<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 Quarterly Period Ended March 31, 1998
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number 0-23000
The Harvey Entertainment Company
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(Exact name of registrant as specified in its charter)
California 95-4217605
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1999 Avenue of the Stars, Suite 2050, Los Angeles, California 90067-6055
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(Address of principal executive offices)
Registrant's phone number, including area code (310) 789-1990
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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 preceding 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.
<TABLE>
<CAPTION>
Class Outstanding at May 5, 1998
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<S> <C>
Common 4,186,941
</TABLE>
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARY
INDEX
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
PART I
FINANCIAL INFORMATION
Consolidated Balance Sheets - March 31, 1998 and December 31, 1997 1-2
Consolidated Statements of Operations - Three Months Ended March 31, 1998 and 1997 3
Consolidated Statements of Cash Flows - Three Months Ended March 31, 1998 and 1997 4
Notes to Consolidated Financial Statements 5
Management's Discussion and Analysis of Financial Condition and Results of Operations 6-8
PART II
OTHER INFORMATION 9-10
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
ASSETS 1998 1997
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(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 7,251,000 $ 6,316,000
Accounts receivable, net of allowance for doubtful accounts
of $658,000 and $606,000 in 1998 and 1997, respectively 6,715,000 8,013,000
Prepaid income taxes 819,000
Prepaid expenses and other assets 362,000 489,000
Film library, net of accumulated amortization of $3,888,000
and $3,373,000 in 1998 and 1997, respectively 9,721,000 10,236,000
Furniture and equipment, net of accumulated
depreciation of $531,000 and $497,000 in 1998 and 1997,
respectively 543,000 483,000
Goodwill, net of accumulated amortization of $1,124,000
and $1,092,000 in 1998 and 1997, respectively 1,470,000 1,503,000
Trademarks and copyrights, net of accumulated
amortization of $243,000 and $210,000 in 1998 and 1997,
respectively 641,000 590,000
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TOTAL $27,522,000 $27,630,000
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</TABLE>
See notes to consolidated financial statements.
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1998 1997
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(UNAUDITED)
<S> <C> <C>
LIABILITIES:
Accounts payable and accrued expenses $ 2,411,000 $ 2,300,000
Income taxes payable 498,000
Deferred income taxes 2,665,000 3,788,000
Accrued rent and other liabilities 212,000 131,000
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Total liabilities 5,288,000 6,717,000
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STOCKHOLDERS' EQUITY:
Preferred stock, $1 par value, 3,000,000 shares
authorized, none issued
Common stock, no par value, 10,000,000 shares authorized,
4,098,000 issued and outstanding at March 31, 1998 and
3,573,000 at December 31, 1997 21,273,000 18,153,000
Retained earnings 961,000 2,760,000
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Total stockholders' equity 22,234,000 20,913,000
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TOTAL $ 27,522,000 $ 27,630,000
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</TABLE>
See notes to consolidated financial statements.
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<PAGE> 5
THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1998 1997
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<S> <C> <C>
OPERATING REVENUES:
Filmed entertainment $ 85,000 $ 763,000
Merchandising 775,000 1,018,000
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Net operating revenues 860,000 1,781,000
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OPERATING EXPENSES:
Cost of sales 311,000 632,000
Selling, general and administrative expenses 2,966,000 1,383,000
Amortization of film library, goodwill,
trademarks, copyrights and other 580,000 88,000
Depreciation expense 34,000 22,000
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Total operating expenses 3,891,000 2,125,000
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LOSS FROM OPERATIONS (3,031,000) (344,000)
OTHER INCOME 34,000 56,000
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LOSS BEFORE INCOME TAX BENEFIT (2,997,000) (288,000)
INCOME TAX BENEFIT 1,198,000 105,000
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NET LOSS $(1,799,000) $ (183,000)
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WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic 3,585,000 3,594,000
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NET LOSS PER SHARE:
Basic $ (0.50) $ (0.05)
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Diluted $ (0.50) $ (0.05)
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</TABLE>
See notes to consolidated financial statements.
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THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
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<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
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1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,799,000) $ (183,000)
Adjustments to reconcile net loss to net cash used in
operating activities:
Depreciation 34,000 22,000
Amortization of film library, goodwill, trademarks and copyrights
and other 580,000 88,000
Deferred income taxes (559,000) (105,000)
Warrant expense 35,000
Write-off of leasehold improvements 20,000
Changes in operating assets and liabilities:
Accounts receivable, net 1,298,000 (670,000)
Prepaid income taxes (819,000)
Prepaid expenses and other assets (27,000) 28,000
Video inventory write-off 154,000
Accounts payable and accrued expenses 111,000 (147,000)
Income taxes payable (498,000)
Accrued rent and other liabilities 81,000 72,000
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Net cash used in operating activities (1,444,000) (840,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of furniture and equipment (94,000) (102,000)
Investments in trademarks, copyrights and film library (83,000) (204,000)
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Net cash used in investing activities (177,000) (306,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from exercise of stock options 2,556,000
Repurchase and retirement of common stock (357,000)
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Net cash provided by (used in) financing activities 2,556,000 (357,000)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 935,000 (1,503,000)
CASH AND CASH EQUIVALENTS, Beginning of period 6,316,000 6,057,000
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CASH AND CASH EQUIVALENTS, End of period $ 7,251,000 $ 4,554,000
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</TABLE>
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<PAGE> 7
THE HARVEY ENTERTAINMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SUMMARY OF ACCOUNTING POLICIES
The consolidated financial statements of The Harvey Entertainment Company and
Subsidiary (the "Company") have been prepared in accordance with generally
accepted accounting principles for interim financial information. Accordingly,
they do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. Certain
reclassifications have been made to the March 31, 1997 consolidated financial
statements to conform with current quarter's presentation. The accompanying
financial statements should be read in conjunction with the more detailed 1997
financial statements and related footnotes included in the Company's Form 10-KSB
filed with the Securities and Exchange Commission on April 15, 1998.
In the opinion of the Company, the accompanying unaudited financial statements
as of March 31, 1998 and for the three months ended March 31, 1998 and 1997
contain all adjustments, which include normal recurring accruals, necessary to
present fairly the financial position of the Company as of March 31, 1998 and
the results of operations and cash flows for the three months ended March 31,
1998 and 1997.
The results of operations for the interim periods of the Company's fiscal year
are not necessarily indicative of the results to be expected for the entire
year.
* * * * * *
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CHANGE IN MANAGEMENT
On March 20, 1998, the Company's Board of Directors voted not to renew the
employment agreements of the Company's Chief Executive Officer, Jeffrey A.
Montgomery, and Chief Financial Officer and Executive Vice President, Gregory M.
Yulish which expired on April 17, 1998. On March 27 and March 30, respectively,
Messrs. Yulish and Montgomery resigned from the Board of Directors. The Board of
Directors retained the non-exclusive services of Anthony J. Scotti as the
Company's Interim Chief Executive Officer and Michael S. Hope as the Company's
Interim Chief Financial Officer, effective as of March 23, 1998, through a
management services agreement with Global Media Management Group, LLC for an
initial six-month term.
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
Results of Operations - The Company's net operating revenues in the 1998 and
1997 three month periods were $860,000 and $1,781,000 respectively, a decrease
of $921,000. The decrease in revenues from 1997 to 1998 includes a decrease of
$678,000 in filmed entertainment revenues and a decrease of $243,000 in
merchandising revenues. The development of new revenue opportunities in the
filmed entertainment area requires significant lead time. The number of projects
expected to generate revenues in 1998 is limited and, accordingly, the Company
expects that 1998 operating results will be adversely impacted compared to prior
periods. The Company is in the early stages of formulating a new business plan,
the results of which will not be realized until subsequent periods.
Revenues - Net filmed entertainment revenues were $85,000 and $763,000 in 1998
and 1997, respectively, a decrease of $678,000. In February 1997, the Company
and Universal Cartoon Studios received an order from Fox Kid's Network for an
additional 26 thirty-minute episodes of "Casper" for a total of 52 animated
episodes resulting in license fee revenues of $303,000 for 1997, but only
$63,000 for 1998. The decrease is due to fewer episodes being produced in the
first quarter of 1998 than in the first quarter of 1997. No additional episodes
have been ordered. Foreign broadcast license revenues from the Harvey Classic
Film Library accounted for $22,000 in 1998 and $38,000 in 1997. The low revenues
were due in part to the expiration of the Company's distribution agreement with
its prior foreign distributor, which expired in November 1997. In March 1998,
the Company hired a foreign distribution consultant based in London to assist
with and oversee foreign sales of the Harvey Classic Film Library. The remaining
balance of 1997 first quarter revenues, consist of revenues associated with the
domestic barter sales of the "Richie Rich" animated series which premiered in
September 1996, and residuals from the Richie Rich cartoon series distributed by
Hanna Barbera, a wholly owned subsidiary of Time Warner. There were no such
comparable revenues for 1998.
Net merchandising revenues were $775,000 and $1,018,000 in 1998 and 1997,
respectively, a decrease of $243,000. The revenues in 1998 consist of new
licenses for the worldwide merchandising of the Harvey Classic Characters and
the licensing revenues from the Company's first, feature length direct-to-video,
"Casper, A Spirited Beginning" released in September 1997, entered into by the
Company's in-house licensing division. Although merchandising licenses are
generally granted for a period of one to three years, all minimum guaranteed
license revenues are recognized when the license period begins, provided certain
conditions have been met. Due to this accounting treatment, revenue fluctuations
from the Company's merchandising activities will likely recur in the future on a
quarterly and annual basis.
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<PAGE> 9
The ongoing success of the merchandising program is in part dependent upon the
attractiveness and future marketability of the Harvey Classic Characters.
Cost of Sales - Costs of sales relating to filmed entertainment revenues were
$198,000 and $187,000 in 1998 and 1997, respectively. The increase in cost of
sales relative to comparable revenue amounts is due to a $150,000
adjustment in the carrying value of certain video inventory.
Merchandising costs of sales were $113,000 and $445,000 in 1998 and 1997,
respectively. The decrease in cost of sales is due to a decrease in
merchandising activity for the period.
Selling, General and Administrative Expenses - Selling, general and
administrative expenses (SG&A) were $2,966,000 and $1,383,000 for 1998 and 1997,
respectively, an increase of $1,583,000. The increase in SG&A in the 1998 period
is primarily the result of an approximate $500,000 provision relating to
doubtful accounts from previously recognized guarantees from agents and
licensees operating in the Pacific Rim territories and a $450,000 provision
relating to the Company's prior participation interest in Universal Studios,
Inc.'s, Harvey-related merchandising business. Additionally, the Company
incurred increased salaries and consulting expenses in the current period.
Depreciation and Amortization - Depreciation expense was $34,000 and $22,000 in
1998 and 1997. Amortization of the film library was $515,000 and $43,000 in 1998
and 1997, respectively. The amortization amount in the current period includes
the write-off of $500,000 of previously capitalized product development costs
due to uncertainties concerning the recoverability of such costs. Amortization
of trademarks and copyrights was $33,000 in 1998 and $13,000 in 1997.
Amortization of goodwill was $32,000 in both 1998 and 1997.
Other Income - Other income includes interest income, which was $67,000 and
$56,000 in 1998 and 1997, respectively. The increase in interest income was due
to higher cash balances during the period, which generated increased interest
income. Other income in 1998 was net of $33,000 in currency translation loss
related to the Company's licensing and merchandising activities in foreign
territories.
Income Taxes - Income tax benefit was $1,198,000 and $105,000 in 1998 and 1997,
respectively. The increase is due to the increase in operating losses.
Liquidity and Capital Resources - Net cash used in operating activities was
$2,008,000 and $840,000 in 1998 and 1997, respectively. The increase in cash
used in operations was primarily due to the higher operating loss in 1998 and
tax payments made in the current period.
Net cash used in investing activities was $177,000 and $306,000 in 1998 and
1997, respectively. The decrease in cash used in investing activities is
primarily due to less investment by the Company in its trademarks, copyrights
and film library.
Net cash provided by (used in) financing activities was $3,120,000 and
$(357,000) in 1998 and 1997, respectively. The increase is due to the exercise
of employee stock options.
The Company has a $5,000,000 revolving credit facility with City National Bank,
which expires on June 1, 1998. The Company is presently in discussion with the
bank on extending the maturity date of the facility.
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<PAGE> 10
Interest on advances made under the facility accrues at 1% above the prime rate
as reported by the lender. The Company has not drawn on this facility. The
facility is secured by substantially all of the assets of the Company.
Management believes that the Company's current sources of working capital,
including amounts expected to be available under existing or future credit
facilities, will provide adequate working capital for the Company's current
requirements for at least the next 12 months.
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<PAGE> 11
OTHER INFORMATION
Item 1 - 1. Franklin Litigation. On September 30, 1994, the Company filed
suit in the Superior Court of the State of California for the County
of Los Angeles against Jeffrey Franklin d/b/a ATI Enterprises, and
Franklin/Waterman Entertainment, Inc., seeking to recover damages
arising from, among other things, wrongful usurpation of corporate
business opportunities. The Company filed a related claim against
Franklin's business partner Stephen Waterman in May 1996. The
Company was also named in a related action filed by the defendants'
insurers, American Casualty Co., in which the insurers sought
determinations as to their obligations to provide insurance coverage
for the claims made by the Company against the defendants. In June
1997, judgment was granted in favor of the Company in the Franklin
action an amount in excess of $800,000, and the cross-complaint
brought by defendant ATI against the Company was dismissed. The
defendants appealed. The parties have reached a tentative settlement
agreement conditional on the approval of the bankruptcy court, among
other things. The conditions have not yet been satisfied.
Item 1 - 2. Realty Trust Advisors, Inc. On December 31, 1997, Realty
Trust Advisors, Inc. filed suit against the Company in Los Angeles
Superior Court seeking damages arising out of the alleged failure of
the Company to pay certain commissions. On May 11, 1998 the Company
filed a Demurrer and a Motion to Strike portions of the First
Amended Complaint. The hearing on the Company's Demurrer and Motion
to Strike is scheduled for June 10, 1998.
Items 2 through 4 are omitted as not applicable.
Item 5 - Other Information
None
Item 6 (a) - Exhibit 10.39 Employment Agreement dated as of October 1996
between the Company and Charles Day
Exhibit 10.40 Stock Option Agreement dated as of October 1996
between the Company and Charles Day
Exhibit 10.41 Amendment dated December 19, 1997 to Employment
Agreement dated as of October 1996 between the
Company and Charles Day
Exhibit 10.42 Stock Option Agreement dated December 19, 1997
between the Company and Charles Day
Exhibit 10.43 Employment Agreement dated February 27, 1998
between the Company and Don Gold
Exhibit 10.44 Stock Option Agreement dated February 27, 1998
between the Company and Don Gold
Exhibit 10.45 Management Consulting Agreement dated March 23,
1998 between the Company and Global Media
Management Group, LLC
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<PAGE> 12
Exhibit 10.46 Warrant Agreement dated March 23, 1998 between
the Company and Anthony J. Scotti, Michael S. Hope
and Leonard Breijo
Exhibit 10.47 Stock Option Agreement Director dated April 13,
1998 between the Company and Gary M. Gray
Exhibit 10.48 Stock Option Agreement Services dated April 13,
1998 between the Company and Anthony J. Scotti
Exhibit 10.49 Stock Option Agreement Services dated April 13,
1998 between the Company and Michael S. Hope
Exhibit 10.50 Stock Option Agreement Services dated April 13,
1998 between the Company and Leonard Breijo
Exhibit 10.51 Termination and Consulting Agreement and Mutual
General Release dated April 17, 1998 between the
Company on one hand, and Gregory M. Yulish,
Jane McGregor and JEM Entertainment, Inc., on the
other
Item 6 (b) - Reports on Form 8-K
None
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<PAGE> 13
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 HARVEY ENTERTAINMENT COMPANY
AND SUBSIDIARY (Registrant)
May 15, 1998 /s/Anthony J. Scotti
-------------------------------
Anthony J. Scotti
Interim Chief Executive Officer
May 15, 1998 /s/Michael S. Hope
-------------------------------
Michael S. Hope
Interim Chief Financial Officer
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<PAGE> 1
Exhibit 10.39
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of October ___,
1996, between THE HARVEY ENTERTAINMENT COMPANY, a California corporation
("Company"), and CHARLES DAY ("Executive").
RECITALS
WHEREAS, Company and Executive desire to enter into this
Agreement to assure Company of the exclusive services of Executive as the Vice
President of Consumer Products of Company and to set forth the rights and duties
of the parties hereto.
NOW THEREFORE, in consideration of the promises and the mutual
covenants set forth herein, the parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES
Executive represents and warrants that there are no agreements or
arrangements, whether written or oral, that would be breached by Executive upon
execution of this Agreement or that would prevent or impair Executive from
rendering exclusive services to the Company during the term hereof.
2. TERMS OF EMPLOYMENT
(a) Subject to the provisions for termination set forth
herein, the term of Executive's employment hereunder shall continue from October
___, 1996 until September 30, 1998 (the "Term").
(b) Executive shall act as the Company's Vice President of
Consumer Products and shall report to the Company's Executive Vice President
with respect to budgeting, finances, revenues and other economic considerations,
and to the Company's Chief Executive Officer as to creative and artistic
decisions. Executive shall be responsible for the merchandising of Company's
Classic Characters and shall work closely with Company's Executive Vice
President, Chief Executive Officer and with MCA Inc. with respect to such
merchandising activities. Executive shall comply with all of the reasonable and
customary employment policies of Company and its affiliates. The services to be
rendered herein shall generally be performed at the principal offices of
Company, currently in Century City, California. In addition, the services may be
performed by Executive, from time to time, on a temporary travel basis at such
other locations as Company shall reasonably request consistent with its
reasonable business needs. Executive agrees to perform his services hereunder in
a competent and professional manner, consistent with the skills to be possessed
by a senior employee of Company.
3. RESTRICTIONS ON OUTSIDE BUSINESS ACTIVITIES/CONFIDENTIAL
INFORMATION
<PAGE> 2
(a) During his employment, Executive shall devote his
exclusive energies, interests, abilities and productive business time to perform
all the duties required of and from his pursuant to the terms of this Agreement.
During the Term of this Agreement and of the Executive's employment by Company,
Executive shall not, directly or indirectly, engage in any business for his own
account which is competitive with the business of Company or Company's
affiliates or enter into the employ of or render any services to any persons
engaged in businesses competitive with that of Company, or acquire any interest
in any business competitive with the businesses of Company in any capacity,
whether as an employee, consultant, investor, agent, principal, trustee,
shareholder or director, or induce any customer or supplier of Company to
terminate its relationship with Company. Notwithstanding the foregoing,
Executive may acquire, solely as an investment, ownership of securities of
publicly traded companies which may be competitive with Company's business
provided, however, that Executive may own no more that one percent (1%) of such
competitive company's publicly traded securities. Executive agrees that his
services hereunder are of a special, unique, unusual, extraordinary and
intellectual character which gives them particular value, the loss of which
cannot be reasonably or adequately compensated in an action of law for damages.
Executive further agrees that any breach hereunder, including the breach of
Executive's obligation of non-competition, will cause Company irreparable injury
and, therefore, Executive agrees that Company is entitled to seek injunctive and
other equitable relief to prevent a breach or threatened breach of this
Agreement which shall be in addition to any other rights or remedies to which
Company may be entitled. Executive may continue the activities set forth on
Exhibit A hereto.
(b) Executive will keep secret all material confidential
matters of Company and its Affiliates which are not otherwise in the public
domain and will not intentionally disclose them to anyone outside of Company or
its Affiliates, either during or after the Term, except with Company's written
consent and except for such disclosure as is necessary in the performance of
Executive's duties during the Term.
(c) Executive will deliver promptly to Company on
termination of the Term or at any other time Company may so request, at
Company's expense, all confidential memoranda, notes, records, reports and other
documents (and all copies thereof) relating to Company's and its Affiliates'
business, which Executive obtained while employed by, or otherwise serving or
acting on behalf of, Company, or which Executive may then possess or have under
his control.
4. COMPENSATION AND BENEFITS
(a) Company shall pay a "Basic Salary" to Executive at the
rate of One Hundred Thirty Thousand Dollars ($130,000) per year for the Term of
employment. The Basic Salary shall be payable in equal bi-monthly installments
for the entire term of this Agreement subject to the terms and conditions
contained herein.
(b) In addition to this Basic Salary, Executive shall
receive a living allowance of $3,000 per month during the first 12 months of
employment.
(c) Executive shall also be entitled to receive, for each
year of this Agreement, a bonus equal to 2% of the pre-tax net profits from the
Company's merchandising
<PAGE> 3
activities under or similar to those under the direction and supervision of
Executive which accrue during each year of the Term. Such pre-tax profits shall
be after an appropriate allocation (reasonably determined in good faith by the
Company's Chief Financial Officer in accordance with generally accepted
accounting principles) of the Company's overhead, administrative and corporate
costs and expenses. Such share of pre-tax net profits shall be paid within 60
days of December 1997 and 1998 for the pre-tax net profits for the periods
October 1, 1996 through September 30, 1997 and October 1, 1997 through September
30, 1998 respectively. All third party participations, fees and expenses shall
be deducted in determining such pre-tax net profits.
If the Company secures the return from MCA of its merchandising
rights for the Casper(R) character, pre-tax net profits shall be determined
including all of the Company's merchandising revenues from activities under
Executive's supervision. If the Company does not secure the return of such
rights, no revenues or net profits from merchandising the Casper(R) character
will be included in the net profits calculation until such time as any advances
paid by MCA to the Company have been recouped. If the Company secures the return
of such rights and then MCA reacquires Casper(R) merchandising rights in
connection with a new Casper(R) motion picture, the parties agree to negotiate
Executive's participation in any new MCA advance to reflect Executive's
involvement in securing the advance, the expected recoupment period for the
advance in comparison to the Term of this Agreement, and the Company's projected
net profits attributable thereto.
(d) Executive shall receive options to purchase 15,000
shares of Company Common Stock at a market price equal to the closing price on
September 30, 1996. Five Thousand (5,000) shares shall vest, subject to
continued employment, on each of September 30, 1997, 1998 and 1999 and shall be
subject to and issued in accordance with the terms of the Stock Option Agreement
attached hereto.
(e) Executive shall be entitled to health, dental and all
other insurance benefits which are made generally available to senior employees
and their families of Company. In addition, Executive shall be entitled to
participate in Company's profit sharing and pension plan on the same terms as
other senior employees of Company. These benefits and plans may change from time
to time in accordance with Company policies and procedures.
(f) Executive shall be entitled to three weeks (15 days)
of paid vacation per year during the period ending September 30, 1998, such
vacation to accrue at the rate of 1-1/4th days per month. Vacation may only be
taken after consultation with Company's Executive Vice President at times
convenient to Company's reasonable business needs.
(g) Executive shall receive the use of a 1992 BMW 540 or
its equivalent plus reimbursement for the reasonable business cost of automobile
insurance, gas and maintenance. Executive shall add Company to Executives
automobile insurance policy as an additional insured. Executive shall provide
Company with appropriate documentation respecting Executive's business use of
his automobile, and acknowledges that Executive may be determined to have
received compensation income with respect to that portion of Executive's
automobile allowance not attributable to business use.
(h) In partial consideration of (and as an inducement to)
Executive moving from the United Kingdom to California, Company shall reimburse
Executive for the
<PAGE> 4
reasonable and necessary costs incurred by Executive and Executive's wife in
traveling to the United States and for packing, shipping and temporary storage
(until Executive secures permanent accommodations) of Executive's personal
property, including furniture and furnishings. Executive's reimbursement shall
be limited to $12,500, of which Executive has received an advance of $10,000,
and shall be subject to reasonable and customary documentation as required for
federal income tax purposes.
(i) Company has advanced to Executive's attorney the sum
of $2,500 for Executive's use in obtaining legal counsel to review and negotiate
this Agreement. Executive agrees to reimburse Company the sum of $1,125 (which
Company may recoup from amounts payable to Executive other than the moving
expense allowance set forth above).
(j) Company and Executive agree to review this Agreement
approximately one year after its commencement date (but no later than September
1997) and, in light of all relevant circumstances, determine whether in good
faith the compensation and benefits provided to Executive hereunder should be
increased or improved; provided, however, that in no event shall such review
result in any of Executive's compensation or other benefits hereunder being
decreased, limited, eliminated, delayed or otherwise adversely changed.
Executive acknowledges that no commitment to any such increase or improvement
has been made.
5. CONTINUATION OF COMPENSATION
All compensation, as well as any other employment benefits which
Executive may otherwise receive from Company during the Term of this Agreement,
shall be paid less income tax withholding and other normal employee deductions.
Except as set forth herein, Company shall have no continuing obligation to make
any compensation payments after the termination of Executive's employment with
Company.
6. TERMINATION FOR CAUSE
This Agreement, the employment of Executive, and any future
obligation of the Company to make salary or other future payments hereunder, may
be terminated by Company "for cause" upon any of the following events:
6.1 Executive has committed fraud, defalcation,
misappropriation or any similar act;
6.2 Executive is in default in the performance of
Executive's obligations, services or duties hereunder, which shall include,
without limitation, Executive's disregarding the instruction from the Company's
Executive Vice President or the Company's Chief Executive Officer concerning the
conduct of his duties hereunder, Executive's abuse of expense accounts,
Executive's acting in a manner inconsistent with the policies of the Company,
its Chief Executive Officer or its Board of Directors, or if Executive has
breached any material provision of this Agreement;
6.3 Executive is grossly negligent or engages in willful
misconduct in
<PAGE> 5
the performance of his duties hereunder;
6.4 Executive has engaged in illegal activities which have
an adverse impact on the Company, other than de minimis violations of civil law
which can be cured without material adverse impact to the Company, unless such
violations indicate a pattern of conduct which, in the aggregate, materially
adversely impact the Company;
6.5 Executive has developed or pursued interests
materially adverse to those of Company or any of its affiliates; or
6.6 Executive has contributed to the Company's financial
condition undergoing or having undergone any material adverse change.
7. TERMINATION WITHOUT CAUSE
The employment of Executive and, except as otherwise provided in
Section 7.1(c) hereof, any future obligation of the Company to make salary or
other payments hereunder, may be terminated "without cause" as follows:
7.1 by mutual agreement of the parties hereto;
7.2 by the Company, pursuant to the provisions of Section
9 of this Agreement (Illness or Incapacity);
7.3 automatically, on Executive's death or disability; or
7.4 upon the expiration of the Term of this Agreement.
8. EFFECT OF TERMINATION
If Executive's employment is terminated by Company for cause or
without cause as described in Paragraphs 6 and 7 above or in Paragraph 13 below,
Executive shall be entitled to accrued salary, a pro rata portion of any bonus
(which shall be paid at the times set forth in Paragraph 4(c) above), vacation
through the date of termination and unreimbursed business or auto expenses
accrued through the date of termination and the obligations of Company under the
terms of the Agreement shall be of no further force and effect. If Executive's
employment is terminated by Company for reasons other than as specified
hereinabove, Executive shall receive a lump-sum payment equal to the Basic
Salary, without increase, the Executive would have earned through the remainder
of the Term of this Agreement.
If Executive's employment is terminated by Company on or prior to
September 30, 1997 due to Executive's illness under Paragraph 9 or disability,
and Executive permanently relocates to the United Kingdom within six months of
such termination, Company shall reimburse Executive for his actual moving costs
of the type set forth in Paragraph 4(h) up to a maximum of $10,000.
9. ILLNESS OR INCAPACITY
<PAGE> 6
If during the Term of this Agreement, Executive shall be unable
to perform his duties hereunder for a period exceeding twelve (12) consecutive
weeks or sixteen (16) weeks in the aggregate out of any fifty-two (52)
consecutive weeks by reason of illness or incapacity, this Agreement may be
terminated by the Company at its election pursuant to the provisions of Section
7 hereof.
10. UNFAIR COMPETITION AFTER TERMINATION
10.1 Because of his employment by Company, Executive will
have access to trade secrets and confidential information about Company, its
products, its customers, and its methods of doing business. In consideration of
his access to this information, Executive agrees that if his employment is
terminated in accordance with Section 6 or 7 hereof, Executive will not, for a
period of two years (2) after termination of his employment, directly or
indirectly compete with the Company within the United States; provided, however,
that Executive may engage in the business activities described in Exhibit A and
such other business activities to which the Company consents, which consents
will not be unreasonably withheld, during such two year period as long as
Executive does not disclose any confidential information of or concerning
Company.
10.2 Executive understands and agrees that direct
competition means the design, development, production, promotion, or sale of
products or services competitive with those of Company. Indirect competition
means employment by any competitor or third party providing products competing
with Company's products, for whom Executive will perform the same or similar
function as he performs for Company.
11. OWNERSHIP OF INTANGIBLES
All processes, inventions, patents, copyrights, trademarks, and
other intangible rights that may be conceived or developed by Executive either
alone or with others, during the Term of Executive's employment, whether or not
conceived during working hours shall be the sole property of Company and
Executive shall execute such further instruments as may be necessary to reflect
the foregoing.
12. INDEMNIFICATION
Company shall indemnify, defend and hold Executive harmless from
and against any and all damages, deficiencies, claims, demands, suits, actions,
judgments, liabilities, losses, expenses and costs (including attorneys' fees),
and amounts paid in any settlement, incurred or suffered by Executive, arising
out of or in connection with Executive's duties or services for or on behalf of
Company, or any affiliate of Company, pursuant to this Agreement or by reason of
the fact that Executive is or was an agent of Company, provided that Executive
acted in good faith and in a manner Executive reasonably believed to be in the
best interests of Company. Company shall advance to Executive all costs and
expenses incurred by Executive and/or his agents in advance of the final
disposition of any proceeding for which indemnification is required hereunder.
The indemnification provided herein shall not in any manner limit or restrict
other indemnification provisions provided in the Company's Articles of
Incorporation or Bylaws, and
<PAGE> 7
shall survive termination of this Agreement with respect to claims from or
relating to acts or omissions alleged to have occurred during the Term.
13. IMMIGRATION APPROVAL AS A CONDITION PRECEDENT
13.1 This Agreement is contingent in each and all respects
upon Executive and Executive's wife obtaining approval from governmental
immigration authorities (including without limitation obtaining "green cards" or
the like from the U.S. Immigration and Naturalization Service) permitting
Executive and Executive's wife to work and reside in the United States
throughout the Term of Executive's employment with the Company. Provided,
however, the Company shall be under no obligation to employ Executive's wife and
shall help facilitate the process.
13.2 Company agrees that it shall do anything, and provide
any documentation or information, which is lawful and reasonably necessary in
order to facilitate Executive and Executive's wife obtaining such immigration
approvals.
13.3 For their part, Executive and Executive's wife shall
likewise do anything, and provide any documentation or information, which is
lawful and reasonably necessary in order to facilitate their obtaining such
immigration approvals.
13.4 In the event that, after Executive has commenced
employment hereunder, it is determined by appropriate governmental authorities
that Executive cannot remain in the United States and continue to work here for
reasons relating to immigration laws, and if the problem resulting from such
determination cannot be cured with reasonable effort, at reasonable expense and
in a reasonable time, then either Company or Executive shall have the option and
right to terminate this Agreement without cause upon written notice thereof to
the other.
14. CHOICE OF LAW
The formation, construction and performance of this Agreement
shall be construed in accordance with the law of the State of California.
15. INTEGRATION
This Agreement contains the entire agreement between Executive
and Company and supersedes all prior oral and written agreements,
understandings, commitments, and practices between the parties and their
affiliates.
16. EXECUTION
Executed by the parties and effective as of the day and year
first above written.
THE HARVEY ENTERTAINMENT COMPANY
<PAGE> 8
By: /s/ Gregory M. Yulish /s/ Charles Day
------------------------------- -------------------------------
GREGORY M. YULISH CHARLES DAY
Vice President
<PAGE> 1
EXHIBIT 10.40
FORM OF STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") dated October ___, 1996 is
entered into between THE HARVEY ENTERTAINMENT COMPANY, a California corporation
("Company"), and CHARLES DAY ("Optionee"). This Option is granted under, and is
governed by, the Company's 1994 Stock Option Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of Fifteen Thousand (15,000) shares of Company's common
stock ("Common Stock") at a price of $8.125 per share [the closing price on
October 1, 1996]. The Option granted hereunder is not intended to qualify as an
"Incentive Stock Option" within the meaning of Section 422A of the Internal
Revenue Code of 1986, as amended. The grant of this Option is subject to
confirmation by the Company's Stock Option Committee.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof, unless
sooner terminated in accordance with the provisions set forth herein or in the
Plan;
(b) The Option shall become exercisable (i) on September 30, 1997
with respect to one-third of the number of shares of Stock subject to the
Option, (ii) on September 30, 1998 with respect to an additional one-third of
the number of shares of Stock subject to the Option, (iii) on September 30, 1999
with respect to the remaining one-third of the shares of Stock subject to the
Option, and (vi) as otherwise provided pursuant to Sections 2(c) and (d) hereof
or in accordance with Section 4.7 of the Plan;
(c) If Optionee ceases to be employed by the Company or a
Subsidiary for any reason other than the Optionee's death or permanent
disability (within the meaning of Section 105(d)(4) of the Code), the unvested
Optionee's Options shall immediately become void and of no further force or
effect; provided, however, that if such cessation of employment shall be due to
the Optionee's voluntary resignation with the consent of the Board of Directors
of the Company or such Subsidiary, expressed in the form of a written
resolution, or shall be due to the Optionee's retirement under the provisions of
any pension or retirement plan of the Company or such Subsidiary then in effect,
then within three months after the date the Optionee ceases to be an employee of
the Company or such Subsidiary such Option may be exercised to the extent
exercisable on the date of such cessation of employment. A leave of absence
approved in writing the Board of Directors or the Committee shall not be deemed
a termination of employment for the purposes of this Section 2, but no Option
may be exercised during any such leave of absence, except during the first three
months thereof;
(d) If Optionee dies or becomes permanently disabled while
employed by the Company or a Subsidiary, Optionee's Option shall expire one year
after the date of such death or permanent disability. During such period after
death, such Option may, to the extent that it remains unexercised (but
exercisable by the Optionee according to such Option's terms) upon the
-1-
<PAGE> 2
date of such death, be exercised by the person or persons to whom the Optionee
rights under the Option shall pass by the Optionee's will or by the laws of
descent and distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for the Company,
of the right of the applicable person(s) to exercise the Option. Not less than
one hundred (100) shares may be purchased at any one time unless the number
purchased is the total number which may be purchased under the Option and in no
event may the Option be exercised with respect to fractional shares.
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto, as provided in the Plan.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable only by Optionee or the Optionee's guardian or legal
representative during his lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a court of competent
jurisdiction, by will or by the applicable laws of descent and distribution or
the executor or administrator of Optionee's estate, shall have the right to
exercise the Option, pursuant to the terms of this Agreement and the Plan.
Except as permitted by the preceding sentence, no option granted hereunder may
be transferred. assigned, pledged, hypothecated or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so transfer, assign, pledge,
hypothecate or otherwise dispose of any option granted hereunder. such option
and all rights thereunder shall immediately become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been
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<PAGE> 3
registered under the Securities Act or applicable state securities law; (b) any
subsequent sale of any such shares shall be made either pursuant to an effective
registration statement under the Securities Act and any applicable state
securities laws, or pursuant to an exemption from registration under the
Securities Act and such state securities laws; and (c) if requested by the
Company, Optionee shall submit a written statement, in form satisfactory to
counsel for the Company, to the effect that such representation (x) is true and
correct as of the date of purchase of any shares hereunder, or (y) is true and
correct as of the date of any sale of any such shares, as applicable. A legend
to the foregoing effect shall be placed upon any shares received upon exercise
of this Option. As a further condition precedent to any exercise of the Option,
Optionee shall comply with all regulations and requirements of any regulatory
authority having control of or supervision over the issuance of the shares and,
in connection therewith, shall execute any documents which the Board or any
committee authorized by the Board shall in its sole discretion deem necessary or
advisable.
8. DELIVERY OF CERTIFICATES.
Upon the exercise of the Option in whole or in part, the Company
shall deliver one or more certificates representing the number of shares
purchased against full payment therefor. The Company shall pay all original
issue or transfer taxes and all fees and expenses incident to such delivery,
except as otherwise provided in Section 3.2.
9. ADJUSTMENTS.
In the event of any change in the outstanding Common Stock by
reason of any stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation, spin-off or
other similar change in capitalization, or any distribution to holders of Common
Stock other than a cash dividend, the number and class of shares available under
this Plan, the number and class of shares under each outstanding option and the
purchase price per share, shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding options without a change in
the aggregate purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
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<PAGE> 4
12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
13. COUNTERPARTS. This Agreement may be executed in two counterparts
each of which shall be deemed an original and both of which together shall
constitute one and the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE HARVEY ENTERTAINMENT COMPANY,
a California corporation
By: _______________________________________
Its: _______________________________________
AGREED AND ACCEPTED:
- -------------------------------------
CHARLES DAY
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<PAGE> 5
EXHIBIT A
The parties acknowledge that (a) Executive has a pre-existing
arrangement with a partner licensing products for sale in Asia, the United
Kingdom and Ireland, and (b) Executive is a shareholder in a retail business in
Ireland heretofore operated by Executive's wife, and that no such business
activities shall be prohibited or limited in any way by any provision of this
Agreement, so long as they do not materially and directly interfere with
Executive's performance of his obligations to Company hereunder. Furthermore,
nothing set forth in Paragraph 3(a) above shall be construed to prohibit or
limit Executive from having an ownership interest, directly or by operation of
community property laws, inheritance or the like, in any business entity owned
and operated, in whole or in substantial part, by Executive's wife, so long as
Executive does not actively participate in the operation of any such business
entity.
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<PAGE> 1
EXHIBIT 10.41
AMENDMENT TO EMPLOYMENT AGREEMENT
This is an amendment to an Employment Agreement ("Original
Agreement") originally entered in to as of October 1996 between The Harvey
Entertainment Company a California Corporation ("Company") and Charles Day
("Executive"). This Amendment is entered into and is effective as of December
19, 1997.
The Original Agreement is amended as follows:
1. Paragraph 2(a) is amended to provide that the Term of the
Original Agreement is amended through September 30, 1999. In addition, at the
Company's written election given to Executive on or before September 1, 1999,
the Company may extend the Term for an additional year through September 30,
2000.
2. Paragraph 4(c) of the Original Agreement shall be amended to
provide that the bonus shall equal 4% of the pre-tax net profits of the
Company's merchandising activities as determined in such paragraph for periods
commencing October 1, 1997. Such share of pre-tax net profits shall be paid
within 60 days of December 31, 1997, 1998, 1999 and, if applicable, 2000, for
the pre-tax profits for the twelve month periods ending September 30, 1997 (at
the prior rate of 2% of pre-tax net profits), September 30, 1998, September 30,
1999 and, if applicable, September 30, 2000.
By way of clarification, net pre-tax profits from the Company's
merchandising activities under or similar to those under the direction and
supervision of Executive pursuant to Paragraph 4(c) shall include profits from
merchandising activities based upon the historical Harvey Classic Characters
(including Casper), as that term is understood within the Company, and as
determined in good faith by the Company's Chief Financial Officer, and shall not
include pre-tax net profits from the Company's merchandising activities arising
out of acquisitions made by the Company or, if the Company is acquired,
merchandising activities of the acquiring company. (In this regard to the extent
the Company acquires character assets not being merchandized, new merchandising
activities undertaken by the Company with respect to such character assets will
become part of the activities included in the bonus calculation and, to the
extent the Company acquires character assets which are being merchandized, if
(i) the Company renews licenses relating to such characters with existing
licensees on better terms and conditions than previously existed or (ii) enters
into new licensing arrangements with respect to such acquired characters which
contain better terms and conditions that the prior existing licenses, the
difference between the prior existing terms and conditions and the new terms and
conditions shall be included in the bonus calculation.)
3. In addition to the Base Salary, Executive shall receive a
living allowance of $3,000 per month during the Term of employment, as extended
herein.
4. In consideration of Executive's execution of this Agreement,
Executive shall receive an option to acquire 5,000 shares of the Company's
Common Stock at a price equal to the closing price of such Common Stock on
December 19, 1997, pursuant to the terms and in accordance with the Stock Option
Agreement attached hereto.
<PAGE> 2
5. Paragraph 4(j) shall be amended to provide that the Company
and Executive agree to review the Agreement in September during each year of the
Term and, in light of all relevant circumstances, to determine whether in good
faith the compensation and benefits provided to Executive pursuant to the
Agreement should be increased or improved; provided, however, that in no event
shall such review result in any of Executive's compensation or other benefits
pursuant to the Agreement being decreased, limited, eliminated, delayed or
otherwise adversely changed. Executive acknowledges that no commitment to any
such increase or improvement has been made.
In all other respects the Original Agreement, as amended hereby,
shall continue in full force and effect for the Term as extended herein.
THE HARVEY ENTERTAINMENT COMPANY CHARLES DAY
By: /s/ Gregory M. Yulish /s/ Charles Day
------------------------------- -------------------------------
Gregory M. Yulish Charles Day
Vice President
- 2 -
<PAGE> 1
EXHIBIT 10.42
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") dated as of December 19,
1997 is entered into between THE HARVEY ENTERTAINMENT COMPANY, a California
corporation ("Company"), and Charles Day ("Optionee"). This Option is granted
under, and is governed by, the Company's 1997 Stock Option Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of 5,000 shares of Company's common stock ("Common
Stock") at a price of $11.00 per share. The Option granted hereunder is not
intended to qualify as an "Incentive Stock Option" within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof (the
"Expiration Date"), unless sooner terminated in accordance with the provisions
set forth herein or in the Plan;
(b) The Option shall vest over a two-year period in accordance
with the following schedule: (i) on the first anniversary hereof with respect to
one-half of the number of shares of Stock subject to the Option, (ii) on the
second anniversary with respect to the remaining one-half of the shares of Stock
subject to the Option, and (vi) as otherwise provided pursuant to Sections 2(c)
and (d) hereof or in accordance with the Plan;
(c) The Option shall vest in its entirety and be immediately
exercisable upon the consummation of a merger, consolidation or other
reorganization of the Company, completion of a tender offer for more than 50% of
the Company's outstanding capital stock or sale of all or substantially all of
the assets of the Company to any person other than AKAUSA Limited and its
affiliates (a "Change of Control"). On a Change of Control, the following
provisions shall apply:
(i) In the event of a Change of Control in which the
consideration received by the Company's shareholders in exchange
for their shares of the Company's Common Stock consists solely
of cash, the Option shall be deemed to have been exercised in
full immediately prior to the consummation of such Change of
Control and, in connection with such exercise, Optionee shall
receive a cash amount equal to the difference between the
exercise price of the Option and the price per share of Common
Stock received by the holders of the Company's Common Stock
pursuant to such Change of Control.
(ii) In the event of a Change of Control in which the
consideration received by the Company's shareholders in exchange
for their shares of the Company's Common Stock does not consist
solely of cash, the Option shall thereafter be exercisable for
the number of shares of stock or other securities and
the amount of cash or other property, if any, that Optionee
would have received pursuant to such Change of Control in
respect of the shares of Common Stock
<PAGE> 2
underlying the Option had the Option been exercised immediately
prior thereto.
(d) If the Optionee's employment by the Company terminates for
any reason other than good cause, death or disability, the Option shall be
exercisable only to the extent it is exercisable on the effective date of the
Optionee's termination of employment and may thereafter be exercised by the
Optionee until and including the earliest to occur of (i) the date which is
three (3) months after the effective date of the Optionee's termination of
employment and (ii) the Expiration Date of the Options.
(e) If the Optionee's employment by the Company terminates by
reason of death or disability, the Option shall be exercisable only to the
extent it is exercisable on the date of death or disability and may thereafter
be exercised by the Optionee until and including the earliest to occur of (i)
the date which is one (1) year after the date of death or disability and (ii)
the Expiration Date.
(f) If the Optionee's employment by the Company terminates for
good cause, the Option shall terminate automatically on the effective date of
the Optionee's termination of employment.
(g) If the Optionee dies during the period set forth in Section
2(e) following termination of employment by reason of disability, or if the
Optionee dies during the period set forth in Section 2(d) following termination
of employment for other than good cause, the Option shall be exercisable only to
the extent it is exercisable on the date of death and may thereafter be
exercised by the Optionee's Legal Representative or Permitted Transferees, as
the case may be, until and including the earliest to occur of (i) the date which
is one (1) year after the date of death and (ii) the Expiration Date. After
death, such Option may, to the extent that it remains unexercised (but
exercisable by the Optionee according to such Option's terms) upon the date of
such death, be exercised by the person or persons to whom the Optionee rights
under the Option shall pass by the Optionee's will or by the laws of descent and
distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for the Company,
of the right of the applicable person(s) to exercise the Option. Not less than
one hundred (100) shares may be purchased at any one time unless the number
purchased is the total number which may be purchased under the Option and in no
event may the Option be exercised with respect to fractional shares.
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto, as provided in the Plan.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable
<PAGE> 3
only by Optionee or the Optionee's guardian or legal representative during his
lifetime. After death, the persons to whom Optionee's rights under the Option
shall have passed by order of a court of competent jurisdiction, by will or by
the applicable laws of descent and distribution or the executor or administrator
of Optionee's estate, shall have the right to exercise the Option, pursuant to
the terms of this Agreement and the Plan. Except as permitted by the preceding
sentence, no option granted hereunder may be transferred. assigned, pledged,
hypothecated or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process. Upon any attempt to
so transfer, assign, pledge, hypothecate or otherwise dispose of any option
granted hereunder. such option and all rights thereunder shall immediately
become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act or
applicable state securities law; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, Optionee shall submit a written
statement, in form satisfactory to counsel for the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
shares hereunder, or (y) is true and correct as of the date of any sale of any
such shares, as applicable. A legend to the foregoing effect shall be placed
upon any shares received upon exercise of this Option. As a further condition
precedent to any exercise of the Option, Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance of the shares and, in connection therewith, shall
execute any documents which the Board or any committee authorized by the Board
shall in its sole discretion deem necessary or advisable.
8. DELIVERY OF CERTIFICATES.
Upon the exercise of the Option in whole or in part, the Company
shall deliver one or more certificates representing the number of shares
purchased against full payment therefor. The Company shall pay all original
issue or transfer taxes and all fees and expenses incident to such delivery,
except as otherwise provided in Section 3.2.
9. ADJUSTMENTS.
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<PAGE> 4
In the event of any change in the outstanding Common Stock by
reason of any stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation, spin-off or
other similar change in capitalization, or any distribution to holders of Common
Stock other than a cash dividend, the number and class of shares available under
this Plan, the number and class of shares under each outstanding option and the
purchase price per share, shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding options without a change in
the aggregate purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
13. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE HARVEY ENTERTAINMENT COMPANY,
a California corporation
By:
-------------------------------
Name:
Title:
AGREED AND ACCEPTED:
/s/ Charles Day
- -------------------------------
CHARLES DAY
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<PAGE> 1
EXHIBIT 10.43
[EXECUTION COPY]
EMPLOYMENT AGREEMENT
This Employment Agreement is entered into as of February 27,
1998, by and between THE HARVEY ENTERTAINMENT COMPANY, a California corporation
("Company"), and DON GOLD ("Executive").
RECITALS
WHEREAS, Company and Executive desire to enter into this
Agreement to assure Company of the exclusive services of Executive as the Senior
Vice President - Harvey Home Entertainment and to set forth the rights and
duties of the parties hereto.
NOW THEREFORE, in consideration of the promises and the mutual
covenants set forth herein, the parties hereto agree as follows:
1. REPRESENTATIONS AND WARRANTIES
Executive represents and warrants that there are no agreements or
arrangements, whether written or oral, that would be breached by Executive upon
execution of this Agreement or that would prevent or impair Executive from
rendering exclusive services to Company during the term hereof.
2. TERMS OF EMPLOYMENT
(a) Subject to the provisions for termination set forth
herein, the initial term of Executive's employment hereunder shall continue from
March 16, 1998 until March 16, 2000 (the "Initial Term"). At the end of the
Initial Term, Company shall have the option to extend this Agreement for two
additional years by giving notice to the Executive of the foregoing at least 60
but not more than 120 days before the end of the Initial Term (as so determined,
the "Term").
(b) Executive shall act as Company's Senior Vice President
- - Harvey Home Entertainment and shall report to Company's Executive Vice
President with respect to budgeting, finances, revenues and other economic
considerations, and to Company's Chief Executive Officer as to creative and
artistic decisions. Executive shall be responsible for overseeing the domestic
marketing and distribution of home videos and other home entertainment products
of the Company. Executive shall comply with all of the reasonable and customary
employment policies of Company and its affiliates. The services to be rendered
herein shall generally be performed at the principal offices of Company,
currently in Century City, California. In addition, the services may be
performed by Executive, from time to time, on a temporary travel basis at such
other locations as Company shall reasonably request consistent with its
reasonable business needs. Executive agrees to perform his services hereunder in
a competent and professional manner, consistent with the skills to be possessed
by a senior
<PAGE> 2
[EXECUTION COPY]
employee of Company.
3. RESTRICTIONS ON OUTSIDE BUSINESS ACTIVITIES/CONFIDENTIAL
INFORMATION
(a) Except as set forth below, during the Term of this
Agreement, Executive shall devote his exclusive energies, interests, abilities
and productive business time to perform all the duties required of and from his
pursuant to the terms of this Agreement. During the Term of this Agreement and
of the Executive's employment by Company, Executive shall not, directly or
indirectly, engage in any business for his own account which is competitive with
the business of Company or Company's affiliates or enter into the employ of or
render any services to any persons engaged in businesses competitive with that
of Company, or acquire any interest in any business competitive with the
businesses of Company in any capacity, whether as an employee, consultant,
investor, agent, principal, trustee, shareholder or director, or induce any
customer or supplier of Company to terminate its relationship with Company.
Notwithstanding the foregoing, Executive may acquire, solely as an investment,
ownership of securities of publicly traded companies which may be competitive
with Company's business provided, however, that Executive may own no more than
one percent (1%) of such competitive company's publicly traded securities.
Executive agrees that his services hereunder are of a special, unique, unusual,
extraordinary and intellectual character which gives them particular value, the
loss of which cannot be reasonably or adequately compensated in an action of law
for damages. Executive further agrees that any breach hereunder, including the
breach of Executive's obligation of non-competition, will cause Company
irreparable injury and, therefore, Executive agrees that Company is entitled to
seek injunctive and other equitable relief to prevent a breach or threatened
breach of this Agreement which shall be in addition to any other rights or
remedies to which Company may be entitled. Executive may continue the activities
set forth on Exhibit B hereto (the "Permitted Activities"), provided, however,
that Executive shall at all times perform his obligations under this Agreement
before engaging in the Permitted Activities. At such time that Company gives
notice to Executive that the Permitted Activities are interfering with
Executive's obligations under this Agreement, Executive shall cease the
Permitted Activities immediately.
(b) Executive with keep secret all material confidential
matters of Company and its Affiliates which are not otherwise in the public
domain and will not intentionally disclose them to anyone outside of Company or
its Affiliates, either during or after the Term, except with Company's written
consent and except for such disclosure as is necessary in the performance of
Executive's duties during the Term.
(c) Executive will deliver promptly to Company on
termination of the Term or at any other time Company may so request, at
Company's expense, all confidential memoranda, notes, records, reports and other
documents (and all copies thereof) relating to Company's and its Affiliates'
business, which Executive obtained while employed by, or otherwise serving or
acting on behalf of, Company, or which Executive may then possess or have
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<PAGE> 3
[EXECUTION COPY]
under his control.
4. COMPENSATION AND BENEFITS
(a) Company shall pay a "Basic Salary" to Executive at the
rate of One Hundred Fifty Thousand Dollars ($150,000) for the first year of the
Initial Term and One Hundred Sixty Five Thousand Dollars ($165,000) for the
second year of the Initial Term. If the Term extends beyond the Initial Term
pursuant to Section 2(a) hereunder, the parties shall negotiate an increase in
the Basic Salary for such additional years which shall be no less than 10% of
the Basic Salary in the final year of the Initial Term. The Basic Salary shall
be payable in equal bi-monthly installments for the Term subject to the terms
and conditions contained herein.
(b) In addition to this Basic Salary, Executive shall
receive (i) a one-time signing bonus of Twenty Thousand Dollars ($20,000) upon
executing this Agreement, (ii) in the first year of the Initial Term a bonus
equal to three percent (3%) of the amount by which Net Profits exceed
$3,000,000, (iii) in the second year of the Initial Term a bonus equal to four
percent (4%) of the amount by which Net Profits exceed $3,000,000, and (iv) if
the Term is extended beyond the Initial Term, for each additional year of
employment a bonus equal to a percentage to be negotiated in good faith by the
parties of the amount by which Net Profits for such year exceed $3,000,000,
provided, however, that such percentage shall not be less than four percent
(4%). Bonuses to be paid pursuant to (ii), (iii) and (iv) above shall be paid on
or around February 15 of the year following the year upon which the bonus is
based. If Net Profits from the Company's domestic home entertainment business
activities under the direction and supervision of Executive which accrue during
any year of Executive's employment under this Agreement are less than or equal
to $3,000,000, Executive shall not receive any bonus for that year under this
Section 4(b). "Net Profits" shall mean the gross profits from sales of Company's
entertainment programming sold for viewing on home video devices developed under
the direction and supervision of Executive which accrue and are recognized
during the Term of Executive's employment under this Agreement on a yearly basis
("Gross Profits") (as determined according to generally accepted accounting
principles ("GAAP")) less any and all expenses incurred during each such year
associated with or relating to the generation of such Gross Profits and the
operation of the Company's domestic home video business including, but not
limited to, Executive's salary, the salary of other staff in Company's domestic
home video business division, and an allocable portion of general corporate
overhead expenses (e.g., legal, accounting, rent, utilities, copying, word
processing), development costs and production costs (as determined according to
GAAP). Gross Profits and Net Profits shall be determined by the senior financial
officer of the Company and such determination shall be conclusive and binding
absent a showing of manifest error. All disputes between Executive and Company
arising in connection with this Section 4(b) shall be finally settled by
arbitration in Los Angeles, California in accordance with the rules of the
American Arbitration Association ("Rules") by one or more arbitrator(s)
appointed in accordance with the Rules. The expense of such arbitration shall be
borne in accordance with the award of the arbitrator(s). Any such award rendered
pursuant to this arbitration provision shall be final and binding upon the
parties to such arbitration, and may be
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<PAGE> 4
[EXECUTION COPY]
entered in any court having jurisdiction.
(c) Subject to the Board's approval to be sought in March
1998, Executive shall receive options to purchase 20,000 shares of Company
Common Stock at a market price equal to the closing price on the date of
approval. Ten thousand (10,000) shares shall vest, subject to continued
employment, on each of the first and second anniversary hereof and shall be
subject to and issued in accordance with the terms of the Stock Option Agreement
attached hereto as Exhibit A.
(d) Executive shall be entitled to health, dental and all
other insurance benefits which are made generally available to senior employees
and their families of Company. In addition, Executive shall be entitled to
participate in Company's profit sharing and pension plan on the same terms as
other senior employees of Company. These benefits and plans may change from time
to time in accordance with Company policies and procedures.
(e) Executive shall be entitled to three weeks (15 days)
of paid vacation per year during the Term, such vacation to accrue at the rate
of 1-1/4th days per month. Vacation may only be taken after consultation with
Company's Executive Vice President at times convenient to Company's reasonable
business needs.
(f) During the Term, Executive shall receive Seven Hundred
Dollars ($700) per month for the reasonable business cost of leasing or
purchasing an automobile, gas and maintenance plus Company shall reimburse
Executive for his annual car insurance and registration expenses. Executive
shall add Company to Executive's automobile insurance policy as an additional
insured. Executive shall provide Company with appropriate documentation
respecting Executive's business use of his automobile and his annual car
insurance and registration expenses, and acknowledges that Executive may be
determined to have received compensation income with respect to that portion of
Executive's automobile allowance and expense reimbursement not attributable to
business use.
(g) Notwithstanding any other provisions herein, the
Maximum Total Compensation of Executive in the first year of the Initial Term
shall be Three Hundred Thousand Dollars ($300,000); in the second year of the
Initial Term shall be Three Hundred Fifty Thousand Dollars ($350,000); if the
Initial Term is extended, in the third year of the Term shall be Four Hundred
Thousand Dollars ($400,000); and, if the Initial Term is extended, in the fourth
year of the Term shall be Four Hundred Fifty Thousand Dollars ($450,000).
"Maximum Total Compensation" for a given year shall include Basic Salary,
bonuses and automobile allowance in such year.
(h) Company shall reimburse Executive for expenses which
are business-related such as his cellular phone expenses upon receipt from
Executive of documentation evidencing such expenses.
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<PAGE> 5
[EXECUTION COPY]
(i) Executive shall be entitled to travel in "business
class" when he is required to travel by airplane for the Company.
(j) Upon Company's receipt of documentation of such legal
fees, Company will pay to Executive's attorney the sum of no more than $2,000
for reviewing and negotiating this Agreement.
5. CONTINUATION OF COMPENSATION
All compensation, as well as any other employment benefits which
Executive may otherwise receive from Company during Term of this Agreement,
shall be paid less income tax withholding and other normal employee deductions.
Except as set forth herein, Company shall have no continuing obligation to make
any compensation payments after the termination of Executive's employment with
Company.
6. TERMINATION FOR CAUSE
This Agreement, the employment of Executive, and any future
obligation of Company to make salary or other future payments hereunder, may be
terminated by Company "for cause" upon any of the following events:
6.1 Executive has committed fraud, defalcation,
misappropriation or any similar act;
6.2 Executive is in default in the performance of
Executive's obligations, services or duties hereunder, which shall include,
without limitation, Executive's disregarding the instruction from Company's
Executive Vice President or Company's Chief Executive Officer concerning the
conduct of his duties hereunder, Executive's abuse of expense accounts,
Executive's acting in a manner inconsistent with the policies of Company, its
Chief Executive Officer or its Board of Directors, or if Executive has breached
any material provision of this Agreement;
6.3 Executive is grossly negligent or engages in willful
misconduct in the performance of his duties hereunder;
6.4 Executive has engaged in illegal activities which have
an adverse impact on Company, other than de minimis violations of civil law
which can be cured without material adverse impact to Company, unless such
violations indicate a pattern of conduct which, in the aggregate, materially
adversely impact Company;
6.5 Executive has developed or pursued interest materially
adverse to those of Company or any of its affiliates; or
6.6 Executive has contributed to Company's financial
condition
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<PAGE> 6
[EXECUTION COPY]
undergoing or having undergone any material adverse change.
7. TERMINATION WITHOUT CAUSE
The employment of Executive and, except as otherwise provided in
Section 7.1(c) hereof, any future obligation of Company to make salary or other
payments hereunder, may be terminated "without cause" as follows:
7.1 by mutual agreement of the parties hereto;
7.2 by Company, pursuant to the provisions of Section 9 of
this Agreement (Illness or Incapacity);
7.3 automatically, on Executive's death or disability; or
7.4 upon the expiration of the Term of this Agreement.
8. EFFECT OF TERMINATION
If Executive's employment is terminated by Company for cause or
by Executive without cause as described in Paragraphs 6 and 7 above or in
Paragraph 9 below, Executive shall be entitled to accrued salary, a pro rata
portion of any bonus (which shall be paid at the times set forth in Paragraph
4(c) above), vacation accrued through the date of termination and unreimbursed
business expenses accrued through the date of termination and the obligations of
Company under the terms of the Agreement shall be of no further force and
effect. If Executive's employment is terminated by Company for reasons other
than as specified hereinabove, Executive shall receive (i) a lump-sum payment
equal to the Basic Salary, without increase that Executive would have earned
through the remainder of the Term of this Agreement if this Agreement had not
been terminated (paid within thirty (30) days after the date of termination),
(ii) any bonus pursuant to Section 4(b) that Executive would have earned through
the remainder of the Term of this Agreement if this Agreement had not been
terminated (paid on or around February 15th of each year an amount is due as
provided in Section 4(b)) and (iii) the car allowance that Executive would have
earned through the remainder of the Term of this Agreement if this Agreement had
not been terminated (paid on a monthly basis) (such lump-sum payment, bonus
payments and car allowance payments being called the "Mitigation Amount") plus
unreimbursed business expenses, vacation and bonus accrued through the date of
termination. The Mitigation Amount owed by Company pursuant to this Section 8
shall be reduced by any and all compensation or other amounts that Executive
receives after termination in connection with his rendering of services to any
third party.
9. ILLNESS OR INCAPACITY
If during the Term of this Agreement, Executive shall be unable
to perform his duties hereunder for a period exceeding twelve (12) consecutive
weeks or sixteen (16) weeks in
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<PAGE> 7
[EXECUTION COPY]
the aggregate out of any fifty-two (52) consecutive weeks by reason of illness
or incapacity; this Agreement may be terminated by Company at its election
pursuant to the provisions of Section 7 hereof.
10. CONFIDENTIAL INFORMATION
Because of his employment by Company, Executive will have access
to trade secrets and confidential information about Company, its products, its
customers, and its methods of doing business. Executive agrees that he will not
disclose any confidential information of or concerning Company during the Term
and after termination of this Agreement.
11. OWNERSHIP OF INTANGIBLES
All processes, inventions, patents, copyrights, trademarks, and
other intangible rights that may be conceived or developed by Executive either
alone or with others, during the Term of Executive's employment, whether or not
conceived during working hours shall be the sole property of Company and
Executive shall execute such further instruments as may be necessary to reflect
the foregoing.
12. INDEMNIFICATION
Company shall indemnify, defend and hold Executive harmless from
and against any and all damages, deficiencies, claims, demands, suits, actions,
judgments, liabilities, losses, expenses and costs (including attorneys' fees),
and amounts paid in any settlement, incurred or suffered by Executive, arising
out of or in connection with Executive's duties or services for or on behalf of
Company, or any affiliate of Company, pursuant to this Agreement or by reason of
the fact that Executive is or was an agent of Company, provided that Executive
acted in good faith and in a manner Executive reasonably believed to be in the
best interests of Company. Company shall advance to Executive all costs and
expenses incurred by Executive and/or his agents in advance of the final
disposition of any proceeding for which indemnification is required hereunder.
The indemnification provided herein shall not in any manner limit or restrict
other indemnification provisions provided in Company's Articles of Incorporation
or Bylaws, and shall survive termination of this Agreement with respect to
claims from or relating to acts or omissions alleged to have occurred during the
Term.
13. CHOICE OF LAW
The formation, construction and performance of this Agreement
shall be construed in accordance with the law of the State of California.
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<PAGE> 8
[EXECUTION COPY]
14. INTEGRATION
This Agreement contains the entire agreement between Executive
and Company and supersedes all prior oral and written agreements,
understandings, commitments, and practices between the parties and their
affiliates.
15. NOTICES
Any notice or other communication required or permitted hereunder
shall be in writing and shall be delivered personally, telegraphed, telexed,
sent by facsimile transmission or sent by certified, registered or express mail,
postage prepaid. Any such notice shall be deemed given when so delivered
personally, telegraphed, telexed or sent by facsimile transmission or, if
mailed, two days after the deposit in the United States mails, as follows:
if to Executive, to: with a copy to:
Don Gold Linda Benjamin, Esq.
c/o Linda Benjamin, Esq. Garvin, Davis & Benjamin, LLP
Garvin, Davis & Benjamin, LLP 9200 Sunset Boulevard
9200 Sunset Blvd., Penthouse 25 Penthouse 25
Los Angeles, California 90069 Los Angeles, California 90069
Fax: (310) 278-7306 Fax: (310) 278-7306
if to Company, to: with a copy to:
The Harvey Entertainment Company Gary J. Cohen, Esq.
1999 Avenue of the Stars Sidley & Austin
Suite 2050 555 West 5th St., Suite 4000
Los Angeles, California 90067 Los Angeles, California 90013
Attn: Gregory M. Yulish
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<PAGE> 9
[EXECUTION COPY]
16. EXECUTION
Executed by the parties and effective as of the day and year
first above written.
THE HARVEY ENTERTAINMENT COMPANY
By:_____________________________ _____________________________
Gregory M. Yulish Don Gold
Vice President
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<PAGE> 10
[EXECUTION COPY]
EXHIBIT A
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") dated as of February __,
1998 entered into between THE HARVEY ENTERTAINMENT COMPANY, a California
corporation ("Company"), and DON GOLD ("Optionee"). [This Option is granted
under, and is governed by, The Harvey Entertainment Company 1997 Stock Option
Plan (the "Plan")].
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of 20,000 shares of Company's common stock ("Common
Stock") at a price of $____ per share. The Option granted hereunder is not
intended to qualify as an "Incentive Stock Option" within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof (the
"Expiration Date"), unless sooner terminated in accordance with the provisions
set forth herein or in the Plan;
(b) The Option shall vest over a two-year period in accordance
with the following schedule: (i) on the first anniversary hereof with respect to
one-half of the number of shares of Stock subject to the Option, (ii) on the
second anniversary hereof with respect to an additional one-half of the number
of shares of Stock subject to the Option, and (iii) as otherwise provided
pursuant to Sections 2(c) hereof;
(c) The Option shall vest in its entirety and be immediately
exercisable upon the consummation of a merger, consolidation or other
reorganization of the Company, completion of a tender offer for more than 50% of
the Company's outstanding capital stock or sale of all or substantially all of
the assets of the Company to any person other than AKAUSA Limited and its
affiliates (a "Change of Control"). On a Change of Control, the following
provisions shall apply:
(i) In the event of a Change of Control in which the
consideration received by the Company's shareholders in exchange
for their shares of the Company's Common Stock consists solely
of cash, the Option shall be deemed to have been exercised in
full immediately prior to the consummation of such Change of
Control and, in connection with such exercise, Optionee shall
receive a cash amount equal to the difference between the
exercise price of the Option and the price per share of Common
Stock received by the holders of the Company's Common Stock
pursuant to such Change of Control.
<PAGE> 11
(ii) In the event of a Change of Control in which the
consideration received by the Company's shareholders in exchange
for their shares of the Company's Common Stock does not consist
solely of cash, the Option shall thereafter be exercisable for
the number of shares of stock or other securities and the amount
of cash or other property, if any, that Optionee would have
received pursuant to such Change of Control in respect of the
shares of Common Stock underlying the Option had the Option been
exercised immediately prior thereto.
(d) If the Optionee's employment by the Company terminates for
any reason other than good cause, death or disability, the Option shall be
exercisable only to the extent it is exercisable on the effective date of the
Optionee's termination of employment and may thereafter be exercised by the
Optionee until and including the earliest to occur of (i) the date which is
three (3) months after the effective date of the Optionee's termination of
employment and (ii) the Expiration Date of the Options.
(e) If the Optionee's employment by the Company terminates by
reason of death or disability, the Option shall be exercisable only to the
extent it is exercisable on the date of death or disability and may thereafter
be exercised by the Optionee until and including the earliest to occur of (i)
the date which is one (1) year after the date of death or disability and (ii)
the Expiration Date.
(f) If the Optionee's employment by the Company terminates for
good cause, the Option shall terminate automatically on the effective date of
the Optionee's termination of employment.
(g) If the Optionee dies during the period set forth in Section
2(e) following termination of employment by reason of disability, or if the
Optionee dies during the period set forth in Section 2(d) following termination
of employment for other than good cause, the Option shall be exercisable only to
the extent it is exercisable on the date of death and may thereafter be
exercised by the Optionee's Legal Representative or Permitted Transferees, as
the case may be, until and including the earliest to occur of (i) the date which
is one (1) year after the date of death and (ii) the Expiration Date. After
death, such Option may, to the extent that it remains unexercised (but
exercisable by the Optionee according to such Option's terms) upon the date of
such death, be exercised by the person or persons to whom the Optionee rights
under the Option shall pass by the Optionee's will or by the laws of descent and
distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for
<PAGE> 12
[EXECUTION COPY]
the Company, of the right of the applicable person(s) to exercise the Option.
Not less than one hundred (100) shares may be purchased at any one time unless
the number purchased is the total number which may be purchased under the Option
and in no event may the Option be exercised with respect to fractional shares.
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto, as provided in the Plan.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable only by Optionee or the Optionee's guardian or legal
representative during his lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a court of competent
jurisdiction, by will or by the applicable laws of descent and distribution or
the executor or administrator of Optionee's estate, shall have the right to
exercise the Option, pursuant to the terms of this Agreement and the Plan.
Except as permitted by the preceding sentence, no option granted hereunder may
be transferred. assigned, pledged, hypothecated or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so transfer, assign, pledge,
hypothecate or otherwise dispose of any option granted hereunder. such option
and all rights thereunder shall immediately become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act or
applicable state securities law; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, Optionee shall submit a written
statement, in form satisfactory to counsel for the Company, to the effect that
such representation (x) is true and correct as of the date of purchase
<PAGE> 13
[EXECUTION COPY]
of any shares hereunder, or (y) is true and correct as of the date of any sale
of any such shares, as applicable. A legend to the foregoing effect shall be
placed upon any shares received upon exercise of this Option. As a further
condition precedent to any exercise of the Option, Optionee shall comply with
all regulations and requirements of any regulatory authority having control of
or supervision over the issuance of the shares and, in connection therewith,
shall execute any documents which the Board or any committee authorized by the
Board shall in its sole discretion deem necessary or advisable.
8. DELIVERY OF CERTIFICATES.
Upon the exercise of the Option in whole or in part, the Company
shall deliver one or more certificates representing the number of shares
purchased against full payment therefor. The Company shall pay all original
issue or transfer taxes and all fees and expenses incident to such delivery,
except as otherwise provided in Section 3.2.
9. ADJUSTMENTS.
In the event of any change in the outstanding Common Stock by
reason of any stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation, spin-off or
other similar change in capitalization, or any distribution to holders of Common
Stock other than a cash dividend, the number and class of shares available under
this Plan, the number and class of shares under each outstanding option and the
purchase price per share, shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding options without a change in
the aggregate purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
<PAGE> 14
[EXECUTION COPY]
13. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE HARVEY ENTERTAINMENT COMPANY,
a California corporation
By: /s/ Gregory M. Yulish
-------------------------------
Name:
Title:
AGREED AND ACCEPTED:
/s/ Don Gold
- -------------------------------
DON GOLD
<PAGE> 15
[EXECUTION COPY]
EXHIBIT B
PERMITTED ACTIVITIES
None.
<PAGE> 1
EXHIBIT 10.44
STOCK OPTION AGREEMENT
This Stock Option Agreement (the "Agreement") dated as of February 27,
1998 entered into between THE HARVEY ENTERTAINMENT COMPANY, a California
corporation ("Company"), and DON GOLD ("Optionee"). This Option is granted
under, and is governed by, The Harvey Entertainment Company 1997 Stock Option
Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of 20,000 shares of Company's common stock ("Common
Stock") at a price of $10.25 per share. The Option granted hereunder is not
intended to qualify as an "Incentive Stock Option" within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof (the
"Expiration Date"), unless sooner terminated in accordance with the provisions
set forth herein or in the Plan;
(b) The Option shall vest over a two-year period in accordance
with the following schedule: (i) on the first anniversary hereof with respect to
one-half of the number of shares of Stock subject to the Option, (ii) on the
second anniversary hereof with respect to an additional one-half of the number
of shares of Stock subject to the Option, and (iii) as otherwise provided
pursuant to Sections 2(c) hereof;
(c) The Option shall vest in its entirety and be immediately
exercisable upon the consummation of a merger, consolidation or other
reorganization of the Company, completion of a tender offer for more than 50% of
the Company's outstanding capital stock or sale of all or substantially all of
the assets of the Company to any person other than AKAUSA Limited and its
affiliates (a "Change of Control"). On a Change of Control, the following
provisions shall apply:
(i) In the event of a Change of Control in which the
consideration received by the Company's shareholders in exchange
for their shares of the Company's Common Stock consists solely
of cash, the Option shall be deemed to have been exercised in
full immediately prior to the consummation of such Change of
Control and, in connection with such exercise, Optionee shall
receive a cash amount equal to the difference between the
exercise price of the Option and the price per share of Common
Stock received by the holders of the Company's Common Stock
pursuant to such Change of Control.
(ii) In the event of a Change of Control in which the
consideration received by the Company's shareholders in exchange
for their shares of the Company's Common Stock does not consist
solely of cash, the Option shall thereafter be exercisable for
the number of shares of stock or other securities and
<PAGE> 2
the amount of cash or other property, if any, that Optionee
would have received pursuant to such Change of Control in
respect of the shares of Common Stock underlying the Option had
the Option been exercised immediately prior thereto.
(d) If the Optionee's employment by the Company terminates for
any reason other than good cause, death or disability, the Option shall be
exercisable only to the extent it is exercisable on the effective date of the
Optionee's termination of employment and may thereafter be exercised by the
Optionee until and including the earliest to occur of (i) the date which is
three (3) months after the effective date of the Optionee's termination of
employment and (ii) the Expiration Date of the Options.
(e) If the Optionee's employment by the Company terminates by
reason of death or disability, the Option shall be exercisable only to the
extent it is exercisable on the date of death or disability and may thereafter
be exercised by the Optionee until and including the earliest to occur of (i)
the date which is one (1) year after the date of death or disability and (ii)
the Expiration Date.
(f) If the Optionee's employment by the Company terminates for
good cause, the Option shall terminate automatically on the effective date of
the Optionee's termination of employment.
(g) If the Optionee dies during the period set forth in Section
2(e) following termination of employment by reason of disability, or if the
Optionee dies during the period set forth in Section 2(d) following termination
of employment for other than good cause, the Option shall be exercisable only to
the extent it is exercisable on the date of death and may thereafter be
exercised by the Optionee's Legal Representative or Permitted Transferees, as
the case may be, until and including the earliest to occur of (i) the date which
is one (1) year after the date of death and (ii) the Expiration Date. After
death, such Option may, to the extent that it remains unexercised (but
exercisable by the Optionee according to such Option's terms) upon the date of
such death, be exercised by the person or persons to whom the Optionee rights
under the Option shall pass by the Optionee's will or by the laws of descent and
distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for the Company,
of the right of the applicable person(s) to exercise the Option. Not less than
one hundred (100) shares may be purchased at any one time unless the number
purchased is the total number which may be purchased under the Option and in no
event may the Option be exercised with respect to fractional shares.
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income
<PAGE> 3
tax withholding obligations, including paying to the Company the amount of any
taxes which the Company may be required to withhold with respect thereto, as
provided in the Plan.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable only by Optionee or the Optionee's guardian or legal
representative during his lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a court of competent
jurisdiction, by will or by the applicable laws of descent and distribution or
the executor or administrator of Optionee's estate, shall have the right to
exercise the Option, pursuant to the terms of this Agreement and the Plan.
Except as permitted by the preceding sentence, no option granted hereunder may
be transferred. assigned, pledged, hypothecated or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so transfer, assign, pledge,
hypothecate or otherwise dispose of any option granted hereunder. such option
and all rights thereunder shall immediately become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act or
applicable state securities law; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, Optionee shall submit a written
statement, in form satisfactory to counsel for the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
shares hereunder, or (y) is true and correct as of the date of any sale of any
such shares, as applicable. A legend to the foregoing effect shall be placed
upon any shares received upon exercise of this Option. As a further condition
precedent to any exercise of the Option, Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance of the shares and, in connection therewith, shall
execute any documents which the Board or any committee authorized by the Board
shall in its sole discretion deem necessary or advisable.
8. DELIVERY OF CERTIFICATES.
Upon the exercise of the Option in whole or in part, the Company
shall deliver
<PAGE> 4
one or more certificates representing the number of shares purchased against
full payment therefor. The Company shall pay all original issue or transfer
taxes and all fees and expenses incident to such delivery, except as otherwise
provided in Section 3.2.
9. ADJUSTMENTS.
In the event of any change in the outstanding Common Stock by
reason of any stock split, stock dividend, recapitalization, reorganization,
merger, consolidation, combination, exchange of shares, liquidation, spin-off or
other similar change in capitalization, or any distribution to holders of Common
Stock other than a cash dividend, the number and class of shares available under
this Plan, the number and class of shares under each outstanding option and the
purchase price per share, shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding options without a change in
the aggregate purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
13. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE HARVEY ENTERTAINMENT COMPANY,
a California corporation
By: /s/ Gregory M. Yulish
-------------------------------
Name: Gregory M. Yulish
Title: Chief Financial Officer
<PAGE> 5
AGREED AND ACCEPTED:
/s/ Don Gold
- -------------------------------
DON GOLD
<PAGE> 1
EXHBIT 10.45
[Global Media Management Group, Letterhead]
March 23, 1998
The Harvey Entertainment Company
1999 Avenue of the Stars, Suite 2050
Los Angeles, California 90067
Re: Management Consulting Agreement
This letter will confirm the engagement of Global Media Management Group, LLC
("Global") as an Independent Contractor, to provide certain management
consulting services for The Harvey Entertainment Company ("the Client" or "the
Company"). The following are the terms and conditions of our Agreement.
1. Our services will consist of providing certain management services and
assisting in formulating financial, management and operational
strategies/plans for the affairs of the Company. Services which may be
provided by Global include, but are not limited to, the following: (1)
formulating financial, management and/or operating plans; (2) advising
and consulting with other operating personnel with respect to operations
and management of the Company's business and business plans; (3)
reviewing, evaluating, participating in various negotiations with
strategic parties, creditors, lenders, lessors, etc...; (4) directing
and/or assisting other operating personnel with the specific activities
required to implement and complete any operating changes; (5) analyzing
and advising in areas which affect cash flow, marketing, communications
and acquisition/divestiture; (6) possible acquisitions and/or sale of
the Company; (7) evaluating the Company's organization structure and its
personnel, and assisting with personnel changes and areas to reduce
costs; (8) designing and monitoring systems and controls to help control
daily operations, relationships with creditors, including financial
institutions; and (9) otherwise assisting in such matters as will aid in
accomplishing the foregoing. Global will provide the Board of Directors
from time to time with written reports concerning the Company and
Global's activities in connection therewith and will meet with the Board
at least once per calendar quarter, at a time convenient to all parties,
to review the foregoing. Representatives of Global shall be entitled to
exercise such power and authority as is
<PAGE> 2
commensurate with their positions; provided, however, that nothing
contained herein is intended to limit the power and authority of the
Company's Board of Directors as provided under applicable law.
2. The services will be rendered by various individuals, including, but not
limited to, the following: Anthony J. Scotti, Michael S. Hope, Leonard
Breijo and other consultants as appropriate. Such other consultants
shall be provided to, and paid by Company at Global's actual cost
therefor. Anthony J. Scotti shall serve as interim Chief Executive
Officer of the Company; Michael S. Hope shall serve as interim Chief
Financial Officer of the Company; and Leonard Breijo shall direct the
Business Affairs of the Company. Such services shall be for such portion
of their business time as is reasonably necessary to perform Global's
services required hereunder. Such services shall be non-exclusive and
shall not be required to be rendered on a full time basis. Global
reserves the right to utilize or substitute other consultants, not named
here, as required and as determined in its sole discretion, provided,
however, that any replacement for the services of Anthony J. Scotti
and/or Michael S. Hope shall be subject to the prior written approval of
the Company's Board of Directors.
3. The terms of our compensation are as follows:
(a) Compensation: Seventy Five Thousand Dollars ($75,000.00) per
month for the services of Anthony J. Scotti and Michael S. Hope,
and Ten Thousand Dollars ($10,000.00) per month for the services
of Leonard Breijo, all payable monthly in advance on the 23rd of
each month of the Initial Term, for six (6) months commencing on
March 23, 1998 and continuing through September 22, 1998 (the
"Initial Term") unless extended pursuant to the mutual agreement
of Global and the Company. Services for consultants other than
Anthony J. Scotti and Michael S. Hope shall be payable within
ten (10) days of Harvey's receipt therefor; provided, however,
that any additional consultants paid by Global whose cost in the
aggregate exceeds one thousand dollars ($1,000.00) per month
shall be subject to approval by the Company's Board of
Directors.
(b) Warrants, etc.: Warrants for two hundred thousand (200,000)
shares of the Company's common stock, issuable to such
representatives of Global as Global shall specify, fully vested
as of the commencement of the Initial Term, exercisable over a
five (5) year period at an exercise price of $12.75 per share
(subject to customary anti-dilution protection in the event of
stock splits, combination, stock dividends, recapitalization and
similar events), together with one (1) demand and so called
"piggyback" registration rights concerning the underlying common
stock on terms no less favorable than any similar registration
rights outstanding (the cost for making such rights effective to
be borne wholly by the Company). In addition, in connection with
the election of Anthony Scotti and Michael Hope as officers of
the Company, the Compensation Committee has awarded fully vested
<PAGE> 3
The Harvey Entertainment Company
March 23, 1998
Page 3
stock options to purchase an aggregate of fifty thousand (50,000)
shares of common stock (38,800 shares to Mr. Scotti; 9,700 shares
to Mr. Hope and 1,500 shares to Mr. Breijo at the exercise price
of $12.6875 per share under the Company's 1997 stock option plan.
(c) Expenses: All out-of-pocket expenses for necessary, Company
related travel (including reimbursement for first class
commercial travel for Messrs. Hope and Scotti, including
reimbursement at first class rates for the use of corporate
aircraft), reproductions, printing, graphics, messenger
services, overnight mail, shipping, and other third-party
charges will be billed to you at our cost. You have authorized
us to advance such costs and make such out-of-pocket
expenditures as may be reasonably necessary in connection with
our services.
4. Global is not a law firm or accounting firm. As such we will not be
providing legal or accounting advice, opinions on legal matters,
drafting or reviewing legal documents, nor representing the Company on
any legal or accounting matters.
5. Because the information needed to manage the Company, or to advise on a
strategic/business plan, will be based on assumptions and information
provided by the Company, its employees and Directors, the Company's
advisors, appraisers, accountants, and lawyers, the Company will assume
full and complete responsibility therefor. The Company understands and
acknowledges that Global's work effort, analysis and advice are
inherently subjective and that reasonable professionals/individuals
reviewing the same information may reach entirely different conclusions.
The Company releases Global from all responsibility as to the
effectiveness of its services provided pursuant to this agreement or the
reliability and accuracy of the information provided to and prepared by
Global, provided, however, that the Company does not release Global from
the gross negligence or willful misconduct of its officers or agents.
While we will use our reasonable best efforts and judgement in assisting
the Company, in light of the Company's circumstances, we cannot
guarantee any particular results or assume responsibility for the
Company's ultimate success.
6. Either the Company or Global may terminate this agreement at any time
after the expiration of the Initial Term, with or without cause. Upon
termination, all fees and expenses incurred throughout the close of
business on the date such termination is effective are due and payable.
Global (including its representatives and consultants) reserves the
right to stop work at any time if any invoices have not been paid.
<PAGE> 4
7. The Company shall indemnify, defend and hold harmless Global, its
officers, directors, representatives, consultants and employees from and
against any and all claims, damages, losses, liabilities (and reasonable
fees and costs incurred in the defense thereof) incurred by Global, its
principals, representatives, consultants and employees (collectively
"Liabilities") to the extent arising from, or in connection with this
agreement or the performance of services by Global or such other persons
pursuant to this agreement. The foregoing indemnification shall not
extend to Liabilities resulting from gross negligence or willful
misconduct by Global, its officers, directors, employees or authorized
agents as determined by a final non-appealable judgement of a court of
competent jurisdiction.
8. Global acknowledges that in connection with the services to be rendered
by Global pursuant hereto, Global may obtain certain written and
non-written information pertaining to the nature and operations of the
Company of a confidential nature. Global agrees that Global will not at
any time during or subsequent to the term of this Agreement or any
extension hereof, without the consent of the Company, knowingly disclose
to any third party whatsoever any such confidential information, except
as required by law or regulation or as reasonably deemed necessary by
Global or its representatives in the performance of Global's duties.
9. Because of the breadth and nature of Global's operations, Global, its
principals, representatives, consultants and employees may work for, or
may acquire and/or manage other businesses or clients, which may be
creditors or competitors of Company and of whose interests otherwise may
be opposed to that of the Company, for which Global may work in an
unrelated matter. Please be assured that, despite any such
representations, we strictly preserve all client confidences and pursue
the interests of each of our clients. The Company agrees that it does
not consider such concurrent employment or acquisitions, in unrelated
matters, of the Company, its principals, representatives, consultants or
employees and any other client or business of Global, its principals,
representatives, consultants or employees to be inappropriate, and
therefore waives any objections to any such present or future concurrent
assignments; provided that Global notifies the Company's Board of
Directors if it is separately providing, or agrees to separately
provide, consulting or other similar services to, or if its principals
knowingly invest in, other companies with which the Company is engaged
or proposes to engage in material business transactions during the term
of this agreement (and of which Global is aware with respect to such
other company's engagement with Company).
10. This agreement shall be governed and construed pursuant to the laws of
the State of California with respect to contracts wholly entered into
and performed therein. Any actions which may be brought by reason of
this agreement shall only be brought in the courts, State or Federal,
located within the County of Los Angeles for the State of California. If
either of us do institute any action or proceeding with respect to the
Agreement, the prevailing party will be entitled to reasonable fees,
costs and expenses of attorneys, accountants, and other professionals
and consultants.
<PAGE> 5
The Harvey Entertainment Company
March 23, 1998
Page 5
11. This agreement, and the agreements contemplated hereby, constitutes the
entire understanding between Company and Global regarding our services.
Further, this agreement supersedes and replaces any prior agreements
between the parties regarding Global's performance of services involving
the Company. By executing this agreement, you acknowledge that you have
read it carefully and understand all of its terms. This agreement cannot
be modified except by further written agreement signed by each party.
If the scope of services, compensation, terms and conditions confirm your
understanding, please sign the enclosed copy of this letter and return it to us
with the required payment for the first month of the Initial Term. By executing
and delivering a copy of this letter, the Company warrants and represents that
the retention of Global, on the terms set forth herein, has been duly authorized
by the Company's Board of Directors.
Sincerely,
Global Media Management Group, LLC Accepted By:
- ----------------------------------- -----------------------------------
Anthony J. Scotti, President The Harvey Entertainment Company
-----------------------------------
(Date)
<PAGE> 1
Exhibit 10.46
WARRANT AGREEMENT OF
THE HARVEY ENTERTAINMENT COMPANY
200,000 SHARES
Dated as of March 23, 1998
COMMON STOCK PURCHASE WARRANT
<PAGE> 2
WARRANT AGREEMENT dated as of March 23, 1998, between The Harvey
Entertainment Company, a California corporation (the "Company"), the Company as
Warrant Agent (in such capacity, "Warrant Agent"), and the persons signing below
as the "Warrant Holder" or "Holder".
The Company proposes to issue three Common Stock Purchase Warrants as
hereinafter described (the "Warrant") to purchase an aggregate of up to 200,000
shares of its Common Stock (the "Common Stock"), no par value per share (the
shares of Common Stock issuable on exercise of the Warrant being referred to
herein as the "Warrant Shares"), in favor of the Warrant Holder.
In consideration of the employment services to be provided to the
Company by the Warrant Holder pursuant to a management services agreement dated
as of March 23, 1998 between the Company and Global Media Management Group,
Inc., and for the purpose of defining the terms and provisions of the Warrant
and the respective rights and obligations thereunder of the Company and the
Holder, the Company and the Warrant Holder hereby agree as follows:
SECTION 1. TRANSFERABILITY AND FORM OF THE WARRANT.
1.1 REGISTRATION. The Warrant shall be numbered and shall be
registered on the books of the Company maintained at the principal office of the
Company in Los Angeles, California ("the Warrant Register"). The Company shall
be entitled to treat the Holder of the Warrant as the owner in fact thereof for
all purposes and shall not be bound to recognize any equitable or other claim to
or interest in such Warrant on the part of any other person, and shall not be
liable for any Company registration or transfer of Warrant which is registered
or to be registered in the name of a fiduciary or the nominee of a fiduciary
unless made with the actual knowledge that a fiduciary or nominee is committing
a breach of trust in requesting such registration of transfer, or with such
knowledge of such facts that its participation therein amounts to bad faith.
1.2 TRANSFER RESTRICTIONS. The Holder may not transfer the
Warrant without the prior written consent of the Company, which consent may be
granted or denied in the sole discretion of the Company except that all or a
portion of this Warrant may be transferred to any employee of Global Media
Management Group,. Inc., any family member of Holder or in connection with
estate planning matters (including by operation of law). Should such consent be
granted, the Warrant so transferred shall continue to be bound by this
restriction in the hands of a subsequent Holder, and the Company shall not
recognize any attempted transfer of the Warrant in violation of this Agreement.
1.3 TRANSFER - GENERAL. Subject to the terms hereof, the Warrant
shall be transferable only on the books of the Company maintained at its
principal office upon delivery thereof duly endorsed by the Holder or by his
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or a copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their
<PAGE> 3
authority shall be produced, and may be required to be deposited and to remain
with the Company in its discretion. Upon any registration of transfer, the
Company shall countersign and deliver a new Warrant to the persons entitled
thereto. The Company or the Warrant Agent may require the payment of a sum
sufficient to cover any tax or governmental charge that may be imposed in
connection with any such transfer.
1.4 FORM OF THE WARRANT. The text of the Warrant and of the form
of election to purchase Warrant Shares (the "Purchase Form") shall be
substantially as set forth respectively in Exhibits A and B attached hereto. The
price per Warrant Share and the number of Warrant Shares issuable upon exercise
of the Warrant are subject to adjustment upon the occurrence of certain events,
all as hereinafter provided. The Warrant shall be executed on behalf of the
Company by its Chairman of the Board, its Chief Executive Officer, President or
one of its Vice Presidents, under its corporate seal reproduced thereon, and
attested by its Secretary or an Assistant Secretary.
The Warrant shall be dated as of the date of countersignature
thereof by the Company either upon initial issuance or upon transfer.
SECTION 2. TERM OF THE WARRANT; EXERCISE OF THE WARRANT; WARRANT PRICE,
ETC.
2.1 TERM OF THE WARRANT. Subject to the terms of this Agreement,
the Holder shall have the right, which may be exercised from time to time, from
and through the dates set forth in the Warrant, to purchase from the Company the
number of fully paid and nonassessable Warrant Shares which the Holder may at
the time be entitled to purchase on exercise of such Warrant. If the last day
for the exercise of the Warrant shall not be a business day, then the Warrant
may be exercised on the next succeeding business day.
2.2 VESTING OF THE WARRANT. The Warrant is vested in full and may
be exercised on or after the date hereof in accordance with the terms of this
Agreement and the Warrant Certificate.
2.3 EXERCISE OF THE WARRANT. The Warrant may be exercised upon
surrender to the Company, at its principal office, of the certificate evidencing
the Warrant to be exercised, together with the Purchase Form on the reverse
thereof duly filled in and signed, and upon payment to the Company, of the
Warrant Price (as defined in and determined in accordance with the provisions of
Sections 2 and 6 hereof), for the number of Warrant Shares in respect of which
such Warrant is then exercised. Upon partial exercise, a Warrant Certificate for
the unexercised portion shall be delivered to the Holder. Payment of the Warrant
Price shall be made at the option of the Holder by one or more of the following
methods: (i) by delivery of cash, or a certified or official bank check in the
amount of such Warrant Price, (ii) by instructing the Company to withhold a
number of Warrant Shares then issuable upon exercise of the particular Warrant
with an aggregate current market price (as defined in Section 6.1(e) hereof)
equal to such Warrant Price (the "Net Exercise Option"), or (iii) by
surrendering to the Company shares of Common Stock previously acquired by the
Holder with an aggregate current market price equal to such Warrant Price, or
any combination of foregoing. In the event of any withholding of Warrant Stock
or surrender of Common Stock pursuant to clause (ii) or (iii) above where the
-2-
<PAGE> 4
number of shares whose current market price is equal to the Warrant Price is not
a whole number, the number of shares withheld by or surrendered to the Company
shall be rounded down to the nearest whole share.
Subject to Section 3 hereof, upon such surrender of the Warrant
and payment of the Warrant Price as aforesaid, the Company shall issue and cause
to be delivered with all reasonable dispatch to or upon the written order of the
Holder and in such name or names as the Holder may designate, a certificate or
certificates for the number of full Warrant Shares so purchased upon the
exercise of such Warrant, together with cash, as provided in Section 8 hereof,
in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of
such Warrant and payment of the Warrant Price, as aforesaid.
2.4 COMPLIANCE WITH GOVERNMENT REGULATIONS. Holder acknowledges
that none of the Warrant or Warrant Shares has been registered under the
Securities Act of 1933, as amended (the "Securities Act"), and therefore may be
sold or disposed of in the absence of such registration only pursuant to an
exemption from such registration and in accordance with this Agreement. The
Warrant and the Warrant Shares will bear a legend to the following effect:
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. NO SALE OR OTHER DISPOSITION OR
PLEDGE OF THESE SECURITIES OR THE SECURITIES
UNDERLYING THESE SECURITIES CAN BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT
RELATING THERETO OR AN AVAILABLE EXEMPTION FROM
REGISTRATION."
2.5 WARRANT PRICE. The price per share at which Warrant Shares
shall be purchasable upon exercise of the Warrant (the "Warrant Price") shall be
$12.75, subject to adjustment pursuant to Section 6 hereof.
SECTION 3. PAYMENT OF TAXES.
3.1 PAYMENT OF TAXES. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant and Warrant
Shares upon the exercise of Warrant; provided, however, that the Company shall
not be required to pay any income tax or taxes resulting from the issuance of
the warrant or any other tax or taxes which may be payable in respect of any
transfer involved in the issue or delivery of the Warrant or certificates for
Warrant Shares.
SECTION 4. MUTILATED OR MISSING WARRANT. In case the Warrant shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrant, or
in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant certificate of like tenor and representing an equivalent right or
interest; but only upon receipt of evidence reasonably satisfactory to the
Company of
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<PAGE> 5
such loss, theft or destruction of such Warrant certificate and indemnity or
bond, if requested, also reasonably satisfactory to them. An applicant for such
substitute Warrant certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 5. RESERVATION OF WARRANT SHARES.
5.1 RESERVATION OF WARRANT SHARES. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized shares of
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding Warrant. The
transfer agent for the Common Stock ("Transfer Agent"), and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be and are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized shares as shall be requisite for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrant. The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrant will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof. The Company will supply such Transfer Agent
and any subsequent transfer agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be payable as provided in Section 8 of this Agreement. The Company will furnish
to such Transfer Agent a copy of all notices of adjustments, and certificates
related thereto, transmitted to each Holder. The Warrant surrendered in the
exercise of the rights thereby evidenced shall be canceled by the Company.
5.2 CANCELLATION OF THE WARRANT. In the event the Company shall
purchase or otherwise acquire the Warrant, the same shall be canceled and
retired.
SECTION 6. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT SHARES. The
number and kind of securities purchasable upon the exercise of the Warrant and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
6.1 MECHANICAL ADJUSTMENTS. The number of Warrant Shares
purchasable upon the exercise of the Warrant and the Warrant Price shall be
subject to adjustment as follows:
(a) In case the Company shall at any time after the date
of this Agreement (i) declare or pay a dividend in shares of Common
Stock or make a distribution in shares of Common Stock, (ii) subdivide
its outstanding shares of Common Stock, (iii) combine its outstanding
shares of Common Stock into a smaller number of shares of Common Stock
or (iv) issue any shares of its capital stock in a reclassification of
the Common Stock (including any such reclassification in connection with
a consolidation or merger in which the Company is the continuing
entity), the number of Warrant Shares purchasable upon exercise of the
Warrant immediately prior thereto shall
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<PAGE> 6
be adjusted so that the Holder of the Warrant shall be entitled to
receive the kind and number of Warrant Shares or other securities of the
Company which it would have owned or have been entitled to receive after
the happening of any of the events described above, had such Warrant
been exercised immediately prior to the happening of such event or any
record date with respect thereto. An adjustment made pursuant to this
paragraph (a) shall become effective immediately after the effective
date of such event retroactive to the record date, if any, for such
event.
(b) In case the Company shall issue rights, options or
warrants to holders of its outstanding Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share
which is lower at the record date mentioned below than the then current
market price per share of Common Stock (as defined in paragraph (e)
below), the number of Warrant Shares thereafter purchasable upon the
exercise of the Warrant shall be determined by multiplying the number of
Warrant Shares theretofore purchasable upon exercise of the Warrant by a
fraction, of which the numerator shall be the number of shares of Common
Stock outstanding on the date of issuance of such rights, options or
warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the denominator shall be the
number of shares of Common Stock outstanding on the date of issuance of
such rights, options or warrants plus the number of shares which the
aggregate offering price of the total number of shares of Common Stock
so offered would purchase at the current market price per share of
Common Stock at such record date. Such adjustments shall be made
whenever such rights, options or warrants are issued, and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive such rights, options or warrants.
(c) In case the Company shall distribute to holders of its
shares of Common Stock evidences of its indebtedness or assets
(excluding dividends or distributions referred to in paragraph (a) above
or in the paragraph immediately following this paragraph) or rights,
options or warrants, or convertible or exchangeable securities
containing the right to subscribe for or purchase shares of Common Stock
(excluding those referred to in paragraph (b) above), then in each case
the number of Warrant Shares thereafter purchasable upon the exercise of
the Warrant shall be determined by multiplying the number of Warrant
Shares theretofore purchasable upon the exercise of the Warrant by a
fraction, of which the numerator shall be the then current market price
per share of Common Stock (as defined in paragraph (e) below) on the
date of such distribution, and of which the denominator shall be the
then current market price per share of Common Stock, less the then fair
value (as determined by the Board of Directors of the Company, whose
determination shall be conclusive) of the portion of the assets or
evidences of indebtedness so distributed or of such subscription rights,
options or warrants, or of such convertible or exchangeable securities
applicable to one share of Common Stock. Such adjustment shall be made
whenever any such distribution is made, and shall become effective on
the date of distribution retroactive to the record date for the
determination of stockholders entitled to receive such distribution.
In the event of a distribution by the Company to holders
of its shares of
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<PAGE> 7
Common Stock of stock of a subsidiary or securities convertible into or
exercisable for such stock, then in lieu of an adjustment in the number
of Warrant Shares purchasable upon the exercise of the Warrant, the
Holder of the Warrant, upon the exercise thereof at any time after such
distribution, shall be entitled to receive from the Company, such
subsidiary or both, as the Company shall determine, the stock or other
securities to which such Holder would have been entitled if such Holder
had exercised such Warrant immediately prior thereto, all subject to
further adjustment as provided in this Section 6.1; provided, however,
that no adjustment in respect of dividends or interest on such stock or
other securities shall be made during the term of a Warrant or upon the
exercise of a Warrant other than adjustments required by this Section 6.
(d) In case the Company shall issue shares of Common Stock
or rights, options or warrants containing the right to subscribe for or
purchase shares of Common Stock or securities convertible into Common
Stock (excluding (i) shares, rights, options, warrants or convertible
securities issued in any of the transactions described in paragraphs
(a), (b) or (c) above, or (ii) Warrant Shares issued upon exercise of
the Warrant), for a price per share of Common Stock, in the case of the
issuance of Common Stock, or for a price per share of Common Stock
initially deliverable upon conversion or exchange of such securities
less than the then current market price per share of Common Stock (as
defined in paragraph (e) below) on the date the Company fixed the
offering, conversion or exchange price of such additional shares, the
number of Warrant Shares thereafter purchasable upon the exercise of the
Warrant shall be determined by multiplying the number of Warrant Shares
theretofore purchasable upon exercise of the Warrant by a fraction, of
which the numerator shall be the number of shares of Common Stock
outstanding on such date plus the number of additional shares of Common
Stock offered for subscription or purchase, and of which the denominator
shall be the number of shares of Common Stock outstanding on such date
plus the number of shares which the aggregate offering price of the
total number of shares of Common Stock so offered would purchase at the
current market price per share of Common Stock at such record date. Such
adjustment shall be made whenever such shares, rights, options or
warranties are issued, and shall become effective immediately after the
effective date of such event retroactive to the record date, if any, for
such event.
(e) For the purpose of any computation under Section 2.3
or paragraphs (b), (c) and (d) of this Section, the current market price
per share of Common Stock at any date shall be the average of the daily
closing prices for 10 consecutive trading days commencing 20 trading
days and ending 10 trading days before the date of such computation. The
closing price for each day shall be the last such reported sales price
regular way or, in case no such reported sale takes place on such day,
the average of the closing bid and asked prices regular way for such
day, in each case on the principal national securities exchange or in
the NASDAQ National Market System to which the shares of Common Stock
are listed or admitted to trading or, if not listed or admitted to
trading, the average of the closing bid and asked prices of the Common
Stock in the over-the-counter market as reported by NASDAQ or any
comparable system, or if the Common Stock is not listed on NASDAQ or a
comparable system, the average of the closing bid and asked prices as
furnished by two members of the National Association of
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<PAGE> 8
Securities Dealers, Inc. ("NASD") selected from time to time by the
Board of Directors of the Company for that purpose. In the absence of
one or more such quotations, the Board of Directors of the Company shall
determine in good faith the current market price on the basis of such
quotations as it considers appropriate or in the case of securities
which are not quoted, the Board of Directors of the Company shall
determine in good faith the current market price based upon such
information and advice as it considers appropriate. In the case of
rights, options, warrants or convertible or exchangeable securities, the
price per share of Common Stock shall be determined by dividing (x) the
total amount received or receivable by the Company in consideration of
the sale and issuance of such rights, options, warrants or convertible
or exchangeable securities, plus the total consideration payable to the
Company upon exercise or conversion or exchange thereof, by (y) the
total number of shares of Common Stock covered by such rights, options,
warrants or convertible or exchangeable securities.
(f) Whenever the number of Warrant Shares purchasable upon
the exercise of the Warrant is adjusted, as herein provided, the Warrant
Price payable upon exercise of the Warrant shall be adjusted by
multiplying such Warrant Price immediately prior to such adjustment by a
fraction, of which the numerator shall be the number of Warrant Shares
purchasable upon the exercise of the Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Warrant
Shares purchasable immediately thereafter.
(g) In case the Company shall sell or issue shares of
Common Stock or rights, options, warrants or convertible or exchangeable
securities containing the right to subscribe or purchase shares of
Common Stock to officers, directors, consultants or employees of the
Company pursuant to an employee stock option plan approved by the
Company's shareholders either at a price not less than 95% of the
current market price of the Company's Common Stock, there shall be no
adjustment in the Warrant Price or the number of Warrant Shares either
upon the initial issuance of such securities or upon the exercise or
conversion thereof.
(h) No adjustment in the number of Warrant Shares
purchasable hereunder shall be required unless such adjustment would
result in an increase or decrease of at least one percent (1%) of the
Warrant Price; provided, however, that any adjustments which by reason
of this paragraph (h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment or upon
exercise of the Warrant. All calculations shall be made to the nearest
cent or to the nearest one-thousandth of a share, as the case may be.
(i) No adjustment in the number of Warrant Shares
purchasable upon the exercise of the Warrant need be made under
paragraphs (b), (c), or (d) if the Company issues or distributes to the
Holder of the Warrant the shares, rights, options, warrants, or
convertible or exchangeable securities, or evidences of indebtedness or
assets referred to in those paragraphs which the Holder of the Warrant
would have been entitled to receive had the Warrant been exercised prior
to the happening of such event or the record date with respect thereto
and provided there is no tax to such Holder upon such issuance or
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<PAGE> 9
distribution. No adjustment need be made for a change in the par value
of the Warrant Shares.
(j) For the purpose of this Section 6.1, the term "shares
of Common Stock" shall mean (i) the class of stock designated as the
Common Stock of the Company at the date of this Agreement, or any other
class of stock designated as "Common Stock," or (ii) any other class of
stock resulting from successive changes or reclassifications of such
shares consisting solely of changes from no par value to par value,
changes in par value, or changes from par value to no par value. In the
event that at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holder shall become entitled to purchase any
securities of the Company other than shares of Common Stock, thereafter
the number of such other shares so purchasable upon exercise of the
Warrant and the Warrant Price of such shares shall be subject to
adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Warrant
Shares contained in paragraphs (a) through (h), inclusive, above, and
the provisions of Section 2 and Sections 6.2 through 6.3, inclusive,
with respect to the Warrant Shares, shall apply on like terms to any
such other securities; provided, however, that the Warrant Price shall
at no time be less than the par value of the Common Stock of the
Company; provided, further, that the Company shall reduce the par value
of its Common Stock from time to time as necessary so that such par
value shall not be more than the Warrant Price then in effect.
(k) Upon the expiration of any rights, options, warrants
or conversion or exchange privileges, the issuance of which required an
adjustment in the number of shares of Common Stock purchasable upon
exercise of the Warrant, if any thereof shall not have been exercised,
the Warrant Price and the number of shares of Common Stock purchasable
upon the exercise of the Warrant shall, upon such expiration, be
readjusted and shall thereafter be such as it would have been had it
been originally adjusted (or had the original adjustment not been
required, as the case may be) as if (A) the only shares of Common Stock
so issued were the shares of Common Stock, if any, actually issued or
sold upon the exercise of such rights, options, warrants or conversion
or exchange rights and (B) such shares of Common Stock, if any, were
issued or sold for the consideration actually received by the Company
upon such exercise plus the aggregate consideration, if any, actually
received by the Company for the issuance, sale or grant of all such
rights, options, warrants or conversion or exchange rights whether or
not exercised; provided, however, that no such readjustment shall have
the effect of increasing the Warrant Price or decreasing the number of
shares of Common Stock purchasable upon the exercise of the Warrant by
an amount in excess of the amount of the adjustment initially made in
respect to the issuance, sale or grant of such rights, options, warrants
or conversion or exchange rights, and provided further that the issuance
of shares of Common Stock pursuant to rights, options, warrants or
conversion or exchange rights shall not be cause for additional
adjustments beyond the adjustments provided in respect of the initial
issuance of the rights, options, warrants or conversion or exchange
rights.
6.2 NOTICE OF ADJUSTMENT. Whenever the number of Warrant Shares
purchasable upon the exercise of the Warrant or the Warrant Price of such
Warrant Shares is
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<PAGE> 10
adjusted, as herein provided, the Company shall mail by first class, postage
prepaid, to each Holder notice of such adjustment or adjustments and shall
deliver to the Holder a copy of a certificate of either the Board of Directors
of the Company or of a firm of independent public accountants selected by the
Board of Directors of the Company (who may be the regular accountants employed
by the Company) setting forth the number of Warrant Shares purchasable upon the
exercise of the Warrant and the Warrant Price of such Warrant Shares after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment in the absence of manifest error.
6.3 NO ADJUSTMENT FOR DIVIDENDS. Except as provided in Section
6.1, no adjustment in respect of any dividends shall be made during the term of
a Warrant or upon the exercise or conversion of a Warrant.
6.4 PRESERVATION OF PURCHASE RIGHTS UPON MERGER, CONSOLIDATION,
ETC. In case of any consolidation of the Company with or merger of the Company
into another corporation or in case of any sale, transfer or lease to another
corporation of all or substantially all the property of the Company, the Company
or such successor or purchasing corporation, as the case may be, shall execute
an amendment to this Agreement that each Holder shall have the right thereafter
upon payment of the Warrant Price in effect immediately prior to such action to
purchase upon exercise of the Warrant the kind and amount of shares and other
securities and property which it would have owned or have been entitled to
receive upon the happening of such consolidation, merger, sale, transfer or
lease had such Warrant been exercised immediately prior to such action. Such
agreement shall provide for adjustments, which shall be as nearly equivalent as
may be practicable to the adjustments provided for in this Section 6. The
provisions of this Section 6.4 shall similarly apply to successive
consolidations, mergers, sales, transfers or leases.
6.5 STATEMENT ON THE WARRANT. Irrespective of any adjustments in
the Warrant Price or the number or kind of shares purchasable upon the exercise
of the Warrant, the Warrant theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the
Warrant initially issuable pursuant to this Agreement.
SECTION 7. REGISTRATION RIGHTS.
7.1 CERTAIN DEFINITIONS.
As used in this Warrant Agreement, the following terms shall have
the following respective meanings:
(a) COMMISSION means the Securities and Exchange
Commission.
(b) EXCHANGE ACT means the Securities Exchange Act of
1934, as amended, or any successor act, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at the
time.
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<PAGE> 11
(c) REGISTRABLE SECURITIES means the Warrant Shares issued
or issuable upon exercise of the Warrants, provided, however, that Registrable
Securities shall not include any Shares which have theretofore been registered
and sold pursuant to the Securities Act or which have been sold to the public
pursuant to Rule 144 or any similar rule promulgated by the Commission pursuant
to the Securities Act, and, provided further, the Company shall have no
obligation under Section 7 to register any Registrable Securities of a Holder if
the Company shall deliver to the Holders requesting such registration an opinion
of counsel reasonably satisfactory to such Holders and its counsel to the effect
that the proposed sale or disposition of all of the Registrable Securities for
which registration was requested does not require registration under the
Securities Act for any sales or dispositions of such shares within the period
set forth in Rule 144(e), currently three (3) months. For purposes of this
Agreement, a Person will be deemed to be a holder of Registrable Securities
whenever such Person has the then-existing right to acquire such Registrable
Securities (by conversion, subscription or otherwise), whether or not such
acquisition has actually been effected. As to any particular Registrable
Security, once issued, such security shall cease to be one of the Registrable
Securities when (x) such security shall have been transferred to any person
pursuant to an effective registration statement, (y) such security shall have
been transferred to any person that is not an Affiliate (as defined in the
Exchange Act) of the initial Warrant Holder pursuant to Rule 144 (or any
successor provision) under the Securities Act and the shares thereupon are
freely tradeable, or (z) such security shall have ceased to be outstanding.
(d) REGISTRATION EXPENSES means all expenses incident to
the Company's performance of or compliance with the registration rights herein,
including, without limitation, all registration, filing, listing and NASD fees,
all fees and expenses of complying with securities or blue sky laws, all word
processing, duplicating and printing expenses, messenger and delivery expenses,
fees and expenses of Company's counsel and independent public accountants,
including the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, and any fees and
disbursements of underwriters customarily paid by issuers and sellers of
securities; provided, however, that Registration Expenses shall not include fees
and expenses of counsel for the holders of Registrable Securities nor shall it
include underwriting discounts, commissions and transfer taxes, if any, relating
to the offer and sale of Registrable Securities, all of which shall be borne by
such holders.
(e) SECURITIES ACT means the Securities Act of 1933, as
amended, or any successor act thereto, and the rules and regulations of the
Commission promulgated thereunder, all as the same shall be in effect at the
time.
7.2 REGISTRATION.
(a) DEMAND REGISTRATION. (1) If the Holders of Registrable
Securities make a written request to the Company (the "Demanding Holders"), the
Company shall cause there to be filed with the Commission a registration
statement meeting the requirements of the Securities Act (a "Demand
Registration"), and each Demanding Holder shall be entitled to have included
therein (subject to Section 7.2(d)) all or such number of such Demanding
Holder's Registrable Securities, as the Demanding Holder shall request in
writing; provided, however, that no request may be made pursuant to this Section
7.2(a) if within six (6) months prior to the date
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<PAGE> 12
of such request a registration statement pursuant to this Section 7.2 shall have
been declared effective by the Commission. Such Demand Registration shall be
effected by the Company by means of a registration statement on Form S-3, if
available to the Company. Any request made pursuant to this Section 7.2(a) shall
be addressed to the attention of the Secretary of the Company, and shall specify
the number of Registrable Securities to be registered, the intended methods of
disposition thereof and that the request is for a Demand Registration pursuant
to this Section 7.2(a). The Holders (including Anthony J. Scotti, Michael S.
Hope and Leonard Breijo and their successors pursuant to this Warrant Agreement)
shall be entitled to no more than one (1) Demand Registration.
(2) The Company shall be entitled to postpone for up to
ninety (90) days the filing of any registration statement otherwise required to
be prepared and filed pursuant to this Section 7.2(a), if the Board determines,
in its good faith reasonable judgment (with the concurrence of the managing
underwriter, if any), that such registration and the sale of Registrable
Securities contemplated thereby would materially interfere with, or require
premature disclosure of, any financing, acquisition or reorganization involving
the Company or any of its wholly owned subsidiaries and the Company promptly
gives the Demanding Holders notice of such determination; provided, however,
that the Company shall not have postponed pursuant to this Section 7.2(a)(ii)
the filing of any other registration statement otherwise required to be prepared
and filed pursuant to this Section 7.2 during the twelve (12) month period ended
on the date of the relevant request pursuant to Section 7.2(a).
(b) COMPANY REGISTRATION. If (without any obligation to do
so) the Company proposes to register (including for this purpose any
registration effected by the Company for holders other than the holders of
Registrable Securities) any of its Common Stock or other securities under the
Securities Act in connection with the public offering of such securities solely
for cash (other than a registration on Forms S-4 or S-8 or equivalent successor
forms), then the Company shall, at such time, promptly give all holders of
Registrable Securities written notice of such registration. Any such
registration effected by the Company is referred to herein as a "Company
Registration." Upon the written request of one or more of such holders given
within fifteen (15) days after the giving of such notice by the Company, the
Company shall, subject to the provisions of Section 7.2(c) below, cause to be
included in such registration statement and registered under the Securities Act
all of the Registrable Securities that each such holder ("Participating
Holders") has requested to be registered.
(c) EXPENSES. The Company shall pay all Registration
Expenses incurred in connection with the registration of Registrable Securities
pursuant to Section 7.2(a).
(d) PRIORITY IN REQUESTED REGISTRATIONS. If the Company
Registration pursuant to Section 7.2(b) involves an underwritten offering, and
the managing underwriter shall advise the Company in writing, with a copy to the
Participating Holders that, in its opinion, the number of securities requested
to be included in such registration (including securities of the Company which
are not Registrable Securities) exceeds the number which can be sold in such
offering; then, in the case of a Company Registration shares shall be included
in the following priority: (x) first, other securities to be sold for the
account of the Company to be
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included in the Company Registration, and (y) second, the Registrable Securities
and other securities of the Company entitled to similar registration rights, pro
rata, in proportion to the number of Registrable Securities and other securities
requested to be included in such registration statement.
7.3 REGISTRATION PROCEDURES.
(a) If and whenever the Company is required to use its
best efforts to effect the registration of any Registrable Securities under the
Securities Act as provided in Section 7.2, the Company, as expeditiously as
possible and subject to the terms and conditions of Section 7.2, will:
(i) prepare and file with the Commission the
requisite registration statement to effect such registration and use its best
efforts to cause such registration to become effective;
(ii) furnish to each Participating Holder such number
of conformed copies of such registration statement and of each such amendment
and supplement thereto, such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act, and
such other documents, as each Participating Holder may reasonably request;
(iii) immediately notify the Participating Holders at
any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading and at
the request of the Participating Holders promptly prepare and furnish to the
Participating Holders a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading; and
(iv) use its best efforts to list all Registrable
Securities covered by such registration statement on the securities exchange or
NASD/NMS, if any, on which the Common Stock is then listed.
(b) The Company may require each Participating Holder to
furnish the Company with such information and undertakings as it may reasonably
request regarding the holders requesting registration and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
(c) Each Participating Holder agrees (A) that upon receipt
of any
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<PAGE> 14
notice from the Company of the happening of any event of the kind described in
Section 7.3(a)(iii), such holder will forthwith discontinue its disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until receipt by such Participating Holder of the copies
of the supplemented or amended prospectus contemplated by subdivision (a)(iii)
of this Section 7.3 and, if so directed by the Company, will deliver to the
Company all copies, other than permanent file copies, then in such holder's
possession of the prospectus relating to such Registrable Securities at the time
of receipt of such notice and (b) that it will immediately notify the Company,
at any time when a prospectus relating to the registration of such Registrable
Securities is required to be delivered under the Securities Act, of the
happening of any event as a result of which information previously furnished by
such Participating Holder to the Company in writing for inclusion in such
prospectus contains an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.
(d) Nothing in this Agreement to the contrary, the Company
will not be required to file such a registration statement with respect to, or
include in any registration statement, any Registrable Securities if the Company
obtains an opinion (in form and substance satisfactory to the holder requesting
registration) of counsel acceptable to the holder of such Registrable Securities
to the effect that the sale of the Registrable Securities in the manner
contemplated by such holder may be effected without registration regardless of
the identity or status of the buyer(s) of such Registrable Securities and that
such securities are freely tradeable.
7.4 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In the event of any
registration under the Securities Act pursuant to Section 7 hereof of any
Registrable Securities covered by such registration, the Company will, and
hereby does, indemnify and hold harmless the Participating Holders, their
directors and officers, each other person who participates as an underwriter in
the offering or sale of such securities (if so required by such underwriter as a
condition to including the Participating Holders' Registrable Securities in such
registration) and each other person, if any, who controls the Participating
Holders or any such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to which
the Participating Holders or any such director or officer or underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
securities were registered under the Securities Act, any preliminary prospectus,
final prospectus or summary prospectus contained therein or any document
incorporated therein by reference, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse the Participating Holders and each such director,
officer, underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage,
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<PAGE> 15
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by any Participating Holder specifically for inclusion therein; provided
further that the Company shall not be liable to any person who participates as
an underwriter in the offering or sale of Registrable Securities or any other
person, if any, who controls such underwriter within the meaning of the
Securities Act, in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of such person's failure to send or give a copy of the final prospectus to
the person claiming an untrue statement or alleged untrue statement or omission
or alleged omission at or prior to the written confirmation of the sale of
Registrable Securities to such person if such statement or omission was
corrected in such final prospectus.
(b) INDEMNIFICATION BY THE PARTICIPATING HOLDERS. The Company may
require, as a condition to including any Registrable Securities of the
Participating Holders in any registration statement filed pursuant to Section 7,
that the Company shall have received an undertaking satisfactory to it from the
Participating Holders to indemnify and hold harmless (in the same manner and to
the same extent as set forth in subdivision (a) of this Section 7.4) the
Company, each director of the Company, each officer of the Company and each
other person, if any, who controls the Company within the meaning of the
Securities Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in conformity with
written information furnished to the Company by the Participating Holders
specifically for inclusion therein.
(c) NOTICES OF CLAIMS, ETC. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this Section 7.4,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this Section 7.4, except to the extent that
the indemnifying party is actually and materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified to the extent that it may wish, with counsel reasonably satisfactory to
such indemnified party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof other than reasonable costs of investigation. No indemnifying
party shall consent to entry of any judgment or enter into any settlement
without the consent of the indemnified party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a
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<PAGE> 16
release from all liability in respect to such claim or litigation.
(d) OTHER INDEMNIFICATION. Indemnification similar to that
specified in the preceding subdivisions of this Section 7.4 (with appropriate
modifications) shall be given by the Company and the Participating Holders with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority, other than
the Securities Act.
(e) CONTRIBUTION. If the indemnification provided for in this
Section 7.4 from the indemnifying party is unavailable to an indemnified party
hereunder in respect of any losses, claims, damages, liabilities or expenses
referred to herein, then the indemnifying party, to the extent such
indemnification is unavailable, in lieu of indemnifying such indemnified party,
shall contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions that resulted in
such losses, claims, damages, liabilities or expenses. The relative fault of
such indemnifying party and indemnified parties shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been made by, or relates to information supplied by,
such indemnifying party or indemnified parties, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such action. The amount paid or payable by a party as a result of the losses,
claims, damages, liabilities and expenses referred to above shall be deemed to
include any legal or other fees or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable
if contribution pursuant to this Section 7.4(e) were determined by pro rata
allocation or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the meaning of Section
10(f) of the Securities Act) shall be entitled to contribution from any person.
In no event shall any participating Holder be obligated to contribute an amount
in excess of the net amount received by such Holder in respect of the securities
sold in the related offering.
If indemnification is available under this Section 7.4, the
indemnifying parties shall indemnify each indemnified party to the full extent
provided in Sections 7.4(a) and 7.4(b) without regard to the relative fault of
said indemnifying parties or indemnified party or any other equitable
consideration provided for in this Section 7.4(e).
SECTION 8. FRACTIONAL INTERESTS. The Company shall not be required to
issue fractional Warrant Shares on the exercise of the Warrant. If any fraction
of a Warrant Share would, except for the provisions of this Section 8, be
issuable on the exercise of the Warrant (or specified portion thereof), the
Company shall pay an amount in cash equal to the closing price for one share of
the Common Stock, as defined in paragraph (e) of Section 6.1, on the trading day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
SECTION 9. NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDER. Nothing
contained in this
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<PAGE> 17
Agreement or in the Warrant shall be construed as conferring upon the Holder or
its permitted transferees the right to vote or to receive dividends or to
consent to or receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company.
SECTION 10. INSPECTION OF WARRANT AGREEMENT. The Company shall keep
copies of this Agreement and any notices given or received hereunder available
for inspection by the Holder during normal business hours at its principal
office.
SECTION 11. IDENTITY OF TRANSFER AND WARRANT AGENT. Forthwith upon the
appointment of any subsequent transfer agent for the Common Stock or Warrant
Agent, or any other shares of the Company's capital stock issuable upon the
exercise of the Warrant, the Company will notify the Holder of the name and
address of such subsequent transfer agent.
SECTION 12. NOTICES. Any notice pursuant to this Agreement by any Holder
to the Company, shall be in writing and shall be mailed first class, postage
prepaid, or delivered to the Company at its office at 1999 Avenue of the Stars,
Suite 2050, Los Angeles, California, 90067, Attention: Chief Executive Officer.
Each party hereto may from time to time change the address to
which notices to it are to be delivered or mailed hereunder by notice in writing
to the other party. Any notice mailed pursuant to this Agreement by the Company
or the Warrant Agent to the Holder shall be in writing and shall be mailed first
class, postage prepaid, or delivered to the Holder at its address on the books
of the Warrant Agent.
SECTION 13. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without giving
effect to principles of conflict of laws. The parties hereto agree to submit to
the jurisdiction of the Courts of the State of California in any action or
proceeding arising out of or relating to this Agreement.
SECTION 14. SUPPLEMENTS AND AMENDMENTS. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement in order to cure
any ambiguity or to correct or supplement any provision contained herein which
may be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrant and which shall not
adversely affect the interests of the Holder.
SECTION 15. 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 hereunder.
SECTION 16. MERGER OR CONSOLIDATION OF THE COMPANY. So long as the
Warrant remains outstanding, the Company will not merge or consolidate with or
into, or sell, transfer or lease all or substantially all of its property to,
any other corporation unless the successor or purchasing corporation, as the
case may be (if not the Company), shall expressly assume, by
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<PAGE> 18
supplemental agreement, the due and punctual performance and observance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company.
SECTION 17. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, and
the Holder any legal or equitable right, remedy or claim under this Agreement,
but this Agreement shall be for the sole and exclusive benefit of the Company
and the Holder.
SECTION 18. CAPTIONS. The captions of the Sections of this Agreement
have been inserted for convenience only and shall have no substantive effect.
SECTION 19. COUNTERPARTS. This Agreement may be executed in any number
of counterparts each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
* * *
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<PAGE> 19
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed as of the day, month and year first above written.
THE COMPANY:
THE HARVEY ENTERTAINMENT COMPANY THE WARRANT AGENT:
a California corporation
THE HARVEY ENTERTAINMENT COMPANY
a California corporation
By:
-----------------------------
Gary M. Gray By:
Chairman of the Board -------------------------------
Gary M. Gray
Chairman of the Board
THE WARRANT HOLDER: THE HARVEY ENTERTAINMENT COMPANY
a California corporation
ANTHONY J. SCOTTI (155,200 shares)
By:
-------------------------------
Signature Gary M. Gray
Chairman of the Board
Address: THE WARRANT HOLDER:
MICHAEL S. HOPE (38,800 shares)
THE WARRANT HOLDER:
LEONARD BREIJO (6,000 shares) Signature
Address:
Signature
Address:
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<PAGE> 20
EXHIBIT A
Warrant Certificate
Warrant No. __ ________ Shares
COMMON STOCK PURCHASE WARRANT
Void After 5:00 P.M.
Pacific Time on March 23, 2003
THIS CERTIFIES THAT, for value received, ____________, the registered
holder of this Common Stock Purchase Warrant (the "Warrant") or permitted
assigns (the "Holder"), is entitled to purchase from The Harvey Entertainment
Company, a California corporation (the "Company"), at any time until 5:00 p.m.
Pacific Time on March 23, 2003 (the "Expiration Date"), at the purchase price of
$12.75 per share (the "Warrant Price"), the number of shares of Common Stock of
the Company (the "Common Stock") which is equal to the number of Shares set
forth above. The number of shares purchasable upon exercise of this Warrant and
the Warrant Price per share shall be subject to adjustment from time to time as
set forth in the Warrant Agreement referred to below.
This Warrant is issued under and in accordance with a Warrant Agreement,
dated as of March 23, 1998, between the Company Agent and the Warrant Holder and
is subject to the terms and provisions contained in the Warrant Agreement, to
all of which the Holder of this Warrant by acceptance hereof consents. A copy of
the Warrant Agreement may be obtained for inspection by the Holder hereof upon
written request to the Company.
This Warrant may be exercised in whole or in part by presentation of
this Warrant with the Purchase Form on the reverse side hereof duly executed and
simultaneous payment of the Warrant Price (subject to adjustment) at the
principal office of the Company in Los Angeles, California. Payment of such
price shall be payable at the option of the Holder hereof in cash or by
certified or official bank check or wire transfer. Terms relating to exercise of
Warrant is set forth more fully in the Warrant Agreement.
This Warrant may be exercised in whole or in part. Upon partial
exercise, a Warrant Certificate for the unexercised portion shall be delivered
to the Holder. No fractional shares will be issued upon the exercise of this
Warrant but the Company shall pay the cash value of any fraction upon the
exercise of the Warrant. This Warrant is transferable only in limited
circumstances as described in this Warrant Agreement at the office of the
Company in Los Angeles, California, in the manner and subject to the limitations
set forth in the Warrant Agreement.
"THE SALE OF THE SECURITIES REPRESENTED HEREBY HAS NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS
<PAGE> 21
AMENDED (THE "ACT"). NO SALE OR OTHER DISPOSITION OR PLEDGE OF THESE
SECURITIES OR THE SECURITIES UNDERLYING THESE SECURITIES CAN BE EFFECTED
WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATING THERETO OR AN
AVAILABLE EXEMPTION FROM REGISTRATION."
The Holder hereof may be treated by the Company and all other persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company. Any notice to the contrary
notwithstanding, and until such transfer on which books, the Company may treat
the Holder hereof as the owner for all purposes.
This Warrant does not entitle any Holder hereof to any of the rights of
a stockholder of the Company.
THE HARVEY ENTERTAINMENT COMPANY
By:
-------------------------------
Gary M. Gray
Chairman of the Board
Attest
-------------------------------
Michael S. Hope
Interim Secretary
DATED: As of March 23, 1998
<PAGE> 22
EXHIBIT B
PURCHASE FORM
Mailing Address
- ------------------------------- -------------------------------
- ------------------------------- -------------------------------
- ------------------------------- -------------------------------
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_______________ shares of the stock provided for therein, and tenders herewith
payment of the purchase price in full in the form of cash or by cashier's check
in the amount of $______________ or as otherwise provided in the Warrant
Agreement.
The undersigned requests that certificates for such shares be issued in
the name of:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Please Print Name, Address and Social Security No.)
DATED: , ______
Name of Warrant Holder or Permitted Assignee:
- --------------------------------------------------------------------------------
Address:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Signature:
----------------------------------------------------------------------
Signature Guaranteed: Note: The above signature must correspond with the
name as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change
whatever, unless this Warrant has been assigned.
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<PAGE> 1
EXHIBIT 10.47
STOCK OPTION AGREEMENT
DIRECTOR
This Stock Option Agreement (the "Agreement") dated as of April 13, 1998
is entered into between THE HARVEY ENTERTAINMENT COMPANY, a California
corporation ("Company"), and Gary M. Gray ("Optionee"). This Option is granted
under, and is governed by, the Company's 1997 Stock Option Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of 50,000 shares of Company's common stock ("Common
Stock") at a price of $12.6875 per share. The Option granted hereunder is not
intended to qualify as an "Incentive Stock Option" within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof (the
"Expiration Date"), unless sooner terminated in accordance with the provisions
set forth herein or in the Plan;
(b) The Option is fully vested on the date hereof;
(c) If the Optionee's services as a director of the Company
terminates for any reason, the Option shall be exercisable only to the extent it
is exercisable on the date of termination and may thereafter be exercised by the
Optionee until and including the earliest to occur of (i) the date which is one
(1) year after termination and (ii) the Expiration Date.
(d) If the Optionee dies during the period when it may be
exercised, the Option may thereafter be exercised by the person or persons to
whom the Optionee rights under the Option shall pass by the Optionee's will or
by the laws of descent and distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for the Company,
of the right of the applicable person(s) to exercise the Option. Not less than
one hundred (100) shares may be purchased at any one time unless the number
purchased is the total number which may be purchased under the Option and in no
event may the Option be exercised with respect to fractional shares.
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto, as provided in the Plan.
<PAGE> 2
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable only by Optionee or the Optionee's guardian or legal
representative during his lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a court of competent
jurisdiction, by will or by the applicable laws of descent and distribution or
the executor or administrator of Optionee's estate, shall have the right to
exercise the Option, pursuant to the terms of this Agreement and the Plan.
Except as permitted by the preceding sentence, no option granted hereunder may
be transferred. assigned, pledged, hypothecated or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so transfer, assign, pledge,
hypothecate or otherwise dispose of any option granted hereunder. such option
and all rights thereunder shall immediately become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act or
applicable state securities law; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, Optionee shall submit a written
statement, in form satisfactory to counsel for the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
shares hereunder, or (y) is true and correct as of the date of any sale of any
such shares, as applicable. A legend to the foregoing effect shall be placed
upon any shares received upon exercise of this Option. As a further condition
precedent to any exercise of the Option, Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance of the shares and, in connection therewith, shall
execute any documents which the Board or any committee authorized by the Board
shall in its sole discretion deem necessary or advisable.
8. DELIVERY OF CERTIFICATES. Upon the exercise of the Option in whole or
in part, the Company shall deliver one or more certificates representing the
number of shares purchased against full payment therefor. The Company shall pay
all original issue or transfer taxes and all fees and expenses incident to such
delivery, except as otherwise provided in Section 3.2.
9. ADJUSTMENTS. In the event of any change in the outstanding Common
Stock by reason of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation,
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<PAGE> 3
combination, exchange of shares, liquidation, spin-off or other similar change
in capitalization, or any distribution to holders of Common Stock other than a
cash dividend, the number and class of shares available under this Plan, the
number and class of shares under each outstanding option and the purchase price
per share, shall be appropriately adjusted by the Committee, such adjustments to
be made in the case of outstanding options without a change in the aggregate
purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
13. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE HARVEY ENTERTAINMENT COMPANY,
a California corporation
By:
-------------------------------
Name:
Title:
AGREED AND ACCEPTED:
- -------------------------------
GARY M. GRAY (50,000 SHARES)
-3-
<PAGE> 1
EXHIBIT 10.48
STOCK OPTION AGREEMENT
SERVICES
This Stock Option Agreement (the "Agreement") dated as of April 13, 1998
is entered into between THE HARVEY ENTERTAINMENT COMPANY, a California
corporation ("Company"), and Anthony J. Scotti ("Optionee"). This Option is
granted under, and is governed by, the Company's 1997 Stock Option Plan (the
"Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of 38,800 shares of Company's common stock ("Common
Stock") at a price of $12.6875 per share. The Option granted hereunder is not
intended to qualify as an "Incentive Stock Option" within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof (the
"Expiration Date"), unless sooner terminated in accordance with the provisions
set forth herein or in the Plan;
(b) The Option is fully vested on the date hereof;
(c) If the Optionee's employment by, or services on behalf of,
the Company terminates for any reason other than good cause, the Option shall be
exercisable only to the extent it is exercisable on the date of termination and
may thereafter be exercised by the Optionee until and including the earliest to
occur of (i) the date which is one (1) year after termination and (ii) the
Expiration Date.
(d) If the Optionee's employment by, or services on behalf of,
the Company terminates for good cause, the Option shall terminate automatically
on the effective date of the Optionee's termination.
(e) If the Optionee dies during the period when it may be
exercised, the Option may thereafter be exercised by the person or persons to
whom the Optionee rights under the Option shall pass by the Optionee's will or
by the laws of descent and distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for the Company,
of the right of the applicable person(s) to exercise the Option. Not less than
one hundred (100) shares may be purchased at any one time unless the number
purchased is the total number which may be purchased under the Option and in no
event may the Option be exercised with respect to fractional shares.
<PAGE> 2
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto, as provided in the Plan.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable only by Optionee or the Optionee's guardian or legal
representative during his lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a court of competent
jurisdiction, by will or by the applicable laws of descent and distribution or
the executor or administrator of Optionee's estate, shall have the right to
exercise the Option, pursuant to the terms of this Agreement and the Plan.
Except as permitted by the preceding sentence, no option granted hereunder may
be transferred. assigned, pledged, hypothecated or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so transfer, assign, pledge,
hypothecate or otherwise dispose of any option granted hereunder. such option
and all rights thereunder shall immediately become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act or
applicable state securities law; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, Optionee shall submit a written
statement, in form satisfactory to counsel for the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
shares hereunder, or (y) is true and correct as of the date of any sale of any
such shares, as applicable. A legend to the foregoing effect shall be placed
upon any shares received upon exercise of this Option. As a further condition
precedent to any exercise of the Option, Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance of the shares and, in connection therewith, shall
execute any documents which the Board or any committee authorized by the Board
shall in its sole discretion deem necessary or advisable.
8. DELIVERY OF CERTIFICATES. Upon the exercise of the Option in whole or
in part, the
-2-
<PAGE> 3
Company shall deliver one or more certificates representing the number of shares
purchased against full payment therefor. The Company shall pay all original
issue or transfer taxes and all fees and expenses incident to such delivery,
except as otherwise provided in Section 3.2.
9. ADJUSTMENTS. In the event of any change in the outstanding Common
Stock by reason of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization, or any
distribution to holders of Common Stock other than a cash dividend, the number
and class of shares available under this Plan, the number and class of shares
under each outstanding option and the purchase price per share, shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding options without a change in the aggregate purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
13. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE HARVEY ENTERTAINMENT COMPANY,
a California corporation
By:
-------------------------------
Name:
Title:
-3-
<PAGE> 4
AGREED AND ACCEPTED:
/s/ Anthony J. Scotti
- -------------------------------
ANTHONY J. SCOTTI (38,800 SHARES)
-4-
<PAGE> 1
EXHIBIT 10.49
STOCK OPTION AGREEMENT
SERVICES
This Stock Option Agreement (the "Agreement") dated as of April 13, 1998
is entered into between THE HARVEY ENTERTAINMENT COMPANY, a California
corporation ("Company"), and Michael S. Hope ("Optionee"). This Option is
granted under, and is governed by, the Company's 1997 Stock Option Plan (the
"Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of 9,700 shares of Company's common stock ("Common
Stock") at a price of $12.6875 per share. The Option granted hereunder is not
intended to qualify as an "Incentive Stock Option" within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof (the
"Expiration Date"), unless sooner terminated in accordance with the provisions
set forth herein or in the Plan;
(b) The Option is fully vested on the date hereof;
(c) If the Optionee's employment by, or services on behalf of,
the Company terminates for any reason other than good cause, the Option shall be
exercisable only to the extent it is exercisable on the date of termination and
may thereafter be exercised by the Optionee until and including the earliest to
occur of (i) the date which is one (1) year after termination and (ii) the
Expiration Date.
(d) If the Optionee's employment by, or services on behalf of,
the Company terminates for good cause, the Option shall terminate automatically
on the effective date of the Optionee's termination.
(e) If the Optionee dies during the period when it may be
exercised, the Option may thereafter be exercised by the person or persons to
whom the Optionee rights under the Option shall pass by the Optionee's will or
by the laws of descent and distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for the Company,
of the right of the applicable person(s) to exercise the Option. Not less than
one hundred (100) shares may be purchased at any one time unless the number
purchased is the total number which may be purchased under the Option and in no
event may the Option be exercised with respect to fractional shares.
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the
-1-
<PAGE> 2
Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto, as provided in the Plan.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable only by Optionee or the Optionee's guardian or legal
representative during his lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a court of competent
jurisdiction, by will or by the applicable laws of descent and distribution or
the executor or administrator of Optionee's estate, shall have the right to
exercise the Option, pursuant to the terms of this Agreement and the Plan.
Except as permitted by the preceding sentence, no option granted hereunder may
be transferred. assigned, pledged, hypothecated or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so transfer, assign, pledge,
hypothecate or otherwise dispose of any option granted hereunder. such option
and all rights thereunder shall immediately become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act or
applicable state securities law; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, Optionee shall submit a written
statement, in form satisfactory to counsel for the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
shares hereunder, or (y) is true and correct as of the date of any sale of any
such shares, as applicable. A legend to the foregoing effect shall be placed
upon any shares received upon exercise of this Option. As a further condition
precedent to any exercise of the Option, Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance of the shares and, in connection therewith, shall
execute any documents which the Board or any committee authorized by the Board
shall in its sole discretion deem necessary or advisable.
8. DELIVERY OF CERTIFICATES. Upon the exercise of the Option in whole or
in part, the Company shall deliver one or more certificates representing the
number of shares purchased against full payment therefor. The Company shall pay
all original issue or transfer taxes and all
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<PAGE> 3
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.2.
9. ADJUSTMENTS. In the event of any change in the outstanding Common
Stock by reason of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization, or any
distribution to holders of Common Stock other than a cash dividend, the number
and class of shares available under this Plan, the number and class of shares
under each outstanding option and the purchase price per share, shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding options without a change in the aggregate purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
* * *
13. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE HARVEY ENTERTAINMENT COMPANY,
a California corporation
By:
-------------------------------
Name:
Title:
AGREED AND ACCEPTED:
-3-
<PAGE> 4
/s/ Michael S. Hope
- -------------------------------
MICHAEL S. HOPE (9,700 SHARES)
-4-
<PAGE> 1
EXHIBIT 10.50
STOCK OPTION AGREEMENT
SERVICES
This Stock Option Agreement (the "Agreement") dated as of April 13, 1998
is entered into between THE HARVEY ENTERTAINMENT COMPANY, a California
corporation ("Company"), and Leonard Breijo ("Optionee"). This Option is granted
under, and is governed by, the Company's 1997 Stock Option Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants to Optionee the option
("Option") to purchase upon, and subject to, the terms and conditions set forth
herein, all or any part of 1,500 shares of Company's common stock ("Common
Stock") at a price of $12.6875 per share. The Option granted hereunder is not
intended to qualify as an "Incentive Stock Option" within the meaning of Section
422A of the Internal Revenue Code of 1986, as amended.
2. TERM AND EXERCISABILITY.
(a) The term of the Option granted hereunder shall commence as of
the date hereof and shall terminate on the tenth anniversary hereof (the
"Expiration Date"), unless sooner terminated in accordance with the provisions
set forth herein or in the Plan;
(b) The Option is fully vested on the date hereof;
(c) If the Optionee's employment by, or services on behalf of,
the Company terminates for any reason other than good cause, the Option shall be
exercisable only to the extent it is exercisable on the date of termination and
may thereafter be exercised by the Optionee until and including the earliest to
occur of (i) the date which is one (1) year after termination and (ii) the
Expiration Date.
(d) If the Optionee's employment by, or services on behalf of,
the Company terminates for good cause, the Option shall terminate automatically
on the effective date of the Optionee's termination.
(e) If the Optionee dies during the period when it may be
exercised, the Option may thereafter be exercised by the person or persons to
whom the Optionee rights under the Option shall pass by the Optionee's will or
by the laws of descent and distribution.
3. EXERCISE OF OPTION.
3.1 NOTICE. The Option shall be exercised by written notice
delivered to the Company stating the number of shares with respect to which the
Option is being exercised, together with the form of payment allowed in the
Plan. If the Option is being exercised by any person(s) other than Optionee,
notice shall be accompanied by proof, satisfactory to counsel for the Company,
of the right of the applicable person(s) to exercise the Option. Not less than
one hundred (100) shares may be purchased at any one time unless the number
purchased is the total number which may be purchased under the Option and in no
event may the Option be exercised with respect to fractional shares.
3.2 WITHHOLDING TAX. Optionee may not exercise all or any portion
of the
-1-
<PAGE> 2
Option granted hereunder unless and until Optionee shall have made all
arrangements which the Company and its counsel shall deem necessary to satisfy
the Company's federal and state income tax withholding obligations, including
paying to the Company the amount of any taxes which the Company may be required
to withhold with respect thereto, as provided in the Plan.
4. NONTRANSFERABILITY; DISABILITY OR DEATH OF OPTIONEE. The Option shall
not be transferable except by will or by the laws of descent and distribution
and shall be exercisable only by Optionee or the Optionee's guardian or legal
representative during his lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a court of competent
jurisdiction, by will or by the applicable laws of descent and distribution or
the executor or administrator of Optionee's estate, shall have the right to
exercise the Option, pursuant to the terms of this Agreement and the Plan.
Except as permitted by the preceding sentence, no option granted hereunder may
be transferred. assigned, pledged, hypothecated or otherwise disposed of
(whether by operation of law or otherwise) or be subject to execution,
attachment or similar process. Upon any attempt to so transfer, assign, pledge,
hypothecate or otherwise dispose of any option granted hereunder. such option
and all rights thereunder shall immediately become null and void.
5. PRIVILEGES OF STOCK OWNERSHIP. Optionee shall have no rights as a
stockholder with respect to the Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for dividends or other
rights for which the record date is prior to the date the stock certificates are
issued.
6. NOTIFICATION OF SALE. Subject to Section 7 hereof, Optionee agrees
that Optionee, or any person acquiring shares upon exercise of the Option, will
notify the Company not more than five (5) days after any sale or other
disposition of such shares.
7. HOLDING OF STOCK AFTER EXERCISE OF OPTION. Optionee hereby represents
and covenants that (a) any share of Stock purchased upon exercise of the Option
will be purchased for investment and not with a view to the distribution thereof
within the meaning of the Securities Act of 1933, as amended (the "Securities
Act"), unless such purchase has been registered under the Securities Act or
applicable state securities law; (b) any subsequent sale of any such shares
shall be made either pursuant to an effective registration statement under the
Securities Act and any applicable state securities laws, or pursuant to an
exemption from registration under the Securities Act and such state securities
laws; and (c) if requested by the Company, Optionee shall submit a written
statement, in form satisfactory to counsel for the Company, to the effect that
such representation (x) is true and correct as of the date of purchase of any
shares hereunder, or (y) is true and correct as of the date of any sale of any
such shares, as applicable. A legend to the foregoing effect shall be placed
upon any shares received upon exercise of this Option. As a further condition
precedent to any exercise of the Option, Optionee shall comply with all
regulations and requirements of any regulatory authority having control of or
supervision over the issuance of the shares and, in connection therewith, shall
execute any documents which the Board or any committee authorized by the Board
shall in its sole discretion deem necessary or advisable.
8. DELIVERY OF CERTIFICATES. Upon the exercise of the Option in whole or
in part, the Company shall deliver one or more certificates representing the
number of shares purchased against full payment therefor. The Company shall pay
all original issue or transfer taxes and all
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<PAGE> 3
fees and expenses incident to such delivery, except as otherwise provided in
Section 3.2.
9. ADJUSTMENTS. In the event of any change in the outstanding Common
Stock by reason of any stock split, stock dividend, recapitalization,
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization, or any
distribution to holders of Common Stock other than a cash dividend, the number
and class of shares available under this Plan, the number and class of shares
under each outstanding option and the purchase price per share, shall be
appropriately adjusted by the Committee, such adjustments to be made in the case
of outstanding options without a change in the aggregate purchase price.
10. SUCCESSORS. This Agreement shall be binding upon and inure to the
benefit of any successor or successors of the Company and any person or persons
who shall, upon the death of Optionee, acquire any rights hereunder.
11. NOTICES. Any notice to the Company provided for in this Agreement
shall be addressed to it in care of its Chief Financial Officer as its main
office, and any notice to Optionee shall be addressed to Optionee's address on
file with the Company or a subsidiary corporation, or to such other address as
either may designate to the other in writing. Any notice shall be deemed to be
duly given if and when enclosed in a properly sealed enveloped and addressed as
stated above, and deposited. postage prepaid, in a post office or branch post
office regularly maintained by the United States government. In lieu of giving
notice by mail as aforesaid, any written notice under this Agreement may be
given to Optionee in person, and to the Company by personal delivery to its
Chief Financial Officer.
12. GOVERNING LAW. This Agreement shall be governed by, and interpreted
in accordance with, the internal laws of the State of California.
* * *
13. COUNTERPARTS. This Agreement may be executed in counterparts each of
which shall be deemed an original and which together shall constitute one and
the same instrument.
Please confirm your agreement to the foregoing by signing below where
indicated.
THE HARVEY ENTERTAINMENT COMPANY,
a California corporation
By:
-------------------------------
Name:
Title:
AGREED AND ACCEPTED:
-3-
<PAGE> 4
/s/ Leonard Breijo
- -------------------------------
LEONARD BREIJO (1,500 SHARES)
-4-
<PAGE> 1
EXHIBIT 10.51
CONFIDENTIAL SETTLEMENT
TERMINATION AND CONSULTING AGREEMENT
AND MUTUAL GENERAL RELEASE
This Termination and Consulting Agreement and Mutual General Release
(this "Agreement") is entered into as of the 17th day of April, 1998, by and
between Gregory M. Yulish, an individual ("Yulish"), JEM Entertainment, Inc., a
California corporation ("JEM"), and Jane McGregor, an individual ("Executive,"
and, together with JEM, "McGregor") on the one hand, and The Harvey
Entertainment Company (the "Company") on the other, with reference to the
following facts:
A. WHEREAS, on April 17, 1995, Yulish entered into an amended employment
agreement with Company (the "Yulish Employment Agreement"); and
B. WHEREAS, Company has entered into a series of Letter Agreements with
JEM, among others, those dated September 10, 1997 and March 5, 1998 for the
services of Executive (collectively, the "McGregor Agreements"). (The Yulish
Employment Agreement and the McGregor Agreements are collectively the
"Yulish-McGregor Agreements.") The McGregor Agreements contemplate a continued
profit participation or interest by JEM and/or Executive in certain
entertainment projects developed or to be developed by Executive and/or the
Company; and
C. WHEREAS, Yulish and Executive are husband and wife; and
D. WHEREAS, the Yulish Employment Agreement terminated on April 17, 1998
and the McGregor Agreements were terminated in April 1998; and
E. WHEREAS, the parties hereto desire to resolve all matters with
respect to the Yulish-McGregor Agreements, and all other matters covered herein.
F. NOW, THEREFORE, the parties by this Agreement wish, among other
things, (a) to terminate and extinguish any and all obligations of the parties
under or in any way related to the Yulish-McGregor Agreements and render the
Yulish-McGregor Agreements of no further force or effect except as provided
herein, (b) to confirm the termination of the Yulish Employment Agreement, and
(c) to release any and all other claims, rights or obligations (whether past,
present or future) of whatever kind or nature by, between or among the parties
hereto through the date of this Agreement, except as set forth herein.
In consideration of the agreements herein contained, the parties hereto
agree as follows:
1. CLOSING PLACE AND DATE. The parties hereto contemplate the
execution of this Agreement as soon as practicable on the "Closing Date." The
parties intend the effective date of this Agreement to be as of April 17, 1998.
<PAGE> 2
2. PAYMENTS TO YULISH AND MCGREGOR.
(a) In consideration of Yulish's performance of the
Consulting Services (as hereinafter defined) and for the
release of the Company's obligations under the
Yulish-McGregor Agreements, upon the execution of this
Agreement the Company shall (i) pay to JEM Seventy-Five
Thousand Dollars ($75,000) and (ii) reimburse
outstanding business expenses incurred by Yulish and
Executive on behalf of the Company through the
termination date of the Yulish Employment Agreement and
McGregor Agreements, respectively, to the extent such
expenses are properly documented on the expense reports
of Yulish and Executive.
(b) The Company shall pay to Yulish One Hundred Dollars
($100.00) per hour for services requested and performed
during the Consulting Period (as hereinafter defined).
Time that Yulish spends providing Consulting Services to
the Company shall be aggregated on a daily basis and
paid in hourly increments. Payment shall be made every
two weeks in accordance with the Company's customary
practices for time submitted at least 48 hours prior to
the payment date.
(c) The Company shall pay to Yulish $14,218 on May 1, 1998,
less applicable withholding, as compensation for all
accrued vacation through April 17, 1998.
Yulish and McGregor shall be exclusively liable for the payment of any
federal and state income and the employee share of any employment taxes which
may be due as the result of the payments to be made by the Company hereunder,
and shall indemnify and hold the Company harmless from any failure by them to
pay such taxes.
3. YULISH-MCGREGOR AGREEMENTS. The Yulish-McGregor Agreements are
terminated as of April 17, 1998 and are of no further force or effect. Except as
set forth below, McGregor further agrees and hereby releases any and all claims,
profit participations, rights of authors or creators, rights to fees or credits,
and any and all other rights which may have existed with respect to the various
entertainment projects covered by the McGregor Agreements, all of which shall be
the sole and exclusive property of the Company; provided, however, that the
Company releases any rights it may have had in the following projects: (i) Space
Cadets, (ii) Braveheart and (iii) Beany and Cecil. McGregor further agrees to
execute and acknowledge such further instruments and agreements as may be
necessary to more fully vest in the Company the rights referred to herein and
the release of any such claims by McGregor.
4. CONSULTING PERIOD. During the period between April 17, 1998
through October 17, 1998 (the "Consulting Period"), Yulish shall be available
for up to 5 hours (10 hours through May 1, 1998) per week (in one hour minimums)
to consult with the Company and its advisors on such matters as the Company may
reasonably request (the "Consulting Services"). The Company shall provide Yulish
with reasonable advance telephonic notice of its needs for his
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<PAGE> 3
services. (The Company is not required to request a minimum level of consulting
services.) Yulish agrees and acknowledges that, during the Consulting Period and
with respect to the Consulting Services, he is and shall at all times be acting
as an independent contractor and not an employee of Company. Yulish agrees to
comply with all of the reasonable and customary personnel policies of Company
not inconsistent herewith. The Consulting Services shall be generally performed
at the principal offices of Company, in Century City, California, or by
telephonic consultation. In addition, the Consulting Services may be performed
by Yulish from time to time on a temporary travel basis (consistent with the
Company's past practice and upon 72 hours' advance notice) at such other
locations as Company shall reasonably request consistent with its reasonable
business needs. (Yulish may bill for travel time.) Yulish agrees to perform the
Consulting Services in a competent and professional manner. Yulish shall report
to the Chief Financial Officer of the Company. Yulish agrees that he will be
generally available during the six-month period ending October 17, 1998, and
will coordinate with the Chief Financial Officer of the Company for mutually
convenient times to be available.
5. STOCK OPTIONS. Yulish acknowledges that but for the provisions
of this Agreement, an option to purchase 16,666 shares of the Company's Common
Stock (the "Option") granted to him under the Company's 1994 Stock Option Plan
which was scheduled to vest on April 25, 1998 would not vest due to the
termination of the Yulish Employment Agreement prior to such date. The Company
has agreed that for so long as Yulish continues to be available to perform the
Consulting Services through October 17, 1998, Yulish shall continue to be
eligible for vesting and the continued exercise of such Option and all other
options in his name. Furthermore, the Company agrees that the stock option
floor, i.e., the requirement that the shares of the Company's Common Stock trade
at in excess of $12.00 for a period of fifteen (15) days before exercise, is
deleted from the Option, and the Option, which will fully vest on April 25, 1998
in accordance with its terms, may be exercised by Yulish in accordance with its
terms.
6. EXPENSE REIMBURSEMENT. Upon presentation to Company of
customary documentation, Yulish will be entitled to reimbursement of his
reasonable and customary business expenses incurred on behalf of Company or
Company's affiliates. The Company will advance significant travel costs required
during the Consulting Period.
7. OTHER PROVISIONS. Yulish shall be entitled to COBRA benefits
commencing as of April 17, 1998. The Company shall use its best efforts to amend
its profit sharing plan to provide for the distribution to Yulish of any amounts
therein vested in Yulish's name. Yulish agrees to assume the lease of the
Company car currently used by him a Mercedes S320 and to indemnify and hold the
Company harmless from all costs and expenses incurred with respect to such lease
and such automobile. Yulish agrees to use his best efforts to have the lease
assigned to him and placed in his name and, lacking such assignment by May 5,
1998, to provide the Company with evidence of insurance showing that the Company
is an additional named insured on the leased automobile. Yulish agrees to
provide to the Company, by May 1, 1998, a list of all computers and related
equipment, fax machines, television and audio visual equipment, telephones and
other assets of the Company which are in his possession and the Company and
Yulish shall either agree on a sale price for Yulish to buy such equipment, or
Yulish shall return all of such equipment to the Company on or before May 5,
1998. Yulish and
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<PAGE> 4
McGregor agree to return to Company all of its proprietary documents, files, and
business information and confirm to the Company that they have destroyed all
Company credit cards, parking cards and office keys.
8. CONFIDENTIALITY. Yulish and McGregor both agree that their
services to the Company have brought them into close contact with many
confidential affairs of Company and its affiliates, including information about
costs, profits, markets, sales, products, key personnel and other business
affairs and methods and other information not readily available to the public,
and plans for future development. In recognition of the foregoing, Yulish and
McGregor covenant and agree to keep secret and not use for their benefit all
material confidential matters of Company and its affiliates which are not
otherwise in the public domain and will not disclose them to anyone outside of
Company or its affiliates, and will not use such information in any manner
except on behalf of the Company. Yulish and McGregor acknowledge that their
breach of paragraph 8 of this agreement will cause irreparable damage to Company
for which legal remedies will be inadequate and agree that, in the event of such
breach, Company will have the right to seek and obtain (in addition to any
available legal remedies) injunctive and other equitable relief from a court of
competent jurisdiction to prevent any further or continued breach of this
paragraph.
9. ALLEGED BREACHES AND CURE. The Company may seek reimbursement
from Yulish and McGregor of amounts paid pursuant to Section 2 only for the
material breach of any covenant, condition, agreement or term of this Agreement,
and only if Company shall have given written notice to Yulish and McGregor
specifying the claimed cause or breach and, provided such breach is curable,
Yulish and McGregor fails to correct the claimed breach or fails to alter the
objectional pattern of conduct specified in the applicable written notice as
soon as practical thereafter but no later than five (5) days after receipt of
the applicable notice. However, in no event shall a breach of the provisions of
Section 8 be subject to cure.
10. MUTUAL GENERAL RELEASES AND WAIVER OF CIVIL CODE SECTION
1542. Yulish and McGregor on the one hand, and Company, on the other, on behalf
of themselves and their respective predecessors, successors and assigns and
their respective officers, directors, employees, representatives, and
shareholders do hereby remise, release and forever discharge the other and their
respective predecessors, successors and assigns and, in the case of Yulish and
McGregor, release hereunder the officers, directors, shareholders, agents,
employees, representatives, attorneys of the Company, and of all affiliated
parent or subsidiary corporations or divisions and each of them (the "Related
Parties"), of and from any and all claims, rights, debts, liabilities, demands,
obligations, promises, acts, agreements, costs, expenses (all of the foregoing
being referred to collectively as the "Claims and Expenses") (including, but not
limited to, unknown Claims and Expenses through and including the date hereof
including, without limitation, any and all Claims and Expenses in any way based
on, arising out of or related to the Yulish-McGregor Agreements or Yulish's or
McGregor's employment with the Company) as well as any claim not set forth
herein for severance pay, bonus, sick leave, holiday pay, vacation pay, life
insurance, health and medical insurance or any other fringe benefit, workers'
compensation or disability under Title VII of the Civil Rights Act of 1964, the
Americans with Disabilities Act, or the California Fair Employment and Housing
Act, PROVIDED, HOWEVER,
-4-
<PAGE> 5
that this general release is not intended to and shall not be construed as a
release of any rights, obligations or warranties of the parties under this
Agreement, nor shall Yulish, McGregor, the Company or the Related Parties be
released for prior conduct constituting fraud or breach of fiduciary duty.
Said parties, and each of them, expressly waive and relinquish
all rights and benefits under Section 1542 of the Civil Code of California,
which reads as follows:
"1542. Extent of General Release.
A general release does not extend to claims which the creditor
does not know or suspect to exist in his favor at the time of
executing the release, which if known by him must have materially
affected his settlement with the debtor."
Said parties, and each of them, acknowledge that they, or any of
them, may hereafter discover facts different from or in addition to those they,
or any of them, now know or believe to be true with respect to the Claims and
Expenses herein released and agree that this Agreement shall be and remain
effective in all respects notwithstanding such different or additional facts. It
is the intention hereby fully, finally and forever to settle and release all
Claims and Expenses which do now exist, may exist or heretofore have existed
between Yulish and McGregor on the one hand, and Company (or any of its
predecessors in interest in the Yulish-McGregor Agreements) on the other. In
furtherance of such intention, among other things, the releases herein given
shall be and remain in full force and effect as full and complete mutual general
releases to the full extent of their terms and the Yulish Employment Agreement
and McGregor Agreements shall be and remain of no further force or effect
notwithstanding the discovery or existence of any such additional or different
claims or facts relative thereto and notwithstanding the breach of any terms or
conditions of this Agreement.
Furthermore, notwithstanding this release, Yulish shall be
entitled to the continued benefit of all contractual and statutory
indemnification agreements provided by the Company in accordance with their
terms.
11. REPRESENTATIONS, WARRANTIES AND INDEMNITIES.
(a) Each party hereto represents and warrants that it has
the full right and authority to enter into this
Agreement and that the officer or representative (if
any) of each party executing this Agreement on its
behalf has the full right and authority to execute this
Agreement and to fully bind such party hereto, and that
this Agreement represents the valid and binding
agreement of each such party enforceable in accordance
with its terms. Yulish and Executive each represent and
warrant to the Company that they are under the age of 40
years old.
(b) Each party represents, warrants and agrees as follows:
-5-
<PAGE> 6
(i) Such party has received independent legal advice
with respect to the advisability of making this
Agreement;
(ii) Such party (nor any officer, agent, employee,
partner, representative or attorney of or any
party) has not made any statement,
representation or promise, other than as set
forth herein, to any other party in entering
into this Agreement which has been relied upon
by any other party (or any officer, agent,
employee, partner, representative or attorney
for another party) in entering into or executing
this Agreement;
(iii) Such party has made such investigation of the
facts pertaining to this Agreement and of all
other matters pertaining hereto as it deems
necessary; and
(iv) Such party has not assigned or transferred to
any person not a party to this Agreement any
released matter or any part or portion thereof
and each shall defend, indemnify and hold
harmless the other from and against any claim
(including the payment of attorneys' fees and
costs actually incurred whether or not
litigation is commenced) based on or in
connection with or arising out of any such
assignment or transfer made, purported or
claimed.
12. NOTICES. Any notice under this Agreement shall not be
effective as such unless addressed as set forth below and mailed by U.S.
certified mail, return receipt requested, postage prepaid, or by telecopy or by
overnight delivery service and not otherwise. Notices shall be effective three
business days after mailing, or upon receipt if sent by telecopy or overnight
delivery service.
If To Company: The Harvey Entertainment Company
1999 Avenue of the Stars, Suite 2050
Los Angeles, CA 90067
Attention: Chief Financial Officer
Facsimile: 310/789-1992
with a copy toSidley & Austin
555 West Fifth Street, 40th Floor
Los Angeles, CA 90013-1010
Attention: Gary J. Cohen, Esq.
Facsimile: 213/896-6600
If To Yulish or Executive: 3902 Peartree Place
Calabasas, CA 91302
Home Facsimile: 818/225-8936
-6-
<PAGE> 7
with a copy to: Troop Meisinger Steuber & Pasich
10940 Wilshire Boulevard, 8th Floor
Los Angeles, CA 90024-3915
Attention: Jon D. Meer, Esq.
Facsimile: 310/443-8511
13. INTEGRATION. This Agreement has been fully negotiated and
shall not be interpreted for or against either party. This Agreement and the
documents referenced and/or incorporated herein constitute an integration of the
entire understanding and agreement of the parties. Any representation, promise
or condition, whether written or oral, not specifically incorporated herein
shall not be binding upon any of the parties hereto and all parties acknowledge
that they have not relied, in entering into this Agreement, upon any
representations, promises or conditions not specifically set forth herein.
14. SURVIVAL. All representations, warranties, covenants,
agreements and acknowledgments made by the parties herein shall be considered to
have been relied upon by the parties hereto and shall survive the execution,
performance and delivery of this Agreement and all other documents contemplated
herein.
15. SUCCESSORS AND ASSIGNS. This Agreement, including, without
limitation, the representations, warranties, covenants, agreements,
acknowledgments and indemnities contained herein, a) shall inure to the benefit
of and be enforceable by the respective parties hereto, and Company, Yulish and
McGregor's successors and permitted assigns and permitted transferees, and b)
shall be binding upon and enforceable against the respective parties hereto, and
Company, Yulish and McGregor's successors, permitted assigns and permitted
transferees. Either party may assign its rights hereunder, provided that,
notwithstanding any such assignment, the obligations of such party shall remain
in full force and effect until fully performed and satisfied.
16. CONSTRUCTION AND ATTORNEYS' FEES. This Agreement shall be
construed and enforced in accordance with the laws of the State of California
where it is to be executed and delivered. Should any action (including an
arbitration proceeding) be brought by the parties hereto to enforce any
provision or right herein, the prevailing party shall be entitled to recover in
addition to any other relief, reasonable attorneys' fees and costs of litigation
(as determined under California Civil Code Section1717). Disputes hereunder
shall be exclusively settled by arbitration in Los Angeles to be heard and
determined by an arbitrator employed by Judicial Arbitration and Mediation
Services (JAMS) in accordance with the rules established by JAMS for such
proceedings. The parties shall bear their own attorneys' fees incurred in
negotiating and drafting this Agreement and all matters related thereto.
17. PUBLICITY. The parties hereto agree that they will not at any
time engage in any acts, make any statements, or bring any action which, either
directly or indirectly, disparages or results in the actual disparagement of the
other party. The parties hereto agree to cooperate in connection with any
publicity concerning this Agreement.
18. NO MODIFICATION OR AMENDMENT EXCEPT BY WRITING. No
modification,
-7-
<PAGE> 8
amendment or waiver of any of the provisions herein contained, nor any future
representation promises or conditions in connection with the subject matter
hereof, shall be binding upon any party hereto unless made in writing and signed
by such party or by a duly authorized officer or agent on behalf of such party.
19. SEVERABILITY. In the event that any one or more of the
provisions contained herein shall for any reason be held to be invalid illegal
or unenforceable, such provision shall not affect any other provisions of this
Agreement so long as the remaining pro visions can and are construed to fulfill
the intent of the parties as set forth herein as if such invalid, illegal or
unenforceable provision was not contained herein.
20. CAPTIONS AND HEADINGS; COUNTERPARTS. Captions and paragraph
headings used herein are for convenience only and are not a part of this
Agreement and shall not be used in construing it. This Agreement may be executed
in two or more counterparts, all of which when taken together shall constitute
the entire instrument. Photographic copies of such signed counterparts may be
used in lieu of the originals for any purpose.
21. NO ADMISSION. While this Agreement resolves all issues
between the Company, Yulish and McGregor, as well as any future effects of any
acts or omissions, it does not constitute an admission by Company or by Yulish
or McGregor of any violation of federal, state or local law, ordinance or
regulation or of any violation of the Company's policies or procedures or any
contract or of any liability or wrongdoing whatsoever. Neither this Agreement
nor anything in this Agreement shall be construed to be or shall be admissible
in any proceeding as evidence of liability or wrongdoing by the Company or
Yulish or McGregor.
22. FURTHER ASSURANCES. All parties agree to cooperate fully and
to execute any and all supplementary documents and to take all additional
actions that may be necessary or appropriate to give full force to the basic
terms and intent of this Agreement and which are not inconsistent with its
terms. As required from time to time after the Consulting Period, Yulish agrees,
on an informal basis and subject to his availability, and for no fee so long as
the time involved is not material, to consult with Company regarding the status
or background of ongoing matters (including current or future litigation) for
which he had responsibility or substantial involvement during his employment
with Company.
23. ACKNOWLEDGMENT. YULISH AND MCGREGOR BOTH ACKNOWLEDGE THAT
THEY HAVE CAREFULLY READ, FULLY UNDERSTOOD AND VOLUNTARILY EXECUTED THIS
AGREEMENT. YULISH AND MCGREGOR BOTH UNDERSTAND THAT THIS IS A LEGAL DOCUMENT AND
THAT THEY HAVE PREVIOUSLY BEEN ADVISED THAT THEY MAY CONSULT WITH AN ATTORNEY
CONCERNING THEIR RIGHTS UNDER THIS AGREEMENT AND WITH THE COMPANY, AND THAT THEY
HAVE DONE SO.
* * *
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties have affixed their signatures on
the date set forth above.
"COMPANY" "YULISH"
THE HARVEY ENTERTAINMENT COMPANY
By: /s/ Michael S. Hope /s/ Gregory M. Yulish
------------------------------- -------------------------------
Michael S. Hope Gregory M. Yulish
Chief Financial Officer
Date:
"EXECUTIVE" "JEM"
JEM ENTERTAINMENT, INC.
/s/ Jane McGregor By: /s/ Jane McGregor
- ------------------------------- -------------------------------
Jane McGregor Jane McGregor
AGREED AS TO FORM: AGREED AS TO FORM:
Sidley & Austin Troop Meisinger Steuber & Pasich
By: /s/ Gary J. Cohen, Esq. By: /s/ Jon D. Meer, Esq.
------------------------------- -------------------------------
Gary J. Cohen, Esq. Jon D. Meer, Esq.
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 7,251
<SECURITIES> 0
<RECEIVABLES> 7,373
<ALLOWANCES> 658
<INVENTORY> 0
<CURRENT-ASSETS> 0<F1>
<PP&E> 1,074
<DEPRECIATION> 531
<TOTAL-ASSETS> 27,522
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,234
<TOTAL-LIABILITY-AND-EQUITY> 27,522
<SALES> 860
<TOTAL-REVENUES> 860
<CGS> 311
<TOTAL-COSTS> 311
<OTHER-EXPENSES> 1,800
<LOSS-PROVISION> 1,165
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (2,997)
<INCOME-TAX> 1,198
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> ($0.90)
<EPS-DILUTED> 0
<FN>
<F1>Unclassified Balance Sheet.
</FN>
</TABLE>
