SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended May 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-25308
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ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-3751702
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
<TABLE>
<CAPTION>
<S> <C>
c/o Bannon & Co., Inc., 202 North Canon Drive, Beverly Hills, California 90210
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(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code (310) 276-7929
---------------------------
Former name, former address and former fiscal year, if
changed since last report.
Indicate by check [X] whether the registrant (1) has filed all
reports required to be filed by Sections 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: 2,600,000 shares
of the Company's Common Stock, $.001 par value, were outstanding as of May 31,
1996.
<PAGE>
ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
Index to May 31, 1996 Form 10-Q
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Page
----
Part I -- Financial Information
Item 1. Financial Statements (Unaudited)
Balance sheets...................................................4
Statements of operations.........................................5
Statements of common stock,
common stock subject to possible
conversion, preferred stock, additional
paid-in capital and retained earnings (deficit)................6
Statements of cash flows.........................................7
Summary of Accounting Policies...................................8
Notes to financial statements...................................10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................15
Part II -- Other Information
Item 1. Legal Proceedings...............................................17
Item 2. Changes in Securities...........................................17
Item 3. Defaults Upon Senior Securities.................................17
Item 4. Submission of Matters to a Vote of Security Holders.............17
Item 5. Other Information...............................................17
Item 6. Exhibits and Reports on Form 8-K................................17
Signatures......................................................19
2
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements
3
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Balance Sheets
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<TABLE>
<CAPTION>
May 31,
November 30, 1996
1995 (unaudited)
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<S> <C> <C>
Assets
Cash and cash equivalents $ 501,763 $ 239,687
U.S. Government security deposited in Trust Fund and accrued
interest thereon (Note 1) 10,667,644 10,930,166
Prepaid expenses and other current assets 70,633 23,832
Deferred merger costs (Note 7) - 257,880
Organization costs, less accumulated amortization of $5,820 and
$17,460 32,982 21,342
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$11,273,022 $11,472,907
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Liabilities and Stockholders' Equity
Accrued expenses and taxes $ 96,722 $ 222,861
Commitment (Note 4)
Common stock, subject to possible conversion, 419,790 shares at
conversion value (Note 1) 2,132,462 2,184,940
Common stock, $.001 par value - shares authorized 20,000,000;
outstanding 2,600,000 for each period (which includes 419,790
shares subject to possible conversion) (Notes 2 and 6) 2,180 2,180
Additional paid-in capital 9,047,741 9,047,741
Retained earnings (deficit) accumulated during the development
stage (6,083) 15,185
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$11,273,022 $11,472,907
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See accompanying summary of accounting policies
and notes to financial statements.
</TABLE>
4
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Statements of Operations
(Unaudited)
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<TABLE>
<CAPTION>
Period
Three months ended Six months ended December 9,
May 31, May 31, 1993
---------------------------------------- ----------------------------------- (inception)
to May 31,
1995 1996 1995 1996 1996
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<S> <C> <C> <C> <C> <C>
Income:
Interest $ 161,179 $ 137,472 $ 161,179 $ 284,981 $760,065
- ------------------------------------------------------------------------------------------------------------------------------
Expenses:
General and administrative
expenses 36,931 35,101 74,551 61,175 199,970
Insurance 27,300 23,400 27,300 46,800 120,900
Occupancy (Note 4) 15,000 15,000 15,000 30,000 75,667
Amortization of financing
costs, debt discount
and organization costs 1,940 5,820 7,107 11,640 48,460
State franchise taxes 7,500 4,500 9,433 10,920 29,353
Interest (Note 3) - - 3,569 - 16,069
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Total expenses 88,671 83,821 136,960 160,535 490,419
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Net income before
taxes on income 72,508 53,651 24,219 124,446 269,646
Taxes on income:
Federal - 16,000 - 38,000 77,000
State - 6,200 - 12,700 32,700
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Net income for the period $ 72,508 $ 31,451 $ 24,219 $ 73,746 $159,946
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Net income per share $ .03 $ .01 $ .02 $ .03
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Weighted average common
shares outstanding 2,600,000 2,600,000 1,584,615 2,600,000
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See accompanying summary of accounting policies
and notes to financial statements.
</TABLE>
5
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Statements of Common Stock, Common Stock Subject to Possible Conversion,
Preferred Stock, Additional Paid-In Capital and Retained Earnings (Deficit)
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Period December 9, 1993 (inception) to May 31, 1996
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<TABLE>
<CAPTION>
Common stock, subject
Common stock to possible conversion Preferred stock
------------------- ------------------------ -------------------
Number Number Number
of shares Amount of shares Amount of shares Amount
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 9, 1993 (inception) - $ - - $ - - $ -
Original issuance of common stock 500,000 500 - - - -
Issuance of warrants to purchase common
stock - - - - - -
Net loss for the period - - - - - -
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Balance, November 30, 1994 500,000 500 - - - -
Sale of 2,100,000 units, net of underwriting
discount and offering expenses 1,680,210 1,680 419,790 2,040,179 - -
Accretion of conversion value of common
stock - - - 92,283 - -
Net income for the year - - - - - -
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Balance, November 30, 1995 2,180,210 2,180 419,790 2,132,462 - -
Accretion of conversion value of common
stock (unaudited) - - - 52,478 - -
Net income for the period (unaudited) - - - - - -
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Balance, May 31, 1996 (unaudited) 2,180,210 $2,180 419,790 $2,184,940 - $ -
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</TABLE>
<TABLE>
<CAPTION>
Retained
earnings
(deficit)
accumulated
Additional during the
paid-in development
capital stage
- ------------------------------------------------------------------------------------
<S> <C> <C>
Balance, December 9, 1993 (inception) $ - $ -
Original issuance of common stock 24,500 -
Issuance of warrants to purchase common
stock 15,000 -
Net loss for the period - (45,815)
- ------------------------------------------------------------------------------------
Balance, November 30, 1994 39,500 (45,815)
Sale of 2,100,000 units, net of underwriting
discount and offering expenses 9,008,241 -
Accretion of conversion value of common
stock - (92,283)
Net income for the year - 132,015
- ------------------------------------------------------------------------------------
Balance, November 30, 1995 9,047,741 (6,083)
Accretion of conversion value of common
stock (unaudited) - (52,478)
Net income for the period (unaudited) - 73,746
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Balance, May 31, 1996 (unaudited) $9,047,741 $ 15,185
- ------------------------------------------------------------------------------------
</TABLE>
See accompanying summary of accounting policies
and notes to financial statements.
6
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Statements of Cash Flows
(Unaudited)
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<TABLE>
<CAPTION>
Period
Six months ended December 9,
May 31, 1993 (inception)
--------------------------- to May 31,
1995 1996 1996
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<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 24,219 $ 73,746 $ 159,946
- ---------------------------------------------------------------------------------------------------------------------
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization 7,107 11,640 48,460
Decrease (increase) in prepaid expenses (118,100) 46,801 (23,832)
Decrease in accrued interest on notes payable (12,500) - -
Increase in accrued expenses and taxes 93,141 126,139 222,861
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Total adjustments (30,352) 184,580 247,489
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Net cash provided by operating activities (6,133) 258,326 407,435
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Cash flows from investing activities:
U.S. Government security deposited in Trust Fund
and accrued interest thereon (10,366,053) (262,522) (10,930,166)
Deferred merger costs - (257,880) (257,880)
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Net cash used in investing activities (10,366,053) (520,402) (11,188,046)
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Cash flows from financing activities:
Proceeds from notes payable and issuance of warrants - - 150,000
Proceeds from public offering of 2,100,000 units, net
of underwriting discount and offering expenses 11,050,100 - 11,050,100
Repayment of notes payable (150,000) - (150,000)
Proceeds from sale of shares of common stock to
founding stockholders - - 25,000
Deferred registration and financing costs 161,808 - (16,000)
Organization costs (38,802) - (38,802)
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Net cash provided by financing activities 11,023,106 - 11,020,298
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Net increase (decrease) in cash and cash equivalents 650,920 (262,076) 239,687
Cash and cash equivalents, beginning of period 35,062 501,763 -
- ---------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents, end of period $ 685,982 $ 239,687 $ 239,687
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Supplemental disclosures:
Cash paid for:
Interest $ 16,069 $ - $ 16,069
Income taxes 1,465 - 61,690
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See accompanying summary of accounting policies
and notes to financial statements.
</TABLE>
7
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Summary of Accounting Policies
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Income Taxes The Company follows Statement of Financial Accounting
Standards No. 109 ("SFAS No. 109"), "Accounting for
Income Taxes". SFAS No. 109 is an asset and liability
approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax
consequences of events that have been recognized in
the Company's financial statements or tax returns.
Organization Costs Organization costs are being amortized over 60 months.
Net Income Per Share Net income per common share is computed on
the basis of the weighted average number
of common shares outstanding during the period,
including common stock equivalents (unless
anti-dilutive) which would arise from the exercise of
stock warrants and options.
Cash Equivalents For purposes of the statements of cash flows,
the Company considers all highly liquid debt
instruments purchased with a maturity of three months
or less to be cash equivalents.
Trust Fund U.S. Government security deposited in Trust Fund at
November 30, 1995 represents a U.S. Treasury Bill
purchased on November 16, 1995 and maturing on
February 15, 1996. The cost of the security was
$10,643,367. U.S. Government security deposited in
Trust Fund at May 31, 1996 represents a U.S. Treasury
Bill purchased on May 16, 1996 and maturing on July
11, 1996. The cost of the security was $10,906,232.
Use of Estimates The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make assumptions that affect the
reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the
date of the financial statements and the reported
amounts of revenues and expenses during the reporting
period. Actual results could differ from those
estimates.
8
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Summary of Accounting Policies
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Interim Results (unaudited) The accompanying balance sheet as of
May 31, 1996 and the related statements of
operations, common stock, common stock
subject to possible conversion, preferred
stock, additional paid-in capital, retained
earnings (deficit) and cash flows for the
periods ending May 31, 1995 and 1996 are
unaudited. In the opinion of management,
these financial statements have been
prepared on the same basis as the audited
financial statements and include all
adjustments, consisting only of normal
recurring adjustments, necessary for the
fair presentation of financial data for such
periods. The interim operating results are
not necessarily indicative of the results
for a full year.
9
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
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1. Organization and Entertainment/Media Acquisition Corporation
Business Operations (the "Company") was incorporated in Delaware
on December 9, 1993 with the objective of
acquiring an operating business engaged
in the entertainment/media industry. The
Company's founding stockholders purchased 625,000
common shares, $.001 par value, for $25,000. The
Company has selected November 30 as its fiscal
year-end. During December 1994, 125,000 shares
were returned to the Company, for no
consideration, by the founding stockholders which
reduced the common stock outstanding to 500,000
shares and adjusted the founding stockholders'
percentage ownership to 20% of the common stock
expected to be outstanding after the Company's
initial public offering ("Offering"). This return
of shares has been retroactively reflected in the
financial statements.
The registration statement for the Company's
Offering was effective February 16, 1995. The
Company consummated the Offering on February 27,
1995 and raised net proceeds of $11,050,100 (Note
2). The Company's management has broad discretion
with respect to the specific application of the
net proceeds of this offering, although
substantially all of the net proceeds of this
offering are intended to be generally applied
toward consummating a business combination with
an operating business engaged in the
entertainment/media industry ("Business
Combination"). Furthermore, there is no assurance
that the Company will be able to successfully
effect a Business Combination. $10,206,000 was
placed in an interest-bearing trust account
("Trust Fund") until the earlier of (i) the
consummation of a Business Combination or (ii)
liquidation of the Company. The Trust Fund
indenture limits investments to U.S. Government
securities with maturities of 180 days or less.
The remaining proceeds are being used to pay for
business, legal and accounting due diligence on
prospective acquisitions, and continuing general
and administrative expenses in addition to other
expenses.
10
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
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The Company has signed a definitive agreement for
the acquisition of a target business and will
submit such transaction for stockholder approval
(see Note 7). All of the Company's stockholders
prior to the Offering, including all of the
officers and directors of the Company ("Initial
Stockholders") have agreed to vote the shares of
common stock owned by them immediately prior to
the effective date of the Offering in accordance
with the vote of the majority of all other shares
of common stock ("Public Shares") voted on in any
Business Combination. The holders of the Public
Shares are referred to herein as the "Public
Stockholders". After consummation of the
Company's first Business Combination, this voting
safeguard will no longer be applicable.
With respect to the first Business Combination
which is approved and consummated, any Public
Stockholder who voted against the Business
Combination may demand that the Company convert
his shares into cash. The per share conversion
price will equal the amount in the Trust Fund as
of the record date for determination of
stockholders entitled to vote on the Business
Combination divided by the number of shares held
by Public Stockholders. The Company will not
consummate a Business Combination if 20% or more
in interest of the Public Stockholders exercise
their conversion rights. Accordingly, Public
Stockholders holding 19.99% of the aggregate
number of shares owned by all Public Stockholders
may have their shares converted to cash in the
event of a Business Combination. Such Public
Stockholders are entitled to receive their
per-share interest in the Trust Fund computed
without regard to shares held by Initial
Stockholders. Accordingly, a portion of the net
proceeds from the Offering (19.99% of the amount
held in the Trust Fund) has been classified as
common stock subject to possible conversion in
the accompanying balance sheet at the conversion
value.
11
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
- ------------------------------------------------------------------------------
The Company's Certificate of Incorporation
provides for mandatory liquidation of the Company
in the event that the Company does not consummate
a Business Combination within 18 months from the
date of the consummation of the Offering, or 24
months from the consummation of the Offering if
certain extension criteria have been satisfied.
Upon the signing of the definitive merger
agreement (Note 7), such extension criteria were
satisfied. In the event of liquidation, it is
likely that the per-share value of the residual
assets remaining available for distribution
(including Trust Fund assets) will be less than
the initial public offering price per share in
the Offering (assuming no value is attributed to
the Warrants contained in the Units to be offered
in the Offering discussed in Note 2).
2. Public Offering On February 27, 1995, the Company sold 2,100,000
units ("Units") in the Offering which included
100,000 units of the 300,000 units subject to the
underwriter's overallotment option. Each Unit
consists of one share of the Company's common
stock, $.001 par value, and two Redeemable Common
Stock Purchase Warrants ("Warrants"). Each
Warrant entitles the holder to purchase from the
Company one share of common stock at an exercise
price of $5.00 during the period commencing on
the later of one year from the effective date of
the Offering or the consummation of a Business
Combination and ending seven years from the
effective date of the Offering. The Warrants will
be redeemable at a price of $.01 per Warrant upon
30 days notice at any time, only in the event
that the last sale price of the common stock is
at least $8.50 per share for 20 consecutive
trading days ending on the third day prior to
date on which notice of redemption is given. In
connection with this Offering, the Company issued
to the underwriter an option to purchase 200,000
units at an exercise price of $9.90 per unit. In
addition, the warrants underlying such units are
exercisable at $5.85 per share.
12
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
- ------------------------------------------------------------------------------
3. Notes Payable The Company issued an aggregate of $150,000 of
promissory notes to certain accredited investors.
These notes bore interest at the rate of 10% per
annum and were repaid on the consummation of the
Company's Offering with accrued interest thereon
of $16,069. In addition, the investors were
issued 300,000 warrants (valued at $.05 per
warrant - aggregate $15,000) which are identical
to the Warrants discussed in Note 2, except that
they are only redeemable by the Company beginning
90 days after the consummation of a Business
Combination.
4. Commitment The Company presently occupies office space
provided by a company affiliated with certain
officers and directors of the Company. Such
company has agreed that, until the acquisition of
a target business by the Company, it will make
such office space, as well as certain office and
secretarial services, available to the Company,
as may be required by the Company from time to
time. The Company has been paying $5,000 per
month for such services commencing on the
effective date of the Offering.
5. Preferred Stock The Company is authorized to issue 1,000,000
shares of preferred stock with such designations,
voting and other rights and preferences as may be
determined from time to time by the Board of
Directors.
6. Common Stock At May 31, 1996, 5,100,000 shares of common
stock were reserved for issuance upon exercise of
redeemable warrants, underwriter's warrants and
options.
13
<PAGE>
Entertainment/Media Acquisition Corporation
(a corporation in the development stage)
Notes to Financial Statements
- ------------------------------------------------------------------------------
7. Proposed Merger On July 2, 1996, the Company entered into a
definitive merger agreement with Overseas
Filmgroup, Inc. The approximately $24 million
merger consideration, to be paid to Overseas
Filmgroup shareholders, consists of (i) 3,177,778
shares of the Company's common stock, (ii) $1.5
million in cash, (iii) a $2.0 million, 9%, five-
year note, and (iv) the repayment of $3.5 million
in loans.
The merger is subject to a number of conditions,
including approval by the stockholders of the
Company.
14
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Entertainment/Media Acquisition Corporation ("Company") is a
Specified Purpose Acquisition Company, the objective of which is to acquire an
operating business in the entertainment and media industry. On July 2, 1996,
the Company and Overseas Filmgroup, Inc. ("Overseas") jointly announced that
the Company had entered into a definitive merger agreement with Overseas and
its founders and majority stockholders, Ellen Dinerman Little and Robert B.
Little. The merger consideration to be paid to Overseas shareholders consists
of (i) 3,177,178 shares of the Company's common stock, (ii) $1.5 million in
cash, (iii) a $2.0 million, 9%, five-year note, and (iv) the repayment of $3.5
million in loans.
In February 1994, the Company raised $150,000 in bridge financing
("Bridge Financing") in order to pay certain organizational expenses, the
costs of the Bridge Financing and certain costs of its initial public offering
("Offering"). Seven investors in the Bridge Financing loaned an aggregate of
$150,000 to the Company and were issued promissory notes in that amount,
bearing interest at the rate of 10% per annum and payable at the consummation
of the Offering.
The Company's Offering was consummated on February 27, 1995, and
raised net proceeds of $11,050,100 after payment of Offering expenses.
The Company's management has broad discretion with respect to the
specific application of the net proceeds of the Offering, although
substantially all of the net proceeds of this offering are intended to be
applied toward consummating a business combination with an operating business
in the entertainment and media industry. There is no assurance that the
Company will be able to successfully effect a business combination. A majority
of the net proceeds ($10,206,000) was placed in an interest-bearing trust
account (the "Trust Fund") until the earlier of (i) the consummation of a
business combination or (ii) the liquidation of the Company. The Trust Fund
indenture limits investments to United States government securities. The
remaining proceeds are being used to pay for business, legal and accounting
due diligence on prospective acquisitions, and continuing general and
administrative expenses in addition to other expenses.
In the event the Company does not consummate a business combination
within 18 months from the consummation of the Offering, or 24 months if
certain criteria are met, the Company will be dissolved and will distribute to
all public stockholders, in proportion to their respective equity interests in
the Company, an aggregate sum equal to the amount in the Trust Fund plus any
remaining net assets of the Company. Upon the signing of the definition merger
agreement with Overseas (see Item 5), such extension criteria were satisfied.
A public stockholder also is entitled to have his shares of the Company's
Common Stock converted to cash by the Company in connection with a business
combination which the stockholder votes against but which is consummated by
the Company.
Substantially all of the Company's working capital needs subsequent
to the Offering have been attributable to the identification, evaluation and
selection of a suitable target business and the structuring, negotiation and
consummation of the proposed business combination with Overseas. Such working
capital needs have been satisfied from the net proceeds of the Offering
15
<PAGE>
not deposited in the Trust Fund.
During the three month period ended May 31, 1996, the Company
incurred expenses of $83,821, including expenses related to general and
administrative, insurance, and occupancy. The Company received $137,472 in
interest income from the Trust Fund and from cash and cash equivalents not
held in the Trust Fund during this period.
16
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
See attached press release.
On July 2, 1996, the Company and Overseas Filmgroup, Inc.
("Overseas") jointly announced that the Company had entered into a definitive
merger agreement with Overseas and its founders and majority stockholders,
Ellen Dinerman Little and Robert B. Little. The merger consideration to be
paid to Overseas shareholders consists of (i) 3,177,178 shares of the
Company's common stock, (ii) $1.5 million in cash, (iii) a $2.0 million, 9%,
five-year note, and (iv) the repayment of $3.5 million in loans. For more
information, see the attached press release and Exhibit 10.7, attached hereto.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit
No.
3.1 Registrant's Certificate of Incorporation (incorporated by
reference to exhibit 3.1 to the Registrant's Registration
Statement on Form S-1, Registration No. 33-83624
("Registrant's Registration Statement")).
3.2 Registrant's By-laws (incorporated by reference to exhibit 3.2
to the Registrant's Registration Statement).
17
<PAGE>
4.1 Form of Common Stock Certificate (incorporated by reference
to exhibit 4.1 to the Registrant's Registration Statement).
4.2 Form of Warrant Certificate (incorporated by reference to
exhibit 4.2 to the Registrant's Registration Statement).
4.3 Form of Unit Purchase Option granted to Underwriters
(incorporated by reference to exhibit 4.3 to the
Registrant's Registration Statement).
4.4 Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant (incorporated by reference to
exhibit 4.4 to the Registrant's Registration Statement).
10.1 Agency Agreement dated as of December 10, 1993 between the
Registrant and GKN Securities Corp., and amendments
thereto (without schedules)(incorporated by reference to
exhibit 10.1 to the Registrant's Registration Statement).
10.2 Letter Agreement among each of the Stockholders of the
Registrant, the Registrant and GKN Securities Corp. (without
schedules)(incorporated by reference to exhibit 10.2 to the
Registrant's Registration Statement).
10.3 Form of Warrant issued in Bridge Financing (incorporated by
reference to exhibit 10.4 to the Registrant's Registration
Statement).
10.4 Form of Investment Management Trust Agreement between U.S.
Trust and the Registrant (incorporated by reference to exhibit
10.5 to the Registrant's Registration Statement).
10.5 Form of Stock Escrow Agreement between the Registrant and
Continental Stock Transfer & Trust Company (incorporated by
reference to exhibit 10.6 to the Registrant's Registration
Statement).
10.6 Letter Agreement regarding administrative support
(incorporated by reference to exhibit 10.7 to the Registrant's
Registration Statement).
10.7 Agreement of Merger among the Registrant, Overseas and Ellen
Dinerman Little and Robert B. Little.
(b) Reports on Form 8-K
No reports on Form 8-K.
18
<PAGE>
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.
ENTERTAINMENT/MEDIA
ACQUISITION CORPORATION
(Registrant)
Date: July 12, 1996 /s/ Jeffrey A. Rochlis
-----------------------
Jeffrey A. Rochlis
Chief Executive Officer and President
Date: July 12, 1996 /s/ Scot K. Vorse
-------------------
Scot K. Vorse
Vice President - Finance
(Principal Financial and Accounting Officer),
Treasurer and Secretary
19
<PAGE>
Jafonni & Collins
INCORPORATED
News Announcement
(EW)(OVERSEAS-FILMGRP/EMAC)(EMAC) Overseas Filmgroup to merge with
Entertainment/Media Acquisition Corporation
LOS ANGELES -- (ENTERTAINMENT WIRE) -- July 2, 1996 --
Entertainment/Media Acquisition Corporation (EMAC) (Nasdaq BB: EMAC, EMACU,
EMACW) and Overseas Filmgroup, Inc. jointly announced today that EMAC has
entered into a definitive merger agreement with Overseas Filmgroup, Inc. and
its founders and majority stockholders, Ellen Dinerman Little and Robert B.
Little. The approximately $24 million merger consideration, to be paid to
Overseas Filmgroup shareholders, consists of (i) 3,177,778 shares of EMAC
common stock (based on the $5.25 average of the closing bid and asked prices
on June 28, 1996), (ii) $1.5 million in cash, (iii) a $2.0 million, 9%
five-year note, and (iv) the repayment of $3.5 million in loans.
The resulting entity would retain the Overseas Filmgroup, Inc.
corporate name and would have approximately 5.78 million primary shares
outstanding.
Headquartered in Los Angeles, Overseas Filmgroup, Inc. is a leading
independent motion picture distribution company specializing in the
acquisition and worldwide distribution of independently produced feature films
of all genres. While historically the Company has focused on international
distribution, in 1993 Overseas launched First Look Pictures, its domestic
theatrical releasing operation. For the year ended December 31, 1995, the
Company had revenues of $21.7 million and operating income of $2.6 million.
Since its formation in 1980, Overseas Filmgroup has built a feature film
library of over 170 titles.
Overseas Filmgroup's recent films include the Academy Award winning
Antonia's Line, Academy Award-nominated The Scent of Green Papaya, John
Sayle's highly acclaimed The Secret of Roan Inish and The Prophecy, starring
Christopher Walken. Upcoming releases include The Big Squeeze, starring Lara
Flynn Boyle, scheduled for release later this summer and Infinity, a love
story directed by Matthew Broderick, starring Broderick and Patricia Arquette,
scheduled for release this fall. In addition, the Company developed and served
as executive producer of the Golden Globe and Academy Award-nominated Richard
III.
Pursuant to the merger agreement, Ellen Dinerman Little and Robert
B. Little will serve as the Co-Chairs of the Board and Co-Chief Executive
Officers of the combined company and will enter into five-year employment
agreements which include a grant of options to purchase an aggregate of 2.2
million shares of EMAC common Stock, subject to certain vesting requirements.
William F. Lischak, Chief Operating Officer and Chief Financial Officer of
Overseas Filmgroup, will retain those titles in the combined organization. Mr.
Lischak and one other individual to be designated by the Littles will be
appointed to the Board of Directors.
Stephen K. Bannon, Chairman of Entertainment/Media Acquisition
Corporation will Vice Chairman of the Board and Chairman of the Executive
Committee. Jeffrey A. Rochlis and Scot K. Vorse, current EMAC Board members,
will also continue as Board members the
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combined company.
Commenting on the merger, Ellen Dinerman Little, said, "Overseas
Filmgroup's ability to pursue opportunities in the independent film industry
will be significantly enhanced through the capital available from the merger.
This will reinforce our strategy of nurturing talent and distributing quality
projects we perceive as innovative and marketable."
Robert B. Little, commented, "We are delighted with the prospects
of becoming a public company and are committed to pursuing prudent growth
opportunities which strengthen our range of industry relationships and
experience."
Stephen K. Bannon stated, "This merger fulfills our objective to
seek out and merge EMAC's capital base with an entertainment company that
combines high quality library asset accumulation with sustained cash flow and
profitability. Overseas Filmgroup's proven strategy and management, with the
addition of EMAC's growth capital, should position the Company for continued
growth and success."
With $11.3 million in current assets and no debt as of February 29,
1996, Beverly Hills- based Entertainment/Media Acquisition Corporation is a
publicly-traded Specified Purpose Acquisition Corporation formed to enter into
a business combination with an operating business in the entertainment and
media industry.
This press release contains forward-looking statements regarding
future events and the future financial performance of Entertainment/Media
Acquisition Corporation and the combined company. These statements are only
predictions and the actual events or results may differ materially. Please
refer to the documents that Entertainment/Media Acquisition Corporation files
from time to time with the Securities and Exchange Commission. These documents
contain and identify important factors that could cause the actual results to
differ materially from those contained int he forward-looking statements.
CONTACT: William F. Lischak
Chief Operating Officer, Chief Financial Officer
Overseas Filmgroup, Inc.
310/855-1475
or
Stephen K. Bannon
Chairman
Entertainment/Media Acquisition Corporation
310/276-7929
or
Joseph N. Jaffoni, David C. Collins
Jaffoni & Collins Incorporated
212/505-3015 or [email protected]
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ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
Exhibit Index
Exhibit
No.
3.1 Registrant's Certificate of Incorporation (incorporated by
reference to exhibit 3.1 to the Registrant's Registration
Statement on Form S-1, Registration No. 33- 83624 ("Registrant's
Registration Statement")).
3.2 Registrant's By-laws (incorporated by reference to exhibit 3.2
to the Registrant's Registration Statement).
4.1 Form of Common Stock Certificate (incorporated by reference to
exhibit 4.1 to the Registrant's Registration Statement on Form
S-1, Registration No. 33-83624 ("Registrant's Registration
Statement")).
4.2 Form of Warrant Certificate (incorporated by reference to
exhibit 4.2 to the Registrant's Registration Statement).
4.3 Form of Unit Purchase Option granted to Underwriters
(incorporated by reference to exhibit 4.3 to the Registrant's
Registration Statement).
4.4 Warrant Agreement between Continental Stock Transfer & Trust
Company and the Registrant (incorporated by reference to exhibit
4.4 to the Registrant's Registration Statement).
10.1 Agency Agreement dated as of December 10, 1993 between the
Registrant and GKN Securities Corp., and amendments thereto
(without schedules)(incorporated by reference to exhibit 10.1
to the Registrant's Registration Statement).
10.2 Letter Agreement among each of the Stockholders of the
Registrant, the Registrant and GKN Securities Corp. (without
schedules)(incorporated by reference to exhibit 10.2 to the
Registrant's Registration Statement).
10.3 Form of Warrant issued in Bridge Financing (incorporated by
reference to exhibit 10.4 to the Registrant's Registration
Statement).
10.4 Form of Investment Management Trust Agreement between U.S.
Trust and the Registrant (incorporated by reference to exhibit
10.5 to the Registrant's Registration Statement).
10.5 Form of Stock Escrow Agreement between the Registrant and
Continental Stock Transfer & Trust Company (incorporated by
reference to exhibit 10.6 to the Registrant's Registration
Statement).
10.6 Letter Agreement regarding administrative support (incorporated
by reference to exhibit 10.7 to the Registrant's Registration
Statement).
10.7 Agreement of Merger among the Registrant, Overseas and Ellen
Dinerman Little and Robert B. Little.
22
AGREEMENT OF MERGER
among
ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
(a Delaware corporation),
OVERSEAS FILMGROUP, INC.
(a Delaware corporation),
and
ELLEN DINERMAN LITTLE and ROBERT B. LITTLE
July ____, 1996
<PAGE>
TABLE OF CONTENTS
<TABLE>
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<S> <C> <C>
ARTICLE I DEFINITIONS................................................................ 1
ARTICLE II THE MERGER................................................................. 8
2.1 The Merger................................................................. 8
2.2 Effective Time............................................................. 8
2.3 Effects of the Merger...................................................... 8
2.4 Amended and Restated Certificate of Incorporation and Bylaws............... 8
2.5 Directors and Officers; Operations after the Merger........................ 8
2.6 Closing.................................................................... 9
ARTICLE III CONVERSION OF SHARES AND OTHER MATTERS..................................... 9
3.1 Conversion of the Overseas Shares.......................................... 9
3.2 Surrender and Payment...................................................... 10
3.3 Adjustments................................................................ 10
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF OVERSEAS AND THE
OVERSEAS STOCKHOLDERS............................................................... 10
4.1 Corporate Status........................................................... 10
4.2 Authorization.............................................................. 11
4.3 Consents and Approvals..................................................... 11
4.4 Capitalization and Stock Ownership......................................... 11
4.5 Financial Statements....................................................... 12
4.6 Title to Assets and Related Matters........................................ 12
4.7 Real Property Leases....................................................... 13
4.8 Personal Property.......................................................... 13
4.9 Non-Real Estate Leases..................................................... 13
4.10 Accounts Receivable........................................................ 13
4.11 Liabilities................................................................ 14
4.12 Taxes...................................................................... 14
4.13 Subsidiaries............................................................... 15
4.14 Legal Proceedings and Compliance with Law.................................. 15
4.15 Contracts.................................................................. 15
4.16 Insurance.................................................................. 17
4.17 Intellectual Property...................................................... 17
4.18 Employee Relations......................................................... 18
4.19 ERISA...................................................................... 18
4.20 Corporate Records.......................................................... 20
4.21 Absence of Certain Changes................................................. 20
4.22 Finder's Fees.............................................................. 20
4.23 Accuracy of Information.................................................... 20
4.24 Overseas Disclosure Schedule............................................... 21
4.25 Certain Business Relationships with Affiliates............................. 21
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4.26 Overseas Film Library...................................................... 21
4.27 Representations and Warranties of the Stockholders of Overseas............. 23
ARTICLE V REPRESENTATIONS AND WARRANTIES OF EMAC..................................... 25
5.1 Corporate Status........................................................... 25
5.2 Authorization.............................................................. 25
5.3 Consents and Approvals..................................................... 25
5.4 Capitalization and Stock Ownership......................................... 26
5.5 Financial Statements....................................................... 27
5.6 SEC Reports................................................................ 27
5.7 Trust Funds................................................................ 28
5.8 Fair Market Value.......................................................... 28
5.9 Assets; Leases; Accounts Receivable........................................ 28
5.10 Liabilities................................................................ 28
5.11 Taxes...................................................................... 28
5.12 Subsidiaries............................................................... 29
5.13 Legal Proceedings and Compliance with Law.................................. 29
5.14 Contracts.................................................................. 29
5.15 Insurance.................................................................. 30
5.16 Intellectual Property...................................................... 30
5.17 Employee Relations......................................................... 30
5.18 ERISA...................................................................... 31
5.19 Corporate Records.......................................................... 31
5.20 Absence of Certain Changes................................................. 31
5.21 Rule 419................................................................... 31
5.22 Finder's Fees.............................................................. 31
5.23 Accuracy of Information.................................................... 31
5.24 Certain Business Relationships with Affiliates............................. 32
5.25 EMAC Disclosure Schedule................................................... 32
ARTICLE VI COVENANTS OF OVERSEAS AND THE OVERSEAS
STOCKHOLDERS........................................................................ 32
6.1 Operation of the Business.................................................. 32
6.2 Access..................................................................... 33
6.3 No Other Negotiations...................................................... 33
6.4 Maintenance of the Assets.................................................. 33
6.5 Employees and Business Relations........................................... 33
6.6 Confidentiality............................................................ 33
6.7 Expenses................................................................... 33
6.8 No Securities Transactions................................................. 33
6.9 Fulfillment of Conditions.................................................. 34
6.10 Financial Statements....................................................... 34
6.11 Overseas Subsidiaries...................................................... 34
6.12 Disclosure of Certain Matters.............................................. 34
</TABLE>
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ARTICLE VII COVENANTS OF EMAC.......................................................... 34
7.1 Operation of the Business of EMAC.......................................... 34
7.2 Stockholders' Meeting...................................................... 35
7.3 Access..................................................................... 35
7.4 No Other Negotiations...................................................... 36
7.5 Maintenance of the Assets.................................................. 36
7.6 Confidentiality............................................................ 36
7.7 Appointment of Directors and Officers...................................... 36
7.8 Expenses................................................................... 37
7.9 No Securities Transactions................................................. 37
7.10 Fulfillment of Conditions.................................................. 37
7.11 Disclosure of Certain Matters.............................................. 37
7.12 Resignations............................................................... 37
7.13 Nasdaq National Market Listing Application................................. 37
7.14 Stock Option Plans......................................................... 38
7.15 Continuation of Employee Benefit Plans..................................... 38
7.16 EMAC Stockholders.......................................................... 39
7.17 Repayment of Loan.......................................................... 39
ARTICLE VIII COVENANTS OF EMAC, OVERSEAS AND THE OVERSEAS
STOCKHOLDERS........................................................................ 39
8.1 Miscellaneous Covenants.................................................... 39
8.2 Overseas Employee Bonuses.................................................. 40
8.3 Voting Agreement........................................................... 41
8.4 Cooperation................................................................ 41
ARTICLE IX CONDITIONS PRECEDENT TO THE MERGER......................................... 41
9.1 Conditions to Each Party's Obligations..................................... 41
9.2 Conditions to Obligations of EMAC.......................................... 43
9.3 Conditions to Obligations of Overseas and the Overseas Stockholders........ 45
ARTICLE X INDEMNIFICATION............................................................ 47
10.1 Indemnification by the Overseas Stockholders............................... 47
10.2 Limitations on Indemnification............................................. 47
10.3 Indemnification by EMAC.................................................... 48
10.4 Indemnification Procedures................................................. 48
10.5 Survival................................................................... 50
10.6 Satisfaction of Indemnification Obligations................................ 50
ARTICLE XI PUBLIC ANNOUNCEMENTS....................................................... 50
ARTICLE XII TERMINATION................................................................ 50
12.1 Grounds for Termination.................................................... 50
12.2 Payment of Expenses upon Termination....................................... 51
</TABLE>
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Page
12.3 Effect of Termination...................................... 52
ARTICLE XIII CONTENTS OF AGREEMENT, AMENDMENT, PARTIES IN
INTEREST, ASSIGNMENT, ETC....................................... 52
ARTICLE XIV INTERPRETATION.............................................. 53
ARTICLE XV NOTICES...................................................... 53
ARTICLE XVI GOVERNING LAW............................................... 54
ARTICLE XVII COUNTERPARTS............................................... 55
EXHIBITS
Exhibit A -- Certificate of Merger
Exhibit B -- EMAC Special Management Option Plan
Exhibit C -- EMAC 1996 Basic Stock Option Plan
Exhibit D -- Lischak Employment Agreement
Exhibit E -- Lock-up and Registration Rights Agreement
Exhibit F -- Form of Non-Competition Agreement
Exhibit G -- Form of Non-Disclosure Agreement
Exhibit H -- Overseas Stockholders' Employment Agreement
Exhibit I -- Stockholders' Voting Agreement
Exhibit J -- Tax Reimbursement Agreement
Exhibit K -- Operating Guidelines
Exhibit L -- Form of Merger Note
Exhibit M -- Form of Security Agreement
Exhibit N -- Amended and Restated Certificate of Incorporation
of EMAC and Form of By-Laws
Exhibit O -- Opinion of Gipson, Hoffman & Pancione
Exhibit P -- Opinion of Deborah Chiaramonte, Esq.
Exhibit Q -- Opinion of Brobeck, Phleger & Harrison LLP
Exhibit R -- Merger Consideration
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<PAGE>
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER is made as of July __, 1996 by and among
ENTERTAINMENT/MEDIA ACQUISITION CORPORATION, a Delaware corporation ("EMAC"),
OVERSEAS FILMGROUP, INC., a Delaware corporation ("Overseas") and each of
ELLEN DINERMAN LITTLE and ROBERT B. LITTLE (Ellen Dinerman Little and Robert
B. Little are sometimes collectively referred to herein as the "Overseas
Stockholders").
Background
----------
The Overseas Stockholders own approximately 92% of the outstanding
capital stock of Overseas. EMAC, Overseas and the Overseas Stockholders desire
to merge Overseas with and into EMAC (the "Merger") in accordance with the
Delaware General Corporation Law, as amended (the "DGCL"), and on the terms
and conditions set forth herein.
Witnesseth
----------
NOW, THEREFORE, in consideration of the respective covenants
contained herein and intending to be legally bound hereby, the parties hereto
agree as follows:
ARTICLE I
DEFINITIONS
For convenience, certain terms used in more than one part of this
Agreement are listed in alphabetical order and defined or referred to below
(such terms as well as any other terms defined elsewhere in this Agreement
shall be equally applicable to both the singular and plural forms of the terms
defined).
"Affiliates" means, with respect to a particular Person, Persons
controlling, controlled by or under common control with that Person, as well
as any executive officer, directors and majority-owned entities of that
Person.
"Agreement" means this Agreement and the exhibits and schedules
hereto.
"Annual Report" is defined in Section 5.6(a).
"Assets" means all of the assets, properties, real and personal,
tangible and intangible, wherever situated and whether or not reflected in the
most recent financial statements of the referenced party that are owned or
purported to be owned by said party.
"Average Price" is defined in Section 3.1(c).
"Benefit Plans" means all employee benefit plans of a Representing
Party within the meaning of Section 3(3) of ERISA.
<PAGE>
"Business" means the entire business and operations of Overseas or
EMAC, respectively, unless otherwise specified.
"Certificate of Merger" is defined in Section 2.2 and shall be in the
form attached hereto as Exhibit A.
"Closing" means the consummation of the steps necessary to effect the
Merger (other than the delivery of the Certificate of Merger to the Secretary
of State of Delaware and the filing thereof) in accordance with the terms of
this Agreement.
"Closing Date" is defined in Section 2.6.
"Closing EMAC Disclosure Schedule" is defined in Section 5.25.
"Closing Overseas Disclosure Schedule" is defined in Section 4.24.
"Code" means the Internal Revenue Code of 1986, as amended, and the
Regulations promulgated thereunder.
"Contract" means any written or oral contract, agreement, lease,
instrument or other commitment that is binding on any Person or its property
under applicable law.
"Court Order" means any judgment, decree, injunction, order or ruling
of any federal, state, local or foreign court or governmental or regulatory
body or authority that is binding on any Person or its property under
applicable law.
"Default" means (i) a breach, default or violation or (ii) the
occurrence of an event that with the passage of time or the giving of notice,
or both, would constitute a breach, default or violation.
"Definitive Proxy Statement" is defined in Section 7.2.
"DGCL" is defined above in the Background section.
"Distribution" means the contemplated distribution prior to the
Closing by Overseas to the stockholders of Overseas of $3,500,000 as described
on Schedule 9.3(l) hereto.
"Effective Time" is defined in Section 2.2.
"EMAC" is defined in the Preamble to this Agreement.
"EMAC Balance Sheet" is defined in Section 5.5.
"EMAC Balance Sheet Date" is defined in Section 5.5.
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"EMAC Common Stock" means the Common Stock, $0.001 par value per
share, of EMAC.
"EMAC Designees" is defined in Section 7.7(a)(ii).
"EMAC Disclosure Schedule" means the Disclosure Schedule provided by
EMAC in connection with this Agreement.
"EMAC Indemnified Party" is defined in Section 10.1.
"EMAC Losses" is defined in Section 10.1.
"EMAC Minor Contracts" is defined in Section 5.14.
"EMAC Option Plans" means the EMAC Stock Option Plan and the Special
Management Option Plan.
"EMAC Special Management Option Plan" means the EMAC 1996 Special
Stock Option Plan and Agreement, covering 2,200,000 shares of EMAC Common
Stock, attached hereto as Exhibit B.
"EMAC Stock Option Plan" means the EMAC 1996 Basic Stock Option Plan,
covering 550,000 shares of EMAC Common Stock, attached hereto as Exhibit C.
"EMAC Stockholders" is defined in Section 5.2.
"EMAC Stockholders' Meeting" is defined in Section 7.2.
"EMAC Unit" means the units issued by EMAC consisting of one EMAC
Share and two EMAC Warrants.
"EMAC Warrants" means the warrants issued by EMAC entitling the
holders thereof to purchase shares of EMAC Common Stock at a price of $5.00
per share and exercisable until February 16, 2002.
"Encumbrances" means any lien, mortgage, security interest, pledge or
other charge or encumbrance of any nature whatsoever on any property or
property interest.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
"Exchange Act" is defined in Section 5.3.
"Existing Shares" is defined in Section 4.4.
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"Fair Market Value" is defined in Section 7.14.
"Film Library" is defined in Section 4.26(b).
"Film Library Threshold Amount" is defined in Section 10.2(a).
"GAAP" means United States generally accepted accounting principles.
"GKN" means GKN Securities Corp.
"Governmental Permits" is defined in Section 4.14(b).
"Gross Participations" is defined in Section 4.26(a).
"Indemnitor" is defined in Section 10.4(a).
"Initial EMAC Stockholders" is defined in Section 5.3.
"Intellectual Property" is defined in Section 4.17(a).
"IRS" is defined in Section 4.19(c).
"Liability" means any direct or indirect liability, indebtedness,
obligation, expense, claim, loss, damage, deficiency, or guaranty or
endorsement of or by any Person, absolute or contingent, accrued or unaccrued,
due or to become due, liquidated or unliquidated.
"Lischak Employment Agreement" means the form of Employment Agreement
to be entered into with William F. Lischak, attached hereto as Exhibit D.
"Litigation" means any lawsuit, action, arbitration, administrative
or other legal proceeding, criminal prosecution or governmental investigation
or inquiry.
"Loan" is defined in Section 7.17.
"Lock-up and Registration Rights Agreement" is the Lock-up and
Registration Rights Agreement attached hereto as Exhibit E.
"Major Media" is defined in Section 4.26(a).
"Master Avail" is defined in Section 4.26(e).
"Material Adverse Effect" means with respect to EMAC a material
adverse effect on the financial condition or results of operations of EMAC.
"Material Adverse Effect", when used with respect to Overseas, the Overseas
Subsidiaries or any subsidiary of Overseas means a material adverse effect on
the financial condition or results of operations of Overseas, together with
all of the Subsidiaries of Overseas, taken as a whole.
4
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"Merger" is defined above in the Background section.
"Merger Cash" is defined in Section 3.1(b).
"Merger Consideration" is defined in Section 3.1(b).
"Merger Note" is defined in Section 3.1(b).
"Merger Shares" is defined in Section 3.1(b).
"Non-Competition Agreement" is the form of Non-Competition Agreement
attached hereto as Exhibit F.
"Non-Disclosure Agreement" is the form of Non-Disclosure Agreement
attached hereto as Exhibit G.
"Non-Film Library Threshold Amount" is defined in Section 10.2(a).
"Non-Real Estate Leases" is defined in Section 4.9.
"Non-Redeemable Option" refers to the Group B options to be granted
(and as defined) in the EMAC Special Management Option Plan.
"Operating Guidelines" is defined in Section 2.5.
"Ordinary course" or "ordinary course of business" means the ordinary
course of business that is consistent with past practices.
"Original EMAC Disclosure Schedule" is defined in Section 5.25.
"Original Overseas Disclosure Schedule" is defined in Section 4.24.
"Overseas" is defined in the Preamble to this Agreement and, solely
for purposes of Section 4.19(d), in such Section 4.19(d).
"Overseas Balance Sheet" is defined in Section 4.5.
"Overseas Balance Sheet Date" is defined in Section 4.5.
"Overseas Common Stock" means the Common Stock, $0.01 par value per
share, of Overseas.
"Overseas Designees" is defined in Section 7.7(a)(i).
"Overseas Disclosure Schedule" means the disclosure schedule provided
by Overseas in connection with this Agreement.
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"Overseas Employees" is defined in Section 8.2
"Overseas Films" is defined in Section 4.26(c).
"Overseas Film Library" is defined in Section 4.26(b).
"Overseas Financial Statements" is defined in Section 4.5.
"Overseas Minor Contracts" is defined in Section 4.15(a).
"Overseas Share" means a share of Overseas Common Stock.
"Overseas Stockholders" is defined in the Preamble to this Agreement.
"Overseas Stockholders' Employment Agreement" means the form of
Employment Agreement to be entered into with each of the Overseas
Stockholders, attached hereto as Exhibit H.
"Overseas Stockholders Indemnified Party" is defined in Section 10.3.
"Overseas Subsidiaries" means the following companies: Jacaranda
Music, Inc., a Delaware corporation; Walrus Pictures, Inc., a California
corporation; and Overseas Filmgroup (U.K.) Ltd., a United Kingdom corporation.
"Payment Date" is defined in Section 10.4(c).
"Person" means any natural person, corporation, partnership,
proprietorship, association, trust or other legal entity.
"Preliminary Proxy Statement" is defined in Section 7.2.
"Proxy Statement" is defined in Section 7.2.
"Real Estate Leases" is defined in Section 4.7.
"Real Property" is defined in Section 4.7.
"Record Date" is defined in Section 7.16.
"Redeemable Special Management Option" refers to the Group A options
to be granted (and as defined) in the EMAC Special Management Option Plan.
"Regulation" means any statute, law, ordinance, regulation, order or
rule of any federal, state, local, foreign or other governmental agency or
body or of any other type of regulatory body that is binding on any Person or
its property, including those covering
6
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environmental, energy, safety, health, transportation, bribery, recordkeeping,
zoning, anti-discrimination, antitrust, wage and hour, and price and wage
control matters.
"Representing Party" means Overseas and the Overseas Stockholders
when used in connection with terms used in Article IV, and EMAC when used in
connection with terms used in Article V.
"Required Consents" is defined in Section 4.3.
"Restated Certificate" is defined in Section 7.2.
"SEC" means the Securities and Exchange Commission.
"SEC Reports" is defined in Section 5.6(a).
"Securities Act" means the Securities Act of 1933, as amended, and
the Regulations promulgated thereunder.
"Security Agreement" is defined in Section 3.1(b).
"Selected Contract" is defined in Section 4.26(a).
"Selected Films" is defined in Section 4.26(a).
"Stockholders' Voting Agreement" means the Stockholders' Voting
Agreement attached hereto as Exhibit I.
"Subsidiary," with respect to any Person, means a corporation the
voting securities of which, in an amount sufficient to elect at least a
majority of its Board of Directors, are owned directly or indirectly by such
Person.
"Surviving Corporation" is defined in Section 2.1.
"Syndication Agreement" is defined in Section 9.1(j).
"Tax" is defined in Section 4.12.
"Tax Reimbursement Agreement" means the Tax Reimbursement Agreement
attached hereto as Exhibit J.
"Termination Date" is defined in Section 12.1(b).
"Third Party Claim" is defined in Section 10.4(b).
"Transaction Documents" means this Agreement, the Certificate of
Merger, the Merger Note, the Security Agreement, the Overseas Stockholder
Employment Agreements, the
7
<PAGE>
Lischak Employment Agreement, the Lock-up and Registration Rights Agreement,
the Non-Competition Agreements, the Stockholders' Voting Agreement, the EMAC
Option Plans, the Tax Reimbursement Agreement.
"Transactions" means the Merger and the other related transactions
contemplated by the Transaction Documents.
"Trust Account" is defined in Section 5.7.
"Trust Company" is defined in Section 5.7.
"Unit Purchase Option" means the option issued by EMAC entitling GKN
Securities Corp., the underwriter of EMAC's initial public offering, to
purchase 200,000 EMAC Units at a price of $9.90 per Unit and exercisable until
February 16, 2000.
"Welfare Plan" is defined in Section 4.19(g).
ARTICLE II
THE MERGER
2.1 The Merger. Upon the terms and subject to the conditions hereof,
and in accordance with the relevant provisions of the DGCL, Overseas shall
merge with and into EMAC at the Effective Time. Following the Merger, EMAC
shall continue as the surviving corporation (the "Surviving Corporation") and
shall continue its existence under the laws of the State of Delaware, and the
separate corporate existence of Overseas shall cease.
2.2 Effective Time. As soon as practicable on or after the Closing
Date, after the satisfaction or waiver of all conditions to the Merger, EMAC
and Overseas shall file with the Secretary of State of the State of Delaware
the Certificate of Merger in accordance with the DGCL (the "Certificate of
Merger"). The Merger shall become effective at such time as the Certificate of
Merger is so filed (the "Effective Time").
2.3 Effects of the Merger. The Merger shall have the effect set forth
in Section 259 of the DGCL, a copy of which is attached hereto as Exhibit 2.3.
2.4 Amended and Restated Certificate of Incorporation and Bylaws. The
Restated Certificate and bylaws of EMAC as amended and restated as of the
Closing Date in accordance with Section 7.2 of this Agreement shall be the
Restated Certificate and bylaws, respectively, of the Surviving Corporation at
the Effective Time.
2.5 Directors and Officers; Operations after the Merger. The persons
who are appointed and elected in accordance with Section 7.7 of this Agreement
shall be the directors and officers of the Surviving Corporation at the
Effective Time. Such persons shall hold such positions as directors and
officers until their successors are elected or appointed in accordance
8
<PAGE>
with the Restated Certificate and the bylaws of the Surviving Corporation. The
Directors of the Surviving Corporation shall be in such classes as set forth
in Section 7.7(b). The Operating Guidelines attached hereto as Exhibit K shall
serve as general operating guidelines for the Surviving Corporation following
the Effective Time (the "Operating Guidelines") until otherwise properly
amended or modified.
2.6 Closing. Unless this Agreement shall have been terminated and the
Transactions abandoned pursuant to Article XII, subject to satisfaction or
waiver of the conditions to the Merger set forth in Article IX, the Closing
shall take place as promptly as practicable (and in any event within five
business days) after satisfaction or waiver of the conditions to the Merger
set forth in Article IX, at the offices of Gipson, Hoffman & Pancione, 1901
Avenue of the Stars, Suite 1100, Los Angeles, California 90067, unless the
parties hereto agree in writing to another date or place. The date on which
the Closing occurs is referred to herein as the "Closing Date."
ARTICLE III
CONVERSION OF SHARES AND OTHER MATTERS
3.1 Conversion of the Overseas Shares.
(a) Each Overseas Share that, immediately prior to the
Effective Time, is held by Overseas as treasury stock or by any Subsidiary of
Overseas shall be cancelled, and no consideration shall be delivered with
respect thereto.
(b) Except as otherwise provided in Sections 3.1(c) and
3.2(a), the Overseas Shares outstanding immediately prior to the Effective
Time shall be converted, as of the Effective Time, by virtue of the Merger and
without any action on the part of the holders thereof, into, in the aggregate
(to be allocated among the holders of Overseas Shares in accordance with
Exhibit R hereto): (i) 3,177,778 shares of EMAC Common Stock (the "Merger
Shares"), (ii) $1,500,000, in immediately available funds payable at the
Closing by certified check or by wire transfer, at the option of the Overseas
Stockholders (the "Merger Cash"), and (iii) a note in the principal amount of
$2,000,000 with the terms and conditions set forth in the form of Merger Note
attached hereto as Exhibit L (the "Merger Note") (collectively, the "Merger
Consideration"). The Merger Note will be secured by all of the assets of the
Surviving Corporation in accordance with the form of Security Agreement
attached hereto as Exhibit M (the "Security Agreement").
(c) In the event that the average of the mean between the
closing bid and asked prices for EMAC Common Stock as quoted on the NASD
Electronic Bulletin Board for the three trading days prior to the Closing Date
(the "Average Price") is less than $5.20 per share of EMAC Common Stock, then
in addition to the Merger Consideration per Overseas Share pursuant to Section
3.1(b), each holder of an Overseas Share shall be entitled to receive
additional Merger Cash per Overseas Share equal to the difference between
$5.20 and the
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Average Price multiplied by the 3,177,778 Merger Shares and such
amount shall be deemed included as part of the Merger Consideration.
(d) No fractional shares of EMAC Common Stock shall be
issued in the Merger. All fractional shares of EMAC Common Stock that a holder
of Overseas Shares would otherwise be entitled to receive as a result of the
Merger shall be aggregated and if a fractional share of EMAC Common Stock
results from such aggregation, such holder shall be entitled to receive, in
lieu thereof, a full share of EMAC Common Stock.
3.2 Surrender and Payment. At the Closing, each holder of Overseas
Shares shall surrender to EMAC the Overseas Shares held in their names, as set
forth in Exhibit R in exchange for the Merger Consideration, which Merger
Consideration shall be distributed as set forth in Exhibit R. No transfer
taxes shall be payable by any holder of Overseas Shares in connection with
such exchange.
3.3 Adjustments. If at any time during the period between the date of
this Agreement and the Effective Time, the outstanding shares of capital stock
of EMAC or Overseas shall have been changed into a different number of shares
or a different class, by reason of any stock dividend, subdivision,
reclassification, recapitalization, split, combination or exchange of shares,
the Merger Consideration shall be correspondingly adjusted to reflect such
stock dividend, subdivision, reclassification, recapitalization, split,
combination or exchange of shares; provided, however, that neither EMAC nor
Overseas shall take any such action without the prior written consent of the
other.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF OVERSEAS AND
THE OVERSEAS STOCKHOLDERS
Overseas and the Overseas Stockholders jointly and severally hereby
represent and warrant to EMAC as follows:
4.1 Corporate Status. Overseas is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware.
Overseas is qualified to do business as a foreign corporation in California
and any jurisdiction where it is required to be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect. Each of the
Overseas Subsidiaries is a corporation duly organized, validly existing and in
good standing under the laws of the jurisdiction of its incorporation and is
duly qualified to do business as a foreign corporation in any jurisdiction
where it is required to be so qualified, except where the failure to so
qualify would not have a Material Adverse Effect. The copies of the
Certificate of Incorporation and bylaws of Overseas and Overseas Subsidiaries
that have been delivered to EMAC have been duly adopted, and are current,
correct and complete.
4.2 Authorization. Overseas has the requisite power and authority to
execute and deliver the Transaction Documents to which it is or will be a
party and to perform the
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Transactions to be performed by it. Such execution, delivery and performance
by Overseas have been duly authorized by all necessary corporate action,
including the approval by the stockholders of Overseas as required by the
DGCL. The Transaction Documents to be executed and delivered by Overseas or
the Overseas Stockholders have been, or will be on the Closing Date, duly and
validly executed and delivered by such party or parties. The Transaction
Documents executed on or before the date hereof constitute, and the
Transaction Documents to be executed after the date hereof will constitute,
legally valid and binding obligations of Overseas and the Overseas
Stockholders, to the extent they are parties thereto, enforceable against each
such party in accordance with their respective terms, except that the remedies
of specific performance, injunction and other forms of equitable relief are
subject to certain tests of equity jurisdiction, equitable defenses and the
discretion of the court before which any proceeding may be brought.
4.3 Consents and Approvals. Except for the consents specified in
Section 4.3 of the Overseas Disclosure Schedule (the "Required Consents"), the
approval of the Merger Agreement by the holders of a majority of the issued
and outstanding Overseas Shares, and the filing of the Certificate of Merger
in accordance with the DGCL, neither the execution and delivery by Overseas or
the Overseas Stockholders of the Transaction Documents to which either is or
will be a party, nor the performance of the Transactions to be performed by
Overseas or the Overseas Stockholders will require any filing to be made by
Overseas, or any consent or approval to be obtained by Overseas or constitute
a Default under (a) any Regulation or Court Order to which Overseas or any of
the Overseas Subsidiaries is subject, (b) the Certificate of Incorporation or
bylaws, or other comparable organizational documents with respect to any
foreign corporation, of Overseas or any of the Overseas Subsidiaries, or (c)
any Contract, Governmental Permit or other document to which Overseas or any
of the Overseas Subsidiaries is a party or by which the properties or other
assets of Overseas or any of the Overseas Subsidiaries is subject, except
where the aggregate effect of any such Defaults or the failure to make or
obtain any such filings, consents or approvals would not have a Material
Adverse Effect.
4.4 Capitalization and Stock Ownership. The total authorized capital
stock of Overseas consists of 2,000 shares of Overseas Common Stock, of which
100 shares are issued and outstanding (the "Existing Shares"). Neither
Overseas nor any of the Overseas Subsidiaries has any shares of capital stock
that are issued and held by Overseas or the Overseas Subsidiaries,
respectively, as treasury stock. There are no existing options, warrants,
calls, subscriptions, commitments, arrangements or other rights of any
character (including conversion or preemptive rights) relating to the
issuance, acquisition or registration of any issued or unissued capital stock
or other securities of Overseas and the Overseas Subsidiaries, and, except as
set forth in Section 4.4 of the Overseas Disclosure Schedule, the Overseas
Stockholders have not agreed or committed to transfer any Overseas Shares held
by them on or prior to the Effective Time. All of the outstanding shares of
Overseas Common Stock and the common stock of the Overseas Subsidiaries are
duly and validly authorized and issued, fully paid and non-assessable. Section
4.4 of the
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Overseas Disclosure Schedule correctly lists the record owners of all of the
Existing Shares and the number of Existing Shares owned of record and
beneficially by each such holder. Except where the aggregate effect of any
such noncompliance would not have a Material Adverse Effect or as set forth in
Section 4.4 of the Overseas Disclosure Schedule, Overseas complied with all
applicable federal and state securities Regulations in connection with the
offer and issuance of all of the Existing Shares and there are no rescission
rights relating thereto. Except as set forth in Section 4.4 of the Overseas
Disclosure Schedule, there are no shareholder agreements, agreements among
securityholders, voting trusts or other agreements or understandings to which
Overseas is a party, or, to the knowledge of Overseas, to which any
securityholder of Overseas is a party, including, without limitation, any
agreements or understandings with respect to (i) the voting of the capital
stock of Overseas and of each of the Overseas Subsidiaries, respectively, (ii)
the relative rights and obligations of the securityholders of Overseas and of
each of the Overseas Subsidiaries, respectively, (iii) any buy-sell or rights
of first refusal regarding Overseas and of each of the Overseas Subsidiaries,
respectively, and/or the interests of any securityholders therein, (iv)
relations among the securityholders of Overseas and of each of the Overseas
Subsidiaries, respectively, or (v) representation on Overseas' Board of
Directors or the Board of Directors of any of the Overseas Subsidiaries.
4.5 Financial Statements. Overseas has delivered to EMAC complete
copies of the financial statements of Overseas consisting of a balance sheet
as of December 31, 1993, 1994 and 1995 and the related statements of income,
shareholders' equity and cash flows for the periods then ended, and the
footnotes thereto (to which the representations and warranties contained in
this Agreement shall be qualified and subject), which financial statements
have been audited by the firm of Price Waterhouse LLP. All such audited
financial statements (including the footnotes thereto), together with the
financial statements referred to in Section 6.10 (when delivered) (including
the footnotes thereto), are referred to herein collectively as the "Overseas
Financial Statements." The Overseas Financial Statements fairly present in
conformity with GAAP applied on a consistent basis the financial position and
assets and liabilities of Overseas as of the dates thereof and Overseas'
results of operations and cash flows for the periods then ended (on a
consolidated basis in the case of the financial statements referred to in
Section 6.10), except for normal year-end adjustments and accruals in the case
of the unaudited financial statements to be delivered under Section 6.10. The
audited balance sheet as of December 31, 1995 is referred to herein as the
"Overseas Balance Sheet," and December 31, 1995 is referred to herein as the
"Overseas Balance Sheet Date."
4.6 Title to Assets and Related Matters. Overseas and each of the
Overseas Subsidiaries, respectively, has good and marketable title to, or
valid leasehold interests in, all of its tangible personal property which have
a cost or fair market value equal to or in excess of $10,000, free from any
Encumbrances except those specified in Section 4.6 of the Overseas Disclosure
Schedule and any Encumbrances (including for this purpose, defects of title)
that, in the aggregate, are not material to Overseas and the Overseas
Subsidiaries, taken as a whole. All tangible personal property of Overseas and
each of the Overseas Subsidiaries, respectively, is generally suitable for the
purposes for which it is used, free from any known defects, except such
defects that, in the aggregate, would not have a Material Adverse Effect.
Neither Overseas nor any of the Overseas Subsidiaries owns any Real Property.
4.7 Real Property Leases. Section 4.7 of the Overseas Disclosure
Schedule lists all real estate leased by Overseas and each of the Overseas
Subsidiaries, respectively, and contains a general description of the
improvements (including buildings and other structures)
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located on such real estate (collectively, the "Real Property"). Section 4.7
of the Overseas Disclosure Schedule lists any leases under which any such Real
Property is possessed (the "Real Estate Leases"). To the knowledge of Overseas
and the Overseas Stockholders, except as set forth in Section 4.7 of the
Overseas Disclosure Schedule, (i) neither Overseas nor any of the Overseas
Subsidiaries, respectively, is currently in Default under any of the Real
Estate Leases, and (ii) neither Overseas nor the Overseas Stockholders is
aware of any Default by any of the lessors thereunder, except in the case of
(i) and (ii) such Defaults that, in the aggregate, would not have a Material
Adverse Effect.
4.8 Personal Property. Overseas has delivered to EMAC a fixed asset
schedule, describing all material items of tangible personal property of
Overseas that were included in the Overseas Balance Sheet and all items of
tangible personal property of the Overseas Subsidiaries material to Overseas
and the Overseas Subsidiaries, taken as a whole. Except as set forth in
Section 4.8 of the Overseas Disclosure Schedule, since the Overseas Balance
Sheet Date, neither Overseas nor any of the Overseas Subsidiaries,
respectively, has acquired or disposed of any items of tangible personal
property other than (a) items having acquisition costs (per item) of less than
$30,000 or (b) acquisitions or dispositions in the ordinary course. All of
such personal property is in good operating condition, reasonable wear and
tear excepted, except such defects that, in the aggregate, would not have a
Material Adverse Effect.
4.9 Non-Real Estate Leases. Section 4.9 of the Overseas Disclosure
Schedule lists all material tangible Assets (other than Real Property) that
are used as of the date of this Agreement in the operation of the Business and
that are possessed by Overseas and each of the Overseas Subsidiaries,
respectively, under an existing lease, including all machinery, equipment,
fixtures, furniture and computers that are material to the Business. Section
4.9 of the Overseas Disclosure Schedule also lists the leases under which such
assets and property are possessed. All of such leases and any leases of such
types that are entered into after the date of this Agreement are referred to
herein as the "Non-Real Estate Leases." Overseas and each of the Overseas
Subsidiaries, respectively, is not in Default under any of the Non-Real Estate
Leases, and Overseas and each of the Overseas Subsidiaries, respectively, is
not aware of any Default by any of the lessors thereunder, except for such
Defaults that, in the aggregate, would not have a Material Adverse Effect.
4.10 Accounts Receivable. The accounts receivable of Overseas
reflected in the Overseas Balance Sheet are bona fide accounts receivable
created in the ordinary course of business, and, to the knowledge of Overseas
and the Overseas Stockholders, are collectible within periods of time normally
prevailing in the industry at the aggregate recorded amounts thereof, subject
to the allowance for doubtful accounts that is included in the Overseas
Balance Sheet.
4.11 Liabilities. Except as specified in Section 4.11 of the Overseas
Disclosure Schedule, Overseas and each of the Overseas Subsidiaries,
respectively, has no Liabilities, and none of the Assets of Overseas nor any
of the Overseas Subsidiaries, respectively, is subject to any Liabilities,
except (a) to the extent reflected on or provided for in the Overseas Balance
Sheet, (b) intercompany accounts, (c) Liabilities which are not material
either
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individually or in the aggregate, and which are not required to be reflected
on or provided for on the Overseas Balance Sheet, (d) Liabilities incurred
since the Overseas Balance Sheet Date that, individually or in the aggregate,
are not material to the Business of Overseas or the material Assets, (e)
Liabilities under any Contracts that were not required under GAAP to have been
specifically disclosed or reserved for on the Overseas Balance Sheet, (f)
Liabilities under, or contemplated by, or in connection with this Agreement,
(g) Liabilities incurred after the Overseas Balance Sheet Date that are not
prohibited by Section 6.1, (h) Liabilities incurred since the Overseas Balance
Sheet Date that are approved in writing by EMAC, (i) deferred federal tax
liabilities accruable on termination of the status of Overseas as a Subchapter
S corporation under the Code, and (j) Liabilities which accrue as a function
of the licensing, sale or collection of the Overseas Film Library or any
Assets therein or related thereto, and (k) Liabilities incurred after the
Overseas Balance Sheet Date that are reflected on or provided for in the
Overseas March 31, 1996 or June 30, 1996 Balance Sheet.
4.12 Taxes. Except as set forth in Section 4.12 of the Overseas
Disclosure Schedule, Overseas and each of the Overseas Subsidiaries,
respectively, (a) has duly filed all foreign, federal, state, local and other
Tax returns that are required to be filed and that were due, and (b) has paid,
or set up an adequate reserve for the payment of, all material Taxes with
respect to all periods through December 31, 1995; provided, however, that Tax
or Taxes for purposes of this sentence shall not include any Federal, state,
local or foreign income, profits or franchise taxes (an "Income Tax") assessed
against the Company for a period prior to January 1, 1996, to the extent that
it is reasonable to expect that as a result of such assessment the Company
will obtain an increase in deductions or tax credits or a decrease in income
or profits for purposes of such Income Tax for a period after December 31,
1995. Except as set forth in Section 4.12 of the Overseas Disclosure Schedule,
all Taxes and other assessments and levies that Overseas and each of the
Overseas Subsidiaries, respectively, has been required by law to withhold or
to collect for periods prior to December 31, 1995 have been duly withheld and
collected and have been paid over to the proper governmental authorities or
are properly held by Overseas and each of the Overseas Subsidiaries,
respectively, for such payment. Except as set forth in Section 4.12 of the
Overseas Disclosure Schedule, there are no proceedings or other actions
pending, and to the knowledge of Overseas and the Overseas Stockholders, no
proceedings or other actions threatened, for the assessment and collection of
additional taxes of any kind for any period for which returns have or should
have been filed. For purposes of this Agreement, the term "Tax" or "Taxes"
shall include all Federal, state, local, and foreign income, profits,
franchise, gross receipts, payroll, sales, employment, use, property,
withholding, excise and other Taxes, duties and governmental assessments of
any nature whatsoever imposed upon Overseas or any of the Overseas
Subsidiaries (but not the Overseas Stockholders or William F. Lischak)
together with all interest, penalties and additions imposed with respect to
such amounts.
4.13 Subsidiaries. Except as specified in Section 4.13 of the
Overseas Disclosure Schedule, Overseas does not own, directly or indirectly,
any interest or investment (whether equity or debt) in any corporation,
partnership, business, trust, joint venture or other legal entity.
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4.14 Legal Proceedings and Compliance with Law.
(a) Except as disclosed in Section 4.14(a) of the Overseas
Disclosure Schedule, there is no Litigation that is pending or, to Overseas'
and the Overseas Stockholders' knowledge, threatened against Overseas or any
of the Overseas Subsidiaries, respectively, except any threatened Litigation
that, individually or in the aggregate, would not have a Material Adverse
Effect. Neither Overseas nor any of the Overseas Subsidiaries is in Default
under any applicable Regulations, except for any Defaults that would not have
a Material Adverse Effect. Neither Overseas nor any of the Overseas
Subsidiaries is in Default with respect to any applicable Court Order.
(b) Overseas and each of the Overseas Subsidiaries,
respectively, has obtained and is in full compliance with all governmental
permits, licenses, registrations, certificates of occupancy, approvals and
other authorizations that are required for the complete operation of the
Business of Overseas and each of the Overseas Subsidiaries, respectively, as
currently operated, except such items as to which the failure to obtain or to
comply, in the aggregate, would not have a Material Adverse Effect (the
"Governmental Permits"). All of the Governmental Permits are listed in Section
4.14(b) of the Overseas Disclosure Schedule, along with their respective
expiration dates. All of the Governmental Permits are currently valid and in
full force, and to the knowledge of Overseas and the Overseas Stockholders, no
revocation, cancellation or withdrawal thereof has been threatened.
(c) To the best of the knowledge of Overseas and the
Overseas Stockholders, neither Overseas nor any of the Overseas Subsidiaries,
nor any of their officers or directors is the subject of any investigation,
inquiry or proceeding before the Securities and Exchange Commission or any
state securities commission.
4.15 Contracts.
(a) Section 4.15 of the Overseas Disclosure Schedule lists
each Contract of the following types to which Overseas and each of the
Overseas Subsidiaries, respectively, as of the date of this Agreement, is a
party, or by which it is bound, excluding (x) any Contract relating to any
item in the Overseas Film Library (including, without limitation, any Contract
relating to the development, production, distribution, exploitation,
acquisition, or licensing of Overseas Films, the Overseas Film Library or any
component thereof), (y) any Contract that may be terminated by Overseas or any
of the Overseas Subsidiaries, respectively, on not more than one month's
notice without any liability on the part of Overseas or any of the Overseas
Subsidiaries, respectively, and (z) any Contract under which the executory
obligation (including any remaining payments) of Overseas or any of the
Overseas Subsidiaries, respectively, involves an amount or, in the case of
security agreements, secures an amount, of less than $50,000 (such excluded
Contracts referred to in clauses (y) and (z) are referred to in this Section
4.15 collectively as "Overseas Minor Contracts") and excluding this Agreement,
the Transaction Documents and the other Contracts expressly referred to
herein:
(i) Contracts with any present or former
securityholder, director, officer,
employee, partner or consultant of
Overseas or any of
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the Overseas Subsidiaries, respectively, or
Affiliate thereof, including, without
limitation, registration rights agreements,
indemnification agreements, shareholder
agreements and voting agreements;
(ii) Contracts for the future purchase of, or
payment for, supplies or products, or for
the lease of any material Asset from or
the performance of services by a third
party;
(iii) Contracts to perform services;
(iv) Contracts to lease to or to operate for
any other party any material Asset;
(v) Any notes, debentures, bonds, conditional
sale agreements, equipment trust
agreements, letter of credit agreements,
reimbursement agreements, loan agreements,
security agreements or other Contracts for
the borrowing or lending of money or
security therefor (including loans to or
from officers, directors, partners,
stockholders or Affiliates of Overseas or
any of the Overseas Subsidiaries, or any
members of their immediate families),
agreements or binding arrangements for a
line of credit or for a guarantee of, or
other binding undertaking in connection
with, the indebtedness of any other
Person;
(vi) Any other Contracts (other than Overseas
Minor Contracts, Contracts excluded by
4.15(a)(x) and those Contracts described
in any of (i) through (v) above) not made
in the ordinary course of business.
(b) To Overseas' and the Overseas Stockholders' knowledge,
neither Overseas nor any of the Overseas Subsidiaries is in Default under any
Contract, which Default, together with all other such Defaults under
Contracts, would result in a Material Adverse Effect. Neither Overseas nor any
of the Overseas Subsidiaries has received any written communication from, or
given any written communication to, any other party indicating that Overseas
or such other party, as the case may be, is in Default under any Contract
where such Default is reasonably likely to have a Material Adverse Effect.
Overseas and each of the Overseas Subsidiaries has delivered or made available
to EMAC or its counsel true and complete copies of all Contracts identified on
the Overseas Disclosure Schedule.
4.16 Insurance. Section 4.16 of the Overseas Disclosure Schedule
lists all policies or binders of insurance held by or on behalf of Overseas
and each of the Overseas Subsidiaries or relating to the Business or any of
its Assets, as of the date of this Agreement, and the Overseas Disclosure
Schedule specifies with respect to each policy the insurer, the amount of the
coverage, the type of insurance, the expiration date, the policy number and
any
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pending claims thereunder. To Overseas' and the Overseas Stockholders'
knowledge, there is no Default with respect to any such policy or binder, nor
has there been any failure by Overseas or any of the Overseas Subsidiaries to
give any notice or present any claim under any such policy or binder with
respect to a known claim in a timely fashion or in the manner or detail
required by the policy or binder, except for any of the foregoing that would
not, individually or in the aggregate, have a Material Adverse Effect. There
is no notice of nonrenewal or cancellation with respect to, or disallowance of
any claim under, any such policy or binder that has been received by Overseas
or any of the Overseas Subsidiaries, respectively, except for any of the
foregoing that would not, individually or in the aggregate, have a Material
Adverse Effect.
4.17 Intellectual Property.
(a) Section 4.17 of the Overseas Disclosure Schedule sets
forth all trademarks, servicemarks, trade names, patents, and all applications
therefor, owned by Overseas or any of the Overseas Subsidiaries, respectively
(the "Intellectual Property"). Except as set forth in Section 4.17 of the
Overseas Disclosure Schedule, all of the Intellectual Property is owned or
otherwise lawfully used by Overseas or any of the Overseas Subsidiaries,
respectively, except where the failure to own or use such Intellectual
Property would not have a Material Adverse Effect, and, to the knowledge of
Overseas and the Overseas Stockholders, Overseas' and each of the Overseas
Subsidiaries' use of the Intellectual Property does not infringe upon or
unlawfully or wrongfully use any trademark, trade name, service mark, or
patent owned or claimed by another Person or knows of any infringement or
unlawful use by another person of any of the Intellectual Property. Neither
Overseas nor any of the Overseas Subsidiaries is in Default, except for any
Default that would not have a Material Adverse Effect, and has not received
any notice of any claim of infringement or any other claim or proceeding, with
respect to any such Intellectual Property. No current or former employee of
Overseas or any of the Overseas Subsidiaries, and to the knowledge of the
Overseas Stockholders no other Person owns or has any proprietary, financial
or other interest, direct or indirect, in whole or in part, in any of the
Intellectual Property, or in any application therefor except for such interest
that may arise by virtue of such person's ownership (in whole or in part) of
any Affiliate of Overseas or any of the Overseas Subsidiaries.
(b) To Overseas' and the Overseas Stockholders' knowledge,
no employee or consultant of Overseas or any of the Overseas Subsidiaries is
subject to any agreement (other than agreements with Overseas) limiting the
freedom of such employee to compete in any line of business similar to
Overseas' Business, with any person or entity, in any geographic area.
4.18 Employee Relations. Neither Overseas nor any of the Overseas
Subsidiaries is (a) a party to, involved in or, to Overseas' or the Overseas
Stockholders' knowledge, threatened by, any labor dispute or unfair labor
practice charge or (b) currently negotiating any collective bargaining
agreement, and neither Overseas nor any of the Overseas Subsidiaries,
respectively, has experienced any work stoppage during the last three years.
Overseas has delivered to EMAC a complete and correct list of the names and
1995 and 1996
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salaries, bonus and other cash compensation of all employees (including
officers) of Overseas and each of the Overseas Subsidiaries, respectively,
whose total cash compensation for 1995 exceeded, or whose total compensation
for 1996 is expected to exceed, $60,000.
4.19 ERISA.
(a) Section 4.19 of the Overseas Disclosure Schedule
contains a complete list of all Benefit Plans sponsored or maintained by
Overseas and each of the Overseas Subsidiaries, respectively, or under which
they may be obligated. Overseas has delivered to EMAC or EMAC has had access
to (i) accurate and complete copies of all Benefit Plan documents and all
summary plan descriptions, summary annual reports and insurance contracts, if
any (ii) accurate and complete summaries of all unwritten Benefit Plans, (iii)
accurate and complete copies of the most recent financial statements and
actuarial reports with respect to all Benefit Plans for which financial
statements or actuarial reports are required or have been prepared and (iv)
accurate and complete copies of all annual reports for all Benefit Plans (for
which annual reports are required) prepared within the last three years. Each
Benefit Plan providing benefits that are funded through an insurance policy is
indicated by the word "insured" placed next to the listing of said Benefit
Plan in Section 4.19 of the Overseas Disclosure Schedule.
(b) All Benefit Plans conform (and at all times have
conformed) in all material respects to, and are being administered and
operated (and have at all time been administered and operated) in material
compliance with, the requirements of ERISA, the Code and all other applicable
Regulations. All returns, reports and disclosure statements required to be
made under ERISA and the Code with respect to all Benefit Plans have been
timely filed or delivered. There have not been any "prohibited transactions,"
as such term is defined in Section 4975 of the Code or Section 406 of ERISA
involving any of the Benefit Plans, that could subject Overseas or any of the
Overseas Subsidiaries to any material penalty or Tax imposed under the Code or
ERISA.
(c) Except as is set forth in Section 4.19 of the Overseas
Disclosure Schedule, any Benefit Plan that is intended to be qualified under
Section 401(a) of the Code and exempt from Tax under Section 501(a) of the
Code has been determined by the Internal Revenue Service ("IRS") to be so
qualified, and such determination remains in effect and has not been revoked.
To the knowledge of Overseas and the Overseas Stockholders, nothing has
occurred since the date of any such determination that is reasonably likely to
affect adversely such qualification or exemption, or result in the imposition
of excise Taxes or income Taxes on unrelated business income under the Code or
ERISA with respect to any Benefit Plan.
(d) Neither Overseas nor any of the Overseas Subsidiaries
has a defined benefit plan subject to Title IV of ERISA. Neither Overseas nor
any of the Overseas Subsidiaries has a current or contingent obligation to
contribute to any multiemployer plan (as defined in Section 3(37) of ERISA).
For purposes of this Section 4.19(d), the term "Overseas" and the "Overseas
Subsidiaries" shall include any corporation that is a member of any controlled
group of corporations (as defined in Section 414(b) of the Code) that includes
Overseas or any of the Overseas Subsidiaries, any trade or business (whether
or not
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incorporated) that is under common control (as defined in Section 414(c) of
the Code) with Overseas or any of the Overseas Subsidiaries, any organization
(whether or not incorporated) that is a member of an affiliated service group
(as defined in Section 414(m) of the Code) that includes Overseas or any of
the Overseas Subsidiaries and any other entity required to be aggregated with
Overseas or any of the Overseas Subsidiaries pursuant to the regulations
issued under Section 414(o) of the Code.
(e) There are no pending or, to the knowledge of Overseas or
the Overseas Stockholders, threatened claims by or on behalf of any Benefit
Plans, or by or on behalf of any individual participants or beneficiaries of
any Benefit Plans, alleging any breach of fiduciary duty on the part of
Overseas or any of the Overseas Subsidiaries, or any of their officers,
directors or employees under ERISA or any other applicable employee benefit
plan regulations, or claiming benefit payments other than those made in the
ordinary operation of such plans, nor is there, to the knowledge of Overseas
and the Overseas Stockholders, any basis for such claim. To the knowledge of
Overseas, the Benefit Plans are not the subject of any investigation, audit or
action by the IRS, the Department of Labor or the Pension Benefit Guaranty
Corporation ("PBGC").
(f) Overseas and each of the Overseas Subsidiaries,
respectively, has made all required contributions under the Benefit Plans
including the payment of any premiums payable to the PBGC and other insurance
premiums.
(g) Except as set forth in Section 4.19(g) of the Overseas
Disclosure Schedule, with respect to any Benefit Plan that is an employee
welfare benefit plan (within the meaning of Section 3(l) of ERISA) (a "Welfare
Plan"), (i) each Welfare Plan for which contributions are claimed as
deductions under any provision of the Code is in material compliance with all
applicable requirements pertaining to such deduction, (ii) with respect to any
welfare benefit fund (within the meaning of Section 419 of the Code) related
to a Welfare Plan, there is no disqualified benefit (within the meaning of
Section 4976(b) of the Code) that would result in the imposition of a Tax
under Section 4976(a) of the Code, (iii) any Benefit Plan that is a group
health plan (within the meaning of Section 498OB(g)(2) of the Code) complies,
and in each and every case has complied, with all of the material requirements
of Section 4980B of the Code, ERISA, Title XXII of the Public Health Service
Act and the applicable provisions of the Social Security Act and (iv) all
Welfare Plans may be amended or terminated at any time on or after the Closing
Date, except in the case of (i), (ii), (iii) and (iv) where such
noncompliance, imposition of a Tax, amendment or termination would not have a
Material Adverse Effect.
4.20 Corporate Records. The minute books of Overseas and each of the
Overseas Subsidiaries, respectively, contain complete, correct and current
copies of its Certificate of Incorporation and bylaws, or other comparable
organizational documents with respect to any foreign corporation, and, in all
material respects, of all minutes of meetings, resolutions and other official
proceedings of its Board of Directors and stockholders. The stock record list
of Overseas is complete, correct and current.
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4.21 Absence of Certain Changes. Except as set forth in Section 4.21
of the Overseas Disclosure Schedule, since the Overseas Balance Sheet Date,
Overseas and each of the Overseas Subsidiaries, respectively, has generally
conducted its Business in the ordinary course and there has not been:
(a) any material adverse change in its Business;
(b) any distribution or payment declared or made in respect
of its capital stock by way of dividends (other than dividends on the Overseas
Shares in accordance with the business practice of Overseas), purchase or
redemption of shares or otherwise;
(c) any increase in the compensation payable or to become
payable to any director, officer, employee or agent, except for merit and
seniority increases for employees made in the ordinary course of business and
in the aggregate not exceeding $50,000 on an annualized basis, nor any other
change in any employment or consulting arrangement that is material;
(d) any material sale, assignment or transfer of Assets, or
any additions to or transactions involving any material Assets, other than
those made in the ordinary course of business;
(e) other than in the ordinary course of business, any
waiver or release of any claim or right or cancellation of any material debt
held; or
(f) any payments to any Affiliate of Overseas or any of the
Overseas Subsidiaries other than compensation, reimbursements of expenses or
other payments in the ordinary course of business.
4.22 Finder's Fees. Except as set forth in Section 4.22 of the
Overseas Disclosure Schedule, neither Overseas nor any of the Overseas
Subsidiaries is, nor will any of them be, obligated to pay to any Person
retained by it any commission or finder's or similar fee in connection with
the Transactions.
4.23 Accuracy of Information. No representation or warranty by
Overseas or any Overseas Stockholder in any Transaction Document, including in
any schedules and exhibits thereto, contains any untrue statement of a
material fact or, taken together with all Transaction Documents, omits to
state any material fact necessary in order to make the statements made herein
or therein, in light of the circumstances under which they were made, not
misleading.
4.24 Overseas Disclosure Schedule. The Overseas Disclosure Schedule
as in effect on the date of this Agreement (the "Original Overseas Disclosure
Schedule") shall be amended as of the Closing Date to be true and correct as
of the Closing Date and a copy thereof, as so amended (the "Closing Overseas
Disclosure Schedule"), certified by the President of Overseas to be true and
correct, shall be delivered to EMAC on the Closing Date. Any disclosure made
pursuant to any Section of this Article IV or the Overseas
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Disclosure Schedule (Original or Closing) will be deemed made as to the other
Sections in this Article IV to which it applies if the import of the
disclosure to such other Sections is reasonably ascertainable on its face to a
person who is not familiar with the affairs of Overseas.
4.25 Certain Business Relationships with Affiliates. Except as set
forth in Schedule 4.25, or except for any transaction among Overseas and any
Subsidiaries of Overseas or any transaction among Subsidiaries of Overseas, no
Affiliate of Overseas or of any Overseas Subsidiary (a) owns any property or
right, tangible or intangible, which is used in the business of Overseas or
any Overseas Subsidiary, (b) has any claim or cause of action against Overseas
or any Subsidiary, or (c) owes any money to Overseas or any Overseas
Subsidiary where such property, claim, cause of action or debt is in excess of
$25,000.
4.26 Overseas Film Library.
(a) As used herein, (i) "Selected Films" shall mean the
thirty-four motion pictures listed on Schedule 4.26(a) hereto, (ii) "Major
Media" shall mean theatrical, free and pay television and home video, (iii)
"Selected Contract" shall mean an executory acquisition/distribution Contract
to which Overseas, as of the date of this Agreement, is a party under which
Overseas acquires copyright rights, distribution rights and/or agency rights
in the Major Media with respect to the Selected Films from third parties
(other than Overseas Minor Contracts as defined in Section 4.15), and (iv)
"Gross Participations" shall mean participations granted by Overseas to a
third party with respect to a Selected Film, which are measured as a
percentage of gross receipts of a licensee from exploitation by such licensee
of the Selected Film in a particular media and which arise at a time prior to
Overseas' sharing in such gross receipts from exploitation of the Selected
Film in such media. Schedule 4.26(b) contains a list of the Selected
Contracts.
(b) Notwithstanding anything else contained in this
Agreement to the contrary (and subject to the references to Section 4.10 of
this Agreement in subsection (d) below), the parties hereto acknowledge and
agree that the only representations or warranties made by Overseas or the
Overseas Stockholders in this Agreement, the Transaction Documents or
otherwise with respect to the Film Library (as defined below) owned,
controlled or distributed by Overseas, in whole or in part (the "Overseas Film
Library"), the components thereof, Contracts related thereto, or the
Intellectual Property contained therein, are the representations and
warranties set forth in this Section 4.26, and no other representations or
warranties with respect to the Overseas Film Library, the components thereof,
Contracts related thereto, or Intellectual Property contained therein, are set
forth in this Agreement, or in any of the Transaction Documents or in any
other agreements nor shall any such representations or warranties be implied
by operation of law or otherwise. As used herein, "Film Library" shall mean
all full-length theatrical motion pictures, shorts, cartoons, trailers, short
subjects, television programs or series of all kinds, made-for-television
features, and all other audiovisual works of any kind or character, and all
other rights associated therewith, together with all negative and positive
film, soundtracks, optical and advertising materials and supplies associated
therewith and rights in underlying rights in and to literary, musical and
dramatic material, including, without limitation, all sequel and remake rights
and
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all rights to novelization, merchandising, characters and serialization
customarily associated in the motion picture production and distribution
industry as being a part of a film library, and also including, but not
limited to, the right to receive royalties, revenues, and profits of every
kind.
(c) To the best knowledge and belief of Overseas and the
Overseas Stockholders, Schedule 4.26(c) hereto lists all motion pictures which
Overseas owns or has any rights to distribute, license or sublicense excluding
motion pictures for which Overseas does not have any rights in the Major Media
and the failure of which to include in such list would not have a Material
Adverse Effect. The motion pictures listed on Schedule 4.26(c) are referred to
herein as the "Overseas Films." Schedule 4.26(d) hereto lists all copyrights
which Overseas owns.
(d) To Overseas' and the Overseas Stockholders' actual
knowledge, Overseas is not in Default under any Selected Contract, which
Default would result in a Material Adverse Effect. Except as set forth in
Schedule 4.26(e), no executive officer of Overseas has, within the twelve
months preceding the date of this Agreement, received any written
communication from, or given any written communication to, any other party to
a Selected Contract (other than Selected Contracts for which accounts
receivable related thereto are covered by the representations and warranties
contained in Section 4.10 herein) expressly indicating that Overseas or such
other party, as the case may be, has breached or violated or is in default
under such Selected Contract (other than breaches, violations or defaults
relating to the past due payment of money) where such breach, violation or
default is reasonably likely to have a Material Adverse Effect. Nothing in the
foregoing sentence shall be deemed to broaden or expand, in any manner
whatsoever, the representations and warranties contained in Section 4.10
herein. Overseas has delivered or made available to EMAC or its counsel true
and complete copies of all Selected Contracts.
(e) Schedule 4.26(f) hereto contains a general summary by
Overseas (commonly referred to by Overseas as its "Master Avail") of rights in
the Major Media licensed by Overseas to third parties with respect to the
Selected Films, including the territories licensed, the name of the licensee,
the licensed rights and the duration of such licensed rights. Overseas has
reviewed such Schedule in good faith and believes it to be an accurate
summary; however, the parties hereto acknowledge and agree that such summary
is meant to be a general summary only.
(f) Except as disclosed in Schedule 4.26(g), (i) there is no
suit, action or proceeding pending against Overseas, or to the actual
knowledge of Overseas, threatened against Overseas that involves a claim of
infringement of any copyright with respect to any Overseas Film, and (ii)
Overseas has no actual knowledge of any existing infringement by any other
person of any copyright held by Overseas with respect to any Overseas Film
except in the case of (i) and (ii), suits, actions, proceedings, existing
infringement and claims of infringement which would not have a Material
Adverse Effect.
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(g) Overseas has in full force and effect one or more valid,
blanket "errors and omissions" policy(ies) of insurance. True and complete
copies of such blanket policy(ies) are attached hereto as Schedule 4.26(h).
(h) Overseas has not granted Gross Participations with
respect to the Selected Films other than as listed on Schedule 4.26(i) or such
Gross Participations as would not have a Material Adverse Effect.
(i) To Overseas' and the Overseas Stockholders' knowledge,
Overseas holds the rights to the Overseas Films which it purports to hold
necessary for the operation of Overseas' Business, including, but not limited
to, proprietary rights, copyright rights, distribution rights and/or agency
rights (except where the failure to hold such rights would not have a Material
Adverse Effect), and, to the knowledge of Overseas and the Overseas
Stockholders, no Person has any conflicting rights to the Overseas Films that
would have a Material Adverse Effect.
4.27 Representations and Warranties of the Stockholders of
Overseas. Each of the stockholders of Overseas, which for purposes of this
Section 4.27 only, shall include Ellen Dinerman Little, Robert B. Little and
William F. Lischak, hereby, severally but not jointly, represents and warrants
to EMAC that:
(a) Except as set forth on Schedule 4.27, such stockholder
of Overseas has, and on the Closing Date will have, good and valid title to
the Existing Shares owned by such stockholder as specified on Schedule 4.4,
free and clear of all liens, pledges, encumbrances and claims whatsoever and
the full right, power and authority to deliver such Existing Shares for
conversion in the Merger.
(b) Purchase Entirely for Own Account. The Merger Shares to
be received by such stockholder of Overseas will be acquired for investment
for such stockholder's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof, and that such
stockholder has no present intention of selling, granting any participation
in, or otherwise distributing the same. By executing this Agreement, such
stockholder of Overseas further represents that, except as set forth on
Schedule 4.27, he or she does not have any contract, undertaking, agreement or
arrangement with any Person to sell, transfer or grant participations to such
Person or to any third person, with respect to any of the Merger Shares except
for wills, estate planning documents and the Lock-up and Registration Rights
Agreement.
(c) Disclosure of Information. Such stockholder represents
that he or she has had an opportunity to ask questions and receive answers
from EMAC regarding the terms and conditions of the offering of the Merger
Shares and the business, properties, prospects and financial condition of
EMAC. Nothing in the foregoing or any other provision of this Section 4.27,
however, limits or amends or modifies in any manner whatsoever the
representations and warranties of EMAC in the Transaction Documents,
including, without limitation, Article V of this Agreement or the right of
Overseas or such stockholder of Overseas to rely thereon, nor does the
foregoing affect in any manner whatsoever the
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indemnification obligations of EMAC and the other rights and remedies of such
stockholders and Overseas contained herein in the Transaction Documents, at
law, in equity or otherwise.
(d) Investment Experience. Such stockholder of Overseas
acknowledges that he or she is able to fend for himself or herself, can bear
the economic risk of his or her investment in the Merger Shares, and has such
knowledge and experience in financial and business matters that he or she is
capable of evaluating the merits and risks of an investment in the Merger
Shares.
(e) Restricted Securities. Such stockholder of Overseas
understands that the Merger Shares he or she is acquiring are characterized as
"restricted securities" under the federal securities laws inasmuch as they are
being acquired from EMAC in a transaction not involving a public offering and
that, under such laws and applicable regulations, such securities may be
resold without registration under the Securities Act only in certain limited
circumstances. In this connection, such stockholder represents that he or she
is familiar with SEC Rule 144, as presently in effect, and understands the
resale limitations imposed thereby and by the Securities Act.
(f) In the Event that the transfer agent of the Surviving
Corporation requires an opinion from the attorneys of the Overseas
Stockholders concerning the compliance of any sale of EMAC Common Stock by the
Overseas Stockholders with relevant securities laws, the Overseas Stockholders
shall cause such opinion to be provided; provided, however, that the Surviving
Corporation shall pay for such opinion.
(g) Disposition of Merger Shares. Without in any way
limiting the representations set forth above, such stockholder of Overseas may
dispose of all or any portion of the Merger Shares provided that the
disposition is permitted by state and federal securities law, and the
disposition is not otherwise restricted by the Lock-Up (as such term is
defined in the Lock-Up and Registration Rights Agreement).
(h) Legends. It is understood that the certificates
evidencing the Merger Shares may bear one or all of the following legends:
(i) "These securities have not been registered
under the Securities Act of 1933, as amended. They may not be sold, offered
for sale, pledged or hypothecated in the absence of a registration statement
in effect with respect to the securities under such Act or an opinion of
counsel reasonably satisfactory to the company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
(ii) The shares represented by this certificate
are subject to certain restrictions upon transfer as set forth in an agreement
dated ________, between the corporation and the registered holder, a copy of
which is on file at the principal office of the corporation.
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The Company will promptly remove the foregoing legends from
the certificates representing Merger Shares upon written request from the
holder thereof, provided that such legends are no longer required by
applicable law or agreement.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF EMAC
EMAC hereby represents and warrants to Overseas and the Overseas
Stockholders as follows:
5.1 Corporate Status. EMAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. EMAC is
qualified to do business as a foreign corporation in California and in any
other jurisdictions where it is required to be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect. The
Certificate of Incorporation and bylaws of EMAC that have been delivered to
Overseas and the Overseas Stockholders have been duly adopted and are current,
correct and complete.
5.2 Authorization. EMAC has the requisite power and authority to
execute and deliver the Transaction Documents to which it is or will be a
party and to perform the Transactions to be performed by it. Such execution,
delivery and performance by EMAC have been duly authorized by all necessary
corporate action including approval of the Board of Directors of EMAC, except
for approval by the holders of EMAC stock (the "EMAC Stockholders") required
by EMAC's Certificate of Incorporation and the DGCL, which will be solicited
in accordance with the provisions thereof, Section 7.2 of this Agreement, and
all applicable state and federal law. Upon receipt of EMAC Stockholder
approval in accordance with Section 7.2 hereof, such execution, delivery and
performance by EMAC will have been duly authorized by all necessary corporate
action. The Transaction Documents to be executed and delivered by EMAC have
been, or will be on the Closing Date, duly and validly executed and delivered.
The Transaction Documents executed on or before the date hereof constitute,
and the Transaction Documents to be executed after the date hereof will
constitute, legally valid and binding obligations of EMAC, enforceable in
accordance with their respective terms, except that the remedies of specific
performance, injunction and other forms of equitable relief are subject to
certain tests of equity jurisdiction, equitable defenses and the discretion of
the court before which any proceeding may be brought.
5.3 Consents and Approvals. Neither the execution and delivery by
EMAC of the Transaction Documents to which it is or will be a party, nor the
performance of the Transactions to be performed by EMAC, will require any
filing, consent or approval or constitute a Default under (a) any Regulation
or Court Order to which EMAC is subject, (b) the Certificate of Incorporation
or bylaws of EMAC or (c) any Contract, Governmental Permit or other document
to which EMAC is a party or by which the properties or other assets of EMAC
may be subject, other than (i) the approval of the Merger Agreement by not
less than 80% of the shares of EMAC Common Stock issued and outstanding on the
record date for the EMAC Stockholders Meeting (as defined in Section 7.2)
which are held by EMAC
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Stockholders other than those Persons listed in Section 5.3 of the EMAC
Disclosure Schedule (the "Initial EMAC Stockholders"); (ii) the approval of
the EMAC Option Plans by a majority of the shares of EMAC Common Stock issued
and outstanding on such record date; (iii) the filing of the Certificate of
Merger in accordance with the DGCL; (iv) compliance with any applicable
requirements of the Securities Act and securities laws of the various states
in connection with the issuance of the Merger Shares; and (v) compliance with
any applicable requirements of the Securities Exchange Act of 1934, as
amended, and the Regulations promulgated thereunder (the "Exchange Act") in
connection with the solicitation of the approval of the EMAC Stockholders, and
except in those cases under (a), (b) and (c) above where the aggregate effect
of any such Defaults would not have a Material Adverse Effect.
5.4 Capitalization and Stock Ownership.
(a) The total authorized capital stock of EMAC consists of
20,000,000 shares of EMAC Common Stock, 2,600,000 shares of which are issued
and outstanding, and 1,000,000 shares of preferred stock, $0.001 par value per
share, none of which is issued and outstanding. EMAC does not have any shares
of capital stock that are issued and held by EMAC as treasury stock. Except as
specified in Section 5.4(a) of the EMAC Disclosure Schedule, there are no
existing options, warrants, calls, subscriptions, commitments, arrangements or
other rights of any character (including conversion or preemptive rights)
relating to the issuance, acquisition or registration of any issued or
unissued capital stock or other securities of EMAC. All of the outstanding
shares of EMAC Common Stock are duly and validly authorized and issued, fully
paid and non-assessable. All of the outstanding options, warrants and units to
purchase EMAC securities have been duly and validly authorized and issued and
sufficient numbers of shares of EMAC Common Stock have been reserved for
issuance upon exercise of such securities. EMAC has complied with all
applicable Regulations in connection with the offer, sale and issuance of all
of the shares of EMAC Common Stock, options and warrants to purchase shares of
EMAC Common Stock and EMAC Units issued by EMAC since its formation, except
where the aggregate effect of any such noncompliance would not have a Material
Adverse Effect. All outstanding shares of EMAC Common Stock and all
outstanding EMAC Warrants were issued pursuant to a registration statement
declared effective under the Securities Act. There are no rescission rights
relating to any of the securities of EMAC. Except as set forth in Section
5.4(a) of the EMAC Disclosure Schedule, there are no shareholder agreements,
agreements among securityholders, voting trusts or other agreements or
understandings to which EMAC is a party, or, to EMAC's knowledge, to which any
securityholder of EMAC is a party, including without limitation, any
agreements or understandings with respect to (i) the voting of the capital
stock of EMAC, (ii) the relative rights and obligations of the securityholders
of EMAC, (iii) any buy-sell or rights of first refusal regarding EMAC and/or
the interests of any securityholders therein, (iv) relations among the
securityholders of EMAC, or (v) representation on EMAC's Board of Directors.
(b) All of the Merger Shares will, upon issuance in
accordance with the terms of this Agreement, constitute validly authorized,
issued and outstanding, fully paid and non-assessable shares of EMAC Common
Stock free from all liens, pledges, encumbrances and claims created by, or as
the result of actions of EMAC. Based on the representations
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made by the stockholders of Overseas in Section 4.25 of this Agreement, the
Merger Shares will be issued in compliance with the Securities Act and the
Exchange Act and any and all applicable state "blue sky" or securities laws.
5.5 Financial Statements. The audited consolidated financial
statements and the unaudited consolidated financial statements of EMAC
included in EMAC's Annual Report on Form 10-K and its Quarterly Reports on
Form 10-Q that are referred to in Section 5.6 fairly present, in conformity
with GAAP applied on a consistent basis, the consolidated financial position
and assets and liabilities of EMAC as of the dates thereof and EMAC's
consolidated results of operations and cash flows for the periods then ended
(subject, in the case of any unaudited interim financial statement, to normal,
recurring year-end adjustments that were not material in amount). The balance
sheet of EMAC as of February 29, 1996, which is included in such financial
statements, is referred to herein as the "EMAC Balance Sheet," and the date
thereof is referred to herein as the "EMAC Balance Sheet Date."
5.6 SEC Reports.
(a) EMAC has delivered to Overseas and the Overseas
Stockholders true, correct and complete copies of (i) EMAC's Annual Report on
Form 10-K for the period ended November 30, 1995 (the "Annual Report"), (ii)
EMAC's Quarterly Reports on Form 10-Q for the quarters ended February 28,
1995, May 31, 1995, August 31, 1995 and February 29, 1996, (iii) EMAC's
prospectus, dated February 16, 1995, relating to its initial public offering
of securities, and (iv) all other reports, documents and proxy statements
filed by EMAC under the Securities Act and the Exchange Act (all of such
materials, together with any exhibits, amendments or supplements thereto and
documents incorporated by reference therein, are referred to herein as the
"SEC Reports").
(b) As of its filing date or, if applicable, its effective
date, each SEC Report complied in all material respects with the requirements
of the Regulations applicable to such SEC Report, including the Securities Act
and the Exchange Act.
(c) As of its filing date or, if applicable, its effective
date, each SEC Report filed pursuant to the Securities Act or the Exchange Act
did not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. EMAC
has filed all reports under the Exchange Act that were required to be filed as
of the date hereof and will have filed all such reports required to have been
filed through the Effective Time and has otherwise materially complied with
all requirements of the Securities Act and the Exchange Act.
(d) EMAC is not required to register as an investment
company under the Investment Company Act of 1940.
(e) To the best of the knowledge of EMAC, neither EMAC nor
any of its respective officers or directors is the subject of any
investigation, inquiry or proceeding
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before the SEC or any state securities commission or administrative agency.
5.7 Trust Funds. As of the Effective Time, EMAC will have an amount
invested in government securities or in money market or other cash equivalent
accounts in a trust account (the "Trust Account") with the United States Trust
Company of New York (the "Trust Company") of no less than (i) $10.9 million,
minus (ii) the amount of funds, if any, to be applied to the redemption of
shares of EMAC Common Stock pursuant to Article SIXTH of the EMAC Restated
Certificate of Incorporation as in effect on the date of this Agreement. Upon
consummation of the Merger and notice thereof to the trustee, the trust
account will terminate and the funds and government securities held in such
trust account will be thereupon released to EMAC without any restriction upon
the use thereof and, except as set forth in Section 5.7 of the EMAC Disclosure
Schedule, free from any Encumbrances.
5.8 Fair Market Value. The Board of Directors of EMAC has
determined in good faith that the fair market value of the business of
Overseas is at least 80% of the net assets of EMAC.
5.9 Assets; Leases; Accounts Receivable. Except as set forth on
Schedule 5.9 of the EMAC Disclosure Schedule, EMAC has no Assets other than
cash and cash equivalents and none of such Assets are subject to any
Encumbrances. EMAC is not a party to any Real Estate Leases. To the knowledge
of EMAC, EMAC is not currently in Default under any such Real Estate Leases.
EMAC has no accounts receivable.
5.10 Liabilities. EMAC has no Liabilities and none of the Assets of
EMAC is subject to any Liabilities, except (a) to the extent specifically
disclosed or provided for in the EMAC Balance Sheet, (b) Liabilities incurred
since the EMAC Balance Sheet Date that, individually or in the aggregate, are
not material to EMAC, (c) Liabilities under, contemplated by or in connection
with this Agreement, (d) Liabilities incurred after the date of this Agreement
that are not prohibited by Section 7.1, and (e) Liabilities incurred since the
EMAC Balance Sheet Date that are approved in writing by Overseas.
5.11 Taxes. Except as set forth in Schedule 5.11, EMAC has duly filed
all foreign, federal, state, local and other Tax returns that are required to
be filed and that were due, and has paid all material Taxes and assessments
that have become due pursuant to such returns, pursuant to any assessment
received or are otherwise due or will be due with respect to all periods
through the Effective Date (other than estimated tax payments for 1996 that
are not yet due). All Taxes and other assessments and levies that EMAC has
been required by law to withhold or to collect have been duly withheld and
collected and have been paid over to the proper governmental authorities or
are properly held by EMAC for such payment. There are no proceedings or other
actions pending, and to the knowledge of EMAC, no proceedings or other actions
are threatened, for the assessment and collection of additional Taxes of any
kind for any period for which returns have or should have been filed.
5.12 Subsidiaries. EMAC does not own, directly or indirectly, any
interest or investment (whether equity or debt) in any corporation,
partnership, business, trust, joint
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venture or other legal entity, nor does EMAC have any agreement or obligation
to acquire any such interest or investment.
5.13 Legal Proceedings and Compliance with Law.
(a) There is no Litigation that is pending or, to EMAC's
knowledge, threatened against or related to EMAC. There has been no Default
under any Regulations applicable to EMAC, except for any Defaults that would
not have a Material Adverse Effect. There has been no Default with respect to
any Court Order applicable to EMAC.
(b) No Governmental Permits are required for the complete
operation of the business of EMAC as currently operated.
5.14 Contracts.
(a) Section 5.14 of the EMAC Disclosure Schedule lists each
Contract of the following types to which EMAC, as of the date of this
Agreement, is a party, or by which it is bound, excluding (y) any Contract
that may be terminated by EMAC on not more than one month's notice without any
liability on the part of EMAC and (z) other than with respect to paragraphs
(v) and (vi) below, any Contract under which the executory obligation
(including any remaining payments) of EMAC involves an amount of less than
$25,000 (such excluded Contracts referred to in clauses (y) and (z) are
referred to in this Section 5.14 collectively as "EMAC Minor Contracts") and
excluding this Agreement and the other Contracts expressly referred to herein:
(i) Contracts with any present or former
securityholder, director, officer, employee, partner or
consultant of EMAC or Affiliate thereof including, without
limitation, registration rights agreements, indemnification
agreements, shareholder agreements and voting agreements;
(ii) Contracts for the future purchase of, or
payment for, supplies, or for the lease of any asset from or
the performance of services by a third party;
(iii) Contracts to perform services;
(iv) Contracts to lease to or to operate for any
other party any asset;
(v) Any notes, debentures, bonds, conditional sale
agreements, equipment trust agreements, letter of credit
agreements, reimbursement agreements, loan agreements,
security agreements or other Contracts for the borrowing or
lending of money or security therefor (including loans to or
from officers, directors, partners, stockholders or
Affiliates of EMAC or any members of their immediate
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families), agreements or arrangements for a line of credit
or for a guarantee of, or other undertaking in connection
with, the indebtedness of any other Person;
(vi) Contracts for the acquisition of any business,
corporation, other entity or assets or letters of intent
with respect thereto; and
(vii) Any other Contracts (other than EMAC Minor
Contracts and those described in any of (i) through (vi)
above).
(b) EMAC is not a party to any Contract other than this
Agreement.
(c) To the knowledge of EMAC, EMAC is not in Default under
any Contract, which Default, together with all other such Defaults under
Contracts, could result in a Material Adverse Effect. EMAC has not received
any communication from, or given any communication to, any other party
indicating that EMAC or such other party, as the case may be, is in Default
under any Contract where such Default could have a Material Adverse Effect.
5.15 Insurance. Section 5.15 of the EMAC Disclosure Schedule lists
all policies or binders of insurance held by or on behalf of EMAC or relating
to the Business or Assets of EMAC, as of the date of this Agreement, and the
EMAC Disclosure Schedule specifies with respect to each policy the insurer,
the amount of the coverage, the type of insurance, the risks insured, the
expiration date, the policy number and any pending claims thereunder. To the
knowledge of EMAC, there is no Default with respect to any such policy or
binder, nor has there been any failure to give any notice or present any claim
under any such policy or binder in a timely fashion or in the manner or detail
required by the policy or binder, except for any of the foregoing that would
not, individually or in the aggregate, have a Material Adverse Effect. There
is no notice of nonrenewal or cancellation with respect to, or disallowance of
any claim under, any such policy or binder that has been received by EMAC,
except for any of the foregoing that would not, individually or in the
aggregate, have a Material Adverse Effect.
5.16 Intellectual Property. EMAC does not own or use any trademarks,
servicemarks, trade names, trade secrets, copyrights, patents or any
applications therefor.
5.17 Employee Relations. EMAC is not (a) a party to, involved in or,
to the knowledge of EMAC, threatened by, any labor dispute or unfair labor
practice charge or (b) currently negotiating any collective bargaining
agreement, and EMAC has not experienced any work stoppage during the last
three years. EMAC does not employ any Person nor has EMAC paid any salary,
bonus or other cash compensation to any Person, including officers of EMAC.
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5.18 ERISA. EMAC does not sponsor, maintain nor is it obligated under
any Benefit Plans. EMAC does not have any Contract, plan, trust, program,
policy, arrangement, practice, custom or understanding, in each case whether
formal or informal, that provides benefits of economic value to any present or
former employee or present or former beneficiary, dependent or assignee of any
such employee or former employee which, individually or in the aggregate with
any other thereof, is material.
5.19 Corporate Records. The minute books of EMAC contain complete,
correct and current copies of its Certificate of Incorporation and bylaws and of
all minutes of meetings, resolutions and other proceedings of its Board of
Directors and stockholders.
5.20 Absence of Certain Changes. Since the EMAC Balance Sheet Date,
EMAC has generally conducted its Business in the ordinary course and there has
not been:
(a) any material adverse change in its Liabilities;
(b) any distribution or payment declared or made in
respect of its capital stock by way of dividends, purchase or redemption of
shares or otherwise;
(c) any increase in the compensation payable or to
become payable to any director, officer, employee or agent, nor any other
change in any employment or consulting arrangement that is material;
(d) any sale, assignment or transfer of its Assets, or
any additions to or transactions involving any of its Assets;
(e) any waiver or release of any claim or right or
cancellation of any debt held; or
(f) any payments to any Affiliate of EMAC, except as
specified in Section 5.20 of the EMAC Disclosure Schedule.
5.21 Rule 419. EMAC is not subject to the provisions of Rule 419
promulgated pursuant to the Securities Act.
5.22 Finder's Fees. EMAC is not nor will it be obligated to pay
to any Person retained by EMAC any commission or finder's or similar fee in
connection with the Transactions.
5.23 Accuracy of Information. No representation or warranty by EMAC
in any Transaction Document, including any schedules or exhibits thereto,
contains any untrue statement of a material fact or omits to state any
material fact necessary in order to make the statements made herein or
therein, in light of the circumstances under which they were made, not
misleading.
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5.24 Certain Business Relationships with Affiliates. No Affiliate of
EMAC or of any Subsidiary (a) owns any property or right, tangible or
intangible, which is used in the business of EMAC or any Subsidiary, (b) has
any claim or cause of action against EMAC or any Subsidiary, or (c) owes any
money to EMAC or any Subsidiary. Section 5.24 of the EMAC Disclosure Schedule
describes any transactions or relationships between EMAC and any Affiliate
thereof that are not otherwise reflected in the EMAC Disclosure Schedule or
contemplated by this Agreement.
5.25 EMAC Disclosure Schedule. The EMAC Disclosure Schedule as in
effect on the date of this Agreement (the "Original EMAC Disclosure Schedule")
shall be amended as of the Closing Date to be true and correct as of the
Closing Date and a copy thereof, as so amended (the "Closing EMAC Disclosure
Schedule"), certified by the President of EMAC to be true and correct, shall
be delivered to EMAC on the Closing Date. Any disclosure made pursuant to any
Section of this Article V or the EMAC Disclosure Schedule (Original or
Closing) will be deemed made as to the other Sections in this Article V to
which it applies if the import of the disclosure to such other Sections is
reasonably ascertainable on its face to a person who is not familiar with the
affairs of EMAC.
ARTICLE VI
COVENANTS OF OVERSEAS AND THE OVERSEAS STOCKHOLDERS
6.1 Operation of the Business. From the date hereof to the Effective
Time, except as set forth in Schedule 6.1, Overseas shall conduct its Business
solely in the ordinary course and, except as set forth in Schedule 6.1, shall
refrain from the following actions in furtherance of and in addition to such
restriction (except as contemplated by this Agreement or as approved by EMAC
in writing): amending its Certificate of Incorporation or bylaws; merging or
consolidating with, or acquiring all or substantially all of, or otherwise
acquiring any material business operations of, any Person; selling or
otherwise disposing of any material Assets other than in the ordinary course;
entering into amending, modifying or supplementing any Contract or otherwise
incurring any Liability, other than in the ordinary course, if Overseas'
executory obligation in any such individual case, or series of related cases,
exceeds $100,000; discharging or satisfying any material Encumbrance or paying
or satisfying any material Liability except pursuant to the terms thereof or
otherwise in the ordinary course or compromising, settling or otherwise
modifying any material claim otherwise than in the ordinary course or
litigation; making any capital expenditure other than in the ordinary course
involving in any individual case, or series of related cases, more than
$50,000; or issuing any securities; and agreeing, whether in writing or
otherwise, to do any of the foregoing; provided, however, that the foregoing
shall not restrict Overseas' ability to enter into any Contract or incur any
Liability that is described on the Overseas Disclosure Schedule. EMAC agrees
that the Overseas Stockholders may transfer their shares in Overseas to a
living trust or other estate planning vehicle; provided that such transferee
agrees to be bound by all the terms and conditions of the Transaction
Documents to which the Overseas Stockholders are a party.
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6.2 Access. Overseas shall give EMAC and its accountants, counsel and
other representatives full access, during normal business hours and without
unreasonably interfering with business operations, to all properties, books,
Contracts and records and shall furnish to EMAC all such documents, records
and information as EMAC shall from time to time reasonably request.
6.3 No Other Negotiations. Until the earlier of the Closing or the
termination of this Agreement, neither Overseas nor the Overseas Stockholders
shall (a) solicit, encourage, or respond to, directly or indirectly, any
inquiries, discussions or proposals for, (b) continue, propose or enter into
any negotiations or discussions looking toward or (c) enter into any agreement
or understanding providing for any acquisition of any capital stock of
Overseas or of any material part of its Assets or the Business, other than as
contemplated or authorized hereby, nor shall Overseas or the Overseas
Stockholders provide any information to any Person (other than as contemplated
by Section 6.2) for the purpose of evaluating or determining whether to make
or pursue any such inquiries or proposals with respect to any such
acquisition. Overseas shall immediately notify EMAC of any such inquiries or
proposals or requests for information for such purpose.
6.4 Maintenance of the Assets. Overseas shall continue to maintain
and service its Assets consistent with past practice. Overseas shall not
directly or indirectly, sell or encumber all or any material part of its
Assets, other than sales or encumbrances in the ordinary course of business,
or initiate or participate in any discussions or negotiations or enter into
any agreement to do any of the foregoing.
6.5 Employees and Business Relations. Overseas shall use reasonable
efforts to keep available the services of its current employees and agents and
to maintain its relations and goodwill with its suppliers, customers,
distributors and any others having business relations with it.
6.6 Confidentiality. Overseas and the Overseas Stockholders will
continue to abide by and be bound by the Non-Disclosure Agreement.
6.7 Expenses. Except as provided in Section 12.2 or as otherwise
agreed to in writing by the parties, the Surviving Corporation shall pay all
of the legal, accounting and other expenses incurred by Overseas or the
Overseas Stockholders in connection with the Transaction (and the Overseas
Stockholders shall have no responsibility therefor), and EMAC shall pay any
fees referred to in Section 4.22 or Schedule 4.22 of the Agreement. The
provisions of this Section 6.7 shall survive the Merger.
6.8 No Securities Transactions. Neither Overseas nor the Overseas
Stockholders shall engage in any transactions involving the securities of EMAC
prior to the Effective Date, and Overseas shall use its reasonable best
efforts to require each Affiliate of Overseas to comply with the foregoing
requirement.
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6.9 Fulfillment of Conditions. Overseas and the Overseas Stockholders
shall use their reasonable best efforts to fulfill the conditions specified in
Article IX to the extent that the fulfillment of such conditions is within
their control. The foregoing obligation includes (a) the execution and
delivery of the Transaction Documents and (b) taking or refraining from such
actions as may be necessary to fulfill such conditions (including using their
reasonable best efforts to conduct the Business in such manner that on the
Closing Date the representations and warranties of Overseas and the Overseas
Stockholders contained herein shall be accurate as though then made, except as
contemplated by the terms hereof).
6.10 Financial Statements. Overseas will deliver to EMAC, no later
than July 5, 1996, the unaudited consolidated financial statements of Overseas
as of and for the quarter ending March 31, 1996.
6.11 Overseas Subsidiaries. On or before or concurrently with the
Closing, Overseas will own 100% of the capital stock of each of the Overseas
Subsidiaries, respectively, free and clear of all liens, pledges, encumbrances
and claims whatsoever except as set forth on Section 6.11 of the Overseas
Disclosure Schedule. EMAC agrees that the purchase price for each of the
Overseas Subsidiaries shall be as set forth on Section 6.11 of the Overseas
Disclosure Schedule and that the purchase price shall be paid by Overseas.
6.12 Disclosure of Certain Matters. During the period from the date
hereof through the Closing Date, Overseas and the Overseas Stockholders shall
give EMAC prompt written notice of any event or development that occurs and is
known to them that (a) is an event of the type listed in Section 6.1, (b)
gives Overseas any reason to believe that any of the conditions set forth in
Article IX will not be satisfied prior to the Termination Date, (c) is of a
nature that is or is reasonably likely to be materially adverse to the
operations, prospects or condition (financial or otherwise) of Overseas, or
(d) would require any amendment or supplement to the Proxy Statement.
ARTICLE VII
COVENANTS OF EMAC
7.1 Operation of the Business of EMAC. From the date hereof to the
Effective Time, EMAC shall conduct its business solely in the ordinary course,
and shall refrain from the following actions in furtherance of and in addition
to such restriction (except as contemplated by this Agreement or as approved
by Overseas and the Overseas Stockholders in writing): amending its
Certificate of Incorporation or bylaws; merging or consolidating with, or
acquiring all or substantially all of, or otherwise acquiring any business
operations of, any Person; selling or otherwise disposing of any Assets other
than in the ordinary course; entering into any Contract or otherwise incurring
any Liability, even if in the ordinary course, if EMAC's executory obligation
in any such individual case, or series of related cases, exceeds $5,000;
amending the terms of any existing Contract; discharging or satisfying any
Encumbrance or paying or satisfying any material Liability except pursuant to
the terms thereof or compromising, settling or otherwise modifying any
material claim or litigation;
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making any capital expenditure involving in any individual case, or series of
related cases, more than $10,000; issuing any securities other than in
connection with the exercise of any warrants or other rights that are
outstanding on the date hereof, or decreasing the exercise price of any
outstanding EMAC Warrant or the Unit Purchase Option issued to GKN, except if
required pursuant to the terms thereof; and agreeing, whether in writing or
otherwise, to do any of the foregoing; provided, however, that the foregoing
shall not restrict EMAC's ability to enter into any Contract or incur any
Liability that is described on the EMAC Disclosure Schedule.
7.2 Stockholders' Meeting. EMAC shall cause a meeting of its
stockholders (the "EMAC Stockholders' Meeting") to be duly called and held as
soon as reasonably practicable for the purpose of voting on (a) the approval
of this Agreement, the Merger and the other Transaction Documents as required
by the Certificate of Incorporation of EMAC or otherwise, (b) the adoption of
a proposed Amended and Restated Certificate of Incorporation of EMAC (the
"Restated Certificate") and By-laws, a copy of which is attached to this
Agreement as Exhibit N, (c) the election of directors of EMAC in accordance
with Section 7.7 and (d) the adoption of the EMAC Option Plans. The directors
of EMAC shall recommend to the EMAC Stockholders that they vote in favor of
the adoption of such matters. In connection with the EMAC Stockholders'
Meeting, EMAC will file a preliminary proxy statement (the "Preliminary Proxy
Statement") with the SEC and will use reasonable best efforts to receive and
respond to the comments of the SEC and to cause the definitive Proxy Statement
and all other proxy materials (the "Definitive Proxy Statement") to be mailed
to the EMAC Stockholders, all at the earliest practicable time. EMAC will
notify Overseas and the Overseas Stockholders promptly of the receipt of the
comments of the SEC, if any, on the Preliminary Proxy Statement, and of any
request by the SEC for amendments or supplements to the Preliminary and
Definitive Proxy Statements (collectively, the "Proxy Statement") or for
additional information, and will supply Overseas and the Overseas Stockholders
with copies of all correspondence between EMAC or its representatives, on the
one hand, and the SEC or members of its staff, on the other hand, with respect
to the Preliminary and Definitive Proxy Statements. The Company will notify
Overseas and the Overseas Stockholders, both orally and in writing, at least
24 hours prior to the mailing of the Definitive Proxy Statement to the EMAC
Stockholders. In connection with the EMAC Stockholders' Meeting, EMAC (a) will
use reasonable best efforts to obtain the necessary approvals by its
stockholders of this Agreement, the Transactions and the foregoing, and (b)
will otherwise comply with all legal requirements applicable to such meeting
and solicitation and issuance of Merger Shares, including compliance of all
federal and state securities laws. EMAC will pay all expenses of filing,
printing and distributing the Proxy Statement.
7.3 Access. EMAC shall give Overseas and its accountants, counsel and
other representatives full access, during normal business hours and without
unreasonably interfering with business operations, to all properties, books,
Contracts and records of EMAC and shall furnish to Overseas all such
documents, records and information as Overseas shall from time to time
reasonably request.
7.4 No Other Negotiations. Until the earlier of the Closing or the
termination of this Agreement, EMAC shall not (a) solicit, encourage or
respond to, directly or indirectly,
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any inquiries, discussions or proposals for, (b) continue, propose or enter
into any negotiations or discussions looking toward or (c) enter into any
agreement or understanding providing for any acquisition of any capital stock
of EMAC, acquisition of capital stock of another entity or other business
combination with any other entity, other than as contemplated or authorized
hereby, nor shall EMAC provide any information to any Person for the purpose
of evaluating or determining whether to make or pursue any such inquiries or
proposals with respect to any such acquisition. EMAC shall immediately notify
Overseas of any such inquiries or proposals or requests for information for
such purpose. EMAC shall use its best efforts to cause the directors,
officers, employees, agents and other representatives and Affiliates of EMAC
to comply with the provisions of this Section .
7.5 Maintenance of the Assets. EMAC shall continue to maintain and
service its Assets consistent with past practice. EMAC shall not, directly or
indirectly, sell or encumber all or any material part of its Assets, or
initiate or participate in any discussions or negotiations or enter into any
agreement to do any of the foregoing.
7.6 Confidentiality. EMAC shall continue to abide by and be bound
by the Non-Disclosure Agreement.
7.7 Appointment of Directors and Officers. EMAC shall use reasonable
best efforts so that, at the Effective Time,
(a) the Board of Directors of EMAC shall consist of a total
of seven members, namely:
(i) four persons who shall be designated by
Overseas: Ellen Dinerman Little, Robert B. Little, William F. Lischak and a
fourth designee to be selected by the Overseas Stockholders prior to filing
the Proxy Statement (such persons are collectively referred to as the
"Overseas Designees"); and
(ii) three persons who shall be designated by
EMAC: Stephen K. Bannon, Scot K. Vorse and a third designee to be selected by
EMAC prior to filing the Proxy Statement (such persons are collectively
referred to as the "EMAC Designees").
(b) Robert B. Little and Stephen K. Bannon shall be
designated Class I Directors to serve until the EMAC annual stockholders'
meeting in 1997; Ellen Dinerman Little and Scot K. Vorse shall be designated
Class II Directors to serve until the EMAC annual stockholders' meeting in
1998; and William F. Lischak and the remaining two Directors shall be
designated Class III Directors to serve until the EMAC annual stockholders'
meeting in 1999.
(c) The following Persons and the persons listed on Schedule
7.7 shall be elected to the following respective offices and/or Board
positions of EMAC:
Ellen Dinerman Little Co-Chairman of the Board, Co-Chief Executive Officer,
Co-President, Member of Executive Committee
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Robert B. Little Co-Chairman of the Board, Co-Chief Executive Officer,
Co-President Member of Executive Committee
Stephen K. Bannon Vice Chairman of the Board, Chairman of Executive
Committee
William F. Lischak Chief Operating Officer and Chief Financial Officer
7.8 Expenses. Except as set forth in Section 12.2, EMAC shall pay
all of the legal, accounting and other expenses incurred by EMAC in connection
with the Transaction. The provisions of this Section shall survive the Merger.
7.9 No Securities Transactions. Neither EMAC nor the Initial EMAC
Stockholders shall engage in any transactions involving the securities of EMAC
prior to the Effective Date and EMAC shall use its reasonable best efforts to
require each Affiliate of EMAC, including the Initial EMAC Stockholders, to
comply with the foregoing.
7.10 Fulfillment of Conditions. EMAC shall use its reasonable best
efforts to fulfill the conditions specified in Article IX to the extent that
the fulfillment of such conditions is within EMAC's control. The foregoing
obligation includes (a) the execution and delivery of the Transaction
Documents and (b) taking or refraining from such actions as may be necessary
to fulfill such conditions (including conducting the Business of EMAC in such
manner that on the Closing Date the representations and warranties of EMAC
contained herein shall be accurate as though then made).
7.11 Disclosure of Certain Matters. During the period from the date
hereof through the Closing Date, EMAC shall give Overseas prompt written
notice of any event or development that occurs that (a) had it existed or been
known on the date hereof would have been required to be disclosed under this
Agreement, (b) would cause any of the representations and warranties of EMAC
contained herein to be inaccurate or otherwise misleading, (c) gives EMAC any
reason to believe that any of the conditions set forth in Article IX will not
be satisfied prior to the Termination Date, (d) is of a nature that is or may
be materially adverse to the operations, prospects or condition (financial or
otherwise) of EMAC or, to the knowledge of EMAC, Overseas before or after the
Transactions or (e) would require any amendment or supplement to the Proxy
Statement.
7.12 Resignations. At the Closing, EMAC shall deliver to Overseas the
irrevocable and unconditional resignations of those officers and directors of
EMAC set forth on Schedule 7.12.
7.13 Nasdaq National Market Listing Application. EMAC will file with
Nasdaq, as promptly as practicable after the date hereof, an application to
list on the Nasdaq National Market, subject to the Closing, upon official
notice of issuance, the EMAC Common Stock and the EMAC Warrants, including the
Merger Shares. Overseas will cooperate in the preparation of such listing
application.
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7.14 Stock Option Plans. On the Closing Date, EMAC shall register and
maintain the registration of the EMAC Option Plans and the Common Stock to be
issued thereunder with the SEC and shall apply to have such Common Stock
listed on the Nasdaq National Market; provided that such listing requirement
shall be conditioned on EMAC's having previously obtained approval to list its
Common Stock on the Nasdaq National Market. In the event that such application
is rejected, EMAC shall apply to have such Common Stock listed on the American
Stock Exchange, or in the event that such application is rejected, EMAC shall
apply to have such Common Stock listed on the Nasdaq Small Cap Market. EMAC
will use its reasonable best efforts to cause its Board of Directors to grant
options to purchase an aggregate of 125,000 shares of Common Stock of EMAC to
such employees of EMAC who were formerly employees of Overseas as shall be set
forth on Schedule 7.14 to this Agreement. Such options shall be granted at an
exercise price equal to the Fair Market Value of the EMAC Common Stock on the
date of grant. "Fair Market Value" shall be defined as the closing price of
EMAC Common Stock on the trading day immediately preceding such date. The
closing price shall be the last reported sales price regular way (or, in case
no such reported sale takes place on such day, the last reported sales price
regular way for the most recent day for which such information is available
shall be used), in each case on the principal national securities exchange or
in the Nasdaq National Market on which the shares of EMAC Common Stock are
listed or admitted to trading, or if not listed or admitted to trading
thereon, the average of the closing bid and asked prices of EMAC Common Stock
in the over-the-counter market as reported by Nasdaq or any comparable system,
or if Common Stock is not listed on Nasdaq or a comparable system, the average
of the closing bid and asked prices on such day in the domestic
over-the-counter market as reported on the NASD Electronic Bulletin Board, or,
if not reported on such Bulletin Board, in the "pink sheets" published by the
National Quotation Bureau, Incorporated. If at any time EMAC Common Stock is
not listed on any national securities exchange or quoted in the Nasdaq System
or the over-the-counter market or reported on the NASD Electronic Bulletin
Board or in the "pink sheets" published by the National Quotation Bureau,
Incorporated, the Fair Market Value on such day shall be the fair market value
thereof reasonably determined in good faith by the members of the board of
directors of EMAC, excluding the Overseas Stockholders, and reasonably agreed
to in good faith by the Overseas Stockholders based upon such information and
advice as they mutually consider appropriate. Such options shall vest in
installments no sooner than the following schedule (the final such schedule to
be recommended by Overseas prior to the Closing): (i) fifty percent (50%) on
the Closing Date; (ii) twenty-five percent (25%) on December 31, 1997; and
(iii) the remaining twenty-five percent (25%) on December 31, 1998.
7.15 Continuation of Employee Benefit Plans. EMAC shall assume, and,
following the Closing, EMAC shall continue in effect, Overseas' 401(k) Plan
and Overseas' Profit Sharing Plan identified in Schedule 4.19 and the present
funding thereof.
7.16 EMAC Stockholders. Within ten (10) days following the record
date for the EMAC Stockholders' Meeting (the "Record Date"), EMAC shall
deliver to Overseas a list of EMAC Stockholders as of the Record Date
certified by EMAC's transfer agent.
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7.17 Repayment of Loan. The Surviving Corporation shall fully repay
the $3,500,000 loan to Overseas identified on Schedule 7.17 (for which the
stockholders of Overseas have provided collateral) (the "Loan") in accordance
with the terms of the loan documents related thereto and shall otherwise
comply with all the terms and conditions of such Loan.
ARTICLE VIII
COVENANTS OF EMAC, OVERSEAS
AND THE OVERSEAS STOCKHOLDERS
8.1 Miscellaneous Covenants.
(a) EMAC covenants to Overseas that (i) the Proxy Statement
will comply in all material respects with the applicable provisions of the
Exchange Act and the Securities Act and (ii) will not at the time such
document is declared effective by the SEC, at the time of the mailing of the
Proxy Statement and any amendments thereof or supplements thereto, and at the
time of the meetings of stockholders of EMAC to be held in connection with the
Transactions, contain any untrue statement of a material fact or omit to state
any material fact required to be stated therein or necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or necessary to correct any statement in any earlier
filing with the SEC of such Proxy Statement or any amendment thereof or any
supplement thereto or any earlier communication to the stockholders of EMAC or
Overseas with respect to the Transactions; provided, however, that no
representation, covenant or agreement is made by EMAC under clause (ii) hereof
with respect to information supplied in writing by or on behalf of Overseas
expressly for inclusion in the Proxy Statement.
(b) Overseas covenants to EMAC that the information supplied
by it in writing expressly for inclusion in the Proxy Statement will not, at
the time of the mailing of the Proxy Statement and any amendments thereof or
supplements thereto, and at the time of the EMAC Stockholders' Meeting to be
held in connection with the Transactions contemplated by this Agreement,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, or necessary to correct any statement in any earlier filing
with the SEC of such Proxy Statement or any amendment thereof or any
supplement thereto or any earlier communication to the stockholders of EMAC
with respect to the Transactions.
(c) To the extent permitted by applicable Regulations, EMAC,
Overseas and the Overseas Stockholders shall cooperate with each other in
scheduling meetings with and making presentations to EMAC stockholders prior
to the EMAC Stockholders' Meeting.
(d) Overseas shall use its best efforts to cause to be
delivered to EMAC a letter of Price Waterhouse, dated the date of the Proxy
Statement, and addressed to EMAC, in form and substance reasonably
satisfactory to EMAC (with such changes to which EMAC
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shall consent, it being understood that such consent shall not be unreasonably
withheld) to the effect that:
(i) they are independent certified public accountants
with respect to Overseas within the meaning of the Securities Act and
Exchange Act, including the applicable published Regulations
thereunder;
(ii) the financial statements of Overseas certified by
them and included in the Proxy Statement comply as to form in all
material respects with the applicable accounting requirements of the
Securities Act and Exchange Act, including the published Regulations
thereunder; and
(iii) they have carried out procedures to a specified
date not more than five business days prior to the date of the Proxy
Statement that do not constitute an audit in accordance with GAAP of
the financial statements of Overseas, as follows: (A) read the
unaudited financial statements of Overseas included in the Proxy
Statement, (B) read the unaudited financial statements of Overseas
for the period from the date of the most recent financial statements
included in the Proxy Statement through the date of the latest
available interim financial statements, (C) read the minutes of the
meetings of stockholders and Boards of Directors of Overseas from the
date of the most recent financial statements of Overseas included in
the Proxy Statement to such date not more than five business days
prior to the date of the Proxy Statement and (D) consulted with
certain officers of Overseas responsible for financial and accounting
matters as to whether any of the changes or decreases referred to
below has occurred, and based on such procedures, nothing has come to
their attention that would cause them to believe that (1) any
unaudited financial statements of Overseas included in the Proxy
Statement do not comply as to form in all material respects with the
applicable accounting requirements of the Securities Act, the
Exchange Act and of the published Regulations thereunder; (2) such
unaudited financial statements are not fairly presented in conformity
with GAAP (except as permitted by Form 10-Q promulgated by the SEC)
applied on a basis substantially consistent with that of the audited
financial statements of Overseas included in the Proxy Statement; (3)
as of such date not more than five business days prior to the date of
the Proxy Statement, there was not, except as set forth in such
letter, any change in capital stock, treasury stock or long-term debt
of Overseas.
8.2 Overseas Employee Bonuses. Promptly after the Closing Date, EMAC
shall pay bonuses to individuals who are employees of Overseas on the
Effective Date (the "Overseas Employees") in an aggregate amount not to exceed
$175,000. Any such bonuses agreed, mutually by the Overseas Stockholders and
EMAC, to be paid to Overseas Employees promptly after the Closing Date in
excess of such amount will be paid by EMAC but will reduce the Merger Cash
payable to the stockholders of Overseas by such amount in excess of $175,000.
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8.3 Voting Agreement. Each of the Overseas Stockholders agrees to
vote their shares of Overseas Common Stock (or execute a written consent in
lieu thereof) in favor of the Merger and the Transaction Documents, both in
their capacities as directors and stockholders of Overseas. EMAC shall use
their best efforts to cause each of the Founders (as such term is defined in
the Stockholders' Voting Agreement) to vote their shares of EMAC Common Stock
in favor of the Merger and the Transaction Documents at the EMAC Stockholders'
Meeting.
8.4 Cooperation. Each of the parties hereto will cooperate with the
other and execute and deliver to the other such other instruments and
documents and take such other actions as may be reasonably requested from time
to time by the other party hereto as necessary to carry out, evidence and
confirm the intended purposes of this Agreement. EMAC shall promptly furnish
to the Overseas Parties copies of all reports and other information given by
it to its stockholders.
ARTICLE IX
CONDITIONS PRECEDENT TO THE MERGER
9.1 Conditions to Each Party's Obligations. The respective
obligations of each party to consummate the Merger and related Transactions
shall be subject to the fulfillment or waiver, on or before the Closing Date,
of each of the following conditions. If any of the conditions set forth below
are not satisfied on or before the Closing Date and the parties nonetheless
consummate the Merger and related Transactions, said condition shall be deemed
waived, and there shall be no liability on the part of either party with
respect to said condition.
(a) Approval by EMAC Stockholders. The Merger and the other
matters referred to in Section 7.2 of this Agreement shall have been approved
by the stockholders of EMAC in accordance with EMAC's Certificate of
Incorporation as in effect on the date hereof, and not more than an aggregate
of 20% of the number of shares of EMAC Common Stock outstanding as of the
Record Date and owned by Persons other than the Initial EMAC Stockholders
shall take one or more of the following actions: (i) demand conversion of said
EMAC Common Stock into cash pursuant to EMAC's certificate of incorporation or
(ii) demand appraisal rights pursuant to the DGCL.
(b) No Litigation, Governmental Order or Regulation.
(i) No court of competent jurisdiction shall have
issued (and such issuance shall not be threatened or
pending) any injunction, restraining order or other order
which prohibits the consummation of the transactions
contemplated by this Agreement and which is in effect as of
the Closing Date and no governmental action or proceeding
shall have been commenced or threatened seeking an
injunction, restraining order or other order which seeks to
prohibit the consummation of the transactions contemplated
by this Agreement.
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(ii) No litigation, proceeding or investigation
shall be pending, threatened or in existence which, if
adversely determined, would result in:
(1) The issuance of a preliminary or
permanent injunction or other order which would
restrain, prevent or require rescission of this
Agreement or the transactions contemplated hereby;
(2) Liability to EMAC, Overseas, the
Overseas Stockholder or any officers, directors,
employees or agents of any of them arising from
this Agreement or the transactions contemplated
hereby; or
(3) The consummation of the transactions
contemplated hereby being unlawful.
(c) EMAC Option Plans. The EMAC Stockholders shall have
approved (i) the EMAC Option Plans and (ii) any options thereunder which,
under EMAC's Certificate of Incorporation, the DGCL or SEC Regulations,
require EMAC Stockholder approval. The EMAC Option Plans shall be registered
in accordance with Section 7.14.
(d) Directors and Officers. As of the Closing Date: (A) the
Board of Directors of EMAC shall consist solely of the Overseas Designees and
the EMAC Designees, and (B) the only officers of EMAC shall be the Persons
specified as officers in Section or Schedule 7.7.
(e) Lock-up and Registration Rights Agreement. The Lock-up
and Registration Rights Agreement shall have been duly executed and delivered
by the parties thereto.
(f) Employment Agreements; Special Management Option
Agreements. Each of Ellen Dinerman Little and Robert B. Little, on the one
hand, and EMAC, on the other, shall have executed and delivered an Overseas
Stockholder Employment Agreement and William F. Lischak and EMAC shall have
executed and delivered the Lischak Employment Agreement. EMAC shall have
granted to each of Ellen Dinerman Little and Robert B. Little, at the
Effective Time, a Redeemable Special Management Option to purchase 537,500
shares of EMAC Common Stock and a Non-Redeemable Special Management Option to
purchase 562,500 shares of EMAC Common Stock pursuant to the EMAC Special
Management Option Plan.
(g) Stockholders' Voting Agreement. The Stockholders'
Voting Agreement shall have been duly executed and delivered by the parties
thereto.
(h) Resignations. The officers and directors of EMAC
identified on Schedule 7.12 shall have submitted their irrevocable and
unconditional resignations effective on the Closing Date, as officers and
directors of EMAC.
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(i) Indemnity Agreement. EMAC shall have entered into an
Indemnity Agreement with each director and executive officer of EMAC in form
and substance reasonably satisfactory to the Overseas Stockholders.
(j) Relationships with Lenders. The Syndication Agreement
dated as of May 9, 1994 among Coutts & Co., Berliner Bank AG London Branch and
Overseas (the "Syndication Agreement") shall have been renewed for an
aggregate amount equal to or greater than the amount available under said
agreement immediately prior to its renewal. Such lenders shall have entered
into an agreement with Overseas and the Overseas Stockholders as to the
relative rights and obligations of such lenders, Overseas and the Overseas
Stockholders with respect to the Merger Note and the indebtedness under the
Syndication Agreement.
9.2 Conditions to Obligations of EMAC. The obligations of EMAC to
consummate the Merger and related Transactions shall be subject to the
satisfaction or waiver, on or before the Closing Date, of each of the
following conditions. If any of the conditions set forth below are not
satisfied on or before the Closing Date, or any changes are made from the
Original Overseas Disclosure Schedule to the Closing Overseas Disclosure
Schedule, and EMAC nonetheless consummates the Merger and related
Transactions, said condition shall be deemed waived, and there shall be no
liability with respect to said condition.
(a) Representations and Warranties True. Except for changes
contemplated by this Agreement, (i) the representations and warranties of
Overseas and the Overseas Stockholders contained herein shall be true and
correct in all material respects at and as of the date hereof and (ii) such
representations and warranties shall be true and correct in all material
respects at and as of the Closing Date as though such representations and
warranties were made again at and as of the Closing Date, except to the extent
that such representations and warranties are made herein as of a specific date
prior to the Closing Date. Notwithstanding the preparation and delivery of the
Closing Overseas Disclosure Schedule, the representations and warranties of
Overseas for purposes of Section 9.2(a)(i) shall be such representations and
warranties incorporating the Original Overseas Disclosure Schedule.
(b) Performance. Overseas and the Overseas Stockholders
shall have performed and complied in all material respects with the agreements
contained in this Agreement required to be performed or complied with by it on
or prior to the Closing Date.
(c) Approval by Overseas Stockholders. The Merger shall
have been approved and adopted by the stockholders of Overseas in accordance
with the DGCL and the Certificate of Incorporation and by-laws of Overseas.
(d) Consents and Approvals. Overseas and the Overseas
Stockholders shall have obtained all Overseas third-party consents and
approvals necessary, proper or advisable to consummate the Merger, except for
those which, if not obtained, would not have a Material Adverse Effect.
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(e) Legal Opinion. EMAC shall have received (i) an opinion
of Gipson, Hoffman & Pancione, outside counsel to Overseas, dated as of the
Closing Date, covering the matter set forth in Exhibit O and (ii) an opinion
of Deborah Chiaramonte, Esq. in-house counsel to Overseas, dated as of the
Closing Date, substantially in the form attached hereto as Exhibit P.
(f) Non-Competition Agreements. The Non-Competition
Agreement shall have been duly executed and delivered by each of the Overseas
Stockholders.
(g) Certificates. Overseas shall have furnished to EMAC a
certificate of the chief executive officer of Overseas, dated the Closing
Date, certifying compliance as of the Closing Date with the conditions set
forth in paragraphs (a), (b) and (c) of this Section
in all material respects.
(h) Life Insurance. The Surviving Corporation or EMAC shall
be named as the beneficiary under the life insurance policies set forth in
Schedule 9.2(h) for the amounts set forth in said Schedule. The cash value
under such policies at the time that EMAC is named beneficiary under such
policies (approximately $128,000 as of the date of this Agreement) shall be
paid by the Surviving Corporation to the Overseas Stockholders at the Closing
by execution of an unsecured promissory note of the Surviving Corporation in
favor of the Overseas Stockholders for such amount, with a maturity date of
one year after the Closing, at an interest rate of 9% per annum (with
principal and interest payable at maturity) and with such other terms
reasonably acceptable to the Overseas Stockholders.
(i) Subsidiaries. The Overseas Subsidiaries shall be wholly
owned subsidiaries of Overseas.
(j) Other Documents. EMAC shall have received executed
copies of all Transaction Documents to which Overseas or the Overseas
Stockholders is a party to the extent that they shall not have been received
prior to the Closing. EMAC shall have received all other documents required
under the terms of any of the Transaction Documents and any other documents
reasonably requested on or prior to the Closing Date.
9.3 Conditions to Obligations of Overseas and the Overseas
Stockholders. The obligations of Overseas and the Overseas Stockholders to
consummate the Merger and related Transactions shall be subject to the
satisfaction or waiver, on or before the Closing Date, of each of the
following conditions. If any of the conditions set forth below is not
satisfied on or before the Closing Date, or any changes are made from the
Original EMAC Disclosure Schedule to the Closing EMAC Disclosure Schedule, and
Overseas and the Overseas Stockholders nonetheless consummate the Merger and
related Transactions, said condition shall be deemed waived, and there shall
be no liability with respect to said condition.
(a) Representations and Warranties True. Except for changes
contemplated by this Agreement, (i) the representations and warranties of EMAC
contained herein shall be true and correct in all material respects at and as
of the date hereof and (ii) such representations and warranties shall be true
and correct in all material respects at and as of the Closing
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Date as though such representations and warranties were made again at and as
of the Closing Date, except to the extent that such representations and
warranties are made herein as of a specific date prior to the Closing Date.
Notwithstanding the preparation and delivery of the Closing EMAC Disclosure
Schedule, the representations and warranties of EMAC for purposes of Section
9.3(a)(i) shall be such representations and warranties incorporating the
Original EMAC Disclosure Schedule.
(b) Performance. EMAC shall have performed and complied in
all material respects with the agreements contained in this Agreement required
to be performed or complied with by it on or prior to the Closing Date.
(c) Consents and Approvals. EMAC shall have obtained all
third-party consents and approvals and made all filings necessary, proper or
advisable to consummate the Merger, except for those which, if not obtained,
would not have a Material Adverse Effect or a material adverse effect on
consummation of the Transactions.
(d) Trust Funds. At the Effective Time, EMAC will have an
amount in government securities invested in the Trust Account with the Trust
Company of no less than (i) $10.9 million, minus (ii) the amount of funds, if
any, to be applied to the redemption of shares of EMAC Common Stock pursuant
to Article SIXTH of the EMAC Restated Certificate of Incorporation as in
effect on the date of this Agreement, with no restrictions on the use thereof
such that such funds and government securities may be used to pay the Merger
Consideration, and the Overseas Stockholders shall have received a
certification from the Chairman or President of EMAC to such effect, together
with confirmation from the Trust Company of the availability of such funds.
(e) Merger Notes and Security Agreements. EMAC shall have
delivered to the Overseas Stockholders the Merger Cash, the Merger Shares, the
Merger Note and the Security Agreement in accordance with Section 3.1(b) of
this Agreement.
(f) Legal Opinion. Overseas shall have received an opinion
of Brobeck, Phleger & Harrison LLP, counsel to EMAC, dated as of the Closing
Date covering the matter set forth on Exhibit Q.
(g) Tax Opinion. Overseas shall have received an opinion of
Brobeck, Phleger & Harrison LLP, counsel to EMAC, dated as of the Closing
Date, to the effect that for federal income tax purposes (i) the Merger will
constitute a "reorganization' within the meaning of Section 368(a)(1)(A) of
the Code; (ii) each of EMAC and Overseas will be a "party to the
reorganization" within the meaning of Section 368(b) of the Code; (iii) no
gain or loss will be recognized to the holders of Overseas Shares upon the
receipt of the Merger Shares in exchange for their Overseas Shares pursuant to
the Merger; (iv) the tax basis of the Merger Shares received by the holders of
Overseas Shares will be the same as the basis of the Overseas Shares exchanged
therefor; (v) the holding period of the Merger Shares in the hands of the
holders of Overseas Shares will include the holding period of their Overseas
Shares exchanged therefor, provided that the Overseas Shares are held as a
capital asset at the
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Effective Time of the Merger and (vi) no gain or loss will be recognized by
EMAC and Overseas in the Merger.
(h) Other Documents. Overseas shall have received executed
copies of all Transaction Documents to which EMAC is a party to the extent
that they shall not have been received prior to the Closing. Overseas shall
have received all other documents required under the terms of any of the
Transaction Documents and any other documents reasonably requested on or prior
to the Closing Date.
(i) Certificates. EMAC shall have furnished to Overseas a
certificate of the chief executive officer of EMAC, dated the Closing Date,
certifying compliance as of the Closing Date with the conditions set forth in
paragraph (a) of Section 9.1 and paragraphs (a) and (b) of this Section 9.3 in
all material respects.
(j) Nasdaq National Market Application. EMAC shall have
applied for the listing, effective upon the Effective Date, of EMAC Common
Stock on the Nasdaq National Market.
(k) Tax Reimbursement Agreement. EMAC and the Overseas
Stockholders shall have executed and delivered the Tax Reimbursement Agreement.
(l) Distribution. The Distribution shall have been made to
the stockholders of Overseas. Neither the Distribution nor the Loan shall have
been rescinded, and no action (or state of facts with respect thereto)
prohibited by Section 9.1(b) shall exist with respect to the Distribution or
the Loan. No action shall have been taken by the lenders under the Loan to
enforce the Loan or the security interest securing such Loan (including,
without limitation, taking action to declare a default or an event of default,
accelerate such Loan or foreclose on the security interest or collateral
securing such Loan).
(m) EMAC 1996 Special Stock Option Plan and Agreement. The
EMAC 1996 Special Stock Option Plan shall have been approved by the EMAC
Stockholders and the Board of Directors of EMAC. EMAC and the Overseas
Stockholders shall have executed and delivered the EMAC 1996 Special Stock
Option Agreement.
(n) Amendment to Unit Purchase Options. The Unit
Purchase Options shall have been amended in the manner provided by Overseas to
EMAC.
ARTICLE X
INDEMNIFICATION
10.1 Indemnification by the Overseas Stockholders. Subject to the
provisions of Sections 10.1 and 10.2, each of the Overseas Stockholders shall
severally, and jointly, indemnify, defend and hold harmless EMAC, and any
director, officer, employee, agent or advisor of EMAC, or any of its
respective successors or assigns (an "EMAC Indemnified
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Party"), from and against any and all demands, claims, actions, causes of
action, assessments, losses, damages, liabilities, judgments, settlements,
fines, penalties, sanctions, costs and expenses (including, without
limitation, reasonable attorneys' fees and disbursements, interest and
penalties, and all other reasonable costs of investigating and defending third
party claims as incurred but not including special, punitive, speculative or
consequential damages) (collectively, "EMAC Losses") asserted against,
resulting to, imposed upon or incurred by any EMAC Indemnified Party, directly
or indirectly, by reason of or resulting from:
(i) the failure of any of the representations and
warranties of Overseas or the Overseas Stockholders contained in or made
pursuant to Article IV hereof to have been true when made and (unless made as
of a specified date only) as of the Closing Date; and
(ii) the breach or failure to perform any covenant or
agreement of Overseas or the Overseas Stockholders contained in or made
pursuant to this Agreement.
10.2 Limitations on Indemnification.
(a) The indemnification in favor of the EMAC Indemnified
Parties contained in Section 10.1 hereof with respect to the representations
and warranties of Overseas and the Overseas Stockholder contained in Section
4.26 of this Agreement shall not be effective until the aggregate dollar
amount of all Losses indemnified against under such Section exceeds $350,000
(the "Film Library Threshold Amount"), and then only to the extent such
aggregate amount exceeds the Film Library Threshold Amount. The
indemnification in favor of the EMAC Indemnified Parties for Losses related to
all other matters indemnified against under Section 10.1, other than as set
forth in the preceding sentence, shall not become effective until the
aggregate dollar amount of such Losses exceeds $150,000 (the "Non-Film Library
Threshold Amount") and then only to the extent such aggregate amount exceeds
the Non-Film Library Threshold Amount. Any payments made to the Overseas
Stockholders by the EMAC Parties under paragraph 2 of the Tax Reimbursement
Agreement shall be credited against the Non-Film Library Threshold Amount.
(b) The indemnification in favor of the EMAC Indemnified
Parties shall be limited to an amount equal to the aggregate of (i) the value
from time to time of the Merger Shares issued to the Overseas Stockholders and
(ii) the unpaid principal and interest from time to time on the Merger Note.
Any amounts paid under the Merger Notes shall no longer be subject to this
Article X. The Surviving Corporation shall have no right to offset against any
payments under the Merger Note the amount of any rights, claims or damages it
may have against Overseas or the Overseas Stockholders, and nothing herein
shall be deemed to permit any offset by EMAC against the Merger Note to
satisfy any indemnification obligation of the Overseas Stockholders under
Section 10.1. Except with respect to claims based on wilful or intentional
fraud, the rights of EMAC Indemnified Parties and the Overseas Stockholders
Indemnified Parties (as defined below) under this Article X shall be the
exclusive remedy of such Indemnified Parties with respect to claims resulting
from or relating to any misrepresentation, breach of warranty or failure to
perform any covenant or agreement under this Agreement.
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10.3 Indemnification by EMAC. Subject to the provisions of this
Section 10.3, EMAC shall indemnify, defend and hold harmless the Overseas
Stockholders, and any director, officer, employee, agent, advisor or
stockholder of Overseas or any of their respective successors or assigns (an
"Overseas Stockholders Indemnified Party"), from and against any and all
demands, claims, actions, causes of action, assessments, losses, damages,
liabilities, judgments, settlements, fines, penalties, sanctions, costs and
expenses (including, without limitation, reasonable attorneys' fees and
disbursements, interest and penalties, and all other reasonable costs of
investigating and defending third party claims as incurred) (collectively,
"Overseas Losses") asserted against, resulting to, imposed upon or incurred by
any Overseas Stockholders Indemnified Party, directly or indirectly, by reason
of or resulting from:
(i) the failure of any of the representations
and warranties of EMAC contained in or made pursuant to Article V hereof to
have been true when made and (unless made as of a specified date only) as of
the Closing Date; and
(ii) the breach or failure to perform any
covenant or agreement of EMAC contained in or made pursuant to this Agreement.
10.4 Indemnification Procedures.
(a) Notice. If any legal proceeding shall be threatened or
instituted or any claim or demand shall be asserted by any EMAC Indemnified
Party or any Overseas Stockholders Indemnified Party, or any EMAC Indemnified
Party or any Overseas Stockholder Indemnified Party becomes aware of any facts
giving rise to a potential claim, in respect of which indemnification may be
sought under the provisions of this Agreement, the Party seeking
indemnification (the "Claiming Party") shall promptly cause written notice of
the assertion of any such claim, demand or proceeding of which it has
knowledge to be forwarded to the Party from whom it is claiming
indemnification (the "Indemnitor"). Such notice shall contain a reference to
the provisions hereof in respect of which such claim is being made, and shall
specify, in reasonable detail, the basis for the claim and the amount of such
Loss if determinable at such time. The Claiming Party's failure to give the
Indemnitor prompt notice shall not preclude the Claiming Party from seeking
indemnification from the Indemnitor unless the Claiming Party's failure has
materially prejudiced the Indemnitor's ability to defend the claim, demand or
proceeding.
(b) Third Party Claims. Subject to the provisions of
Sections 10.1, 10.2 and 10.3 hereof, if the Claiming Party seeks
indemnification from the Indemnitor as a result of a claim or demand being
made by a third party (a "Third Party Claim"), the Indemnitor shall have the
right to promptly assume the control of the defense of such Third Party Claim,
including, at its own expense, employment by it of counsel reasonably
satisfactory to the Claiming Party. The Claiming Party may, in its sole
discretion and at its own expense, employ counsel to represent it in the
defense of the Third Party Claim, and in such event counsel for the Indemnitor
shall cooperate with counsel for the Claiming Party in such defense, provided
that the Indemnitor shall direct and control the defense of such Third Party
Claim or proceeding. The Indemnitor shall not consent to the entry of any
judgment, except
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with the written consent of the Claiming Party, and shall not enter into any
settlement of such Third Party Claim without the written consent of the
Claiming Party which (i) does not include as an unconditional term thereof the
release of the Claiming Party from all liability in respect of such Third
Party Claim and (ii) results in the imposition on the Claiming Party of any
remedy other than money damages; provided, however, that the Claiming Party
shall not unreasonably withhold or delay its consent to the entry of any
judgment or any settlement of a Third Party Claim. If the Indemnitor elects
not to exercise its rights to assume the defense of the Third Party Claim, or
if injunctive relief is sought, the Claiming Party may, but shall have no
obligation to, defend against such Third Party Claim or legal proceeding in
such reasonable manner as it may deem appropriate, provided that the Claiming
Party shall not compromise or settle such Third Party Claim or proceeding
without the Indemnitor's consent.
(c) Payment. After any final judgment or award shall have
been rendered by a court, arbitration board or administrative agency of
competent jurisdiction and the time in which to appeal therefrom shall have
expired, or a settlement shall have been consummated, or the Claiming Party
and the Indemnitor shall arrive at a mutually binding agreement with respect
to each separate matter alleged to be indemnified by the Indemnitor hereunder,
the Claiming Party shall forward to the Indemnitor notice of any sums due and
owing by it with respect to such matter and the Indemnitor shall pay all of
the sums so owing to the Claiming Party by wire transfer, certified or bank
cashier's check within ten (10) days after the date of such notice (the
"Payment Date"); provided, however, that any amounts otherwise payable under
this Article X shall be reduced by any amounts recovered from third parties
and amounts actually paid to the Indemnified Parties under any policy or
policies of insurance covering the EMAC Losses or the Overseas Losses as the
case may be; and provided, further, that if such payment is made by the
surrender of EMAC Common Stock pursuant to Section 10.6, such payment shall be
made on the earliest possible date after the Payment Date on which the
transfer of EMAC Common Stock for such purposes will not result in a violation
(based on voluntary transactions occurring prior to such date but not
thereafter) of Section 16(b) of the Exchange Act.
10.5 Survival. The representations, warranties, covenants and
agreements of EMAC and the Overseas Stockholders set forth in this Agreement
shall survive the Closing and the consummation of the Merger and the other
Transactions contemplated hereby and continue until the earlier of two years
after the Closing Date or fifteen (15) days following the delivery of the
consolidated audited financial statements of the Surviving Corporation for the
fiscal year ending December 31, 1997. Notwithstanding the foregoing, the
representations contained in Sections 4.12 and 5.11 relating to tax matters
shall continue until the expiration of the applicable statute of limitations
relating to such representations, and the representations contained in Section
5.4(b) shall survive indefinitely. If a notice is given in accordance with
Section 10.4 before the expiration of the applicable period, then
(notwithstanding the expiration of such time period) the representation,
warranty, covenant or agreement shall survive until, but only for purposes of,
the resolution of such claim.
10.6 Satisfaction of Indemnification Obligations. Any obligations of
the Overseas Stockholders under Section 10.1 of this Agreement to indemnify
the EMAC Indemnified Parties may be satisfied, at the option of the Overseas
Stockholders, by either (a) payment in
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cash in the amount of the Losses incurred, or (b) delivery of a number of
shares of EMAC Common Stock for cancellation by EMAC having a Fair Market
Value equal to such Losses as of the date of delivery. In the event that any
Merger Shares are to be released to EMAC under this Section 10.6, such number
of Merger Shares shall automatically be released from the Lock-Up (as such
term is defined in the Lock-Up and Registration Rights Agreement).
ARTICLE XI
PUBLIC ANNOUNCEMENTS
EMAC, Overseas, and the Overseas Stockholders will consult with each
other before issuing any press release or making any public statement with
respect to this Agreement and the Transactions and, except as may be required
by applicable law or stock exchange regulations, will not issue any such press
release or make any such public statement prior to such consultation.
ARTICLE XII
TERMINATION
12.1 Grounds for Termination. This Agreement may be terminated at
any time prior to the Closing Date:
(a) by mutual written consent of EMAC and Overseas;
(b) by either EMAC or Overseas, if the Closing has not
occurred by October 31, 1996 (the "Termination Date"); provided, however, that
the right to terminate this Agreement under this paragraph (b) of Section 12.1
shall not be available to any party that has breached any of the covenants to
be performed by it, her or him in this Agreement;
(c) by Overseas and the Overseas Stockholders, (i) if EMAC
shall have breached any of its covenants in Article VII or VIII hereof in any
respect and such breach results in a Material Adverse Effect upon Overseas,
the Overseas Stockholders or EMAC, or (ii) if the representations and
warranties of EMAC contained in this Agreement shall not be true and correct
in all material respects, at the time made, or (iii) if such representations
and warranties shall not be true and correct in all material respects at and
as of the Closing Date as though such representations and warranties were made
again at and as of the Closing Date, except to the extent that such
representations are made herein as of a specific date prior to the Closing
Date, and in any such event, if such breach is subject to cure, EMAC have not
cured such breach within 10 business days of Overseas' notice of an intent to
terminate;
(d) by EMAC, (i) if Overseas or the Overseas Stockholders
shall have breached any of their covenants in Article VI or VIII hereof in any
respect and such breach results in a Material Adverse Effect upon Overseas or
EMAC, or (ii) if the representations
50
<PAGE>
and warranties of Overseas and the Overseas Stockholders contained in this
Agreement shall not be true and correct in all material respects, at the time
made, or (iii) if such representations and warranties shall not be true and
correct in all material respects at and as of the Closing Date as though such
representations and warranties were made again at and as of the Closing Date,
except to the extent that such representations are made herein as of a
specific date prior to the Closing Date, and in any such event, if such breach
is subject to cure, Overseas or the Overseas Stockholders has not cured such
breach within 10 business days of any notice by either of EMAC of an intent to
terminate; or
(e) by EMAC, the Overseas Stockholders or Overseas, if, at
the EMAC Stockholders' Meeting (including, any adjournments thereof), this
Agreement and the Merger, the EMAC Option Plans, the Restated Certificate,
By-laws or the Directors nominated pursuant to Section 7.7 shall fail to be
approved and adopted by the affirmative vote of the holders of EMAC Common
Stock required under EMAC's present Certificate of Incorporation, or if an
aggregate of 20% or more of the number of shares of EMAC Common Stock
outstanding as of the record date for the EMAC Stockholders' Meeting held by
Persons other than the Initial EMAC Stockholders take one or more of the
following actions: (i) demand conversion of said EMAC Common Stock into cash
pursuant to EMAC's certificate of incorporation or (ii) demand appraisal
rights pursuant to the DGCL.
12.2 Payment of Expenses upon Termination.
(a) Except as set forth in Section 6.7 or in Section 12.2(b)
below or in the last sentence of Section 7.2, in the event that this Agreement
is terminated pursuant to Section 12.1, Overseas, the Overseas Stockholders
and EMAC shall each be solely responsible for their own expenses incurred in
connection with this Agreement, the Merger and the Transaction.
(b) In the event that this Agreement is terminated pursuant
to Section 12.1(c) or 12.1(e), in addition to any other liabilities hereunder,
EMAC shall reimburse Overseas and the Overseas Stockholders for their
out-of-pocket fees and expenses incurred from and after February 10, 1996
(including, without limitation, the fees and expenses of each of their
attorneys, accountants and financial advisors) in connection with the
negotiation, documentation and performance of this Agreement, the Transaction
and the Transaction Documents up to an amount not exceeding the amount of cash
and the proceeds of any other Assets of EMAC remaining in EMAC (other than any
amounts remaining in the Trust Account) immediately prior to the liquidation
of EMAC pursuant to Article SIXTH of the Certificate of Incorporation of EMAC
in effect on the date of this Agreement and after the payment by EMAC of its
expenses and other obligations related to these Transactions (including
without limitation the fees and expenses of its attorneys and accountants,
printing fees and filing fees) and the liquidation and dissolution of EMAC.
(c) If any party terminates this Agreement pursuant to
Section 12.1, all obligations of the parties hereunder shall terminate without
any liability of any party to any other party (except for any liability for
damages or equitable relief of any party for willful breaches of this
Agreement, which liability shall not be limited by this Article XII,
including,
51
<PAGE>
without limitation, Section 12.2(b)); provided, however, that the
provisions of Section 12.3 shall survive any such termination.
12.3 Effect of Termination. If this Agreement is terminated pursuant
to Section 12.1, the agreements contained in Sections 6.6, 6.7, 7.6, 7.8, 12.2
and the last sentence of Section 7.2 shall survive the termination hereof.
ARTICLE XIII
CONTENTS OF AGREEMENT, AMENDMENT,
PARTIES IN INTEREST, ASSIGNMENT, ETC.
This Agreement, together with the schedules and exhibits hereto, sets
forth the entire understanding of the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings
of the parties in connection therewith. There are no representations and
warranties other than those expressly set forth or referred to herein. This
Agreement may be amended, modified or supplemented only by a written
instrument duly executed by each of the parties hereto. This Agreement shall
be binding upon and inure to the benefit of and be enforceable by the
respective heirs, legal representatives, successors and permitted assigns of
the parties hereto. No party hereto shall assign this Agreement or any right,
benefit or obligation hereunder. This Agreement shall not confer any rights or
remedies upon any Person other than the parties hereto and their permitted
assigns. Any term or provision of this Agreement may be waived at any time by
the party entitled to the benefit thereof by a written instrument duly
executed by such party. The parties hereto shall execute and deliver any and
all documents and take any and all other actions that may be deemed reasonably
necessary by their respective counsel to complete the Transactions.
ARTICLE XIV
INTERPRETATION
Unless the context of this Agreement clearly requires otherwise, (a)
references to the plural include the singular, the singular the plural, the
part the whole, and (b) "including" has the inclusive meaning frequently
identified with the phrase "but not limited to." The section and other
headings contained in this Agreement are for reference purposes only and do
not control or affect the construction of this Agreement or the interpretation
thereof in any respect. Section, subsection, schedule and exhibit references
are to this Agreement unless otherwise specified. Each accounting term used
herein that is not specifically defined herein shall have the meaning given to
it under GAAP.
52
<PAGE>
ARTICLE XV
NOTICES
All notices that are required or permitted hereunder shall be in
writing and shall be sufficient if personally delivered or sent by mail,
facsimile message (confirmed by person or machine) or Federal Express or other
nationally recognized overnight delivery service. Any notices shall be deemed
given upon the earlier of the date when received at, or the third day after
the date when sent by registered or certified mail or the first business day
after the date when sent by Federal Express or other nationally recognized
overnight delivery service to, the address or fax number set forth below,
unless such address or fax number is changed by notice to the other party
hereto:
If to EMAC:
Entertainment/Media Acquisition Corporation
c/o Bannon & Co.
202 North Canon Drive
Beverly Hills, CA 90210
Attention: Stephen K. Bannon, Chairman of the Board
Tel. No. (310) 276-3555
Fax. No. (310) 276-0583
with required copies to:
Brobeck, Phleger & Harrison LLP
1301 Avenue of the Americas
New York, NY 10019
Attention: Ellen B. Corenswet
Tel. No. (212) 237-2526
Fax. No. (212) 586-7878
Rosenfeld, Meyer & Susman
9601 Wilshire Blvd., 4th Floor
Beverly Hills, CA 90210
Attention: P. John Burke
Tel. No. (310) 246-3228
Fax. No. (310) 271-6430
53
<PAGE>
If to Overseas Filmgroup, Inc., Ellen Dinerman Little or Robert B. Little:
Overseas Filmgroup, Inc.
8800 Sunset Boulevard
Los Angeles, CA 90069
Attention: Ellen Dinerman Little
Robert B. Little
William F. Lischak
Tel. No. (310) 855-1199
Fax. No. (310) 855-0849
with a required copy to:
Gipson, Hoffman & Pancione
1901 Ave. of the Stars
Suite 1100
Los Angeles, CA 90067
Attention: John McHale
Tel. No. (310) 557-8815
Fax. No. (310) 556-8945
ARTICLE XVI
GOVERNING LAW
This Agreement shall be construed and interpreted in accordance with
the law of the State of Delaware, without regard to its provisions concerning
conflicts of law. Each of the parties hereto consents to the jurisdiction of,
and confers exclusive jurisdiction on, any court or tribunal located in Los
Angeles County, California (in the case of state courts) or the Central
District of California (in the case of federal courts), over any action, suit
or proceeding arising out of or relating to this Agreement or any other
Transaction Document to which it is a party. Each party hereby irrevocably
waives, and agrees not to assert as a defense in any such action, suit or
proceeding, any objection which he, she or it may now or hereafter have to
venue of any such action, suit or proceeding brought in any court or tribunal
located in Los Angeles County, California or the Central District of
California and hereby irrevocably waives any claim that any such action, suit
or proceeding brought in any such court or tribunal has been brought in an
inconvenient forum.
54
<PAGE>
ARTICLE XVII
COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of
which shall be binding as of the date first written above, and all of which
shall constitute one and the same instrument. Each such copy shall be deemed
an original, and it shall not be necessary in making proof of this Agreement
to produce or account for more than one such counterpart.
55
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first written above.
ENTERTAINMENT/MEDIA ACQUISITION
CORPORATION
By:
-----------------------------------
Title: Chairman of the Board
By:
-----------------------------------
Title: Chief Executive Officer and
President
OVERSEAS FILMGROUP, INC.
By:
-----------------------------------
Title: Chairman of the Board
OVERSEAS STOCKHOLDERS
--------------------------------------
Ellen Dinerman Little
--------------------------------------
Robert B. Little
The undersigned is executing this Agreement solely for purposes of,
and with the understanding that he is bound by, the provision of Section 4.27
of this Agreement.
--------------------------------------
William F. Lischak
56
<PAGE>
Exhibit A
CERTIFICATE OF MERGER
OF
OVERSEAS FILMGROUP, INC.
a Delaware corporation
WITH AND INTO
ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
a Delaware corporation
The undersigned corporation organized and existing under and by
virtue of the General Corporation Law of the State of Delaware, does hereby
certify as follows:
FIRST: That the name and state of incorporation of each of
----- the constituent corporations of the merger is as
follows:
Name State of Incorporation
---- -----------------------
OVERSEAS FILMGROUP, INC. Delaware
ENTERTAINMENT/MEDIA Delaware
ACQUISITION CORPORATION
SECOND: That an Agreement of Merger (the "Merger
------ Agreement") between the parties to the merger has
been approved, adopted, certified, executed and
acknowledged by each of the constituent
corporations in accordance with the requirements of
Section 251(c) of the General Corporation Law of
the State of Delaware.
THIRD: The surviving corporation of the merger is
----- ENTERTAINMENT/MEDIA ACQUISITION CORPORATION, a
Delaware corporation, which shall, at the time of
merger, change its name to "Overseas Filmgroup, Inc."
FOURTH: That the Certificate of Incorporation of the
------ surviving corporation is hereby amended and
restated to read in
<PAGE>
its entirety as set forth in Exhibit 1 attached
hereto.
FIFTH: That the executed Merger Agreement is on file at
----- the principal place of business of the surviving
corporation. The address of the principal place of
business of the surviving corporation is 8800
Sunset Boulevard, Suite 302, Los Angeles,
California 90069.
SIXTH: That a copy of the Merger Agreement will be furnished
----- by the surviving corporation, on request and without
cost to any stockholder of any constituent
corporation.
SEVENTH: The merger shall become effective upon the filing of
------- this Certificate of Merger with the Secretary of State
of the State of Delaware.
IN WITNESS WHEREOF, this Certificate of Merger has been duly executed as of
the ______ day of ______ , 1996.
ENTERTAINMENT/MEDIA ACQUISITION
CORPORATION
By:
-----------------------------------
Jeffrey A. Rochlis
President and
Chief Executive Officer
2
<PAGE>
EXHIBIT B
OVERSEAS FILMGROUP, INC.
1996 SPECIAL STOCK OPTION PLAN AND AGREEMENT
This OVERSEAS FILMGROUP, INC. 1996 SPECIAL STOCK OPTION PLAN AND
AGREEMENT (the "Plan Agreement") is made and entered into this day of , 1996
by and among ROBERT B. LITTLE, ELLEN DINERMAN LITTLE and OVERSEAS FILMGROUP,
INC., a Delaware corporation (the "Company"). Robert B. Little and Ellen
Dinerman Little are each sometimes individually referred to herein as an
"Optionee" and they sometimes are collectively referred to herein as the
"Optionees."
RECITALS
--------
A. The Company has entered into an Employment Agreement dated as
of _____________, 1996 with each Optionee (the "Employment Agreements").
B. As a term and condition of each Employment Agreement and as
consideration for the execution thereof, the parties have entered into this
Plan Agreement.
AGREEMENT
---------
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Representations and Warranties of the Company. The Company
represents and warrants that:
(a) This Plan Agreement has been approved by the affirmative vote of
the holders of the outstanding voting stock of the Company within the time
period, and pursuant to the procedures, required for compliance with the
provisions of Rule 16b-3 of the General Rules and Regulations ("Rule 16b-3")
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
and Section 162(m)(4)(C) of the Internal Revenue Code of 1986, as amended (the
"Code");
(b) The grant of options under this Plan Agreement and the terms and
conditions of this Plan Agreement have been approved by a committee (the
"Committee") comprised solely of two or more Directors of the Company who are
(i) "outside directors" within the meaning of Section 162(m)(4)(C) of the Code
and (ii) "disinterested persons" within the meaning of Rule 16b-3(c)(2)(i)
under the Exchange Act; and
(c) This Plan Agreement complies in all respects with Rule 16b-3 in
connection with the options to be granted hereunder.
2. Registration; Reservation of Shares. The Company represents and
warrants that it has registered under the Securities Act of 1933, as amended
(the "Act"), this Plan Agreement and the shares of the Company's common stock
, $[ ] par value per share ("Common Stock"), issuable upon exercise of the
options to be granted hereunder on such form and in such manner so that upon
exercise of the options hereunder the shares of Common Stock issuable as a
result thereof may be transferred thereafter by the Optionees without
restriction under any federal or state securities law. Until all options
granted hereunder have been exercised or have expired, the Company shall use
its best efforts to maintain such registration, keep the applicable
registration statement effective and otherwise permit the transferability
by Optionees
-1-
<PAGE>
of the Common Stock issuable upon exercise of the options granted hereunder
without restriction under any federal or state securities laws. The Company
shall cause all shares of Common Stock issuable upon exercise of the options
granted hereunder to be listed on each securities exchange or quotation system
on which similar securities issued by the Company are then listed. All of the
foregoing actions of the Company have been and shall be at the Company's
expense. The Company will at all times reserve and keep available, free from
preemptive rights, out of the aggregate of its authorized but unissued Common
Stock, for the purpose of enabling it to satisfy any obligation to issue
shares of Common Stock upon exercise of the Options, the maximum number of
shares of Common Stock which may then be deliverable upon the exercise of all
outstanding Options.
3. Grants to Optionees.
The Company hereby grants, on the date hereof (the "Date of Grant"),
to each Optionee, subject to the terms and conditions set forth herein,
options to purchase from the Company an aggregate of 1,100,000 shares of the
Company's Common Stock per Optionee, of which options to purchase 537,500
shares of Common Stock shall be referred to herein as "Group A Options" and
options to purchase 562,500 shares of Common Stock shall be referred to herein
as "Group B Options." The Group A Options and the Group B Options shall be
collectively referred to herein as the "Options" and each option hereunder is
sometimes individually referred to herein as an "Option." Neither the Group A
Options nor the Group B Options are intended to qualify as and will not be
treated as "incentive stock options" within the meaning of Section 422 of the
Code. The maximum number of shares of Common Stock for which each Optionee may
be granted options under this Plan Agreement shall be limited to 1,100,000
(such number being subject to adjustment in accordance with the terms and
provisions hereof including, without limitation, Section 12 hereof).
4. Price and Exercise of the Options.
(a) Exercise Price. The exercise price of the Group A Options is
$5.00 per share of Common Stock, subject to adjustment as provided in this
Plan Agreement. The exercise price of the Group B Options is $8.50 per share
of Common Stock, subject to adjustment as provided in this Plan Agreement. The
exercise price of the Group A Options and the exercise price of the Group B
Options, shall be referred to herein as the "Exercise Prices" (and each as an
"Exercise Price"). The Exercise Price shall be paid in full at the time of
exercise (except to the extent the sale and remittance procedure described in
subparagraph (iv) below is utilized) by one of the following methods selected
in each case by the Optionee:
(i) in cash or by certified or cashier's check payable to
the order of the Company,
(ii) by cancellation of indebtedness owed by the Company to
the Optionee exercising the Option, including, without limitation, the Merger
Note (as defined in that certain Merger Agreement by and among
Entertainment/Media Acquisition Corporation, Overseas Filmgroup, Inc., Robert
B. Little and Ellen Dinerman Little, dated as of [ ], 1996 (the "Merger
Agreement"),
(iii) by delivery of shares of the Common Stock of the
Company already beneficially owned by the Optionee(s) and having an aggregate
Current Market Price determined in accordance with Section 9 hereof equal to
the total Exercise Price of the Options being exercised (provided such shares
have been beneficially owned by the Optionee(s) for at least six (6) months),
(iv) through a special sale and remittance procedure, which
the Company shall promptly establish, pursuant to which upon irrevocable
written instructions of Optionee to the Company
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<PAGE>
(a) a Company-designated brokerage firm shall effect the immediate sale of the
shares underlying the Options being exercised and remit to the Company, out of
the sale proceeds available on the settlement date, sufficient funds to cover
the aggregate Exercise Price payable for the exercise of the Options covering
such shares plus all applicable taxes required to be withheld by the Company
by reason of such exercise, (b) the remainder of the sale proceeds shall be
promptly remitted to Optionee and (c) the Company shall deliver the
certificates for such shares underlying the Options being exercised directly
to such brokerage firm in order to complete the sale,
(v) by any combination thereof, or
(vi) in such other manner as the Committee may specify
in order to facilitate the exercise of Options by the Optionees.
(b) Exercise Notice. In order to exercise an Option, the Optionee or
any other person or persons entitled to exercise the Option shall give written
notice to the Secretary of the Company or to such other person as may be
designated by the Company, in the form set forth on Exhibit "A" or Exhibit
"B," specifying the number of shares to be purchased. If the Option is being
exercised by any person(s) other than the Optionee, such notice shall be
accompanied by proof, satisfactory to counsel for the Company, of the right of
such person(s) to exercise the Option. This notice shall be accompanied by
payment of the Exercise Price for the shares as provided in Section 4(a). The
Optionee shall also deliver such additional documents as the Company may then
reasonably require pursuant to this Plan Agreement.
(c) Withholding Tax. Upon the exercise of an Option, the Company
shall have the right to require the Optionee, and Optionee hereby agrees, to
pay the Company the amount of any taxes which the Company may be required to
withhold with respect thereto. The Committee may, in its discretion, grant an
Optionee, at any time while any of such Optionee's Options remain outstanding,
the right to pay the amount of any taxes which the Company may be required to
withhold in connection with the subsequent exercise of such Options by
delivering shares of Common Stock with a Current Market Price (determined in
accordance with Section 9 hereof) equal to such withholding tax obligation. If
such right is granted to an Optionee, then the shares which may be delivered
in satisfaction of such withholding tax obligation may, at such Optionee's
discretion, be either shares withheld by the Company upon the exercise of the
Option or other shares of Common Stock.
5. Vesting Schedule.
(a) Subject to paragraphs (c), (d), (e) and (f) of this Section 5 and
Section 7 of this Plan Agreement, the Group A Options granted to each Optionee
will vest as follows:
Number of Shares
of Common Stock
Underlying Options which
Vesting Date Vest on Vesting Date
------------ ------------------------
Date of Grant 100,000
______, 1997 87,500
______, 1998 87,500
______, 1999 87,500
______, 2000 87,500
______, 2001 87,500
-3-
<PAGE>
(b) Subject to paragraphs (c), (d), (e) and (f) of this Section 5 and
Section 7 of this Plan, the Group B Options granted to each Optionee will vest
as follows:
Number of Shares
of Common Stock
Underlying Options which
Vesting Date Vest on Vesting Date
------------ ------------------------
______, 1997 112,500
______, 1998 112,500
______, 1999 112,500
______, 2000 112,500
______, 2001 112,500
(c) Notwithstanding the foregoing, if, during the term of an
Optionee's employment under such Optionee's Employment Agreement, such
Optionee's employment with the Company (i) is validly terminated by the
Company for "Cause" (as defined in such Optionee's Employment Agreement) or
(ii) is voluntarily terminated by such Optionee other than for "Good Reason"
(as defined in such Optionee's Employment Agreement), then all of such
Optionee's unvested Options shall cease to continue to vest and all of such
Optionee's unvested Options shall expire and become void.
(d) Notwithstanding anything to the contrary contained in this Plan
Agreement (including anything in Section 13), if an Optionee's employment with
the Company is terminated (i) by the Company other than for "Cause" (as such
term is defined in such Optionee's Employment Agreement), or (ii) by Employee
for "Good Reason" (as such term is defined in such Optionee's Employment
Agreement), then all of such Optionee's Options shall automatically and
without any required action on the part of Optionee or the Company,
immediately fully vest (to the extent any such Options were unvested) and
become exercisable.
(e) Notwithstanding anything to the contrary contained herein, (i) if
an Optionee's employment with the Company is terminated as a result of
Optionee's Death or Disability (as such terms are defined in Optionee's
Employment Agreement) and the other Optionee's employment with the Company
shall not have previously terminated, then such deceased or disabled
Optionee's Options which were to have vested on the next two Vesting Dates
following the date of such termination of employment due to Death or
Disability shall automatically, and without any required action on the part of
Optionee or the Company, immediately fully vest (to the extent such Options
were unvested at the time of such Optionee's termination of employment due to
Death or Disability) and become exercisable and (ii) if an Optionee's
employment with the Company is terminated as a result of Optionee's Death or
Disability and the other Optionee's employment with the Company shall have
previously terminated or shall simultaneously terminate due to Death or
Disability, then such deceased or disabled Optionee's Options which were to
have vested on the next Vesting Date following the date of such Optionee's
termination of employment due to Death or Disability shall automatically, and
without any required action on the part of Optionee or the Company,
immediately fully vest (to the extent such Options were unvested at the time
of such Optionee's termination of employment due to Death or Disability) and
become fully exercisable. Any portion of the deceased or disabled Optionee's
Options which remain unvested after the application of the acceleration
provisions of this paragraph (e) upon such Optionee's Death or Disability
shall cease to continue to vest and such unvested portion of the deceased or
disabled Optionee's Options shall immediately expire and become void.
-4-
<PAGE>
(f) In addition to the accelerated vesting pursuant to paragraphs (d)
and (e) of this Section 5, the vesting of shares subject to the Options
granted to an Optionee shall accelerate upon the terms and conditions set
forth in Sections 7 and 13 hereof.
(g) Installments of vested Options may be exercised in whole or in
part, and, to the extent not exercised, will accumulate and be exercisable at
any time on or before termination of the Options.
6. Expiration Date.
Both the Group A Options and the Group B Options shall terminate and
expire at 5:00 p.m., California time, on , 2003. In no event may either the
Group A Options or the Group B Options be exercised after the date on which
they terminate.
7. Redemption of Group A Options
The Company may, upon the affirmative vote of the majority of the
Committee, call the Group A Options for redemption, in whole or in part, at a
price of $0.01 per Group A Option (each, a "Redemption Call"), (i) on the
date, if any, on which the Company calls for redemption (the "Warrant Call")
all of the Company's Redeemable Common Stock Purchase Warrants issued pursuant
to that certain Warrant Agreement dated as of February 16, 1995, by and
between the Company and Continental Stock Transfer & Trust Company or (ii) at
any time after the Warrant Call, upon notice in the case of (i) and (ii) (in
the manner set forth below) to each Optionee of not less than 30 days prior to
the date of redemption (the "Redemption Date"), and, in the case of a
Redemption Call pursuant to clause (ii) of this sentence, such Redemption Call
may only be made if the Current Market Price (determined in accordance with
Section 9 hereof) of the Common Stock has been at least $8.50, subject to
adjustment in accordance with Section 12 hereof, on each of the twenty (20)
consecutive trading days ending on the third business day prior to the date on
which notice of such Redemption Call is given. Any Group A Options which are
subject to a Redemption Call, but which have not vested prior to such
Redemption Call, shall immediately become fully vested. The Company shall
cause to be mailed, certified mail, postage prepaid, return receipt requested,
to each Optionee at the notice address set forth in Section 15 hereof, a
written notice, notifying such Optionee that the Company has called all or a
portion of the Group A Options for redemption and stating (i) the Redemption
Date, (ii) the number of Group A Options called for redemption (identifying
any Group A Options called for redemption which are not yet vested), (iii)
that all Group A Options subject to such Redemption Call which have not been
previously exercised may be exercised prior to and including the Redemption
Date, regardless of whether such Group A Options would otherwise be vested as
of such Redemption Date and (iv) that all Group A Options which are the
subject of such Redemption Call which are not exercised on or before the
Redemption Date shall thereafter cease to be exercisable. Notwithstanding
anything to the contrary in the foregoing, in the event that exercise of an
Optionee's Group A Options and/or sale of the shares received upon exercise
during the period after a Redemption Call and prior to the applicable
Redemption Date (i) would result in liability under Sections 10(b) or 16(b) of
the Exchange Act or (ii) would be prohibited or restricted in any manner by
any applicable law or regulation, the redemption of such Optionee's Group A
Options shall be delayed until the tenth day after the later of (i) last date
upon which such exercise and sale would result in such liability or (ii) the
last date when any applicable law or regulation would prohibit or restrict in
any manner such exercise or sale.
8. Transferability.
The Options granted under this Plan Agreement shall be
non-transferable by the holder either voluntarily or by operation of law,
other than by will or the laws of descent and distribution, and shall
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<PAGE>
be exercisable during the holder's lifetime only by the holder, regardless of
any community property interest therein of the spouse of the holder, or such
spouse's successors in interest. If the spouse of the holder shall have
acquired a community property interest in an Option pursuant to a domestic
relations order as defined under the Code or Title 1 of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), the holder, or
the holder's permitted successors in interest, may exercise the Option on
behalf of the spouse of the holder or such spouse's successors in interest.
9. Current Market Price of Common Stock
For purposes of this Plan Agreement, Current Market Price means the
closing price of a share of Common Stock on the trading day immediately
preceding the date of such determination. The closing price shall be the last
reported sales price regular way (or, in case no such reported sale takes
place on such day, the last reported sales price regular way for the most
recent day for which such information is available shall be used), 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 thereon, 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 on such day in the domestic over-the-counter market as
reported on the NASD Electronic Bulletin Board, or, if not reported on such
bulletin board, in the "pink sheets" published by the National Quotation
Bureau, Incorporated. If at any time the Common Stock is not listed on any
national securities exchange or quoted in the Nasdaq System or the
over-the-counter market or reported on the NASD Electronic Bulletin Board or
in the "pink sheets" published by the National Quotation Bureau, Incorporated,
the Current Market Price on such day shall be the fair market value thereof
reasonably determined in good faith by the Committee and agreed to by the
Optionees (which agreement shall not be unreasonably withheld) based upon such
information and advice as they mutually consider appropriate (such agreement
between the Committee and the Optionees being referred to herein as "Mutual
Agreement"). If the Committee and the Optionee are unable to so agree within
twenty-one (21) days of the date of determination, the Current Market Price on
such day will be the fair market value thereof determined by an independent,
nationally recognized investment banking firm selected by mutual agreement of
the Committee and the Optionees (an "Agreed Upon Firm").
10. No Right to Continued Employment or Engagement by the Company.
This Plan Agreement is not an employment contract and nothing in this
Plan Agreement shall be deemed to create in any way whatsoever any obligation
on Optionee's part to continue in the employ of the Company, or an affiliate
of the Company or on the Company's part to continue Optionee's employment with
the Company or an affiliate of the Company.
11. Privileges of Stock Ownership
No person entitled to exercise any Option granted under this Plan
Agreement shall have any of the rights or privileges of a stockholder of the
Company in respect of any shares of Common Stock issuable upon exercise of
such Option until certificates representing such shares shall have been issued
and delivered.
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12. Adjustment of Exercise Prices and Number of Options.
The Exercise Prices shall be subject to adjustment from time to time
as hereinafter provided.
(a) Subdivision or Combination of Stock. In case the Company shall at
any time subdivide the outstanding shares of Common Stock into a greater
number of shares, whether through a stock split, stock dividend or otherwise,
the number of shares of Common Stock issuable upon exercise of the Options
shall be proportionately increased and the Exercise Prices in effect
immediately prior to such subdivision shall be proportionately reduced, and
conversely, in case the outstanding shares of Common Stock shall be combined
into a smaller number of shares, the number of shares of Common Stock issuable
upon exercise of the Options shall be proportionately reduced and the Exercise
Prices in effect immediately prior to such combination shall be
proportionately increased. Upon each adjustment of the Exercise Prices
pursuant to this paragraph (a), each Optionee shall thereafter be entitled to
purchase, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock obtained by multiplying the Exercise Price in effect
immediately prior to such adjustment by the number of shares of Common Stock
issuable upon exercise of such Option immediately prior to such adjustment and
dividing the product thereof by the Exercise Price resulting from such
adjustment.
(b) Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, Etc. In case the Company (i) consolidates with or merges into
any other entity and is not the continuing or surviving corporation of such
consolidation or merger, or (ii) permits any other entity to consolidate with
or merge into the Company and the Company is the continuing or surviving
corporation but in connection with such consolidation or merger, the Common
Stock is changed into or exchanged for stock or other securities of any other
corporation or cash or any other assets, or (iii) transfers all or
substantially all of its properties and assets to any other entity, or (iv)
effects a capital reorganization or reclassification of the capital stock of
the Company in such a way that holders of Common Stock shall be entitled to
receive stock, securities, cash or assets with respect to or in exchange for
Common Stock (each of the foregoing events in clauses (i) through (iv) being a
"Fundamental Change"), then in each such case proper provision shall be made
so that, upon the basis and upon the terms and in the manner provided in this
subsection (b), the Optionees, upon the exercise of the Options at any time
after the consummation of such Fundamental Change, shall be entitled to
receive (at the aggregate Exercise Price in effect for all shares of Common
Stock issuable upon such exercise immediately prior to such consummation as
adjusted to the time of such transaction), in lieu of shares of Common Stock
issuable upon such exercise prior to such consummation, the stock and other
securities, cash and assets to which such Optionees would have been entitled
upon such consummation if such Optionees had exercised such Options
immediately prior thereto (subject to adjustments subsequent to such corporate
action as nearly equivalent as possible to the adjustments provided for in
this Section 12). In the case of any Fundamental Change, the Company shall
require the successor or acquiring corporation to assume the obligation to
perform each and every covenant and condition of this Plan Agreement to be
performed and observed by the Company and all liabilities and obligations of
the Company hereunder.
(c) Other Equitable Adjustments. If any event occurs as to which the
other provisions of this Section 12 are not strictly applicable (or if
strictly applicable would not fairly protect the rights of the Optionees in
accordance with the basic intent and principles of such provisions) but, in
the reasonable opinion of the Committee, an adjustment should be made to
fairly protect the rights of Optionees in accordance with the basic intent and
principles of such provisions, then the Company shall appoint a firm of
independent certified public accountants (which may be the regular auditors of
the Company) of recognized national standing, which shall give its opinion
upon the adjustment, if any, to be made to protect the Optionees against
dilution on a basis consistent with the basic intent and principles
established
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<PAGE>
in the other provisions of this Section 12. Upon receipt of such opinion, the
Company shall forthwith make the adjustments, if any, described therein,
provided such equitable adjustments under this Section 12(c) would not result
in a charge to the Company's earnings pursuant to applicable financial
accounting principles.
(d) Notice of Adjustment. Upon any adjustment of the Exercise Prices
or of the number of shares issuable upon the exercise of the Options, then and
in each such case the Company shall promptly deliver a notice to each Optionee
of the adjustment and a copy of a certificate of either the Committee or a
firm of independent public accountants selected by the Committee (who may be
the regular accountants employed by the Company), which certificate shall
state the Exercise Prices resulting from such adjustment and the increase or
decrease, if any, in the number of shares issuable at such prices upon the
exercise of each Option, setting forth in reasonable detail the method of
calculation and the facts upon which such calculation is based.
(e) Other Notices. In case at any time:
(i) the Company shall declare any cash dividend on its
Common Stock;
(ii) the Company shall pay any dividend payable in stock
upon its Common Stock or make any distribution (other than regular cash
dividends) to the holders of its Common Stock;
(iii) the Company shall offer for subscription pro rata to
the holders of its Common Stock any additional shares of stock of any class or
other rights;
(iv) the Company shall authorize the distribution to all
holders of its Common Stock of evidences of its indebtedness or assets (other
than cash dividends or cash distributions payable out of earnings or earned
surplus or dividends payable in Common Stock);
(v) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or
merger of the Company with another corporation (other than a subsidiary of the
Company in which the Company is the surviving or continuing corporation and no
change occurs in the Company's Common Stock), or sale of all or substantially
all of its assets to, another entity;
(vi) there shall be a voluntary or involuntary dissolution,
liquidation, bankruptcy, assignment for the benefit of creditors, or winding
up of the Company; or
(vii) the Company proposes to take any other action or an
event occurs which would require an adjustment of the Exercise Prices pursuant
to this Section 12;
then, in any one or more of such cases, the Company shall give written notice
to each Optionee who is not then an executive officer or director of the
Company, addressed to each such Optionee at the address of the Optionee shown
on the books of the Company, of (1) the date on which the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights, or (2) the date (or, if not then known, a reasonable
approximation thereof by the Company) on which such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation,
bankruptcy, assignment for the benefit of creditors, winding up or other
action, as the case may be, shall take place. Such notice shall also specify
(or, if not then known, reasonably approximate) the date as of which the
holders of Common Stock or record shall participate in such dividend,
distribution or subscription rights or shall be entitled
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<PAGE>
to exchange their Common Stock for securities or other property deliverable
upon such reorganization, reclassification, consolidation, merger, sale,
dissolution, liquidation, bankruptcy, assignment for the benefit of creditors,
winding up or other action, as the case may be. Such written notice shall be
given at least ten days prior to the action in question and not less than ten
days prior to the record date or the date on which the Company's transfer
books are closed in respect thereto.
(f) Adjustments below Par Value. Before taking any action which would
cause an adjustment pursuant to this Section 12 to reduce the Exercise Prices
below the then par value (if any) of the shares of Common Stock issuable upon
the exercise of Options, the Company will take any corporate action which may,
in the opinion of its counsel (which may by counsel employed by the Company),
be necessary in order that the Company may validly and legally issue fully
paid and nonassessable shares of Common Stock at the Exercise Prices as so
adjusted.
(g) Shares of Common Stock. For the purpose of this Section 12, the
terms "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 (ii) any
other class of stock resulting from successive changes or reclassifications of
such shares consisting solely of changes in par value, or from par value to no
par value, or from no par value to par value. In the event that at any time,
as a result of an adjustment made pursuant to this Section 12, the Optionees
shall become entitled to purchase any securities of the Company other than
shares of Common Stock, thereafter the number of such other shares so issuable
upon exercise of each Option and the Exercise Prices with respect to such
shares shall be subject to adjustment from time to time in a manner on the
terms as nearly equivalent as practicable to the provisions with respect to
the Options contained in this Section 12, and the provisions of this Section
12 shall apply on like terms to any such other securities.
13. Amendment of Plan Agreement
(a) This Plan Agreement may not be revised or amended without the
written consent of the Company and each Optionee who holds an outstanding
Option subject to such proposed revision or amendment, provided further, that
any such amendment or revision shall also be subject to any applicable
stockholder approval requirements. Notwithstanding the foregoing, this Plan
Agreement may not be amended more than once every six months, other than to
comport with changes in the Code, ERISA or the rules thereunder.
(b) Except as provided in Section 12 hereof, no modification may be
made to the Options except in compliance with Rule 16b-3.
14. Section 16 of the Exchange Act
(a) It is the intent of the Company that this Plan Agreement comply
in all respects with Rule 16b-3 in connection with the Options granted
hereunder. Accordingly if any provision of this Plan Agreement does not comply
with Rule 16b-3 as then applicable to Optionees, then, with the written
consent of Optionees, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements with respect to the
Optionees.
(b) Unless an Optionee could otherwise transfer an Option or the
shares of Common Stock issued upon exercise of an Option granted under this
Plan Agreement without incurring liability under Section 16(b) of the Exchange
Act, at least six months shall elapse from the Grant Date to the date of
disposition of any Common Stock issuable upon exercise of any Option
hereunder.
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<PAGE>
15. Notices.
Any notice that the Company is required or may desire to give to
Optionees hereunder shall be in writing and may be served by delivering it to
Optionees, or by sending it to Optionees by certified mail, return receipt
requested (effective five days after mailing) or overnight delivery of the
same by delivery service capable of providing verified receipt (effective the
next business day) or facsimile (effective twenty-four hours after receipt is
confirmed by person or machine), at the addresses set forth below, or such
substitute addresses as Optionees may from time to time designate by notice to
the Company. Any notice that the Optionees are required or may desire to serve
upon the Company hereunder shall be in writing and may be served by delivering
it personally or by sending it certified mail, return receipt requested or
overnight delivery, or facsimile (with receipt confirmed by person or machine)
to the address set forth below, or such substitute address as the Company may
from time to time designate by notice to Optionees. Such notices by Employee
shall be effective at the same times as specified in this Section 15 for
notices by the Company.
Robert B. Little: Robert B. Little
12309 Viewcrest Road
Studio City, CA 91604
(fax) (818) 760-2981
Ellen Dinerman Little: Ellen Dinerman Little
12309 Viewcrest Road
Studio City, CA 91604
(fax) (818) 760-2981
The Company: OVERSEAS FILMGROUP, INC.
8800 Sunset Boulevard
Los Angeles, California 9069
Attention: Corporate Secretary
(fax) (310) 855-0719
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<PAGE>
17. Governing Law; Assigns.
This Plan Agreement and the Options issued hereunder shall be deemed
to be a contract made under the laws of Delaware and for all purposes shall be
governed by and construed in accordance with the internal laws of such state,
regardless of the law of choice of law of that or any other jurisdiction. This
Plan Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective heirs, legal representatives, successors and
permitted assigns of the parties hereto.
IN WITNESS WHEREOF, the parties have caused this Plan Agreement to be
executed as of the date first set forth above.
OVERSEAS FILMGROUP, INC.
a Delaware corporation
By:
----------------------------------
Name:
Title:
-------------------------------------
ROBERT B. LITTLE
Social Security No.:
-----------------
-------------------------------------
ELLEN DINERMAN LITTLE
Social Security No.:
-----------------
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EXHIBIT A
EXERCISE NOTICE
OVERSEAS FILMGROUP, INC,
8800 Sunset Boulevard
Los Angeles, California 90069
Attention: Corporate Secretary
Re: Exercise of Stock Option
------------------------
Ladies and Gentlemen:
Pursuant to Section 4 of that certain OVERSEAS FILMGROUP, INC. 1996
SPECIAL STOCK OPTION PLAN AND AGREEMENT (the "Plan Agreement") between the
undersigned and OVERSEAS FILMGROUP, INC., a Delaware corporation (the
"Company"), the undersigned hereby elects to exercise options granted thereby
to purchase ____ shares of Common Stock of the Company at a price of $ ____
per share. Accompanying this Notice is the payment in full for such shares
in the following manner permitted by Section 4 of the Plan Agreement: (check
one and fill in blanks)
CHECK HERE
[ ] (i) $___________ in cash or by certified check or cashier's check payable
to the order of the Company;
[ ] (ii) $___________ by cancellation of indebtedness (including principal and
accrued interest) in the amount of $___________ owed by the Company to the
undersigned (which indebtedness may include the Merger Note (as defined in
Section 4(a)(ii) of the Plan Agreement));
[ ] (iii) $___________ by delivery of _________ shares of Common Stock of the
Company, which have an aggregate Current Market Price determined in accordance
with Section 9 of the Plan Agreement of $____________which shares are
beneficially owned by the undersigned and, if applicable, by ____________ and
have been so beneficially owned for a least six (6) months prior to the date
hereof;
[ ] (iv) $___________ through the special sale and remittance procedure
pursuant to which, attached hereto are the following: (i) irrevocable written
instructions to the Company-designated brokerage firm in the form supplied to
the undersigned pursuant to the Plan Agreement and (ii) irrevocable written
instructions to the Company to deliver the shares underlying the Options being
exercised herewith to deliver such shares to the Company-designated brokerage
firm in the form supplied to the undersigned pursuant to the Plan Agreement;
[ ] (v) $___________ through a combination of the payment methods set forth
above. (Check each payment method being used and indicate the amount of the
aggregate exercise price being paid pursuant to each method.
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<PAGE>
[ ] (vi) $___________ in the manner described in the addendum to this Exercise
Notice, which manner has been approved by the Committee described in Section
1(b) of the Plan Agreement.
Dated:
----------------------- --------------------------------------
Signature
--------------------------------------
Print Name
--------------------------------------
Please print here the exact name
desired to be on the stock certificate
and the records of the Company.
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<PAGE>
EXHIBIT C
OVERSEAS FILMGROUP, INC.
1996 BASIC STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
1. Purpose.
The purpose of this 1996 Basic Stock Option and Stock Appreciation
Rights Plan (the "Plan") of Overseas Filmgroup, Inc., a Delaware corporation
(the "Company"), is to secure for the Company and its stockholders the
benefits arising from stock ownership and participation in stock appreciation
by selected employees of the Company or any "parent corporation" or
"subsidiary corporation" within the meaning of Sections 424(e) and (f) of the
Internal Revenue Code of 1986, as amended (the "Code") (each such parent or
subsidiary corporation being referred to herein as an "Affiliate"), Directors,
consultants or other persons as the Board of Directors of the Company (the
"Board of Directors"), or a committee thereof constituted for the purpose, may
from time to time determine consistent with the limitations set forth herein.
The Plan will provide a means whereby (i) such employees may purchase shares
of the Common Stock of the Company pursuant to options that will qualify as
"incentive stock options" under Section 422 of the Code, (ii) such employees,
Directors, consultants or other persons may purchase shares of Common Stock of
the Company pursuant to "non-qualified stock options," and (iii) such
employees, Directors, consultants or other persons may acquire the right to
participate in the appreciation of the Common Stock of the Company pursuant to
"stock appreciation rights." Incentive stock options and non-qualified stock
options are sometimes referred to collectively as "options." It is intended
that the provisions of this Plan pertaining to incentive stock options shall
be consistent with the requirements of the Code and other applicable law
pertaining to incentive stock options, and the Plan shall be interpreted and,
if necessary, deemed modified to the extent necessary to permit options
granted hereunder as incentive stock options to so qualify for federal income
tax purposes.
2. Administration.
2.1 The Plan shall be administered by the Board of Directors or by
one or more committees of the Board of Directors, each consisting of two or
more Directors of the Company to whom administration of the Plan has been
delegated (the "Committee"), provided, however, that with respect to
participation of the Directors of the Company, the Plan shall be administered
prior to August 15, 1996, by a Committee comprised solely of two or more
Directors who are "disinterested persons" as that term is defined in Rule
16b-3(c)(2)(i) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and shall on or after
August 15, 1996, be administered with respect to participation by Directors
and executive officers by a Committee comprised solely of two or more
Directors who are "non-employee directors" as that term is defined in Rule
16b-3(b)(3)(i) of the General Rules and Regulations under the Exchange Act.
Any action of the Board of Directors or the Committee with respect to
administration of the Plan shall be taken by a majority vote or written
consent of its members.
2.2 Subject to the provisions of the Plan, the Board of Directors or
the Committee shall have authority (i) to construe and interpret the Plan,
(ii) to define the terms used therein, (iii) to prescribe, amend and rescind
rules and regulations relating to the Plan, (iv) to determine those eligible
individuals to whom and the time or times at which options or stock
appreciation rights shall be granted (with any such individual being referred
to herein as a "Participant"), whether any options granted will be incentive
stock options or non-qualified stock options, the number of shares to be
subject to each option or stock appreciation right, the exercise price of an
option or the Initial Value of a stock appreciation right, the
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<PAGE>
number of installments, if any, in which each option or stock appreciation
right may be exercised, and the duration of each option or stock appreciation
right, (v) to approve and determine the duration of leaves of absence which
may be granted to Participants without constituting a termination of their
employment for the purposes of the Plan, and (vi) to make all other
determinations necessary or advisable for the administration of the Plan. All
determinations and interpretations made by the Board of Directors or Committee
shall be binding and conclusive on all Participants in the Plan and their
legal representatives and beneficiaries.
3. Shares Subject to the Plan; Limits Upon Awards.
Subject to adjustment as provided in Section 16 and Section 17
hereof:
3.1 Shares made subject to options under the Plan shall consist of
the Company's authorized but unissued Common Stock;
3.2 Stock appreciation rights awarded under the Plan shall be granted
with reference to shares of the Company's Common Stock, and the number of such
shares so referenced -- i.e., the number of stock appreciation rights awarded
as described in Section 8.1 below -- shall be deemed to be made subject to
stock appreciation rights for purposes of the limitations of this Section 3;
and
3.3 The aggregate combined number of shares of the Company's Common
Stock made subject to options or stock appreciation rights granted under the
Plan, during the term hereof, to all recipients in total shall not exceed Five
Hundred Fifty Thousand (550,000) shares. In no event may any one individual be
granted stock options and independently exercisable stock appreciation rights
under the Plan for more than Two Hundred Thousand (200,000) shares of Common
Stock in the aggregate over the term of the Plan.
If any option or stock appreciation right granted under the Plan
shall expire or terminate for any reason, without having been exercised in
full, the unpurchased shares that were subject to such expired option or the
unexercised rights that were subject to such expired stock appreciation right,
as applicable, shall again be available to be made subject to options or stock
appreciation rights to be granted under the Plan.
4. Eligibility.
4.1 The following persons, and only the following persons, shall be
eligible to participate in and receive awards or grants under the Plan, as
follows:
4.1.1 All regular full-time employees of the Company or any
Affiliate shall be eligible to receive incentive stock options, non-qualified
stock options and stock appreciation rights.
4.1.2 Directors of the Company or any Affiliate who are not
regular salaried employees of the Company or any Affiliate, and consultants
and other persons who provide services to the Company or any Affiliate on a
regular or substantial basis, but who are not regular salaried employees of
the Company or any Affiliate, shall not be eligible to receive incentive stock
options, but shall be eligible to receive non-qualified stock options and
stock appreciation rights.
4.2 No incentive stock option may be granted to any employee
who, at the time the incentive
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<PAGE>
stock option is granted, owns shares possessing more than ten percent (10%) of
the total combined voting power of all classes of stock in the Company or an
Affiliate, unless the exercise price of such incentive stock option is at
least one hundred ten percent (110%) of the fair market value of the stock
subject to the incentive stock option, determining fair market value as of the
date each respective option is granted in accordance with Section 9 hereof,
and such incentive stock option by its terms is not exercisable after the
expiration of five years from the date such incentive stock option is granted.
4.3 The aggregate fair market value of the Common Stock with respect
to which incentive stock options granted to any one employee under this Plan
or any other incentive stock option plan of the Company or an Affiliate are
exercisable for the first time during any calendar year shall not exceed
$100,000, determining fair market value as of the date each respective option
is granted (such determination to be made in accordance with Section 9
hereof).
5. Duration of Options and Stock Appreciation Rights.
Each option and stock appreciation right and all rights associated
therewith shall expire on such date as the Board of Directors or the Committee
may determine, but in no event later than ten years from the date on which the
option or stock appreciation right is granted, and shall be subject to earlier
termination as provided herein.
6. Price and Exercise of Options.
6.1 Subject to Section 4.2, the purchase price of the Common Stock
covered by each option shall be determined by the Board of Directors or the
Committee, but in the case of an incentive stock option shall not be less than
one hundred percent of the fair market value of such Common Stock on the date
the incentive stock option is granted, determined in accordance with Section 9
below. Except to the extent the sale and remittance procedure described in
subparagraph (iv) below is utilized, the purchase price of the Common Stock
upon exercise of an option shall be paid in full at the time of exercise in
one or more of the forms specified below:
(i) in cash or by certified or cashier's check payable to the order
of the Company,
(ii) by cancellation of indebtedness owed by the Company to the
Participant,
(iii) by delivery of shares of Common Stock of the Company already
owned by and in the possession of the Participant and having an aggregate fair
market value equal to the total exercise price of the option being exercised
(provided such shares have been held by the Participant for at least six (6)
months),
(iv) through a special sale and remittance procedure pursuant to
which the Participant shall concurrently provide irrevocable written
instructions to (a) a Company-designated brokerage firm to effect the
immediate sale of the shares underlying the options being exercised and remit
to the Company, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate exercise price payable for exercise of
the options covering such shares plus all applicable taxes required to be
withheld by the Company by reason of such exercise, and (b) the Company to
deliver the certificates for the shares underlying the options being exercised
directly to such brokerage firm in order to complete the sale,
(v) if authorized by the Board of Directors or the Committee or if
specified in the option being
3
<PAGE>
exercised, by a promissory note made by the Participant in favor of the
Company, subject to terms and conditions determined by the Board of Directors
or the Committee, secured by the Common Stock issuable upon exercise, and in
compliance with applicable law (including, without limitation, state,
corporate and federal requirements),
(vi) by any combination thereof, or
(vii) in such other manner as the Board of Directors or the
Committee may specify in order to facilitate the exercise of options by the
holders thereof. Shares of Common Stock used to satisfy the exercise price of
an option in accordance with Section 6.1(iii) above shall be valued at their
fair market value determined in accordance with Section 9 hereof.
6.2 No option granted under this Plan shall be exercisable if such
exercise would involve a violation of any applicable law or regulation
(including without limitation, federal and state securities laws and
regulations). Each option shall be exercisable in such installments during the
period prior to its expiration date as the Board of Directors or Committee
shall determine; provided, however, that unless otherwise determined by the
Board of Directors or Committee, if the Participant shall not in any given
installment period purchase all of the shares which the Participant is
entitled to purchase in such installment period, then such Participant's right
to purchase any shares not purchased in such installment period shall continue
until the expiration date or sooner termination of the Participant's option.
No option may be exercised for a fraction of a share and no partial exercise
of any option may be for less than ten shares.
7. Annual Grants to Non-Employee Directors.
7.1 A non-qualified stock option to purchase Five Thousand (5,000)
shares of the Company's Common Stock (subject to the adjustments provided in
Sections 16 and 17 below) shall be granted under this Plan to each eligible
non-employee Director in accordance with the following provisions:
(a) Each individual who is serving as a non-employee
Director on the effective date of this Plan shall receive such a non-qualified
stock option.
(b) Each individual who is first elected or appointed as a
non-employee Director at any time after the effective date of this Plan shall
receive, at the time of such initial election or appointment, such a
non-qualified stock option.
(c) On the date of each Annual Stockholders Meeting,
beginning with the 1997 Annual Meeting, each individual who is to continue to
serve after such meeting as a non-employee Director shall be granted such a
non-qualified stock option, provided such individual has served as a Director
for at least six (6) months.
7.2 Each such option shall include the following terms and
provisions:
(a) the exercise price per share shall be equal to the
greater of (a) the fair market value of one such share of Common Stock
(determined as set forth in Section 9 hereof) on the date of grant of such
option or (b) the par value of one such share of Common Stock;
(b) the option shall be exercisable one year after the date
of grant of such option, subject
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<PAGE>
to full and immediate acceleration upon the occurrence of a Corporate
Transaction or Change of Control in accordance with the provisions of Section
17, and shall expire (subject to Section 17) on the first to occur of the
following: (a) the third anniversary of the date upon which the optionee shall
cease to be a Director or (b) the tenth anniversary of the date of grant of
such option;
(c) payment of the exercise price of such option shall be
made in accordance with the provisions of Section 6.1 hereof;
(d) the option shall be subject to Sections 3, 4, 9, 10, 11,
15, 16, 17, 18, 19 and 20 hereof.
8. Terms and Conditions of Stock Appreciation Rights.
All stock appreciation rights shall be evidenced by a Certificate of
Grant (sometimes referred to herein as a "Certificate") in such form as the
Board of Directors or the Committee shall from time to time approve. Stock
appreciation rights granted to Directors or executive officers shall require
approval of the Committee. A grant of stock appreciation rights shall be
subject to the following terms and conditions:
8.1 Each stock appreciation right shall entitle a Participant to an
amount (the "Appreciation") equal to the excess of the Exercise Value of one
share of Common Stock over the Initial Value of one share of Common Stock. The
Initial Value for each stock appreciation right shall be specified in the
Certificate of Grant evidencing such right and shall equal the fair market
value of a share of Common Stock on the date of grant, determined as set forth
in Section 9 hereof. The Exercise Value for a stock appreciation right shall
equal the fair market value of a share of Common Stock on the date the stock
appreciation right is exercised, determined as set forth in Section 9 hereof.
The total Appreciation available to a Participant from the exercise of any
stock appreciation right shall be equal to the number of stock appreciation
rights exercised, multiplied by the amount of Appreciation per stock
appreciation right. Participants acknowledge that a stock appreciation right
is a method of incentive compensation for employees, Directors, consultants
and other persons and does not constitute an offering or sale of Common Stock
to anyone.
8.2 The Appreciation available to a Participant upon exercise of the
Participant's stock appreciation rights shall be paid to the Participant in
cash or Common Stock as determined by the Board of Directors or the Committee.
If payment is made in Common Stock of the Company, then the fair market value
of the Common Stock for purposes of calculating the number of shares of Common
Stock that shall be issued to pay the Appreciation of a stock appreciation
right shall be based upon the fair market value of the Common Stock as
determined in Section 9 hereof on the date of exercise of the stock
appreciation right. If the total Appreciation is paid in Common Stock, the
total Appreciation will be reduced to the largest amount divisible by the fair
market value of one share of Common Stock. Appreciation shall be paid as
compensation and without interest by the Company as specified in the
Certificate of Grant.
8.3 All stock appreciation rights must have an Initial Value no less
than the fair market value of a share of Common Stock as determined in Section
9 hereof as of the date of grant of such rights.
8.4 A stock appreciation right (a "Related Right") may be granted
under this Plan pursuant to a Certificate of Grant providing that the exercise
of the stock appreciation right affects the exercise of an option granted
pursuant to this Plan (the "Related Option"). For example, to the extent
permitted by
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applicable law, the Certificate of Grant pursuant to which a Related Right is
granted may provide that the Related Right may be exercised only to the extent
to which a Related non-qualified stock option is simultaneously exercised.
Alternatively, a Certificate of Grant may provide that a Related Right may be
exercisable only to the extent to which the Related Option is exercisable, and
then only in lieu of the exercise of such Related Option, in which case (i)
upon the exercise or termination of the Related Right, the Related Option
shall cease to be exercisable and shall be canceled to the extent of the
number of shares with respect to which the Related Right was exercised or
terminated, and (ii) upon the exercise or termination of the Related Option,
the Related Right shall cease to be exercisable and shall be canceled to the
extent of the number of shares to which the Related Option was exercised or
terminated. In addition to the foregoing, if the Related Option is an
"incentive stock option" granted pursuant to the Plan, then the Related Right
must satisfy the following conditions:
8.4.1 The Related Right must be granted only at the time of
grant of the Related Option;
8.4.2 The Related Right must expire no later than the
expiration of the Related Option;
8.4.3 The Related Right must be granted for an amount of
Appreciation equal to or less than one hundred percent of the difference
between the exercise price of the Related Option and the market price of the
Stock subject to the Related Option at the time the Related Right is
exercised;
8.4.4 The Related Right may be transferable only when the
Related Option is transferable, and only under the same conditions;
8.4.5 The Related Right may be exercised only when the
Related Option is eligible to be exercised; and
8.4.6 The Related Right may be exercised only when the
market price of the Stock subject to the Related Option exceeds the exercise
price of the Related Option.
8.5 No stock appreciation right granted under this Plan shall be
exercisable if such exercise would involve a violation of any applicable law
or regulation (including, without limitation, federal and state securities
laws and regulations). Each stock appreciation right shall be exercisable in
such installments during the period prior to its expiration date as the Board
of Directors or the Committee shall determine; provided, however, that, unless
otherwise determined by the Board of Directors or the Committee, if the
Participant shall not in any given installment period exercise all of the
stock appreciation rights which the Participant is entitled to exercise in
such installment period, then the Participant's right to exercise any stock
appreciation rights not exercised in such installment period shall continue
until the expiration date or sooner termination of the Participant's stock
appreciation rights.
9. Fair Market Value of Common Stock.
The fair market value of a share of Common Stock of the Company
shall, if possible, be determined for the purposes of this Plan by reference
to the mean between the bid and asked price of a share as supplied by the
National Association of Securities Dealers through NASDAQ (or its successor in
function) or, if such shares are then traded on a principal stock exchange, by
reference to the closing price of a share on the principal stock exchange on
which such shares are traded, in each case as reported by The Wall Street
Journal for the business day immediately preceding the date on which the fair
market value is determined (or, if for any reason no such price is available,
in such other manner as the Board
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of Directors or the Committee may deem appropriate to reflect the then fair
market value thereof).
10. Withholding Tax.
Upon (i) the disposition of shares of Common Stock acquired pursuant
to the exercise of an incentive stock option granted pursuant to the Plan
within two years of the granting of the incentive stock option or within one
year after exercise of the incentive stock option, (ii) the exercise of a
non-qualified stock option (or an incentive stock option treated as a
non-qualified stock option) or (iii) the exercise of a stock appreciation
right, the Company shall have the right to require such disposing or
exercising person, and such person by accepting the options or stock
appreciation rights granted under the Plan hereby agrees, to pay the Company
the amount of any taxes which the Company may be required to withhold with
respect thereto. The Board of Directors or the Committee shall have the
authority, exercisable either at the time the option or stock appreciation
right is granted or at any time while such option or stock appreciation right
remains outstanding, to provide such person with the right, exercisable in
connection with a clause (i) or (ii) transaction or clause (iii) exercise if
the Appreciation is paid with Common Stock, to pay the amount of any required
withholding taxes by delivering to the Company shares of the Company's Common
Stock having a fair market value determined in accordance with Section 9
hereof equal to the withholding tax obligation determined by the Company. If
such right is granted to such disposing or exercising person, then the shares
which may be delivered in satisfaction of such withholding tax obligation may,
at such person's discretion, be either shares withheld by the Company upon the
exercise of the option or stock appreciation right or other shares of Common
Stock.
11. Nontransferability.
An option or stock appreciation right granted under the Plan shall,
by its terms, be nontransferable by the holder either voluntarily or by
operation of law, other than by will or the laws of descent and distribution,
and shall be exercisable during the holder's lifetime only by the holder,
regardless of any community property interest therein of the spouse of the
holder, or such spouse's successors in interest. If the spouse of the holder
shall have acquired a community property interest in an option or stock
appreciation right pursuant to a domestic relations order as defined under the
Code or Title 1 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the holder, or the holder's permitted successors in
interest, may exercise the option or stock appreciation right on behalf of the
spouse of the holder or such spouse's successors in interest.
12. Holding of Stock After Exercise of Option.
At the discretion of the Board of Directors or the Committee, any
option or stock appreciation right may provide that the Participant, by
accepting such option or stock appreciation right, represents and agrees, for
the Participant and the Participant's permitted transferees, that none of the
shares acquired upon exercise of an option or stock appreciation right will be
acquired with a view to any sale, transfer or distribution of said shares in
violation of the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations promulgated thereunder, and the person entitled to exercise
the same shall furnish evidence satisfactory to the Company (including a
written and signed representation) to that effect in form and substance
satisfactory to the Company, including an indemnification of the Company in
the event of any violation of the Act by such person.
13. Termination of Employment.
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Subject to Section 17 hereof, if a holder of an incentive stock
option ceases to be employed by the Company or an Affiliate for any reason
other than the holder's death or permanent disability (within the meaning of
Section 22(e)(3) of the Code), the holder's incentive stock options shall
immediately become void and of no further force and effect; provided, however,
that if such cessation of employment shall be due to the holder's voluntary
resignation with the consent of the Board of Directors of the Company or such
Affiliate, expressed in the form of a written resolution, or shall be due to
the holder's retirement under the provisions of any pension or retirement plan
of the Company or such Affiliate, then in effect, then within three months
after the date the holder ceases to be an employee of the Company or such
Affiliate such incentive stock option may be exercised to the extent
exercisable on the date of such cessation of employment. A leave of absence
approved in writing by the Board of Directors or the Committee shall not be
deemed a termination of employment for the purposes of this Section 13, but no
incentive stock option may be exercised during any such leave of absence,
except during the first three months thereof. Subject to Section 17 hereof,
termination of employment or other relationship with the Company by the holder
of a non-qualified stock option or stock appreciation right will have the
effect specified in the individual option agreement or Certificate of Grant as
determined by the Board of Directors or the Committee.
14. Death or Permanent Disability of Option Holder.
If the holder of an incentive stock option dies or becomes
permanently disabled while the option holder is employed by the Company or an
Affiliate, the holder's option shall expire one year after the date of such
death or permanent disability unless by its terms it expires sooner. During
such period after death, such incentive stock option may, to the extent that
it remains unexercised (but exercisable by the holder according to such
option's terms) upon the date of such death, be exercised by the person or
persons to whom the option holder's rights under the incentive stock option
shall pass by the option holder's will or by the laws of descent and
distribution. The death or permanent disability of a holder of a non-qualified
stock option or stock appreciation right will have the effect specified in the
individual option agreement or Certificate of Grant as determined by the Board
of Directors or the Committee.
15. Privileges of Stock Ownership.
No person entitled to exercise any option or stock appreciation right
granted under the Plan shall have any of the rights or privileges of a
stockholder of the Company in respect of any shares of Common Stock issuable
upon exercise of such option or stock appreciation right until certificates
representing such shares shall have been issued and delivered. No shares shall
be issued and delivered upon exercise of any option or stock appreciation
right unless and until, in the opinion of counsel for the Company, there shall
have been full compliance with any applicable registration requirements of the
Act, any applicable listing requirements of any national securities exchange
on which the Common Stock is then listed, and any other requirements of law or
of any regulatory bodies having jurisdiction over such issuance and delivery.
16. Adjustments.
16.1 If the outstanding shares of the Common Stock of the Company are
increased, decreased, changed into or exchanged for a different number or kind
of shares or securities of the Company through a reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split or other similar transaction, an appropriate and proportionate
adjustment shall be made in the maximum number and kind of stock appreciation
rights and shares as to which options may be granted under this Plan on both
an aggregate and per-Participant basis. A corresponding adjustment changing
the number or kind
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of stock appreciation rights and shares allocated to unexercised options or
portions thereof, which shall have been granted prior to any such change,
shall likewise be made. Any such adjustment in the outstanding options shall
be made without change to the aggregate purchase price applicable to the
unexercised portion of the option but with a corresponding adjustment in the
purchase price for each share covered by the option. Any such adjustment in
the outstanding stock appreciation rights shall be made without change in the
aggregate Initial Value applicable to the unexercised portion of the stock
appreciation rights but with a corresponding adjustment in the Initial Value
for each share covered by the stock appreciation right.
16.2 Adjustments under this Section 16 shall be made by the Board of
Directors or the Committee, whose determination as to what adjustments shall
be made, and the extent thereof, shall be final, binding and conclusive. No
fractional shares of stock shall be issued under the Plan on any such
adjustment.
17. Certain Events.
17.1 For purposes of this Section 17, the following definitions
shall apply:
17.1.1 "Corporate Transaction" shall mean either of the
following stockholder approved transactions to which the Company is a party:
(i) a merger or consolidation in which securities
possessing more than fifty percent (50%) of the total combined voting power of
the Company's outstanding securities are transferred to a person or persons
different from the persons holding those securities immediately prior to such
transaction; or
(ii) the sale, transfer or other disposition of all
or substantially all of the Company's assets in a complete liquidation or
dissolution of the Company.
17.1.2 "Change in Control" shall mean a change in ownership
or control of the Company effected through either of the following
transactions:
(i) the acquisition, directly or indirectly, by
any person or related group of persons (other than the Company or a person
that directly or indirectly controls, is controlled by, or is under common
control with, the Company) of beneficial ownership (within the meaning of Rule
13d-3 under the Exchange Act) of securities possessing more than fifty percent
(50%) of the total combined voting power of the Company's outstanding
securities pursuant to a tender or exchange offer made directly to the
Company's stockholders which the Board of Directors does not recommend such
stockholders accept, or
(ii) a change in the composition of the Board of
Directors over a period of thirty-six (36) consecutive months or less such
that a majority of Directors ceases, by reason of one or more contested
elections for Directors, to be comprised of individuals who either (A) have
been Directors continuously since the beginning of such period or (B) have
been elected or nominated for election as Directors during such period by at
least a majority of the Directors described in clause (A) who were still in
office at the time the Board of Directors approved such election or
nomination.
17.1.3 "Involuntary Termination" shall mean the termination
of the Services of any
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Participant which occurs by reason of:
(i) such individual's involuntary dismissal or
discharge by the Company for reasons other than Misconduct, or
(ii) such individual's voluntary resignation
following (A) a change in his or her position with the Company which
materially reduces his or her level of responsibility, (B) a reduction in his
or her level of compensation (including base salary, fringe benefits and
participation in corporate- performance based bonus or incentive programs) by
more than fifteen percent (15%) or (C) a relocation of such individual's place
of employment by more than fifty (50) miles, provided, and only if, such
change, reduction or relocation is effected by the Company without the
individual's consent.
17.1.4 "Misconduct" shall mean the commission of any act of
fraud, embezzlement or dishonesty by the Participant, any unauthorized use or
disclosure by such person of confidential information or trade secrets of the
Company (or any parent or subsidiary), or any other intentional misconduct by
such person adversely affecting the business or affairs of the Company (or any
parent or subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Company (or
any parent or subsidiary) may consider as grounds for the dismissal or
discharge of any Participant in the Service of the Company (or any parent or
subsidiary).
17.1.5 "Service" shall mean the provision of services to the
Company (or any parent or subsidiary) by a person in the capacity of an
employee, a non-employee Director or a consultant or independent advisor,
except to the extent otherwise specifically provided in the documents
evidencing the option grant.
17.2 In the event of any Corporate Transaction, each outstanding
option and stock appreciation right under this Plan shall automatically
accelerate so that each such option and stock appreciation right shall,
immediately prior to the effective date of the Corporate Transaction, become
fully exercisable for all of the shares of Common Stock at the time subject to
such options and stock appreciation rights and may be exercised for any or all
of those shares as fully-vested shares of Common Stock. However, an
outstanding option or stock appreciation right shall not so accelerate if and
to the extent: (i) such option or stock appreciation right is, in connection
with the Corporate Transaction, either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase, or stock appreciation right relating to, shares of capital stock of
the successor corporation (or parent thereof), (ii) such option or stock
appreciation right is to be replaced with a cash incentive program of the
successor corporation which preserves the spread existing on the unvested
options and stock appreciation rights at the time of the Corporate Transaction
and provides for subsequent payout in accordance with the same vesting
schedule applicable to such options or stock appreciation rights, or (iii) the
acceleration of such option or stock appreciation right is subject to other
limitations imposed by the Board of Directors or the Committee at the time of
the option grant. The determination of option and stock appreciation right
comparability under clause (i) above shall be made by the Board of Directors
or the Committee, and its determination shall be final, binding and
conclusive.
17.3 The Board of Directors or the Committee shall have the
discretion, exercisable either at the time an option or stock appreciation
right under this Plan is granted or at any time while such option or stock
appreciation right remains outstanding, to provide for the automatic
acceleration of one or more outstanding options or stock appreciation rights
upon the occurrence of a Corporate Transaction, whether
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or not those options or stock appreciation rights are to be assumed or
replaced in the Corporate Transaction. The Board of Directors or the Committee
shall also have the discretion to grant options or stock appreciation rights
under this Plan which do not accelerate whether or not such options or stock
appreciation rights are assumed in connection with a Corporate Transaction.
17.4 Immediately following the consummation of a Corporate
Transaction, all outstanding options and stock appreciation rights under this
Plan shall terminate and cease to be outstanding, except to the extent assumed
by the successor corporation (or parent thereof).
17.5 Each option and stock appreciation right under this Plan which
is assumed in connection with a Corporate Transaction shall be appropriately
adjusted, immediately after such Corporate Transaction, to apply to the number
and class of securities which would have been issuable to the Participant upon
consummation of such Corporate Transaction had the option or stock
appreciation right been exercised immediately prior to such Corporate
Transaction. Appropriate adjustments shall also be made to (i) the number and
class of securities available for issuance under the Plan following
consummation of the Corporate Transaction, (ii) the exercise price payable per
share under each outstanding option and Initial Value for each stock
appreciation right, provided the aggregate exercise price payable and Initial
Values for such securities shall remain the same, and (iii) the maximum number
of securities and/or class of securities for which any one person may be
granted options and separately exercisable stock appreciation rights under the
Plan.
17.6 Any options and stock appreciation rights under this Plan which
are assumed or replaced in the Corporate Transaction and do not otherwise
accelerate at that time, shall automatically accelerate in the event the
Participant's Services should subsequently terminate by reason of an
Involuntary Termination within eighteen (18) months following the effective
date of such Corporate Transaction. Any options and stock appreciation rights
so accelerated shall remain exercisable for fully-vested shares until the
earlier of (i) the expiration of the term of the option or stock appreciation
right or (ii) the expiration of a one (1) year period measured from the
effective date of the Involuntary Termination.
17.7 The Board of Directors or the Committee shall have the
discretion, exercisable either at the time the option or stock appreciation
right under this Plan is granted or at any time the option or stock
appreciation right remains outstanding, to (i) provide for the automatic
acceleration of one or more outstanding options and stock appreciation rights
upon the occurrence of a Change in Control or (ii) condition any such option
or stock appreciation right acceleration upon the subsequent Involuntary
Termination of the Participant's Services within a specified period following
the effective date of such Change in Control. Any options or stock
appreciation rights so accelerated in connection with a Change in Control
shall remain fully exercisable until the expiration or sooner termination of
the term of the option or stock appreciation right.
17.8 The portion of any incentive stock option under this Plan
accelerated in connection with a Corporate Transaction or Change in Control
shall remain exercisable as an incentive stock option only to the extent the
applicable One Hundred Thousand Dollar ($100,000) limitation is not exceeded.
To the extent such dollar limitation is exceeded, the accelerated portion of
such option shall be exercisable as a non-qualified stock option under the
Code.
17.9 The grant of options and stock appreciation rights under the
Plan shall in no way affect the right of the Corporation to adjust,
reclassify, reorganize or otherwise change its capital or business structure
or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or
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assets.
18. Amendment and Termination of Plan.
18.1 Unless earlier terminated in accordance with its provisions,
this Plan shall terminate on [ ], 2006, and no grants or awards shall be made
hereunder after such date.
18.2 The Board of Directors or the Committee may at any time suspend
or terminate the Plan, or amend or revise the terms of the Plan, provided that
any such amendment or revision shall be subject to any applicable stockholder
approval requirements.
18.3 The provisions of Section 7 hereof shall not be amended more
than once every six months, other than to comport with changes in the Code,
ERISA, or the rules thereunder. Subject to the provisions of Sections 16 and
17 above, no amendment, suspension or termination of the Plan shall, without
the consent of the holder, alter or impair any rights or obligations under any
option or stock appreciation right theretofore granted under the Plan.
18.4 Except as provided in Sections 16 and 17 hereof, no modification
may be made to an option or stock appreciation right granted to a Participant
who is subject to Section 16 of the Exchange Act except in compliance with
Rule 16b-3 of the General Rules and Regulations under the Exchange Act.
19. General Provisions Applicable to Participants Subject to Section 16
of the Exchange Act.
19.1 It is the intent of the Company that this Plan comply in all
respects with Rule 16b-3 of the General Rules and Regulations under the
Exchange Act ("Rule 16b-3") in connection with any option, or if applicable
any stock appreciation right, granted to a person who is subject to Section 16
of the Exchange Act. Accordingly, if any provision of this Plan does not
comply with the requirements of Rule 16b-3 as then applicable to any such
person, such provisions shall be construed or deemed amended to the extent
necessary to conform to such requirements with respect to such person.
19.2 Unless a Participant could otherwise transfer an equity
security, derivative security or shares of the Company's Common Stock issued
upon exercise of a derivative security granted under the Plan without
incurring liability under Section 16(b) of the Exchange Act, (i) an equity
security issued under the Plan, other than an equity security issued pursuant
to the exercise of a derivative security granted under the Plan, shall be held
for at least six months from the date of acquisition, and (ii) with respect to
a derivative security granted under the Plan and the equity security issued
pursuant to the exercise thereof, at least six months shall elapse from the
date of acquisition of the derivative security to the date of disposition of
the derivative security (other than upon exercise or conversion) or its
underlying equity security.
20. Effective Date of Plan.
No option or stock appreciation right may be granted under the Plan
unless and until (i) the options and underlying shares and stock appreciation
rights have been registered under the Act and qualified with the appropriate
state regulatory agencies, or (ii) the Company has been advised by counsel
that such options, shares and stock appreciation rights are exempt from such
registration and/or qualification. The Plan shall be submitted for approval by
the holders of the outstanding voting stock of the Company within the time
period, and pursuant to the procedures, required for compliance with the
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provisions of Rule 16b-3 and Code Section 422, and in any event no later than
twelve months from the date the Plan is adopted by the Board of Directors. The
Plan shall be deemed approved by the holders of the outstanding voting stock
of the Company if it is approved by (i) the affirmative vote of the holders of
a majority of the voting shares of the Company represented and voting at a
duly held meeting at which a quorum representing a majority of all outstanding
voting shares is present either in person or by proxy, or (ii) the written
consent of the holders of a majority of the outstanding voting shares of the
Company. Any options or stock appreciation rights granted under the Plan prior
to obtaining such stockholder approval shall be granted under the conditions
that the options or stock appreciation rights so granted (i) shall not be
exercisable prior to such approval, and (ii) shall become null and void if
such stockholder approval is not obtained.
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EXHIBIT D
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is entered into as of the
[ ] day of [ ], 1996 between William F. Lischak ("Employee") and Overseas
Filmgroup, Inc., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Agreement of Merger, dated as of [ ], 1996
(the "Merger Agreement") by and among Entertainment/Media Acquisition
Corporation ("EMAC"), Overseas Filmgroup, Inc. (the "Disappearing
Corporation"), Robert B. Little and Ellen Dinerman Little, the Disappearing
Corporation has been merged with and into EMAC (the "Merger"), with EMAC being
the surviving corporation which was renamed "Overseas Filmgroup, Inc." at the
effective time of the Merger; and
WHEREAS, Employee has been Chief Operating Officer and Chief
Financial Officer of the Disappearing Corporation, an entertainment company
engaged in the business of, among other things, motion picture distribution,
since [ ], and during such period Employee was a loyal and dedicated officer
and employee of the Company, devoting his time and energies to the success of
the Company; and
WHEREAS, Employee possesses special skills, knowledge, abilities and
experience unique to the Company's business and possesses an intimate
knowledge of the operations of the Disappearing Corporation which the Company
deems valuable and desirous of maintaining; and
WHEREAS, a condition to consummation of the Merger was that the
Company, as the surviving corporation in the Merger, and Employee enter into
this Agreement as of the date that the Merger becomes effective; and
WHEREAS, Employee and the Company desire to enter into this Agreement
setting forth the terms and conditions for the employment relationship of
Employee with the Company during the Term (as defined below).
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties to this Agreement hereby agree as follows:
1. SERVICES.
--------
1.1 Employment. During the Term (as defined below), the Company hires
Employee to serve as Chief Operating Officer and Chief Financial Officer of
the Company and to perform such other services as the Company or its
Affiliates may from time to time reasonably request consistent with Employee's
position and duties with the Company and Employee's stature and experience
(the "Services"). Employee agrees to perform such Services in a competent and
professional manner, consistent with the skills to be possessed by a senior
executive in Company's business. Employee shall comply with all of the
reasonable and customary employment policies of the Company and its
Affiliates. For purposes of this Agreement, "Affiliates" shall mean, as to any
person, any other person controlled by or under common control with (or, where
applicable, controlling), directly or indirectly, such person; and "person"
shall mean any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof, or any other entity.
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1.2 Location. During the Term, Employee's Services shall be performed
principally in Los Angeles, California or elsewhere in the western
Metropolitan Los Angeles area. In addition, the Services may be performed by
Employee from time to time on a temporary travel basis at such other locations
as Company shall reasonably request consistent with its reasonable business
needs.
1.3 Reporting Requirements. During the Term, Employee shall report to
the persons holding the positions of Co-Chief Executive Officers of the
Company (or the person holding the position of Chief Executive Officer if such
office is not shared by two persons), the Board of Directors and the Executive
Committee thereof. During the Term, no person shall be interposed between
Employee and the persons holding the positions of Co-Chief Executive Officers
(or the person holding the position of Chief Executive Officer if such office
is not shared by two persons). Employee agrees to comply with Section "V" of
the Company's Operating Guidelines attached hereto as Exhibit "A."
1.4 Offices. The Company, in its discretion, may from time to time
during the Term appoint Employee to one or more additional offices of the
Company or its Affiliates and elect Employee to the Board of Directors of the
Company, such subsidiaries or Affiliates. Employee agrees to accept such
offices if consistent with Employee's stature and experience and with the type
of offices with the Company held by Employee.
1.5 Term. The term of Employee's employment under this Agreement (the
"Term") shall commence at the effective time of the Merger on the date first
written above (the "Effective Date") and shall end on [ ], 2001 unless sooner
terminated in accordance with the provisions of this Agreement. For purposes
of this Agreement, "Employment Year" shall mean each twelve month period
during the Term commencing on [ ] and ending on [ ] of the following year.
1.6 Exclusivity. During the Term, the Services shall be rendered on a
full-time basis during normal working hours. During the Term of this Agreement
and of Employee's employment by the Company, all Services of Employee shall be
exclusive to the Company and its Affiliates and, among other things, Employee
shall not, directly or indirectly, (i) engage in any business for his own
account which is competitive with the businesses of the Company or Company's
Affiliates (collectively, "Competitive Business") so long as Company or
Company's Affiliates (as the case may be) continue to engage in such business;
(ii) enter the employ of, or render any services to, any person engaged in a
Competitive Business; (iii) become interested in a Competitive Business in any
capacity, including, without limitation, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or consultant; or
(iv) induce any customer or supplier of Company or Company's Affiliates to
terminate its relationship with Company or Company's Affiliates (as the case
may be). Notwithstanding anything to the contrary stated in this Agreement,
Employee may acquire and/or retain, as an investment, and take customary
actions (including the exercise or conversion of any securities or rights) to
maintain and preserve Employee's ownership of any one or more of the following
(provided such actions, other than passive investment activities, do not
unreasonably interfere with Employee's Services hereunder): (i) securities of
any corporation that are registered under Sections 12(b) or 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and that are
publicly traded as long as Employee is not part of any control group of such
corporation and, in the case of public corporations in Competitive Businesses,
such securities do not constitute more than five percent of the outstanding
voting power of that public company; (ii) any securities of a partnership,
trust, corporation or other person so long as Employee remains a passive
investor in that entity and so long as such entity is not, directly or
indirectly, in competition with the Company or its Affiliates; (iii)
securities or other interests now owned or controlled, in whole or in part,
directly or indirectly, by Employee in any corporation or other person and
which are identified on Schedule 1.6 hereto; and (iv) securities of the
Company or any of its Affiliates. Nothing in this
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Agreement shall be deemed to restrict Employee's ability to render on-going
consultation to the entities listed on Schedule 1.6 hereto provided such
consultation does not unreasonably interfere with Employee's services
hereunder.
1.7 Confidentiality. Employee acknowledges that in furnishing his
Services to the Company, he will, through the Term, come into close contact
(and through services provided to the Disappearing Corporation has come into
close contact) with many confidential affairs of the Company, including
confidential information about costs, profits, sales, pricing policies,
operational methods, and other confidential information not readily available
to the public (the "Confidential Materials"). In recognition of the foregoing,
Employee covenants and agrees that Employee will keep secret all material
confidential matters of the Company and its Affiliates and will not
intentionally disclose any material Confidential Materials to anyone outside
the Company and its Affiliates during or after the Term except in the course
of rendering the Services or with the Company's written consent. For purposes
of this Agreement, the term "Confidential Materials" does not include
information which at the time of disclosure has previously been made generally
available to the public by any means other than the wrongful act of Employee
in violation of this Section 1.7. Employee may use and disclose Confidential
Materials to the extent necessary to assert any right or defend against any
claim arising under this Agreement, to assert any right or defend against any
claim pertaining to Confidential Materials or their use, to comply with any
applicable statute, constitution, treaty, rule, regulation, ordinance or
order, whether of the United States, any state thereof, or any other
jurisdiction applicable to Employee after giving prior notice to the Company
(time permitting), or if Employee receives a request to disclose all or any
part of the information contained in the Confidential Materials under the
terms of a subpoena, order, civil investigative demand or similar process
issued by a court of competent jurisdiction or by a governmental body or
agency, whether of the United States or any state thereof, or any other
jurisdiction applicable to Employee after giving prior notice to the Company
(time permitting). Employee will deliver promptly to the 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 Employee obtained while employed by, or otherwise
serving or acting on behalf of, Company, or which Employee may then possess or
have under his control; provided, however, that Employee may maintain a copy
of such documents to the extent necessary to assert any right or defend
against any claim arising under this Agreement; provided further, that
Employee shall promptly return such materials to the Company when it is no
longer necessary for Employee to maintain such materials in accordance with
the foregoing proviso.
1.8 Indemnification. The Company shall indemnify Employee to the
fullest extent allowed by applicable law. Without limiting the foregoing,
Employee shall be entitled to the benefit of the indemnification provisions
contained on the date hereof in the Bylaws of the Company and any applicable
Bylaws of any Affiliate, notwithstanding any future changes therein, and
Employee shall also be entitled to the benefit of the Indemnification
Agreement attached hereto as Exhibit "A" which shall be entered into between
the Company and Employee concurrently with the execution of this Agreement.
During the Term, Employee shall also be entitled to the protection of any
insurance policies the Company or any of its Affiliates may elect to maintain
generally for the benefit of its directors and officers against all costs,
charges and expenses whatsoever incurred or sustained by Employee or his legal
representatives in connection with any action, suit or proceeding to which
Employee (or his legal representatives or other successors) may be made a
party by reason of Employee being or having been a director or officer of the
Company or any of its Affiliates or Employee serving or having served any
other enterprises as a director, officer or employee at the request of the
Company.
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2. COMPENSATION; BENEFITS; EXPENSES.
--------------------------------
As compensation and consideration for all Services provided by
Employee during the Term pursuant to this Agreement, the Company agrees to pay
to Employee the compensation set forth below.
2.1 Fixed Annual Compensation. During the Term, the Company shall pay
to Employee salary ("Fixed Annual Compensation") at the rate of $175,000 per
annum for the first two Employment Years, $200,000 per annum for the third and
fourth Employment Years and $225,000 per annum for the fifth Employment Year.
Fixed Annual Compensation payable to Employee by the Company hereunder shall
be paid at such times and in such amounts as the Company may designate in
accordance with the Company's usual salary practices, but in no event less
than once monthly.
2.2 Annual Bonus. During each Employment Year during the Term,
Employee shall be entitled to a bonus of $50,000 (the "Annual Bonus") payable
to Employee in four equal installments of $12,500 with the first installment
payable on the first day of the first full month of the Employment Year and
the remaining installments paid each three months thereafter. During the Term,
Employee shall also be entitled to such additional bonus, if any, as may be
granted to Employee by the Company's Board of Directors (with Employee
abstaining from any vote thereon) or compensation or similar committee thereof
in the Board's (or such committee's) sole discretion based upon Employee's
performance of his Services under this Agreement.
2.3 Stock Options. During the Term, Employee shall be entitled to
stock options ("Options"), if any, only if granted by the Board of Directors
of the Company or appropriate committee of the Board of Directors of the
Company.
2.4 Employee Benefits. In addition to the foregoing, during the
Term, the Company agrees as follows:
2.4.1 To provide Employee with an automobile allowance of
$1,200 per month during the Term ("Automobile Benefits").
2.4.2 During the Term, to include Employee and his eligible
dependents in any group hospital, surgical, officer's medical reimbursement
and medical and dental benefit plans of Company which the Company maintains
for the benefit of its general employees ("Health Insurance Benefits");
provided, however, that the Company shall not be obligated to provide
Employee's eligible dependents any such Health Insurance Benefits which the
Company is not also providing to the eligible dependents of its general
employees.
2.4.3 Employee shall be entitled for each Employment Year
during the Term to an aggregate of four weeks of vacation with full pay. Such
vacation shall be taken at such time or times during the applicable year as
may be determined by Employee subject to the Company's business needs
("Vacation Benefits"). Employee shall be entitled to accrue vacation
(beginning with any vacation after December 31, 1995) and/or be paid therefor
in accordance with the Company's policies with respect thereto applicable to
the Company's general employees. Employee shall also be entitled for each
Employment Year during the Term to take a leave of absence of up to five
business days (with full pay) if required due to a serious illness in
Employee's family.
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2.4.4 Employee shall be entitled to reimbursement of all
reasonable legal fees and expenses incurred in connection with the
negotiation, execution and delivery of this Agreement up to a maximum
aggregate amount of $5,000.
2.4.5 In addition to any life insurance benefits or
insurance coverage provided to Employee through any group plan of the Company
or its Affiliates, the Company during the Term shall provide Employee with
life insurance (from a reputable and financially-sound carrier of national
standing which is acceptable to Employee) providing the maximum amount of life
insurance benefits to Employee that are available under a life insurance
policy with an annual premium of $5,000 ("Life Insurance Benefits"). Employee
shall be entitled to name the beneficiary or beneficiaries of such policy. The
Company shall pay such annual premium of $5,000 directly to the insurance
company; provided, however, that Employee reserves the right (either before or
after the Company obtains such life insurance policy) to require the Company
to pay directly to Employee the premiums for such policy (and to assign the
policy to Employee if the Company has already obtained such policy) so that
Employee owns the policy and Employee makes the premium payments. In the event
of a payment on such policy during the Term, the Company will be paid its
premium investment in such policy from the policy benefits. Employee may
supplement or increase such insurance coverage by paying additional premiums
in excess of the $5,000 annual premium to be paid by the Company. Upon
expiration (or earlier termination) of the Term, Employee shall have the right
to require the Company to assign any rights it may have in such life insurance
policy to Employee. Employee agrees that the Company may secure additional
insurance on Employee's life for the benefit of the Company, and Employee
shall cooperate with the Company (including taking such physical exams as an
insurance carrier reasonably requests) in connection with obtaining such
insurance.
2.4.6 In addition to any disability benefits or insurance
coverage provided to Employee through any group disability plan of the Company
or its Affiliates, as well as in addition to any social security or workers'
compensation benefits provided to Employee, the Company during the Term shall
provide Employee with disability insurance with one or more substantial
carriers providing the maximum amount of disability benefits to Employee that
are available under a disability policy with an annual premium of $2,500
("Disability Insurance Benefits"). The Company shall pay such annual premium
of $2,500 directly to the insurance company; provided, however, that Employee
reserves the right (either before or after the Company obtains such disability
insurance policy) to require the Company to pay directly to Employee the
premiums for such policy (and to assign the policy to Employee if the Company
has already obtained such policy) so that Employee owns the policy and
Employee makes the premium payments. Employee may supplement or increase such
insurance coverage by paying additional premiums in excess of the $2,500
annual premium to be paid by the Company. Upon expiration (or earlier
termination) of the Term, Employee shall have the right to require the Company
to assign any rights it may have in such disability insurance policy to
Employee.
The foregoing Health Insurance Benefits, Automobile Benefits, Life
Insurance Benefits, Disability Insurance Benefits, and Vacation Benefits shall
be hereinafter referred to as "Special Benefits".
2.5 Additional Benefits. Without limiting any other provision hereof,
Employee shall be entitled to participate during the Term in any
profit-sharing, pension, health, insurance or other plans (including 401(k)
plans), benefits or policies available generally to the senior executive
employees of Company and not duplicative of those provided herein on the terms
determined by the Company in its sole and absolute discretion from time to
time, and Employee will be entitled during the Term to reimbursement of his
reasonable and customary business expenses (including first-class air travel)
incurred on behalf of the Company or the Company's Affiliates and for which
Employee makes an adequate
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accounting to the Company ("Additional Benefits"). The determination of the
adequacy of the accounting of the foregoing expenses shall be within the
reasonable discretion of the Company's independent certified accountants
taking into consideration the substantive requirements of the Internal Revenue
Code of 1986, as amended.
3. TERMINATION.
3.1 Termination by Company.
3.1.1 Employee Material Breach. The Company shall have the
right, at its election, to terminate the Term, by written notice to Employee
to that effect, only for "good cause" defined for this purpose to mean (i)
material and repeated instances of misconduct or habitual failure to perform
the Services, (ii) a single act so grievous as to constitute the equivalent of
such repeated instances (including, without limitation, theft or
misappropriation of the Company's assets), (iii) unauthorized disclosure of
confidential information which is materially damaging to the Company, (iv)
conviction of a felony involving a crime of moral turpitude, or (v) a material
breach of any covenant, condition, agreement or term of this Agreement (each
of (i) through (v) constituting an "Employee's Material Breach") and only if
the Company shall have given written notice to Employee specifying the claimed
cause or breach and, provided such breach is curable, Employee fails to
correct the claimed breach or fails to alter the objectionable pattern of
conduct specified in the applicable written notice as soon as practical
thereafter but no later than thirty (30) days after receipt of the applicable
notice or such longer time as may be reasonably required by the nature of the
claimed breach. However, in no event shall a material breach of the provisions
of Sections 1.7 or 3.1(ii), (iii) or (iv) be subject to cure.
3.1.2 Effect of Termination by Company. Should the Term be
terminated by the Company by reason of Employee's Material Breach, Employee
shall have no right to any further Fixed Annual Compensation or Annual Bonus
from and after termination, or to any Special Benefits or Additional Benefits
accruing for the fiscal year of termination or thereafter, and all Options, if
any, not then vested shall terminate.
3.2 Termination by Employee.
3.2.1 Company's Material Breach. Employee shall have the
right, at his election, to terminate the Term by written notice to the Company
to that effect if the Company shall have failed to substantially comply with
or perform a material condition or covenant of this Agreement ("Company's
Material Breach"); provided that, if such breach is curable, termination for
Company's Material Breach will not be effective until Employee shall have
given written notice specifying the claimed breach and the Company fails to
correct the claimed breach within thirty (30) days after the receipt of the
applicable notice or such longer time as may be reasonably required by the
nature of the claimed breach (but within ten business days, if the failure to
perform is a failure to pay monies when due under the terms of this
Agreement).
3.2.2 Effect of Termination by Employee. Subject to the
provisions of Section 3.4 below, should Employee terminate the Term due to
Company's Material Breach, Company shall, for the then remainder of the Term,
pay to Employee or provide Employee with:
(i) Employee's Fixed Annual Compensation,
(ii) Annual Bonuses,
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(iii) Health Insurance Benefits,
(iv) Life Insurance Benefits,
(v) Disability Benefits, and
(vi) Automobile Benefits.
In addition, all Options, if any, shall vest on the date of such termination.
Employee shall also receive, through the date of termination, such Vacation
Benefits accrued but unpaid through such date. All other benefits shall cease
on the date of termination of employment.
Should Employee terminate the Term other than for Company's
Material Breach, such termination shall be treated as a termination by the
Company for Employee's Material Breach.
3.3 Employee's Death or Disability.
3.3.1 Death. The Term shall immediately terminate upon
Employee's death as certified in accordance with the provisions of California
law ("Death").
3.3.2 Disability. As used herein, the term "Disability"
shall have such meaning as set forth in the Company's disability policy in
effect as of the date hereof. If there is no Company disability policy in
effect on the date of a potential Disability, the term "disability" shall mean
Employee becoming unable to perform the Services as a result of his permanent
or temporary, total or partial, physical or mental disability. In such event,
absent a Material Breach by Employee, Company shall not have the right
(notwithstanding any other provision of this Agreement to the contrary) to
terminate the Term due to Disability prior to the expiration of the Disability
Period. As used herein, the term "Disability Period" shall mean the period
commencing on the first day of the calendar month following the month during
which such Disability occurs and ending on the first to occur of the
following: (i) the expiration of the Term; (ii) if the Disability is
continuous throughout the five consecutive months following the month during
which the Disability occurs, then the last day of such fifth consecutive
calendar month; and (iii) if the Disability is intermittent and shall exist
throughout each of any twelve calendar months following the month during which
the Disability occurs, then the last day of such twelfth calendar month.
3.3.3 Effect of Death or Disability.
(a) Fixed Annual Compensation, Special Benefits
and Additional Benefits: Should the Term be terminated in accordance with the
provisions of Sections 3.3.1 or 3.3.2 by reason of Employee's Death or
Disability, Employee or his estate (as the case may be) shall have no right to
any further Fixed Annual Compensation, any Annual Bonuses, any Special
Benefits, any Additional Benefits or any other sums or benefits accruing to
Employee hereunder after the date of termination; provided, however, that the
Fixed Annual Compensation and installments of Annual Bonus otherwise payable
during the Disability Period shall nevertheless be payable on the terms set
forth herein to Employee as a disability benefit ("Disability Benefit")
reduced on a dollar-for-dollar basis by any disability insurance proceeds
actually received by Employee during the Disability Period with respect to
such Disability. All disability insurance proceeds received by Employee after
the Disability Period (or during the Disability Period but in excess of the
Disability Benefit) shall be the sole property of Employee as governed by such
insurance policy.
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(b) Options: All Options, if any, shall vest
on the date of termination by reason of Employee's Death or Disability, and
Employee's estate shall be entitled to exercise all such Options by reason of
Employee's Death as provided in the option agreement relating to such options.
3.4 Mitigation. Employee agrees to attempt to mitigate the damages he
may incur in the event of termination due to Company's Material Breach
provided, however, that he shall not be required to accept employment not
consistent with his stature and position in the entertainment industry.
Employee agrees that if Employee furnishes his services for other engagements
or employment after termination hereunder, fifty percent of the total
compensation actually earned by Employee together with any other benefits
earned by Employee shall reduce (on a dollar-for-dollar basis) any amounts and
benefits which the Company would otherwise be required to pay or provide to
Employee. By way of example, if Employee earns $100,000 after termination
hereunder due to the Company's Material Breach, the amounts and benefits which
the Company would otherwise be required to pay or provide to Employee
hereunder would be reduced by $50,000. Employee agrees that he shall give
written notice to the Company (promptly after accepting employment or
furnishing his services after termination of his employment with the Company)
of any amount earned (or to be earned) by Employee and any benefits provided
(or to be provided) to Employee pursuant to his new employment arrangement.
Employee's inability to mitigate due to Disability shall not be a breach
hereof.
4. GENERAL.
4.1 Applicable Law Controls. Nothing contained in this Agreement
shall be construed to require the commission of any act contrary to law and
wherever there is any conflict between the provisions of this Agreement and
any material statute, law, ordinance or regulation contrary to which the
parties have no legal right to contract, then the latter shall prevail;
provided, however, that in any such event the provisions of this Agreement so
affected shall be curtailed and limited only to the extent necessary to bring
them within applicable legal requirements, and provided further that if any
obligation to pay the Fixed Annual Compensation, Annual Bonuses or any other
amount due Employee hereunder is so curtailed, then such compensation or
amount shall be paid as soon thereafter, either during or subsequent to the
Term, as permissible.
4.2 Waiver/Estoppel. Any party hereto may waive the benefit of any
term, condition or covenant in this Agreement or any right or remedy at law or
in equity to which any party may be entitled, but only by an instrument in
writing signed by the parties to be charged. No estoppel may be raised against
any party except to the extent the other parties rely on an instrument in
writing, signed by the party to be charged, specifically reciting that the
other parties may rely thereon. Except as provided herein, the parties' rights
and remedies under and pursuant to this Agreement or at law or in equity shall
be cumulative and the exercise of any rights or remedies under one provision
hereof or rights or remedies at law or in equity shall not be deemed an
election of remedies; and any waiver or forbearance of any breach of this
Agreement or remedy granted hereunder or at law or in equity shall not be
deemed a waiver of any preceding or succeeding breach of the same or any other
provision hereof or of the opportunity to exercise such right or remedy or any
other right or remedy, whether or not similar, at any preceding or subsequent
time. Employee acknowledges that Employee's performances and 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 at law for damages and that
a breach by Employee of the terms hereof (including, without limitation,
Section 1.6 and Section 1.7) will cause the Company irreparable injury.
Employee agrees that the 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 the
Company may be entitled.
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4.3 Attorneys' Fees and Costs. Subject to Section 4.11.4 hereof, in
any action, suit or proceeding brought by any party hereto with respect to
this Agreement, its subject matter or the actions, statements or conduct of
any or each of the parties in the negotiation, execution or performance of
this Agreement, the prevailing party shall be entitled to recover from the
other parties all reasonable costs and expenses incurred in connection
therewith, including but not limited to attorneys' fees, attorneys' costs and
court costs.
4.4 Notices. Any notice that the Company is required or may desire to
give to Employee hereunder shall be in writing and may be served by delivering
it to Employee, or by sending it to Employee by certified mail, return receipt
requested (effective five days after mailing) or overnight delivery of the
same by delivery service capable of providing verified receipt (effective the
next business day), or facsimile (effective twenty-four hours after receipt is
confirmed by person or machine), at the address set forth below, or such
substitute address as Employee may from time to time designate by notice to
the Company. Any notice that Employee is required or may desire to serve upon
the Company hereunder shall be in writing and may be served by delivering it
personally or by sending it certified mail, return receipt requested, or
overnight delivery, or facsimile (with receipt confirmed by person or machine)
to the address set forth below, or such other substitute address as the
Company may from time to time designate by notice to Employee. Such notices by
Employee shall be effective at the same times as specified in this Section 4.4
for notices by the Company.
The Company: Overseas Filmgroup, Inc.
8800 Sunset Boulevard
Third Floor
Los Angeles, California 90069
Fax: (310) 855-0719
Employee: William F. Lischak
601 N. Sweetzer, Unit B
Los Angeles, California 90048
with a copy to: Michael Agusta
Agusta & Ross
6215 Myrtle Avenue
Glendale, New York 11385
Fax: (718) 366-6184
4.5 Governing Law. Subject to Section 4.11 hereof, this Agreement
shall be governed by, construed and enforced and the legality and validity of
each term and condition shall be determined in accordance with the internal,
substantive laws of the State of California applicable to agreements fully
executed and performed entirely in California.
4.6 Captions. The paragraph headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
4.7 No Joint Venture. Nothing herein contained shall constitute a
partnership between or joint venture by the parties hereto.
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4.8 Assignability. Neither the Company nor Employee may assign this
Agreement or any portion of its rights or obligations hereunder. This
Agreement shall be fully effective and binding upon the successors in
interest, assigns and Affiliates of the Company.
4.9 Modification/Entire Agreement. This Agreement may not be altered,
modified or amended except by an instrument in writing signed by all of the
parties hereto. No person, whether or not an officer, agent, employee or
representative of any party, has made or has any authority to make for or on
behalf of that party any agreement, representation, warranty, statement,
promise, arrangement or understanding not expressly set forth in this
Agreement or in any other document executed by the parties concurrently
herewith ("Parol Agreements"). This Agreement and all other documents executed
by the parties concurrently herewith constitute the entire agreement between
the parties and supersede all express or implied, prior or concurrent, Parol
Agreements and prior written agreements with respect to the subject matter
hereof. The parties acknowledge that in entering into this Agreement, they
have not relied and will not in any way rely upon any Parol Agreements.
4.10 Severability. If any term, provision or covenant in this
Agreement is held to be invalid, void or unenforceable, (i) the remainder of
the terms, provisions and covenants in this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
(ii) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, all portions of any section of this Agreement
containing any such provision held to be invalid, void or unenforceable that
are not themselves invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, void or
unenforceable.
4.11 Arbitration.
4.11.1 Company and Employee each hereby irrevocably agree to
submit any and all disputes between them arising under this Agreement to
binding, non-appealable arbitration, to be conducted in accordance with this
Section 4.11. The parties further agree irrevocably to submit themselves, in
any suit to confirm the judgment or finding of such arbitrator, to the
jurisdiction of the Superior Court for the County of Los Angeles, State of
California, and hereby waive and agree not to assert (by way of motion, as a
defense or otherwise) (a) any and all objections to jurisdiction that they may
have under the laws of the State of California or the United States and (b)
any claim (i) that it or he is not subject personally to jurisdiction of such
court, (ii) that such forum is inconvenient, (iii) that venue is improper, or
(iv) that this Agreement or its subject matter may not for any reason be
arbitrated or enforced as provided in this Section 4.11.
4.11.2 The aggrieved party shall, upon written notice to the
other, submit any dispute or controversy respecting actual or alleged breach
of, or interpretation of, or enforcement of, this Agreement to binding
non-appealable arbitration before a retired judge of the Superior Court of the
State of California in and for the County of Los Angeles, to be conducted by
means of a reference pursuant to California Code of Civil Procedure Section
6381(1). Within ten (10) business days after receipt of the notice submitting
a dispute or controversy to arbitration, the parties shall attempt in good
faith to agree upon an arbitrator to whom the dispute will be referred and on
a joint statement of contentions. Failing agreement thereto within ten (10)
business days after receipt of such notice, each party shall name three (3)
retired judges and thereafter either party may file a petition seeking the
appointment of one of the persons named by the party as a referee by the
presiding Judge of the Superior Court, which petition shall recite in a clear
and meaningful manner the factual basis of the controversy between the parties
and the issues to be submitted to the referee for decision. Each party hereby
agrees that service of process in such
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action will be deemed accomplished and completed when a copy of the documents
is sent in accordance with the notice provisions in Section 4.4 hereof.
4.11.3 The hearing before the referee shall be held within
thirty (30) days after the parties reach agreement as to the identity of the
referee (or within thirty (30) days after the appointment of a referee by the
court). Unless more extensive discovery is expressly permitted by the referee,
each party shall have only the right to two document production requests,
shall serve but two sets of interrogatories and shall only be entitled to
depose those witnesses which the referee expressly permits, it being the
parties' intention to minimize discovery procedures and to hold the hearing on
an expedited basis. The referee shall establish the discovery schedule
promptly following submission of the joint statement of contentions (or the
filing of the answer to the petition) which schedule shall be strictly adhered
to. To the extent the contentions of the parties relate to custom or practice
in the film business, or the entertainment industry generally, or to
accounting matters, the referee shall select an independent expert or
accountant (as applicable) with substantial experience in the industry segment
involved to provide recommendations to the referee. All decisions of the
referee shall be in writing and shall not be subject to appeal. The referee
shall make all rulings in accordance with California law and shall have
authority equal to that of a Superior Court judge, to grant equitable relief
in an action pending in Los Angeles Superior Court in which all parties have
appeared.
4.11.4 Except as otherwise provided in this Agreement, the
fees and costs of the referee and of any experts retained shall be shared
equally by the parties to such dispute. The referee shall award legal fees,
disbursements and reimbursement of other expenses to the prevailing party for
such amounts, if any, as determined by the referee to be appropriate. Judgment
upon the referee's award may be entered as if after trial in accordance with
California law.
4.12 Contractual Nomenclature. All references herein to "Dollars" or
"$" shall mean Dollars of the United States of America, its legal tender for
all debts public and private. Wherever used herein and to the extent
appropriate, the masculine, feminine or neuter gender shall include the other
two genders, the singular shall include the plural, and the plural shall
include the singular.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
OVERSEAS FILMGROUP, INC.
By:
-------------------------------------
Name:
Title:
-------------------------------------
William F. Lischak
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Exhibit "A"
The officers of the Corporation will submit the following actions to
the Board for its consideration (unless contemplated by the Annual Business
Plan of the Corporation):
(a) Any material amendments to the Annual Business Plan and
quarterly updates.
(b) The disposition of any asset or assets of the Corporation or
any subsidiary of the Corporation with an aggregate fair
market value in excess of $2,000,000; provided that the
Corporation may dispose of distribution and other rights to
motion pictures or other related properties or assets in the
ordinary course of business.
(c) Any acquisition by the Corporation or any subsidiary of the
Corporation of any business of another person, or any
property, securities, rights or other assets in a
transaction for a consideration in excess of $2,000,000;
provided that the Corporation may acquire distribution and
other rights to motion pictures or other related properties
or assets in the ordinary course of business.
(d) The creation, incurrence, assumption or guaranty by the
Corporation or any subsidiary of the Corporation of any
indebtedness obligation or liability in excess of
$2,000,000, except for (i) film financing incurred by the
Corporation or by special purpose subsidiaries of the
Corporation, (ii) bank financing used for general corporate
purposes of the Corporation or its subsidiaries, or (iii) as
otherwise permitted by the Operating Guidelines of the
Corporation (collectively, "Permitted Indebtedness").
(e) The creation, incurrence, or assumption of any lien,
mortgage, pledge, security interest, charge or encumbrance
by the Corporation or any subsidiary of the Corporation with
respect to any property, capital stock or asset of the
Corporation or any subsidiary of the Corporation, which
secures payment of indebtedness of the Corporation in excess
of $2,000,000, except (i) liens or pledges securing
Permitted Indebtedness, (ii) liens or pledges encumbering
film collateral necessary to secure film financing, or (iii)
as otherwise permitted by the Operating Guidelines of the
Corporation.
(f) Committing to finance in excess of $4,000,000 of the
Uncovered Amount of the budgeted negative costs of any
motion picture. For purposes hereof, the Uncovered Amount
means the budgeted negative costs of any motion picture not
to be financed by advances, guarantees, or bank or other
third party financing commitments.
(g) Committing to finance in excess of $3,000,000 of the
distribution costs of any motion picture which are not being
financed by other means.
(h) The declaration or payment by the Corporation or any
subsidiary of the Corporation (other than special purpose
subsidiaries) of any dividend on any class of its common
stock.
(i) Any other investments, or series of investments, by the
Corporation or any subsidiary of the Corporation in excess
of $1,500,000 other than (i) marketable direct obligations
issued or unconditionally guaranteed by the United States
Government or issued by any agency thereof and backed by the
full faith and credit of the United States, (ii) marketable
direct obligations issued by any state of the United States
of America or any political
A-1
<PAGE>
subdivision of any such state or any public instrumentality
thereof, (iii) commercial paper or other corporate
obligations, (iv) repurchase agreements and reverse
repurchase agreements, (v) money market funds organized
under the laws of the United States of America or any state
thereof and administered by securities dealers of recognized
national standing, (vi) any investment in subsidiaries of
the Corporation, and (vii) negotiable instruments endorsed
for deposit or collection or similar instruments in the
ordinary course of business.
(j) Raising additional debt or equity capital including material
increases to existing bank facilities.
(k) Granting any bonus in excess of $50,000 per grant to any
employee or agent of, or consultant to the Corporation not
required by any employment, consulting or other agreement.
A-2
<PAGE>
EXHIBIT E
-------------------
LOCK-UP AND REGISTRATION RIGHTS AGREEMENT
-------------------
__________, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
Page
1. Definitions...................................................... 1
2. Lock-Up.......................................................... 2
3. Registration Rights..................................... 4
3.1 Demands for Registration................................ 4
3.2 Company Registrations................................... 5
3.3 Obligations of the Company.............................. 6
3.4 Furnish Information..................................... 8
3.5 Expenses of Registrations............................... 8
3.6 Indemnification......................................... 8
3.7 Assignment of Registration Rights....................... 10
3.8 "Market Stand-Off" Agreement............................ 11
3.9 Underwriting Requirements............................... 12
3.10 Reports Under Securities Exchange Act of 1934........... 12
3.11 Limitations on Subsequent Registration Rights........... 13
3.12 Termination of Registration Rights...................... 13
4. Miscellaneous........................................... 13
4.1 Restrictive Legend...................................... 13
4.2 Successors and Assigns.................................. 13
4.3 Governing Law........................................... 14
4.4 Counterparts............................................ 14
4.5 Titles and Subtitles.................................... 14
4.6 Notices................................................. 14
4.7 Expenses................................................ 14
4.8 Amendments and Waivers.................................. 14
4.9 Severability............................................ 15
4.10 Entire Agreement........................................ 15
4.11 Specific Performance.................................... 15
<PAGE>
LOCK-UP AND REGISTRATION RIGHTS AGREEMENT
-----------------------------------------
THIS LOCK-UP AND REGISTRATION RIGHTS AGREEMENT (the
"Agreement") is made as of the ______ day of ______, 1996, by and between
Entertainment/Media Acquisition Corporation, a Delaware corporation (the
"Company"), and each of Ellen Dinerman Little ("EDL"), Robert B. Little
("RBL") and William F. Lischak ("WFL") (each an "Overseas Stockholder" and,
collectively, the "Overseas Stockholders").
RECITALS
--------
WHEREAS, the Company and the Overseas Stockholders are among
the parties to an Agreement of Merger, dated July __, 1996 (the "Merger
Agreement");
WHEREAS, as a material inducement to the Company's entering
into the Merger Agreement and as a material inducement to the Overseas
Stockholders' entering into the Merger Agreement, the Overseas Stockholders
and the Company hereby agree that this Agreement shall govern the right of the
Company to restrict the sale of the Merger Shares (as defined below) by the
Overseas Stockholders for certain periods of time and the rights of the
Overseas Stockholders to cause the Company to register the Merger Shares and
certain other matters as set forth herein.
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Definitions. For purposes of this Agreement:
(a) The term "Holder" means each of the Overseas Stockholders
and any permitted assignee under Section 3.7 of this Agreement.
(b) The term "Merger Agreement" shall have the meaning
set forth in the Preamble to this Agreement.
(c) The term "Merger Shares" means the 3,177,778
shares of Common Stock to be received by the Overseas Stockholders pursuant
to the Merger Agreement;
(d) The term "register", "registered," and "registration"
refer to a registration effected by preparing and filing a registration
statement or similar document in compliance with the Securities Act of 1933,
as amended, and the rules and regulations promulgated thereunder as such may
be amended from time to time (collectively, the "Act"), and the declaration or
ordering of effectiveness of such registration statement or document by the
Securities and Exchange Commission;
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<PAGE>
(e) The term "Registrable Securities" means (1) the Merger
Shares, and (2) any Common Stock issued as (or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as) a
dividend or other distribution with respect to, pursuant to a stock split or
in exchange for or in replacement of, the Merger Shares, excluding in all
cases, however, any Registrable Securities which are sold, assigned or
otherwise disposed of by a Holder in a transaction in which such Holder's
rights under this Agreement are not assigned or assignable;
(f) The number of shares of "Registrable Securities then
outstanding" shall be determined by the number of shares of Common Stock
outstanding which are, and the number of shares of Common Stock issuable
pursuant to then exercisable or convertible securities which are, Registrable
Securities; and
(g) Any capitalized terms used in this Agreement but not
otherwise defined shall have the meanings set forth in the Merger Agreement.
2. Lock-Up.
(a) Subject to Section 2(b) below, each of the Overseas
Stockholders covenants and agrees that such Overseas Stockholder will not,
directly or indirectly, sell, offer, contract to sell, pledge, grant any
option to purchase or otherwise dispose of any Merger Shares held by such
Overseas Stockholder (such restrictions are hereinafter referred to as the
"Lock-Up") for a period (the "Lock-Up Period") commencing on the date hereof
and ending on the following dates (rounded to the nearest whole number of
shares): (a) as to one-third of the Merger Shares held by such Overseas
Stockholder, the Lock-Up will terminate on February 16, 1998, (b) as to
one-half of the remaining Merger Shares held by such Overseas Stockholder, the
Lock-Up will terminate on February 16, 1999, and (c) as to the balance of the
Merger Shares held by such Overseas Stockholder, the Lock-Up will terminate on
February 16, 2000.
(b) Notwithstanding Section 2(a):
(i) the Overseas Stockholders shall be entitled to
transfer all or any portion of the Merger Shares during the Lock-Up Period for
bona fide estate planning purposes, as charitable contributions and/or in
connection with the bona fide pledge of Merger Shares, and the Merger Shares
subject to the Lock-Up shall also be transferable by will and by the laws of
intestacy; provided that in each such case, the transferee of such Merger
Shares shall agree in writing to be bound by the terms of the Lock-Up with
respect to such Merger Shares as a condition to such transfer;
(ii) the Lock-Up will terminate prior to the end of the
Lock-Up Period immediately upon the happening of any of the following events:
(A) as to the Merger Shares owned beneficially in whole or in part by any
Overseas Stockholder (or his or her permitted transferees pursuant to this
Section 2) in the event that such Overseas Stockholder's
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<PAGE>
employment with the Company is terminated Without Cause or is terminated by
such Overseas Stockholder for Good Reason (as such terms are defined in the
respective employment agreement between the Company and such Overseas
Stockholder); and (B) as to ten percent (10%) of the Merger Shares subject to
the Lock-Up in the event that both of EDL and RBL are deceased;
(iii) WFL shall be permitted to transfer Merger
Shares held by him to EDL and/or RBL or their designees pursuant to any right
of first refusal or repurchase agreement among such parties and EDL and RBL
shall be permitted to transfer Merger Shares held by them to each other;
provided that in any such case, the transferee or transferees shall agree in
writing to be bound by the terms of the Lock-Up with respect to such Merger
Shares as a condition to such transfer;
(iv) the Lock-Up shall terminate prior to the
end of the Lock-Up Period as to (A) any Merger Shares that are surrendered for
cancellation pursuant to Section 10.6 of the Merger Agreement, or (B) any
Merger Shares surrendered for cancellation in payment upon the exercise of
outstanding stock options held by EDL or RBL; and
(v) if any Event of Default occurs under the
Security Agreement with respect to any Note under which an Overseas
Stockholder is a payee, the Lock-Up shall immediately terminate as to a number
of Merger Shares beneficially owned by such Overseas Stockholder (or his or
her permitted transferee), either individually or jointly with another
Overseas Stockholder (or such stockholder's permitted transferee), equal to
(A) the remaining amount of principal and interest due to such Overseas
Stockholder under such Note, divided by (B) Current Market Price, which shall
be the closing price of EMAC Common Stock on the trading day immediately
following the date of such Event of Default. The closing price shall be the
last reported sales price regular way (or, in case no such reported sale takes
place on such day, the last reported sales price regular way for the next
succeeding day for which such information is available shall be used), in each
case on the principal national securities exchange or the Nasdaq National
Market on which the shares of EMAC Common Stock are listed or admitted to
trading, or if not listed or admitted to trading thereon, the average of the
closing bid and asked prices of EMAC Common Stock in the over-the-counter
market as reported by Nasdaq or any comparable system, or if EMAC Common Stock
is not listed on Nasdaq or a comparable system, the average of the closing bid
and asked prices on such day in the domestic over-the-counter market as
reported on the NASD Electronic Bulletin Board, or, if not reported on such
Bulletin Board, in the "pink sheets" published by the National Quotation
Bureau, Incorporated. If at any time EMAC Common Stock is not listed on any
national securities exchange or quoted in the Nasdaq System or the
over-the-counter market or reported on the NASD Electronic Bulletin Board or
in the "pink sheets" published by the National Quotation Bureau, Incorporated,
the Current Market Price on such day shall be the fair market value thereof
reasonably determined in good faith by the members of the board of directors
of EMAC, excluding the Overseas Stockholders, and reasonably agreed to in good
faith by the Overseas Stockholders based upon such information and advice as
they mutually consider appropriate.
- 3 -
<PAGE>
3. Registration Rights. The Company covenants and agrees
as follows:
3.1 Demands for Registration.
(a) If the Company shall receive, at any time on or after
February 16, 1998 or such earlier date on which the Lock-Up terminates under
Section 2, a written demand from the Holders of a majority of the Registrable
Securities then outstanding that the Company file a registration statement
under the Act covering the registration of at least 250,000 shares of the
Registrable Securities (such number to be appropriately adjusted for stock
splits, stock dividends, recapitalizations and similar events), then the
Company shall, subject to the limitations specified in this Agreement, use its
best efforts to effect within 90 days of the receipt of such request, the
registration under the Act of all Registrable Securities which such Holders
have demanded to have registered. The Company covenants and agrees to give
written notice of its receipt of any written demand by any Holder(s) to all
other Holders within ten days from the date of receipt of such notice.
(b) If the Holders initiating the registration demand (the
"Initiating Holders") hereunder intend to distribute the Registrable
Securities covered by their demand by means of an underwriting, such
Initiating Holders shall so advise the Company as a part of their demand made
pursuant to this Section 3.1. The underwriter will be selected by a majority
in interest of the Initiating Holders; provided that such underwriter shall be
reasonably acceptable to the Company. In such event, the right of any Holder
to include his or her Registrable Securities in such registration shall be
conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute Registrable
Securities through such underwriting shall (together with the Company as
provided in Section 3.3(e)) enter into an underwriting agreement in customary
form with the underwriter or underwriters selected for such underwriting.
(c) The Company is obligated to effect only three (3) such
registrations pursuant to this Section 3.1. A demand to effect a registration
pursuant to this Section 3.1 may not be made if a demand pursuant to this
Section 3.1 was made within the preceding eighteen (18) months and the Company
complied with the requirements of this Agreement with respect to such demand.
Registration pursuant to this Section 3.1 shall not be deemed to have been
effected and a demand not made; (i) unless a registration statement with
respect thereto has become effective and the Company has complied with all
covenants and agreements required by this Agreement to be performed by it in
connection with such registration, (ii) if, after the registration statement
has become effective, the offering is prevented by any stop order, injunction
or other order or requirement of the Securities and Exchange Commission or
other governmental agency or court for any reason other than by reason of some
wrongful act or omission of an Overseas Stockholder, (iii) if the conditions
to closing agreed to by the Company specified in the purchase agreement or
underwriting agreement entered into in connection with such registration are
not satisfied by reason of breach by the Company of its covenants contained
therein, or (iv) if the number of
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<PAGE>
Registrable Shares included in such registration is less then 662/3% of the
total number of shares of Common Stock included in such registration.
(d) Notwithstanding the foregoing, if the Company shall
furnish to the Initiating Holders a certificate signed by the Chief Executive
Officer or President of the Company stating that, in the good faith judgment
of the Board of Directors of the Company, such filing could reasonably be
expected to have a material adverse effect on any plan or proposal by the
Company with respect to any material transaction which the Company is at that
time actively pursuing, and it is therefore essential to defer the filing of
such registration statement, the Company shall have the right to defer the
filing of such registration statement for a reasonable period not to exceed
sixty (60) days after receipt of the request of the Initiating Holders.
(e) The registration statement filed pursuant to the demand
of the Initiating Holders may include other securities of the Company (i)
which are held by persons who, by virtue of agreements with the Company, are
entitled to include their securities in any such registration, (ii) which are
held by officers and directors of the Company, or (iii) which are being
offered for the account of the Company; provided that the percentage of
Registrable Shares requested to be included in such registration by the
Initiating Holders is not reduced or limited, without such Initiating Holders'
consent, as a result of the inclusion of persons other than Initiating Holders
below 662/3% of the total number of shares included in such registration; and
provided, further, that the plan of distribution proposed by such other
persons shall not be different from the plan of distribution proposed by the
Initiating Holders.
3.2 Company Registrations. If (but without any obligation to
do so) the Company proposes to register (including for this purpose a
registration effected by the Company for stockholders other than the Holders)
Common Stock or other securities under the Act (other than a registration on
Form S-8 or any successor form relating solely to the sale of securities to
participants in a Company stock plan, or a registration on Form S-4 in
connection with a merger transaction contemplated by Rule 145(a) or any
successor form), the Company shall, at such time, promptly give each Holder
written notice of such registration (but in no event shall such notice be
delivered less than twenty days prior to the proposed date of such filing).
Upon the written request of any Holder given within twenty (20) days after
delivery of such notice in accordance with Section 4.6, the Company shall,
subject to the provisions of Section 3.10, cause to be registered under the
Act all of the Registrable Securities that such Holder has requested to be
registered. The Company represents to each Holder that, as of the date of this
Agreement, except for the Unit Purchase Option, there are no agreements which
would prohibit the inclusion (subject to Underwriter cutbacks and resulting
requirements of pro rata inclusion) of Registrable Securities in any
registration by the Company, and the Company covenants and agrees not to enter
into any such agreement so long as any of the Registrable Securities are
outstanding.
- 5 -
<PAGE>
3.3 Obligations of the Company. Whenever required under this
Section 3 to effect the registration of any Registrable Securities, the
Company shall promptly and in accordance with any and all other time periods
set forth herein:
(a) Prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement with respect to such
Registrable Securities (including such audited financial statements as may be
required by the Act) and use its best efforts to cause such registration
statement to become effective, and, upon the demand of Initiating Holders,
keep such registration statement effective until the earlier of (i) the date
which is one hundred and eighty (180) days after such registration statement
first became effective or (ii) the date on which all of the Registrable
Securities included in such registration statement are sold. Each Holder of
Registrable Securities agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section
3.3(f), such Holder shall forthwith discontinue disposition of Registrable
Securities pursuant to the registration statement covering such Registrable
Securities until such Holder's receipt of the copies of the supplemented or
amended prospectus contemplated by Section 3.3(f), and, if so directed by the
Company, such Holder shall deliver to the Company (at the Company's expense)
all copies, other than permanent file copies then in such Holder's possession,
of the prospectus covering such Registrable Securities current at the time of
receipt of such notice. The Company shall extend the period during which such
registration statement shall be maintained effective pursuant to this
Agreement by the number of days during the period from and including the date
of the giving of such notice pursuant to Section 3.3(f) to and including the
date when each seller of Registrable Securities covered by such registration
statement shall have received the copies of the supplemented or amended
prospectus contemplated by Section 3.3(f).
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection with such registration statement as may be necessary to keep such
registration statement effective and to comply with the provisions of the Act
with respect to the disposition of all securities covered by such registration
statement.
(c) Furnish to the Holders whose Registrable Securities are
covered by the Registration Statement and each underwriter, if any, such
numbers of copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of a prospectus, including a preliminary prospectus, in conformity with
the requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by the Holders.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities
or Blue Sky laws of such jurisdictions as shall be reasonably requested by any
Holder whose Registrable Securities are covered by the
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<PAGE>
Registration Statement; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business in
any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter of such offering. Each Holder
proposing to distribute Registrable Securities through such underwritten
public offering shall also enter into and perform its obligations under such
an agreement.
(f) Promptly notify the Holders whose Registrable Securities
are covered by the registration statement at any time when a prospectus
relating thereto is required to be delivered under the Act of the occurrence
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 a material fact required to be stated therein or necessary
to make the statements therein not misleading in light of the circumstances
under which they were made and, at the request of the Holders, promptly
prepare and furnish to the 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 not misleading in light of the circumstances under which
they were made.
(g) Use its best efforts to furnish, at the request of the
Holders whose Registrable Securities are covered by the Registration
Statement, on the date that such Registrable Securities are delivered to the
underwriters for sale in connection with a registration pursuant to this
Section 3, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the
registration statement with respect to such securities becomes effective, (i)
an opinion, dated such date, of the counsel representing the Company for the
purposes of such registration, in form and substance as is customarily given
to underwriters in an underwritten public offering, addressed to the
underwriters, if any, and to the Holders whose Registrable Securities are
covered by the Registration Statement and (ii) a "comfort" letter dated such
date, from the independent certified public accountants of the Company, in
form and substance as is customarily given by independent certified public
accountants to underwriters in an underwritten public offering, addressed to
the underwriters, if any, and to the Holders whose Registrable Securities are
covered by the Registration Statement.
(h) Cause all such Registrable Securities registered
pursuant to such registration statement to be listed on each securities
exchange or quotation system on which similar securities issued by the Company
are then listed.
(i) Otherwise comply with all applicable rules and
regulations of the Securities and Exchange Commission and applicable blue sky
authorities.
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<PAGE>
3.4 Furnish Information. It shall be a condition precedent
to the obligations of the Company to effect a registration pursuant to this
Section 3 with respect to the Registrable Securities of a Holder whose
Registrable Securities are covered by the Registration Statement that such
Holder shall furnish to the Company such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such
Holder's Registrable Securities.
3.5 Expenses of Registrations. All expenses other than the
underwriting discounts and commissions charged per share (for which each
Holder shall be responsible with respect to the Registrable Securities being
sold by such Holder) incurred in connection with registrations, filings or
qualifications pursuant to this Section 3, including (without limitation) all
registration, filing and qualification fees and expenses, printers' and
accounting fees (including the expenses of any audits or comfort letter
required by or incident thereto), fees and disbursements of counsel for the
Company, and the reasonable fees and disbursements of one counsel for the
Holders whose Registrable Securities are covered by the Registration Statement
(which counsel shall be chosen by the OverSeas Stockholders) shall be borne by
the Company. If the Initiating Holders elect to pay all the expenses in
connection with a registration request withdrawn by the Initiating Holders
other than by reason of the discovery or occurrence of material adverse
information regarding the Company's results of operations, financial
condition, business or properties or any material adverse event affecting the
proposed registration (in which case such payment will not be required), then
the Initiating Holders shall remain entitled to the number of registrations
which they were entitled to pursuant to Section 3.1 prior to making such
withdrawn registration request.
3.6 Indemnification. In the event any Registrable
Securities are included in a registration statement under this Section 3:
(a) To the extent permitted by law, the Company will
indemnify and hold harmless each Holder whose Registrable Securities are
covered by the Registration Statement, any underwriter (as defined in the Act)
for such Holder and each person, if any, who controls such Holder or
underwriter within the meaning of the Act or the Securities Exchange Act of
1934, as amended (the "1934 Act"), and each of their respective officers and
directors, against any losses, claims, damages, expenses, or liabilities
(joint or several) to which any of the foregoing may become subject under the
Act or the 1934 Act, or any rule or regulation promulgated under the Act or
the 1934 Act, 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 of the following statements, omissions or
violations (collectively a "Violation"): (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus, final prospectus or summary prospectus
contained therein or any document incorporated therein by reference or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Act,
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<PAGE>
the 1934 Act, any State "blue sky" or securities law or any rule or regulation
promulgated under the Act, the 1934 Act or any State "blue sky" or securities
law; and the Company will also pay to such Holders, and each such underwriter
or controlling person and any other person entitled to be indemnified pursuant
to Section 3.6(a), any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, however, that the indemnity
agreement contained in this Section 3.6 shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent shall
not be unreasonably withheld), nor shall the Company be liable in any such
case for any such loss, claim, damage, liability, action or proceeding to the
extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished
specifically for inclusion in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement thereto by such Holders, or any such underwriter or controlling
person.
(b) To the extent permitted by law, each Holder whose
Registrable Securities are covered by the Registration Statement will
indemnify and hold harmless the Company, each of its directors, each of its
officers who has signed the registration statement, each person, if any, who
controls the Company within the meaning of the Act, any underwriter, and any
controlling person of any such underwriter, against any losses, claims,
damages, or liabilities (joint or several) to which any of the foregoing
persons may become subject under the Act or the 1934 Act or any rule or
regulation promulgated under the Act or the 1934 Act, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereto) arise out of
or are based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder specifically for inclusion in
such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement thereto; and such
Holder will pay any legal or other expenses reasonably incurred by any person
entitled to be indemnified pursuant to this Section 3.6(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity and contribution agreement contained in
this Section 3.6(b) and 3.6(d) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is
effected without the consent of such Holder, which consent shall not be
unreasonably withheld; provided further, that in no event shall any indemnity
or contribution under this Section 3.6 exceed the proceeds (net of any
underwriting discounts and commissions) from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under
this Section 3.6 of notice of the commencement of any action (including any
governmental action or proceeding), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this
Section 3.6, deliver to the indemnifying party a written notice of the
commencement thereof and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to
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<PAGE>
the indemnified parties; provided, however, that an indemnified party, (together
with all other indemnified parties which may be represented without conflict by
one counsel) shall have the right to retain one separate counsel, with the fees
and expenses to be paid by the indemnifying party, and to participate in the
defense of such action (subject to the right of counsel to the indemnifying
party to assume and control such defense) if representation of such indemnified
party by the counsel retained by the indemnifying party would be inappropriate
due to actual or potential differing interests between such indemnified party
and any other party represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within a reasonable time of
the commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 3.6, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 3.6.
(d) If the indemnification provided for in this Section 3.6
is held by a court of competent jurisdiction to be unenforceable as to an
indemnified party with respect to any loss, liability, claim, damage, or
expense referred to therein, then the indemnifying party, in lieu of
indemnifying such indemnified party hereunder, shall contribute to the amount
paid or payable by such indemnified party as a result of such loss, liability,
claim, damage, or expense in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions
that resulted in such loss, liability, claim, damage, or expense as well as
any other relevant equitable considerations. The relative fault of the
indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission to state a material fact relates
to information supplied by the indemnifying party or by the indemnified party
and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) The rights accorded to any indemnified party shall be in
addition to any rights that any indemnified party may have at law, by separate
agreement, or otherwise.
(f) The obligations of the Company and Holders under this
Section 3.6 shall survive the completion of any offering of Registrable
Securities in a registration statement under this Agreement.
3.7 Assignment of Registration Rights. Any heir or the
estate of an Overseas Stockholder which acquires the Registrable Securities
from such Overseas Stockholder by will or intestate succession shall be
entitled to cause the Company to register Registrable Securities pursuant to
this Section 3. Any Overseas Stockholder may sell, assign or transfer
Registrable Securities to his or her spouse or children or to a trust
established for the benefit of his or her spouse, children or himself or
herself, and such transferee shall be entitled to cause the Company to
register Registrable Securities pursuant to this Section 3, if, and only if,
such transferee agrees in writing to be bound by the terms of this Agreement.
In
- 10 -
<PAGE>
addition, the rights to cause the Company to register Registrable Securities
pursuant to this Agreement may be assigned by a Holder to a transferee or
assignee of such securities, provided that: (a) the Company is, within a
reasonable time after such transfer, furnished with written notice of the name
and address of such transferee or assignee and the securities with respect to
which such specified registration rights are being assigned; (b) such
transferee or assignee agrees in writing to be bound by and subject to the
terms and conditions of this Agreement; and (c) a minimum of 100,000 (such
number to be appropriately adjusted for stock splits, stock dividends,
recapitalizations and similar events) of the Registrable Securities held by a
Holder are transferred or assigned; provided, however, that if a transferee
acquires Registrable Securities from a Holder in a transaction in which such
securities are not subject to restrictions on transfer under the Act in the
hands of the transferee, the registration rights set forth in Section 3 shall
not be assignable to such transferee. In each such event and for purposes of
this Agreement, the term "Holder" as used herein shall include all such heirs,
such estate or such transferees.
3.8 "Market Stand-Off" Agreement. Each Overseas Stockholder
hereby agrees that: (i) for a period of 180 days following the effective date
of an underwritten registration statement of the Company filed under the Act,
if requested by the underwriter of such Registrable Securities, but only on
one occasion and not within six months of the expiration of a preceding
"market standoff" period, and (ii) with respect to any other underwritten
registration statement of the Company filed under the Act, for a period of 90
days following the effective date of such registration statement, but not
within six months of the expiration of a preceding "market standoff" period,
such Overseas Stockholder shall not, to the extent requested by such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase
or otherwise transfer or dispose of (other than to donees who agree to be
similarly bound) any Common Stock, any securities of the Company that are of
the class subject to such registration statement, or any securities that are
convertible into such class of securities, held by it at any time during such
period except (A) for any Common Stock or other securities included in such
registration, (B) under the circumstances set forth in clauses (i) (other than
pledges of Registrable Securities), and (iii) of Section 2 of this Agreement
(provided the transferee agrees in writing to be subject to the provisions of
this Section 3.8), (C) for the exercise of stock options held by such Overseas
Stockholder, and (D) for a private placement of Registrable Securities
pursuant to a written agreement executed by such Overseas Stockholder prior to
the request by the underwriter(s) to such Overseas Stockholder for a market
stand-off commitment; and each Overseas Stockholder agrees to enter into an
agreement to such effect with such underwriter; provided, however, that all
executive officers and directors of the Company enter into agreements that are
at least as restrictive as the terms hereof.
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities
of the Overseas Stockholders (and the shares or securities of every other
person subject to the foregoing restriction) until the end of such period.
- 11 -
<PAGE>
This Section 3.8 and the "market stand-off" agreement
contained herein shall terminate on the eighth anniversary of the date of this
Agreement; provided, however, that the 180-day market standoff shall not be
available to the Company if the Overseas Stockholders own less than fifteen
percent (15%) of the original number of Registrable Securities held by them.
3.9 Underwriting Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital stock,
the Company shall not be required under Section 3.2 to include any Holder's
securities in such underwriting unless such Holder complies with the last
sentence of Section 3.3(e) of this Agreement. If the total amount of
securities, including Registrable Securities, requested by stockholders to be
included in such offering exceeds the amount of securities that, in the
written opinion of the managing underwriters, when added to the securities
being registered by the Company, will exceed the maximum amount of the
Company's securities which can be marketed (a) at a price reasonably related
to their then current market value, and (b) without materially and adversely
affecting the entire offering, then the Company shall be required to include
in the offering only that number of such securities, including Registrable
Securities, which the underwriters determine in their sole discretion will not
jeopardize the success of the offering (the securities so included to be
apportioned pro rata among the selling stockholders according to the total
amount of securities entitled to be included therein owned by each selling
stockholder or in such other proportions as shall mutually be agreed to by
such selling stockholders). For purposes of the preceding parenthetical
concerning apportionment, for any selling stockholder which is a holder of
Registrable Securities and which is a partnership or corporation, the
partners, retired partners and stockholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for
the benefit of any of the foregoing persons shall be deemed to be a single
"selling stockholder", and any pro rata reduction with respect to such
"selling stockholder" shall be based upon the aggregate amount of shares
carrying registration rights owned by all entities and individuals included in
such "selling stockholder", as defined in this sentence.
3.10 Reports Under Securities Exchange Act of 1934. With a
view to making available to the Holders the benefits of Rule 144 promulgated
under the Act and any other rule or regulation of the Commission that may at
any time permit a Holder to sell securities of the Company to the public
without registration, the Company agrees to:
(a) make and keep public information available, as
those terms are understood and defined in Rule 144 under the Act, at all
times;
(b) file with the Commission in a timely manner all
reports and other documents required of the Company under the Act and the 1934
Act; and
(c) furnish to any Holder, so long as the Holder owns any
Registrable Securities, forthwith upon request (i) a written statement by the
Company as to whether it has complied with the reporting requirements of Rule
144, (ii) a copy of the most recent annual
- 12 -
<PAGE>
or quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the Commission
which permits the selling of any such securities without registration.
3.11 Limitations on Subsequent Registration Rights. From and
after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of a majority of the outstanding Registrable
Securities, enter into any agreement with any holder or prospective holder of
any securities of the Company that would allow such holder or prospective
holder (a) to include such securities in any registration statement filed by
the Company or (b) to make a demand registration unless such registration
rights are subordinate to the registration rights granted to the Holders
pursuant to this Agreement.
3.12 Termination of Registration Rights. The Holders shall
not be entitled to exercise any piggyback registration right provided for in
Section 3.2 after eight (8) years following the date of this Agreement. The
demand registration rights set forth in Section 3.1 shall terminate: (a) as to
one demand registration, after eight (8) years following the date of this
Agreement, (b) as to a second demand registration, after twelve (12) years
following the date of this Agreement, and (c) as to the third demand
registration after fifteen (15) years following the date of this Agreement.
4. Miscellaneous.
4.1 Restrictive Legend. All certificates evidencing the
Merger Shares shall have affixed thereto a legend substantially in the
following form:
"The shares of stock represented by this
certificate are subject to certain restrictions on
transfer as set forth in a Lock-Up and Registration
Rights Agreement by and among the registered owner
of this certificate, the Company and another
stockholder of the Company, a copy of which is
available for inspection at the offices of the
Secretary of the Company."
The Company will promptly remove the foregoing legend from any Merger Shares
upon termination of the Lock-Up related to such shares.
4.2 Successors and Assigns. Except as otherwise provided
herein, and provided that the transfer or assignment is in accordance with the
terms hereof, the terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective successors and assigns of the
parties (including any permitted transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any
- 13 -
<PAGE>
rights, remedies, obligations, or liabilities under or by reason of this
Agreement, except as expressly provided in this Agreement.
4.3 Governing Law. This Agreement shall be governed by and
construed under the laws of the State of California without regard to
principles of conflicts or choice of laws. Each of the parties hereto consents
to the jurisdiction of, and confers exclusive jurisdiction on, any court or
tribunal located in Los Angeles County, California (in the case of state
courts) or the Central District of California (in the case of federal courts),
over any action, suit or proceeding arising out of or relating to this
Agreement. Each party hereby irrevocably waives, and agrees not to assert as a
defense in any such action, suit or proceeding, any objection which he, she or
it may now or hereafter have to venue of any such action, suit or proceeding
brought in any court or tribunal located in Los Angeles County, California or
the Central District of California and hereby irrevocably waives any claim
that any such action, suit or proceeding brought in any such court or tribunal
has been brought in an inconvenient forum.
4.4 Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
4.5 Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
4.6 Notices. Unless otherwise provided, any notice required
or permitted under this Agreement shall be given in writing and shall be
deemed effectively given upon personal delivery to the party to be notified or
upon deposit with the United States Post Office, by registered or certified
mail, postage prepaid and addressed to the party to be notified at the address
indicated for such party in the Merger Agreement, or at such other address as
such party may designate by ten (10) days' advance written notice to the other
parties.
4.7 Expenses. If any action at law or in equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party
shall be entitled to reasonable attorneys' fees, costs and disbursements in
addition to any other relief to which such party may be entitled.
4.8 Amendments and Waivers. Any term of this Agreement may
be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of (a) the Company (acting
through its Board of Directors, with a majority of the directors not
designated by the Overseas Stockholders approving such amendment or waiver)
and (b)(i) in the case of Section 2, Overseas Stockholders holding a majority
of the Merger Shares held by the Overseas Stockholders, (ii) in the case of
Section 3, the Holders of a
- 14 -
<PAGE>
majority of the Registrable Securities then outstanding, and (iii) in the case
of any material changes to the registration rights of the Overseas
Stockholders, each of the Overseas Stockholders. Any amendment or waiver
effected in accordance with this paragraph shall be binding upon each Holder
of any Registrable Securities then outstanding, each future Holder of all such
Registrable Securities, and the Company.
4.9 Severability. If any term, provision or covenant in this
Agreement is held to be invalid, void or unenforceable, (i) the remainder of
the terms, provisions and covenants in this Agreement shall remain in full
force and effect and shall in no way be affected, ignored or invalidated, and
(ii) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, all portions of any section of this Agreement
containing any such provision held to be invalid, void or unenforceable that
are not themselves invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, void or
unenforceable.
4.10 Entire Agreement. This Agreement (including the
Exhibits hereto, if any) constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
4.11 Specific Performance. The parties hereto acknowledge
that there may be no adequate remedy at law if any party fails to perform any
of its obligations hereunder and that each party may be irreparably harmed by
any such failure, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other party
under this Agreement in accordance with the terms and conditions of this
Agreement.
- 15 -
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Lock-Up
and Registration Rights Agreement as of the date first above written.
ENTERTAINMENT/MEDIA ACQUISITION
CORPORATION
By:
-----------------------------------
Name:
Title:
OVERSEAS STOCKHOLDERS:
--------------------------------------
Ellen Dinerman Little
--------------------------------------
Robert B. Little
--------------------------------------
William F. Lischak
- 16 -
<PAGE>
EXHIBIT F
NON-COMPETITION AGREEMENT
This Non-Competition Agreement is entered into as of _____________,
1996 among Ellen Dinerman Little ("Little"), Entertainment/Media Acquisition
Corporation, a Delaware corporation ("EMAC"), and Overseas FilmGroup, Inc., a
Delaware corporation ("OFG"). EMAC and OFG are hereinafter sometimes
collectively referred to as the "Company."
Company and Little are parties to the Agreement of Merger, dated as
of ___________, 1996 (the "Merger Agreement"), pursuant to which OFG will be
merged with EMAC.
Little has developed substantial expertise and experience in the
business conducted by OFG and has had access to proprietary and confidential
business information relating to the business of OFG.
To induce EMAC to enter into the Merger Agreement and protect the
value to EMAC of OFG, which EMAC will own upon consummation of the acquisition
contemplated by the Merger Agreement and the goodwill associated therewith,
Little desires to enter into this Agreement and provide certain covenants to
Company.
The execution of this Agreement is a condition to the consummation of
the transactions contemplated by the Merger Agreement.
In consideration of the mutual promises contained herein, and for
other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
Definitions. For purposes of this Agreement and used herein, "Business" shall
mean the material business and operations of OFG as engaged in by OFG
immediately prior to the Closing Date, including, without limitation the
development, production, and sale or distribution of feature length motion
pictures for initial presentation in theatrical exhibition, as well as all
forms of programming for initial presentation on in-home television, no
matter how delivered or paid for (the "Business").
<PAGE>
The Business is conducted throughout each of the counties in the State of
California and the other States of the United States of America, and such other
countries where the Company may be engaged in the Business (the "Territory").
Capitalized terms used in this Agreement and not defined herein shall have the
meanings given to them in the Merger Agreement. Effectiveness of this Agreement
is conditioned upon consummation of the Merger in accordance with the Merger
Agreement, and this Agreement shall be deemed to be of no force or effect if the
Merger is not consummated. For purposes of this Agreement, "Employment
Agreement" shall mean that certain Employment Agreement between Little and the
Company of even date herewith, and "Confidential Materials," "Cause," "Good
Reason" and "Services" shall have the same meanings given to such terms in the
Employment Agreement.
Non-competition.
For a period of five (5) years (unless earlier terminated as
provided in subsection (c) below) (the "Term") commencing on the Closing Date,
Little agrees that, except in the course of rendering the Services, she shall
not at any time, directly or indirectly, within the Territory so long as
Company continues to engage in a like business in the Territory:
own, manage, operate, control or be connected in any
material manner with the ownership, management, operation or control of any
person or entity, other than the Company, that engages in a business
competitive with the Business (in either case, "Competitive Business"), which
includes but is not limited to, acting as a director, officer, agent,
employee, consultant, investor, independent contractor, partner or stockholder
of a Competitive Business, except such activities as may be specifically
permitted by Section 1.4 of the Employment Agreement;
i) engage in any activity which is in competition with the
Business except such activities as may be specifically permitted by Section
1.4 of the Employment Agreement;
ii) interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between Company and any customer or
prospective customer (as evidenced by meaningful contacts with the Company),
supplier, lessee or employee of
2.
<PAGE>
Company, or other party with whom Company has an advantageous
business relationship, including without limitation the customers
and suppliers of the Business prior to the Closing Date;
iii) solicit employment for or of employees of Company
or induce any employee to leave the employ of Company;
iv) lend or allow her name or reputation to be used by or in
connection with any Competitive Business, except such activities as may be
specifically permitted by Section 1.4 of the Employment Agreement;
v) render material advice to or otherwise allow her skill,
knowledge or experience to be used in a material manner in or by any
Competitive Business, except such activities as may be specifically permitted
by Section 1.4 of the Employment Agreement.
Notwithstanding anything in this Section 2 to the contrary, nothing
in this Agreement shall limit the right of Little to engage in the production
of motion pictures; provided that any such activities are not in violation of
Section 3(b) hereof.
a) If (i) Little's employment shall be terminated without "Cause," or
for "Good Reason," or (ii) the Company shall have breached an obligation to
pay money (and failed to cure any such monetary breach as provided in the
applicable agreement) under that certain Note of even date herewith, in the
case of (ii) at a time when Little (together with Little's spouse, trusts
established by or for the benefit of Little or Little's spouse or other
relatives, or other entities controlled by Little or Little's spouse) does not
control a majority of the Board of Directors of the Company, then Little
shall, upon such termination or breach, be released from the restrictions of
this Agreement.
Trade Secrets; Confidential Information; Non-Solicitation in
Connection with Pending Projects.
Except as permitted by Section 1.6 of the Employment Agreement or to
the extent necessary to defend against any claim or assert any right under
this Agreement, and provided that Little's employment shall not have been
terminated without "Cause," or for "Good Reason," during the Term Little shall
not
3.
<PAGE>
misuse, use for the benefit of any other person or entity, or disclose any
Confidential Materials to anyone outside the Company and its Affiliates.
Except as may be permitted under Section 1.4 of the Employment
Agreement, during the Term (i) Little will not, or will not cause any other
person or entity to wrongfully and without the permission of the Company,
directly or indirectly, undertake to bid for, acquire or make properties or
projects in which the Company or any of its subsidiaries has an ownership or
other proprietary interest (i.e., an option, an exclusive negotiating right or
similar position) (the "Projects"), and (ii) Little will not solicit or accept
any business from, offer to render any services to, or agree to provide
financing, or any other financial support, or otherwise engage or employ in
any respect whatsoever any talent, creative personnel, producers, directors,
writers, cinematographers or other similar parties in connection with their
activities on such Projects.
Severable Covenants. The parties hereto intend that the covenants set forth in
Sections 2 and 3 hereof shall be construed as separate covenants. It is the
desire and intent of the parties hereto that the provisions of this Agreement
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought. If any
particular provision or portion of this Agreement shall be adjudicated to be
invalid or unenforceable, such adjudication shall apply only with respect to
the operation of this Agreement in the particular jurisdiction in which such
adjudication is made.
Injunctive Relief. Little hereby acknowledges and agrees that any breach of or
default under this Agreement will cause irreparable damage to Company in an
amount difficult to ascertain. Accordingly, in addition to any other relief to
which Company may be entitled, Company shall be entitled, without proof of
actual damages, to such injunctive relief as may be ordered by any court of
competent jurisdiction including, but not limited to, an injunction
restraining any violation of Section 2 or 3 hereof.
Independent Agreements and Remedies. This Agreement is in
4.
<PAGE>
addition to the Merger Agreement and Company's rights and
remedies under this Agreement and under the Merger Agreement shall be
independent, separate and distinct.
Cumulative Remedies; Waiver. To the extent permitted by law, all rights and
remedies existing under this Agreement are cumulative to and not exclusive of,
any rights or remedies otherwise available under applicable law. No failure on
the part of any party to exercise or delay in exercising any right hereunder
shall be deemed a waiver thereof, nor shall any single or partial exercise
preclude any further or other exercise of such or any other right.
Attorneys' Fees and Costs. In the event of any action for the breach of this
Agreement or misrepresentation by any party in this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and expenses
incurred in connection with such action.
No Assignment. Neither this Agreement nor any rights or obligations under it
are assignable, except that Company may assign its rights hereunder to any
successor (by way of purchase of assets, stock, merger or similar acquisitive
transaction) to substantially all of the operating assets of the Business and
to its associated goodwill. This Agreement shall be binding upon and inure to
the benefit of each party and its successors and such permitted assigns.
Governing Law. This Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the laws of the State of
California applicable to contracts made and performed in such State without
regard to conflicts of law doctrines, except to the extent that certain
matters are preempted by federal law or governed by the law of the
jurisdiction of organization of the respective parties.
Entire Agreement. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings of the parties in connection therewith.
Amendments; Waivers. This Agreement may be amended only by
an agreement in writing of all parties. No waiver of any provision
5.
<PAGE>
nor consent to any exception to the terms of this
Agreement shall be effective unless in writing and signed by the
party to be bound and then only to the specific purpose, extent
and instance so provided.
Counterparts. This Agreement may be executed in one or more counterparts and
by different parties in separate counterparts. All of such counterparts shall
constitute one and the same agreement and shall become effective when one or
more counterparts of this Agreement have been signed by each party and
delivered to the other parties.
Headings. The descriptive headings of the Sections of this
Agreement are for convenience only and do not constitute part of
this Agreement.
Notices. Any notice or other communication hereunder must be given in writing
and either (a) delivered in person, (b) transmitted by facsimile or electronic
mail or (c) mailed by certified or registered mail, postage prepaid, receipt
requested, as follows:
IF TO LITTLE, ADDRESSED TO:
12309 Viewcrest Road
Studio City, CA 91604
(818) 760-2981 (Facsimile)
WITH A COPY TO:
John McHale, Esq.
Gipson, Hoffman & Pancione
1901 Avenue of the Stars, Suite 1100
Los Angeles, CA 90067
(310) 556-8945 (Facsimile)
IF TO EMAC OR OFG:
8800 Sunset Boulevard, Suite 302
Los Angeles, CA 90069
(310) 855-0719 (Facsimile)
6.
<PAGE>
WITH A COPY TO:
202 N. Canon, Suite 200
Beverly Hills, CA 90210
(310 276-0583
AND TO:
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Boulevard, Suite 444
Beverly Hills, California, 90210
Attention: Mel Ziontz, Esq.
(310) 271-6430 (Facsimile)
or such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number or address so specified in (or pursuant
to) this Section 15 and an appropriate answerback or confirmation is received,
(ii) if given by mail, three days after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iii) if
given by any other means, when actually received at such address.
7.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Non-Competition Agreement to be executed as of the day and year first above
written.
ELLEN DINERMAN LITTLE
------------------------------
Ellen Dinerman Little
ENTERTAINMENT/MEDIA ACQUISITION
CORPORATION
By: __________________________
Name: ________________________
Title: _______________________
------------------------------
OVERSEAS FILMGROUP, INC.
By: __________________________
Name: ________________________
Title: _______________________
8.
<PAGE>
EXHIBIT F
NON-COMPETITION AGREEMENT
This Non-Competition Agreement is entered into as of _____________,
1996 among Robert B. Little ("Little"), Entertainment/Media Acquisition
Corporation, a Delaware corporation ("EMAC"), and Overseas FilmGroup, Inc., a
Delaware corporation ("OFG"). EMAC and OFG are hereinafter sometimes
collectively referred to as the "Company."
Company and Little are parties to the Agreement of Merger, dated as
of ___________, 1996 (the "Merger Agreement"), pursuant to which OFG will be
merged with EMAC.
Little has developed substantial expertise and experience in the
business conducted by OFG and has had access to proprietary and confidential
business information relating to the business of OFG.
To induce EMAC to enter into the Merger Agreement and protect the
value to EMAC of OFG, which EMAC will own upon consummation of the acquisition
contemplated by the Merger Agreement and the goodwill associated therewith,
Little desires to enter into this Agreement and provide certain covenants to
Company.
The execution of this Agreement is a condition to the consummation of
the transactions contemplated by the Merger Agreement.
In consideration of the mutual promises contained herein, and for
other good and valuable consideration the receipt of which is hereby
acknowledged, the parties hereto agree as follows:
Definitions. For purposes of this Agreement and used herein, "Business" shall
mean the material business and operations of OFG as engaged in by OFG
immediately prior to the Closing Date, including, without limitation the
development, production, and sale or distribution of feature length motion
pictures for initial presentation in theatrical exhibition, as well as all
forms of programming for initial presentation on in- home television, no
matter how delivered or paid for (the "Business").
<PAGE>
The Business is conducted throughout each of the counties in the State of
California and the other States of the United States of America, and such
other countries where the Company may be engaged in the Business (the
"Territory"). Capitalized terms used in this Agreement and not defined herein
shall have the meanings given to them in the Merger Agreement. Effectiveness
of this Agreement is conditioned upon consummation of the Merger in accordance
with the Merger Agreement, and this Agreement shall be deemed to be of no
force or effect if the Merger is not consummated. For purposes of this
Agreement, "Employment Agreement" shall mean that certain Employment Agreement
between Little and the Company of even date herewith, and "Confidential
Materials," "Cause," "Good Reason" and "Services" shall have the same meanings
given to such terms in the Employment Agreement.
Non-competition.
For a period of five (5) years (unless earlier terminated as
provided in subsection (c) below) (the "Term") commencing on the Closing Date,
Little agrees that, except in the course of rendering the Services, he shall
not at any time, directly or indirectly, within the Territory so long as
Company continues to engage in a like business in the Territory:
own, manage, operate, control or be connected in any material
manner with the ownership, management, operation or control of any person or
entity, other than the Company, that engages in a business competitive with
the Business (in either case, "Competitive Business"), which includes but is
not limited to, acting as a director, officer, agent, employee, consultant,
investor, independent contractor, partner or stockholder of a Competitive
Business, except such activities as may be specifically permitted by Section
1.4 of the Employment Agreement;
i) engage in any activity which is in competition with the
Business except such activities as may be specifically permitted by Section
1.4 of the Employment Agreement;
ii)interfere with, disrupt or attempt to disrupt the
relationship, contractual or otherwise, between Company and any customer or
prospective customer (as evidenced by meaningful contacts with the Company),
supplier, lessee or employee of
2.
<PAGE>
Company, or other party with whom Company has an advantageous business
relationship, including without limitation the customers and suppliers of the
Business prior to the Closing Date;
iii) solicit employment for or of employees of Company or induce
any employee to leave the employ of Company;
iv) lend or allow his name or reputation to be used by or in
connection with any Competitive Business, except such activities as may be
specifically permitted by Section 1.4 of the Employment Agreement;
v) render material advice to or otherwise allow his skill,
knowledge or experience to be used in a material manner in or by any
Competitive Business, except such activities as may be specifically permitted
by Section 1.4 of the Employment Agreement.
Notwithstanding anything in this Section 2 to the contrary, nothing
in this Agreement shall limit the right of Little to engage in the production
of motion pictures; provided that any such activities are not in violation of
Section 3(b) hereof.
a)If (i) Little's employment shall be terminated without "Cause," or
for "Good Reason," or (ii) the Company shall have breached an obligation to
pay money (and failed to cure any such monetary breach as provided in the
applicable agreement) under that certain Note of even date herewith, in the
case of (ii) at a time when Little (together with Little's spouse, trusts
established by or for the benefit of Little or Little's spouse or other
relatives, or other entities controlled by Little or Little's spouse) does not
control a majority of the Board of Directors of the Company, then Little
shall, upon such termination or breach, be released from the restrictions of
this Agreement.
Trade Secrets; Confidential Information; Non-Solicitation in Connection with
Pending Projects.
Except as permitted by Section 1.6 of the Employment Agreement or to
the extent necessary to defend against any claim or assert any right under
this Agreement, and provided that Little's employment shall not have been
terminated without "Cause," or for "Good Reason," during the Term Little shall
not
<PAGE>
misuse, use for the benefit of any other person or entity, or disclose any
Confidential Materials to anyone outside the Company and its Affiliates.
Except as may be permitted under Section 1.4 of the Employment
Agreement, during the Term (i) Little will not, or will not cause any other
person or entity to wrongfully and without the permission of the Company,
directly or indirectly, undertake to bid for, acquire or make properties or
projects in which the Company or any of its subsidiaries has an ownership or
other proprietary interest (i.e., an option, an exclusive negotiating right or
similar position) (the "Projects"), and (ii) Little will not solicit or accept
any business from, offer to render any services to, or agree to provide
financing, or any other financial support, or otherwise engage or employ in
any respect whatsoever any talent, creative personnel, producers, directors,
writers, cinematographers or other similar parties in connection with their
activities on such Projects.
Severable Covenants. The parties hereto intend that the covenants set forth in
Sections 2 and 3 hereof shall be construed as separate covenants. It is the
desire and intent of the parties hereto that the provisions of this Agreement
shall be enforced to the fullest extent permissible under the laws and public
policies applied in each jurisdiction in which enforcement is sought. If any
particular provision or portion of this Agreement shall be adjudicated to be
invalid or unenforceable, such adjudication shall apply only with respect to
the operation of this Agreement in the particular jurisdiction in which such
adjudication is made.
Injunctive Relief. Little hereby acknowledges and agrees that any breach of or
default under this Agreement will cause irreparable damage to Company in an
amount difficult to ascertain. Accordingly, in addition to any other relief to
which Company may be entitled, Company shall be entitled, without proof of
actual damages, to such injunctive relief as may be ordered by any court of
competent jurisdiction including, but not limited to, an injunction
restraining any violation of Section 2 or 3 hereof.
Independent Agreements and Remedies. This Agreement is in
4.
<PAGE>
addition to the Merger Agreement and Company's rights and remedies under this
Agreement and under the Merger Agreement shall be independent, separate and
distinct.
Cumulative Remedies; Waiver. To the extent permitted by law, all rights and
remedies existing under this Agreement are cumulative to and not exclusive of,
any rights or remedies otherwise available under applicable law. No failure on
the part of any party to exercise or delay in exercising any right hereunder
shall be deemed a waiver thereof, nor shall any single or partial exercise
preclude any further or other exercise of such or any other right.
Attorneys' Fees and Costs. In the event of any action for the breach of this
Agreement or misrepresentation by any party in this Agreement, the prevailing
party shall be entitled to reasonable attorneys' fees, costs and expenses
incurred in connection with such action.
No Assignment. Neither this Agreement nor any rights or obligations under it
are assignable, except that Company may assign its rights hereunder to any
successor (by way of purchase of assets, stock, merger or similar acquisitive
transaction) to substantially all of the operating assets of the Business and
to its associated goodwill. This Agreement shall be binding upon and inure to
the benefit of each party and its successors and such permitted assigns.
Governing Law. This Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the laws of the State of
California applicable to contracts made and performed in such State without
regard to conflicts of law doctrines, except to the extent that certain
matters are preempted by federal law or governed by the law of the
jurisdiction of organization of the respective parties.
Entire Agreement. This Agreement constitutes the entire agreement among the
parties pertaining to the subject matter hereof and supersedes all prior
agreements and understandings of the parties in connection therewith.
Amendments; Waivers. This Agreement may be amended only by an agreement in
writing of all parties. No waiver of any provision nor consent to any
exception to the terms of this Agreement shall
5.
<PAGE>
be effective unless in writing and signed by the party to be bound and then
only to the specific purpose, extent and instance so provided.
Counterparts. This Agreement may be executed in one or more counterparts and
by different parties in separate counterparts. All of such counterparts shall
constitute one and the same agreement and shall become effective when one or
more counterparts of this Agreement have been signed by each party and
delivered to the other parties.
Headings. The descriptive headings of the Sections of this
Agreement are for convenience only and do not constitute part of
this Agreement.
Notices. Any notice or other communication hereunder must be given in writing
and either (a) delivered in person, (b) transmitted by facsimile or electronic
mail or (c) mailed by certified or registered mail, postage prepaid, receipt
requested, as follows:
If to Little, addressed to:
12309 Viewcrest Road
Studio City, CA 91604
(818) 760-2981 (Facsimile)
With a copy to:
John McHale, Esq.
Gipson, Hoffman & Pancione
1901 Avenue of the Stars, Suite 1100
Los Angeles, CA 90067
(310) 556-8945 (Facsimile)
If to EMAC or OFG:
8800 Sunset Boulevard, Suite 302
Los Angeles, CA 90069
(310) 855-0719 (Facsimile)
6.
<PAGE>
With a copy to:
202 N. Canon, Suite 200
Beverly Hills, CA 90210
(310 276-0583
and to:
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Boulevard, Suite 444
Beverly Hills, California, 90210
Attention: Mel Ziontz, Esq.
(310) 271-6430 (Facsimile)
or such other address or to such other person as either party shall have last
designated by such notice to the other party. Each such notice or other
communication shall be effective (i) if given by telecommunication, when
transmitted to the applicable number or address so specified in (or pursuant
to) this Section 15 and an appropriate answerback or confirmation is received,
(ii) if given by mail, three days after such communication is deposited in the
mails with first class postage prepaid, addressed as aforesaid or (iii) if
given by any other means, when actually received at such address.
7.
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Non-Competition Agreement to be executed as of the day and year first above
written.
ROBERT B. LITTLE
--------------------------------------
Robert B. Little
ENTERTAINMENT/MEDIA ACQUISITION
CORPORATION
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
--------------------------------------
OVERSEAS FILMGROUP, INC.
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
8.
<PAGE>
EXHIBIT G
NONDISCLOSURE AGREEMENT
This agreement sets forth the mutual agreement between
Entertainment/Media Acquisition Corporation ("EMAC") and Overseas Filmgroup,
Inc. ("Overseas") regarding the disclosure of confidential information between
the parties in connection with a potential acquisition by EMAC of Overseas, by
merger or otherwise (the "Merger"). For the purpose of this agreement,
references to the parties are to EMAC and Overseas and the references to a
party shall be deemed to include the affiliates of such party.
It is mutually agreed and understood by and between the
parties that in consideration of the mutual covenants contained herein, all
trade secrets or confidential or proprietary information of a party
(including, but not limited to, financial and operational information and
including, in the case of Overseas, financial information, trade secrets or
confidential or proprietary information of its stockholders)("Confidential
Information") disclosed by such party (or the directors, stockholders,
officers, employees, representatives, advisors or agents of such party)
(collectively, "Representatives") to the other party or its Representatives
shall be treated as confidential and shall be disclosed only to
Representatives who need to know such Confidential Information for the purpose
of evaluating the Merger. Each party agrees that it and its Representatives
shall use the Confidential Information solely for the purposes of evaluating
the Merger and not for any other purpose. Such Confidential Information shall
not be disclosed to any third party or be utilized without the express prior
written consent of the party who furnished the Confidential Information.
In addition, each party agrees that, without the prior
written consent of the other, it and its Representatives will not disclose to
any person the fact that information of the other party has been made
available to it, that discussions or negotiations are taking place concerning
the Merger or any of the terms, conditions or other facts with respect thereto
(including the status thereof), unless such disclosure is required by law and
then only with as much prior written notice to the party who furnished the
information as is practical under the circumstances and only to the extent
required by law.
If the parties decide not to proceed with the proposed
transaction, or at any time upon the request of either party for any reason,
each party will and will cause its Representatives to promptly deliver to the
party who furnished the Confidential Information all documents (and all copies
thereof) furnished to it or its Representatives containing Confidential
Information. Notwithstanding the return of Confidential Information, each
party and its Representatives will continue to be bound by the obligations of
confidentiality required by this letter.
The confidentiality obligations contained in this agreement
shall not, however, apply to any information that (a) can be demonstrated to
be in the public domain prior to its disclosure to the other party or its
representatives, or (b) becomes part of the public domain not through any
unauthorized act or omission on the part of the party to whom the disclosure
is made (or its representatives or affiliates), or (c) is available or known
to the party to whom the disclosure is made prior to the making of such
disclosure, or (d) is lawfully obtained from a third party who has an
unrestricted right to disclose the information. Confidential information may
be disclosed to the extent necessary to comply with any applicable statute,
constitution, rule, regulation, ordinance or order, whether of the United
States, any state thereof, or any other governmental jurisdiction applicable
to a party after giving prior written notice to the other party, or if a party
receives a request to disclose any Confidential Information under the terms of
a subpoena, order, civil investigative demand or similar process issued by a
court of competent jurisdiction or by a governmental body or agency, whether
of the United States or any state thereof, or any other governmental
jurisdiction applicable to the party after giving prior written notice to the
other party.
Each party agrees that, without limiting any other available
remedies, each party shall be entitled to an injunction and other equitable
relief in the event of any failure to comply with the provisions of this
agreement by the other party or its Representatives. It is further understood
and agreed that no failure or delay by any such party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise of
any right, power or
<PAGE>
privilege. In addition to the liability that may accrue to the Representatives
of either party hereto as a result of a breach of this agreement caused by
their actions, each party agrees to be responsible for any breach of this
agreement caused by its Representatives; provided, however, that in the event
that such breaching Representative has agreed in writing to treat all
Confidential Information confidentially in the same manner as set forth
herein, the party for whom the breaching Representative serves shall not be
responsible for the breach caused by such Representative.
Notwithstanding anything to the contrary contained herein,
neither party shall issue any press release or announcement of or relating to
the negotiation or execution of, or any terms, provisions or conditions of the
Merger without the other party's prior approval of the content and timing of
any such announcement or announcements.
Each party acknowledges that this is the entire agreement
between them regarding the specific subject matter herein and that any further
obligations regarding the potential Merger will be established by a separate
written agreement. This letter agreement shall be governed by the laws of the
State of California, regardless of the law of choice of law of that or any
other jurisdiction.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the day and year set forth below.
, 1996
- ---------- ---
Entertainment/Media Acquisition Corporation
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
Overseas Filmgroup, Inc.
By:
------------------------------------
Title:
---------------------------------
Date:
----------------------------------
<PAGE>
EXHIBIT H
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the
[ ] day of [ ], 1996 between [RL/EL] ("Employee") and Overseas Filmgroup,
Inc., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Agreement of Merger, dated as of [ ], 1996
(the "Merger Agreement") by and among Entertainment/Media Acquisition
Corporation ("EMAC"), Overseas Filmgroup, Inc. (the "Disappearing
Corporation"), Robert B. Little and Ellen Dinerman Little, the Disappearing
Corporation has been merged with and into EMAC (the "Merger") with EMAC being
the surviving corporation, which was renamed "Overseas Filmgroup, Inc." at the
effective time of the Merger; and
WHEREAS, Employee was [RL: Chairman of the Board and Chief Executive
Officer; EL: President and Secretary] of the Disappearing Corporation, for
numerous years; and
WHEREAS, a condition to consummation of the Merger was that the
Company, as the surviving corporation in the Merger, and Employee enter into
this Agreement as of the date that the Merger becomes effective; and
WHEREAS, Employee and the Company desire to enter into this Agreement
setting forth the terms and conditions for the employment relationship of
Employee with the Company during the Term (as defined below).
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties to this Agreement hereby agree as follows:
1. SERVICES.
1.1 Employment. During the Term (as defined below), the Company hires
Employee to perform such services as the Company may from time to time
reasonably request consistent with Employee's position with the Company (as
set forth in Section 1.5 hereof) and Employee's stature and experience in the
motion picture industry (the "Services"). The Services and authority of
Employee shall include management and supervision of (A) the general business,
affairs, management and operations of the Company, (B) the distribution of
motion pictures, and (C) other principal business activities of the Company
and its Affiliates. For purposes of this Agreement, "Affiliates" shall mean,
as to any person, any other person controlled by or under common control with
(or, where applicable, controlling), directly or indirectly, such person; and
"person" shall mean any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency or political
subdivision thereof, or any other entity.
1.2 Location. During the Term, Employee's Services shall be performed
in Los Angeles, California or elsewhere in the western Metropolitan Los
Angeles area. The parties, however, acknowledge and agree that the nature of
Employee's duties hereunder may require domestic and international travel from
time to time.
1.3 Term. The term of Employee's employment under this Agreement (the
"Term") shall commence at the effective time of the Merger on the date first
written above (the "Effective Date") and
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<PAGE>
shall end on [ ], 2001 unless sooner terminated in accordance with the
provisions of this Agreement. For purposes of this Agreement, "Employment Year"
shall mean each twelve month period during the Term commencing on [ ] and ending
on [ ] of the following year.
1.4 Exclusivity. During the Term, the Services shall be rendered on a
full-time basis during normal working hours. During the Term, all Services of
Employee shall be exclusive to the Company and its Affiliates. Notwithstanding
anything to the contrary stated in this Agreement, Employee may acquire and/or
retain, as an investment, and take customary actions (including the exercise
or conversion of any securities or rights) to maintain and preserve Employee's
ownership of any one or more of the following (provided such actions, other
than passive investment activities, do not unreasonably interfere with
Employee's Services hereunder): (i) securities of any corporation that are
registered under Sections 12(b) or 12(g) of the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and that are publicly traded as long as
Employee is not part of any control group of such corporation and, in the case
of public corporations in competition with the Company, such securities do not
constitute more than five percent of the voting power of that public company;
(ii) any securities of a partnership, trust, corporation or other person so
long as Employee remains a passive investor in that entity and so long as such
entity is not, directly or indirectly, in competition with the Company; (iii)
securities or other interests now owned or controlled, in whole or in part,
directly or indirectly, by Employee in any corporation or other person and
which are identified on Schedule 1.4 hereto; and (iv) securities of the
Company or any of its Affiliates. Nothing in this Agreement shall be deemed to
prevent or restrict Employee's ownership interest in the Company and its
Affiliates or Employee's ability to render charitable or community services.
Any executive producer or similar producer fees earned by Employee from a
third party during the Term in connection with the Services shall be assigned
by Employee to the Company, and the Company shall fully indemnify Employee
with respect to any and all taxes to be paid by Employee in connection
therewith (i.e., Employee shall be placed in the same after-tax position that
[he/she] would have been in had such fees not been paid to Employee). Nothing
in this Agreement shall be deemed to restrict Employee's ability to render
ongoing consultation to the entities listed on Schedule 1.4 hereto (provided
such consultation does not unreasonably interfere with Employee's Services
hereunder) or to receive consulting fees in connection therewith. Employee
represents and warrants that through December 31, 1995 the aggregate amount of
consulting fees earned by Employee from consultation services rendered to NEO
Motion Pictures, Inc. (and to which Employee is entitled to be paid by such
company) did not exceed $350,000.
1.5 Power and Authority.
1.5.1 During the Term, Employee shall be a member and Co-
Chairman of the Board of Directors of the Company (the "Board"), a member of the
executive or supervisory committee (or comparable committee) (the "Executive
Committee") of the Board, and Co-President and Co-Chief Executive Officer of the
Company. During the Term, the only other Co-Chairman of the Board, Co-
President, or Co-Chief Executive Officer of the Company shall be [RL/EL] (the
"Co-Executive"). In the event that the Co-Executive ceases at any time during
the Term to serve as Co-Chairman of the Board, Co-President or Co-Chief
Executive Officer of the Company, (i) Employee shall become the sole Chairman of
the Board, President or Chief Executive Officer, as applicable, (ii) Employee
shall no longer share any such office and (iii) as applicable, all references
herein to the joint authority of Employee and Co-Executive to make certain
decisions and take certain actions shall thereafter be deemed to be references
instead to the sole authority of Employee.
2
<PAGE>
1.5.2 During the Term, all officers and employees of the
Company shall report to, and only to, Employee and the Co-Executive (directly or
through such channels as Employee and the Co- Executive shall designate). During
the Term, there shall be no officer or employee of the Company whose title,
position or authority with the Company is equal to Employee (other than the Co-
Executive) or superior to that of Employee.
1.5.3 The Company may from time to time during the Term
appoint Employee to one or more additional offices of the Company. Employee
agrees to accept such offices if consistent with Employee's stature and
experience and with the type of offices with the Company held by Employee. The
Company shall not appoint the Co-Executive to any additional office without
simultaneously offering Employee the identical office and title which, if
Employee accepts such office, they shall hold as co-officers.
1.5.4 In addition to the other duties and authority of
Employee set forth herein, Employee and the Co-Executive (and no other person
without Employee's consent) shall have, subject to Section "V" of the
Company's Operating Guidelines attached hereto as Exhibit "A," the sole and
ultimate authority and responsibility to make all creative decisions for the
Company with respect to all motion pictures financed, produced or distributed
by the Company or its Affiliates. This authority shall include, without
limitation, the creative decisions for acquiring and developing properties,
attaching all creative elements, greenlighting films for acquisition, and
approving the motion pictures or other properties to be financed or acquired
by the Company, as well as by its Affiliates. In addition, Employee and the
Co-Executive shall have sole authority and responsibility to make all
employment decisions regarding Company personnel, including personnel of the
Company's Affiliates.
1.6 Confidentiality. Employee acknowledges that in furnishing
[his/her] Services to the Company, [he/she] will, through the Term, come into
close contact (and through services provided to the Disappearing Corporation
has come into close contact) with many confidential affairs of the Company,
including confidential information about costs, profits, sales, pricing
policies, operational methods, and other confidential information not readily
available to the public (the "Confidential Materials"). In recognition of the
foregoing, Employee covenants and agrees that Employee will not intentionally
disclose any material Confidential Materials to anyone outside the Company and
its Affiliates during the Term except in the course of rendering the Services
or with the Company's written consent. For purposes of this Agreement, the
term "Confidential Materials" does not include information which at the time
of disclosure has previously been made generally available to the public by
any means other than the wrongful act of Employee (or Employee's spouse) in
violation of this Section 1.6. Employee may use and disclose Confidential
Materials to the extent necessary to assert any right or defend against any
claim arising under this Agreement, the Merger Agreement, the Overseas
Filmgroup, Inc. 1996 Special Stock Option Plan and Agreement dated [ ], 1996
by and between [ ] (the "Option Agreement"), the Tax Reimbursement Agreement
dated [ ], 1996 by and between [ ] (the "Tax Agreement"), the Lock-up and
Registration Rights Agreement dated [ ], 1996 by and between [ ] (the
"Registration Rights Agreement"), the Secured Promissory Note of the Company
dated [ ] (the "Note"), the Security Agreement dated [ ], 1996 by and between
[ ] (the "Security Agreement"), the Stockholders Voting Agreement dated [ ] by
and between [ ] (the "Stockholders Agreement"), and any other documents
entered into pursuant to or contemplated by the foregoing (this Agreement, the
Option Agreement, the Tax Agreement, the Registration Rights Agreement, the
Note, the Security Agreement, the Stockholders Agreement and any other documents
entered into pursuant to or contemplated by the foregoing are collectively
referred to herein as the "Transaction Documents"). Employee may also use and
disclose Confidential Materials to
3
<PAGE>
the extent necessary to assert any right or defend against any claim pertaining
to Confidential Materials or their use, to the extent necessary to comply with
any applicable statute, constitution, treaty, rule, regulation, ordinance or
order, whether of the United States, any state thereof, or any other
jurisdiction applicable to Employee after giving prior notice to the Company
(time permitting), or if Employee receives a request to disclose all or any part
of the information contained in the Confidential Materials under the terms of a
subpoena, order, civil investigative demand or similar process issued by a court
of competent jurisdiction or by a governmental body or agency, whether of the
United States or any state thereof, or any other jurisdiction applicable to
Employee after giving prior notice to the Company (time permitting).
1.7 Indemnification. The Company shall indemnify Employee to the
fullest extent allowed by applicable law. Without limiting the foregoing,
Employee shall be entitled to the benefit of the indemnification provisions
contained on the date hereof in the Bylaws of the Company and any applicable
Bylaws of any Affiliate, notwithstanding any future changes therein, and
Employee shall also be entitled to the benefit of the Indemnification
Agreement attached hereto as Exhibit "B" which shall be entered into between
the Company and Employee concurrently with the execution of this Agreement.
1.8 Credits. With respect to any motion picture developed,
distributed or financed, in whole or in part, by the Company or its Affiliates
which is set for production during the Term, the Company shall accord
presentation, producer or executive producer credit, the type of credit to be
chosen at Employee's election, (and the Company shall direct its licensees, to
the extent reasonable, to accord such credit) to Employee on screen on a
separate card in the main titles and in paid advertising in which any other
credit appears (other than award, congratulatory, nomination or personal
appearance advertisements) in form and size to be determined by Employee
consistent with custom and practice in the entertainment industry.
2. COMPENSATION.
As compensation and consideration for the Services provided by
Employee during the Term pursuant to this Agreement, the Company agrees to pay
to Employee the compensation set forth below.
2.1 Fixed Annual Compensation. The Company shall pay to Employee
salary ("Fixed Annual Compensation") at the rate of $125,000 per annum. Fixed
Annual Compensation payable to Employee by the Company hereunder shall be paid
at such times and in such amounts as the Company may designate in accordance
with the Company's usual salary practices, but in no event less than once
monthly.
2.2 Bonus. During each Employment Year during the Term, Employee
shall be entitled to a bonus of $25,000 (the "Annual Bonus") if Employee
attends at least one foreign festival, market or other similar event,
including, without limitation, the Cannes Film Festival, the Berlin Film
Festival, the Venice Film Festival, the "London Screenings," MIFED, MIP or
MIPTV. The "Annual Bonus" shall be paid promptly after Employees' attendance
at the applicable festival, market or other event. If in any Employment Year,
Employee is prevented from earning the Annual Bonus due to illness or
disability, Employee shall nevertheless be entitled to the full amount of the
Annual Bonus for each such Employment Year. Employee shall also be entitled to
such additional bonus, if any, as may be granted to Employee by the Company's
Board of Directors (with Employee and Employee's spouse abstaining from any vote
thereon) or compensation or similar committee thereof in the Board's (or such
committee's) sole discretion based upon Employee's performance of [his/her]
Services under this Agreement.
4
<PAGE>
3. EXPENSES; ADDITIONAL BENEFITS
3.1 Vacation. During the Term, Employee shall be entitled for each
Employment Year to an aggregate of four weeks of vacation with full pay.
Employee shall be entitled to accrue vacation (beginning with any vacation
after December 31, 1995) and/or be paid therefor in accordance with the
Company's policies with respect thereto applicable to the Company's general
employees.
3.2 Employee Business Expense Reimbursement. Employee shall be
entitled to reimbursement of all business expenses for which Employee makes an
adequate accounting to the Company, including, without limitation, all
expenses of a home office (consistent with the past practices of the
Disappearing Corporation in connection with the reimbursement of home office
expenses). The determination of the adequacy of the accounting of the
foregoing expenses shall be within the reasonable discretion of the Company's
independent certified accountants taking into consideration the substantiation
requirements of the Internal Revenue Code of 1986, as amended (the "Code").
3.3 Merger Expenses. Employee shall be entitled to reimbursement
of all reasonable legal and accounting fees and expenses incurred in connection
with the negotiation, execution and delivery of the Transaction Documents and
the transactions contemplated by each.
3.4 Directors and Officers Liability Insurance. Employee shall be
entitled to the protection of any insurance policies the Company or any of its
Affiliates may elect to maintain generally for the benefit of its directors
and officers against all costs, charges and expenses whatsoever incurred or
sustained by Employee or [his/her] legal representatives in connection with
any action, suit or proceeding to which Employee (or [his/her] legal
representatives or other successors) may be made a party by reason of Employee
being or having been a director or officer of the Company or any of its
Affiliates or Employee serving or having served any other enterprises as a
director, officer or employee at the request of the Company. The Company shall
provide and maintain at all times during the Term and for a period of six
years thereafter such a directors and officers insurance policy covering
Employee and [his/her] legal representatives, issued by a reputable and
financially-sound insurance carrier of national standing which is acceptable
to Employee, and providing coverage in the amount of at least $1,500,000.
3.5 Life Insurance Policy. The Company shall provide Employee with a
whole-life life insurance policy (from a reputable and financially-sound
insurance carrier of national standing which is acceptable to Employee) for
[his/her] benefit in the amount of not less than $1,000,000 (the "Life
Insurance Policy"). The Company agrees to make all premium payments under the
Life Insurance Policy; provided, however, that Employee reserves the right
(either before or after the Company obtains such life insurance policy) to
require the Company to pay directly to Employee the premiums for such policy
(and to assign the policy to Employee if the Company has already obtained such
policy) so that Employee owns the policy and Employee makes the premium
payments. Employee shall be entitled to name the beneficiary or beneficiaries
of such policy and, upon expiration (or earlier termination) of the Term,
Employee shall have the right to require the Company to assign any rights it
may have in such policy to Employee. Employee agrees that the Company may
secure additional insurance on Employee's life for the benefit of the Company.
Notwithstanding the foregoing, the Company agrees to make all premium payments
under the $3,000,000 term life insurance policy described on Schedule 3.5 hereto
during the term of such policy, and such payments shall be deemed to satisfy the
requirements of this Section 3.5 during the term of such policy.
5
<PAGE>
3.6 Disability Insurance. In addition to any disability benefits or
insurance coverage provided to Employee through any group disability plan of
the Company or its Affiliates, as well as in addition to any social security
or workers' compensation benefits provided to Employee, the Company shall
provide Employee with disability insurance with one or more substantial
carriers providing the maximum amount of disability benefits to Employee that
are available under a disability policy with an annual premium of $5,000. The
Company shall pay such annual premium of $5,000 directly to the insurance
company; provided, however, that Employee reserves the right (either before or
after the Company obtains such disability insurance policy) to require the
Company to pay directly to Employee the premiums for such policy (and to
assign the policy to Employee if the Company has already obtained such policy)
so that Employee owns the policy and Employee makes the premium payments.
Employee may supplement or increase such insurance coverage by paying
additional premiums in excess of the $5,000 annual premium to be paid by the
Company. Upon expiration (or earlier termination) of the Term, Employee shall
have the right to require the Company to assign any rights it may have in such
disability insurance policy to Employee. Notwithstanding the foregoing, the
$5,000 annual premium to be paid by the Company shall be increased by the
amount of any disability insurance premiums to be paid by the Company pursuant
to the Company's employment agreement with the Co-Executive but which are not
utilized by the Co-Executive.
3.7 Additional Benefits. In addition to the foregoing, Employee shall
receive and continue to receive such additional benefits ("Additional
Benefits") specified in this Section 3.7 and such additional and fringe
benefits as [he/she] now enjoys. Such Additional Benefits to be received by
Employee shall include without limitation (i) memberships (including
initiation fees, annual dues and other recurring expenses) for fraternal and
business organizations, country clubs, and any other clubs in an amount not to
exceed $5,000 in each year of the Term, (ii) first-class air travel for all
trips (domestic and foreign) made by Employee in connection with Employee's
Services to the Company or its Affiliates, (iii) reimbursement of Employee's
personal legal and accounting expenses (including the cost of a business
manager) in an amount not to exceed $15,000 in each year of the Term plus
reimbursement of the cost of preparation of the annual tax returns of Employee
and [his/her] related entities in an amount not to exceed $5,000 in each year
of the Term, (iv) customary health, medical and dental insurance for Employee
and [his/her] spouse, and (v) an automobile of Employee's choice and
reimbursement of all expenses incurred in connection with such automobile,
including, without limitation, lease or purchase payments (which at Employee's
election shall be made directly by the Company), taxes, fees, registration,
insurance, gas, carphone, maintenance and repairs. The aggregate amount of the
automobile lease or purchase payments hereunder shall not exceed $14,500 in
any year of the Term. Employee shall retain title to such automobile upon
expiration or earlier termination of the Term.
3.8 Stock Option Plan and Agreement. Concurrently with the execution
of this Agreement and in consideration for the execution thereof, Employee and
the Company shall enter into the Overseas Filmgroup, Inc. 1996 Special Stock
Option Plan and Agreement attached hereto as Exhibit "B" which represents a
material inducement to Employee's willingness to enter into this Agreement.
3.9 Other Agreements. Concurrently with the execution of this
Agreement, Employee and the Company shall enter into the Registration Rights
Agreement, Tax Agreement, Stockholders Agreement, Note, Security Agreement
(and other Transaction Documents which have not been previously executed).
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3.10 General. Employee shall be entitled to participate in any
profit-sharing, pension, health, insurance or other plans, benefits or
policies (not duplicative of the benefits provided hereunder) available to the
employees of the Company or its Affiliates on the terms generally applicable
to such employees.
3.11 No Reduction of Benefit or Payment. No payment or benefit made
or provided under this Agreement shall be deemed to constitute payment to
Employee or [his/her] legal representative or guardian in lieu of, or in
reduction of, any benefit or payment under an insurance, pension or other
benefit plan, and no payment under any such plan shall reduce any payment or
benefit due under this Agreement except as set forth in Section 5.2.
4. TERMINATION.
If any of the events described in this Section 4 shall occur,
Employee shall be entitled to the benefits provided in Section 5 hereof upon
the subsequent termination of Employee's employment during the Term of
Employment. As used in this Agreement, "Date of Termination" means (i) if
employment is terminated for Disability (as defined in Section 4.1 below),
thirty (30) days after Notice of Termination is given (provided that Employee
shall not have returned to the performance of [his/her] duties on a full-time
basis during such thirty (30) day period), and (ii) if employment is
terminated for any other reason, the date specified in the Notice of
Termination (which, in the case of termination for "cause" pursuant to Section
4.2 shall not be less than thirty (30) days, and in the case of a termination
for "Good Reason" pursuant to Section 4.3 shall not be more than thirty (30)
days, respectively, from the date such Notice of Termination is given). If the
Company acknowledges that it has terminated Employee other than for "Cause"
(as hereinafter defined), the Date of Termination shall be the date upon which
Employee receives payments due to [him/her] under Section 5.4(A)(i), (ii) and
(iii) hereof. "Notice of Termination" means a written notice that shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so
indicated.
4.1 Employee Incapacity. If, as a result of Employee's incapacity
because of physical or mental illness, Employee shall have been absent from
[his/her] duties with the Company on a full-time basis for five consecutive
months or for more than an aggregate of six months in any Employment Year, and
within thirty days after written Notice of Termination is given [he/she] shall
not have returned to the full-time performance of [his/her] duties, the
Company may terminate Employee's employment for "Disability."
4.2 Termination by the Company "For Cause." The Company may terminate
Employee's employment only for Cause (solely as hereafter defined).
Termination by the Company of Employee's employment for "Cause" shall mean
termination upon the willful and continued failure by Employee substantially
to perform [his/her] material duties with the Company in good faith (other
than any such failure resulting from [his/her] incapacity because of physical
or mental illness or any such actual or anticipated failure resulting from
[his/her] termination for Good Reason), after a demand for substantial
performance is delivered to [him/her] by the Board that specifically
identifies the manner in which the Board believes that Employee has not
substantially performed [his/her] duties in good faith. Notwithstanding the
foregoing, Employee shall not be deemed to have been terminated for Cause unless
and until there shall have been delivered to Employee written Notice of
Termination and a copy of resolutions duly adopted by a majority of the
authorized number of members of the Board (with Employee and Employee's spouse
abstaining from such vote) at a meeting called and held for such purpose (after
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reasonable notice to Employee and an opportunity for Employee, together with
[his/her] counsel, to be heard before the Board) finding that in the good faith
opinion of the Board, (i) Employee was guilty of conduct set forth above in the
second sentence of this Section 4.2 and specifying the particulars thereof in
detail and (ii) Employee did not correct such conduct after the Board's demand
for substantial performance and after the Employee was afforded a reasonable
opportunity to do so.
4.3 Employee's Termination for "Good Reason." Employee shall be
entitled to terminate [his/her] employment for Good Reason. For purposes of
this Agreement, "Good Reason" shall mean the commission or omission of any of
the following actions:
(A) the failure of the Company or any of its Affiliates to
comply with or perform a material term, condition or covenant of, or
other material breach by the Company or any of its Affiliates of or
default (or Event of Default) by the Company or any of its Affiliates
under, the Note, the Security Agreement, the Registration Rights
Agreement, or the Tax Agreement;
(B) the assignment to Employee of any duties inconsistent in
any material respect with [his/her] status set forth in Sections 1.1
and 1.5 hereof;
(C) a reduction by the Company in the Fixed Annual
Compensation set forth in Section 2.1, or a reduction in the Annual
Bonus set forth in Section 2.2.
(D) the failure by the Company to continue to provide
Employee with benefits substantially similar to those enjoyed by
[him/her] under any of the pension, retirement, dental, medical,
health and accident plans in which [he/she] is presently entitled to
participate (provided that the failure to provide any such benefits
which individually and in the aggregate are immaterial shall not
constitute Good Reason), or the taking of any action by the Company
that would, directly or indirectly, materially reduce any of such
benefits or deprive Employee of any fringe benefit presently enjoyed
by [him/her] immediately prior to the Effective Date or to which
Employee is entitled at any time after the Effective Date;
(E) any purported termination of Employee's employment that
is not effected pursuant to a Notice of Termination; and for purposes
of this Agreement, no such purported termination shall be effective;
(F) a Change in Control of the Company (as defined below);
(G) any fundamental change to the business of the Company
effectuated without Employee's consent, so that the Company is no
longer principally involved in the distribution of motion pictures.
4.4 "Change in Control." For purposes of this Agreement, "Change in
Control of the Company" means a change in control (except changes in control
effected with the express consent of Employee or, during periods when there is a
Co-Executive, the Co-Executive) of a nature that would be required to be
reported in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated
under the Exchange Act, whether or not the Company is then subject to such
reporting requirement; provided that, without limitation, such a change in
control shall be deemed to have occurred if the individuals designated by
Employee to serve on the Board of Directors of the Company cease to constitute
(when
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considered with Employee and, during periods when there is a Co-Executive, the
Co-Executive) a majority thereof.
4.5 Notice of Termination.
(A) Any purported termination of employment by Employee
pursuant to Section 4.3 hereof shall be made, in addition to any
other requirements that may be set forth herein, by giving Notice of
Termination within six months of Employee receiving actual knowledge
of the action set forth above giving rise to the right to terminate
for Good Reason. The failure of Employee to give Notice of
Termination within such period shall not be construed to prevent the
giving of Notice of Termination upon the next occurrence of such
action or upon the occurrence of another action set forth in Section
4.3 hereof. The Company shall have 30 days after receipt of the
Notice of Termination to cure the event giving rise to Employee's
right to terminate for Good Reason (or, in the case of termination
for Good Reason in accordance with Section 4.3(A), such other cure
period expressly provided for in such Transaction Document);
provided, however, the Company shall not have the right to cure the
event if it is an event set forth in Section 4.3(F) or (G).
Employee's right to terminate [his/her] employment pursuant to
Section 4.3 hereof shall not be affected by [his/her] incapacity due
to physical or mental illness.
(B) Any purported termination by the Company or by Employee
shall be communicated by written Notice of Termination to the other
party hereto.
5. COMPENSATION UPON TERMINATION.
5.1 Death of Employee. Upon the death of Employee ("Death"), the
Company shall pay to Employee's estate (i) the Fixed Annual Compensation that
would otherwise be payable to Employee hereunder to the end of the month in
which such Death occurs, (ii) an amount equal to the product of two times the
sum of (x) the aggregate Fixed Annual Compensation that [he/she] was entitled
to receive pursuant to Section 2.1 hereof for the full Employment Year in
which Death occurs plus (y) an amount equal to the Annual Bonus, and (iii) any
amounts earned pursuant to the terms of this Agreement but unpaid at the time
of Death. The payments specified in this Section 5.1 shall be paid as soon as
practicable but in any event no later than one month after the date of Death.
Upon such payments, the Company shall have no further liability or obligation
hereunder to the deceased Employee's estate, [his/her] executors or
administrators, [his/her] heirs or assigns or any other person claiming under
or through [him/her].
5.2 Disability of Employee. Upon the termination of Employee's
employment as a result of [his/her] Disability, Employee shall be entitled to
receive (i) an amount equal to the product of two times the sum of (x) the
Fixed Annual Compensation that [he/she] was entitled to receive pursuant to
Section 2.1 hereof for the full Employment Year in which the effective date of
termination for Disability hereunder occurs, plus (y) an amount equal to the
Annual Bonus, and (ii) any amounts earned pursuant to the terms of this
Agreement but unpaid at the Date of Termination. The payments specified in
this Section 5.2 shall be paid as soon as practicable but in any event no later
than one month after the Date of Termination.
Whenever compensation is payable to Employee hereunder
during a time when Employee is partially or totally disabled and such
disability (except for the provisions hereof) would entitle Employee to
disability income or to salary continuation payments from the Company
according to the terms of any
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<PAGE>
plan now or hereafter provided by the Company or according to any policy of the
Company in effect at the time of such disability, the compensation payable to
Employee hereunder shall be inclusive of any such disability income or salary
continuation and shall not be in addition thereto. If disability income is
payable directly to Employee by an insurance company under an insurance policy
paid for by the Company, then any such disability income paid during the thirty
(30) months following the Date of Termination shall be considered to be part of
the payments to be made by the Company pursuant to this Section 5.2, and not in
addition thereto, and shall be paid to the Company, up to but not to exceed the
amount of payments actually made by the Company pursuant to this Section 5.2.
All disability income paid to Employee by said insurance company (i) during the
thirty (30) months following the Date of Termination in excess of the payments
actually made by the Company pursuant to this Section 5.2, and (ii) after thirty
(30) months following the Date of Termination shall be the sole property of
Employee as governed by said insurance policy and shall not be required to be
paid to the Company.
5.3 Termination for Cause. If Employee's employment shall be
terminated for Cause, the Company shall pay Employee [his/her] full Fixed
Annual Compensation, whatever amounts that have become due and payable to
Employee on or prior to the Date of Termination and other benefits to which
Employee is entitled through the Date of Termination at the rate in effect at
the time Notice of Termination is given. In addition, Employee shall receive
an amount equal to the Annual Bonus for such Employment Year, prorated through
the Date of Termination.
5.4 Termination Other Than for Cause, Retirement, Death or Disability
or For Good Reason.
(A) If Employee's employment by the Company shall be
terminated (i) by the Company other than for Cause, Death or Disability or
(ii) by Employee for Good Reason, then Employee shall be entitled to the
benefits provided below:
(i) The Company shall pay Employee, not
later than the fifth day following the Date of Termination, a lump sum
equal to 250% of the greater of (x) the aggregate of all Fixed Annual
Compensation payments arising under Section 2.1 hereof to which
Employee would otherwise have been entitled under this Agreement
through the balance of the Term had Employee's employment not been so
terminated or (y) an amount equal to the Fixed Annual Compensation and
Annual Bonus for one full Employment Year.
(ii) The Company shall also pay Employee,
not later than the fifth day following the Date of Termination, a lump
sum equal to 250% of the aggregate of all Annual Bonuses to which
Employee would otherwise have been entitled under this Agreement
through the balance of the Term had Employee's employment not been so
terminated (assuming for such purposes that Employee would have
satisfied the attendance requirements set forth in Section 2.2).
(iii) Notwithstanding any provision of any
benefit plan, the Company shall pay to Employee not later than the
fifth day following the Date of Termination, a lump sum amount equal to
the sum of (x) Annual Bonuses, if any, to which Employee has become
entitled but has not yet been paid, (y) any additional compensation
that the Board has approved for any period that has closed prior to the
Date of Termination but has not yet been paid, and (z) a pro rata
portion for the period through the Date of Termination of the aggregate
value of all contingent awards, if any.
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(B) If Employee's employment shall be terminated (i) by the
Company other than for Cause, Death or Disability, or (ii) by Employee for
Good Reason, then for the remaining period of the Term as set forth in Section
1.3 hereof (i.e., until [ ], 2001), the Company shall arrange to provide
Employee with life, disability, accident and health insurance and all other
benefits substantially similar to those which Employee is receiving
immediately prior to the Notice of Termination. In addition, all stock options
issued pursuant to the Option Agreement or otherwise shall become immediately
exercisable upon Notice of Termination whether or not then vested.
(C) In the event that this Agreement expires by its terms on
[ ], 2001, and the Term is not extended, the Company shall have no obligation
to Employee and Employee shall have no obligation to the Company under this
Agreement except as otherwise set forth herein.
5.5 No Mitigation. Employee shall not be required to mitigate the
amount of any payment provided for in this Section 5 by seeking other
employment or otherwise, nor shall the amount of any payment or benefit
provided for in this Section 5 be reduced by any compensation earned by
Employee as the result of employment by another employer or by retirement
benefits after the Date of Termination. The Company shall not be entitled to
any rights to offset, mitigate or otherwise reduce the amounts owing to
Employee by virtue of this Section 5 with respect to any rights, claims or
damages that the Company or its Affiliates may have against Employee,
including, without limitation, any claims by reason of any breach or alleged
breach of this Agreement by Employee.
5.6 Potential Excise Taxes. For purposes of this Section 5.6,
"Payment" shall mean any payment, benefit, compensation or transfer to
Employee arising or resulting from or relating to (i) the termination of
Employee's employment by the Company other than for Cause, Death or
Disability, or (ii) the termination of Employee's employment by Employee for
Good Reason, and shall include, without limitation, the benefits under Section
5.4 hereof. Should any Payment be subject to excise tax pursuant to Section
4999 of the Code or any successor or similar provision thereto, or comparable
state or local tax laws, the Company shall pay to Employee such additional
compensation as is necessary (after taking into account all Federal, state and
local income taxes payable by Employee as a result of receipt of such
compensation) to place Employee in the same after-tax position that [he/she]
would have been in had no such excise tax (or any interest or penalties
thereon) been paid or incurred. The Company shall pay such additional
compensation upon the earlier of (i) the time at which the Company is required
to withhold such excise tax for any payments to Employee or (ii) 30 days after
Employee notifies the Company that Employee has filed a tax return that takes
the position that such excise tax is due and payable in reliance on a written
opinion of Employee's tax counsel that it is more likely than not that such
excise tax is due and payable. If Employee makes any payment with respect to
any such excise tax as a result of an adjustment to Employee's tax liability
by any Federal, state or local authority, the Company will pay such additional
compensation within 30 days after Employee notifies the Company of such
payment. Without limiting the obligation of the Company hereunder, Employee
agrees, in the event Employee makes any payment pursuant to the preceding
sentence, to negotiate with the Company in good faith with respect to procedures
reasonably requested by the Company that would afford the Company the ability to
contest the imposition of such excise tax; provided, however, that Employee will
not be required to afford the Company any right to contest the applicability of
any such excise tax to the extent that Employee reasonably determines that such
contest is inconsistent with the overall tax interests of Employee. The Company
agrees to hold in confidence and not to disclose, without Employee's prior
written consents, any information with regard to Employee's tax position that
the Company obtains pursuant to this Section 5.6.
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6. GENERAL.
6.1 Applicable Law Controls. Nothing contained in this Agreement
shall be construed to require the commission of any act contrary to law and
wherever there is any conflict between the provisions of this Agreement and
any material statute, law, ordinance or regulation contrary to which the
parties have no legal right to contract, then the latter shall prevail;
provided, however, that in any such event the provisions of this Agreement so
affected shall be curtailed and limited only to the extent necessary to bring
them within applicable legal requirements, and provided further that if any
obligation to pay the Fixed Annual Compensation, Annual Bonus or any other
amount due Employee hereunder is so curtailed, then such compensation or
amount shall be paid as soon thereafter, either during or subsequent to the
Term, as permissible.
6.2 Waiver/Estoppel. Any party hereto may waive the benefit of any
term, condition or covenant in this Agreement or any right or remedy at law or
in equity to which any party may be entitled, but only by an instrument in
writing signed by the parties to be charged. No estoppel may be raised against
any party except to the extent the other parties rely on an instrument in
writing, signed by the party to be charged, specifically reciting that the
other parties may rely thereon. The parties' rights and remedies under and
pursuant to this Agreement or at law or in equity shall be cumulative and the
exercise of any rights or remedies under one provision hereof or rights or
remedies at law or in equity shall not be deemed an election of remedies; and
any waiver or forbearance of any breach of this Agreement or remedy granted
hereunder or at law or in equity shall not be deemed a waiver of any preceding
or succeeding breach of the same or any other provision hereof or of the
opportunity to exercise such right or remedy or any other right or remedy,
whether or not similar, at any preceding or subsequent time.
6.3 Attorneys' Fees and Costs. Subject to Section 6.12.4 hereof, in
any action, suit or proceeding brought by any party hereto with respect to
this Agreement, its subject matter or the actions, statements or conduct of
any or each of the parties in the negotiation, execution or performance of
this Agreement, the prevailing party shall be entitled to recover from the
other parties all reasonable costs and expenses incurred in connection
therewith, including but not limited to attorneys' fees, attorneys' costs and
court costs.
6.4 Notices. Any notice that the Company is required or may desire to
give to Employee hereunder shall be in writing and may be served by delivering
it to Employee, or by sending it to Employee by certified mail, return receipt
requested (effective five days after mailing) or overnight delivery of the
same by delivery service capable of providing verified receipt (effective the
next business day), or facsimile (effective twenty-four hours after receipt is
confirmed by person or machine), at the address set forth below, or such
substitute address as Employee may from time to time designate by notice to the
Company. Any notice that Employee is required or may desire to serve upon the
Company hereunder shall be in writing and may be served by delivering it
personally or by sending it certified mail, return receipt requested or
overnight delivery, or facsimile (with receipt confirmed by person or machine)
to the address set forth below, or such other substitute address as the Company
may from time to time designate by notice to Employee. Such notices by Employee
shall be effective at the same times as specified in this Section 6.4 for
notices by the Company.
The Company:
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Employee:
with a copy to:
6.5 Governing Law. This Agreement shall be governed by, construed and
enforced and the legality and validity of each term and condition shall be
determined in accordance with the internal, substantive laws of the State of
California applicable to agreements fully executed and performed entirely in
California.
6.6 Captions. The paragraph headings contained herein are for
reference purposes only and
shall not in any way affect the meaning or interpretation of this Agreement.
6.7 No Joint Venture. Nothing herein contained shall constitute a
partnership between or
joint venture by the parties hereto.
6.8 Assignability. Employee may assign all or any portion of
[his/her] rights to receive compensation hereunder to any corporation at least
fifty percent (50%) of the capital stock of which is owned or controlled by
Employee, to any other entity in which Employee owns or controls at least
fifty percent of the total ownership interests, to trusts for the benefit of
the family of Employee, to charitable trusts or to trusts for the benefit of
any charitable purpose, or to any charity or non-profit organization.
Notwithstanding any other provision hereof, Employee shall be permitted to
establish loan-out companies to provide [his/her] services to the Company and
assign this Agreement thereto, subject to the delivery by Employee of a
customary personal adherence letter. The Company may not assign this Agreement
or any portion of its rights or obligations hereunder. This Agreement shall be
fully effective and binding upon the successors in interest, assigns and
Affiliates of the Company.
6.9 Modification/Entire Agreement. This Agreement may not be
altered, modified or amended except by an instrument in writing signed by all
of the parties hereto. No person, whether or not an officer, agent, employee
or representative of any party, has made or has any authority to make for or on
behalf of that party any agreement, representation, warranty, statement,
promise, arrangement or understanding not expressly set forth in this Agreement
or in any other document executed by the parties concurrently herewith ("Parol
Agreements"). This Agreement and all other documents executed by the parties
concurrently herewith constitute the entire agreement between the parties and
supersede all express or implied, prior or concurrent, Parol Agreements and
prior written agreements with respect to the subject matter hereof. The parties
acknowledge that in entering into this Agreement, they have not relied and will
not in any way rely upon any Parol Agreements.
6.10 Severability. If any term, provision or covenant in this
Agreement is held to be invalid, void or unenforceable, (i) the remainder of
the terms, provisions and covenants in this Agreement shall
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remain in full force and effect and shall in no way be affected, impaired or
invalidated, and (ii) to the fullest extent possible, the provisions of this
Agreement (including, without limitation, all portions of any section of this
Agreement containing any such provision held to be invalid, void or
unenforceable that are not themselves invalid, void or unenforceable) shall be
construed so as to give effect to the intent manifested by the provision held
invalid, void or unenforceable.
6.11 No Mitigation; No Offset. Without limiting any other provision
hereof, the Company agrees that any income and other employment benefits
received by Employee from any and all sources (other than as set forth in
Section 5.2) before, during or after the expiration or termination of this
Agreement for any reason shall in no way reduce or otherwise affect the
Company's obligation to make payments and afford benefits hereunder. The
Company shall have no right to offset against any payments or other benefits
due to Employee under this Agreement the amount of any rights, claims or
damages it or its Affiliates may have against Employee, including, without
limitation, any claims by reason of any breach or alleged breach of this
Agreement by Employee.
6.12 Arbitration.
6.12.1 Company and Employee each hereby irrevocably agree to
submit any and all disputes between them arising under this Agreement to
binding, non-appealable arbitration, to be conducted in accordance with this
Section 6.12.1. The parties further agree irrevocably to submit themselves, in
any suit to confirm the judgment or finding of such arbitrator, to the
jurisdiction of the Superior Court for the County of Los Angeles, State of
California, and hereby waive and agree not to assert (by way of motion, as a
defense or otherwise) (a) any and all objections to jurisdiction that they may
have under the laws of the State of California or the United States, and (b)
any claim (i) that it or [he/she] is not subject personally to jurisdiction of
such court, (ii) that such forum is inconvenient, (iii) that venue is
improper, or (iv) that this Agreement or its subject matter may not for any
reason be arbitrated or enforced as provided in this Section 6.12.
6.12.2 The aggrieved party shall, upon written notice to the
other, submit any dispute or controversy respecting actual or alleged breach
of, or interpretation of, or enforcement of, this Agreement to binding
non-appealable arbitration before a retired judge of the Superior Court of the
State of California in and for the County of Los Angeles, to be conducted by
means of a reference pursuant to California Code of Civil Procedure Section
6381(1). Within ten (10) business days after receipt of the notice submitting
a dispute or controversy to arbitration, the parties shall attempt in good
faith to agree upon an arbitrator to whom the dispute will be referred and on
a joint statement of contentions. Failing agreement thereto within ten (10)
business days after receipt of such notice, each party shall name three (3)
retired judges and thereafter either party may file a petition seeking the
appointment of one of the persons named by the party as a referee by the
presiding Judge of the Superior Court, which petition shall recite in a clear
and meaningful manner the factual basis of the controversy between the parties
and the issues to be submitted to the referee for decision. Each party hereby
agrees that service of process in such action will be deemed accomplished and
completed when a copy of the documents is sent in accordance with the notice
provisions in Section 6.4 hereof.
6.12.3 The hearing before the referee shall be held within
thirty (30) days after the parties reach agreement as to the identity of the
referee (or within thirty (30) days after the appointment of a referee by the
court). Unless more extensive discovery is expressly permitted by the referee,
each party shall have only the right to two document production requests,
shall serve but two sets of
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interrogatories and shall only be entitled to depose those witnesses which the
referee expressly permits, it being the parties' intention to minimize discovery
procedures and to hold the hearing on an expedited basis. The referee shall
establish the discovery schedule promptly following submission of the joint
statement of contentions (or the filing of the answer to the petition) which
schedule shall be strictly adhered to. To the extent the contentions of the
parties relate to custom or practice in the film business, or the entertainment
industry generally, or to accounting matters, the referee shall select an
independent expert or accountant (as applicable) with substantial experience in
the industry segment involved to provide recommendations to the referee. All
decisions of the referee shall be in writing and shall not be subject to appeal.
The referee shall make all rulings in accordance with California law and shall
have authority equal to that of a Superior Court judge, to grant equitable
relief in an action pending in Los Angeles Superior Court in which all parties
have appeared.
6.12.4 Except as otherwise provided in this Agreement, the
fees and costs of the referee and of any experts retained shall be shared
equally by the parties to such dispute. The referee shall award legal fees,
disbursements and reimbursement of other expenses to the prevailing party for
such amounts, if any, as determined by the referee to be appropriate. Judgment
upon the referee's award may be entered as if after trial in accordance with
California law.
6.13 Contractual Nomenclature. All references herein to "Dollars" or
"$" shall mean Dollars of the United States of America, its legal tender for
all debts public and private. Wherever used herein and to the extent
appropriate, the masculine, feminine or neuter gender shall include the other
two genders, the singular shall include the plural, and the plural shall
include the singular.
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6.14 Publicity. Neither party shall issue any press release or
announcement of or relating to the execution of, or any terms, provisions, or
conditions contained in this Agreement without the other party's prior
approval of the content and timing of any such announcement or announcements.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first above written.
[ ]
By: ___________________________________
Name:
Title:
_______________________________________
[ ]
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EXHIBIT "A"
The officers of the Corporation will submit the following actions to
the Board for its consideration (unless contemplated by the Annual Business
Plan of the Corporation):
(a) Any material amendments to the Annual Business Plan and
quarterly updates.
(b) The disposition of any asset or assets of the Corporation or
any subsidiary of the Corporation with an aggregate fair
market value in excess of $2,000,000; provided that the
Corporation may dispose of distribution and other rights to
motion pictures or other related properties or assets in the
ordinary course of business.
(c) Any acquisition by the Corporation or any subsidiary of the
Corporation of any business of another person, or any
property, securities, rights or other assets in a
transaction for a consideration in excess of $2,000,000;
provided that the Corporation may acquire distribution and
other rights to motion pictures or other related properties
or assets in the ordinary course of business.
(d) The creation, incurrence, assumption or guaranty by the
Corporation or any subsidiary of the Corporation of any
indebtedness obligation or liability in excess of
$2,000,000, except for (i) film financing incurred by the
Corporation or by special purpose subsidiaries of the
Corporation, (ii) bank financing used for general corporate
purposes of the Corporation or its subsidiaries, or (iii) as
otherwise permitted by the Operating Guidelines of the
Corporation (collectively, "Permitted Indebtedness").
(e) The creation, incurrence, or assumption of any lien,
mortgage, pledge, security interest, charge or encumbrance
by the Corporation or any subsidiary of the Corporation with
respect to any property, capital stock or asset of the
Corporation or any subsidiary of the Corporation, which
secures payment of indebtedness of the Corporation in excess
of $2,000,000, except (i) liens or pledges securing
Permitted Indebtedness, (ii) liens or pledges encumbering
film collateral necessary to secure film financing, or (iii)
as otherwise permitted by the Operating Guidelines of the
Corporation.
(f) Committing to finance in excess of $4,000,000 of the
Uncovered Amount of the budgeted negative costs of any
motion picture. For purposes hereof, the Uncovered Amount
means the budgeted negative costs of any motion picture not
to be financed by advances, guarantees, or bank or other
third party financing commitments.
(g) Committing to finance in excess of $3,000,000 of the
distribution costs of any motion picture which are not being
financed by other means.
(h) The declaration or payment by the Corporation or any
subsidiary of the Corporation (other than special purpose
subsidiaries) of any dividend on any class of its common
stock.
(i) Any other investments, or series of investments, by the
Corporation or any subsidiary of the Corporation in excess of
$1,500,000 other than (i) marketable direct obligations issued
or unconditionally guaranteed by the United States Government
or issued by any agency
A-1
<PAGE>
thereof and backed by the full faith and credit of the United
States, (ii) marketable direct obligations issued by any state
of the United States of America or any political subdivision
of any such state or any public instrumentality thereof, (iii)
commercial paper or other corporate obligations, (iv)
repurchase agreements and reverse repurchase agreements, (v)
money market funds organized under the laws of the United
States of America or any state thereof and administered by
securities dealers of recognized national standing, (vi) any
investment in subsidiaries of the Corporation, and (vii)
negotiable instruments endorsed for deposit or collection or
similar instruments in the ordinary course of business.
(j) Raising additional debt or equity capital including material
increases to existing bank facilities.
(k) Granting any bonus in excess of $50,000 per grant to any
employee or agent of, or consultant to the Corporation not
required by any employment, consulting or other agreement.
A-2
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EXHIBIT I
STOCKHOLDERS' VOTING AGREEMENT
------------------------------
This Stockholders' Voting Agreement (the "Agreement") is made and
entered into as of this ____ day of ______, 1996, by and among
Entertainment/Media Acquisition Corporation, a Delaware corporation (the
"Company"), Ellen Dinerman Little ("EDL"), Robert B. Little ("RBL") (EDC and
RDL are referred to collectively as the "Littles") and William F. Lischak
(each of EDC, RDL and William F. Lischak are sometimes individually referred
to herein as an "Overseas Stockholder" and collectively as the "Overseas
Stockholders"), and Jeffrey A. Rochlis, Barbara Boyle, the Hoberman Family
Trust Dated 9/18/92, John Hyde, Sparta Partners III and Stephen K. Bannon,
Scot K. Vorse and Gary M. Stein, individually and as general partners of
Sparta Partners III (each of Messrs. Bannon, Vorse, Rochlis, Hyde and Stein,
and Ms. Boyle, the Hoberman Family Trust Dated 9/18/92, and Sparta Partners
III are sometimes individually referred to herein as a "Founder" and
collectively, the "Founders"). The Overseas Stockholders and the Founders are
sometimes referred to in this Agreement collectively as the "Stockholders."
Capitalized terms used herein and not otherwise defined shall have the meaning
given them in the Agreement of Merger dated _________, 1996 among the Company,
Overseas Filmgroup, Inc., Ellen Dinerman Little and Robert B. Little (the
"Merger Agreement").
Recitals:
--------
1. The Founders collectively own 500,000 shares of Common Stock of
the Company, which constitutes approximately nineteen percent (19%) of the
outstanding shares of Common Stock of the Company prior to the Merger; and
will constitute approximately 8.7% of the outstanding shares of Common Stock
of the Company following the Merger;
2. Pursuant to the Merger Agreement, the Overseas Stockholders will
acquire upon consummation of the Merger shares of Common Stock of the Company
representing approximately fifty- five percent (55%) of the outstanding shares
of Common Stock of the Company following the Merger;
3. Pursuant to Section 7.7 of the Merger Agreement, the
following number of designees will be proposed at the EMAC
Stockholders' Meeting for election as directors of the Company
effective upon the consummation of the Merger: four (4)
designees of the Overseas Stockholders; and three (3) designees
of the Founders;
4. The Company's Restated Certificate of Incorporation, as
in effect upon consummation of the Merger, provides for a seven
<PAGE>
(7) member staggered Board of Directors consisting of three (3) classes: two
(2) Class I directors whose terms shall expire at the 1997 annual meeting of
stockholders, two (2) Class II directors whose terms shall expire at the 1998
annual meeting of stockholders and three (3) class III directors whose terms
shall expire at the 1999 annual meeting of stockholders. Of the directors
initially designated pursuant to Section 7.7 of the Merger Agreement, Robert
B. Little (a designee of the Littles) and Stephen K. Bannon (a designee of the
Founders) are to be designated Class I directors; Ellen Dinerman Little (a
designee of the Littles) and Scot K. Vorse (a designee of the Founders) are to
be designated Class II directors; and William F. Lischak and [ ] (designees of
the Littles) and one person to be designated by the Founders (a designee of
the Founders) are to be designated Class III directors upon consummation of
the Merger.
5. The Overseas Stockholders and the Founders wish to establish
certain rights and obligations of the parties hereto with respect to the
management of the Company and certain other matters.
6. The execution of this Agreement is a condition to the
Closing under the Merger Agreement.
In consideration of the mutual covenants contained herein and the
consummation of the Merger, and for other valuable consideration, receipt of
which is hereby acknowledged, the parties hereto agree as follows:
1. Voting of Shares.
(a) It is the intent of the parties hereto and such parties
shall use their best efforts such that the Board shall consist of seven (7)
members, including four (4) designees of the Littles (the "Overseas Director
Designees"), and three (3) designees of the Founders (the "Founder Director
Designees").
(b) Subject to the provisions of the Restated Certificate
and Bylaws, each Founder agrees to vote, or to use its best efforts to cause
its Director Designees to vote, for the election of the Overseas Director
Designees, and subject to the provisions of the Restated Certificate and
Bylaws, each Overseas Stockholder agrees to vote, or to use its best efforts
to cause its Director Designees to vote, for the election of the Founders
Director Designees.
(c) In any and all elections of directors of the Company,
beginning with the first election to be held after the meeting of stockholders
of the Company at which the Merger Agreement is proposed to be approved, each
Stockholder shall vote or cause to be voted all Shares (as defined in Section
8 below)
2
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owned by him, her or it, or over which he, she or it has voting control, and
otherwise use his, her or its respective best efforts, so as to fix the number
of directors of the Company at seven (7) and to elect (i) one (1) Class I
director, one (1) Class II director and two (2) Class III directors designated
by the Littles and (ii) one (1) Class I director, one (1) Class II director
and one (1) Class III director designated by the Founders (by action of the
holders of a majority of the Shares held by all Founders).
(d) The Company shall provide the Stockholders with 30 days'
prior written notice of any intended mailing of a notice to stockholders for a
meeting at which directors are to be elected (other than the EMAC
Stockholders' Meeting). The Overseas Stockholders and the Founders shall give
written notice to all other parties to this Agreement, no later than 20 days
prior to such mailing, of the persons designated by the Overseas Stockholders
and the Founders as nominees for election as directors; provided, that notice
shall be deemed to have been given for this purpose (i) to the Founders, if
given to Scot K. Vorse, and (ii) to the Overseas Stockholders, if given to
Ellen Dinerman Little. The Company agrees to nominate and recommend for
election as directors only the individuals designated, or to be designated,
pursuant to Section 1(a). If the Overseas Stockholders or the Founders shall
fail to give notice to the Company as provided above, it shall be deemed that
the designees of the Overseas Stockholders or the Founders, as the case may
be, then serving as directors shall be their designees for reelection.
(e) During the term of this Agreement, the Overseas
Stockholders shall not vote to remove any director designated by the Founders
and who is still entitled to be a director hereunder, and the Founders shall
not vote to remove any director designated by the Overseas Stockholders and
who is still entitled to be a director hereunder; provided, however, that as
soon as practicable after the receipt of a written request from holders of a
majority of the Shares held by all Overseas Stockholders to remove an Overseas
Stockholders Designee, or from holders of a majority of the Shares held by all
Founders to remove a Founders Designee, the other Stockholders agree to use
their best efforts to take, or cause to be taken, all appropriate action to
effect the removal and replacement of such Overseas Stockholders Designee or
Founders Designee, as the case may be.
2. Representations and Warranties. Each of the
Stockholders hereby represents and warrants to the other
Stockholders that:
(a) Such party has the requisite power and authority
to enter into this Agreement;
3
<PAGE>
(b) All acts, conditions and things required to be done,
fulfilled and performed and (except as disclosed in writing by any of the
parties to the others prior to the signing of this Agreement) all material
consents, permissions, authorizations or other approval of, notice to, or
registration with, any regulatory authority or other person required to be
obtained or made, in order (i) to enable such party lawfully to enter into,
exercise its rights under, and perform its obligations under this Agreement,
(ii) to ensure that the obligations of such party under this Agreement are
legal, valid and enforceable, have been done, fulfilled, performed, taken,
made or obtained, as applicable;
(c) The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby do not
and will not (i) violate, conflict with or result in the breach of any of the
terms of, result in a modification of the effect of, otherwise give any other
contracting party the right to terminate, or constitute (with notice or
otherwise) a default under, any contract by which each such party, its assets,
properties or business may be bound or subject; (ii) violate any order,
judgment, injunction, award or decree of any regulatory authority against, or
binding upon, such party or its assets, properties or business; or (iii)
except as disclosed in writing by any of the parties to the others prior to
the signing of this Agreement, violate any applicable law or regulation or any
permit, license, franchise, registration or similar authorization with respect
to, or binding upon, its assets, properties or business.
Each of the Founders represents and warrants to the Overseas
Stockholders that he, she or it beneficially owns the shares of Common Stock
and other securities of the Company as set forth on Schedule A attached
hereto.
3. Quorum. Five of the seven authorized members of the
Board of Directors shall constitute a quorum at meetings of the Board of
Directors and, subject to Section 8, (i) at least three of whom shall be
designees of Overseas and (ii) at least two of whom shall be designees of the
Founders.
4. Undertaking; Condition Precedent. Each of the
Stockholders undertakes and agrees to cause their respective Director
Designees to vote in favor of a resolution of the Board implementing the
provisions of Section 5 hereof.
5. Restrictions on Certain Actions. Each Stockholder
agrees that the following actions and decisions to be taken by the Company
(each a "Major Decision") shall require the affirmative vote of at least 75%
of the authorized number of members of the Board of Directors of the Company.
4
<PAGE>
(i) Any amendments to the Restated Certificate or
the Bylaws which would alter (A) the voting rights of the
holders of stock in the Company, (B) the number or classes
of directors on the Board, or (C) the notice and quorum
requirements for meetings of the Board or its Committees or
of the shareholders of the Company;
(ii) Any merger or sale of all or substantially
all of the assets of the Company (other than in
connection with the liquidation, dissolution or winding
up of the Company);
(iii) The designation or issuance of any Preferred
Stock of the Company; or
(iv) Any amendments to the Operating Guidelines.
6. Restrictions on Solicitations. None of the Stockholders
will, and each Stockholder will cause his, her or its affiliates not to: (a)
except pursuant to this Agreement, make, or in any way participate, directly
or indirectly, in any "solicitation" of "proxies" to vote, or initiate,
propose or otherwise solicit stockholders of the Company for the approval of
one or more stockholder proposals or induce or attempt to induce any other
person or entity to initiate any stockholder proposal, if such proxy or
proposal relates to (i) the removal from office of one or more of the
Company's directors who is not a designee of said Stockholder (or in William
F. Lischak's case, is not a designee of the Littles), other than in accordance
with this Agreement, (ii) the proposal of a slate of directors different than
that required by this Agreement or (iii) amending the Company's certificate of
incorporation or bylaws in any way that would contravene this Agreement; or
(b) except pursuant to this Agreement or any agreement previously entered into
by the Founders or Overseas Stockholder, form, join, in any way participate
in, or encourage the formation of, a Group (as defined in the Securities
Exchange Act) with respect to any voting securities of the Company to take any
action prohibited by this section; or (c) in any way directly or indirectly,
aid or abet or otherwise induce any person or entity to take any action
prohibited by the foregoing.
7. Shares. "Shares" shall mean and include any and all
shares of Common Stock and/or shares of capital stock of the Company, by
whatever name called, which carry voting rights (including voting rights which
arise by reason of default) and shall include any shares now owned or
subsequently acquired by a Stockholder, however acquired, including without
limitation stock splits and stock dividends.
5
<PAGE>
8. Termination. This Agreement shall terminate on the
earliest of:
(a) eight and one-half (8 1/2) years following the date of
this Agreement; or
(b) as to the rights (but not the obligations) of the
Founders under this Agreement, as follows: if the Founders cease to
collectively own at least 175,000 Shares, they shall lose the right to
designate one of their director designees and shall be entitled to designate
only two directors; if the Founders cease to collectively own at least 125,000
Shares, they shall lose the right to designate an additional one of their
director designees and shall be entitled to designate only one director; if
the Founders cease to collectively own at least 20,000 Shares, they shall lose
the right to designate an additional one of their director designees and shall
not be entitled to designate any director; or
(c) as to the rights (but not the obligations) of the
Overseas Stockholders, as follows: if the Overseas Stockholders cease to
collectively own at least 794,444 Shares, they shall lose the right to
designate two of their director designees and shall be entitled to designate
only two directors; if the Overseas Stockholders cease to collectively own at
least 20,000 Shares, they shall lose the right to designate an additional two
of their director designees and shall not be entitled to designate any
director; or
(d) the termination of employment of the Overseas
Stockholders under their respective Employment Agreements, dated the date
hereof, with the Company, whether such termination is with Cause, without
Cause, for Good Reason, voluntary or otherwise.
9. No Revocation. The voting agreements contained herein
are coupled with an interest and may not be revoked, except by
written consent of all of the Stockholders.
10. Restrictive Legend. All certificates representing
Shares owned or hereafter acquired by the Stockholders or any
transferee of the Stockholders bound by this Agreement shall have
affixed thereto a legend substantially in the following form:
"The shares of stock represented by this certificate are subject to
certain voting agreements as set forth in a Stockholders' Voting
Agreement by and among the registered owner of this certificate, the
Company and certain other stockholders of the Company, a copy of
which is available for inspection at the offices of the Secretary of
the Company."
6
<PAGE>
11. Transfers of Rights. The rights and obligations under this
Agreement shall be transferable to any transferee of Shares from a
Stockholder, only if such transferee is a controlled Affiliate (other than by
virtue of being an officer or director of such stockholder or transferee) of
such Stockholder (or, in addition, in the case of the Overseas Stockholders,
such transfer is made by the Overseas Stockholders for bona fide estate
planning purposes) and only if such transferee agrees in writing to be bound
by the terms and conditions of this Agreement. Any person or entity that
acquires Sparta Partners III, or any interest therein, shall be deemed to be a
transferee for purposes of this Section 11, and Sparta Partners III and such
transferee shall be entitled to the rights and obligations under this
Agreement only if such transferee is a controlled Affiliate (other than by
virtue of being an officer or director of such stockholder or transferee) of
Sparta Partners III and only if such transferee agrees in writing to be bound
by the terms and conditions of this Agreement.
12. General.
(a) Severability. If any term, provision or covenant in this
Agreement is held to be invalid, void or unenforceable, (i) the remainder of
the terms, provisions and covenants in this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
(ii) to the fullest extent possible, the provisions of this Agreement
(including, without limitation, all portions of any section of this Agreement
containing any such provisions held to be invalid, void or unenforceable that
are not themselves invalid, void or unenforceable) shall be construed so as to
give effect to the intent manifested by the provision held invalid, void or
unenforceable; provided, however, that if the obligations under Section 1 or 6
of this Agreement of either (x) Founders holding at least 175,000 Shares or
(y) Overseas Stockholders holding at least 794,444 Shares shall be deemed to
be invalid, void or unenforceable, then the obligations of the remaining
parties to this Agreement shall terminate.
(b) Specific Performance. In addition to any and all other
remedies that may be available at law, in equity or otherwise in the event of
any breach of this Agreement, each Overseas Stockholder shall be entitled to
specific performance of the agreements and obligations of the Company and the
Stockholders hereunder and to such other injunctive or other equitable relief
as may be granted by a court of competent jurisdiction.
(c) Governing Law. This Agreement shall be governed
by, and construed and enforced in accordance with, the laws of
the State of Delaware regardless of the law of choice of law of
7
<PAGE>
that or any other jurisdiction. Each party irrevocably agrees that any suit,
action, or other legal proceeding arising from or relating to this Agreement
shall be brought in the courts of the State of California or the United States
of America located in Los Angeles County.
(d) Further Assurances. The Stockholders agree to execute
and deliver all documents and instruments and to do all thing necessary to
give effect to the provisions of this Agreement.
(e) Notices. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, mailed by first class certified or registered mail, return receipt
requested, postage prepaid, or by overnight courier capable of a verified
receipt:
If to the Company, or the Founders at Entertainment/Media Acquisition
Corporation, c/o Bannon & Co., Inc., 202 North Canon Drive, Beverly Hills, CA
90210, Attention: Scot K. Vorse, Vice President-Finance, Treasurer and
Secretary, Telephone (310) 276- 3555, Fax (310) 276-0583, or at such other
address or addresses as may have been furnished in writing by the Company to
the Overseas Stockholders, with copies to Brobeck, Phleger & Harrison LLP,
1301 Avenue of the Americas, New York, NY 10019, Attention: Ellen B.
Corenswet, Telephone (212) 237-2526, Fax (212) 586-7878, and Rosenfeld, Meyer
& Susman, 9601 Wilshire Blvd., 4th Floor, Beverly Hills, CA 90210, Attention:
P. John Burke, Telephone (310) 246-3228, Fax (310) 271-6430;
If to the Overseas Stockholders, at Overseas FilmGroup, Inc., 8800
Sunset Boulevard, Los Angeles, CA 90069, Attention: Ellen or Robert Little,
Telephone (310) 855-1199, Fax (310) 855- 0849, or at such other address or
addresses as may have been furnished to the Company in writing by such
Overseas Stockholder, with a copy to Gipson, Hoffman & Pancione, 1901 Avenue
of the Stars, Suite 1100, Los Angeles, CA 90067, Attention: John McHale,
Telephone (310) 557-8815, Fax (310) 556-8945; or
Notices provided in accordance with this Section 8 shall be deemed
delivered upon personal delivery, the next business day if sent by overnight
courier, or four business days after deposit in the U.S. mail.
(f) Complete Agreement; Amendments. This Agreement
constitutes the full and complete agreement of the parties hereto with respect
to the subject matter hereof. No amendment, modification or termination of any
provision of this Agreement shall be valid unless in writing and signed by the
Company, the holders of a majority of the voting power of the Shares then held
8
<PAGE>
by all Founders and the holders of a majority of the voting power of the
Shares then held by all Overseas Stockholders.
(g) Pronouns. Whenever the content may require, any pronouns
used in this Agreement shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural, and vice versa.
(h) Counterparts. This Agreement may be executed in
any number of counterparts, each of which shall constitute one Agreement
binding on all the parties hereto.
(i) Captions. Captions of sections have been added only
for convenience and shall not be deemed to be a part of this Agreement.
9
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed by the parties
hereto as of the day and year first above written.
COMPANY:
ENTERTAINMENT/MEDIA ACQUISITION
CORPORATION
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
OVERSEAS STOCKHOLDERS:
--------------------------------------
Ellen Dinerman Little
--------------------------------------
Robert B. Little
FOUNDERS:
--------------------------------------
Jeffrey A. Rochlis
--------------------------------------
Barbara Boyle
--------------------------------------
Hoberman Family Trust Dated
9/18/92, Bernard G. Hoberman
and Jacklyn A. Hoberman, as
Trustees
--------------------------------------
John Hyde
10
<PAGE>
--------------------------------------
Stephen K. Bannon
--------------------------------------
Scot K. Vorse
--------------------------------------
Gary M. Stein
SPARTA PARTNERS III
By:
-----------------------------------
Name:
----------------------------
Title:
---------------------------
11
<PAGE>
EXHIBIT J
TAX REIMBURSEMENT AGREEMENT
THIS TAX REIMBURSEMENT AGREEMENT ("Agreement") is made as of this [ ]
day of [ ], 1996 between:
Robert B. Little ("RBL"), Ellen Dinerman Little ("EDL") and
William F. Lischak ("WFL"), (RBL, EDL and WFL are collectively
referred to herein as the "Indemnitees");
and
Overseas Filmgroup, Inc., a Delaware corporation (previously
known as Entertainment/Media Acquisition Corporation) with
its principal place of business in Los Angeles (the
"Company").
This Agreement is made with reference to the following facts:
A. Entertainment/Media Acquisition Corporation ("EMAC"), Overseas
Filmgroup, Inc. (the "Disappearing Corporation") and certain other parties
have entered into an Agreement and Plan of Merger dated July __, 1996 (the
"Merger Agreement") pursuant to which the Disappearing Corporation has, as of
the date hereof, merged (the "Merger") with and into EMAC, the name of which
has been changed to "Overseas Filmgroup, Inc." Immediately upon the effective
date of the Merger (the "Merger Date"), the corporate existence of the
Disappearing Corporation ceased.
B. Through the period ending on the date hereof, Indemnitees or
some of them owned all
of the issued and outstanding stock of the Disappearing Corporation.
C. For the period from January 1, 1989, elections were made by RBL,
EDL and the Disappearing Corporation under Subchapter S of the United States
Internal Revenue Code of 1986, as amended (the "Code") with the result that
Indemnitees have been and will be required to include in their taxable income
the annual net income and other items of the Disappearing Corporation, and to
claim the annual net losses, tax credits and other items of the Disappearing
Corporation, in their individual income tax returns for the taxable periods of
the Disappearing Corporation through the Merger Date. Further, the
Disappearing Corporation has not been subject to federal income tax liability
for the taxable income of the Disappearing Corporation for the taxable periods
beginning on January 1, 1989 and ending on the Merger Date. All of the taxable
periods of the Disappearing Corporation beginning on January 1, 1989 and
ending prior to the Merger Date are referred to herein as the "S Corporation
Years."
D. The Company owns all of the outstanding stock of certain
corporations, and therefore cannot make an election under Subchapter S of the
Code. The Company's and its wholly owned subsidiaries' net income or losses
(which will include the net income or losses from the business and assets of
the Disappearing Corporation which were transferred to the Company pursuant to
the Merger) will be subject to the federal corporate income tax or the net
operating loss carry forward rules, as the case may be.
-1-
<PAGE>
E. Gross income not reported in federal income tax returns filed by
the Disappearing Corporation for S Corporation Years (because the Disappearing
Corporation believed such gross income would be reportable in taxable periods
after the Merger Date) may be determined for federal income tax purposes to be
gross income of the Disappearing Corporation reportable in S Corporation Years
(an "Income Adjustment"). Further, deductions reported in the federal income
tax returns filed by the Disappearing Corporation for S Corporation Years may
be determined for federal income tax purposes not to be deductions of the
Disappearing Corporation reportable in S Corporation Years because such
deductions are reportable in a taxable period after the Merger Date (a
"Deduction Adjustment"). Finally, federal income tax credits reported in the
federal income tax returns filed by the Disappearing Corporation for S
Corporation Years may be determined for federal income tax purposes not to be
creditable by the Disappearing Corporation in S Corporation Years because such
credits are reportable in a taxable period after the Merger Date (a "Credit
Adjustment"). Income Adjustments, Deduction Adjustments and Credit Adjustments
are collectively referred to herein as "Adjustments."
F. It is in the best interests of the Indemnitees and the Company
to agree to the tax reimbursement provisions herein in order to provide for an
allocation of the tax costs associated with the Adjustments and certain other
tax liabilities.
NOW, THEREFORE, in reliance on the foregoing facts and the mutual
undertakings herein, the parties hereto agree as follows:
1. Within ten business days after a final determination by the
Internal Revenue Service ("IRS") or the courts, which decision is not
appealable or is not appealed within the permitted time period for such an
appeal, a closing agreement pursuant to Section 7121 of the Code, or the
filing of an amended federal income tax return with respect to the
Disappearing Corporation (a "Determination") which Determination results in an
Adjustment relating to an S Corporation Year, the Company shall pay to each
Indemnitee an amount for such S Corporation Year equal to:
(a) the sum of:
(i) the increase in the taxable income of the Indemnitee as
a result of the combined Income and Deduction Adjustments
for such S Corporation Year multiplied by the maximum
federal corporate income tax rate in effect for the taxable
year in which the Determination is made, if any, plus
(ii) the reduction in the tax credits of the Indemnitee as a
result of the Credit Adjustment, if any, plus
(iii) any federal tax penalties related to such Adjustments,
if any, plus
(iv) interest on the net amount set forth in Sections
1(a)(i), 1(a)(ii) and 1(a)(iii) immediately above imposed
pursuant to Section 6621(a)(1) of the Code, calculated up to
the date of payment of all amounts due under this Section 1,
if any,
which sum shall be divided by
-2-
<PAGE>
(b) the result of:
(i) one, minus
(ii) the sum of the maximum federal individual income tax
rate and maximum California individual income tax rate
(after taking into account any federal income tax benefit
for California income taxes) for the taxable year in which
the payment is made.
The Company shall be obligated to make a payment under this Section 1 with
respect to an Adjustment only to the extent that it is reasonable to expect
that such Adjustment will result in an increase in the deductions or tax
credits of the Company or a decrease in the gross income of the Company in a
taxable period ending after the Merger Date.
2. In the event of a Determination which results in an increase in
the taxable income of the Disappearing Corporation or a reduction in the
deductions or tax credits of the Disappearing Corporation for an S Corporation
Year, but which Determination is not covered by Section 1, the Company shall
pay to each Indemnitee an amount for such S Corporation Year equal to:
(a) the sum of:
(i) the increase in the taxable income of the Indemnitee as
a result of all such Determinations for such S Corporation
Year multiplied by the maximum federal corporate income tax
rate in effect for the taxable year in which the
Determination is made, if any, plus
(ii) the reduction in the tax credits of the Indemnitee as a
result of all such Determinations for such S Corporation Year,
if any, plus
(iii) any federal tax penalties related thereto, if any, plus
(iv) interest on the net amount set forth in Sections
2(a)(i), 2(a)(ii) and 2(a)(iii) immediately above which is
imposed pursuant to Section 6621(a)(1) of the Code, if any,
which sum shall be divided by
(b) the result of:
(i) one, minus
(ii) the sum of the maximum federal individual income tax
rate and maximum California individual income tax rate
(after taking into account any federal income tax benefit
for California income taxes) for the taxable year in which
the payment is made.
3. Notwithstanding anything herein to the contrary,
(a) the cumulative amounts paid as a result of the increase in the
sum set forth in Section 1(a) by the division of such sum by the
fraction set forth in Section 1(b), plus
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<PAGE>
(b) the cumulative amounts paid under Section 2, plus
(c) the cumulative amounts set forth in Section 8(c) below.
shall not exceed the amount of the Non-Film Library Threshold Amount (as
defined in Section 10.2 of the Merger Agreement) with the Non-Film Library
Threshold Amount being determined at such time as payments are made under
Section 1, Section 2 or Section 8(c) herein.
4. Within ten business days after the filing of the Disappearing
Corporation's federal income tax return on Form 1120S for the taxable period
beginning January 1, 1996 and ending on the Merger Date, the Company shall pay
to RBL and EDL an amount equal to:
(a) the Net Taxable Income (defined below) of the Disappearing
Corporation allocable to RBL and EDL for such taxable period plus the
total wages paid to RBL and EDL for such taxable period, multiplied
by
(b) the maximum federal individual income tax rate in effect for
such taxable year, which product of Sections 4(a) and 4(b) shall be
reduced by
(c) any federal income tax credits of the Disappearing Corporation
allocable to RBL and EDL for such taxable period, which amount shall
further be reduced by
(d) the total federal income tax withheld by the Disappearing
Corporation with respect to the total wages paid to RBL and EDL for
such taxable period.
For purposes of this Agreement, Net Taxable Income means the sum of the
ordinary income from trade or business, plus each item of separately stated
income, and minus each item of separately stated loss and deduction, all as
set forth on Schedule K-1 of the Disappearing Corporation's federal income tax
return.
5. Within ten business days after the filing of the Disappearing
Corporation's federal income tax return on Form 1120S for the taxable period
beginning January 1, 1996 and ending on the Merger Date, the Company shall pay
to WFL an amount equal to:
(a) the Net Taxable Income of the Disappearing Corporation
allocable to WFL for such taxable period, multiplied by
(b) the maximum federal individual income tax rate in effect for
such taxable year, which product of Sections 5(a) and 5(b) shall be
reduced by
(c) any federal income tax credits of the Disappearing Corporation
allocable to such Indemnitee for such taxable period.
6. Indemnitees shall prepare and file the federal income tax return
for the Disappearing Corporation for such period, subject to the Company's
prior review and approval (which approval may not be unreasonably withheld),
and on a basis generally consistent with prior federal income tax returns of
the Disappearing Corporation.
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<PAGE>
7. (a) The payments due, if any, under Sections 1 and 2 herein with
respect to the taxable period of the Disappearing Corporation beginning
January 1, 1996 and ending on the Merger Date shall be in addition to the
payments due, if any, under Sections 4 and 5 herein with respect to such
taxable period.
(b) Notwithstanding anything herein to the contrary, unless
the parties hereto agree otherwise, the aggregate amounts paid under Sections
4 and 5 herein shall not exceed $400,000. In the event that the aggregate
amounts claimed by Indemnitees under Sections 4 and 5 herein exceed $400,000,
the Indemnitees will share all amounts paid under such sections ratably in
accordance with the amounts claimed by each.
8. (a) Each Indemnitee shall promptly notify the Company of any
federal income tax audit, inquiry, litigation or other proceeding ("Federal
Income Tax Proceeding") of Indemnitee of which such Indemnitee becomes aware
and as to which reimbursement may be sought under this Agreement; provided,
however, that failure to give timely notice shall not limit any Indemnitee's
right to receive payments hereunder unless the Company has been materially
prejudiced by the delay or failure to give such notice (and then only to the
extent of such material prejudice). The Indemnitees shall assume control of
all Federal Income Tax Proceedings; provided, however, that Company may at its
election assume control of any Federal Income Tax Proceeding, and provided
further that Company's control of a Federal Income Tax Proceeding shall be
limited to items included on the federal income tax returns of the
Disappearing Corporation, and the Company shall not control any other matters
of Indemnitee's federal individual income tax returns. The Company may not
settle any such Federal Income Tax Proceedings without the prior written
consent of Indemnitees, which consent may not be unreasonably withheld. In the
event that the Company does not assume control of such Federal Income Tax
Proceedings, the Indemnitees shall diligently pursue such matters; provided,
however, that Indemnitees shall not settle any such Federal Income Tax
Proceedings without the prior written consent of the Company, which consent
may not be unreasonably withheld. The Indemnitees and Company agree to use
their best efforts to defend the positions taken on the federal income tax
returns of the Disappearing Corporation and Indemnitees as filed.
(b) Company agrees to bear all costs of defending the
Disappearing Corporation and Indemnitees in such Federal Income Tax
Proceedings, and agrees to promptly reimburse Indemnitees for any such costs
incurred by Indemnitees.
(c) Notwithstanding Section 8(b), if the IRS prevails in its
assertion of a position in a Federal Income Tax Proceeding, and as a result
thereof Company makes a payment under Section 1 or Section 2, then the costs
which Company reimbursed (or is obligated to reimburse) to Indemnitees under
Section 8(b) which were incurred to defend against the IRS's assertion of such
position shall be included in Section 3(c) above and thereby subject to the
limitation set forth in Section 3. In the event that reimbursements of costs
are made by Company to Indemnitees under Section 8(b) herein, and it is
determined upon the conclusion of the Federal Income Tax Proceeding that all
or a portion of such reimbursements (the "Excess Cost Reimbursement") would
have been subject to the limitation set forth in Section 3 (as a result of the
prior sentence) if such reimbursements were payable at the conclusion of the
Federal Income Tax Proceeding, then Indemnitees shall promptly reimburse
Company for the amount of such Excess Cost Reimbursement. The Board of
Directors of the Company shall make a good faith determination as to the
portion of the costs reimbursed to Indemnitee's under Section 8(b) that are
subject to the limitation set forth in Section 3 as a result of the first
sentence of this Section 8(c).
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<PAGE>
9. This Agreement is conditioned upon, and shall be effective
only if and after, the consummation of the Merger.
10. If any term, provision or covenant in this Agreement is held to
be invalid, void or unenforceable, (i) the remainder of the terms, provisions
and covenants in this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated, and (ii) to the fullest
extent possible, the provisions of this Agreement (including, without
limitation, all portions of any paragraph of this Agreement containing any
such provision held to be invalid, void or unenforceable that are not
themselves invalid, void or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, void or
unenforceable.
11. This Agreement shall be governed by, construed and enforced and
the legality and validity of each term and condition shall be determined in
accordance with the internal, substantive laws of the State of California
applicable to agreements fully executed and performed entirely in California,
regardless of the law of choice of law of that or any other jurisdiction.
12. This Agreement may not be assigned, altered, modified or amended
except by an instrument in writing signed by all of the parties hereto. No
person, whether or not an officer, agent, employee or representative of any
party, has made or has any authority to make for or on behalf of that party
any agreement, representation, warranty, statement, promise, arrangement or
understanding not expressly set forth in this Agreement or in any other
document executed by the parties concurrently herewith ("Parol Agreements").
This Agreement and all other documents executed by the parties concurrently
herewith constitute the entire agreement between the parties and supersede all
express or implied, prior or concurrent, Parol Agreements and prior written
agreements with respect to the subject matter hereof. The parties acknowledge
that in entering into this Agreement, they have not relied and will not in any
way rely upon any Parol Agreements. This Agreement shall be fully effective
and binding upon the successors in interest, assigns and affiliates of the
Company.
IN WITNESS WHEREOF, the parties have entered into and executed this
Agreement as of the date first above written.
Robert B. Little,
an individual
-------------------------------
Ellen Dinerman Little,
an individual
-------------------------------
William F. Lischak,
an individual
-------------------------------
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<PAGE>
Overseas Filmgroup Inc.,
a Delaware Corporation
By:____________________________
Name:
Title:
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<PAGE>
EXHIBIT K
OPERATING GUIDELINES
These Operating Guidelines are to serve as a general "template" for the
overall conduct of Corporation business.
I. AUTHORITY/RESPONSIBILITY OF CO-CHAIRPERSONS AND CO-CHIEF EXECUTIVE
OFFICERS.
Such officers shall have general supervision, direction and control of the
business and affairs of the Corporation and the general powers and duties of
management usually vested in such officers of a corporation. They shall
preside at all meetings of the Board and at all meetings of the shareholders.
They shall serve on the three member Executive Committee of the Board. Such
officers (and no other persons) shall have the sole and ultimate authority and
responsibility to make all creative decisions for the Corporation. In
addition, such officers shall have the sole authority and responsibility to
make all employment decisions regarding Corporation personnel with decisions
regarding key senior management to be made in consultation with the Executive
Committee. All other officers and employees of the Corporation shall report
to, and only to, such officers (directly or through such channels as they may
designate).
II. BOARD OF DIRECTORS.
The Board will have regular meetings on a quarterly basis. The Executive
Committee of the Board, chaired by the Vice Chairman of the Board, will have
the Co-Chief Executive Officers on as permanent members, and the members of
the Executive Committee will use their reasonable best efforts to meet
bi-weekly to review business operations. During intervals between meetings of
the Board of Directors of the Corporation, the Executive Committee shall
exercise all powers of the Board of Directors (except those specifically
reserved by Delaware law to the full Board of Directors) in the management and
direction of the business and conduct of the affairs of the Corporation in all
cases in which specific directions have not been given by the Board of
Directors.
III. ANNUAL BUSINESS PLAN.
The Corporation will be operated in accordance with an Annual Business Plan to
be prepared by the Corporation's officers, submitted to the Executive
Committee in November and then presented to the Board of Directors at the last
Board meeting of each calendar year. The Annual Business Plan will contain,
among other things, estimated production, acquisition, distribution and
release schedules and general accounts of spending related thereto.
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<PAGE>
IV. AGREEMENTS.
The officers of the Corporation will have the power to execute any and all
agreements, documents, certificates and instruments in connection with the
acquisition, production, distribution and release of motion pictures with
terms which are generally common in the motion picture industry for the type
of services or materials contracted for or with terms (including deviations
from general industry practice) which are consistent with past practices of
the Corporation (or its predecessors, including Overseas Filmgroup, Inc. prior
to its merger into Entertainment/Media Acquisition Corporation) or are
otherwise necessary to accomplish the Corporation's business purposes or
Annual Business Plan. The officers of the Corporation shall use their
reasonable best efforts to consult with the Executive Committee on any
agreement material to the Corporation's performance.
V. ACTIONS TO BE SUBMITTED TO THE BOARD.
The officers of the Corporation will submit the following actions to the Board
for its consideration (unless contemplated by the Annual Business Plan):
A. Any material amendments to the Annual Business Plan and
quarterly updates.
B. The disposition of any asset or assets of the Corporation or
any subsidiary of the Corporation with an aggregate fair
market value in excess of $2,000,000; provided that the
Corporation may dispose of distribution and other rights to
motion pictures or other related properties or assets in the
ordinary course of business.
C. Any acquisition by the Corporation or any subsidiary of the
Corporation of any business or another person, or any
property, securities, rights or other assets in a
transaction for a consideration in excess of $2,000,000;
provided that the Corporation may acquire distribution and
other rights to motion pictures or other related properties
or assets in the ordinary course of business.
D. The creation, incurrence, assumption or guaranty by the
Corporation or any subsidiary of the Corporation of any
indebtedness obligation or liability in excess of $2,000,000,
except for (i) film financing incurred by the Corporation or
by special purpose subsidiaries of the Corporation, (ii) bank
financing used for general corporate purposes of the
Corporation or its subsidiaries, or (iii) as otherwise
permitted by these Operating Guidelines (collectively,
"Permitted Indebtedness").
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<PAGE>
E. The creation, incurrence, or assumption of any lien, mortgage,
pledge, security interest, charge or encumbrance by the
Corporation or any subsidiary of the Corporation with respect
to any property, capital stock or asset of the Corporation or
any subsidiary of the Corporation, which secures payment of
indebtedness of the Corporation in excess of $2,000,000,
except (i) liens or pledges securing Permitted Indebtedness,
(ii) liens or pledges encumbering film collateral necessary to
secure film financing, or (iii) as otherwise permitted by
these Operating Guidelines.
F. Committing to finance in excess of $4,000,000 of the
Uncovered Amount of the budgeted negative costs of any
motion picture. For purposes hereof, the Uncovered Amount
means the budgeted negative costs of any motion picture not
to be financed by advances, guarantees, or bank or other
third party financing commitments.
G. Committing to finance in excess of $3,000,000 of the
distribution costs of any motion picture which are not being
financed by other means.
H. The declaration or payment by the Corporation or any
subsidiary of the Corporation (other than special purpose
subsidiaries) of any dividend on any class of its common
stock.
I. Any other investments, or series of investments, by the
Corporation or any subsidiary of the Corporation in excess of
$1,500,000 other than (i) marketable direct obligations issued
or unconditionally guaranteed by the United States Government
or issued by any agency thereof and backed by the full faith
and credit of the United States, (ii) marketable direct
obligations issued by any state of the United States of
America or any political subdivision of any such state or any
public instrumentality thereof, (iii) commercial paper or
other corporate obligations, (iv) repurchase agreements and
reverse repurchase agreements, (v) money market funds
organized under the laws of the United States of America or
any state thereof and administered by securities dealers of
recognized national standing, (vi) any investment in
subsidiaries of the Corporation, and (vii) negotiable
instruments endorsed for deposit or collection or similar
instruments in the ordinary course of business.
J. Raising additional debt or equity capital including material
increases to existing bank facilities.
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<PAGE>
K. Granting any bonus in excess of $50,000 per grant to any
employee or agent of, or consultant to the Corporation not
required by any employment, consulting or other agreement.
VI. SUPERMAJORITY BOARD APPROVAL.
The following actions and decisions to be taken by the Corporation shall
require the affirmative vote of at least 75% of the authorized number of Board
members:
A. Any amendment to the Restated Certificate of Incorporation or the
Bylaws which would alter (A) the voting rights of the holders of stock in the
Corporation, (B) the number or classes of directors on the Board, or (C) the
notice and quorum requirements for meetings of the Board or its Committee or
of the shareholders of the Corporation;
B. Any merger or sale of all or substantially all of the assets
of the Corporation (other than in connection with the liquidation, dissolution
or winding up of the Corporation); or
C. The designation or issuance of any preferred stock of the
Corporation.
VII. EVALUATION OF OPERATING GUIDELINES.
These Operating Guidelines may be amended by the Board of Directors at any
time with the affirmative vote of 75% of the authorized number of Board
members. At the first Board meeting of each calendar year, the Board of
Directors shall re-evaluate the Operating Guidelines and consider appropriate
changes to the Operating Guidelines consistent with the Annual Business Plan
adopted at such meeting.
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<PAGE>
EXHIBIT L
SECURED PROMISSORY NOTE
$2,000,000 Dated: , 1996
--------------
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to Robert
B. Little and Ellen Dinerman Little ("Payees"), or order, at the address of
Payees maintained at the office of Maker, or such other place as the holder(s)
of this Note may from time to time designate, the principal sum of Two Million
Dollars ($2,000,000) and to pay interest on the principal balance from time to
time outstanding hereunder from the date hereof until paid at the rate of nine
percent (9%) per annum (the "Interest Rate") computed on the basis of the
actual number of days elapsed over a year of 360 days.
The principal amount outstanding hereunder and interest thereon shall be
due and payable in immediately available funds in lawful money of the United
States of America in equal successive monthly installments of Forty-One
Thousand Five Hundred Sixteen and Seventy-One Cents ($41,516.71), which is an
amount sufficient to amortize the original principal amount hereof over a five
(5) year period, on the first day of each calendar month commencing on
____________, 1996, with the final payment being due on _______________, 2001;
provided, however, that the last such installment shall be in the amount
necessary to repay in full the entire unpaid principal balance hereunder and
accrued interest thereon. Payments shall be applied first to accrued interest,
if any, and then to principal.
Any principal, interest or other amounts not paid when due hereunder,
whether at stated maturity, upon acceleration or otherwise, shall bear
interest from the date due until paid in full at a rate equal to the Interest
Rate plus three percent (3%) per annum, computed on the basis of the actual
number of days elapsed over a year of 360 days, compounded monthly. If any
installment on this Note becomes due and payable on a day other than a
business day, the maturity of such installment shall be extended to the next
succeeding business day and interest shall be payable thereon at the Interest
Rate during such extension.
Amounts due hereunder may be prepaid at any time and from time to time.
Prepayments shall be applied to installments due hereunder in reverse order of
maturity.
This Note is entitled to the benefits of, and is secured by the security
interests granted in, the Security Agreement of even date herewith among the
Maker and the Payees (the "Security Agreement"). The Security Agreement, among
other things, contains various covenants of the Maker and contains provisions
for the acceleration of amounts payable hereunder upon the occurrence of an
Event of Default (as defined in the Security Agreement). Should there be an
Event of Default, such as the failure to pay any amount due hereunder or the
default in the performance of the obligations contained in the Security
Agreement, then the entire unpaid principal balance of this Note, together
with accrued interest thereon, may be accelerated and become due and payable.
In addition, pursuant to the Security Agreement, the Maker has authorized the
Payees to perfect the security interest by executing and filing, on behalf of
the
<PAGE>
Maker, Copyright Mortgages and Uniform Commercial Code financing statements in
the appropriate jurisdictions.
In the event the holders of this Note incurs any loss, cost or expense
in enforcing or collecting this Note, in whole or in part, or by enforcing any
of the terms hereof, the Maker agrees to pay the costs and expenses so paid or
incurred by the holders, including, without limitation, reasonable attorneys'
fees and costs.
Any extensions of time granted to the Maker shall not release the Maker
nor constitute a waiver of any payment due on principal or interest or
otherwise diminish the rights of the holders of this Note. The Maker waives
presentment for payment, demand and protest and notice of protest, and of
dishonor in nonpayment of this Note, and expressly consents to an extension of
the time of payment hereof, or of any installment hereof, and any such
extension may be made without notice to the Maker and without in any way
affecting or discharging this liability. The right to plead any and all
statutes of limitations as a defense to demand hereunder is hereby waived to
the extent permitted by law. Notwithstanding anything to the contrary
contained herein, in no event shall any interest be payable under this Note
which exceeds the maximum amount permitted by applicable law. In the event any
payment of interest exceeds the amount permitted by applicable law, such
payment shall be applied to reduce the outstanding principal balance
hereunder.
Time is of the essence of this Note and failure to comply in a timely
manner with any provision herein shall be a material breach of this Note. This
Note may only be modified, changed, or amended by a written instrument
executed by Payees and Maker. This Note may not be assigned, pledged,
hypothecated or otherwise encumbered by Maker, without the prior written
consent of Payees. This Note shall inure to the benefit of the Payees and
their respective successors and assigns, and shall bind Maker and its
respective successors and assigns.
The provisions of this Note are to be governed by and construed in
accordance with the laws of the State of California, without regard to
conflict of laws principles.
OVERSEAS FILMGROUP INC.
By:
------------------------------------
Name:
Title:
2
<PAGE>
EXHIBIT M
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement"), dated as of __________________,
1996, by and among Overseas Filmgroup Inc., a Delaware corporation (the
"Debtor"), and Ellen Dinerman Little, an individual, and Robert B. Little, an
individual (each referred to herein individually as a "Secured Party" and
collectively as the "Secured Parties"), is made with reference to the
following facts:
A. Concurrently herewith, in connection with the consummation of the
transactions contemplated pursuant to that certain Agreement of Merger dated
July ___, 1996 among the Debtor and the Secured Parties, among others (the
"Merger Agreement"), the Debtor is executing one or more Secured Promissory
Notes in favor of Robert B. Little and Ellen Dinerman Little in the aggregate
principal amount of $2,000,000 (collectively referred to herein as the
"Note").
B. The Debtor has agreed to grant the Secured Parties a security
interest in the property hereinafter described as security for the prompt and
complete payment of all indebtedness of the Debtor to the Secured Parties
under the Note, and for the other obligations of the Debtor to the Secured
Parties under this Agreement and the Note (the "Obligations").
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and other agreements hereinafter contained, the Debtor hereby agrees
with Secured Parties for the benefit of Secured Parties as follows:
1. Grant of Security Interest.
The Debtor hereby grants to the Secured Parties a continuing security
interest in the following property of the Debtor, whether the same is now
owned or hereafter acquired (the "COLLATERAL"):
(a) All of the assets and property of every kind of the Debtor,
including all assets and property now owned and hereafter acquired by the
Debtor whether tangible or intangible, wherever located or situated and
whether or not in possession of the Debtor including but not limited to, all
right, title and interest of the Debtor in and to:
(i) All Film Assets (as defined in subparagraph (b) below);
(ii) All Securities (as defined in subparagraph (c) below),
including without limitation, the capital stock described on Schedule 1
attached hereto (the "PLEDGED STOCK") and the certificates representing
the Pledged Stock and any interest of Debtor in the entries on the books
of any financial intermediary pertaining to the Pledged Stock, and all
dividends, cash or proceeds from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
Securities and the Pledged Stock;
<PAGE>
(iii) All tangible personal property, goods, machinery, fixtures,
equipment, furniture, furnishings, vehicles, trailers, implements and
other tangible personal property of every kind and description, wherever
the same may be located, (including, without limitation, all video
recording, transposition, duplication, viewing and other electronic
equipment, all cameras and other photographic, sound recording and
editing equipment, projectors, film developing equipment and machinery),
all goods of like kind or type hereafter acquired in substitution or
replacement thereof and all additions and accessions thereto;
(iv) All intangible personal property, including, without
limitation, all inventions, processes, formulae, licenses, patents,
patent rights, trademarks, trademark rights, service marks, service mark
rights, trade names, trade name rights, logos, indicia, corporate and
company names, business source or business identifiers and renewals and
extensions thereof, domestic and foreign, and the accompanying goodwill
and other like business property rights relating to any aspect of the
business of the Debtor, all rights (but not the obligation) to register
claims under trademark or patent and to renew and extend such trademarks
or patents and all rights (but not the obligation) to sue in the name of
the Debtor and/or in the name of Secured Parties for past, present or
future infringement of trademark or patent;
(v) All accounts, chattel paper and/or other rights to payment,
including, without limitation, all tax refunds, all refunds of fees,
advances or royalties paid or prepaid and all accounts and/or rights to
payment due from third parties in connection with the distribution of
videocassettes and from the exploitation of any and all Film Assets;
(vi) All inventory, including, without limitation, all
merchandise, raw materials, components, parts, supplies, unfinished
goods, work-in-process, finished products intended for sale, lease or
other disposition, and packing and shipping materials of every kind,
nature and description, wherever the same may be located;
(vii) All deposits, deposit accounts, cash and cash equivalents,
drafts, checks, certificates of deposit, notes, bills of exchange and
other writings which evidence a right to the payment of money and all
amounts from time to time in any collection accounts of the Debtor,
including, without limitation, the deposit accounts identified on
Schedule 1 attached hereto (the "PLEDGED DEPOSITS");
(viii) All insurance policies owned by the Debtor or in which the
Debtor is named as an insured or additional insured or loss payee and
all proceeds which may be derived therefrom;
(ix) All licenses, permits, franchises, certificates and other
governmental authorizations and approvals of any nature whatsoever, to
the extent assignable;
(x) All documents, documents of title, receipts and books and
records;
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<PAGE>
(xi) All causes of action, litigations, arbitrations and claims,
together with related judgments, settlements and recoveries, whether in
contract, tort or otherwise, and whether pending or unasserted, known or
unknown;
(xii) All general intangibles not elsewhere included in this
definition, including, without limitation, all general intangibles
consisting of any right to payment which may arise in the distribution
or exploitation of any of the rights set forth herein or which may arise
from the general intangible rights in favor of the Debtor for services
or other performance rendered to or by any third parties; and
(xiii) All products, proceeds and income of any of the foregoing
and all substitutions and replacements of, and additions and accessions
to, any of the foregoing.
(b) "Film Assets" shall mean, with respect to each film acquired,
developed, produced, owned, distributed and/or exploited by the Debtor, all
rights and interests therein or pertaining thereto, including, without
limitation, all rights and interests of every kind and nature, present and
future, direct and indirect, in and to:
(i) the underlying literary property;
(ii) all worldwide copyrights, rights and interests in
copyrights, renewals and extensions of copyrights, domestic and foreign,
obtained upon the film or the underlying literary property or any part
thereof, the right (but not the obligation) to make publication thereof
for copyright purposes and to register claims under copyright, the right
(but not the obligation) to renew and extend such copyright and the
right (but not the obligation) to sue in the name of any person for
past, present and future infringements of copyright;
(iii) all music and musical compositions created for, used in or
to be used in connection with the film, including, without limitation,
all copyrights therein and all rights to perform, copy, record,
rerecord, produce, publish, reproduce or synchronize any or all of said
music and musical compositions as well as all other rights to exploit
such music including record, soundtrack recording and music publishing
rights;
(iv) all collateral, allied, ancillary and subsidiary rights of
every kind and nature whatsoever derived from, appurtenant to or related
to the film or the underlying literary property, including, without
limitation, all production, exploitation, reissue, remake, sequel,
serial or series production rights by any means and in any medium now
known or hereafter devised, whether based upon, derived from or inspired
by the film, the underlying literary property or any part thereof; all
rights to use, exploit and license others to use or exploit any and all
novelization, publishing, commercial tie-ups and merchandising rights of
every kind and nature whatsoever, including those arising out of or
connected with or inspired by the film or the underlying literary
property, the title or titles of the film or the underlying literary
property, the characters appearing in the film or the underlying
literary property and/or the names or characteristics of said
characters, and including further, without limitation, any and all
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<PAGE>
commercial exploitation in connection with or related to the film, all
remakes, sequels or other derivative works thereof and/or said literary
property (collectively the "ANCILLARY RIGHTS");
(v) all rights to develop, produce, acquire, reacquire, finance,
release, sell, distribute, subdistribute, lease, sublease, market,
license, sublicense, exhibit, broadcast, transmit, reproduce, publicize
or otherwise exploit the film, the underlying literary property and the
Ancillary Rights in perpetuity, without limitation, in any manner and in
any media whatsoever throughout the universe, whether now known or
hereafter developed, including, without limitation, by projection,
radio, all forms of television (including, without limitation, free,
pay, toll, cable, sustaining subscription, sponsored and direct
satellite broadcast), in theatres, nontheatrically, on cassettes,
cartridges and discs and by any and all other means, methods, processes
or devices now known or hereafter conceived, devised or created;
(vi) all underlying literary properties and all Ancillary Rights
relating to the film, including, without limitation, (A) all rights to
receive moneys due and to become due under or pursuant to all applicable
distribution agreements (whether or not earned by performance), (B) all
rights to receive proceeds of any insurance, indemnity, warranty or
guaranty with respect to all applicable distribution agreements, (C) all
claims for damages arising out of or for breach of or default under all
applicable distribution agreements, (D) the right to terminate all
applicable distribution agreements, to perform thereunder and to compel
performance and otherwise to exercise all remedies thereunder, (E) all
accounts, chattel paper, instruments, general intangibles, contract
rights, letters of credit and other obligations of any kind or nature
relating to, arising out of or in connection with all applicable
distribution agreements, and (F) all rights now or hereafter existing in
and to all security agreements, leases and other contracts securing or
otherwise relating to all applicable distribution agreements;
(vii) all acquisition and distribution agreements relating to the
film, including, without limitation, all agreements for (A) acquisition
of rights in any film or any literary property and all rights under
distribution and license agreements, (B) personal services, including
the services of writers, directors, performers, producers, special
effects personnel, production personnel, animators, cameramen and other
creative, artistic and technical staff and (C) the use of studio space,
equipment, facilities, locations, production services, special effects
services and laboratory services;
(viii) all physical properties relating to the film, including all
access rights and rights to use the same, all pledgeholder, laboratory,
access or film warehousing agreements relating to the film or any
physical properties thereof and any and all books and records,
including, without limitation, documents or receipts of any kind or
nature issued by any pledgeholder, warehouseman or bailee with respect
to the film and any physical properties thereof;
(ix) all insurance placed upon the film or the insurable
properties thereof and/or any person or persons engaged in the
development, acquisition, production,
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completion, delivery or exploitation of the film, and all rights of any
kind or nature whatsoever in and to all completion guarantees and all other
agreements and documents relating to production, completion and delivery of
the film and the proceeds thereof;
(x) the title or titles of the film including rights protected
pursuant to trademark, service mark, unfair competition and/or other
laws, rules or principles of law or equity and all inventions,
processes, formulae, licenses, copyrights, patents, patent rights,
trademarks, trademarks rights, service marks, service mark rights, trade
names, trade name rights, logos, indicia, corporate and company names,
business source or business identifiers and renewals and extensions
thereof, domestic and foreign, and the accompanying goodwill and other
like business property rights relating to the film, the right (but not
the obligation) to register claims under trademark, patent or copyright
and to renew and extend such trademarks, patents or copyrights and the
right (but not the obligation) to sue in the name of any person for
past, present or future infringement of trademark, copyright or patents;
and
(xi) any and all tangible and intangible personal property,
including, without limitation, any and all accounts, general
intangibles, chattel paper, documents, instruments, goods and books and
records, including inventory and contract rights, not elsewhere included
in this definition, but otherwise constituting or relating to the film
or any of the foregoing.
(c) "Securities" shall mean any stock, shares, partnership
interests, voting trust certificates, bonds, debentures, notes or other
evidences of indebtedness, secured or unsecured, convertible, subordinated or
otherwise, or in general any instruments commonly known as "securities" or any
certificates of interest, depository trust receipts, shares or participations
in temporary or interim certificates, and any options or warrants for the
purchase or acquisition of, or any other right to subscribe to, purchase or
acquire, any of the foregoing.
(d) Notwithstanding the foregoing provisions of this Section 1, the
security interest granted in this Agreement shall not extend to, and the term
"Collateral" shall not include, any general intangibles of the Debtor (whether
owned or held as licensee or lessee, or otherwise), to the extent that there
exists a prohibition on encumbering such general intangibles either (i) as a
matter of law or (ii) under the terms of the license, lease or contract
creating such general intangible (but solely to the extent that any such
prohibition is enforceable under applicable law); provided, however, that the
security interest granted in this Agreement shall extend to, and the term
"Collateral" shall include, (A) any general intangible which is an account,
which is a proceed of, or otherwise related to the enforcement or collection
of, any account, or which are goods which are the subject of any account, (B)
any and all proceeds of general intangibles to the extent that encumbrance of
such proceeds is not so prohibited, and (C) general intangibles previously
excluded from the definition of "Collateral" by this Section 1(d), upon
obtaining the consent of any such licensor, lessor or other applicable party.
Nothing in this Agreement shall be deemed to constitute an assumption by
either of the Secured Parties of any liability or obligation of Debtor with
respect to any of the Collateral.
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2. Security for Obligations.
This Agreement secures and the Collateral is collateral security for the
prompt payment or performance in full when due, whether at stated maturity, by
acceleration or otherwise (including the payment of amounts which would become
due but for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. ss. 362(a)), to each Secured Party of Debtor's
Obligations now existing or hereafter arising to such Secured Party, whether
for principal or interest (including, without limitation, interest which, but
for the filing of a petition in bankruptcy, would accrue on such obligations)
or payments of fees, expenses or otherwise (all such obligations being the
"SECURED OBLIGATIONS").
3. Representations and Warranties.
Debtor represents and warrants as follows:
(a) Status of Debtor. The Debtor is a corporation duly organized,
validly existing and in good standing under the laws of the state of
Delaware and is duly qualified or licensed to conduct business in each
jurisdiction in which the nature of its business or assets requires such
qualification or licensing under applicable law. The Debtor has the
requisite power and authority to own its assets and to transact the
business in which it is presently engaged and in which it proposes to
engage and to grant to Secured Parties the security interests in the
Collateral as herein provided.
(b) Binding Agreement. This Agreement has been duly authorized and
constitutes the legal, valid and binding obligation of the Debtor
enforceable against the Debtor in accordance with its terms.
(c) Title to Collateral. The Debtor has good and marketable title
to all and every part of the Collateral, free and clear of any mortgage,
pledge, lien, security interest, encumbrance, conditional sale contract
or other title retention agreement, or any other adverse claim of any
nature whatsoever (collectively, "LIEN") except for (i) the security
interest granted to each of the Secured Parties hereby, (ii) the
security interests in favor of the lenders pursuant to that certain
Syndication Agreement dated as of May 9, 1994 among Coutts & Co.,
Berliner Bank AG London Branch and Overseas Filmgroup Inc., as amended
(as so amended, the "CREDIT AGREEMENT"), (iii) Permitted Encumbrances
(as defined in the Credit Agreement on the date of this Agreement) and
(iv) Liens existing on the date of the merger as set forth in the
Overseas Disclosure Schedule to the Merger Agreement (the Liens listed
in clauses (i) through (iv) are hereinafter referred to as "Permitted
Liens"). No effective financing statement or other instrument similar in
effect covering all or any part of the Debtor's Collateral is on file in
any recording office, except such as may have been filed in favor of the
Secured Parties and holders of the security interests permitted under
this Section 3(c).
(d) No Default or Required Consent. Neither the execution and
delivery of this Agreement by the Debtor nor the effectuation by the
Secured Parties of any of their rights and remedies hereunder, whether
upon default or otherwise, will result in a breach
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of or constitute a default under any charter provision or bylaw of the
Debtor or any other agreement or instrument to which the Debtor is a
party or by which any of the Debtor's Collateral is bound, nor violate
any law or any rule or regulation of any administrative agency or any
order, writ, injunction or decree of any court or administrative agency,
nor does any of the foregoing require the consent of any person, entity
or governmental agency or any notice or filing with any governmental or
regulatory body, except as shall have been previously obtained, given or
made.
(e) Perfection. Upon the execution and delivery of this Agreement
by Debtor, the filing of appropriate financing statements with the
appropriate governmental agencies and the filing of a Copyright Mortgage
in the form of Exhibit A attached hereto in the U.S. Copyright Office,
the Secured Parties will have a perfected security interest in and to
the Collateral of the Debtor that can be perfected by such filing,
subject only to the Permitted Liens.
(f) Financial Information. Any and all financial or other
information heretofore furnished to either of the Secured Parties by the
Debtor in connection with the Secured Obligations or the Debtor's
financial condition or the value or condition of the Debtor's Collateral
was true and correct as of the date it was so furnished.
(g) No Litigation. There are no legal, administrative or other
proceedings pending or, to the best of Debtor's knowledge, threatened
against, the Debtor's title to the Collateral or against Debtor's grant
of a security interest therein hereunder, nor does the Debtor know of
any basis for the assertion of any such claim.
No event of default under Section 8(g) of this Agreement shall occur if
the representations made by Debtor in Section 3(c), 3(g) or 3(f) are
incorrect, if they are incorrect as a result of the status of, or actions
taken regarding, the Collateral held by Overseas Filmgroup Inc. prior to its
merger with OFG Acquisition Corp. ("Acquisition") pursuant to the Merger
Agreement or as a result of information which Overseas Filmgroup Inc.
furnished or failed to furnish pursuant to the Merger Agreement prior to its
merger with Acquisition.
4. Affirmative Covenants.
Debtor covenants and agrees that until such time as all of the Secured
Obligations are indefeasibly paid or otherwise satisfied in full, unless the
Secured Parties shall otherwise consent in writing:
(a) Conduct of Business and Maintenance of Assets and Licenses. The
Debtor shall do or cause to be done all things necessary to preserve in full
force and effect its existence, its corporate powers and authority, its
qualifications to carry on business in all applicable jurisdictions, and all
rights, interests and assets necessary to the conduct of its business, except
where the failure to do so does not have a material adverse effect on the
financial condition or operations of the Debtor.
(b) Delivery of Collateral. With respect to any Collateral as to
which the
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Secured Parties' security interest must be perfected by, or the
priority thereof must be assured by, possession of the Collateral, subject to
and in accordance with Intercreditor Agreement dated as of __________, 1996,
by and among the Secured Parties, the Debtor and lenders under the Credit
Agreement (the "Intercreditor Agreement"), the Debtor shall deliver possession
of same in pledge to the Secured Parties or their agents appointed to hold
such Collateral on behalf of the Secured Parties, endorsed or accompanied by
such instruments of assignment or transfer as Secured Parties may specify and
stamped or marked in such manner as the Secured Parties may specify.
(c) Protection of Security and Legal Proceedings. The Debtor shall,
at its own expense, take any and all actions necessary to preserve, protect
and defend the security interests of the Secured Parties in the Collateral and
the perfection and priority thereof against any and all adverse claims,
including appearing in and defending all actions and proceedings which purport
to affect any of the foregoing. The Debtor shall promptly reimburse a Secured
Party for any and all sums, including costs, expenses and actual attorneys'
fees, which such Secured Party may pay or incur in defending, protecting or
enforcing his or her security interest in the Collateral or the perfection or
priority thereof.
(d) Payment of Taxes. The Debtor shall pay or cause to be paid all
taxes and other levies with respect to the Collateral when the same become due
and payable, except for any taxes which are being diligently contested in good
faith by appropriate proceedings and for which appropriate reserves have been
established.
(e) Use and Maintenance of Collateral. The Debtor shall comply with
all laws, statutes and regulations pertaining to its use and ownership of the
Collateral and its conduct of its business; maintain all of the Collateral in
good condition, reasonable wear and tear excepted, and keep accurate and
complete books and records pertaining to the Collateral in accordance with
generally accepted accounting principles, except where the failure to do any
of the foregoing does not have a material adverse affect on the Collateral or
the Secured Parties' rights therein.
(f) Insurance. The Debtor shall, at its own expense, maintain
insurance on all of its properties and assets of an insurable character to the
extent and for the time periods consistent with normal industry standards
pursuant to policies issued or underwritten by financially sound and reputable
insurers.
(g) Inspection. The Debtor shall give the Secured Parties such
information as may be reasonably requested concerning the Collateral and shall
during regular business hours and upon reasonable notice, permit the Secured
Parties and their agents and representatives to have full access to and the
right to examine, audit and make copies and abstracts from any and all of the
Debtor's books and records pertaining to the Collateral, to confirm and verify
the value of the Collateral and to do whatever else the Secured Parties
reasonably may deem necessary or desirable to protect their interests.
(h) Notification. The Debtor shall notify Secured Parties in
writing within ten (10) business days of the occurrence of (i) an Event of
Default (as defined in Section 8) or of the occurrence of an event which, with
notice or lapse of time, or both, would constitute an Event
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<PAGE>
of Default, or (ii) any event which materially adversely affects the value of
the Collateral, the ability of the Debtor or the Secured Parties to dispose of
the Collateral or the rights and remedies of the Secured Parties in relation
thereto; provided, however, that the notice shall not be required so long as
the Secured Parties are executive officers of the Debtor.
(i) Further Assurances. The Debtor agrees that at any time and from
time to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action, that may be necessary
or desirable, or that either Secured Party may request, in order to perfect
and to protect any security interest granted or purported to be granted hereby
or to enable the Secured Parties to exercise and to enforce their rights and
remedies hereunder with respect to any Collateral. In addition, Debtor shall
maintain the Pledged Deposits with banks or other financial institutions
within the State of California. Furthermore, the Debtor agrees to furnish
promptly to the Secured Parties such information regarding the financial
condition or business of the Debtor or the Collateral as either Secured Party
may request, and all such information hereafter furnished to either of the
Secured Parties by the Debtor will be true and correct when furnished.
5. Negative Covenants.
The Debtor covenants and agrees that until such time as all of the
Secured Obligations are indefeasibly paid or otherwise satisfied in full,
without the prior written consent of the Secured Parties:
(a) Incurrence of Indebtedness. From and after the date of a Change
in Control (as defined below), the Debtor shall not create, incur, guaranty,
or otherwise become liable for, any indebtedness for borrowed money or for the
deferred purchase price of property under capital leases ("Indebtedness") that
is senior to the prior and indefeasible payment in full of the Secured
Obligations ("Senior Indebtedness") or Indebtedness that is pari passu with
the Secured Obligations, unless all of such Indebtedness from time to time
outstanding is in an aggregate principal amount equal to or less than the sum
of (x) the aggregate principal amount of all of Indebtedness outstanding
immediately preceding the Change in Control plus (y) amounts committed and
available to the Debtor for borrowing immediately preceding the Change in
Control. Nothing in this Section 5(a) shall be deemed to be a consent or
agreement by the Secured Parties to subordinate the Secured Obligations to any
indebtedness of the Debtor. The Debtor shall not create, incur, guaranty or
otherwise become liable for Senior Indebtedness, whether before or after a
Change in Control, unless the holder of such Indebtedness shall have entered
into an intercreditor agreement with the Secured Parties in form and substance
reasonably satisfactory to the Secured Parties. The term "Change in Control"
shall have the meaning assigned to such term in the Employment Agreement dated
as of ___________, 1996 between Ellen Dinerman Little and Debtor (the "EDL
Agreement") or the Employment Agreement dated as of _______________, 1996
between Robert R. Little and Debtor (the "RRL Agreement").
(b) Sale or Hypothecation of Collateral. The Debtor shall not
directly or indirectly, whether voluntarily, involuntarily, by operation of
law or otherwise (i) sell, assign, license, transfer, exchange, lease, lend,
grant any option with respect to or dispose of any of the Collateral or any of
the Debtor's rights therein, except for sales, assignments, licenses,
transfers,
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exchanges, leases or loans in the ordinary course of the Debtor's business,
nor (ii) create or permit to exist any Lien on or with respect to any of the
Collateral, except for the Permitted Liens. The inclusion of "proceeds" as a
component of the Collateral shall not be deemed a consent by the Secured
Parties to any sale, assignment, transfer, exchange, lease, loan, granting of
an option with respect to or disposition of all or any part of the Collateral.
(c) Change of Location or Name. The Debtor shall not, without
giving to the Secured Parties at least thirty (30) days' prior written notice
(i) move its principal place of business or the location of its books or
records; (ii) change its name, its trade or fictitious business name(s) or its
form of doing business, or (iii) establish any deposit accounts other than
those set forth on Schedule 1 attached hereto; provided, however, that such
notice shall not be required so long as the Secured Parties are executive
officers of the Debtor.
(d) Preservation of Collateral. The Debtor shall use reasonable
efforts to preserve the value of the Collateral and the security interests of
the Secured Parties therein.
6. Secured Party Appointed Attorney-in-Fact.
Debtor hereby appoints the Secured Parties as the Debtor's
attorney-in-fact with full authority in the place and stead of the Debtor and
in the name of the Debtor or otherwise, from time to time after an Event of
Default has occurred and is continuing, in the Secured Parties' sole and
absolute discretion, to take any action and to execute any instrument which
the Secured Parties may deem necessary or advisable to accomplish the purposes
of this Agreement. Debtor acknowledges that the foregoing grant of power of
attorney is coupled with an interest and is irrevocable. In addition, the
Secured Parties shall have the right, at any time in its discretion upon five
(5) Business Days' notice to Debtor, to transfer to or to register in the name
of the Secured Parties or any of its nominees any or all of the Pledged Stock.
In addition, the Secured Parties shall have the right at any time to exchange
certificates or instruments representing or evidencing Pledged Stock for
certificates or instruments evidencing smaller or larger denominations. The
rights granted pursuant to Secured Parties pursuant to this Section 6 shall be
subject to and exercised in accordance with the Intercreditor Agreement.
7. Secured Parties May Perform.
If Debtor fails to perform any agreement or covenant contained herein at
such time as either Secured Party is not an executive officer of Debtor, then
the Secured Parties may perform or cause the performance of such agreement or
covenant, and the expenses of each of the Secured Parties incurred in
connection therewith (as provided in Section 11), plus interest from the date
of such advance to the date of reimbursement at the lesser of (a) 12% per
annum or (b) the maximum rate permitted by law, shall be payable by Debtor.
However, nothing in this Agreement shall obligate either Secured Party to act.
8. Events of Default.
The occurrence of any of the following shall constitute an event of
default ("Event of Default") hereunder:
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(a) Failure to Pay. The failure of Debtor to pay any installment
of principal or interest under the Note within five (5) days after such payment
is due;
(b) Other Defaults Under Note or this Agreement. The failure of
Debtor to perform any material term, condition or covenant in favor of either
of the Secured Parties contained in the Note or this Agreement or to pay any
amounts due to Secured Parties pursuant to the Note or this Agreement (other
than as set forth in Section 8(a)) if such default is not cured within 30 days
after receiving notice of such default;
(c) Other Indebtedness. The occurrence of any breach by Debtor of
the Credit Agreement or the occurrence of any material breach of any note,
loan agreement, indenture or debt instrument of the Debtor evidencing or
representing indebtedness in an aggregate principal amount in excess of
$1,000,000, in each case where such default is not cured within any grace
period provided for in such agreement;
(d) Default Under Other Agreements. The termination by Debtor of
the EDL Agreement or the RRL Agreement without "Cause" (as defined in such
agreements), the termination of the EDL Agreement or the RRL Agreement for
"Good Reason" (as defined therein), or from and after the date of a Change in
Control, the occurrence of any material breach by Debtor of (i) the EDL
Agreement, (ii) the RRL Agreement, (iii) the Lock-Up and Registration Rights
Agreement (as defined in the Merger Agreement), or (iv) the Tax Reimbursement
Agreement (as defined in the Merger Agreement), in each case of (i) through
(iv) where such breach is not cured within any grace period as provided in the
applicable agreement or, if no grace period is provided, within 30 days of the
occurrence of such breach;
(e) Bankruptcy Events. Debtor shall admit in writing its inability
to, or shall fail generally or be generally unable to, pay its debts
(including its payrolls) as such debts become due, or shall make a general
assignment for the benefit of creditors; or Debtor shall file a voluntary
petition in bankruptcy or a petition or answer seeking reorganization, to
effect a plan or other arrangement with creditors or any other relief under
the Bankruptcy Reform Act of 1978, as amended or recodified from time to time
(the "Bankruptcy Code") or under any other state or federal law relating to
bankruptcy or reorganization granting relief to debtors, whether now or
hereafter in effect, or shall file an answer admitting the jurisdiction of the
court and the material allegations of any involuntary petition filed against
Debtor pursuant to the Bankruptcy Code or any such other state or federal law;
or Debtor shall be adjudicated a bankrupt, or shall make an assignment for the
benefit of creditors, or there shall be applied for or appointed any
custodian, receiver or trustee for all or any substantial part of Debtor's
property, or shall take any action to authorize any of the actions set forth
above in this paragraph; or an involuntary petition seeking any of the relief
specified in this paragraph shall be filed against Debtor and shall not be
dismissed within 60 days; or any order for relief shall be entered against
Debtor in any involuntary proceeding under the Bankruptcy Code or any such
other state or federal law referred to in this subsection (e);
(f) Liens on Collateral. The initiation of steps by any third party
to obtain a levy or writ of attachment or garnishment upon Collateral in
excess of $1,000,000 or to affect any of such Collateral by other legal
process, unless the same is dismissed within sixty (60) days
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after the initiation thereof;
(g) Misrepresentation. Should any representation made by Debtor to
either Secured Party concerning the financial condition or credit standing of
Debtor prove to be materially false or misleading or should any representation
or warranty of Debtor contained in this Agreement or in any document,
certificate or instrument delivered pursuant thereto or hereto prove to be
materially false or misleading; or
(h) Adverse Judgments. The rendering of a final judgment for the
payment of money the uninsured portion of which is in excess of $1,000,000 by
any court of competent jurisdiction against Debtor, and the same is not
discharged or execution thereunder stayed, whether pursuant to appeal or
otherwise, within sixty (60) days of the entry thereof.
9. Remedies upon Default.
If any Event of Default shall have occurred and be continuing and
subject to and in accordance with the Intercreditor Agreement:
(a) Acceleration of Indebtedness. The Secured Parties may declare
any or all Secured Obligations, or any part thereof, to be immediately due and
payable without demand or notice (and upon the occurrence of any Event of
Default specified in Section 8(e), all Secured Obligations shall without
further action by the Secured Parties become immediately due and payable), and
the Secured Parties may proceed to collect the same.
(b) Notification to Third Parties. The Secured Parties may notify
any account debtor obligated on any of the receivables included in the
Collateral, any purchaser of the Collateral or any other person of the Secured
Parties' interest in the Collateral and instruct any such persons to make
payments thereon directly to the Secured Parties.
(c) Compromise of Claims. The Secured Parties may grant extensions,
compromise claims and settle the Collateral for less than face value, all
without prior notice to Debtor.
(d) Use of Trade Names, Etc. The Secured Parties may use in
connection with any disposition of the Collateral, any trademark, trade name,
trade style, copyright, patent right, technical process or other proprietary
right used or utilized by Debtor.
(e) Other Rights Against Debtor Hereunder. The Secured Parties may
exercise in respect of the Collateral, in addition to other rights and
remedies provided for herein or otherwise available to them, all the rights
and remedies of a secured party under the Uniform Commercial Code as then in
effect in the State of California, and the Secured Parties may also without
notice except as specified below sell the Collateral or any part thereof in
one or more parcels at public or private sale, for cash, on credit or for
future delivery, and upon such other terms as the Secured Parties in their
sole and absolute discretion may deem commercially reasonable. Debtor agrees
that, to the extent notice of sale shall be required by law, at least ten
days' notice to the Debtor of the time and place of any public sale or the
time after which any
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private sale is to be made shall constitute reasonable notification. The
Secured Parties shall not be obligated to make any sale of Collateral
regardless of notice of sale having been given. The Secured Parties may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned. Debtor hereby waives
any claims against either of the Secured Parties arising by reason of the fact
that the price at which any Collateral may have been sold at such a private
sale was less than the price which might have been obtained at a public sale,
even if the Secured Parties accepts the first offer received and does not
offer such Collateral to more than one offeree, and in all events such sale
shall be deemed to be commercially reasonable. At any such public or private
sale, the Secured Parties may be the purchasers of the Collateral.
(f) Application of Proceeds. Any cash held by the Secured Parties
as Collateral and all cash proceeds received by either of the Secured Parties
in respect of any sale of, collection from, or other realization upon all or
any part of the Collateral may, in the discretion of the Secured Parties, be
held by the Secured Parties as collateral for, and/or then or at any time
thereafter applied (after payment of any amounts payable to Secured Parties
pursuant to Section 10 and 11) in whole or in part by the Secured Parties
against all or any part of the Secured Obligations in such order as the
Secured Parties shall elect. Any surplus of such cash or cash proceeds held by
either of the Secured Parties and remaining after payment in full of all the
Secured Obligations shall be paid over to Debtor or to whomsoever may be
lawfully entitled to receive such surplus. In a like manner, Debtor agrees to
pay to the Secured Parties, without demand, whatever amount of the Secured
Obligations remains unpaid after the Collateral has been sold and the proceeds
applied as aforesaid, together with interest thereon from the date of demand
at the highest rate specified in the Note, which interest shall also
constitute a part of the Secured Obligations.
(g) Other Rights. The Secured Parties shall not be obligated to
resort to their rights or remedies with respect to any other security for or
guaranty or payment of the Secured Obligations before resorting to their
rights and remedies against Debtor hereunder. All rights and remedies of the
Secured Parties shall be cumulative and not in the alternative.
10. Liability and Indemnification.
Neither of the Secured Parties shall be liable to Debtor for any
act (including, without limitation, any act of active negligence) or omission
by the Secured Parties under this Agreement unless the Secured Parties'
conduct constitutes willful misconduct or gross negligence. Debtor agrees to
indemnify and to hold each of the Secured Parties harmless from and against
all losses, liabilities, claims, damages, costs and expenses (including actual
attorneys' fees and disbursements) with respect to (a) any action taken
(including, without limitation, any act of active negligence) or any omission
by either of the Secured Parties with respect to the Note or this Agreement,
provided that Secured Parties' conduct does not constitute willful misconduct
or gross negligence, and (b) any claims arising out of Debtor's ownership of
the Collateral or Secured Parties' security interest therein.
11. Expenses.
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Debtor agrees to pay upon demand to the Secured Parties any and all
reasonable expenses, including the reasonable fees and expenses of their
counsel and of any experts and agents, plus interest at the lesser of (a) the
maximum rate permitted by law or (b) 12% per annum, from the date such
expenses were incurred to the date of reimbursement, which the Secured Parties
may incur in connection with (a) the amendment, waiver or modification of the
Note, this Agreement and/or the Intercreditor Agreement, if initiated or
requested by Debtor, (b) the custody or preservation of, or the sale of,
collection from, or other realization upon, any of the Collateral, (c) the
exercise or enforcement of any of the rights of the Secured Parties under the
Note and/or this Agreement, and (iv) the failure by Debtor to perform or
observe any of the provisions of the Note and/or this Agreement.
12. Security Interest Absolute.
All rights of the Secured Parties and security interests hereunder, and
all Secured Obligations of Debtor hereunder, shall be absolute and
unconditional irrespective of:
(a) any lack of validity or enforceability of the Note;
(b) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Note; or
(c) any furnishing, exchange, release or non-perfection of any
other collateral, or any release or amendment or waiver of or consent to
departure from any guaranty for all or any of the Secured Obligations.
13. Amendments, Waiver.
No amendment or waiver of any provision of this Agreement nor consent to
any departure by Debtor herefrom shall in any event be effective unless the
same shall be in writing and signed by the Secured Parties and Debtor, and
then such waiver or consent shall be effective only in the specific instance
and for the specific purpose any party for which given.
14. Notices.
All notices, demands and requests of any kind which any party may
be required or desires to serve upon the other hereunder shall be in writing
and shall be deemed to have been received by such party and be effective on
the day on which delivered to such party at the address set forth below (or at
such other address as such party shall specify to the other party in writing):
If to Debtor: Overseas Filmgroup Inc.
8800 Sunset Boulevard
Los Angeles, California 90068
Attn: William F. Lischak
If to Secured
-14-
<PAGE>
Parties: To each Secured Party at the address for such Secured Party
maintained at the office of Debtor.
15. Continuing Security Interest; Assignment of Obligations.
This Agreement shall create a continuing security interest in the
Collateral and shall (a) remain in full force and effect until indefeasible
payment or other satisfaction in full of the Secured Obligations, (b) be
binding upon Debtor, and the Debtor's successors and assigns, (c) inure,
together with the rights and remedies of the Secured Parties hereunder, to the
benefit of the Secured Parties and their successors, transferees and assigns,
(d) constitute, along with the Note, the entire agreement between Debtor and
the Secured Parties with respect to the subject matters covered hereby, and
(e) be severable in the event that one or more of the provisions herein is
determined to be illegal or unenforceable. Without limiting the generality of
the foregoing clause (c), the Secured Parties may assign or otherwise transfer
any Secured Obligation to any other person or entity, and such other person or
entity shall thereupon become vested with all the benefits in respect thereof
granted to the Secured Parties herein or otherwise, but the Secured Parties
may not assign this Agreement or the benefits in respect hereof except to
assignee(s) of the Secured Obligations. Upon the indefeasible payment or other
satisfaction in full of the Secured Obligations, the Secured Parties, at the
request and expense of Debtor, shall release the security interests in the
Collateral granted herein and execute such termination statements as may be
necessary therefor, to the extent that such Collateral shall not have been
sold or otherwise applied pursuant to the terms hereof.
16. Return of Collateral.
Subject to any duty imposed by law or otherwise to the holder of any
subordinate lien on the Collateral known to the Secured Parties, and subject
to the direction of a court of competent jurisdiction, upon payment in full of
the Secured Obligations, Debtor shall be entitled to the return of all
Collateral belonging to the Debtor in the possession of the Secured Parties;
provided, however, that the Secured Parties shall not be obligated to return
to the Debtor or deliver to the holder of any subordinate lien any such
Collateral until it is satisfied that all amounts with respect to the Secured
Obligations are no longer subject to being recaptured under applicable
bankruptcy or insolvency laws or otherwise. The return of Collateral, however
effected, shall be without recourse to either of the Secured Parties and the
Secured Parties shall be entitled to receive appropriate documentation to such
effect. The return of Collateral shall be effected without representation or
warranty and shall not entitle Debtor to any right to any endorsement.
17. Governing Law; Terms.
This Agreement shall be governed by, and construed in accordance with,
the laws of the State of California.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
Overseas Filmgroup Inc., a Delaware corporation
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<PAGE>
---------------------------------------------
Name:
Title:
--------------------------------------------
Ellen Dinerman Little
--------------------------------------------
Robert B. Little
-16-
<PAGE>
SCHEDULE 1
PLEDGED STOCK
[capital stock owned by Overseas]
PLEDGED DEPOSITS
[list of accounts of Overseas]
-17-
<PAGE>
EXHIBIT A
COPYRIGHT MORTGAGE
(COMPLETED PRODUCT)
KNOW ALL MEN BY THESE PRESENTS that for good and valuable consideration,
receipt of which is hereby acknowledged, the undersigned, Overseas Filmgroup
Inc., a Delaware corporation (the "Mortgagor"), does hereby mortgage, assign,
grant, convey and transfer for security to Ellen Dinerman Little and Robert R.
Little (the "Mortgagees") and their respective successors and assigns,
throughout the universe in perpetuity, all of Mortgagor's right, title and
interest of every kind and nature, without limitation, in and to all
copyrights and rights and interests of every kind or nature in copyrights and
works protectable by copyright, whether now owned or hereafter created or
acquired, and all renewals and extensions thereof, and all accounts receivable
related thereto and all other cash and non-cash proceeds therefrom and all of
the collateral related thereto or derived therefrom, including, without
limitation, such rights in all items of product set forth in Schedule "1"
attached hereto and incorporated herein by reference (the "Works").
Mortgagor agrees that if any person, firm of corporation shall do or
perform any acts which the Mortgagees believe to constitute a copyright
infringement of the Works or constitute a plagiarism, or violate or infringe
any rights of the Mortgagor or the Mortgagees therein or if any person, firm
or corporation shall do or perform any acts which the Mortgagees believe to
constitute an unauthorized or unlawful distribution, exhibition, or use
thereof, then and in any such event, the Mortgagees may and shall have the
right to take such steps and institute such suits or proceedings as the
Mortgagees may deem advisable or necessary to prevent such acts and conduct
and to secure damages and other relief by reason thereof, and to generally
take such steps as may be advisable or necessary or proper for the full
protection of the rights of the parties. The Mortgagees may take such steps or
institute such suits or proceedings in its own name or in the names of the
parties jointly.
Mortgagor hereby irrevocably constitutes and appoints the Mortgagees its
lawful attorneys-in-fact to do all acts and things permitted or contemplated
by the terms hereof and pursuant to the Security Agreement referred to below.
Without limiting the generality of the foregoing, the aforesaid conveyance and
assignment includes all prior choses-in-action, at law, in equity and
otherwise, the right to recover all damages and other sums, and the right to
other relief allowed or awarded at law, in equity, by statute or otherwise.
Mortgagor and Mortgagees have entered into that certain Security
Agreement dated as of ____________, 1996 (the "Security Agreement"), relating
to the mortgage and assignment for security in and to the aforesaid rights and
this Copyright Mortgage is expressly made subject to the terms and conditions
contained in the Security Agreement, as it may be amended, amended and
restated, modified, supplemented, renewed or replaced.
Dated: __________________ Overseas Filmgroup Inc, a Delaware corporation
By: ________________________
Its: _______________________
A-1
<PAGE>
STATE OF CALIFORNIA [GRAPHIC OMITTED]
SS
COUNTY OF LOS ANGELES
On before me, (here insert name and title of the officer),
personally appeared , personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person(s) whose name(s)
is/are subscribed to the within instrument and acknowledged to me that
he/she/they executed the same in his/her/their authorized capacity(ies), and
that by his/her/their signature(s) on the instrument the person(s), or the
entity upon behalf of which the person(s) acted, executed the instrument.
WITNESS by hand and official seal.
Signature (Seal)
A-2
<PAGE>
EXHIBIT N
RESTATED CERTIFICATE
OF
INCORPORATION
OF
ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
(Original Certificate of Incorporation Filed December 9, 1993)
(Pursuant to Section 245 of the
Delaware General Corporation Law)
---------------------
Entertainment/Media Acquisition Corporation, a corporation organized
and existing under the Delaware General Corporation Law,
DOES HEREBY CERTIFY:
That this Restated Certificate of Incorporation was duly adopted in
accordance with Sections 242 and 245 of the Delaware General Corporation Law,
and that its original Certificate of Incorporation, as filed with the
Secretary of State of the State of Delaware on December 9, 1993, is hereby
further amended and restated to read in its entirety as follows:
FIRST: The name of the corporation (hereinafter called the
"Corporation") is OVERSEAS FILMGROUP, INC.
SECOND: The address, including street, number, city and county, of
the registered office of the Corporation in the State of Delaware is 1013
Centre Road, Wilmington, Delaware 19805; and the name of the registered agent
of the Corporation in the State of Delaware at such address is Corporation
Service Company.
THIRD: The purpose of this Corporation is to engage in any lawful
act or activity for which corporations may now or hereafter be organized under
the General Corporation Law of the State of Delaware.
FOURTH: The aggregate number of shares of capital stock of the
Corporation (referred to herein as "Shares") which the Corporation shall have
authority to issue is 27,000,000 Shares, of which 25,000,000 will be common
stock having a par value of $0.001 per share (the "Common Stock") and
2,000,000 will be series preferred stock having a par value of $0.001 per
share (the "Series Preferred Stock"). The Series Preferred Stock may be
issued, from time to time, in one or more series as authorized by the Board of
Directors. Prior to issuance of a series, the Board of Directors by resolution
(the "Preferred Stock Designation") shall designate it from other series and
classes of stock of the Corporation, shall specify the number of shares to be
included in the series, and shall fix the terms, rights, restrictions and
qualifications of the shares of a series, including any preferences, voting
powers, dividend rights and redemption, sinking fund and conversion rights.
Subject to the express terms of the Series Preferred Stock outstanding at the
time, the Board of Directors may increase (but not above the total number of
authorized shares of the class) or decrease (but not below the number of
shares thereof then outstanding) the number of shares or alter the Preferred
Stock Designation or classify or re-classify any unissued shares of a
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<PAGE>
particular series of Series Preferred Stock by fixing or altering in any one
or more respects from time to time before issuing the shares, any terms,
rights, restrictions and qualifications of the shares.
FIFTH:
A. Management Vested in the Board of Directors. The management of the
business and the conduct of the affairs of the Corporation shall be vested in
its Board of Directors. In furtherance of and not in limitation of the powers
conferred by statute, the Board of Directors is expressly authorized to make,
repeal, alter, amend and rescind the Bylaws of the Corporation, subject to any
specific limitation on such power provided by any Bylaws adopted by the
stockholders. The number of directors which shall constitute the whole Board
of Directors shall be fixed by, or in the manner provided in, the Bylaws of
the Corporation from time to time. The phrase "whole Board" and the phrase
"total number of directors" shall be deemed to have the same meaning, to wit,
the total number of directors which the Corporation would have if there were
no vacancies. Elections of directors need not be by written ballot.
B. Board of Directors Divided in Classes. The Board of Directors
shall be and is divided into three classes: Class I, Class II and Class III.
The number of directors in each class shall be the whole number contained in a
quotient arrived at by dividing the authorized number of directors by three.
If a fraction is also contained in such quotient and if such fraction is
one-third (1/3), the extra director shall be a member of Class III. If the
fraction is two-thirds (2/3), one of the extra directors shall be a member of
Class III and the other shall be a member of Class II. Each director shall
serve for a term ending on the date of the third annual meeting following the
annual meeting at which such director was elected (and until such director's
successor shall have been elected and qualified); provided, however, that the
first directors elected to Class I shall serve for a term ending on the date
of the first annual meeting next following January 1, 1997 (and until such
director's successor shall have been elected and qualified), the directors
elected to Class II shall serve for a term ending on the date of the second
annual meeting next following January 1, 1997 (and until such director's
successor shall have been elected and qualified), and the term of the
directors elected to Class III shall serve for a term ending on the date of
the third annual meeting next following January 1, 1997 (and until such
director's successor shall have been elected and qualified). Advance notice of
stockholder nominations for the election of directors shall be given in the
manner provided in the Bylaws of the Corporation.
C. Appointment of New Directors. Except as otherwise provided, newly
created directors resulting from any increase in the number of directors and
any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal or other causes shall be filled by the affirmative
vote of a majority of the remaining directors then in office, even though less
than a quorum of the Board of Directors. Any director elected in accordance
with the preceding sentence shall hold office for the remainder of the full
term of directors in the class of directors in which the new directorship was
created or the vacancy occurred and until such director's successor shall have
been elected and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
D. Removal of Directors. Subject to the rights of any shares having a
preference over the Common Stock as to dividends or upon liquidation to elect
directors under specified circumstances, any director may be removed from
office, with or without cause, but only by the affirmative vote of the holders
of a majority of the combined voting power of all then outstanding shares
entitled to vote generally in the election of directors, voting together as a
single class.
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<PAGE>
E. Vote Required to Repeal or Amend this Article FIFTH.
Notwithstanding anything contained in this Restated Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
sixty-six and two-thirds percent (66-2/3%) of the combined voting power of all
then outstanding shares entitled to vote, voting together as a single class,
shall be required to alter, amend or repeal this Article FIFTH or to adopt any
provision inconsistent therewith.
SIXTH: Meetings of stockholders may be held within or without the
State of Delaware, as the Bylaws may provide. The books of the Corporation may
be kept outside the State of Delaware at such place or places as may be
designated from time to time by the Bylaws of the Corporation.
SEVENTH: The Corporation is to have perpetual existence.
EIGHTH: No holder of any Shares shall be entitled as of right to
subscribe for, purchase, or otherwise acquire any Shares of any capital stock
of the Corporation which the Corporation proposes to issue or any rights or
options which the Corporation proposes to grant for the purchase of Shares of
any class of the Corporation or for the purchase of any Shares, bonds,
securities or obligations of the Corporation which are convertible into or
exchangeable for, or which carry any rights to subscribe for, purchase, or
otherwise acquire Shares of any class of capital stock of the Corporation; and
any and all of such Shares, bonds, securities or obligations of the
Corporation, whether now or hereafter authorized or created, may be issued, or
may be reissued or transferred if the same have been reacquired and have
treasury status, and any and all of such rights and options may be granted by
the Board of Directors to such persons, firms, corporations and associations,
and for such lawful consideration, and on such terms, as the Board of
Directors in its discretion may determine, without first offering the same, or
any thereof, to any said holder.
NINTH: No director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct or
a knowing violation of law, (iii) under Section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived
an improper personal benefit. If the Delaware General Corporation Law is
amended to authorize corporate action further eliminating or limiting the
personal liability of directors, then the liability of a director of the
Corporation shall be eliminated or limited to the fullest extend permitted by
the Delaware General Corporation Law, as so amended. Any repeal or
modification of this Article NINTH by the stockholders of the Corporation
shall not adversely affect any right or protection of a director of the
Corporation with respect to events occurring prior to the time of such repeal
or modification.
TENTH: The Corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented, indemnify any and all persons whom it
shall have the power to indemnify under said section from and against any and
all of the expenses, liabilities or other matters referred to in or covered by
said section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such
person.
ELEVENTH: From time to time any of the provisions of this Restated
Certificate of Incorporation may be amended, altered or repealed, and other
provisions authorized by the laws of the
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<PAGE>
State of Delaware at the time in force may be added or inserted in the manner
and at the time prescribed by said laws, and all rights at any time conferred
upon the stockholders of the Corporation by this Restated Certificate of
Incorporation are granted subject to the provisions of this Article ELEVENTH.
Signed as of [ ], 1996
ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
By:
-----------------------------------
Name:
Title:
ATTEST:
- ------------------------------------
Name:
Title:
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<PAGE>
EXHIBIT N
BYLAWS
------
for the regulation, except as otherwise provided
by statute or the Certificate of Incorporation
of
OVERSEAS FILMGROUP, INC.
(formerly known as ENTERTAINMENT/MEDIA ACQUISITION CORPORATION)
Article I
General Provisions
------------------
Section 1.01 Principal Executive Office
--------------------------
The registered office of the corporation shall be located at 1013
Centre Road, Wilmington, Delaware 19805. The Corporation may also have offices
at such other places both within and without the State of Delaware as the
Board of Directors may from time to time determine or the business of the
corporation may require.
Section 1.02 Number of Directors
-------------------
The affairs of the corporation shall be managed by a Board of
Directors (the "Board") consisting of seven (7) directors until such number of
directors is changed by an amendment to these Bylaws duly adopted by the Board
or by the Stockholders. Directors need not be Stockholders or citizens or
residents of the United States.
Section 1.03 Registration of Shares
----------------------
The corporation shall recognize each person registered in its stock
ledger as the exclusive owner and holder of the shares registered in his or
her name as the "Stockholder" for all purposes hereunder with the exclusive
rights inter alia to vote the shares, to receive dividends declared with
respect to the shares, to transfer the shares to others, and to exercise any
other rights of Stockholders. The corporation shall have no obligation to
recognize any equitable or other claim or interest in any shares on the part
of any person or persons other than the registered owner, as set forth in the
stock ledger, whether or not the corporation shall have any notice thereof,
except as may otherwise be provided by the laws of the State of Delaware.
"Shares" for purposes hereof, shall mean shares of the corporation's stock
authorized by its Certificate of Incorporation and registered in the stock
ledger as issued and outstanding, including any one or more classes of stock
so authorized, and whether or not such share is deemed to have voting or other
privileges.
-1-
<PAGE>
Article II
Shares and Stockholders
-----------------------
Section 2.01 Share Certificates
------------------
A. In General
----------
The corporation shall issue a certificate or certificates
representing shares of its capital stock. Each certificate so issued shall be
signed by or in the name of the corporation by the Chairman or Vice Chairman
of the Board or the President or a Vice President and by the Chief Financial
Officer, Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the corporation and shall state the name of the record owner
thereof and represent the number of shares registered in certificate form. Any
or all of the signatures on the certificate may be a facsimile. In case any
officer, transfer agent or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent or registrar before such certificate is issued, it may
be issued by the corporation with the same effect as if such person were an
officer, transfer agent or registrar at the date of issue.
B. Form of Certificates
--------------------
There shall be set forth on the face or back of a
certificate which the corporation shall issue to represent a class or series
of stock one of the following:
1. A statement of the powers, designations,
preferences and relative participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights; or
2. A summary of the statement described in Subsection
2.01(B)(1) above.
If a security of the corporation is subject to a restriction on the transfer
or registration thereof, such restriction shall be noted, in writing,
conspicuously upon the certificate representing the security.
C. Fractional Share Interests
--------------------------
The corporation may, but shall not be required to, issue
certificates representing a fraction of share and, in this event, the holder
thereof shall have the rights appurtenant to ownership of that interest in the
corporation. If the corporation elects not to issue certificates representing
a fraction of a share to the persons entitled thereto, it shall, at its
election, either:
1. Arrange for disposition of the fractional interest
by those entitled thereto.
2. Pay in cash the fair value of fractions of a share
as of the time when those entitled to receive such fractions are determined.
3. Issue scrip or warrants in registered or bearer
form which entitles the holder to receive a full share upon surrender of such
scrip or warrants aggregating one or more full shares, which
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<PAGE>
scrip or warrants may, if the Board elects, either become (i) void if not so
surrendered on or before a specified date, or (ii) subject to such other
conditions or limitations as may be designated by the Board.
Section 2.02 Transfer of Certificates
------------------------
Where a certificate for shares is presented to the corporation or its
transfer clerk or transfer agent with a request to register a transfer of
shares, the corporation is under a duty to register the transfer, cancel the
certificate presented, and issue a new certificate if:
A. The certificate is endorsed or the instructions originated
by the appropriate person or persons;
B. Reasonable assurance is given that those endorsements or
instructions are genuine and effective;
C. The corporation has no duty to inquire into adverse claims
or has discharged any such duty;
D. Any applicable law relating to the collection of taxes has
been complied with; and
E. The transfer is in fact rightful or is to a bona fide
purchaser.
Section 2.03 Lost Certificates
-----------------
Where a certificate is alleged to have been lost, destroyed or
stolen, the corporation shall issue a new certificate in place of the original
if the owner:
A. So requests, in writing, before the corporation has notice that
the certificate has been acquired by a bona fide purchaser; and
B. If so requested by the Board, gives the corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, destruction or theft of such certificate or the
issuance of such new certificate.
Except as provided above, no new certificate for shares shall be issued in
lieu of an old certificate unless the corporation is ordered to do so by a
court in a judgment in an action brought in a court of appropriate
jurisdiction.
Section 2.04 Meetings of Stockholders
------------------------
A. Place of Meetings
-----------------
Meetings of Stockholders shall be held at any place within
or without the State of Delaware designated by the Board. In the absence of
any such designation, Stockholders' meetings shall be held at the principal
executive office of the corporation.
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<PAGE>
B. Annual Meetings
---------------
An annual meeting of the Stockholders of the corporation
shall be held for the election of directors on the date and at the time fixed,
from time to time, by the Board. Subject to the other terms and provisions of
these Bylaws, any other proper subject for Stockholder consideration may be
transacted which may be presented at the meeting.
C. Special Meetings
---------------
Special meetings of the Stockholders may be called by the
Board, the Chairman of the Board, the President, or by the holders of shares
entitled to cast not less than thirty-three percent (33%) of the votes at the
meeting. Upon request in writing to the Chairman of the Board, the President,
any Vice President or the Secretary by any person (other than the Board)
entitled to call a special meeting of Stockholders, the officer forthwith
shall cause notice to be given to the Stockholders entitled to vote that a
meeting will be held at a time and for the purposes requested by the person or
persons calling the meeting not less than thirty-five (35) nor more than sixty
(60) days after the receipt of the request. If the notice is not given within
twenty (20) days after receipt of the request, the persons entitled to call
the meeting may give the notice. Only such business shall be conducted at a
special meeting of stockholders as shall have been brought before the meeting
pursuant to the notice.
D. Notice of Meetings
------------------
1. Except to the extent otherwise provided by applicable law
or unless lapse of time shall be waived, written notice of any Stockholders'
meeting shall be given not less than ten (10) nor more than sixty (60) days
before the date of the meeting to each Stockholder entitled to vote thereat.
Each notice shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. The notice of any meeting may be accompanied by any additional
documents, statements or information which may be selected by the persons
calling the meeting or which may be prescribed by any applicable law or
regulation.
2. If mailed, notice is given when deposited in the United
States mail, postage prepaid, a directed to the Stockholder at his or her
address as it appears on the records of the corporation. An affidavit of the
Secretary or an Assistant Secretary or of the transfer agent of the
corporation that the notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein.
E. Adjourned Meetings and Notice Thereof
-------------------------------------
Any meeting of Stockholders may be adjourned from time to
time by a vote of a majority of the shares represented either in person or by
proxy whether or not a quorum is present. When a Stockholders' meeting is
adjourned to another time or place, notice need not be given of the adjourned
meeting if the time and place thereof are announced at the meeting at which
the adjournment is taken. At the adjourned meeting the corporation may
transact any business which might have been transacted at the original
meeting. However, if the adjournment is for more than thirty (30) days or if
after the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each Stockholder of record
entitled to vote at the meeting.
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<PAGE>
F. Waiver of Notice
----------------
The transactions of any meeting of Stockholders, however
called and noticed, and wherever held, are as valid as though had at a meeting
duly held after regular call and notice, if a quorum is present either in
person or by proxy, and if, either before or after the meeting, each of the
persons entitled to vote, not present in person or by proxy, signs a written
waiver of notice or a consent to the holding of the meeting or an approval of
the minutes thereof. No Stockholder may object to any failure to comply with
the provisions of this Section if either (i) at any time before or after the
meeting he or she exercises a written waiver of notice or (ii) he or she
attends one meeting in person or by proxy, except if he or she attends solely
for the express purpose of objecting at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Any waiver of notice or consent need not specify either the business
to be transacted or the purpose of any annual or special meeting of
Stockholders. All such waivers, consents and approvals shall be filed with the
corporate records or made a part of the minutes of the meeting.
G. Quorum/Majority Vote
--------------------
Except as otherwise provided by the laws of the State of
Delaware, a majority of shares entitled to vote, present in person, or
represented by proxy, shall constitute a quorum for the transaction of
business. If a quorum is present, the affirmative vote of the majority of the
voting shares represented at the meeting and entitled to vote on any matter
shall be the act of the Stockholders, unless the vote of a greater number, or
voting by classes, is required by law, under the Certificate of Incorporation
of the corporation or these Bylaws. The Stockholders present at a duly called
or held meeting at which a quorum is present may continue to transact business
until adjournment notwithstanding the withdrawal of enough Stockholders to
leave less than a quorum, provided that any action taken (other than
adjournment) must be approved by at least a majority of the shares required to
constitute a quorum.
H. Conduct of Meetings
-------------------
Meetings of Stockholders shall be presided over by one of
the following officers in the following order by seniority, if present and
acting: Chairman of the Board, Vice Chairman of the Board, if any, the
President or any Vice President selected in the order of chronological age.
The Secretary of the corporation or, in his or her absence, any Assistant
Secretary shall act as Secretary of the meeting. In lieu of the foregoing
persons, the Board may designate a Chairman and/or Secretary at any meeting of
the Stockholders. All meetings shall be conducted by reference to Roberts
Rules of Order or other parliamentary system selected by the chairman of the
meeting and not inconsistent with these Bylaws, the Certificate of
Incorporation or any applicable law.
I. Nominations for Directors; Business to be Brought Before Meeting
1. Nominations of persons for election to the Board of
Directors and the proposal of business to be considered by the Stockholders
may be made at an annual meeting of Stockholders (a) pursuant to the
corporation's notice of meeting, (b) by or at the direction of the Board of
Directors or (c) by any Stockholder of the corporation who was a Stockholder
of record at the time of giving of notice provided for in this Section I, who
is entitled to vote at the meeting and who complies with the notice procedures
set forth in this Section I.
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2. For nominations or other business to be properly brought
before an annual meeting by a Stockholder pursuant to clause (c) of paragraph
1 of this Section I, the Stockholder must have given timely notice thereof in
writing to the Secretary of the corporation and such other business must
otherwise be a proper matter for Stockholder action. To be timely, a
Stockholder's notice shall be delivered to the Secretary at the principal
executive offices of the corporation not later than the close of business on
the one hundred twentieth (120th) day nor earlier than the close of business
on the one hundred fiftieth (150th) day prior to the first anniversary of the
date of the proxy statement delivered to Stockholders in connection with the
preceding year's annual meeting; provided, however, that if either (i) the
date of the annual meeting is more than thirty (30) days before or more than
sixty (60) days after such an anniversary date or (ii) no proxy statement was
delivered to Stockholders in connection with the preceding year's annual
meeting, notice by the Stockholder to be timely must be so delivered not
earlier than the close of business on the ninetieth (90th) day prior to such
annual meeting and not later than the close of business on the later of the
sixtieth (60th) day prior to such annual meeting or the close of business on
the tenth (10th) day following the day on which public announcement of the
date of such meeting is first made by the corporation. Such Stockholder's
notice shall set forth (a) as to each person whom the Stockholder proposes to
nominate for election or reelection as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (the
"Exchange Act") (including such person's written consent to being named in the
proxy statement as a nominee and to serving as a director if elected); (b) as
to any other business that the Stockholder proposes to bring before the
meeting, a brief description of the business desired to be brought before the
meeting, the reasons for conducting such business at the meeting and any
material interest in such business of such Stockholder and the beneficial
owner, if any, on whose behalf the proposal is made; and (c) as to the
Stockholder giving the notice and the beneficial owner, if any, on whose
behalf the nomination or proposal is made (i) the name and address of such
Stockholder, as they appear on the corporation's books, and of such beneficial
owner and (ii) the class and number of shares of capital stock of the
corporation that are owned beneficially and held of record by such Stockholder
and such beneficial owner.
3. Notwithstanding anything in the second sentence of
paragraph 2 of this Section I to the contrary, in the event that the number of
directors to be elected to the Board of Directors of the corporation is
increased and there is no public announcement by the corporation naming all of
the nominees for director or specifying the size of the increased Board of
Directors at least seventy (70) days prior to the first anniversary of the
preceding year's annual meeting (or, if the annual meeting is held more than
thirty (30) days before or sixty (60) days after such anniversary date, at
least seventy (70) days prior to such annual meeting), a Stockholder's notice
required by this Section I shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it
shall be delivered to the Secretary at the principal executive office of the
corporation not later than the close of business on the tenth (10th) day
following the day on which such public announcement is first made by the
corporation.
4. For purposes of this Section I, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a document
publicly filed by the corporation with the Securities and Exchange Commission
pursuant to Section 13, 14 and 15(d) of the Exchange Act.
5. Notwithstanding the foregoing provisions of this
Section I, a stockholder shall also comply with all applicable requirements of
the Exchange Act and the rules and regulations thereunder with respect to the
matters set forth in this Section I. Nothing in this Section I shall be deemed
to affect any
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rights (i) of stockholders to request inclusion of proposals in the
corporation's proxy statement pursuant to Rule 14a-8 under the Exchange Act or
(ii) of the holders of any series of Preferred Stock to elect directors under
specified circumstances.
Section 2.05 Voting of Shares
----------------
A. In General
----------
Except as may otherwise be prescribed by the provisions of
the Certificate of Incorporation, each share of stock shall entitle the holder
thereof to one vote. In the election of directors, a plurality of the votes
cast shall elect. Any other action shall be authorized by a majority of the
votes cast except where the applicable law in the State of Delaware prescribes
a different percentage of votes and/or a different exercise of voting power,
and except as may be otherwise prescribed by the provisions of the Certificate
of Incorporation or these Bylaws.
B. Secret Voting by Ballot
-----------------------
Elections for directors and voting in other matters need not
be by secret ballot unless any Stockholder demands voting by secret ballot on
the applicable issues at the meeting and before the voting begins.
C. Voting of Shares by Certain Holders
-----------------------------------
Shares of capital stock of the corporation standing in the
name of another corporation, domestic or foreign, and entitled to vote may be
voted by such officer, agent or proxy as the bylaws of such other corporation
may prescribe or, in the absence of such provision, as the board of directors
of such other corporation may determine.
Shares of capital stock of the corporation standing in the
name of a deceased person, a minor, an incompetent or a corporation declared
bankrupt and entitled to vote may be voted by an administrator, executor,
guardian, conservator or trustee, as the case may be, either in person or by
proxy, without transfer of such other corporation into the name of the
official so voting.
A Stockholder whose shares of capital stock of the
corporation are pledged shall be entitled to vote such shares unless on the
transfer books of the corporation the pledgor has expressly empowered the
pledgee to vote such shares, in which case only the pledgee, or such pledgee's
proxy, may represent such shares and vote thereon.
Shares of capital stock of the corporation belonging to the
corporation, or to another corporation if a majority of the shares entitled to
vote in the election of directors of such other corporation shall be held by
the corporation, shall not be voted at any meeting of Stockholders and shall
not be counted in determining the total number of outstanding shares for the
purpose of determining whether a quorum is present. Nothing in this Section
2.05C shall be construed to limit the right of the corporation to vote shares
of capital stock of the corporation held by it in a fiduciary capacity.
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D. Action Without a Meeting
------------------------
Except as provided in Sections 3.04 and 3.05 hereof, the
Stockholders of the corporation may not take any action by written consent in
lieu of a meeting.
Section 2.06 Proxies
-------
Every person entitled to vote for directors or any other matter shall
have the right to do so either in person or by one or more agents authorized
by a written proxy signed by the person and filed with the Secretary of the
corporation. A proxy shall be deemed signed if the Stockholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission, or otherwise) by the Stockholder or Stockholder's attorney in
fact. A validly executed proxy which does not state that it is irrevocable
shall continue in full force and effect unless (i) revoked by the person
executing it, before the vote pursuant to that proxy, by a writing signed by
the person and delivered to the corporation stating that the proxy is revoked,
or by a subsequent proxy executed by, or attendance at the meeting and voting
in person by the person executing the proxy; or (ii) written notice of the
death or incapacity of the maker of that proxy is received by the corporation
before the vote pursuant to that proxy is counted; provided, however, that no
proxy shall be valid after the expiration of eleven (11) months from the date
of the proxy, unless otherwise provided in the proxy. The revocability of a
proxy that states on its face that it is irrevocable shall be governed by the
provisions of the law applicable in the State of Delaware.
Section 2.07 Inspectors of Election
----------------------
A. Appointment
-----------
The Board shall, in advance of any meeting of Stockholders,
appoint one or more inspectors (individually an "Inspector" and collectively,
the "Inspectors") to act at such meeting and make a written response thereof.
The Board may designate one or more persons as alternate Inspectors to replace
any Inspector who shall fail to act. If no Inspector or alternate shall be
able to act at such meeting, the person presiding at such meeting shall
appoint one or more other persons to act as Inspectors thereat. Each
Inspector, before entering upon the discharge of his or her duties, shall take
and sign an oath faithfully to execute the duties of an Inspector with strict
impartiality and according to the best or his or her ability.
B. Duties
------
The Inspectors shall (i) ascertain the number of shares of
capital stock of the corporation outstanding and the voting power of each,
(ii) determine the shares of capital stock of the corporation represented at
such meeting and the validity of proxies and ballots, (iii) count all votes
and ballots, (iv) determine and retain for a reasonable period a record of the
disposition of any challenges made to any determination by the Inspectors and
(v) certify their determination of the number of such shares represented at
such meeting and their count of all votes and ballots. The Inspectors may
appoint or retain other persons or entities to assist them in the performance
of their duties.
The date and time of the opening and closing of the polls
for each matter upon which the Stockholders will vote at such meeting shall be
announced at such meeting. No ballots, proxies or votes, nor duly revocations
thereof or changes thereto, shall be accepted by the Inspectors after the
closing of
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the polls unless the Court of Chancery of the State of Delaware upon
application by any Stockholder shall determine otherwise.
In determining the validity and counting of proxies and
ballots, the Inspectors shall be limited to an examination of the proxies,
ballots and the regular books and records of the corporation, except that the
Inspectors may consider other reliable information for the limited purpose of,
reconciling proxies and ballots submitted by or on behalf of banks, brokers,
their nominees or similar persons which represent more votes than the holder
of a proxy is authorized by a Stockholder of record to cast or more votes than
such Stockholder holds of record. If the Inspectors consider other reliable
information for the limited purpose permitted herein, the Inspectors, at any
time they make their certification pursuant to this Section 2.07(B), shall
specify the precise information considered by them, including the person or
persons from whom they obtained such information, when the information was
obtained, the means by which such information was obtained and the basis for
the Inspectors' belief that such information is accurate and reliable.
Section 2.08 Record Date
-----------
In order that the corporation may determine the Stockholders entitled
to notice of or to vote at any meeting or entitled to express consent to any
corporate action without a meeting or entitled to receive payment of any
dividend or other distribution or allotment of any rights or entitled to
exercise any rights in respect of any other lawful action, the Board may fix,
in advance, a record date, which shall not be more than sixty (60) nor less
than ten (10) days prior to the date of such meeting nor more than sixty (60)
days prior to any such action. If no record date is fixed:
A. The record date for determining Stockholders entitled to notice of
or to vote at a meeting of Stockholders shall be at the close of business on
the business day next preceding the day on which notice is given or, if notice
is waived, at the close of business on the business day next preceding the day
on which the meeting is held.
B. The record date for determining Stockholders entitled to give
consent to corporate action in writing without a meeting, when no prior action
by the Board has been taken, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is delivered
(by hand or by certified or registered mail, return receipt requested) to the
corporation's registered agent in the State of Delaware, its principal place
of business, or to the Secretary.
C. The record date for determining Stockholders for any other purpose
shall be at the close of business on the day on which the Board adopts the
resolution relating thereto.
A determination of Stockholders of record entitled to notice of or to vote at
a meeting of Stockholders shall apply to any adjournment of the meeting unless
the Board fixes a new record date for the adjourned meeting, but the Board
shall fix a new record date if the meeting is adjourned for more than thirty
(30) days from the date set for the original meeting. The stock ledger shall
be the only evidence as to who are the Stockholders entitled to examine the
stock ledger, the stock list or the books of the corporation, or to vote in
person or by proxy at any meeting of Stockholders.
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Article III
Directors
Section 3.01 Powers
------
Subject to the provisions of the laws of the State of Delaware and
the Certificate of Incorporation, the business and affairs of the corporation
shall be managed and all corporate powers shall be exercised by or under the
direction of the Board. The Board may delegate the management of the
day-to-day operations of the business of the corporation to a management
company or other person provided that the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised under
the ultimate direction of the Board.
Section 3.02 Committees of the Board
-----------------------
A. The Board shall, by resolution adopted by a majority of the whole
Board, designate an Executive Committee consisting of three (3) directors, to
serve at the pleasure of the Board. The Chairman of the Board, or Co-Chairmen
of the Board, shall be members of the Executive Committee. The resolution
adopted by the Board shall provide that during intervals between meetings of
the Board, the Executive Committee shall have and may exercise all the powers
and authority of the Board in the management of the business and affairs of
the corporation in all cases; provided, however, that the Executive Committee
shall not have the power or authority to (i) take any of the actions set forth
in subsection B, nos. 1-6, below, (ii) contravene any specific actions or
directions of the Board, or (iii) act on any matter upon which committees may
not act as otherwise provided in the Delaware General Corporation Law. A
majority of the authorized number of directors on the Executive Committee
shall constitute a quorum for the transaction of such committee's business.
B. The Board may, by resolution adopted by a majority of the whole
Board designate one (1) or more committees, each consisting of one (1) or more
directors, to serve at the pleasure of the Board. Any such committee, to the
extent provided in the resolution of the Board and subject to the provisions
of the applicable law in the state of Delaware, shall have and may exercise
all the powers and authority of the Board in the management of the business
and affairs of the corporation, and may authorize the corporate seal to be
affixed to all papers which may require it, but no such committee shall have
the power or authority with respect to:
1. Amending the Certificate of Incorporation (except that a
Committee may, to the extent provided in the resolution or resolutions
providing for the issuance of shares of stock adopted by the Board is provided
in Section 151(a) of the Delaware General Corporation Law, fix the
designations and any of the preferences or rights of such shares relating to
dividends, redemption, dissolution, any distribution of assets of the
corporation or the conversion into, or the exchange of shares for, shares of
any other class or classes of stock of the corporation or fix the number of
shares of any series of stock or authorize the increase or decrease of the
shares of any series).
2. Adopting an agreement of merger or consolidation under
Sections 251 or 252 of the Delaware General Corporation Law.
3. Recommending to the Stockholders the sale, lease or
exchange of all or substantially all of the corporation's property and assets.
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4. Recommending to the Stockholders a dissolution of the
Corporation or a revocation of a dissolution.
5. Amending the Bylaws of the Corporation.
6. Unless the resolutions, Bylaws, or Certificate of
Incorporation expressly so provide, declaring a dividend, authorizing the
issuance of stock or adopting a certificate of ownership and merger pursuant
to Section 253 of the Delaware General Corporation Law.
C. In the absence or disqualification of a member of a
committee, the member or members thereof present at any meeting may not
appoint another member of the Board to act at the meeting in place of any such
absent or disqualified member.
Section 3.03 Election and Term of Office
---------------------------
The directors shall be elected at each annual meeting of
Stockholders, but, if any such annual meeting is not held or the directors are
not elected thereat, the directors may be elected at any special meeting of
Stockholders held for that purpose. All directors shall hold office until the
expiration of the term for which elected and until their respective successors
are elected and qualified.
Section 3.04 Vacancies
---------
A vacancy or vacancies in the Board shall be deemed to exist in case
of death, resignation or removal of any director, or if the authorized number
of directors be increased, or if the Stockholders fail, at any annual or
special meeting of Stockholders, at which any director or directors are
elected, to elect to fill the full authorized number of directorships. Except
for a vacancy created by the removal of a director, vacancies on the Board may
be filled by a majority of the directors then in office, whether or not less
than a quorum, or by a sole remaining director, and each director so elected
shall hold office until his successor is elected. A vacancy on the Board
created by the removal of a director may only be filled by the vote of a
majority of the shares entitled to vote represented at a duly held meeting at
which a quorum is present, or, notwithstanding anything to the contrary
contained in these Bylaws, by the written consent of a majority of the
outstanding shares entitled to vote (obtained in accordance with the second
paragraph of Section 3.05 hereof). The Stockholders may elect a director or
directors at any time to fill any vacancy or vacancies not filled by the
directors. Insofar as a director or directors are elected by a class or series
of stock, vacancies or newly created directorships are to be filled only by
the remaining director or directors elected by such class or series or by the
vote of a majority of the shares of such class or series.
Section 3.05 Removal
-------
Subject to the rights of any shares having a preference over the
Common Stock of the corporation as to dividends or upon liquidation to elect
directors under specified circumstances, any director may be removed from
office, with or without cause, but only by the affirmative vote of the holders
of a majority of the combined voting power of all then outstanding shares
entitled to vote generally in the election of directors, voting together as a
single class.
Notwithstanding anything to the contrary contained in these Bylaws,
such action may be taken at any annual or special meeting of Stockholders or
such action may be taken without a meeting, without
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prior notice, and without a vote, if a consent or consents in writing, setting
forth the action so taken, shall be signed by the holders of outstanding
shares having not less than the minimum number of votes that would be
necessary to take such action at a meeting at which all shares entitled to
vote thereon were present and vote and shall be delivered to the corporation
by delivery (by hand or by certified and registered mail, return receipt
requested) to its registered office in the State of Delaware, its principal
place of business or to the Secretary of the corporation. Where the approval
of Stockholders is given without a meeting by less than unanimous written
consent, unless the consents of all Stockholders entitled to vote have been
solicited in writing, the Secretary shall give prompt notice of the corporate
action approved by the Stockholders without a meeting. Such notice shall be
given in the same manner as notice of Stockholders' meetings.
Section 3.06 Resignation
-----------
Any director may resign effective upon giving written notice to the
Chairman of the Board, the President, the Secretary or the Board of the
corporation, unless the notice specifies a later time for the effectiveness of
such resignation. If the resignation is effective at a future time the Board
or the Stockholders shall have the power to elect a successor to take office
when the resignation is to become effective.
Section 3.07 Meetings of the Board
----------------------
A. Regular Meetings
----------------
Regular meetings of the Board shall be held at such time and
place within or without the State of Delaware as may be determined from time
to time by resolution of the Board or by written consent of all members of the
Board or in these Bylaws. Regular meetings shall be held upon oral or written
notice given by any means in sufficient time for the convenient assembly of
directors; forty-eight (48) hours' notice delivered by mail or twelve (12)
hours' notice delivered personally or by telephone, telegraph or telecopier or
other similar means shall be deemed sufficient for the foregoing purpose. Any
notice shall state the date, place and hour of the meeting. Notice of a
meeting need not be given to any director who signs a waiver of notice,
whether before or after the meeting, or who attends the meeting without
protesting, prior thereto or at its commencement, the lack of notice to such
director.
B. Organization Meetings
---------------------
Immediately following each annual meeting of Stockholders,
the Board shall hold a regular meeting for the purpose of organization,
election of officers and the transaction of other business.
Notice of such meetings is hereby dispensed with.
C. Special Meetings
----------------
Special meetings of the Board for any purpose or purposes
shall be called at any time or place by the Chairman of the Board or the
President or by any Vice President or the Secretary or any two directors.
Special meetings shall be held upon oral or written notice given by any means
in sufficient time for the convenient assembly of directors; seventy-two (72)
hour's notice delivered by mail or twenty-four (24) hour's notice delivered
personally or by telephone or telegraph or other similar means shall be deemed
sufficient for the foregoing purpose. Any notice shall state the date, place
and hour of the meeting. Notice of a meeting need not be given to any director
who signs a waiver of notice, whether
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before or after the meeting, or who attends the meeting without protesting,
prior thereto or at its commencement, the lack of notice to such director.
D. Notice of Adjournment
---------------------
A majority of the directors present, whether or not a quorum
is present, may adjourn any meeting to another time and place. If the meeting
is adjourned for more than twenty-four (24) hours, notice of such adjournment
to another time and place shall be given prior to the time of the adjourned
meeting to the directors who were not present at the time of adjournment, in
the same manner set forth above for special meetings in Section 3.07.C.
E. Place of Meeting
----------------
Meetings of the Board may be held at any place within or
without the State of Delaware which has been designated in the notice of the
meeting or, if not stated in the notice or there is no notice, then such
meeting shall be held at the principal executive office of the corporation, or
such other place designated by resolution of the Board.
F. Presence by Conference Telephone Call
-------------------------------------
Members of the Board or any committee designated by the
Board may participate in a meeting through use of conference telephone or
similar communications equipment, so long as all members participating in such
meeting can hear each other. Such participation constitutes presence in person
at such meeting.
G. Quorum/Voting
-------------
Five (with the composition of such five subject to the terms
of any stockholder voting agreement to which the Company is a party) of the
seven authorized directors constitutes a quorum of the Board for the
transaction of business; provided, however, that in the absence of a quorum, a
majority of the directors present at any directors' meeting, either regular or
special, may adjourn any meeting to another time and place. If the meeting is
adjourned for more than twenty-four (24) hours, notice of any adjournment to
another time or place shall be given prior to the time of the adjourned
meeting to the directors who were not present at the time of adjournment, in
the same manner as set forth above for special meetings in Section 3.07.C.
Every act or decision done or made by a majority of the directors present at a
meeting duly held at which a quorum is present is the act of the Board, unless
a greater number be required by law, by the Certificate of Incorporation or by
the provisions of these Bylaws; provided, however, that these Bylaws hereby
authorize the Board of Directors to adopt operating resolutions requiring a
greater than majority vote with respect to certain actions. A meeting at which
a quorum is initially present may continue to transact business
notwithstanding the withdrawal of directors, if any action taken is approved
by at least a majority of the required quorum for such meeting.
H. Waiver of Notice
----------------
Whenever notice is required to be given to any director
pursuant to Delaware law, the corporation's Certificate of Incorporation or
these Bylaws, a written waiver thereof, signed by such director, whether
before or after the time stated therein, shall be deemed equivalent to notice.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting except when the director
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attends the meeting for the express and sole purpose of objecting, at the
beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened. All such waivers, consents and
approvals shall be filed with the corporate records or made a part of the
minutes of the meeting.
Section 3.08 Action Without Meeting
----------------------
Any action required or permitted to be taken at any meeting of the
Board or any committee thereof may be taken without a meeting if all members
of the Board or any committee, as the case may be, consent in writing to such
action and the writing or writings are filed with the minutes or proceedings
of the Board or committee, as the case may be.
Section 3.09 Fees and Compensation
---------------------
Directors and members of the committees may receive such
compensation, if any, for their services, and such reimbursement of expenses,
as may be fixed or determined by resolution of the Board.
Section 3.10 Interested Directors
--------------------
The presence of a director, who is directly or indirectly a party in
a contract or transaction with the corporation, or between the corporation and
any other corporation, partnership, association or other organization in which
such director is a director or officer or has a financial interest, may be
counted in determining whether a quorum is present at any meeting of the Board
of Directors or a committee thereof at which such contract or transaction is
discussed or authorized, and such director may participate in such meeting to
the extent permitted by applicable law, including Section 144 of the Delaware
General Corporation Law.
Article IV
Officers
--------
Section 4.01 Officers
--------
The officers of the corporation shall consist of a Chairman (or
Co-Chairmen) of the Board or President (or Co-Presidents), or both, a
Secretary, a Chief Financial Officer, and such additional officers as may be
elected or appointed in accordance with Section 4.03 of these Bylaws and as
may be necessary to enable the corporation to sign instruments and share
certificates. Any number of offices may be held by the same person.
Section 4.02 Elections
---------
All officers of the corporation, except such officers as may be
otherwise appointed in accordance with Section 4.03, shall be chosen by the
Board, and each shall hold his or her office until he or she shall resign or
be removed or is otherwise disqualified to serve, or until his or her
successor is chosen and qualified.
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Section 4.03 Other Officers
--------------
The Board, at their discretion, may appoint, or empower the President
to appoint a Chief Operating Officer, one or more Vice Presidents, one or more
Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, or such
other officers as the business of the corporation may require, each of whom
shall hold office for such period, have such authority and perform such duties
as the Board or the President may from time to time determine.
Section 4.04 Removal
-------
Any officer may be removed, either with or without cause, by the
Board, at any regular or special meeting thereof or by any officer upon whom
such power of removal may be conferred by the Board (subject, in each case, to
the rights, if any, of an officer under contract of employment).
Section 4.05 Resignation
-----------
Any officer may resign at any time by giving written notice to the
Board or to the President, or to the Secretary of the corporation without
prejudice to the rights, if any, of the corporation under any contract to
which the officer is a party. Any such resignation shall take effect at the
time of the receipt of such notice or at any later time specified thereon and,
unless otherwise specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
Section 4.06 Vacancies
---------
A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed
in these Bylaws for regular appointments to such office.
Section 4.07 Chairman of the Board
---------------------
The Board may choose a Chairman (or Co-Chairmen) of the Board from
among its members. The Chairman of the Board, if there shall be such an
officer, shall, if present, preside at all meetings of the Board and at all
meetings of the Stockholders and exercise and perform such other powers and
duties as may be from time to time assigned to him or her by the Board. If
there is no President, the Chairman of the Board shall in addition be the
Chief Executive Officer of the corporation and shall have the powers and
duties prescribed in Section 4.08 below. The Chairman of the Board shall hold
office until the organization meeting of the Board neat succeeding his or her
election and until his or her successor is elected and qualified or until his
or her earlier resignation or removal.
Section 4.08 President
---------
Subject to such supervisory powers, if any, as may be given by the
Board to the Chairman of the Board, if there be such an officer, the President
(or Co-Presidents) shall be the general manager and Chief Executive Officer of
the corporation and shall, subject to the control of the Board, have general
supervision, direction and control of the business and affairs of the
corporation. In the absence of the Chairman of the Board, or if there be none,
he or she shall preside at all meetings of the Board. He or she shall be
ex-officio a member of all the standing committees, including the Executive
Committee, if any, and shall have the general powers and duties of management
usually vested in the office of President
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of a corporation, and shall have such other powers and duties as may be
prescribed by the Board or these Bylaws.
Section 4.09 Secretary
---------
The Secretary shall keep, or cause to be kept, at the principal
executive office or such other place as the Board may order, a book of minutes
of all meetings of Stockholders, the Board and committees of the Board, with
the time and place of holding, whether regular or special, and if special, how
authorized, the notice thereof given, the names of those present at the
directors' or committee meetings, the number of shares present or represented
at Stockholders' meetings, and the proceedings thereof.
The Secretary shall keep or cause to be kept, at the principal
executive office or at the office of the corporation's transfer agent or
registrar, a record of its Stockholders giving the names and addresses of all
Stockholders and the number and class of shares held by each, the number and
date of certificates issued for shares, and the number and date of
cancellation of every certificate surrendered for cancellation. This
information may be kept in written form or in any other form capable of being
converted into written form.
The Secretary shall give, or cause to be given, notice of all
meetings of the Stockholders and of the Board required by the Bylaws or by law
to be given, and shall have such other powers and perform such other duties as
may be prescribed by the Board or by the Bylaws.
Section 4.10 Chief Financial Officer
-----------------------
The Chief Financial Officer shall have general supervision, direction
and control of the financial affairs of the corporation and shall have such
other powers and duties as may be prescribed by the Board or these Bylaws. In
the absence of a named Treasurer, the Chief Financial Officer shall also have
the powers and duties of the Treasurer as hereinafter set forth and shall be
authorized and empowered to sign as Treasurer in any case where such officer's
signature is required.
Section 4.11 Treasurer
---------
The Treasurer shall keep or cause to be kept the books and records of
account as provided for and in accordance with Section 6.01 of these Bylaws.
The books of account shall at all reasonable times be open to inspection by
any director. The Treasurer shall deposit all moneys and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the Board. He or she shall disburse the funds of the corporation
as may be ordered by the Board, shall render to the President and directors,
whenever they request it, an account of all of his transactions as Treasurer
and of the financial condition of the corporation, and shall have such other
powers and perform such other duties as may be prescribed by the Board or
these Bylaws.
Section 4.12 Vice President
--------------
In the absence or disability of the President (or Co-Presidents), the
Vice Presidents, in order of their rank as fixed by the Board, or, if not
ranked, the Vice President designated by the Board, shall perform all the
duties of the President and when so acting shall have all the powers of, and
be subject to the restrictions upon, the President. The Vice Presidents shall
have such other powers and perform such other duties as from time to time may
be prescribed for them.
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<PAGE>
Section 4.13. Chief Operating Officer.
-----------------------
The Chief Operating Officer shall have such authority and perform
such duties as the Board may from time to time determine.
Article V
Indemnification and Insurance
-----------------------------
The corporation shall, to the fullest extend permitted by Section 145
of the General Corporation Law of the State of Delaware, as the same may be
amended and supplemented, indemnify any and all persons whom it shall have the
power to indemnify under said section from and against any and all of the
expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of Stockholders or disinterested directors or
otherwise, both as to action in his or her official capacity and as to action
in another capacity while holding such office, and shall continue as to a
person who has ceased to be a director, officer, employee or agent and shall
inure to the benefit of the heirs, executors and administrators of such
person. Expenses incurred by any such person in connection with a proceeding
shall be paid by the corporation in advance of the final disposition of such
proceeding upon receipt of an undertaking by or on behalf of such person to
repay such amounts, upon such terms and conditions as the Board of Directors
deems appropriate, if it shall ultimately be determined that such person is
not entitled to be indemnified by the corporation.
Article VI
Miscellaneous
-------------
Section 6.01 Books of Account and Proceedings
--------------------------------
The corporation shall keep adequate and correct books and records of
account and shall keep minutes of the proceedings of its Stockholders, Board
and committees of the Board and shall keep at its principal executive office,
or at the office of its transfer agent or registrar, a record of its
Stockholders, giving the names and addresses of all Stockholders and the
number and class of shares held by each. Such minutes shall be kept in written
form. Such other books and records shall be kept either in written form or in
any other form capable of being converted into written form.
Section 6.02 Rights of Inspection
--------------------
A. By Stockholders
---------------
1. Record of Stockholders
----------------------
The Secretary shall prepare and make, at least ten (10) days
before every meeting of Stockholders, a complete list of Stockholders entitled
to vote at the meeting, arranged in alphabetical order, and showing the
address of each Stockholder and the number of shares registered in the name of
such Stockholder. Such list shall be open to the examination of any
Stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, at such
place specified in the notice of the meeting or, if not so specified, at the
place where the meeting
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<PAGE>
is to be held. The list shall also be produced and kept at the time and place
of the meeting during the whole time thereof, and may be inspected by any
Stockholder who is present. Further, any Stockholder, in person or by attorney
or other agent, upon written demand under oath stating the purposes thereof,
has the right, during usual business hours, to inspect for any proper purpose
the corporation's list of Stockholders. Such Stockholder has the right to make
copies or extracts therefrom. A proper purpose for this Section 6.02 shall
mean a purpose reasonably related to such person's interest as a Stockholder.
In every instance where an attorney or other agent shall be the person who
seeks the right to inspection, the demand under oath shall be accompanied by a
power of attorney or such other writing which authorizes the attorney or other
agent to so act on behalf of the Stockholder. The demand under oath shall be
directed to the corporation at its principal place of business. The
corporation shall either permit the right to inspection or reply to the
written demand within five (5) business days of receiving the demand.
2. Corporate Records
-----------------
Any Stockholder, in person or by attorney or other agent,
shall upon written demand under oath stating the purpose thereof, have the
right during business hours to inspect for any proper purpose the accounting
books and records and minutes of proceedings of the Stockholders and the Board
and committees of the Board. This right of inspection shall also extend to the
records of any subsidiary of the corporation.
B. By Directors
------------
Every director shall have the right at any reasonable time
to examine the corporation's stock ledger, a list of its Stockholders and its
other books and records for a purpose reasonably related to his or her
position as a director Such inspection by a director may be made in person or
by agent or attorney and the right of inspection includes the right to copy
and make extracts.
Section 6.03 Checks, Drafts, Etc.
-------------------
All checks, drafts or other orders for payment of money, notes or
other evidences of indebtedness, issued in the name of or payable to the
corporation, shall be signed or endorsed by such person or persons and in such
manner as, from time to time, shall be determined by resolution of the Board.
Section 6.04 Authority to Execute Contracts
------------------------------
The Board may authorize any officer or officers, agent or agents, to
enter into any contract or execute any instrument in the name of and on behalf
of the corporation, and subject to the applicable laws of the State of
Delaware. Such authority may be general or confined to specific instances and,
unless so authorized by the Board, no officer, agent or employee shall have
the power or authority to bind the corporation by any contract or engagement
or to pledge its credit or to render it liable for any purpose or to any
amount.
Section 6.05 Representation of Shares of Other Corporations
----------------------------------------------
The Chairman of the Board, if any, President or any Vice President
and the Secretary or any Assistant Secretary of this corporation are
authorized to vote, represent and exercise on behalf of this corporation all
rights incident to any and all shares of any other corporation or corporations
standing in the name of the corporation. The authority herein granted to said
officers to vote or represent on behalf
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<PAGE>
of this corporation any and all shares held by this corporation in any other
corporation or corporations may be exercised either by such officers in person
or by any other person authorized so to do by proxy or power of attorney duly
executed by said officers.
Section 6.06 Construction and Definitions
----------------------------
Unless the context otherwise requires, the general provisions, rules
of construction and definition contained in the corporation laws of the State
of Delaware shall govern the construction of these Bylaws. Without limiting
the generality of the foregoing, the singular number includes the plural and
the plural number includes the singular, and the term "person" includes a
corporation as well as a natural person.
Article VII
Amendments
----------
Section 7.01 Power of Stockholders
---------------------
New Bylaws may be adopted or these Bylaws may be amended or repealed
by the vote of Stockholder entitled to exercise a majority of the voting power
of the corporation or by the written consent of such Stockholders, except as
otherwise provided by law or by the Certificate of Incorporation.
Section 7.02 Power of Directors
------------------
Subject to the right of Stockholders as provided in Section 7.01 to
adopt, amend or repeal Bylaws, any Bylaw, including this Section 7.02, may be
adopted, amended or repealed by the affirmative vote of at least sixty-six and
two-thirds percent (66-2/3%) of the authorized number of members of the Board
of Directors.
Article VIII
Emergency Provisions
--------------------
Section 8.01 General
-------
The provisions of this Article shall be operative only during any
emergency resulting from an attack on the United States or on a locality in
which the corporation conducts its business or customarily holds meetings of
the Board or Stockholders, or during any nuclear or atomic disaster, or during
the existence of any catastrophe or other similar emergency condition, as a
result of which a quorum of the Board or a standing committee thereof cannot
be convened. Said provisions in such event shall override all other Bylaws of
the corporation in conflict with any provisions of this Article, and shall
remain operative so long as it remains impossible or impracticable to continue
the business of the corporation otherwise, but thereafter shall be
inoperative; provided that all actions taken in good faith pursuant to such
provisions shall thereafter remain in full force and effect unless and until
revoked by action taken pursuant to the provisions of the Bylaws other than
those contained in this Article. No officer, director or employee acting in
accordance with any provision of this Article shall be liable except for
willful misconduct.
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<PAGE>
Section 8.02 Unavailable Directors
---------------------
All directors of the corporation who are not available to perform
their duties as directors by reason of physical or mental incapacity or for
any other reason or who are unwilling to perform their duties or whose
whereabouts are unknown shall automatically cease to be directors, with like
effect as if such persons had resigned as directors, so long as such
unavailability continues.
Section 8.03 Authorized Number of Directors
------------------------------
The authorized number of directors shall be the number of directors
remaining after eliminating those who have ceased to be directors pursuant to
Section 8.02, or the minimum number required by law, whichever number is
greater.
Section 8.04 Quorum
------
The number of directors necessary to constitute a quorum shall be
one-third (1/3) of the authorized number of directors as specified in the
foregoing Section, or such other minimum number as, pursuant to the law or
lawful decree then in force, it is possible for the Bylaws of a corporation to
specify.
Section 8.05 Creation of Emergency Committee
-------------------------------
In the event the number of directors remaining after eliminating
those who have ceased to be directors pursuant to Section 8.02 is less than
the minimum number of authorized directors required by law, then until the
appointment of additional directors to make up such required minimum, all the
powers and authorities which the Board could by law delegate, including all
powers and authorities which the Board could delegate to a committee, shall be
automatically vested in an emergency committee, and the emergency committee
shall thereafter manage the affairs of the corporation pursuant to such powers
and authorities and shall have all other powers and authorities as may by law
or lawful decree be conferred on any person or body of persons during a period
of emergency.
Section 8.06 Constitution of Emergency Committee
-----------------------------------
The emergency committee shall consist of all the directors remaining
after eliminating those who have ceased to be directors pursuant to Section
8.02, provided that such remaining directors are not less than three (3) in
number. In the event such remaining directors are less than three (3) in
number, the emergency committee shall consist of three (3) persons, who shall
be the remaining director or directors and either one (1) or two (2) officers
or employees of the corporation, as the remaining director or directors may in
writing designate. If there is no remaining director, the emergency committee
shall consist of the three (3) most senior officers of the corporation who are
available to serve, and if and to the extent that officers are not available,
the most senior employees of the corporation. Seniority shall be determined in
accordance with any designation of seniority in the minutes of the proceedings
of the Board, and in the absence of such designation, shall be determined by
rate of remuneration. In the event that there are no remaining directors and
no officers or employees of the corporation available, the emergency committee
shall consist of three (3) persons designated in writing by the Stockholder
owning the largest number of shares of record as of the date of the last
record date.
-20-
<PAGE>
Section 8.07 Powers of Emergency Committee
-----------------------------
The emergency committee, once appointed, shall govern its own
procedures and shall have power to increase the number of members thereof
beyond the original number, and in the event of a vacancy or vacancies
therein, arising at any time, the remaining member or members of the emergency
committee shall have the power to fill such vacancy or vacancies. In the event
at any time after its appointment all members of the emergency committee shall
die or resign or become unavailable to act for any reason whatsoever, a new
emergency committee shall be appointed in accordance with the foregoing
provisions of this Article.
Section 8.08 Directors Becoming Available
----------------------------
Any person who has ceased to be a director pursuant to the provisions
of Section 8.02 and who thereafter becomes available to serve as a director
shall automatically become a member of the emergency committee.
Section 8.09 Election of Board
-----------------
The emergency committee shall, as soon after its appointment as is
practicable, take all requisite action to secure the election of a Board, and
upon such election all the powers and authorities of the emergency committee
shall cease.
Section 8.10 Termination of Emergency Committee
----------------------------------
In the event, after the appointment of an emergency committee, a
sufficient number of persons who ceased to be directors pursuant to Section
8.02 become available to serve as directors, so that if they had not ceased to
be directors as aforesaid, there would be enough directors to constitute the
minimum number of directors required by law, then all such persons shall
automatically be deemed to be reappointed as directors and the powers and
authorities of the emergency committee shall be at an end.
The undersigned, being the Secretary of OVERSEAS FILMGROUP, INC.
hereby certifies that the foregoing Bylaws were adopted as the Amended and
Restated Bylaws of said corporation by its Board of Directors on [ ]
Dated: [ ] _______________________________
[ ]
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FINAL 6/27/96 (pending speaking with Debra C.)
Exhibit O
Form of Opinion of Gipson, Hoffman & Pancione
1. Overseas has the requisite power and authority to execute
and deliver the Transaction Documents to which it is or will be a party and to
perform the Transactions to be performed by it. Such execution, delivery and
performance by Overseas have been duly authorized by all necessary corporate
action on the part of Overseas. The Transaction Documents to be executed and
delivered by Overseas or the Overseas Stockholders have been duly and validly
executed and delivered by such party or parties. The Merger Agreement,
Security Agreement, Overseas Stockholder Employment Agreements, Lischak
Employment Agreement, Lock-up and Registration Rights Agreement, Tax
Reimbursement Agreement, EMAC 1996 Special Stock Option Plan and Agreement
constitute legally valid and binding obligations of Overseas and the Overseas
Stockholders, to the extent they are parties thereto, enforceable against each
such party in accordance with their respective terms.
2. No authorization, consent or approval of any federal or
California or Delaware state governmental agency or authority is required on
the part of Overseas in order to permit consummation by Overseas of the
transactions contemplated by the Merger Agreement except such as have been
obtained.
3. Assuming due authorization of the Merger by all necessary
corporate action on the part of EMAC, upon the filing of the Certificate of
Merger with the Secretary of State of Delaware, the Merger will be effective
under Delaware law.
0-1
<PAGE>
Exhibit P
Form of Opinion of Debra Chiaramonte, Esq.
1. Overseas is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware.
Overseas is qualified to do business as a foreign corporation in California
and any jurisdiction where it is required to be so qualified, except where the
failure to so qualify would not have a Material Adverse Effect.
2. Except for the consents specified in Section 4.3 of the
Overseas Disclosure Schedule (the "Required Consents"), the approval of the
Merger Agreement by the holders of a majority of the issued and outstanding
Overseas Shares, and the filing of the Certificate of Merger in accordance
with the DGCL, neither the execution and delivery by Overseas or the Overseas
Stockholders of the Transaction Documents to which either is or will be a
party, nor the performance of the Transactions to be performed by Overseas or
the Overseas Stockholders will require any filing to be made by Overseas, or
any consent or approval to be obtained by Overseas or constitute a Default
under (a) any Regulation or Court Order to which Overseas is subject, (b) the
Certificate of Incorporation or bylaws of Overseas, or (c) any Contract,
Governmental Permit or other document to which Overseas is a party or by which
the properties or other assets of Overseas is subject, except where the
aggregate effect of any such Defaults or the failure to make or obtain any
such filings, consents or approvals would not have a Material Adverse Effect.
3. The total authorized capital stock of Overseas consists
of 2,000 shares of Overseas Common Stock, of which 100 shares are issued and
outstanding (the "Existing Shares"). Overseas does not have any shares of
capital stock that are issued and held by Overseas as treasury stock. Except
as scheduled in the Overseas Disclosure Schedule, to the best of such
counsel's knowledge, there are no existing options, warrants, calls,
subscriptions, commitments, arrangements or other rights of any character
(including conversion or preemptive rights) relating to the issuance,
acquisition or registration of any issued or unissued capital stock or other
securities of Overseas, and, except as set forth in Section 4.4 of the
Overseas Disclosure Schedule, the Overseas Stockholders have not agreed or
committed to transfer any Overseas Shares held by them on or prior to the
Effective Time. All of the outstanding shares of Overseas Common Stock are
duly and validly authorized and issued, fully paid and non-assessable. Except
as set forth in Section 4.4(a) of the Overseas Disclosure Schedule, to the
best of such counsel's knowledge, there are no shareholder agreements,
agreements among securityholders, voting trusts or other
P-1
<PAGE>
agreements or understandings to which the Overseas Parties, or either of them,
is a party, or, to the Overseas Parties' knowledge, to which any
securityholder of the Overseas Parties is a party, including, without
limitation, any agreements or understandings with respect to (i) the voting of
the capital stock of Overseas and of each of the Overseas Subsidiaries,
respectively, (ii) the relative rights and obligations of the securityholders
of Overseas and of each of the Overseas Subsidiaries, respectively, (iii) any
buy-sell or rights of first refusal regarding Overseas and of each of the
Overseas Subsidiaries, respectively, and/or the interests of each of the
Overseas Subsidiaries, respectively, or (v) representation on Overseas' Board
of Directors or the Board of Directors of any of the Overseas Subsidiaries.
Except where the aggregate effect of any such noncompliance would not have a
Material Adverse Effect or as set forth in Section 4.4 of the Overseas
Disclosure Schedule, Overseas complied with all applicable federal and state
securities Regulations in connection with the offer and issuance of all of the
Existing Shares and there are no rescission rights relating thereto.
4. Overseas has obtained and is in compliance in all
material respects with all governmental permits, licenses, registrations,
certificates of occupancy, approvals and other authorizations that are
required for the operation of the Business of Overseas as currently operated
except such items as to which the failure to obtain or to comply, in the
aggregate, would not have a Material Adverse Effect (the "Governmental
Permits").
5. Except as disclosed in Section 4.14(a) of the Overseas
Disclosure Schedule, to the best of such counsel's knowledge, there is no
Litigation that is pending or threatened against Overseas or any of the
Overseas Subsidiaries, respectively, except any pending or threatened
Litigation that, individually or in the aggregate, would not have a Material
Adverse Effect, nor to the best of such counsel's knowledge, is Overseas a
party to, or threatened to be made a party to, any complaint, action, suit,
proceeding, hearing or investigation of or in any court or administrative
agency of any federal, state, local or foreign jurisdiction or before any
arbitrator.
P-2
<PAGE>
Exhibit Q
Form of Opinion of Brobeck, Phleger & Harrison LLP
1. EMAC is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. EMAC is
qualified to do business as a foreign corporation in California.
2. EMAC has the requisite power and authority to execute and
deliver the Transaction Documents to which it is or will be a party and to
perform the Transactions to be performed by it. Such execution, delivery and
performance by EMAC have been duly authorized by all necessary corporate
action on the part of EMAC. The Merger Agreement, Security Agreement, Overseas
Stockholder Employment Agreements, Lischak Employment, Lock-up and
Registration Rights Agreement, Tax Reimbursement Agreement, EMAC 1996 Special
Stock Option Plan and Agreement, Certificate of Merger, Merger Note, and
Stockholders Voting Agreement to be executed and delivered by EMAC are duly
and validly executed and delivered by EMAC. The Transaction Documents
constitute legally valid and binding obligations of EMAC, enforceable in
accordance with their respective terms, except that the remedies of specific
performance, injunction and other forms of equitable relief are subject to
certain tests of equity jurisdiction, equitable defenses and the discretion of
the court before which any proceeding may be brought.
3. Neither the execution and delivery by EMAC of the
Transaction Documents to which it is a party, nor the performance of the
Transactions to be performed by EMAC, will require any filing, consent or
approval or constitute a Default under (a) any Regulation or Court Order to
which EMAC is subject, (b) the Certificate of Incorporation or bylaws of EMAC
or (c) any Contract, Governmental Permit or other document known to such
counsel to which EMAC is a party or by which the properties or other assets of
EMAC may be subject.
4. The total authorized capital stock of EMAC consists of
25,000,000 shares of EMAC Common Stock, 2,600,000 shares of which are issued
and outstanding, and 2,000,000 shares of preferred stock, $0.001 par value per
share, none of which is issued and outstanding. EMAC does not have any shares
of capital stock that are issued and held by EMAC as treasury stock. Except as
specified in Section 5.4(a) of the EMAC Disclosure Schedule, to the best of
such counsel's knowledge, there are no existing options, warrants, calls,
subscriptions, commitments, arrangements or other rights of any character
(including conversion or preemptive rights) relating to the issuance,
Q-1
<PAGE>
acquisition or registration of any issued or unissued capital stock or other
securities of EMAC. All of the outstanding shares of EMAC Common Stock are
duly and validly authorized and issued, fully paid and non-assessable. All of
the outstanding options, warrants and units to purchase EMAC securities have
been duly and validly authorized and issued and are fully paid and
non-assessable and sufficient numbers of shares of EMAC Common Stock have been
reserved for issuance upon exercise of such securities. To the best of such
counsel's knowledge, EMAC has complied with all applicable Regulations in
connection with the offer, sale and issuance of all of the shares of EMAC
Common Stock, options and warrants to purchase shares of EMAC Common Stock and
EMAC Units issued by EMAC since its formation, except where the aggregate
effect of any such noncompliance would not have a Material Adverse Effect. To
the best of such counsel's knowledge, except as set forth in Section 5.4(a) of
the EMAC Disclosure Schedule, there are no rescission rights relating to any
of the securities of EMAC. Except as set forth in Section 5.4(a) of the EMAC
Disclosure Schedule, there are no shareholder agreements, agreements among
securityholders, voting trusts or other agreements or understandings to which
EMAC or is a party, or, to which any securityholder of the EMAC is a party,
including without limitation, any agreements or understandings with respect to
(i) the voting of the capital stock of EMAC, (ii) the relative rights and
obligations of the securityholders of EMAC, (iii) any buy-sell or rights of
first refusal regarding EMAC and/or the interests of any securityholders
therein, (iv) relations among the securityholders of EMAC, or (v)
representation on EMAC's Board of Directors.
5. Except as disclosed in Section 5.13 of the EMAC
Disclosure Schedule, to the best os such counsel's knowledge, there is no
Litigation that is pending or threatened against EMAC, except any pending or
threatened Litigation that, individually or in the aggregate, would not have a
Material Adverse Effect, nor to the best of such counsel's knowledge, is EMAC
a party to, or threatened to be made a party to, any complaint, action, suit,
proceeding, hearing or investigation of or in any court or administrative
agency of any federal, state, local or foreign jurisdiction or before any
arbitrator.
6. All of the Merger Shares will, upon issuance in
accordance with the terms of the Merger Agreement, constitute validly
authorized, issued and outstanding, fully paid and non-assessable shares of
EMAC Common Stock free from all liens, pledges, encumbrances and claims
created by, or as the result of actions of EMAC. Assuming the accuracy of the
representations of the Overseas Stockholders contained in ss.4.27 of the
Merger Agreement, the issuance of EMAC Common Stock pursuant to the Merger
Agreement is exempt from the registration requirements of Section 5 of the
Securities Act of 1933, as amended, by virtue of Section 4(2) thereof or
Regulation D promulgated thereunder and
Q-2
<PAGE>
from the qualification requirements of all applicable state securities laws.
7. No authorization, consent or approval of any federal or
California or Delaware state governmental agency or authority is required on
the part of EMAC in order to permit consummation by EMAC of the transactions
contemplated by the Merger Agreement except such as have been obtained.
8. Upon the filing of the Certificate of Merger with the
Secretary of State of Delaware, the Merger will be effective under Delaware
law and each outstanding share of Overseas Common Stock will be converted as
provided in the Merger Agreement.
Q-3
<PAGE>
OVERSEAS FILMGROUP, INC.
AGREEMENT OF MERGER
Exhibit R
SURRENDER AND PAYMENT
OVERSEAS FILMGROUP, INC. SHARES SURRENDERED:
Name Shares Held
- ---- -----------
Ellen Dinerman Little and Robert Little,
Husband and Wife as Community Property ........... 92.14672
William F. Lischak ................................. 7.85328
MERGER CONSIDERATION TO BE DISTRIBUTED AS FOLLOWS:
Ellen Dinerman Little and Robert Little:
EMAC Common Stock (Merger Shares) ......... 2,928,218 shares
Merger Cash .. ............................ $1,225,135
Merger Note ............................... $2,000,000
William F. Lischak:
EMAC Common Stock ......................... 249,560 shares
Merger Cash ............................... $274,865
Merger Note ............................... $ 0
In the event any additional Merger Cash is distributed, it shall be be
distributed 92.14672% to Ellen and Robert Little and 7.85328% to William
Lischak.
