance of this Warrant is
prior to March 18, 1996, then upon the effective date of such reverse stock
split, the number of Shares subject to this Warrant shall be divided by six and
the exercise price shall be multiplied by six.
6. MERGER OR CONSOLIDATION.
In case of any consolidation of the Company with, or merger of the Company
with or into, another corporation (other than a consolidation or merger which
does not result in any reclassification or change of the outstanding Common
Stock), the corporation formed by such consolidation or merger shall execute and
deliver to the Holder a supplemental warrant agreement providing that the Holder
shall have the right thereafter (until the expiration of such Warrant) to
receive, upon exercise of his Warrant, the kind and amount of shares of stock
and other securities and property receivable upon such consolidation or merger
by a Holder of the number of shares of Common Stock for which his Warrant might
have been exercised immediately prior to such consolidation, merger, sale or
transfer. Such supplemental warrant agreement shall provide for the adjustments
which shall be identical to the adjustments provided in Section 5. The above
provisions of this Section 6 shall similarly apply to successive consolidations
or mergers.
3
<PAGE>
7. EXCHANGE OR REPLACEMENT OF WARRANT.
This Warrant is exchangeable without expense, upon the surrender hereof by
the registered Holder at the principal executive office of the Company, for a
new Warrant of like tenor and date representing in the aggregate the right to
purchase the same number of Shares as are purchasable hereunder in such
denominations as shall be designated by the Holder hereof at the time of such
surrender.
Upon receipt by the Company of evidence reasonably satisfactory to it of
the loss, theft, destruction or mutilation of this Warrant, and, in case of
loss, theft or destruction, of indemnity or security reasonable satisfactory to
it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
8. ELIMINATION OF FRACTIONAL INTERESTS.
The Company shall not be required to issue certificates representing
fractions of Shares on the exercise of this Warrant, nor shall it be required to
issue scrip or pay cash in lieu of fractional interests, it being the intention
of the parties that all fractional interests shall be eliminated.
9. RESERVATION OF SECURITIES.
The Company shall at all times reserve and keep available out of its
authorized Common Stock, solely for the purpose of issuance upon the exercise of
this Warrant, such number of Shares as shall be issuable upon the exercise
hereof. The Company covenants and agrees that, upon the exercise of this Warrant
and payment of the Purchase Price therefor, all Shares issuable upon such
exercise shall be duly and validly issued, fully paid and non-assessable.
10. NOTICES TO WARRANT HOLDERS.
Nothing contained in this Warrant shall be construed as conferring upon the
Holder hereof the right to vote or to consent or to receive notice as a
shareholder in respect of any meetings of shareholders for the election of
directors or any other matter, or as having any rights whatsoever as a
shareholder of the Company.
4
<PAGE>
11. NOTICES.
All notices, requests, consents and other communications required or
permitted hereunder shall be in writing and shall be personally delivered,
telegraphed or sent by certified, registered, or express mail, postage prepaid,
and shall be deemed given when so delivered personally, telegraphed or, if
mailed, five days after the date of deposit in the United States mails, as
follows:
(a) If to the Company, to:
Communications and Entertainment Corp.
380 Lexington Avenue, Suite 2500
New York, New York 10019
Attn: Stephen R. Greenwald, CEO
With a copy to:
Howard J. Kerker, Esq.
45 West 45th Street
New York, New York 10036
(b) If to the registered Holder, to the address of such Holder as shown on
the books of the Company.
12. SUCCESSORS.
All covenants, agreements, representations and warranties contained in this
Warrant shall bind the parties hereto and their respective heirs, executors,
administrators, distributees, successors and assigns.
13. HEADINGS.
The headings in this Warrant are inserted for purposes of convenience only
and shall have no substantive effect.
14. LAW GOVERNING.
This Warrant is delivered in the State of New York and shall be
construed and enforced in accordance with, and governed by, the laws of the
State of New York, without giving effect to conflicts of laws principles.
Each of the Company and the Holder hereby agrees that any dispute or
controversy arising out of this Warrant shall be adjudicated in a court
located in New York City, and hereby submits to the exclusive jurisdiction of
the courts of the State of New York located in New York, New York and of the
federal courts in the Southern District of New York, and irrevocably waives
5
<PAGE>
any objection each now or hereafter may have respecting the venue of such
action or proceeding brought in such a court or respecting the fact that such
court is an inconvenient forum, and consents to the service of process in any
such action or proceeding by means of registered or certified mail, return
receipt requested.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed in its
corporate name by a duly authorized officer and has caused its corporate seal to
be affixed hereto on the date first above written.
Dated: March 6, 1996
COMMUNICATIONS AND ENTERTAINMENT CORP.
By: Stephen R. Greenwald
----------------------------------------------
Stephen R. Greenwald
Title: Chief Executive Officer
6
<PAGE>
SUBSCRIPTION FORM
(To be Executed by the Registered Holder
in Order to Exercise the Warrant)
The undersigned hereby irrevocably elects to exercise the right to
purchase _______________ Shares represented by this Warrant in accordance with
the conditions hereof and herewith makes payment of the Purchase Price of such
Shares in full.
Date:
---------------------------
-----------------------------------------
(Signature)
-----------------------------------------
(Print Name)
-----------------------------------------
(Social Security Number or
Taxpayer's Identification
Number)
7
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-1-1995
<PERIOD-END> MAR-31-1996
<CASH> 878,340
<SECURITIES> 0
<RECEIVABLES> 764,008
<ALLOWANCES> 0
<INVENTORY> 1,049,523
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 2,726,330
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 22,842
<OTHER-SE> (2,425,458)
<TOTAL-LIABILITY-AND-EQUITY> 2,726,330
<SALES> 744,374
<TOTAL-REVENUES> 744,374
<CGS> 4,058,096
<TOTAL-COSTS> 4,058,096
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,594
<INCOME-PRETAX> (4,381,899)
<INCOME-TAX> 0
<INCOME-CONTINUING> (4,381,899)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,381,899)
<EPS-PRIMARY> (1.92)
<EPS-DILUTED> 0
</TABLE>
