SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 25, 1996
Overseas Filmgroup, Inc.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware
- -------------------------------------------------------------------------------
(State or Other Jurisdiction of Incorporation)
0-25308 13-3751702
- -------------------------------------------------------------------------------
(Commission File Number) (I.R.S. Employer Identification No.)
8800 Sunset Boulevard, Los Angeles, California 90067
- -------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(310) 855-1199
- -------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Entertainment/Media Acquisition Corporation
- -------------------------------------------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
202 North Canon Drive, Beverly Hills, California 90210
- -------------------------------------------------------------------------------
(Former Address)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
The response to Item 2 hereof is incorporated herein by
reference.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On October 31, 1996, the Registrant, formerly known as
Entertainment/Media Acquisition Corporation ("EMAC"), consummated its
acquisition of Overseas Filmgroup, Inc., a Delaware corporation ("Pre-Merger
Overseas"), pursuant to the Agreement of Merger, dated as of July 2, 1996, as
amended as of September 20, 1996, among EMAC, Pre-Merger Overseas and Ellen
Dinerman Little and Robert B. Little (as amended, the "Merger Agreement"). The
acquisition was effected by the merger (the "Merger") of Pre-Merger Overseas
with and into EMAC, with EMAC being the surviving corporation. Following the
Merger, EMAC changed its name to "Overseas Filmgroup, Inc." and succeeded to
the business of Pre-Merger Overseas.
The total merger consideration paid by the Registrant to the
stockholders of Pre- Merger Overseas consisted of: (i) 3,177,778 shares of the
Registrant's common stock, par value $.001 per share ("Common Stock"); (ii)
$1.5 million in cash; and (iii) a $2.0 million, 9%, five-year secured
promissory note (collectively, the "Merger Consideration"). The amount of
Merger Consideration was determined through negotiations. EMAC considered the
parties' valuation of Pre-Merger Overseas, the cash value per share of EMAC
common stock, the allocation of Merger Consideration among stock, cash, and
promissory note and the number of outstanding shares of common stock of
Pre-Merger Overseas. The Merger Consideration was paid from the proceeds of a
trust fund which held approximately 90% of the net proceeds of EMAC's initial
public offering of Common Stock (the "IPO") consummated in February, 1995. The
stockholders of Pre-Merger Overseas to whom the Merger Consideration was paid
were Ellen Dinerman Little, Robert B. Little and William F. Lischak.
Reference is made to "Principal Stockholders of EMAC"
contained in the Registrant's definitive Proxy Statement (the "EMAC Proxy
Statement") dated September 25, 1996 filed with the Securities and Exchange
Commission pursuant to Section 14 of the Securities Exchange Act of 1934, as
amended, for information regarding the control of the Registrant prior to the
consummation of the Merger.
Upon consummation of the Merger, Ellen Dinerman Little and
Robert B. Little each became the beneficial owner of 3,277,778 shares of Common
Stock (calculated in the manner set forth below) or approximately 55.8% of
Common Stock. Such holdings of each of Ms. Little and Mr. Little include (i)
the shares of Common Stock received as part of the Merger Consideration and
held by Ms. Little and Mr. Little as community property; (ii) a voting proxy
jointly held by Ms. Little and Mr. Little with respect to 249,560 shares of
Common Stock owned by William F. Lischak; and (iii) 100,000 shares of Common
Stock subject to currently exercisable options granted to such person under the
1996 Special Stock Option Plan and Agreement (the "Management Option Plan")
(but does not include the shares of Common Stock
- 2 -
<PAGE>
subject to currently exercisable options granted to such person's spouse under
the Management Option Plan, but which generally are only exercisable by such
person). Such holdings of each of Ms. Little and Mr. Little also do not include
1,000,000 shares of Common Stock subject to options granted to each of Ms.
Little and Mr. Little under the Management Option Plan, the exercisability of
which is subject to certain vesting requirements.
Upon consummation of the Merger, Ellen Dinerman Little,
Robert B. Little, the Registrant's initial stockholders (i.e., those
stockholders who owned common stock prior the IPO) (the "Initial Stockholders")
and the Registrant entered into a Stockholders' Voting Agreement, pursuant to
which they have agreed to use their best efforts to cause the Registrant's
board of directors to consist of seven members, including four individuals
designated by Ms. Little and Mr. Little, and three individuals designated by
the Initial Stockholders. the Stockholders' Voting Agreement will terminate
eight and one-half years from the consummation of the Merger, or sooner if the
employment of Ms. Little, Mr. Little and Mr. Lischak is terminated. In
addition, if Ms. Little and Mr. Little, or the Initial Stockholders fall below
certain stock ownership thresholds, such group's right to designate directors,
but not their obligation to vote for the designees of the other group, will
terminate. In addition, the Stockholders' Voting Agreement contains other
provisions which require the affirmative vote of at least 75% of the authorized
number of directors in certain circumstances. Reference is made to the
Stockholders' Voting Agreement, a copy of which has been filed herewith as
Exhibit 10.14.
Pursuant to the Merger Agreement, the Registrant has also
adopted certain guidelines for the operation of its business, a copy of which
has been filed herewith as Exhibit 10.19.
Upon consummation of the Merger, the officers of EMAC
resigned their respective positions. New executive officers were appointed by
the Registrant's board of directors as follows:
Name Position
Ellen Dinerman Little Co-Chairman of the Board of Directors,
Co-Chief Executive Officer and President
Robert B. Little Co-Chairman of the Board of Directors and
Co-Chief Executive Officer
William F. Lischak Chief Operating Officer, Chief Financial
Officer and Secretary
Richard Guardian Senior Vice President, Worldwide Distribution
Mansour Mostaedi Senior Vice President, Finance and Accounting
Mary Jane (MJ) Peckos Senior Vice President, Domestic Distribution
and Marketing
- 3 -
<PAGE>
Pre-Merger Overseas, and now, the Registrant, is an
independent film company which specializes in the acquisition and worldwide
license or sale of distribution rights to independently produced, feature films
in a wide variety of genres.
For further information regarding the Merger, please refer to
the EMAC Proxy Statement, the contents of which are incorporated herein by
reference.
ITEM 5. OTHER EVENTS.
On October 25, 1996, the stockholders of the Registrant
approved amendments to, and restatement of, the Registrant's Certificate of
Incorporation to, among other things, (i) change the Registrant's name to
"Overseas Filmgroup, Inc.," (ii) increase the authorized capital stock and
(iii) enact certain anti-takeover provisions, including, without limitation, a
classified board of directors. Such amendments to, and restatement of, the
Registrant's Certificate of Incorporation became effective as of October 31,
1996. Pursuant to the classification of the board of directors, the
stockholders elected Robert B. Little and Stephen K. Bannon as Class I
directors, Ellen Dinerman Little and Scot K. Vorse as Class II directors, and
William F. Lischak, Jeffrey A. Rochlis and Alessandro Fracassi as Class III
directors. A copy of the Restated Certificate of Incorporation has been filed
herewith as Exhibit 3.1.
On October 25, 1996, the stockholders of the Registrant
ratified the appointment of Price Waterhouse LLP, Los Angeles, California, as
independent auditors of the Registrant. Reference is made to "Information
Concerning Independent Auditors of EMAC" in the EMAC Proxy Statement for more
information regarding the change of the Registrant's independent auditors as
previously reported therein.
On October 31, 1996, the Registrant's board of directors
adopted the bylaws a copy of which has been filed herewith as Exhibit 3.2.
On October 31, 1996, the Registrant issued a press release
announcing the consummation of the Merger. A copy of the press release has been
filed herewith as Exhibit 99.2.
On October 31, 1996, pursuant to the Merger Agreement, the
Registrant issued a secured promissory note, as partial payment of the Merger
Consideration, to Ellen Dinerman Little and Robert B. Little, a copy of which
has been filed herewith as Exhibit 10.1.
On October 31, 1996, pursuant to the Merger Agreement, the
Registrant entered into indemnity agreements which each of its officers and
directors, each of which has been filed herewith as Exhibit 10.2 through 10.8.
On October 31, 1996, pursuant to the Merger Agreement, the
Registrant entered into employment agreements with each of Ellen Dinerman
Little, Robert B. Little and William
- 4 -
<PAGE>
F. Lischak, each of which has been filed herewith as Exhibits 10.9, 10.10 and
10.11, respectively.
On October 31, 1996, pursuant to the Merger Agreement, the
Registrant entered into a Security Agreement with Ellen Dinerman Little and
Robert B. Little, a copy of which is attached hereto as Exhibit 10.12.
On October 31, 1996, pursuant to the Merger Agreement, the
Registrant entered into a Tax Reimbursement Agreement with Ellen Dinerman
Little, Robert B. Little and William F. Lischak, a copy of which is attached
hereto as Exhibit 10.13.
On October 31, 1996, pursuant to the Merger Agreement, the
Registrant entered into a Lock-Up and Registration Rights Agreement with Ellen
Dinerman Little, Robert B. Little and William F. Lischak, a copy of which has
been filed herewith as Exhibit 10.15.
On October 31, 1996, pursuant to the Merger Agreement, the
Registrant issued an unsecured promissory note to Ellen Dinerman Little and
Robert B. Little representing the cash value of certain life insurance policies
under which the Registrant has been named as the beneficiary, a copy of which
has been filed herewith as Exhibit 10.16.
On October 31, 1996, the Registrant entered into
Non-Competition Agreements with Ellen Dinerman Little and Robert B. Little,
copies of which have been filed herewith as Exhibits 10.17 and 10.18,
respectively.
On October 28, 1996, the Registrant entered into a letter
agreement amending the Unit Purchase Options, effective upon consummation of
the Merger, a copy of which has been filed herewith as Exhibit 4.5.
On October 31, 1996, the Registrant issued a warrant to
Jefferson Capital Group, Ltd., a copy of which has been filed herewith as
Exhibit 4.6.
On October 25, 1996, the Registrant's stockholders approved
the Management Option Plan, a copy of which has been filed herewith as Exhibit
99.1. The Management Option Plan was executed on October 31, 1996.
On October 25, 1996, the Registrant's stockholders approved
the 1996 Basic Stock Option and Stock Appreciation Rights Plan.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(A) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
- 5 -
<PAGE>
The unaudited financial statements for the six months
ended June 30, 1996 and the audited financial statements for the years ended
December 31, 1995 and 1994 of Pre- Merger Overseas are contained in the EMAC
Proxy Statement and are incorporated herein by reference.
(B) PRO FORMA FINANCIAL INFORMATION.
Attached hereto are:
(1) the unaudited pro forma combined balance
sheet as of June 30, 1996; and
(2) the unaudited pro forma combined statements
of income for the six months ended June 30, 1996 and the year ended December
31, 1995.
(C) EXHIBITS.
2.1 Agreement of Merger among EMAC, Pre-Merger Overseas and Ellen Dinerman
Little and Robert B. Little, dated as of July 2, 1996 (incorporated by
reference to exhibit 10.7 to the Registrant's Form 10-Q for the
quarter ended May 31, 1996).
2.2 Amendment to Agreement of Merger among EMAC, Pre-Merger Overseas and
Ellen Dinerman Little and Robert B. Little, dated as of September 20,
1996 (incorporated by reference to exhibit 10.8 to the Registrant's
Form 10-Q for the quarter ended August 31, 1996).
3.1 Restated Certificate of Incorporation.
3.2 Bylaws.
4.1 Form of Common Stock Certificate.
4.2 Form of Warrant Certificate (incorporated by reference to exhibit 4.2
to the Registrant's Registration Statement on Form S-1, Registration
No. 33-83624 ("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).
- 6 -
<PAGE>
4.5 Letter agreement amending Unit Purchase Options, dated
October 28, 1996.
4.6 Warrant issued to Jefferson Capital Group, Ltd.
10.1 Secured Promissory Note, dated October 31, 1996.
10.2 Indemnity Agreement with Ellen Dinerman Little, dated October 31, 1996.
10.3 Indemnity Agreement with Robert B. Little, dated October 31, 1996.
10.4 Indemnity Agreement with William F. Lischak, dated October 31, 1996.
10.5 Indemnity Agreement with Stephen K. Bannon, dated October 31, 1996.
10.6 Indemnity Agreement with Scot K. Vorse, dated October 31, 1996.
10.7 Indemnity Agreement with Jeffrey A. Rochlis, dated October 31, 1996.
10.8 Indemnity Agreement with Alessandro Fracassi, dated October 31, 1996.
10.9 Employment Agreement with Ellen Dinerman Little, dated
October 31, 1996.
10.10 Employment Agreement with Robert B. Little, dated as of
October 31, 1996.
10.11 Employment Agreement with William F. Lischak, dated as of
October 31, 1996.
10.12 Security Agreement, dated as of October 31, 1996.
10.13 Tax Reimbursement Agreement, dated as of October 31, 1996.
10.14 Insurance Note, dated October 31, 1996.
10.15 Stockholders' Voting Agreement, dated October 31, 1996.
10.16 Lock-Up and Registration Rights Agreement, dated October 31, 1996.
10.17 Non-Competition Agreement with Ellen Dinerman Little, dated as of
October 31, 1996.
10.18 Non-Competition Agreement with Robert B. Little, dated as of
October 31, 1996.
99.1 1996 Special Stock Option Plan and Agreement.
99.2 Press Release issued by the Registrant on October 31, 1996.
- 7 -
<PAGE>
ITEM 8. CHANGE IN FISCAL YEAR.
On October 31, 1996, the board of directors of the Registrant
voted to change the Registrant's fiscal year from November 30 to December 31,
effective for the fiscal year ending December 31, 1996. The report covering the
transition period will be reflected on the Registrant's Form 10-K for the
fiscal year ending December 31, 1996.
- 8 -
<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 hereunto duly authorized.
Overseas Filmgroup, Inc.
(Registrant)
By: /s/ William F. Lischak
Name: William F. Lischak
Title: Chief Operating Officer, Chief
Financial Officer and Secretary
Dated: November 12, 1996
<PAGE>
EXHIBIT INDEX
2.1 Agreement of Merger among EMAC, Pre-Merger Overseas and Ellen Dinerman
Little and Robert B. Little, dated as of July 2, 1996 (incorporated by
reference to exhibit 10.7 to the Registrant's Form 10-Q for the
quarter ended May 31, 1996).
2.2 Amendment to Agreement of Merger among EMAC, Pre-Merger Overseas and
Ellen Dinerman Little and Robert B. Little, dated as of September 20,
1996 (incorporated by reference to exhibit 10.8 to the Registrant's
Form 10-Q for the quarter ended August 31, 1996).
3.1 Restated Certificate of Incorporation.
3.2 Bylaws.
4.1 Form of Common Stock Certificate.
4.2 Form of Warrant Certificate (incorporated by reference to exhibit 4.2
to the Registrant's Registration Statement on Form S-1, Registration
No. 33-83624 ("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).
4.5 Letter agreement amending Unit Purchase Options, dated
October 28, 1996.
4.6 Warrant issued to Jefferson Capital Group, Ltd.
10.1 Secured Promissory Note, dated October 31, 1996.
10.2 Indemnity Agreement with Ellen Dinerman Little, dated October 31, 1996.
10.3 Indemnity Agreement with Robert B. Little, dated October 31, 1996.
10.4 Indemnity Agreement with William F. Lischak, dated October 31, 1996.
10.5 Indemnity Agreement with Stephen K. Bannon, dated October 31, 1996.
10.6 Indemnity Agreement with Scot K. Vorse, dated October 31, 1996.
- 11 -
<PAGE>
10.7 Indemnity Agreement with Jeffrey A. Rochlis, dated October 31, 1996.
10.8 Indemnity Agreement with Alessandro Fracassi, dated October 31, 1996.
10.9 Employment Agreement with Ellen Dinerman Little, dated
October 31, 1996.
10.10 Employment Agreement with Robert B. Little, dated as of
October 31, 1996.
10.11 Employment Agreement with William F. Lischak, dated as of
October 31, 1996.
10.12 Security Agreement, dated as of October 31, 1996.
10.13 Tax Reimbursement Agreement, dated as of October 31, 1996.
10.14 Insurance Note, dated October 31, 1996.
10.15 Stockholders' Voting Agreement, dated October 31, 1996.
10.16 Lock-Up and Registration Rights Agreement, dated October 31, 1996.
10.17 Non-Competition Agreement with Ellen Dinerman Little, dated as of
October 31, 1996.
10.18 Non-Competition Agreement with Robert B. Little, dated as of
October 31, 1996.
99.1 1996 Special Stock Option Plan and Agreement.
99.2 Press Release issued by the Registrant on October 31, 1996.
- 12 -
<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial statements are
based upon the financial statements of Pre-Merger Overseas Filmgroup and EMAC,
combined and adjusted to give effect to the Merger. Pursuant to the Merger
Agreement, all of the outstanding shares of Common Stock of Pre-Merger Overseas
were converted into shares of EMAC Common Stock plus additional consideration,
consisting of cash and a secured promissory note. The unaudited pro forma
financial statements reflect a recapitalization of Pre-Merger Overseas, with the
issuance of shares by Pre-Merger Overseas, for the net assets of EMAC,
consisting primarily of cash. These pro forma combined financial statements
conform to Pre-Merger Overseas' fiscal year since the operations of the
surviving corporation will primarily be those of Pre-Merger Overseas. This
presentation is considered a more accurate reflection of results and would not
be materially different if EMAC's fiscal year of November 30 were the basis of
presentation. The pro forma adjustments are described in the accompanying notes
to the unaudited pro forma financial statements.
The unaudited pro forma combined statements of income for the six months
ended June 30, 1996 and for the year ended December 31, 1995 give effect to the
Merger as if it had occurred on January 1, 1995. The unaudited pro forma
combined statement of income for the six-month period ended June 30, 1996 was
prepared based on the unaudited statement of income of Pre-Merger Overseas for
the six months ended June 30, 1996 and of EMAC for the six months ended August
31, 1996. The unaudited pro forma statement of income for the year ended
December 31, 1995 was prepared based on the statement of income of Pre-Merger
Overseas for the year ended December 31, 1995 and of EMAC for the year ended
November 30, 1995.
The unaudited pro forma combined balance sheet at June 30, 1996 gives effect to
the Merger as if it had occurred on such date and was prepared based on the
unaudited balance sheets of Pre-Merger Overseas as of June 30, 1996 and of EMAC
as of August 31, 1996.
The unaudited pro forma combined financial statements are not necessarily
indicative of the results of operations of financial position of the surviving
corporation that would have occurred had the Merger occurred at the beginning of
each period presented or on the date indicated, nor are they necessarily
indicative of future operating results or financial position. They should be
read in conjunction with (i) the notes hereto, (ii) EMAC's unaudited financial
statements and the notes thereto as of and for the quarter ended August 31,
1996, included in the Form 10-Q of EMAC for the quarterly period ended August
31, 1996, and EMAC's audited financial statements and the notes thereto as of
and for the year ended November 30, 1995, included in EMAC's Annual Report on
Form 10-K for the year ended November 30, 1995, and (iii) the audited and
unaudited financial information for Pre-Merger Overseas included in the EMAC
Proxy Statement incorporated by reference elsewhere herein.
<PAGE>
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF JUNE 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA ASSUMING (A)
-------------------------- ----------------------------
PRE-MERGER
ASSETS OVERSEAS EMAC ADJUSTMENTS COMBINED
----------- ------------ -------------- ------------
<S> <C> <C> <C><C> <C>
Cash and cash equivalents ..................... $ 304,916 $ 112,590 F $ (112,590) $ 304,916
U.S. government security deposited in Trust
Fund and accrued interest thereon ............ 11,069,994 B (5,000,000)
H (703,600)
B (265,000)
F (5,101,394)
Accounts receivable ........................... 11,014,923 11,014,923
Film costs, net of accumulated amortization .. 27,327,904 27,327,904
Fixed assets, net of accumulated depreciation 422,880 422,880
Other assets .................................. 565,262 391,926 H (669,000) 288,188
----------- ------------ -------------- ------------
$39,635,885 $ 11,574,510 $ (11,851,584) $ 39,358,811
=========== ============ ============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses ........ $ 2,261,980 $ 309,117 H $ (372,600) $ 2,198,497
Payable to producers .......................... 5,707,044 5,707,044
Notes payable, banks .......................... 17,013,163 F (5,213,984) 11,799,179
Deferred income taxes ......................... 130,000 G 2,400,000 2,530,000
Deferred revenue .............................. 1,879,700 1,879,700
Notes payable, shareholders ................... C 2,000,000 2,000,000
----------- ------------ -------------- ------------
TOTAL LIABILITIES ............................ 26,991,887 309,117 (1,186,584) 26,114,420
----------- ------------ -------------- ------------
Common stock subject to possible
conversion, 419,999 shares ................... 2,212,892 D (2,212,892)
STOCKHOLDERS' EQUITY:
Common stock .................................. 500 2,180 E 3,178 5,778
D 420
E (500)
Additional paid-in capital .................... 170,000 9,047,741 B (1,500,000)
C (2,000,000)
D 2,212,472
E (3,178)
E 500
E 15,185
E 4,948,182
H (1,000,000) 11,890,902
Retained earnings ............................. 12,473,498 2,580 B (3,500,000)
E (15,185)
E (4,948,182)
B (265,000)
G (2,400,000) 1,347,711
----------- ------------ -------------- -----------
TOTAL STOCKHOLDER EQUITY ..................... 12,643,998 9,052,501 (8,452,108) 13,244,391
----------- ------------ -------------- -----------
$39,635,885 $ 11,574,510 $ (11,851,584) $39,358,811
=========== ============ ============== ===========
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
EMAC stockholders did not exercise any redemption rights in connection with
the Merger and the unaudited pro forma combined balance sheet is presented on
this basis.
There were 100 shares of Overseas common stock outstanding as of June 30,
1996. On a pro forma basis after the Merger, 5,777,778 shares of EMAC Common
Stock will be outstanding, which assumes 2,600,000 of previously outstanding
shares and 3,177,778 shares issued in exchange for outstanding shares of
Overseas common stock.
B. Represents the release of restricted cash from the Trust Fund as a result
of the Merger, which is then used to pay Merger Consideration ($1,500,000), to
repay debt used to fund distributions made to Overseas Stockholders
($3,500,000) and to reimburse the Overseas Stockholders for certain federal
income taxes ($265,000).
C. Represents issuance of the Merger Note as Merger Consideration paid to
the Overseas Stockholders.
D. Represents the reclassification of EMAC Common Stock subject to possible
redemption.
E. Represents the recapitalization of stockholders' equity based upon the
issuance of EMAC Common Stock in exchange for Overseas Common Stock. This
includes a reclassification of remaining S corporation retained earnings to
additional paid-in capital. The amount which is not reclassified represents
Overseas Filmgroup's C corporation retained earnings prior to January 1, 1989,
the effective date of Overseas Filmgroup's initial S corporation election.
F. Represents the release of restricted cash from the Trust Fund as a result
of the Merger and other EMAC cash used to repay debt of Overseas Filmgroup
concurrent with the Merger.
G. Represents the recognition of a deferred federal income tax liability and
the related earnings impact on Overseas Filmgroup upon termination of S
corporation status and conversion to C Corporation status for federal income
tax purposes upon consummation of the Merger.
H. Represents the impact of total estimated expenses of $1,000,000 by EMAC
and Overseas Filmgroup in connection with the Merger.
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (A)
-------------------------- ----------------------------
OVERSEAS EMAC ADJUSTMENTS COMBINED
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues ........................... $21,672,510 $21,672,510
Expenses:
Film costs ........................ 16,320,694 F $ (96,000) 16,224,694
Selling, general and
administrative expenses .......... 2,721,745 $ 284,069 B 350,000 3,310,147
C (45,667)
------------- ----------- ------------- -------------
Total expenses .................... 19,042,439 284,069 208,333 19,534,841
------------- ----------- ------------- -------------
Income (loss) from operations .... 2,630,071 (284,069) (208,333) 2,137,669
------------- ----------- ------------- -------------
Other income (expense) ............ 263,995 475,084 D (475,084)
E 150,450 414,445
------------- ----------- ------------- -------------
Income before income taxes ....... 2,894,066 191,015 (532,967) 2,552,114
Provision for income taxes ....... 432,905 59,000 G 442,095 934,000
------------- ----------- ------------- -------------
Net income ........................ $ 2,461,161 $ 132,015 $(975,062) $ 1,618,114
============= =========== ============= =============
Earnings per share ................ $ 0.06 $ 0.28
=========== =============
Weighted average number of common
shares and common share
equivalents outstanding .......... 2,093,699 H 5,777,778
=========== =============
</TABLE>
<PAGE>
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA (A)
-------------------------- ---------------------------------
OVERSEAS EMAC ADJUSTMENTS COMBINED
------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Revenues ........................... $15,751,970 $15,751,970
Expenses:
Film costs ........................ 12,506,663 F $ (48,000) 12,458,663
Selling, general and
administrative expenses .......... 1,662,152 $ 196,795 B 175,000 2,003,947
C (30,000)
------------- ----------- ------------- -------------
Total expenses .................... 14,168,815 196,795 97,000 14,462,610
------------- ----------- ------------- -------------
Income (loss) from operations .... 1,583,155 (196,795) (97,000) 1,289,360
------------- ----------- ------------- -------------
Other income (expense) ............ 79,907 279,293 D (279,293)
E 80,406 160,313
------------- ----------- ------------- -------------
Income before income taxes ....... 1,663,062 82,498 (295,887) 1,449,673
Provision for income taxes ....... 122,638 35,700 G 370,662 529,000
------------- ----------- ------------- -------------
Net income ........................ $ 1,540,424 $ 46,798 $(666,549) $ 920,673
============= =========== ============= =============
Primary earnings per share ....... $ 0.02 $ 0.16
=========== =============
Fully diluted earnings per share . I 0.14
=============
Weighted average number of common
shares and common share
equivalents outstanding (primary) 2,600,000 H 5,777,778
=========== =============
Weighted average number of common
shares and common share
equivalents outstanding (fully
diluted) ......................... I 10,247,222
=============
</TABLE>
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
EMAC stockholders did not exercise any redemption rights in connection with
the Merger and the unaudited pro forma statements of income are presented on
this basis.
Upon consummation of the Merger, four companies which are owned in whole (or
99%) by Ellen Dinerman Little and Robert B. Little (the principal shareholders
of Overseas Filmgroup) were transferred to Overseas Filmgroup for nominal
consideration. These companies, which became wholly owned subsidiaries of
the Surviving Corporation, do not have significant assets, liabilities or
operations.
B. For the year ended December 31, 1995, and six months ended June 30, 1996,
represents the increased salaries to be paid to certain officers and senior
management pursuant to the Employment Agreements and otherwise.
C. For the year ended December 31, 1995, and six months ended June 30,
1996, represents the elimination of EMAC fees and occupancy costs payable to
Bannon & Co. which terminated on the date of the Merger.
D. For the year ended December 31, 1995, and six months ended June 30, 1996,
represents the elimination of interest income on EMAC's investment in a U.S.
government security deposited in the Trust Fund, and other interest income on
EMAC's short term investments which were liquidated upon consummation of the
Merger to pay the cash portion of the Merger Consideration and repay debt of
Overseas Filmgroup.
E. For the year ended December 31, 1995, and six months ended June 30, 1996,
represents (i) the elimination of $317,000 and $167,393, respectively, of
interest expense on debt assumed repaid with funds available upon consummation
of the Merger, and, (ii) interest expense of $166,550 and
$86,987, respectively, paid on the Merger Note.
F. For the year ended December 31, 1995, and six months ended June 30, 1996,
represents the reduction of film cost expense resulting from the reduction of
capitalized interest relating to debt on film acquisitions.
G. For the year ended December 31, 1995, and six months ended June 30, 1996,
represents the income tax provision at an effective rate of approximately 36.4%
on the pro forma combined income before taxes.
H. This weighted average number of common shares and common share
equivalents is based upon 2,600,000 shares of EMAC Common Stock
outstanding immediately prior to the Merger and the issuance of 3,177,778 shares
as part of the Merger Consideration.
I. Fully diluted earnings per share gives effect to dilutive warrants and
options that will be outstanding upon consummation of the Merger. The dilutive
effect is based on the June 30, 1996 market price of EMAC Common Stock. Using
the treasury stock method, 4,469,444 net new shares are added to
total common shares outstanding. Net income using the treasury stock method is
increased by $490,000.
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 particular series of Series
Preferred Stock by fixing or altering in any one or
-1-
<PAGE>
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 the Bylaws. 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.
-2-
<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.
-3-
<PAGE>
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 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 October 31, 1996
ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
By: /s/ Jeffrey A. Rochlis
Name: Jeffrey A. Rochlis
Title: President
ATTEST:
/s/ Scot K. Vorse
Name: Scot K. Vorse
Title: Secretary
-4-
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
-2-
<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.
-3-
<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.
-4-
<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, Chief Executive
Officer, 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.
-5-
<PAGE>
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
-6-
<PAGE>
with respect to the matters set forth in this Section I. Nothing in this
Section I shall be deemed to affect any 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.
-7-
<PAGE>
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
-8-
<PAGE>
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.
-9-
<PAGE>
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.
-10-
<PAGE>
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
-11-
<PAGE>
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 Chief Executive Officer, 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 Chief
Executive Officer 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
-12-
<PAGE>
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.
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
-13-
<PAGE>
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 a Chief Executive Officer (or Co-Chief Executive
Officers), or both, a President, 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.
-14-
<PAGE>
Section 4.03 Other Officers
The Board, at their discretion, may appoint, or empower the Chief
Executive Officer 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 Chief Executive Officer
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 Chief Executive Officer, 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 Chief Executive Officer or 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 next
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 Chief Executive Officer
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 Chief
Executive Officer (or Co-Chief Executive Officers) 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
-15-
<PAGE>
in the office of Chief Executive Officer of a corporation, and shall have such
other powers and duties as may be prescribed by the Board or these Bylaws.
Section 4.09 President
In the absence or disability of the Chief Executive Officer (or both
Co-Chief Executive Officers if there are Co-Chief Executive Officers), the
President shall perform all the duties of the Chief Executive Officer and when
so acting shall have all the powers of, and be subject to the restrictions
upon, the Chief Executive Officer. The President (or Co-Presidents) shall have
such other powers and duties as may be prescribed by the Board or these Bylaws.
Section 4.10 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 4.11 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 4.12 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 Chief Executive Officer 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.
-16-
<PAGE>
Section 4.13 Vice President
In the absence or disability of the President (or both Co-Presidents
if there are 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.
Section 4.14. Chief Operating Officer.
The Chief Operating Officer shall have such authority and perform such
duties as the Board may from time to time determine.
Section 4.15. Co-Officers.
If any office is held by two persons as co-officers, each such person
shall independently have the full power and authority vested in such office,
unless otherwise prescribed.
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.
-17-
<PAGE>
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 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.
-18-
<PAGE>
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, the Chief Executive Officer,
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 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.
-19-
<PAGE>
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.
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
-20-
<PAGE>
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.
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.
-21-
<PAGE>
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 October 31,
1996.
Dated: October 31, 1996 /s/ William F. Lischak
_______________________________
William F. Lischak
-22-
OVERSEAS
FILMGROUP
[LOGO]
COMMON STOCK COMMON STOCK
NUMBER OF SHARES
INCORPORATED UNDER THE LAWS OF SEE REVERSE FOR
THE STATE OF DELAWARE CERTAIN DEFINITIONS
CUSIP 690337 10 0
THIS CERTIFIES THAT
SPECIMEN
is the record holder of
FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, PAR VALUE $.001 PER SHARE,
OF
OVERSEAS FILMGROUP, INC.
transferable on the books of the Corporation by the holder hereof in person or
by duly authorized attorney upon surrender of this Certificate properly
endorsed.
This Certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile signatures of
its duly authorized officers.
Dated:
SPECIMEN SPECIMEN SEAL SPECIMEN
CO-CHAIRMAN CO-CHAIRMAN SECRETARY
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(Jersey City, NJ)
TRANSFER AGENT AND REGISTRAR,
BY
AUTHORIZED OFFICER
<PAGE>
The Corporation shall furnish without charge to each stockholder who so
requests a statement of the powers, designations, preferences and relative,
participating, optional or other special rights of each class of stock of the
Corporation or series thereof and the qualifications, limitations or
restrictions of such preferences and/or rights. Such requests shall be made to
the Corporation's Secretary at the principal office of the Corporation.
The following abbreviations, when used in the inscription on the face of
the certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- as tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of
survivorship and not as tenants
in common
UNIF GIFT MIN ACT -- ................Custodian.....................
(Cust) (Minor)
under Uniform Gifts to Minors
Act............................................
(State)
UNIF TRF MIN ACT -- .................Custodian (until age ..........)
(Cust)
.........................under Uniform Transfers
(Minor)
to Minors Act...................................
(State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
- ---------------------------------------
- ---------------------------------------
- ------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------Shares
of the common stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
- ----------------------------------------------------------------------Attorney
to transfer the said stock on the books of the within named Corporation with
full power of substitution in the premises.
Dated _____________________
X_____________________________________
X_____________________________________
THE SIGNATURE(S) TO THIS ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN UPON THE FACE OF THE
NOTICE: CERTIFICATE IN EVERY PARTICULAR, WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed
By_________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS,
STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS
AND CREDIT UNIONS WITH MEMBERSHIP IN AN
APPROVED SIGNATURE GUARANTEE MEDALLION
PROGRAM), PURSUANT TO S.E.C. RULE 17AD-15.
October 28, 1996
Entertainment/Media Acquisition Corporation
c/o Bannon & Co., Inc.
745 Fifth Avenue, Suite 3001
New York, New York 10151
Attention: Jeffrey A. Rochlis, President
Re: Entertainment/Media Acquisition Corporation ("EMAC") Unit
Purchase Options to purchase an aggregate of 200,000 EMAC
Units at a price per Unit of $9.90 expiring February 16, 2000
(exercisable for an aggregate of 400,000 EMAC Warrants and
200,000 shares of EMAC Common Stock) (the "Unit Purchase
Options")
Dear Sirs:
The undersigned, who constitute the holders of all the issued and
outstanding Unit Purchase Options, understand that EMAC is negotiating with
respect to a business combination with Overseas Filmgroup, Inc. (the "Business
Combination") and that certain changes to the Unit Purchase Options are
required in order for the parties to the proposed business combination to be
willing to proceed therewith. The undersigned, therefore, hereby agree that,
effective upon consummation of the Business Combination, each Unit Purchase
Option shall, automatically and without any further action required by EMAC or
the undersigned, be amended as follows:
(a) In order to permit the inclusion of certain securities held by
others in the demand registration of the holders of the Unit Purchase Options,
Section 5.3.3 of the Unit Purchase Options shall be deleted and replaced in its
entirety with the following:
"The registration statement filed pursuant to Section 5.1 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 (a) the number of Registrable
Securities demanded to be included in such registration shall not be
reduced, and (b) the percentage of Registrable Securities required to
be included in such registration by the Holders of the Purchase
Options is not reduced or limited, without such Holders' consent, as a
result of the inclusion of persons other than Holders of the
-1-
<PAGE>
the Purchase Options below 66-2/3% of the total number of shares and
warrants 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 Holders of the
Purchase Options."
(b) In order to conform the manner in which securities may be excluded
from a piggyback registration (and how the securities to be included will be
apportioned), the undersigned further agrees that the proviso in Section 5.2.1
of the Unit Purchase Options shall be deleted and replaced in its entirety with
the following:
"provided, however, that 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, if any, for such offering, 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 materially 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 owned by each
selling stockholder or in such other proportions as shall mutually be
agreed to by such selling stockholders) although the Company may, in
its sole and absolute discretion, elect to register all of the
Registrable Securities for which the Holders of the Purchase Options
have requested registration and delay the sale of such portion thereof
which exceeds their pro rata share of the total securities being
registered for a period of 90 days from the effective date of the
offering. If all of the Registrable Securities for which the Holders
of the Purchase Options have validly requested registration are not
included in such registration statement for sale (either upon
effectiveness or 90 days thereafter), then the Holders of the Purchase
Options shall receive one additional demand registration for their
Registrable Securities on the terms set forth in Section 5.1 hereof
which may be exercised after ninety days after the effectiveness of
the registration from which their securities were excluded. 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."
The undersigned also agree, upon the request of EMAC, to exchange each
of their Unit Purchase Options for an amended and restated Unit Purchase Option
incorporating solely the terms of the above amendments. The amendments set
forth above, however, shall, upon consummation of the Business Combination, be
effective and bind EMAC and the undersigned irrespective of whether such
exchange is made.
-2-
<PAGE>
In consideration for their agreement herein, EMAC agrees that it will
require that the registration rights agreement to be executed in connection
with the proposed Business Combination will contain the provision attached as
Exhibit A hereto permitting the inclusion pursuant to existing registration
rights agreements of certain securities in the demand registrations to be
granted to the other party to the Business Combination.
Very truly yours,
<TABLE>
<CAPTION>
<S> <C> <C> <C>
/s/ Richard Buonocore October 28, 1996 /s/ Brian K. Coventry October 28, 1996
- ----------------------------- ----------------------------
Name: Richard Buonocore Name: Brian K. Coventry
Number of Unit Purchase Number of Unit Purchase
Options held: 4,000 Options held: 2,000
/s/ Robert Gladstone October 28, 1996 /s/ Roger Gladstone October 28, 1996
- ----------------------------- ----------------------------
Name: Robert Gladstone Name: Roger Gladstone
Number of Unit Purchase Number of Unit Purchase
Options held: 30,000 Options held: 30,000
/s/ Andrea B. Goldman October 28, 1996 /s/ Jay Goldman October 28, 1996
- ----------------------------- ----------------------------
Name: Andrea B. Goldman Name: Jay Goldman
Number of Unit Purchase Number of Unit Purchase
Options held: 500 Options held: 25,000
/s/ Andrew G. Lazarus October 28, 1996 /s/ David M. Nussbaum October 28, 1996
- ----------------------------- ----------------------------
Name: Andrew G. Lazarus Name: David M. Nussbaum
Number of Unit Purchase Number of Unit Purchase
Options held: 1,000 Options held: 30,000
/s/ Deborah L. Schondorf October 28, 1996 /s/ David M. Nussbaum October 28, 1996
- ----------------------------- ----------------------------
Name: Deborah L. Schondorf Name: GKN Securities Corp.
Number of Unit Purchase By: David Nussbaum, Chief Executive Officer
Options held: 6,500 Number of Unit Purchase
Options held: 71,000
</TABLE>
ACCEPTED AND AGREED TO:
ENTERTAINMENT/MEDIA ACQUISITION
CORPORATION
By: /s/ Scot K. Vorse
-------------------------------
Scot K. Vorse
Vice President - Finance
10/30/96
-3-
<PAGE>
EXHIBIT A
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 66 2/3% 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.
A-1
NEITHER THE WARRANT REPRESENTED BY THIS CERTIFICATE NOR THE UNDERLYING SHARES
OF STOCK HAVE BEEN REGISTERED OR QUALIFIED PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, OR THE VIRGINIA SECURITIES ACT. NEITHER THIS WARRANT NOR THE
UNDERLYING STOCK, NOR ANY PORTION THEREOF OR INTEREST THEREIN, MAY BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS THE SAME IS REGISTERED AND
QUALIFIED IN ACCORDANCE WITH THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
APPLICABLE STATE SECURITIES LAW, OR, IN THE OPINION OF COUNSEL, SUCH
REGISTRATION AND QUALIFICATION ARE NOT REQUIRED.
WARRANT TO PURCHASE
62,500 SHARES OF
COMMON STOCK
WARRANT
TO PURCHASE COMMON STOCK OF
OVERSEAS FILMGROUP, INC.
THIS CERTIFIES THAT, for value received, Jefferson Capital Group, Ltd.
("JCG"), or its registered permitted assigns ("Holder"), is entitled to
purchase from Overseas Filmgroup, Inc., a corporation organized and existing
under the laws of the State of Delaware (hereinafter called the "Company"), in
whole or in part, at an initial purchase price of $5.00 per share, at any time
and from time to time from the date hereof until 5:00 p.m., Los Angeles time,
on October 30, 2003 (the "Final Exercise Date"), an aggregate of sixty-two
thousand, five hundred (62,500) shares of the Company's Common Stock, $.001 par
value per share, subject, however, to the provisions and upon the terms and
conditions hereinafter set forth. Certain terms used in this Warrant are
defined in Paragraph 13 hereof. The number of shares of Common Stock
purchasable hereunder, and the Warrant Purchase Price payable therefor, are
subject to adjustment as hereinafter set forth.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise of Warrant.
(a) Exercise of Warrant. The Warrant may be exercised by the
Holder in whole or in part at any time and from time to time from the
date hereof until 5:00 p.m., Los Angeles time, on the Final Exercise
Date by (i) the delivery of this Warrant, together with a properly
completed and duly executed Purchase Form in the form attached hereto
as Exhibit A, to the Warrant Office and (ii) payment to the Company,
by cash, certified check, bank draft or wire transfer, of the Warrant
Purchase Price for the shares of Common Stock being purchased. The
Company agrees that the Warrant Shares so purchased shall be deemed to
be issued to the Holder as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been
delivered to the Warrant Office and payment made for such shares as
aforesaid. Certificates for the Warrant Shares so purchased (together
with a cash adjustment in lieu of any fraction of a share pursuant to
Paragraph 4) shall be delivered to the Holder within a reasonable
time, not
-1-
<PAGE>
exceeding five (5) business days, after this Warrant shall have been
so exercised, and, if the Warrant has been exercised in part only, a
new Warrant representing the number of shares of Common Stock with
respect to which this Warrant shall not then have been exercised, in
all other respects identical to this Warrant, shall also be issued and
delivered to the Holder within such time until this Warrant has
expired. If this Warrant is not exercised prior to the close of
business on the Final Exercise Date, it shall automatically expire and
shall not thereafter be exercisable. All Warrant Shares which may be
issued upon the exercise of this Warrant, upon issuance, will be duly
authorized, validly issued, fully paid and non-assessable.
(b) Transfer Restriction Legend. Each certificate for Warrant
Shares initially issued upon exercise of this Warrant shall bear the
following legend (unless at the time of exercise such Warrant Shares
are registered under the Securities Act) and any additional legend
required by any state securities law or regulation or any securities
exchange upon which such Warrant Shares may, at the time of such
exercise, be listed:
"The shares of stock represented hereby have not been registered
or qualified pursuant to the Securities Act of 1933, as amended
(the "Act"), or any state securities law. Neither these shares,
nor any portion thereof or interest therein, may be sold,
transferred or otherwise disposed of unless the same are
registered and qualified in accordance with said Act and any
applicable state securities law or, in the opinion of counsel,
such registration and qualification are not required."
2. Payment of Taxes. The Company shall pay all expenses and any
and all United States federal, state and local taxes and other charges that may
be payable in connection with the preparation, issuance and delivery of stock
certificates, except that the Company shall not be required to pay any income
tax applicable to the Holder or any tax which may be payable in respect of any
transfer involved in the issue and delivery of certificates for shares of
Common Stock if such tax arises solely from a delivery of certificates for
shares of Common Stock in a name other than that of the Holder of this
Certificate.
3. Reservation of Shares; Preservation of Rights of Holder. The
Company hereby agrees that at all times there shall be reserved for issuance
and/or delivery upon the exercise of the Warrant, free from preemptive rights,
such number of shares of authorized but unissued or treasury shares of Common
Stock, or other stock or securities deliverable pursuant to Paragraph 5 hereof,
as shall be required for issuance or delivery upon exercise of the Warrant. The
Company further agrees (i) that it will not, by amendment of its Certificate of
Incorporation or Bylaws or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by the Company, and (ii)
promptly to take all action as may from time to time be reasonably required in
order to permit the Holder to exercise the Warrants and the Company duly and
effectively to issue Warrant Shares as provided herein upon the exercise
hereof.
-2-
<PAGE>
4. Fractional Shares. The Company shall not be required to issue
fractional shares of Common Stock upon exercise of the Warrant but shall pay
for any such fraction of a share an amount in cash equal to the then Market
Price per Share multiplied by such fraction.
5. Adjustments.
(a) Stock Dividends; Split-Ups. If after the date hereof, and
subject to the provisions of Paragraph 4 above, the number of
outstanding shares of Common Stock is increased by a stock dividend
payable in shares of Common Stock or by a split-up of shares of Common
Stock or other similar event, then, on the effective date thereof, the
number of Warrant Shares issuable upon exercise of the Warrant shall
be increased in proportion to such increase in outstanding shares and
the Warrant Price shall be correspondingly decreased.
(b) Aggregation of Shares. If after the date hereof, and subject
to the provisions of Paragraph 4 above, the number of outstanding
shares of Common Stock is decreased by a consolidation, combination or
reclassification of shares of Common Stock or other similar event,
then, on the effective date thereof, the number of Warrant Shares
issuable upon exercise of the Warrant shall be decreased in proportion
to such decrease in outstanding shares and the Warrant Price shall be
correspondingly increased.
(c) Reorganizations, etc. If after the date hereof, any capital
reorganization or reclassification of the Common Stock of the Company,
or consolidation or merger of the Company with another corporation, or
the sale of all or substantially all of the assets to another
corporation or other similar event shall be effected, then, as a
condition to such reorganization, reclassification, consolidation,
merger or sale, lawful and fair provision shall be made whereby the
Holder of the Warrant shall thereafter have the right to purchase and
receive, upon the basis and upon the terms and conditions specified in
the Warrant and in lieu of the Warrant Shares immediately theretofore
purchasable and receivable upon exercise of the rights represented by
the Warrant, such shares of stock, securities or assets as may be
issued or payable with respect to or in exchange for the number of
outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon
the exercise of the rights represented by the Warrant, had such
reorganization, reclassification, consolidation, merger or sale not
taken place and in such event, appropriate provision shall be made
with respect to the rights and interests of the Holder to the end that
the provisions hereof (including, without limitation, provisions for
adjustments of the Warrant Price and of the number of Warrant Shares
purchasable upon the exercise of the Warrant) shall thereafter be
applicable, as nearly as may be, to any share of stock, securities or
assets thereafter deliverable upon exercise of the Warrant. The
Company shall not effect any such consolidation, merger or sale
unless, prior to the consummation thereof, the successor corporation
(if other than the Company) resulting from such consolidation or
merger, or the corporation purchasing such assets, shall assume, by
written instrument executed and delivered to the Warrant Agent, the
obligation to deliver to the Holder such shares of stock, securities
or assets which, in accordance with the foregoing provisions, such
Holder may be entitled to purchase.
-3-
<PAGE>
(d) Notices of Changes in Warrant. Upon every adjustment of the
Warrant Purchase Price or the number of Warrant Shares issuable upon exercise
of the Warrant, the Company shall give written notice thereof to the Holder,
which notice shall state the Warrant Purchase Price resulting from such
adjustment and the increase or decrease, if any, in the number of Warrant
Shares purchasable at such price upon exercise of the Warrant and, in
reasonable detail, the method of calculation and the facts upon which the
calculation is based.
(e) Form of Warrant. The form of Warrant need not be changed
because of any adjustment pursuant to this Paragraph 5, and the Warrant issued
after such adjustment may state the same Warrant Purchase Price and the same
number of Warrant Shares as is stated in the Warrant initially. However, the
Company may at any time in its sole discretion make any change in the form of
Warrant that the Company may deem appropriate that does not effect the
substance thereof, and any Warrant thereafter issued or countersigned, whether
in exchange or substitution for an outstanding Warrant or otherwise, may be in
the form as so changed.
6. Notice of Certain Events. The Company shall give the Holder
written notice of (i) the declaration of any dividend or other distribution on
Common Stock, (ii) the granting to the holders of Common Stock of any rights to
subscribe for or purchase shares or units of any class of capital stock or any
other subscription or purchase rights, (iii) the reorganization of the Company
or the reclassification of Common Stock, (iv) the merger or consolidation of
the Company with and into any other corporation, (v) the sale, lease or
transfer of all or substantially all of the Company's assets, (vi) the
voluntary or involuntary dissolution, liquidation or winding up of the Company
or (vii) the issuance of any securities that would require an adjustment
pursuant to Paragraph 5(a) hereof. Such notice shall be given at least 14 days
prior to the date on which a record of the Company's stockholders is to be
taken for the purpose of any of the foregoing, or, if a record is not to be so
taken, the date as of which any such event is to become effective
Notwithstanding anything to the contrary herein, the Company shall not be
required to give the Holder notice of the issuance of any Common Stock or other
securities pursuant to or in connection with any employee benefit plan of the
Company.
7. Piggy-back Registration Rights.
(a) 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
Holder) Common Stock or other securities under the Securities 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 to the Holder written
notice of such proposed date of such filing. Upon the written request
of the Holder given within twenty (20) days after delivery of such
notice in accordance with Paragraph 12, the Company shall, subject to
the provisions of Paragraph 7(f), cause to be registered under the
Securities Act all of the Registrable Warrant Shares that the Holder
has requested to be registered.
-4-
<PAGE>
(b) Obligations of the Company. Whenever required under this
Paragraph 7 to effect the registration of the Registrable Warrant Shares, the
Company shall promptly and in accordance with any and all other time periods
set forth herein:
(1) Prepare and file with the SEC a registration statement
with respect to such Registrable Warrant Shares (including such
audited financial statements as may be required by the Securities
Act) and use its best efforts to cause such registration
statement to become effective, and, upon the demand of the
Holder, keep such registration statement effective until the
earlier of (i) the date which is one hundred and fifty (150) days
after such registration statement first became effective or (ii)
the date on which all of the Registrable Warrant Shares included
in such registration statement are sold. The Holder of
Registrable Warrant Shares agrees that, upon receipt of any
notice from the Company of the occurrence of any event of the
kind described in Paragraph 7(b)(6), such Holder shall forthwith
discontinue disposition of Registrable Warrant Shares pursuant to
the registration statement covering such Registrable Warrant
Shares until such Holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Paragraph
7(b)(6), 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 Warrant
Shares 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 Warrant by the
number of days during the period from and including the date of
the giving of such notice pursuant to Paragraph 7(b)(6) to and
including the date when the Holder of Registrable Warrant Shares
covered by such registration statement shall have received the
copies of the supplemented or amended prospectus contemplated by
Paragraph 7(b)(6).
(2) 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 Securities Act with respect to
the disposition of all securities covered by such registration
statement.
(3) Furnish to the Holder whose Registrable Warrant Shares
are covered by the registration statement, 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 Securities
Act, and such other documents as they may reasonably request in
order to facilitate the disposition of the Registrable Warrant
Shares owned by the Holder.
-5-
<PAGE>
(4) 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 the Holder whose Registrable Warrant
Shares are covered by the 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.
(5) 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. The Holder proposing to distribute Registrable
Warrant Shares through such underwritten public offering shall
also enter into and perform its obligations under such an
agreement.
(6) Promptly notify the Holder whose Registrable Warrant
Shares are covered by the registration statement at any time when
a prospectus relating thereto is required to be delivered under
the Securities 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 Holder, promptly prepare and furnish to the Holder
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.
(7) Cause all such Registrable Warrant Shares 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.
(8) Otherwise comply with all applicable rules and
regulations of the SEC and applicable blue sky authorities.
(c) Furnish Information. It shall be a condition precedent to
the obligations of the Company to effect a registration pursuant to
this Paragraph 7 with respect to the Registrable Warrant Shares of a
Holder whose Registrable Warrant Shares are covered by the
registration statement that such Holder shall furnish to the Company
such information regarding itself, the Registrable Warrant Shares 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 Warrant Shares.
-6-
<PAGE>
(d) Expenses of Registrations. All expenses other than
underwriting discounts and commissions charged per share (for which
the Holder shall be responsible with respect to the Registrable
Warrant Shares being sold by such Holder) incurred in connection with
registrations, filings or qualifications pursuant to this Paragraph 7,
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 to act as
counsel for the Holder whose Registrable Warrant Shares are covered by
the registration statement and all other holders of securities of the
Company whose securities are covered by the registration statement,
shall be borne by the Company.
(e) Indemnification. In the event any Registrable Warrant Shares
are included in a registration statement under this Paragraph 7:
(1) To the extent permitted by law, the Company will indemnify
and hold harmless the Holder whose Registrable Warrant Shares are
covered by the registration statement, any underwriter (as defined in
the Securities Act) and each person, if any, who controls such Holder
or underwriter within the meaning of the Securities Act or the
Securities Exchange 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 Securities Act or the Securities Exchange
Act, or any rule or regulation promulgated under the Securities Act or
the Securities Exchange 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
Securities Act, the Securities Exchange Act, any State "blue sky" or
securities law or any rule or regulation promulgated under the
Securities Act, the Securities Exchange Act or any State "blue sky" or
securities law; and the Company will also pay to such Holder, and each
such underwriter or controlling person and any other person entitled
to be indemnified pursuant to this Paragraph 7(e), 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 Paragraph 7(e) 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 cause 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 Holder, or any such underwriter or controlling person.
-7-
<PAGE>
(2) To the extent permitted by law, the Holder whose Registrable
Warrant Shares 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
Securities 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 Securities Act or the Securities Exchange Act or any
rule or regulation promulgated under the Securities Act or the
Securities Exchange 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 Paragraph 7(e), 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 Paragraph 7(e) 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 Paragraph 7(e)
exceed the proceeds (net of any underwriting discounts and
commissions) from the offering received by such Holder.
(3) Promptly after receipt by an indemnified party under this
Paragraph 7(e) 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 Paragraph 7(e), 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 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 Paragraph 7(e), 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 Paragraph
7(e).
-8-
<PAGE>
(4) If the indemnification provided for in this Paragraph 7(e) 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.
(5) 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.
(6) The obligations of the Company and the Holder under this
Paragraph 7 shall survive the completion of any offering of
Registrable Warrant Shares in a registration statement under this
Agreement.
(f) Underwriting and Other Requirements. In connection with any
offering involving an underwriting of shares of the Company's capital
stock, the Company shall not be required under Paragraph 7 to include the
Holder's Registrable Warrant Shares in such underwriting unless such Holder
complies with the last sentence of Paragraph 7(b)(5) of this Warrant. If
the total amount of securities, including Registrable Warrant Shares,
requested by stockholders to be included in such offering exceeds the
amount of securities that, in the written opinion of the managing
underwriters, if any, for such offering, 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 Warrant Shares, which the underwriters determine in their sole
discretion will not materially 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 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 the Holder of Registrable Warrant Shares and which is a partnership or
corporation, the partners, retired partners and stockholders of such
holder, or the estates and family members of 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 owned by all entities and individuals
included in such "selling stockholder", as defined in this sentence. In
addition, notwithstanding anything to the contrary contained in this
Warrant, the piggy-back registration rights granted to the Holder herein
shall be subject to the terms of the registration rights granted to the
holders of the Unit Purchase Options and to the registration rights set
forth in that certain
-9-
<PAGE>
Lock-up and Registration Rights Agreement dated as of October 31, 1996
by and between Overseas Filmgroup, Inc., Ellen Dinerman Little, Robert B.
Little and William F. Lischak, as amended.
(g) Reports Under Securities Exchange Act. With a view to making
available to the Holder the benefit of Rule 144 promulgated under the
Securities Act and any other rule or regulation of the SEC that may at any
time permit the Holder to sell securities of the Company to the public
without registration, the Company agrees to:
(1) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act, at
all times;
(2) file with the SEC in a timely manner all reports and other
documents required of the Company under the Securities Act and the
Securities Exchange Act; and
(3) furnish to the Holder, so long as the Holder owns this
Warrant or any Warrant Shares, 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 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 the Holder of any rule or
regulation of the Commission which permits the selling of any such
securities without registration.
(h) Termination of Registration Rights. The Holder shall not be
entitled to exercise any piggy-back registration right provided for in
Paragraph 7 after the Final Exercise Date.
8. Maintenance of Warrant Office. The Company shall at all times maintain
an office or agent in Los Angeles, California or New York, New York where this
Warrant may be presented or surrendered for subdivision, combination,
registration of transfer or exchange and where notices and demands may be
served upon the Company in respect of the Warrant. The Company will keep or
cause to be kept at such office or agency books for registration and
registration of transfer of the Warrant. Such books shall show the name and
address of the Holder, the number of Warrants evidenced on its face by each of
the Warrant Certificate, and the date of the Warrants. Such office or agency
shall initially be the Company. The Company shall give the Holder prior written
notice of any change in the address of such office or agency.
9. Exchange, Replacement and Assignability. This Warrant is exchangeable
upon the surrender hereof by the Holder at the Warrant Office for new Warrants
of different denominations representing in the aggregate the right to purchase
the number of shares which may be purchased hereunder. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant or any such new Warrants and, in the case of any such loss, theft
or destruction, of an indemnity letter (reasonably satisfactory to the Company)
of the holder of this Warrant, or in other cases, of a bond of indemnity or
other security satisfactory to the Company, or, in the case of any such
mutilation, upon surrender or cancellation of this Warrant or such new
Warrants, the Company will issue to the Holder a new Warrant of like tenor and
date, in lieu of this Warrant or such
-10-
<PAGE>
new Warrants, representing the right to purchase the number of shares which may
be purchased hereunder. Subject to compliance with applicable securities laws,
this Warrant and all rights hereunder (including, without limitation all piggy-
back registration rights) are transferable, but only if the entire amount
originally received (a Warrant to purchase 62,500 Warrant Shares) is
transferred. Upon surrender of this Warrant to the Company at the Warrant Office
with the Assignment Form attached hereto as Exhibit B duly executed and funds
sufficient to pay the transfer tax specified in Paragraph 2 hereof, the Company
shall, without charge, promptly execute and deliver a new Warrant in the name of
the assignee named in such Assignment Form and this Warrant shall promptly be
canceled.
10. No Rights or Liabilities as Stockholder. This Warrant shall not entitle
the Holder to any voting rights or any rights as a stockholder of the Company
or impose any liabilities or other obligations on the Holder as a stockholder
of the Company.
11. Governing Law; Amendments and Waivers; Headings. The validity,
interpretation and performance of this Warrant and each of its terms and
provisions shall be governed by the laws of the State of Delaware. No provision
of this Warrant may be changed, waived, discharged or terminated except by an
instrument in writing signed by the party against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
12. Notices. Any notice or other document required or permitted to be given
or delivered to the Holder shall be delivered at, or sent by certified or
registered mail to the Holder at, the address shown on the transfer books or to
such other address as shall have been furnished to the Company by the Holder.
Any notice or other document required or permitted to be given or delivered to
the Company shall be delivered at, or sent by certified or registered mail to
the principal office of the Company at 8800 Sunset Boulevard, Suite 302, Los
Angeles, California 90069, or such other address as shall have been furnished
to the Holder by the Company.
13. Definitions. The terms defined in this paragraph, whenever used in this
Warrant, shall, unless the context otherwise requires, have the respective
meanings hereinafter specified:
(a) "Business Day" shall mean any day of the year on which commercial
banks are generally open for business in California and New York.
(b) "Closing Price" shall mean the last reported sale price per share
of Common Stock regular way on a given day or, in case no such reported
sale takes place on such day, the average of the reported closing bid and
asked prices regular way, in each case on the New York Stock Exchange
Composite Tape, or, if the shares of Common Stock are not listed or
admitted to trading on such exchange, on the American Stock Exchange
Composite Tape, or, if the shares of Common Stock are not listed or
admitted to trading on such exchange, the principal national securities
exchange or NASDAQ National Market on which the shares of Common Stock are
listed or admitted to trading, or, if the shares of Common Stock are not
listed or admitted to trading on any national securities exchange or NASDAQ
National Market, the closing sales price, or, if there is no closing sales
price, the average of the closing bid and asked prices, in the
over-the-counter market as reported by NASDAQ or any comparable system, or,
if not so reported by NASDAQ or any comparable system, as reported on the
NASD Electronic Bulletin Board, or if not reported on such Bulletin Board,
as reported by the National Quotation Bureau,
-11-
<PAGE>
Incorporated, or any successor thereof, in the "pink sheets" published by
it, or, if not so reported, the average of the closing bid and asked prices
as furnished by any member of the National Association of Securities
Dealers, Inc. selected from time to time by the Board of Directors of the
Company for that purpose, or, if no such prices are furnished, the fair
market value of a share of Common Stock as estimated by a nationally
recognized investment banking firm selected by the Company.
(c) "Common Stock" shall mean and include the Company's Common Stock,
$.001 par value per share, authorized on the date of the original issue of
this Warrant and shall also include any capital stock of any class of the
Company thereafter authorized which shall not be limited to a fixed sum or
percentage of par or liquidation value in respect of the rights of the
holders thereof to participate in dividends and in the distribution of
assets upon the voluntary or involuntary liquidation, dissolution or
winding-up of the Company, and shall also include in case of any
reorganization, reclassification, consolidation, merger or sale of assets
of the character referred to in Paragraph 5 hereof, the stock, securities
or assets provided for in such paragraph; provided that the shares
purchasable pursuant to this Warrant shall include only shares of such
class referred to in the first paragraph hereof designated in the Company's
Certificate of Incorporation as Common Stock on the date of the original
issue of this Warrant or, in case of any reorganization, reclassification,
consolidation, merger or sale of assets of the character referred to in
Paragraph 5 hereof, the stock, securities or assets provided for in such
paragraph.
(d) "Company" shall mean Overseas Filmgroup, Inc., a Delaware
corporation, and also include any successor thereto with respect to the
obligations hereunder, by merger, consolidation or otherwise.
(e) "Final Exercise Date" shall have the meaning set forth in the
introduction to this Warrant.
(f) "Holder" shall have the meaning set forth in the introduction to
this Warrant.
(g) "Market Price Per Share" shall mean the average of the daily
Closing Prices for the 30 consecutive Trading Days before the date in
question.
(h) "register", "registered" and "registration" refer to registration
effected by preparing and filing a registration statement or similar
document in compliance with the Securities Act, and the declaration or
ordering of effectiveness of such registration statement or document by the
SEC.
(i) "Registrable Warrant Shares" shall mean (1) the Warrant Shares,
and (2) any Common Stock issued as a dividend or other distribution with
respect to, pursuant to a stock split, or in exchange for or in replacement
of, the Warrant Shares, excluding in all cases, however, (i) any Warrant
Shares which are sold, assigned or otherwise disposed of by the Holder in a
transaction in which such Holder's rights under this Warrant are not
assigned or assignable, (ii) any Warrant Shares which have been registered
under the Securities Act and disposed of in
-12-
<PAGE>
accordance with the registration statement covering them, (iii) any Warrant
Shares which have become eligible for sale without restriction pursuant to
Rule 144 or Rule 144A (or any similar provision then in force) under the
Securities Act, and (iv) any Warrant Shares which in the opinion of counsel
to the Company may be freely transferred (without volume or other
limitations) without registration or qualification under the Securities Act
or any similar state securities law.
(j) "SEC" shall mean the Securities and Exchange Commission, or any
other federal agency then administering the Securities Act.
(k) "Securities Act" shall mean the Securities Act of 1933, or any
similar federal statute, and the rules and regulations of the Commission,
or any other federal agency then administering such Securities Act,
thereunder, all as the same shall be in effect at the time.
(l) "Securities Exchange Act" shall mean the Exchange Act of 1934, or
any other similar federal statute, and the rules and regulations of the
Commission, or any other federal agency administering such Securities
Exchange Act, thereunder, all as the same shall be in effect at the time.
(m) "Trading Day" shall mean a day on which the principal national
securities exchange on which the shares of Common Stock are listed or
admitted to trading is open for the transaction of business, or, if the
shares of Common Stock are not listed or admitted to trading on any
national securities exchange, a Monday, Tuesday, Wednesday, Thursday or
Friday on which prices in the over-the-counter market are reported by
NASDAQ.
(n) "Unit Purchase Options" shall mean those certain Unit Purchase
Options granted by the Company and initially dated as of April 12, 1995.
(o) "Warrant" shall mean this Warrant and all rights to purchase
Warrant Shares evidenced hereby and all warrants issued in exchange,
transfer or replacement of this Warrant.
(p) "Warrant Holder" shall mean the registered holder of the Warrants
or any related Warrant Shares.
(q) "Warrant Office" shall mean the office or agency of the Company
maintained for the purpose, among other purposes, of receiving Warrants
upon their exercise pursuant to Paragraph 8 hereof.
(r) "Warrant Purchase Price" shall mean the initial purchase price of
$5.00 per share of Common Stock payable upon exercise of this Warrant, as
adjusted from time to time pursuant to the provisions hereof.
(s) "Warrant Shares" shall mean the shares of Common Stock purchased
or purchasable by the holders of Warrants upon the exercise thereof
pursuant to Paragraph 1.
-13-
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed
by its duly authorized officer under its corporate seal, duly attested by its
authorized office, and to be dated as of October 31, 1996.
OVERSEAS FILMGROUP, INC.
By: /s/ Ellen Dinerman Little
------------------------------
Name: Ellen Dinerman Little
Title: President
ATTEST:
/s/ William F. Lischak
- -----------------------------
Name: William F. Lischak
Title: Secretary
-14-
<PAGE>
EXHIBIT A
PURCHASE FORM
(To be executed upon exercise of Warrant)
The undersigned hereby irrevocably elects to exercise the right, represented by
this Warrant Certificate, to purchase _____ shares of Common Stock (the
"Shares") and herewith tenders payment for such Shares to the order of Overseas
Filmgroup, Inc. in the amount of $________ in accordance with the terms hereof.
The undersigned requests that a certificate for such Shares be registered in
the name of _________________ whose address is _________________ and that such
certificate be delivered to _____________________________ whose address is
________________________________. If said number of Shares is less than all of
the shares of Common Stock purchasable hereunder, the undersigned requests that
a new Warrant representing the remaining balance of the shares be issued to and
registered in the name of the undersigned.
Signature:____________________________
(Signature must conform in all respects
to name of Holder as specified on the
face of this Warrant.)
Dated: ___________________, 19__
-15-
<PAGE>
EXHIBIT B
ASSIGNMENT FORM
For value received, _______________________________ hereby sells,
assigns and transfers unto:
Name _________________________________________________________________________
(Please typewrite or print in block letters)
Address ______________________________________________________________________
the right to purchase Common Stock represented by this Warrant to the extent of
shares as to which such right is exercisable and does hereby irrevocably
constitute and appoint ____________________________________________________,
attorney, to transfer the same on the books of the Company with full power and
substitution in the premises.
Signature:_____________________________
Date: ______________________, 19__.
-16-
SECURED PROMISSORY NOTE
$2,000,000 Dated: October 31, 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 November
1, 1996, with the final payment being due on October 1, 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 Maker, Copyright Mortgages and Uniform
<PAGE>
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: /s/ Scot K. Vorse
------------------------------
Name: Scot K. Vorse
Title: Vice President
2
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this 31st day of October,
1996, by and between OVERSEAS FILMGROUP, INC., a Delaware corporation
(hereinafter called "Overseas"), and Ellen Dinerman Little (hereinafter called
"Indemnitee") (sometimes collectively referred to herein as "the Parties
hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
-1-
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which she has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of her being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of her decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that she is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
-2-
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will of
Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as she is duly elected and qualified in accordance
with the provisions of the bylaws thereof or until such time as she tenders her
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in, or otherwise becomes
involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that she is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by her in any
-3-
<PAGE>
such capacity, against Losses actually incurred by her in connection with such
Proceeding if she acted in good faith and in a manner she reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe that her conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in or otherwise becomes
involved in, any Proceeding by or in the right of Overseas or an Affiliate of
Overseas to procure a judgment in its favor by reason of (or arising in part
out of) the fact that she is or was a director, officer, employee or agent of
Overseas or is or was serving at the request of Overseas as a director,
officer, employee or agent of an Affiliate of Overseas, or by reason of
anything done or not done by her in any such capacity, against Litigation Costs
actually incurred by her in connection with such Proceeding if she acted in
good faith and in a manner she reasonably believed to be in or not opposed to
the best interests of Overseas and except that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to Overseas unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement shall
continue after Indemnitee ceases as a director, officer, employee or agent of
Overseas or an Affiliate of Overseas, and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to her own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the merits
or otherwise in defense of any Proceedings referred to in subsections (a), (b)
or (c) of this Section 3, or in the defense of any claim, issue or matter
described therein, Indemnitee shall be indemnified against Litigation Costs
actually incurred by her in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on her behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
she reasonably believed to be in or not opposed to the best interests of
-4-
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that her conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any other
indemnifying party similarly notified will be entitled to promptly assume the
defense of any such Proceeding, with counsel satisfactory to Indemnitee. After
notice from Overseas to Indemnitee of its election so to assume the defense
thereof, Overseas will not be liable to the Indemnitee under this Agreement for
any Litigation Costs subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ personal counsel in
such Proceeding, but the fees and expenses of such counsel incurred after
notice from Overseas of its assumption of the defense thereof shall be at the
expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has
been authorized by Overseas, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between Overseas and/or any Affiliate
of Overseas and Indemnitee in the conduct of the defense of such action, or
(iii) Overseas shall not in fact have promptly employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of Overseas. Overseas shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of Overseas or an
Affiliate of Overseas or as to which Indemnitee shall have made the conclusion
provided for in (ii) above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other terms
and provisions hereof (including applicable limitations relating to actions by
or in the right of Overseas or Affiliates of Overseas), if Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, Overseas shall indemnify Indemnitee's estate and her spouse, heirs,
administrators and executors against, and Overseas shall, and does hereby
agree, to assume any and all Losses incurred by or for Indemnitee or her estate
in connection with the investigation, defense, settlement or appeal of any such
Proceeding. Further, when requested in writing by the spouse of Indemnitee
and/or the heirs, executors or administrators of Indemnitee's estate, Overseas
shall provide appropriate evidence of Overseas' Agreement set out herein, to
indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under this
Agreement, Indemnitee shall submit to Overseas a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.
-5-
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle her partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and her legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and her legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which she claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
-6-
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, her spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute
-7-
<PAGE>
as to the reasonableness of any Litigation Costs shall not delay an Advancement
by Overseas, and Overseas agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Proceeding against the
Indemnitee. If Indemnitee has petitioned the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction pursuant to Section 8
hereof to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Board of Directors, independent
legal counsel or the stockholders that Indemnitee would not be permitted to be
indemnified under the applicable law shall not be binding and Indemnitee shall
not be required to reimburse Overseas for any Advancements, and Overseas shall
be obligated to continue to make Advancements, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in her official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
-8-
<PAGE>
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and her spouse, heirs, executors and administrators.
-9-
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: /s/ William F. Lischak BY: /s/ Scot K. Vorse
------------------------------ -------------------------------
William F. Lischak Name: Scot K. Vorse
Title: Vice President
Indemnitee
/s/ Ellen Dinerman Little
-------------------------------
Name: Ellen Dinerman Little
Address: 12309 Viewcrest Road
Studio City, CA 91604
-10-
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this 31st day of October,
1996, by and between OVERSEAS FILMGROUP, INC., a Delaware corporation
(hereinafter called "Overseas"), and Robert B. Little (hereinafter called
"Indemnitee") (sometimes collectively referred to herein as "the Parties
hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
-1-
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which he has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of his decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that he is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
-2-
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will of
Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as he is duly elected and qualified in accordance with
the provisions of the bylaws thereof or until such time as he tenders his
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in, or otherwise becomes
involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that he is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by him in any
-3-
<PAGE>
such capacity, against Losses actually incurred by him in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in or otherwise becomes
involved in, any Proceeding by or in the right of Overseas or an Affiliate of
Overseas to procure a judgment in its favor by reason of (or arising in part
out of) the fact that he is or was a director, officer, employee or agent of
Overseas or is or was serving at the request of Overseas as a director,
officer, employee or agent of an Affiliate of Overseas, or by reason of
anything done or not done by his in any such capacity, against Litigation Costs
actually incurred by him in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Overseas and except that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to Overseas unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement shall
continue after Indemnitee ceases as a director, officer, employee or agent of
Overseas or an Affiliate of Overseas, and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to his own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the merits or
otherwise in defense of any Proceedings referred to in subsections (a), (b) or
(c) of this Section 3, or in the defense of any claim, issue or matter
described therein, Indemnitee shall be indemnified against Litigation Costs
actually incurred by him in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on his behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
-4-
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any other
indemnifying party similarly notified will be entitled to promptly assume the
defense of any such Proceeding, with counsel satisfactory to Indemnitee. After
notice from Overseas to Indemnitee of its election so to assume the defense
thereof, Overseas will not be liable to the Indemnitee under this Agreement for
any Litigation Costs subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ personal counsel in
such Proceeding, but the fees and expenses of such counsel incurred after
notice from Overseas of its assumption of the defense thereof shall be at the
expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has
been authorized by Overseas, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between Overseas and/or any Affiliate
of Overseas and Indemnitee in the conduct of the defense of such action, or
(iii) Overseas shall not in fact have promptly employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of Overseas. Overseas shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of Overseas or an
Affiliate of Overseas or as to which Indemnitee shall have made the conclusion
provided for in (ii) above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other terms
and provisions hereof (including applicable limitations relating to actions by
or in the right of Overseas or Affiliates of Overseas), if Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, Overseas shall indemnify Indemnitee's estate and his spouse, heirs,
administrators and executors against, and Overseas shall, and does hereby
agree, to assume any and all Losses incurred by or for Indemnitee or his estate
in connection with the investigation, defense, settlement or appeal of any such
Proceeding. Further, when requested in writing by the spouse of Indemnitee
and/or the heirs, executors or administrators of Indemnitee's estate, Overseas
shall provide appropriate evidence of Overseas' Agreement set out herein, to
indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under this
Agreement, Indemnitee shall submit to Overseas a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.
-5-
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle him partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and his legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and his legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which he claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
-6-
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, his spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute
-7-
<PAGE>
as to the reasonableness of any Litigation Costs shall not delay an Advancement
by Overseas, and Overseas agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Proceeding against the
Indemnitee. If Indemnitee has petitioned the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction pursuant to Section 8
hereof to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Board of Directors, independent
legal counsel or the stockholders that Indemnitee would not be permitted to be
indemnified under the applicable law shall not be binding and Indemnitee shall
not be required to reimburse Overseas for any Advancements, and Overseas shall
be obligated to continue to make Advancements, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one
or more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
-8-
<PAGE>
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse, heirs, executors and administrators.
-9-
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: /s/ William F. Lischak BY: /s/ Scot K. Vorse
--------------------------- ---------------------------
William F. Lischak Name: Scot K. Vorse
Title: Vice President
Indemnitee
/s/ Robert B. Little
-----------------------------
Name: Robert B. Little
Address: 12309 Viewcrest Road
Studio City, CA 91604
-10-
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this 31st day of October,
1996, by and between OVERSEAS FILMGROUP, INC., a Delaware corporation
(hereinafter called "Overseas"), and William F. Lischak (hereinafter called
"Indemnitee") (sometimes collectively referred to herein as "the Parties
hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
-1-
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which he has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of his decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that he is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
-2-
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will of
Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as he is duly elected and qualified in accordance with
the provisions of the bylaws thereof or until such time as he tenders his
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in, or otherwise becomes
involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that he is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by him in any
-3-
<PAGE>
such capacity, against Losses actually incurred by him in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in or otherwise becomes
involved in, any Proceeding by or in the right of Overseas or an Affiliate of
Overseas to procure a judgment in its favor by reason of (or arising in part
out of) the fact that he is or was a director, officer, employee or agent of
Overseas or is or was serving at the request of Overseas as a director,
officer, employee or agent of an Affiliate of Overseas, or by reason of
anything done or not done by his in any such capacity, against Litigation Costs
actually incurred by him in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Overseas and except that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to Overseas unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement shall
continue after Indemnitee ceases as a director, officer, employee or agent of
Overseas or an Affiliate of Overseas, and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to his own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the merits or
otherwise in defense of any Proceedings referred to in subsections (a), (b) or
(c) of this Section 3, or in the defense of any claim, issue or matter
described therein, Indemnitee shall be indemnified against Litigation Costs
actually incurred by him in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on his behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
-4-
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any other
indemnifying party similarly notified will be entitled to promptly assume the
defense of any such Proceeding, with counsel satisfactory to Indemnitee. After
notice from Overseas to Indemnitee of its election so to assume the defense
thereof, Overseas will not be liable to the Indemnitee under this Agreement for
any Litigation Costs subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ personal counsel in
such Proceeding, but the fees and expenses of such counsel incurred after
notice from Overseas of its assumption of the defense thereof shall be at the
expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has
been authorized by Overseas, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between Overseas and/or any Affiliate
of Overseas and Indemnitee in the conduct of the defense of such action, or
(iii) Overseas shall not in fact have promptly employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of Overseas. Overseas shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of Overseas or an
Affiliate of Overseas or as to which Indemnitee shall have made the conclusion
provided for in (ii) above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other terms
and provisions hereof (including applicable limitations relating to actions by
or in the right of Overseas or Affiliates of Overseas), if Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, Overseas shall indemnify Indemnitee's estate and his spouse, heirs,
administrators and executors against, and Overseas shall, and does hereby
agree, to assume any and all Losses incurred by or for Indemnitee or his estate
in connection with the investigation, defense, settlement or appeal of any such
Proceeding. Further, when requested in writing by the spouse of Indemnitee
and/or the heirs, executors or administrators of Indemnitee's estate, Overseas
shall provide appropriate evidence of Overseas' Agreement set out herein, to
indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under this
Agreement, Indemnitee shall submit to Overseas a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.
-5-
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle him partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and his legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and his legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which he claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
-6-
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, his spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute
-7-
<PAGE>
as to the reasonableness of any Litigation Costs shall not delay an Advancement
by Overseas, and Overseas agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Proceeding against the
Indemnitee. If Indemnitee has petitioned the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction pursuant to Section 8
hereof to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Board of Directors, independent
legal counsel or the stockholders that Indemnitee would not be permitted to be
indemnified under the applicable law shall not be binding and Indemnitee shall
not be required to reimburse Overseas for any Advancements, and Overseas shall
be obligated to continue to make Advancements, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
-8-
<PAGE>
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse, heirs, executors and administrators.
-9-
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: /s/ Ellen Dinerman Little BY: /s/ Scot K. Vorse
------------------------------- ---------------------------
Ellen Dinerman Little Name: Scot K. Vorse
Title: Vice President
Indemnitee
/s/ William F. Lischak
----------------------------
Name: William F. Lischak
Address: 601 N. Sweetzer, Unit B
Los Angeles, California 90048
-10-
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this 31st day of October,
1996, by and between OVERSEAS FILMGROUP, INC., a Delaware corporation
(hereinafter called "Overseas"), and Stephen K. Bannon (hereinafter called
"Indemnitee") (sometimes collectively referred to herein as "the Parties
hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
-1-
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which he has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of his decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that he is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
-2-
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will of
Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as he is duly elected and qualified in accordance with
the provisions of the bylaws thereof or until such time as he tenders his
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in, or otherwise becomes
involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that he is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by him in any
-3-
<PAGE>
such capacity, against Losses actually incurred by him in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in or otherwise becomes
involved in, any Proceeding by or in the right of Overseas or an Affiliate of
Overseas to procure a judgment in its favor by reason of (or arising in part
out of) the fact that he is or was a director, officer, employee or agent of
Overseas or is or was serving at the request of Overseas as a director,
officer, employee or agent of an Affiliate of Overseas, or by reason of
anything done or not done by his in any such capacity, against Litigation Costs
actually incurred by him in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Overseas and except that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to Overseas unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement shall
continue after Indemnitee ceases as a director, officer, employee or agent of
Overseas or an Affiliate of Overseas, and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to his own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the merits or
otherwise in defense of any Proceedings referred to in subsections (a), (b) or
(c) of this Section 3, or in the defense of any claim, issue or matter
described therein, Indemnitee shall be indemnified against Litigation Costs
actually incurred by him in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on his behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
-4-
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any other
indemnifying party similarly notified will be entitled to promptly assume the
defense of any such Proceeding, with counsel satisfactory to Indemnitee. After
notice from Overseas to Indemnitee of its election so to assume the defense
thereof, Overseas will not be liable to the Indemnitee under this Agreement for
any Litigation Costs subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ personal counsel in
such Proceeding, but the fees and expenses of such counsel incurred after
notice from Overseas of its assumption of the defense thereof shall be at the
expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has
been authorized by Overseas, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between Overseas and/or any Affiliate
of Overseas and Indemnitee in the conduct of the defense of such action, or
(iii) Overseas shall not in fact have promptly employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of Overseas. Overseas shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of Overseas or an
Affiliate of Overseas or as to which Indemnitee shall have made the conclusion
provided for in (ii) above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other terms
and provisions hereof (including applicable limitations relating to actions by
or in the right of Overseas or Affiliates of Overseas), if Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, Overseas shall indemnify Indemnitee's estate and his spouse, heirs,
administrators and executors against, and Overseas shall, and does hereby
agree, to assume any and all Losses incurred by or for Indemnitee or his estate
in connection with the investigation, defense, settlement or appeal of any such
Proceeding. Further, when requested in writing by the spouse of Indemnitee
and/or the heirs, executors or administrators of Indemnitee's estate, Overseas
shall provide appropriate evidence of Overseas' Agreement set out herein, to
indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under this
Agreement, Indemnitee shall submit to Overseas a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.
-5-
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle him partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and his legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and his legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which he claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
-6-
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, his spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute
-7-
<PAGE>
as to the reasonableness of any Litigation Costs shall not delay an Advancement
by Overseas, and Overseas agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Proceeding against the
Indemnitee. If Indemnitee has petitioned the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction pursuant to Section 8
hereof to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Board of Directors, independent
legal counsel or the stockholders that Indemnitee would not be permitted to be
indemnified under the applicable law shall not be binding and Indemnitee shall
not be required to reimburse Overseas for any Advancements, and Overseas shall
be obligated to continue to make Advancements, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
-8-
<PAGE>
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse, heirs, executors and administrators.
-9-
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: /s/ William F. Lischak BY: /s/ Scot K. Vorse
-------------------------- -----------------------------
William F. Lischak Name: Scot K. Vorse
Title: Vice President
Indemnitee
/s/ Stephen K. Bannon
-----------------------------
Name: Stephen K. Bannon
Address: 107 Winnett Place
Santa Monica, CA 90402
-10-
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this 31st day of October,
1996, by and between OVERSEAS FILMGROUP, INC., a Delaware corporation
(hereinafter called "Overseas"), and Scot K. Vorse (hereinafter called
"Indemnitee") (sometimes collectively referred to herein as "the Parties
hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
-1-
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which he has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of his decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that he is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
-2-
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will of
Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as he is duly elected and qualified in accordance with
the provisions of the bylaws thereof or until such time as he tenders his
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in, or otherwise becomes
involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that he is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by him in any
-3-
<PAGE>
such capacity, against Losses actually incurred by him in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in or otherwise becomes
involved in, any Proceeding by or in the right of Overseas or an Affiliate of
Overseas to procure a judgment in its favor by reason of (or arising in part
out of) the fact that he is or was a director, officer, employee or agent of
Overseas or is or was serving at the request of Overseas as a director,
officer, employee or agent of an Affiliate of Overseas, or by reason of
anything done or not done by his in any such capacity, against Litigation Costs
actually incurred by him in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Overseas and except that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to Overseas unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement shall
continue after Indemnitee ceases as a director, officer, employee or agent of
Overseas or an Affiliate of Overseas, and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to his own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the merits or
otherwise in defense of any Proceedings referred to in subsections (a), (b) or
(c) of this Section 3, or in the defense of any claim, issue or matter
described therein, Indemnitee shall be indemnified against Litigation Costs
actually incurred by him in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on his behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
-4-
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any other
indemnifying party similarly notified will be entitled to promptly assume the
defense of any such Proceeding, with counsel satisfactory to Indemnitee. After
notice from Overseas to Indemnitee of its election so to assume the defense
thereof, Overseas will not be liable to the Indemnitee under this Agreement for
any Litigation Costs subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ personal counsel in
such Proceeding, but the fees and expenses of such counsel incurred after
notice from Overseas of its assumption of the defense thereof shall be at the
expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has
been authorized by Overseas, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between Overseas and/or any Affiliate
of Overseas and Indemnitee in the conduct of the defense of such action, or
(iii) Overseas shall not in fact have promptly employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of Overseas. Overseas shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of Overseas or an
Affiliate of Overseas or as to which Indemnitee shall have made the conclusion
provided for in (ii) above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other terms
and provisions hereof (including applicable limitations relating to actions by
or in the right of Overseas or Affiliates of Overseas), if Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, Overseas shall indemnify Indemnitee's estate and his spouse, heirs,
administrators and executors against, and Overseas shall, and does hereby
agree, to assume any and all Losses incurred by or for Indemnitee or his estate
in connection with the investigation, defense, settlement or appeal of any such
Proceeding. Further, when requested in writing by the spouse of Indemnitee
and/or the heirs, executors or administrators of Indemnitee's estate, Overseas
shall provide appropriate evidence of Overseas' Agreement set out herein, to
indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under this
Agreement, Indemnitee shall submit to Overseas a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.
-5-
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle him partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and his legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and his legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which he claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
-6-
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, his spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute
-7-
<PAGE>
as to the reasonableness of any Litigation Costs shall not delay an Advancement
by Overseas, and Overseas agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Proceeding against the
Indemnitee. If Indemnitee has petitioned the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction pursuant to Section 8
hereof to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Board of Directors, independent
legal counsel or the stockholders that Indemnitee would not be permitted to be
indemnified under the applicable law shall not be binding and Indemnitee shall
not be required to reimburse Overseas for any Advancements, and Overseas shall
be obligated to continue to make Advancements, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
-8-
<PAGE>
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse, heirs, executors and administrators.
-9-
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: /s/ William F. Lischak BY: /s/ Ellen Dinerman Little
-------------------------- -------------------------------
William F. Lischak Name: Ellen Dinerman Little
Title: President
Indemnitee
/s/ Scot K. Vorse
-------------------------------
Name: Scot K. Vorse
Address: 2120 The Strand, #6
Manhattan Beach, CA 90266
-10-
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this 31st day of October,
1996, by and between OVERSEAS FILMGROUP, INC., a Delaware corporation
(hereinafter called "Overseas"), and Jeffrey A. Rochlis (hereinafter called
"Indemnitee") (sometimes collectively referred to herein as "the Parties
hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
-1-
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which he has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of his decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that he is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
-2-
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will of
Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as he is duly elected and qualified in accordance with
the provisions of the bylaws thereof or until such time as he tenders his
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in, or otherwise becomes
involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that he is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by him in any
-3-
<PAGE>
such capacity, against Losses actually incurred by him in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in or otherwise becomes
involved in, any Proceeding by or in the right of Overseas or an Affiliate of
Overseas to procure a judgment in its favor by reason of (or arising in part
out of) the fact that he is or was a director, officer, employee or agent of
Overseas or is or was serving at the request of Overseas as a director,
officer, employee or agent of an Affiliate of Overseas, or by reason of
anything done or not done by his in any such capacity, against Litigation Costs
actually incurred by him in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Overseas and except that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to Overseas unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement shall
continue after Indemnitee ceases as a director, officer, employee or agent of
Overseas or an Affiliate of Overseas, and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to his own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the merits or
otherwise in defense of any Proceedings referred to in subsections (a), (b) or
(c) of this Section 3, or in the defense of any claim, issue or matter
described therein, Indemnitee shall be indemnified against Litigation Costs
actually incurred by him in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on his behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
-4-
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any other
indemnifying party similarly notified will be entitled to promptly assume the
defense of any such Proceeding, with counsel satisfactory to Indemnitee. After
notice from Overseas to Indemnitee of its election so to assume the defense
thereof, Overseas will not be liable to the Indemnitee under this Agreement for
any Litigation Costs subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ personal counsel in
such Proceeding, but the fees and expenses of such counsel incurred after
notice from Overseas of its assumption of the defense thereof shall be at the
expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has
been authorized by Overseas, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between Overseas and/or any Affiliate
of Overseas and Indemnitee in the conduct of the defense of such action, or
(iii) Overseas shall not in fact have promptly employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of Overseas. Overseas shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of Overseas or an
Affiliate of Overseas or as to which Indemnitee shall have made the conclusion
provided for in (ii) above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other terms
and provisions hereof (including applicable limitations relating to actions by
or in the right of Overseas or Affiliates of Overseas), if Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, Overseas shall indemnify Indemnitee's estate and his spouse, heirs,
administrators and executors against, and Overseas shall, and does hereby
agree, to assume any and all Losses incurred by or for Indemnitee or his estate
in connection with the investigation, defense, settlement or appeal of any such
Proceeding. Further, when requested in writing by the spouse of Indemnitee
and/or the heirs, executors or administrators of Indemnitee's estate, Overseas
shall provide appropriate evidence of Overseas' Agreement set out herein, to
indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under this
Agreement, Indemnitee shall submit to Overseas a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.
-5-
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle him partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and his legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and his legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which he claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
-6-
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, his spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute
-7-
<PAGE>
as to the reasonableness of any Litigation Costs shall not delay an Advancement
by Overseas, and Overseas agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Proceeding against the
Indemnitee. If Indemnitee has petitioned the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction pursuant to Section 8
hereof to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Board of Directors, independent
legal counsel or the stockholders that Indemnitee would not be permitted to be
indemnified under the applicable law shall not be binding and Indemnitee shall
not be required to reimburse Overseas for any Advancements, and Overseas shall
be obligated to continue to make Advancements, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
-8-
<PAGE>
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse, heirs, executors and administrators.
-9-
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: /s/ William F. Lischak BY: /s/ Scot K. Vorse
--------------------------- ----------------------------
William F. Lischak Name: Scot K. Vorse
Title: Vice President
Indemnitee
/s/ Jeffrey A. Rochlis
-----------------------------------
Name: Jeffrey A. Rochlis
Address: c/o Rochlis & Associates
3304 O Street NW
Washington, DC 20007
-10-
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this 31st day of October,
1996, by and between OVERSEAS FILMGROUP, INC., a Delaware corporation
(hereinafter called "Overseas"), and Alessandro Fracassi (hereinafter called
"Indemnitee") (sometimes collectively referred to herein as "the Parties
hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
-1-
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which he has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of his decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that he is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
-2-
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will of
Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as he is duly elected and qualified in accordance with
the provisions of the bylaws thereof or until such time as he tenders his
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in, or otherwise becomes
involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that he is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by him in any
-3-
<PAGE>
such capacity, against Losses actually incurred by him in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in or otherwise becomes
involved in, any Proceeding by or in the right of Overseas or an Affiliate of
Overseas to procure a judgment in its favor by reason of (or arising in part
out of) the fact that he is or was a director, officer, employee or agent of
Overseas or is or was serving at the request of Overseas as a director,
officer, employee or agent of an Affiliate of Overseas, or by reason of
anything done or not done by his in any such capacity, against Litigation Costs
actually incurred by him in connection with such Proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the
best interests of Overseas and except that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to Overseas unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement shall
continue after Indemnitee ceases as a director, officer, employee or agent of
Overseas or an Affiliate of Overseas, and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to his own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the merits or
otherwise in defense of any Proceedings referred to in subsections (a), (b) or
(c) of this Section 3, or in the defense of any claim, issue or matter
described therein, Indemnitee shall be indemnified against Litigation Costs
actually incurred by him in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on his behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
-4-
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any other
indemnifying party similarly notified will be entitled to promptly assume the
defense of any such Proceeding, with counsel satisfactory to Indemnitee. After
notice from Overseas to Indemnitee of its election so to assume the defense
thereof, Overseas will not be liable to the Indemnitee under this Agreement for
any Litigation Costs subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ personal counsel in
such Proceeding, but the fees and expenses of such counsel incurred after
notice from Overseas of its assumption of the defense thereof shall be at the
expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has
been authorized by Overseas, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between Overseas and/or any Affiliate
of Overseas and Indemnitee in the conduct of the defense of such action, or
(iii) Overseas shall not in fact have promptly employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of Overseas. Overseas shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of Overseas or an
Affiliate of Overseas or as to which Indemnitee shall have made the conclusion
provided for in (ii) above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other terms
and provisions hereof (including applicable limitations relating to actions by
or in the right of Overseas or Affiliates of Overseas), if Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, Overseas shall indemnify Indemnitee's estate and his spouse, heirs,
administrators and executors against, and Overseas shall, and does hereby
agree, to assume any and all Losses incurred by or for Indemnitee or his estate
in connection with the investigation, defense, settlement or appeal of any such
Proceeding. Further, when requested in writing by the spouse of Indemnitee
and/or the heirs, executors or administrators of Indemnitee's estate, Overseas
shall provide appropriate evidence of Overseas' Agreement set out herein, to
indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under this
Agreement, Indemnitee shall submit to Overseas a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.
-5-
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle him partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and his legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and his legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which he claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
-6-
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, his spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute
-7-
<PAGE>
as to the reasonableness of any Litigation Costs shall not delay an Advancement
by Overseas, and Overseas agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Proceeding against the
Indemnitee. If Indemnitee has petitioned the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction pursuant to Section 8
hereof to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Board of Directors, independent
legal counsel or the stockholders that Indemnitee would not be permitted to be
indemnified under the applicable law shall not be binding and Indemnitee shall
not be required to reimburse Overseas for any Advancements, and Overseas shall
be obligated to continue to make Advancements, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
-8-
<PAGE>
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse, heirs, executors and administrators.
-9-
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: /s/ William F. Lischak BY: /s/ Scot K. Vorse
-------------------------- -------------------------
William F. Lischak Name: Scot K. Vorse
Title: Vice President
Indemnitee
/s/ Alessandro Fracassi
-------------------------------
Name: Alessandro Fracassi
Address: c/o Racing Pictures, s.r.l.
Via Dei Ter Orologi 10
000197 Rome
Italy
-10-
EMPLOYMENT AGREEMENT
--------------------
This Employment Agreement (the "Agreement") is entered into as of the
31st day of October, 1996 between Ellen Dinerman Little ("Employee") and
Overseas Filmgroup, Inc., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Agreement of Merger, dated as of July 2, 1996
by and among Entertainment/Media Acquisition Corporation ("EMAC"), Overseas
Filmgroup, Inc. (the "Disappearing Corporation"), Robert B. Little and Ellen
Dinerman Little, as amended by that certain Amendment to Agreement of Merger,
dated as of September 20, 1996 by and among the same parties (as so amended,
the "Merger Agreement"), 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 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
<PAGE>
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 shall end on October 30, 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 October 31, and ending on October 30, 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 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.
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 President and Co-Chief Executive
Officer of the Company. During the Term, the only other Co-Chairman of the
Board or Co-Chief Executive Officer of the Company shall be Robert B. Little
(the "Co-Executive") and there shall be no other President of the Company. In
the event that the Co-Executive ceases at any time during the Term to serve as
Co-Chairman of the Board or Co-Chief Executive Officer of the Company, (i)
Employee shall become the sole Chairman of the Board 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 her
Services to the Company, 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 October 31,
1996 by and among the Company, Robert B. Little and Employee (the "Option
Agreement"), the Tax Reimbursement Agreement dated as of October 31, 1996 by
and between Robert B. Little, Employee, William F. Lischak and the Company (the
"Tax Agreement"), the Lock-up and Registration Rights Agreement dated as of
October 31, 1996 by and between the Company, Employee, Robert B. Little and
William F. Lischak (the "Registration Rights Agreement"), the Secured
Promissory Note of the Company dated October 31, 1996, in favor of Robert B.
Little and Employee in the principal amount of $2,000,000 (the "Note"), the
Security Agreement dated as of October 31, 1996 by and among the Company,
Employee and Robert B. Little (the "Security Agreement"), the Stockholders
Voting Agreement dated as of October 31, 1996 by and among the Company,
Employee, Robert B. Little, William F. Lischak, 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 (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
3
<PAGE>
herein as the "Transaction Documents"). Employee may also use and disclose
Confidential Materials to 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
4
<PAGE>
thereon) or compensation or similar committee thereof in the Board's (or such
committee's) sole discretion based upon Employee's performance of her Services
under this Agreement.
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 her legal representatives in connection with any
action, suit or proceeding to which Employee (or 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 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 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.
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 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 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 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 "C" 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).
6
<PAGE>
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 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 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 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 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 she shall not have returned
to the full-time performance of 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 her
material duties with the Company in good faith (other than any such failure
resulting from her incapacity because of physical or mental illness or any such
actual or anticipated failure resulting from her termination for Good Reason),
after a demand for substantial performance is delivered to her by the Board
that specifically identifies the manner in which the Board believes that
Employee has not substantially performed 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 reasonable notice to Employee and an opportunity for
Employee, together with her counsel, to be heard before the Board) finding that
in the
7
<PAGE>
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 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 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 her under any
of the pension, retirement, dental, medical, health and accident plans
in which 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 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
8
<PAGE>
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 her
employment pursuant to Section 4.3 hereof shall not be affected by 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 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, her executors or administrators,
her heirs or assigns or any other person claiming under or through her.
5.2 Disability of Employee. Upon the termination of Employee's
employment as a result of 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 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 plan now or hereafter provided by the Company or according to any policy of
the Company
9
<PAGE>
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 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.
10
<PAGE>
(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 October 30, 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
October 30, 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 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.
11
<PAGE>
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.
12
<PAGE>
The Company: Overseas Filmgroup, Inc.
8800 Sunset Boulevard, Third Floor
Los Angeles, California 90069
Fax: (310) 855-0719
Employee: Ellen Dinerman Little
12309 Viewcrest Road
Studio City, CA 91604
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 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 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 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
13
<PAGE>
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 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 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
14
<PAGE>
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.
15
<PAGE>
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.
OVERSEAS FILMGROUP, INC.
By: /s/ Scot K. Vorse
---------------------------
Name: Scot K. Vorse
Title: Vice President
/s/ Ellen Dinerman Little
---------------------------
Ellen Dinerman Little
16
<PAGE>
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
A-1
<PAGE>
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.
(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 "B"
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this ___ day of October, 1996,
by and between OVERSEAS FILMGROUP, INC., a Delaware corporation (hereinafter
called "Overseas"), and Ellen Dinerman Little (hereinafter called "Indemnitee")
(sometimes collectively referred to herein as "the Parties hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
B-1
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which she has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of her being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of her decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that she is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
B-2
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will of
Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as she is duly elected and qualified in accordance
with the provisions of the bylaws thereof or until such time as she tenders her
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in, or otherwise becomes
involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that she is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by her in any
B-3
<PAGE>
such capacity, against Losses actually incurred by her in connection with such
Proceeding if she acted in good faith and in a manner she reasonably believed
to be in or not opposed to the best interests of the corporation and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe that her conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or witness
in, or is threatened to be made a party to, or witness in or otherwise becomes
involved in, any Proceeding by or in the right of Overseas or an Affiliate of
Overseas to procure a judgment in its favor by reason of (or arising in part
out of) the fact that she is or was a director, officer, employee or agent of
Overseas or is or was serving at the request of Overseas as a director,
officer, employee or agent of an Affiliate of Overseas, or by reason of
anything done or not done by her in any such capacity, against Litigation Costs
actually incurred by her in connection with such Proceeding if she acted in
good faith and in a manner she reasonably believed to be in or not opposed to
the best interests of Overseas and except that no indemnification under this
subsection shall be made in respect of any claim, issue or matter as to which
such person shall have been adjudged to be liable to Overseas unless and only
to the extent that the Court of Chancery or the court in which such action or
suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement shall
continue after Indemnitee ceases as a director, officer, employee or agent of
Overseas or an Affiliate of Overseas, and shall inure to the benefit of the
heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to her own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the merits or
otherwise in defense of any Proceedings referred to in subsections (a), (b) or
(c) of this Section 3, or in the defense of any claim, issue or matter
described therein, Indemnitee shall be indemnified against Litigation Costs
actually incurred by her in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on her behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
she reasonably believed to be in or not opposed to the best interests of
B-4
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that her conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any other
indemnifying party similarly notified will be entitled to promptly assume the
defense of any such Proceeding, with counsel satisfactory to Indemnitee. After
notice from Overseas to Indemnitee of its election so to assume the defense
thereof, Overseas will not be liable to the Indemnitee under this Agreement for
any Litigation Costs subsequently incurred by Indemnitee in connection with the
defense thereof other than reasonable costs of investigation or as otherwise
provided below. Indemnitee shall have the right to employ personal counsel in
such Proceeding, but the fees and expenses of such counsel incurred after
notice from Overseas of its assumption of the defense thereof shall be at the
expense of Indemnitee, unless (i) the employment of counsel by Indemnitee has
been authorized by Overseas, (ii) Indemnitee shall have reasonably concluded
that there may be a conflict of interest between Overseas and/or any Affiliate
of Overseas and Indemnitee in the conduct of the defense of such action, or
(iii) Overseas shall not in fact have promptly employed counsel to assume the
defense of such action, in each of which cases the fees and expenses of counsel
shall be at the expense of Overseas. Overseas shall not be entitled to assume
the defense of any Proceeding brought by or on behalf of Overseas or an
Affiliate of Overseas or as to which Indemnitee shall have made the conclusion
provided for in (ii) above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other terms
and provisions hereof (including applicable limitations relating to actions by
or in the right of Overseas or Affiliates of Overseas), if Indemnitee is
deceased and is entitled to indemnification under any provision of this
Agreement, Overseas shall indemnify Indemnitee's estate and her spouse, heirs,
administrators and executors against, and Overseas shall, and does hereby
agree, to assume any and all Losses incurred by or for Indemnitee or her estate
in connection with the investigation, defense, settlement or appeal of any such
Proceeding. Further, when requested in writing by the spouse of Indemnitee
and/or the heirs, executors or administrators of Indemnitee's estate, Overseas
shall provide appropriate evidence of Overseas' Agreement set out herein, to
indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under this
Agreement, Indemnitee shall submit to Overseas a written request, including
therein or therewith such documentation and information as is reasonably
available to Indemnitee and is reasonably necessary to determine whether and to
what extent Indemnitee is entitled to indemnification.
B-5
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle her partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and her legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and her legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which she claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
B-6
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, her spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute as to the reasonableness of any Litigation Costs shall not delay an
Advancement by Overseas, and Overseas agrees that any such dispute shall be
resolved only upon the disposition or conclusion of the underlying Proceeding
against the Indemnitee. If Indemnitee has petitioned
B-7
<PAGE>
the Court of Chancery of the State of Delaware or any other court of competent
jurisdiction pursuant to Section 8 hereof to secure a determination that
Indemnitee should be indemnified under applicable law, any determination made
by the Board of Directors, independent legal counsel or the stockholders that
Indemnitee would not be permitted to be indemnified under the applicable law
shall not be binding and Indemnitee shall not be required to reimburse Overseas
for any Advancements, and Overseas shall be obligated to continue to make
Advancements, until a final judicial determination is made with respect thereto
(as to which all rights of appeal therefrom have been exhausted or have
lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in her official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not
B-8
<PAGE>
to any particular paragraph, subparagraph or other subdivision. When the
context so requires in this Agreement, the masculine gender includes the
feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and her spouse, heirs, executors and administrators.
B-9
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: BY:
-------------------------- --------------------------
Name:
Title:
Indemnitee
Name: Ellen Dinerman Little
Address: 12309 Viewcrest Road
Studio City, CA 91604
B-10
<PAGE>
EXHIBIT "C"
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 31st day of
October, 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
October 31, 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,
warrants, covenants and agrees that within fourteen calendar days of the date
hereof the Company shall have registered under the Securities Act of 1933, as
amended (the "Act"), this Plan Agreement and the shares of the Company's common
stock , $.001 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 any
restriction whatsoever 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
C-1
<PAGE>
registration, keep the applicable registration statement effective and
otherwise permit the transferability by Optionees 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 July 2, 1996 as amended by that certain Amendment
to Agreement of Merger dated as of September 20, 1996 by and among the same
parties (as so amended, 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),
C-2
<PAGE>
(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 (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
October 30, 1997 87,500
October 30, 1998 87,500
October 30, 1999 87,500
October 30, 2000 87,500
October 30, 2001 87,500
C-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
------------ --------------------
October 30, 1997 112,500
October 30, 1998 112,500
October 30, 1999 112,500
October 30, 2000 112,500
October 30, 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.
C-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 October 30, 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.
C-5
<PAGE>
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 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.
C-6
<PAGE>
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
C-7
<PAGE>
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 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
C-8
<PAGE>
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 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
C-9
<PAGE>
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.
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
Ellen Dinerman Little: Ellen Dinerman Little
12309 Viewcrest Road
Studio City, CA 91604
The Company: OVERSEAS FILMGROUP, INC.
8800 Sunset Boulevard
Los Angeles, California 9069
Attention: Corporate Secretary
(fax) (310) 855-0719
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.
C-10
<PAGE>
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: Scot K. Vorse
Title: Vice President
-----------------------------------
ROBERT B. LITTLE
Social Security No.:
---------------
-----------------------------------
ELLEN DINERMAN LITTLE
Social Security No.:
---------------
C-11
<PAGE>
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.
C-12
<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.
C-13
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the
31st day of October, 1996 between Robert B. Little ("Employee") and Overseas
Filmgroup, Inc., a Delaware corporation (the "Company").
WHEREAS, pursuant to an Agreement of Merger, dated as of July 2, 1996
by and among Entertainment/Media Acquisition Corporation ("EMAC"), Overseas
Filmgroup, Inc. (the "Disappearing Corporation"), Robert B. Little and Ellen
Dinerman Little, as amended by that certain Amendment to Agreement of Merger,
dated as of September 20, 1996 by and among the same parties (as so amended,
the "Merger Agreement"), 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 Chairman of the Board and Chief Executive
Officer 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
<PAGE>
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 shall end on October 30, 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 October 31, and ending on October 30, 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 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-Chief Executive Officer of the Company. During
the Term, the only other Co-Chairman of the Board, President, or Co-Chief
Executive Officer of the Company shall be Ellen Dinerman Little (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 or Co-Chief Executive Officer of
the Company, (i) Employee shall become the sole Chairman of the Board 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
2
<PAGE>
decisions and take certain actions shall thereafter be deemed to be references
instead to the sole authority of Employee.
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. During the Term, there shall
be no President of the Company other than Ellen Dinerman Little. In the event
that Co-Executive ceases at any time during the Term to serve as President of
the Company, such office shall remain vacant unless Employee chooses, in his
sole discretion, to assume such additional office, in which case the Company
shall promptly appoint him to such office.
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
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 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 October 31,
1996 by and among the Company, Employee and Ellen Dinerman Little (the "Option
Agreement"), the Tax Reimbursement Agreement dated as of October 31, 1996 by
and between Ellen Dinerman Little, Employee, William F. Lischak and the Company
(the "Tax Agreement"), the Lock-up and Registration Rights Agreement dated as
of October 31, 1996 by
3
<PAGE>
and between the Company, Employee, Ellen Dinerman Little and William F. Lischak
(the "Registration Rights Agreement"), the Secured Promissory Note of the
Company dated October 31, 1996, in favor of Ellen Dinerman Little and Employee
in the principal amount of $2,000,000 (the "Note"), the Security Agreement
dated as of October 31, 1996 by and among the Company, Employee and Ellen
Dinerman Little (the "Security Agreement"), the Stockholders Voting Agreement
dated as of October 31, 1996 by and among the Company, Employee, Ellen Dinerman
Little, William F. Lischak, 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 (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 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
4
<PAGE>
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 Services under this Agreement.
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 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. 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 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
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
5
<PAGE>
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.
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 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 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 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.
6
<PAGE>
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 "C" 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).
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 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 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 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
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 shall not have returned to
the full-time performance of his 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
7
<PAGE>
substantially to perform his material duties with the Company in good faith
(other than any such failure resulting from his incapacity because of physical
or mental illness or any such actual or anticipated failure resulting from his
termination for Good Reason), after a demand for substantial performance is
delivered to him by the Board that specifically identifies the manner in which
the Board believes that Employee has not substantially performed his 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 reasonable notice to Employee and an opportunity for
Employee, together with his 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 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 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 under any
of the pension, retirement, dental, medical, health and accident plans
in which he 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 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);
8
<PAGE>
(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 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
employment pursuant to Section 4.3 hereof shall not be affected by his
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 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 executors or administrators,
his heirs or assigns or any other person claiming under or through him.
9
<PAGE>
5.2 Disability of Employee. Upon the termination of Employee's
employment as a result of his 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 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
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 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
fol- lowing 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
10
<PAGE>
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.
(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 October 30, 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
October 30, 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 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
11
<PAGE>
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.
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
12
<PAGE>
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: Overseas Filmgroup, Inc.
8800 Sunset Boulevard, Third Floor
Los Angeles, California 90069
Fax: (310) 855-0719
Employee: Robert B. Little
12309 Viewcrest Road
Studio City, CA 91604
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
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 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
13
<PAGE>
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 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
14
<PAGE>
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 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.
15
<PAGE>
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.
OVERSEAS FILMGROUP, INC.
By: /s/ Scot K. Vorse
----------------------------
Name: Scot K. Vorse
Title: Vice President
/s/ Robert B. Little
----------------------------
Robert B. Little
16
<PAGE>
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
A-1
<PAGE>
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.
(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 "B"
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this ___ day of October, 1996,
by and between OVERSEAS FILMGROUP, INC., a Delaware corporation (hereinafter
called "Overseas"), and Robert B. Little (hereinafter called "Indemnitee")
(sometimes collectively referred to herein as "the Parties hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers will
inevitably result in less effective direction and supervision of Overseas and
its subsidiaries and affiliates, their business affairs and the operation of
their facilities and the Board deems such
B-1
<PAGE>
consequences to be so detrimental to the best interests of Overseas'
shareholders that it has concluded that its directors and officers should be
provided with maximum protection against inordinate risks in order to insure
that the most capable persons otherwise available will be attracted to such
positions; therefore, said directors have further concluded that it is not only
reasonable and prudent but necessary for Overseas to contractually obligate
itself to indemnify in a reasonable and adequate manner its directors and
officers and the directors and officers of its affiliates and to assume for
itself maximum liability for expenses and damages in connection with claims
lodged against them for their line-of-duty decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which he has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of his decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that he is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
B-2
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will
of Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as he is duly elected and qualified in accordance with
the provisions of the bylaws thereof or until such time as he tenders his
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or
witness in, or is threatened to be made a party to, or witness in, or otherwise
becomes involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that he is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by him in any such capacity, against Losses actually incurred by him
in connection with such Proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best
B-3
<PAGE>
interests of the corporation and, with respect to any criminal action or
proceeding, had no reasonable cause to believe that his conduct was unlawful,
or
(b) If Indemnitee is a person who was or is a party, or
witness in, or is threatened to be made a party to, or witness in or otherwise
becomes involved in, any Proceeding by or in the right of Overseas or an
Affiliate of Overseas to procure a judgment in its favor by reason of (or
arising in part out of) the fact that he is or was a director, officer,
employee or agent of Overseas or is or was serving at the request of Overseas
as a director, officer, employee or agent of an Affiliate of Overseas, or by
reason of anything done or not done by his in any such capacity, against
Litigation Costs actually incurred by him in connection with such Proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of Overseas and except that no indemnification
under this subsection shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to Overseas unless
and only to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement
shall continue after Indemnitee ceases as a director, officer, employee or
agent of Overseas or an Affiliate of Overseas, and shall inure to the benefit
of the heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to his own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the
merits or otherwise in defense of any Proceedings referred to in subsections
(a), (b) or (c) of this Section 3, or in the defense of any claim, issue or
matter described therein, Indemnitee shall be indemnified against Litigation
Costs actually incurred by him in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on his behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was criminal.
B-4
<PAGE>
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any
other indemnifying party similarly notified will be entitled to promptly assume
the defense of any such Proceeding, with counsel satisfactory to Indemnitee.
After notice from Overseas to Indemnitee of its election so to assume the
defense thereof, Overseas will not be liable to the Indemnitee under this
Agreement for any Litigation Costs subsequently incurred by Indemnitee in
connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the right
to employ personal counsel in such Proceeding, but the fees and expenses of
such counsel incurred after notice from Overseas of its assumption of the
defense thereof shall be at the expense of Indemnitee, unless (i) the
employment of counsel by Indemnitee has been authorized by Overseas, (ii)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between Overseas and/or any Affiliate of Overseas and Indemnitee in
the conduct of the defense of such action, or (iii) Overseas shall not in fact
have promptly employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of counsel shall be at the expense of
Overseas. Overseas shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of Overseas or an Affiliate of Overseas or
as to which Indemnitee shall have made the conclusion provided for in (ii)
above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other
terms and provisions hereof (including applicable limitations relating to
actions by or in the right of Overseas or Affiliates of Overseas), if
Indemnitee is deceased and is entitled to indemnification under any provision
of this Agreement, Overseas shall indemnify Indemnitee's estate and his spouse,
heirs, administrators and executors against, and Overseas shall, and does
hereby agree, to assume any and all Losses incurred by or for Indemnitee or his
estate in connection with the investigation, defense, settlement or appeal of
any such Proceeding. Further, when requested in writing by the spouse of
Indemnitee and/or the heirs, executors or administrators of Indemnitee's
estate, Overseas shall provide appropriate evidence of Overseas' Agreement set
out herein, to indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under
this Agreement, Indemnitee shall submit to Overseas a written request,
including therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification.
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything
contained elsewhere herein to the contrary notwithstanding, the determination
as to whether or not Indemnitee has met the
B-5
<PAGE>
standard of conduct required to qualify and entitle him partially or fully, to
indemnification under the provisions of any subparagraph of Paragraph 3 hereof
may be made either (1) by the Board of Directors by a majority vote of
directors who were not parties to such Proceeding even though less than a
quorum, (2) or if there are no such directors or if such directors so direct,
by independent legal counsel (selected and retained by Overseas in the manner
hereinafter set forth) in a written opinion, or (3) by the stockholders of
Overseas provided that the manner in which (and if applicable, the counsel by
which) the right to indemnification is to be determined shall be approved in
advance in writing by both the Board of Directors of Overseas and by
Indemnitee. In the event that such parties are unable to agree on the manner in
which the determination of the right to indemnity is to be made, such
determination may be made by independent legal counsel selected and retained by
Overseas especially for such purpose, provided that such counsel be approved in
advance in writing by both the Board of Directors and Indemnitee and provided
further, that such counsel shall not be outside counsel regularly employed by
Overseas. In the event that the Parties hereto are unable to agree on the
selection of such outside counsel, such outside counsel shall be selected by
lot by the outside counsel regularly employed by Overseas from among the Los
Angeles, California law firms having more than twenty (20) attorneys and having
a rating of "av" or better in the then current Martindale-Hubbell Law
Directory. Such selection by lot shall be made in the presence of Indemnitee
(and his legal counsel or either of them, as Indemnitee may elect). The outside
counsel regularly employed by Overseas and Indemnitee (and his legal counsel or
either of them as Indemnitee may elect) shall contact, in the order of their
selection by lot, such law firms, requesting each such firm to accept
engagement to make the determination required hereunder until one of such firms
accepts such engagement. The fees and expenses of counsel in connection with
making said determination contemplated hereunder shall be paid by Overseas,
and, if requested by such counsel, Overseas shall give such counsel an
appropriate written agreement with respect to the payment of their fees and
expenses and such other matters as may be reasonably requested by counsel.
Nothing contained in this Agreement shall require any determination under this
Section 8 to be made by the Board of Directors, independent legal counsel or
the stockholders prior to the disposition or conclusion of the Proceeding
against the Indemnitee; provided, however, that Advancements shall continue to
be made by Overseas pursuant to and to the extent required by Section 10
hereunder. Notwithstanding the foregoing, Indemnitee may, either before or
within two (2) years after a determination has been made as provided above,
petition the Court of Chancery of the State of Delaware or any other court of
competent jurisdiction to determine whether Indemnitee is entitled to
indemnification under the provisions hereof under which he claims the right to
indemnification, and such court shall thereupon have the exclusive authority to
make such determination, unless and until such court dismisses or otherwise
terminates such action without having made such determination. The
determination of the court, as petitioned, as to whether Indemnitee is entitled
to indemnification hereunder, shall be independent and irrespective of any
prior determination made by the Board of Directors, the stockholders or
counsel. If the Court shall determine that Indemnitee is entitled to
indemnification hereunder as to any claim, issue or matter involved in any
Proceeding with respect to which there has been no prior determination pursuant
hereto or with respect to which there has been a prior determination pursuant
hereto that Indemnitee was not entitled to indemnification hereunder, Overseas
shall pay all expenses (including attorneys' fees) actually incurred by
Indemnitee in connection with such judicial determination. If the person
(including
B-6
<PAGE>
the Board of Directors, independent legal counsel in a written opinion, the
stockholders, or a court) making the determination hereunder shall determine
that Indemnitee is entitled to indemnification as to some claims, issues or
matters involved in the Proceeding but not as to others, such person shall
reasonably prorate the Losses with respect to which indemnification is sought
by Indemnitee among such claims, issues or matters. If, and to the extent it is
finally determined by the Court that Indemnitee is not entitled to
indemnification, then Indemnitee agrees to reimburse (the "Indemnitee
Reimbursement Obligation"), without interest, Overseas (which agreement shall
be an unsecured obligation of Indemnitee) for all expenses advanced or prepaid
pursuant to Section 10 hereof, or the proper proportion thereof, other than the
expenses of obtaining the judicial determination referred to above. Anything
contained elsewhere herein to the contrary notwithstanding, Overseas shall not
be liable to indemnify Indemnitee under this Agreement for any amounts paid in
settlement of any Proceeding or claim effected without its written consent.
Overseas shall not settle any Proceeding or claim in any manner which would
impose any penalty or limitation on Indemnitee without Indemnitee's written
consent. Neither Overseas nor Indemnitee will unreasonably withhold their
consent to any proposed settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action shall
be brought and no cause of action shall be asserted by or on behalf of Overseas
or any Affiliate of Overseas against Indemnitee, his spouse, heirs, executors
or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing by
Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute as to the reasonableness of any Litigation Costs shall not delay an
Advancement by Overseas, and Overseas agrees that any such dispute shall be
resolved only upon the disposition or
B-7
<PAGE>
conclusion of the underlying Proceeding against the Indemnitee. If Indemnitee
has petitioned the Court of Chancery of the State of Delaware or any other
court of competent jurisdiction pursuant to Section 8 hereof to secure a
determination that Indemnitee should be indemnified under applicable law, any
determination made by the Board of Directors, independent legal counsel or the
stockholders that Indemnitee would not be permitted to be indemnified under the
applicable law shall not be binding and Indemnitee shall not be required to
reimburse Overseas for any Advancements, and Overseas shall be obligated to
continue to make Advancements, until a final judicial determination is made
with respect thereto (as to which all rights of appeal therefrom have been
exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance payment
of expenses as provided by any provision of this Agreement shall not be deemed
exclusive of any other rights to which Indemnitee may be entitled under any
provision of law, the Certificate of Incorporation, any Bylaw, this or other
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever
(i) the validity, legality and enforceability of the remaining provisions of
this Agreement (including, without limitation, all portions of any paragraphs
of this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and effect
with regard to the cost of settlement borne or paid by Indemnitee under the
provisions of any agreement executed by Overseas and/or Indemnitee prior to the
date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in one or
more counterparts, each of which shall for all purposes be deemed to be an
original and all of which shall constitute the same instrument, but only one of
which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not
B-8
<PAGE>
to any particular paragraph, subparagraph or other subdivision. When the
context so requires in this Agreement, the masculine gender includes the
feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver. Any repeal
or modification of the relevant provisions of the Delaware General Corporation
Law in effect as of the date of execution of this Indemnity Agreement shall not
affect any right or obligation then existing with respect to any state of facts
then or previously existing or any action, suit or proceeding previously or
thereafter brought or threatened based in part or in whole on such state of
facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to promptly
notify Overseas in writing upon being served with any citation, complaint,
indictment or other document covered hereunder, either civil or criminal.
19. NOTICES. All notices, requests, demands and other communication
hereunder shall be in writing and shall be deemed to have been duly given if
(i) delivered by hand and receipted for by the party to whom said notice or
other communication shall have been directed, or (ii) mailed by certified or
registered mail with postage prepaid on the third business day after the date
on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the signature
page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement shall
be construed and enforced in accordance with and governed by the laws of the
State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse, heirs, executors and administrators.
B-9
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: BY:
-------------------------- ------------------------------
Name:
Title:
Indemnitee
Name: Robert B. Little
Address: 12309 Viewcrest Road
Studio City, CA 91604
B-10
<PAGE>
EXHIBIT "C"
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 31st day of
October, 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
October 31, 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,
warrants, covenants and agrees that within fourteen calendar days of the date
hereof the Company shall have registered under the Securities Act of 1933, as
amended (the "Act"), this Plan Agreement and the shares of the Company's common
stock , $.001 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 any
restriction whatsoever 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
C-1
<PAGE>
registration, keep the applicable registration statement effective and
otherwise permit the transferability by Optionees 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 July 2, 1996 as amended by
that certain Amendment to Agreement of Merger dated as of September 20, 1996 by
and among the same parties (as so amended, 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),
C-2
<PAGE>
(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 (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
October 30, 1997 87,500
October 30, 1998 87,500
October 30, 1999 87,500
October 30, 2000 87,500
October 30, 2001 87,500
C-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
------------ --------------------
October 30, 1997 112,500
October 30, 1998 112,500
October 30, 1999 112,500
October 30, 2000 112,500
October 30, 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.
C-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 October 30, 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
C-5
<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.
12. Adjustment of Exercise Prices and Number of Options.
The Exercise Prices shall be subject to adjustment from time to time
as hereinafter provided.
C-6
<PAGE>
(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 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.
C-7
<PAGE>
(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 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.
C-8
<PAGE>
(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.
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
C-9
<PAGE>
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
Ellen Dinerman Little: Ellen Dinerman Little
12309 Viewcrest Road
Studio City, CA 91604
The Company: OVERSEAS FILMGROUP, INC.
8800 Sunset Boulevard
Los Angeles, California 9069
Attention: Corporate Secretary
(fax) (310) 855-0719
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: Scot K. Vorse
Title: Vice President
--------------------------------
ROBERT B. LITTLE
C-10
<PAGE>
Social Security No.:
------------
--------------------------------
ELLEN DINERMAN LITTLE
Social Security No.:
------------
C-11
<PAGE>
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.
[ ] (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.
C-12
<PAGE>
Dated:
----------------------- ------------------------------
Signature
------------------------------
Print Name
------------------------------
Please print here the exact
name desired to be on the
stock certificate and the
records of the Company.
C-13
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of the
31st day of October, 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 July 2, 1996,
by and among Entertainment/Media Acquisition Corporation ("EMAC"), Overseas
Filmgroup, Inc. (the "Disappearing Corporation"), Robert B. Little and Ellen
Dinerman Little, as amended by that certain Amendment to Agreement of Merger
dated as of September 20, 1996 by and among the same parties (as so amended,
the "Merger Agreement"), 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, for more than
five years, and, during such period Employee served in such positions, Employee
was a loyal and dedicated officer and employee of the Disappearing Corporation,
devoting his time and energies to the success of the Disappearing Corporation;
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,
1
<PAGE>
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
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 October 30, 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 October 31, and ending on October 30, 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
2
<PAGE>
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 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 "B" 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
3
<PAGE>
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.
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.
4
<PAGE>
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
5
<PAGE>
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,
6
<PAGE>
(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.
7
<PAGE>
(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
8
<PAGE>
Agreement, which shall be in addition to any other rights or remedies to which
the Company may be entitled.
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.
9
<PAGE>
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
10
<PAGE>
such 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: /s/ Scot K. Vorse
-----------------------------
Name: Scot K. Vorse
Title: Vice President
/s/ William F. Lischak
-----------------------------
William F. Lischak
11
<PAGE>
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
A-1
<PAGE>
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
<PAGE>
EXHIBIT "B"
INDEMNITY AGREEMENT
This AGREEMENT is made and entered into this ___ day of October, 1996,
by and between OVERSEAS FILMGROUP, INC., a Delaware corporation (hereinafter
called "Overseas"), and William F. Lischak (hereinafter called "Indemnitee")
(sometimes collectively referred to herein as "the Parties hereto").
WHEREAS, there is a general awareness that competent and experienced
persons are becoming more reluctant to serve as directors and officers of a
corporation unless they are protected by comprehensive insurance or
indemnification, especially since stockholder class and derivative lawsuits
against publicly held corporations, their directors and officers for
line-of-duty decisions and actions have increased in number in recent years for
damages in amounts which are greatly in excess of the amount of compensation
received by the directors or officers from the corporations, and
WHEREAS, the vagaries of "public policy" and the interpretations of
ambiguous statutes, regulations and bylaws are too uncertain to provide
corporate officers and directors with adequate, reliable knowledge of legal
risks to which they may be exposed, with these indeterminables multiplied
substantially for officers and directors of corporations such as Overseas with
operations in many of the states in the United States and many foreign
jurisdictions, and
WHEREAS, damages sought by class action plaintiffs in some cases
amount to tens of millions of dollars and, whether or not the case is
meritorious, the cost of defending them is enormous with few individual
directors and officers having the resources to sustain such legal costs, not to
mention the risk of a judgment running into millions even in cases where the
defendant was neither culpable nor profited personally to the detriment of the
corporation, and
WHEREAS, the issues in controversy in such litigation are usually
related to the knowledge, motives and intent of the director or officer and
such person may be the only witness with first-hand knowledge of the essential
facts or of exculpating circumstances, who is qualified to testify in such
person's defense regarding matters of such subjective nature, and the long
period of time which normally and usually elapses before such suits can be
disposed of can extend beyond the normal time for retirement for a director or
officer with the result that such person, after retirement, or in the event of
such person's death, such person's spouse, heirs, executors or administrators,
as the case may be, may be faced with limited ability, undue hardship and an
intolerable burden in launching and maintaining a proper and adequate defense
of such director or officer or such person's estate against claims for damages,
and
WHEREAS, the Board of Directors, based upon their experience as
business managers, have concluded that unless Overseas enters into
indemnification agreements with its directors and officers, the continuation of
present trends in litigation against corporate directors and officers
B-1
<PAGE>
will inevitably result in less effective direction and supervision of Overseas
and its subsidiaries and affiliates, their business affairs and the operation
of their facilities and the Board deems such consequences to be so detrimental
to the best interests of Overseas' shareholders that it has concluded that its
directors and officers should be provided with maximum protection against
inordinate risks in order to insure that the most capable persons otherwise
available will be attracted to such positions; therefore, said directors have
further concluded that it is not only reasonable and prudent but necessary for
Overseas to contractually obligate itself to indemnify in a reasonable and
adequate manner its directors and officers and the directors and officers of
its affiliates and to assume for itself maximum liability for expenses and
damages in connection with claims lodged against them for their line-of-duty
decisions and actions, and
WHEREAS, Section 145 of the General Corporation Law of the State of
Delaware, under which Overseas is organized, empowers corporations to indemnify
persons serving as a director, officer, employee or agent of the corporation or
a person who serves at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, and further specifies that the indemnification set forth in
said section "shall not be deemed exclusive to any other rights to which those
seeking indemnification may be entitled under any bylaw, agreement, vote of
stockholders or disinterested directors or otherwise", and said section further
empowers a corporation to "purchase and maintain insurance" (on behalf of such
persons) "against any liability asserted against him or incurred by him in any
such capacity or arising out of status as such whether or not the corporation
would have the power to indemnify him against such liability under the
provisions of" (said laws), and
WHEREAS, Overseas initiated an investigation to determine the type of
insurance available, the nature and extent of the coverage provided and the
cost thereof to Overseas to insure the directors and officers of Overseas and
of its affiliates against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by such
persons in connection with any action, suit or proceeding with which any such
director or officer is threatened or made a party by reason of such status
and/or such person's line-of-duty decisions or actions, and, upon receiving
such information, the directors of Overseas have determined that the coverage
available is inadequate for Overseas and its directors, officers and agents and
that its shareholders' best interests would be served by Overseas contracting
to indemnify such persons and to thereby effectively self-insure against such
potential liabilities not covered by insurance, and
WHEREAS, Overseas desires to have Indemnitee serve or continue to
serve as a director and/or officer of Overseas and/or of any other corporation,
partnership, joint venture, trust or other enterprise of which he has been or
is serving at the request of, for the convenience of, or to represent the
interests of Overseas (any such enterprise being hereinafter referred to as an
"Affiliate of Overseas") free from undue concern for unpredictable,
inappropriate or unreasonable claims for damages by reason of his being a
director, officer, employee and/or agent of Overseas or of an Affiliate of
Overseas or by reason of his decisions or actions on their behalf and
Indemnitee desires to serve or to continue to serve (provided that he is
furnished the indemnity provided for hereinafter), in one or more of such
capacities, NOW, THEREFORE,
B-2
<PAGE>
W I T N E S S E T H
THAT for and in consideration of the premises and the covenants
contained herein, Overseas and Indemnitee do hereby covenant and agree as
follows:
1. DEFINITIONS.
"Litigation Costs" means all reasonable costs, charges, expenses,
including attorneys', accountants' and expert witnesses' fees, and obligations
paid or incurred in connection with investigating, defending (including
affirmative defenses and counterclaims), obtaining or attempting to obtain a
settlement, being a witness in, or participating in or preparing to defend, be
a witness in, or participate in, any Proceeding and any appeal therefrom and
the cost of appeal, attachment and similar bonds.
"Losses" means the total amount which Indemnitee becomes legally
obligated to pay in connection with any Proceeding including, without
limitation, Litigation Costs, judgments, fines and amounts paid in settlement
(including all interest, assessments and other charges paid or payable in
connection with or in respect of such Litigation Costs, judgments, fines and
amounts paid in settlement) of or with respect to that Proceeding.
"Proceeding" means any threatened, pending or completed action, suit
or proceeding (including, without limitation, securities laws actions, suits,
and proceedings), or any inquiry or investigation, formal or informal,
(including discovery), whether conducted by Overseas or any other party, that
Indemnitee in good faith believes might lead to the institution of any action,
suit, or proceeding, whether civil, criminal, administrative, investigative, or
other.
2. AGREEMENT TO SERVICE.
Indemnitee will serve and/or continue to serve, at the will
of Overseas or its stockholders or under separate contract, if such exists,
Overseas or an Affiliate of Overseas as a director, officer, employee and/or
agent faithfully so long as he is duly elected and qualified in accordance with
the provisions of the bylaws thereof or until such time as he tenders his
resignation in writing or is removed in accordance with applicable law (subject
to the terms of any separate contract, if such exists).
3. INDEMNIFICATION. Overseas shall indemnify Indemnitee:
(a) If Indemnitee is a person who was or is a party, or
witness in, or is threatened to be made a party to, or witness in, or otherwise
becomes involved in, any Proceeding (other than an action by or in the right of
Overseas or an Affiliate of Overseas) by reason of (or arising in part out of)
the fact that he is or was a director, officer, employee or agent of Overseas
or is or was serving at the request of Overseas as a director, officer,
employee or agent of an Affiliate of Overseas, or by reason of anything done or
not done by him in any
B-3
<PAGE>
such capacity, against Losses actually incurred by him in connection with such
Proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe that
his conduct was unlawful, or
(b) If Indemnitee is a person who was or is a party, or
witness in, or is threatened to be made a party to, or witness in or otherwise
becomes involved in, any Proceeding by or in the right of Overseas or an
Affiliate of Overseas to procure a judgment in its favor by reason of (or
arising in part out of) the fact that he is or was a director, officer,
employee or agent of Overseas or is or was serving at the request of Overseas
as a director, officer, employee or agent of an Affiliate of Overseas, or by
reason of anything done or not done by his in any such capacity, against
Litigation Costs actually incurred by him in connection with such Proceeding if
he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of Overseas and except that no indemnification
under this subsection shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to Overseas unless
and only to the extent that the Court of Chancery or the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the relevant circumstances of the
case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper, and
(c) The protections afforded Indemnitee by this Agreement
shall continue after Indemnitee ceases as a director, officer, employee or
agent of Overseas or an Affiliate of Overseas, and shall inure to the benefit
of the heirs, executors and administrators of such Indemnitee, except that no
indemnification shall be due under the provisions of this subsection to the
extent a court of competent jurisdiction shall have found in such Proceeding
that Indemnitee defrauded or stole from Overseas or an Affiliate of Overseas or
converted to his own personal use and benefit business or properties of
Overseas or an Affiliate of Overseas or was guilty of gross negligence or
willful misconduct of a culpable nature to Overseas or an Affiliate of
Overseas, and
(d) To the extent Indemnitee has been successful on the
merits or otherwise in defense of any Proceedings referred to in subsections
(a), (b) or (c) of this Section 3, or in the defense of any claim, issue or
matter described therein, Indemnitee shall be indemnified against Litigation
Costs actually incurred by him in connection with the investigation, defense or
appeal of such action, suit or proceeding. If Indemnitee is not wholly
successful in such Proceedings, but is successful on the merits or otherwise as
to one or more, but less than all, claims, issues or matters in such
Proceedings, Overseas shall indemnify Indemnitee against all Losses actually
incurred by Indemnitee or on his behalf in connection with the successfully
resolved claim, issue or matter.
For purposes of this Section 3 and without limitation, the
termination of any Proceedings by judgment order, settlement, conviction or
upon a plea of nolo contendere or its equivalent, shall not, of itself create a
presumption (1) that Indemnitee did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of
B-4
<PAGE>
Overseas, or (2) with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that his conduct was criminal.
4. OVERSEAS' ASSUMPTION OF DEFENSE.
To the extent that it may wish, Overseas jointly with any
other indemnifying party similarly notified will be entitled to promptly assume
the defense of any such Proceeding, with counsel satisfactory to Indemnitee.
After notice from Overseas to Indemnitee of its election so to assume the
defense thereof, Overseas will not be liable to the Indemnitee under this
Agreement for any Litigation Costs subsequently incurred by Indemnitee in
connection with the defense thereof other than reasonable costs of
investigation or as otherwise provided below. Indemnitee shall have the right
to employ personal counsel in such Proceeding, but the fees and expenses of
such counsel incurred after notice from Overseas of its assumption of the
defense thereof shall be at the expense of Indemnitee, unless (i) the
employment of counsel by Indemnitee has been authorized by Overseas, (ii)
Indemnitee shall have reasonably concluded that there may be a conflict of
interest between Overseas and/or any Affiliate of Overseas and Indemnitee in
the conduct of the defense of such action, or (iii) Overseas shall not in fact
have promptly employed counsel to assume the defense of such action, in each of
which cases the fees and expenses of counsel shall be at the expense of
Overseas. Overseas shall not be entitled to assume the defense of any
Proceeding brought by or on behalf of Overseas or an Affiliate of Overseas or
as to which Indemnitee shall have made the conclusion provided for in (ii)
above.
5. ASSUMPTION OF LIABILITY BY OVERSEAS. Subject to the other
terms and provisions hereof (including applicable limitations relating to
actions by or in the right of Overseas or Affiliates of Overseas), if
Indemnitee is deceased and is entitled to indemnification under any provision
of this Agreement, Overseas shall indemnify Indemnitee's estate and his spouse,
heirs, administrators and executors against, and Overseas shall, and does
hereby agree, to assume any and all Losses incurred by or for Indemnitee or his
estate in connection with the investigation, defense, settlement or appeal of
any such Proceeding. Further, when requested in writing by the spouse of
Indemnitee and/or the heirs, executors or administrators of Indemnitee's
estate, Overseas shall provide appropriate evidence of Overseas' Agreement set
out herein, to indemnify Indemnitee against and to itself assume such Losses.
6. NOTICE OF PROCEEDING. Promptly after receipt by Indemnitee of
notice of the commencement of any Proceeding but in no event later than twenty
days after receipt by Indemnitee of such notice, Indemnitee will, if a claim in
respect thereof is to be made against Overseas under this Agreement, notify
Overseas of the commencement thereof; provided, however, that any failure by
Indemnitee to so notify Overseas shall not relieve Overseas from its
obligations hereunder unless Overseas shall have been materially prejudiced by
the failure of Indemnitee to notify Overseas and then only to the extent of
such material prejudice.
7. REQUEST FOR INDEMNIFICATION. To obtain indemnification under
this Agreement, Indemnitee shall submit to Overseas a written request,
including therein or therewith such documentation and information as is
reasonably available to Indemnitee and is reasonably necessary to determine
whether and to what extent Indemnitee is entitled to indemnification.
B-5
<PAGE>
8. DETERMINATION OF RIGHT TO INDEMNIFICATION. Anything contained
elsewhere herein to the contrary notwithstanding, the determination as to
whether or not Indemnitee has met the standard of conduct required to qualify
and entitle him partially or fully, to indemnification under the provisions of
any subparagraph of Paragraph 3 hereof may be made either (1) by the Board of
Directors by a majority vote of directors who were not parties to such
Proceeding even though less than a quorum, (2) or if there are no such
directors or if such directors so direct, by independent legal counsel
(selected and retained by Overseas in the manner hereinafter set forth) in a
written opinion, or (3) by the stockholders of Overseas provided that the
manner in which (and if applicable, the counsel by which) the right to
indemnification is to be determined shall be approved in advance in writing by
both the Board of Directors of Overseas and by Indemnitee. In the event that
such parties are unable to agree on the manner in which the determination of
the right to indemnity is to be made, such determination may be made by
independent legal counsel selected and retained by Overseas especially for such
purpose, provided that such counsel be approved in advance in writing by both
the Board of Directors and Indemnitee and provided further, that such counsel
shall not be outside counsel regularly employed by Overseas. In the event that
the Parties hereto are unable to agree on the selection of such outside
counsel, such outside counsel shall be selected by lot by the outside counsel
regularly employed by Overseas from among the Los Angeles, California law firms
having more than twenty (20) attorneys and having a rating of "av" or better in
the then current Martindale-Hubbell Law Directory. Such selection by lot shall
be made in the presence of Indemnitee (and his legal counsel or either of them,
as Indemnitee may elect). The outside counsel regularly employed by Overseas
and Indemnitee (and his legal counsel or either of them as Indemnitee may
elect) shall contact, in the order of their selection by lot, such law firms,
requesting each such firm to accept engagement to make the determination
required hereunder until one of such firms accepts such engagement. The fees
and expenses of counsel in connection with making said determination
contemplated hereunder shall be paid by Overseas, and, if requested by such
counsel, Overseas shall give such counsel an appropriate written agreement with
respect to the payment of their fees and expenses and such other matters as may
be reasonably requested by counsel. Nothing contained in this Agreement shall
require any determination under this Section 8 to be made by the Board of
Directors, independent legal counsel or the stockholders prior to the
disposition or conclusion of the Proceeding against the Indemnitee; provided,
however, that Advancements shall continue to be made by Overseas pursuant to
and to the extent required by Section 10 hereunder. Notwithstanding the
foregoing, Indemnitee may, either before or within two (2) years after a
determination has been made as provided above, petition the Court of Chancery
of the State of Delaware or any other court of competent jurisdiction to
determine whether Indemnitee is entitled to indemnification under the
provisions hereof under which he claims the right to indemnification, and such
court shall thereupon have the exclusive authority to make such determination,
unless and until such court dismisses or otherwise terminates such action
without having made such determination. The determination of the court, as
petitioned, as to whether Indemnitee is entitled to indemnification hereunder,
shall be independent and irrespective of any prior determination made by the
Board of Directors, the stockholders or counsel. If the Court shall determine
that Indemnitee is entitled to indemnification hereunder as to any claim, issue
or matter involved in any Proceeding with respect to which there has been no
prior determination pursuant hereto or with respect to which there has been a
prior determination pursuant hereto that Indemnitee was not entitled to
B-6
<PAGE>
indemnification hereunder, Overseas shall pay all expenses (including
attorneys' fees) actually incurred by Indemnitee in connection with such
judicial determination. If the person (including the Board of Directors,
independent legal counsel in a written opinion, the stockholders, or a court)
making the determination hereunder shall determine that Indemnitee is entitled
to indemnification as to some claims, issues or matters involved in the
Proceeding but not as to others, such person shall reasonably prorate the
Losses with respect to which indemnification is sought by Indemnitee among such
claims, issues or matters. If, and to the extent it is finally determined by
the Court that Indemnitee is not entitled to indemnification, then Indemnitee
agrees to reimburse (the "Indemnitee Reimbursement Obligation"), without
interest, Overseas (which agreement shall be an unsecured obligation of
Indemnitee) for all expenses advanced or prepaid pursuant to Section 10 hereof,
or the proper proportion thereof, other than the expenses of obtaining the
judicial determination referred to above. Anything contained elsewhere herein
to the contrary notwithstanding, Overseas shall not be liable to indemnify
Indemnitee under this Agreement for any amounts paid in settlement of any
Proceeding or claim effected without its written consent. Overseas shall not
settle any Proceeding or claim in any manner which would impose any penalty or
limitation on Indemnitee without Indemnitee's written consent. Neither Overseas
nor Indemnitee will unreasonably withhold their consent to any proposed
settlement.
9. LIMITATION OF ACTIONS AND RELEASE OF CLAIMS. No legal action
shall be brought and no cause of action shall be asserted by or on behalf of
Overseas or any Affiliate of Overseas against Indemnitee, his spouse, heirs,
executors or administrators after the expiration of two (2) years from the date
Indemnitee ceases (for any reason) to serve in any one or more of the
capacities covered by this Agreement, and any claim or cause of action of
Overseas or any Affiliate of Overseas shall be extinguished and deemed released
unless asserted by filing of a legal action within such two (2) year period;
provided, however, that nothing in this Section 9 shall be deemed to limit or
prevent any legal action (or to release any claim) based on fraud or criminal
misconduct of Indemnitee which is not discovered by Overseas or the applicable
Affiliate of Overseas until after the expiration of such two (2) year period.
10. ADVANCEMENT OF LITIGATION COSTS. If so requested in writing
by Indemnitee, Overseas shall pay any and all Litigation Costs incurred by
Indemnitee (or, if applicable, reimburse Indemnitee for any and all Litigation
Costs incurred by Indemnitee and previously paid by Indemnitee) and/or shall,
subject to the other terms and provisions hereof (including applicable
limitations relating to actions by or in the right of Overseas or Affiliates of
Overseas), pay any judgments, fines or amounts paid in settlement (or, if
applicable, reimburse Indemnitee for any such sums previously paid by
Indemnitee) in each case promptly, but in any event within 10 days, after such
request (an "Advancement"). Overseas shall be obligated to make or pay an
Advancement in advance of the final disposition or conclusion of any
Proceeding. Any request for an Advancement under this Agreement shall
reasonably evidence the Litigation Costs incurred by Indemnitee. In connection
with any request for an Advancement, if requested by Overseas, Indemnitee or
Indemnitee's counsel shall submit an affidavit stating that the Litigation
Costs incurred were reasonable, and Indemnitee shall submit at such time a
signed undertaking reflecting the terms of the Indemnitee Reimbursement
Obligation set forth in Section 8 hereof (i.e., that Indemnitee shall repay
such Advancement, without interest, if, and to the extent it is finally
determined by the Court that Indemnitee is not entitled to indemnification).
Any dispute
B-7
<PAGE>
as to the reasonableness of any Litigation Costs shall not delay an Advancement
by Overseas, and Overseas agrees that any such dispute shall be resolved only
upon the disposition or conclusion of the underlying Proceeding against the
Indemnitee. If Indemnitee has petitioned the Court of Chancery of the State of
Delaware or any other court of competent jurisdiction pursuant to Section 8
hereof to secure a determination that Indemnitee should be indemnified under
applicable law, any determination made by the Board of Directors, independent
legal counsel or the stockholders that Indemnitee would not be permitted to be
indemnified under the applicable law shall not be binding and Indemnitee shall
not be required to reimburse Overseas for any Advancements, and Overseas shall
be obligated to continue to make Advancements, until a final judicial
determination is made with respect thereto (as to which all rights of appeal
therefrom have been exhausted or have lapsed).
11. OTHER RIGHTS AND REMEDIES. The indemnification and advance
payment of expenses as provided by any provision of this Agreement shall not be
deemed exclusive of any other rights to which Indemnitee may be entitled under
any provision of law, the Certificate of Incorporation, any Bylaw, this or
other agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
while occupying any of the positions or having any of the relationships
referred to in Section 3 of this Agreement, and shall continue after Indemnitee
has ceased to occupy such position, or have such relationship and shall inure
to the benefit of the heirs, executors and administrators of Indemnitee.
12. SEVERABILITY. If any provision or provisions of this
Agreement shall be held to be invalid, illegal or unenforceable for any reason
whatsoever (i) the validity, legality and enforceability of the remaining
provisions of this Agreement (including, without limitation, all portions of
any paragraphs of this Agreement containing any such provision held to be
invalid, illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby, 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, illegal or unenforceable, that are not
themselves invalid, illegal or unenforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
13. PRIOR AGREEMENTS. This Agreement shall be of no force and
effect with regard to the cost of settlement borne or paid by Indemnitee under
the provisions of any agreement executed by Overseas and/or Indemnitee prior to
the date hereof.
14. IDENTICAL COUNTERPARTS. This Agreement may be executed in
one or more counterparts, each of which shall for all purposes be deemed to be
an original and all of which shall constitute the same instrument, but only one
of which need be produced.
15. HEADINGS. The headings of the paragraphs of this Agreement
are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
B-8
<PAGE>
16. USE OF CERTAIN TERMS. As used in this Agreement, the words
"herein", "hereto" and "hereunder", and other words of similar import refer to
this Agreement as a whole and not to any particular paragraph, subparagraph or
other subdivision. When the context so requires in this Agreement, the
masculine gender includes the feminine and/or neuter.
17. MODIFICATION AND WAIVER. No supplement, modification or
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provisions hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
Any repeal or modification of the relevant provisions of the Delaware General
Corporation Law in effect as of the date of execution of this Indemnity
Agreement shall not affect any right or obligation then existing with respect
to any state of facts then or previously existing or any action, suit or
proceeding previously or thereafter brought or threatened based in part or in
whole on such state of facts.
18. NOTICE TO OVERSEAS BY INDEMNITEE. Indemnitee agrees to
promptly notify Overseas in writing upon being served with any citation,
complaint, indictment or other document covered hereunder, either civil or
criminal.
19. NOTICES. All notices, requests, demands and other
communication hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified or registered mail with postage prepaid on the third business day
after the date on which it is so mailed.
(a) If to Indemnitee, at the address indicated on the
signature page hereof;
(b) If to Overseas to:
8800 Sunset Boulevard, Suite 302
Los Angeles, California 90069
Attention: Corporate Secretary
or to such other address as may have been furnished to Indemnitee by Overseas.
20. GOVERNING LAW. The Parties hereto agree that this Agreement
shall be construed and enforced in accordance with and governed by the laws of
the State of Delaware. Nothing in this Agreement is intended to eliminate the
requirement that Indemnitee satisfy the applicable standards of conduct for
indemnification required by Delaware law.
21. SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon Overseas and its successors and assigns and shall inure to the benefit of
Indemnitee and his spouse, heirs, executors and administrators.
B-9
<PAGE>
ENTERED into on the day and year first above written.
ATTEST: OVERSEAS FILMGROUP, INC.
BY: BY:
---------------------------- -------------------------------
Name:
Title:
Indemnitee
-------------------------------
Name: William F. Lischak
Address: 601 N. Sweetzer, Unit B
Los Angeles, California 90048
B-10
SECURITY AGREEMENT
This SECURITY AGREEMENT ("Agreement"), dated as of October 31, 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 as
of July 2, 1996 among the Debtor and the Secured Parties, among others, as
amended by that certain Amendment to Agreement of Merger, dated as of September
20, 1996, by and among the same parties (as so amended, 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
<PAGE>
Pledged Stock;
(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;
-2-
<PAGE>
(x) All documents, documents of title, receipts and books
and records;
(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
-3-
<PAGE>
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 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;
-4-
<PAGE>
(ix) all insurance placed upon the film or the insurable
properties thereof and/or any person or persons engaged in the
development, acquisition, production, 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.
-5-
<PAGE>
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.
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 and restated in accordance with the Merger Agreement (as so
amended and restated, 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).
-6-
<PAGE>
(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 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 Entertainment/Media Acquisition Corporation ("EMAC") 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 EMAC.
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
-7-
<PAGE>
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 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 the subordination agreement to be entered into pursuant
to the Credit Agreement and which shall be by and among the Secured Parties,
the Debtor and lenders under the Credit Agreement (the "Subordination
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
-8-
<PAGE>
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 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 (except as otherwise set forth on Schedule 1
hereto). 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 October 31, 1996 between Ellen Dinerman Little and Debtor (the "EDL
Agreement") or the Employment
-9-
<PAGE>
Agreement dated as of October 31, 1996 between Robert B. Little and Debtor (the
"RBL 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,
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 Subordination 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)
-10-
<PAGE>
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:
(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 RBL Agreement without "Cause" (as defined in such
agreements), the termination of the EDL Agreement or the RBL 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 RBL 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
-11-
<PAGE>
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 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 Subordination 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
-12-
<PAGE>
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 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,
-13-
<PAGE>
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.
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 Subordination 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
-14-
<PAGE>
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 90069
Attn: William F. Lischak
If to Secured
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.
-15-
<PAGE>
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
/s/ Scot K. Vorse
------------------------------------------------
Name: Scot K. Vorse
Title: Vice President
/s/ Ellen Dinerman Little
------------------------------------------------
Ellen Dinerman Little
/s/ Robert B. Little
------------------------------------------------
Robert B. Little
-16-
<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 B. 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 October 31, 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: October 31, 1996 Overseas Filmgroup, Inc, a Delaware corporation
By: ________________________
Its: _______________________
A-1
<PAGE>
STATE OF CALIFORNIA |
| 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
TAX REIMBURSEMENT AGREEMENT
THIS TAX REIMBURSEMENT AGREEMENT ("Agreement") is made as of this 31st
day of October, 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 as of July 2, 1996, as
amended by the same parties by an Amendment to Agreement of Merger dated as of
September 20, 1996, (as so amended, 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
-3-
<PAGE>
(b) the cumulative amounts paid under Section 2, plus
(c) the cumulative amounts set forth in the first sentence of Section
8(c) below, plus
(d) the cumulative amounts paid under Section 4 below, reduced by any
amounts paid to Company by RBL and EDL pursuant to the last sentence
of Section 4, plus
(e) the cumulative amounts paid under Section 5 below
shall not exceed the sum of (i) the amount of the Non-Film Library Threshold
Amount (as defined in Section 10.2 of the Merger Agreement) plus (ii) $400,000,
with the Non-Film Library Threshold Amount being determined at such time, and
from time to time, as payments are made under Section 1, Section 2, Section 4
or Section 5 or included pursuant to the first sentence of 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 (the "1996 Return") 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. If RBL and EDL so elect by written notice to the Company at any time
(and from time to time) after the date hereof and before the date of filing of
the 1996 Return, Company will pay to RBL and EDL
(i) prior to January 1, 1997 up to a maximum of $75,000, and
(ii) thereafter up to a cumulative maximum amount (inclusive of any
amounts paid pursuant to the preceding clause (i)) equal to the
Company's good faith estimate of the amount due RBL and EDL pursuant
to the first sentence of this Section 4,
as a non-interest bearing advance against amounts owed them pursuant to the
first sentence of this Section 4. The total of all amounts paid under the
foregoing sentence (the "1996 Return Advance") shall reduce the amount due RBL
and EDL under the first sentence of this Section 4. In the event that the 1996
Return Advance exceeds the amount due under the first sentence of this Section
4 (prior to reduction by
-4-
<PAGE>
the 1996 Return Advance), then within twenty business days after the filing of
the 1996 Return, RBL and EDL agree to pay the amount of such excess to the
Company.
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.
If WFL so elects by written notice to the Company at any time (and from time to
time) after January 1, 1997 and before the date of filing of the 1996 Return,
Company will pay to WFL up to a maximum cumulative amount equal to the
Company's good faith estimate of the amount due pursuant to the first sentence
of this Section 5 as a non-interest bearing advance against amounts owed him
pursuant to the first sentence of this Section 5. The total of all amounts paid
under the foregoing sentence (the "1996 WFL Return Advance") shall reduce the
amount due WFL under the first sentence of this Section 5. In the event that
the 1996 WFL Return Advance exceeds the amount due under the first sentence of
this Section 5 (prior to reduction by the 1996 WFL Return Advance), then within
twenty business days after the filing of the 1996 Return, WFL agrees to pay the
amount of such excess to the Company.
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.
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) 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
-5-
<PAGE>
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).
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.
-6-
<PAGE>
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
/s/ Robert B. Little
----------------------------------
Ellen Dinerman Little,
an individual
/s/ Ellen Dinerman Little
----------------------------------
William F. Lischak,
an individual
/s/ William F. Lischak
----------------------------------
-7-
<PAGE>
Overseas Filmgroup, Inc.,
a Delaware Corporation
By: /s/ Scot K. Vorse
-------------------------------
Name: Scot K. Vorse
Title: Vice President
PROMISSORY NOTE
$137,061.80
As of October 31, 1996
This is that certain Note (the "Note") referred to in Section
9.2(h) of the Agreement of Merger (the "Merger Agreement"), dated as of July 2,
1996, by and among Entertainment/Media Acquisition Corporation, a Delaware
corporation (the "Maker"); Overseas Filmgroup, Inc., a Delaware corporation and
Ellen Dinerman Little and Robert B. Little (Ellen Dinerman Little and Robert B.
Little being referred to herein as the "Payees").
FOR VALUE RECEIVED, the undersigned Maker hereby promises to
pay to the order of Payees the principal sum of One Hundred Thirty Seven
Thousand Sixty-One and Eighty Cents ($137,060.80), together with interest on
the principal balance hereof from time to time outstanding hereunder from the
date hereof until paid, as hereinafter provided.
1. Interest Accrual and Payment.
(a) The unpaid principal balance of this Note from time to
time shall bear cumulative interest at the rate of nine percent (9%) per annum.
The unpaid principal balance of this Note and all accrued interest shall be
paid to Payees on the first anniversary of this Note.
(b) Upon any default in payment of any amount when due
hereunder, Maker shall pay interest on all amounts in default, from such due
date through the date such defaulted amounts are received by Payees, at the
rate per annum equal to fifteen percent (15%).
(c) All payments hereunder shall be made in immediately
available funds in lawful money of the United States of America.
2. Events of Default/Acceleration.
This Note (the entire unpaid principal balance together with
accrued interest thereon) shall become immediately due and payable,
automatically and without notice or demand or any required action on the part
of Payees or Maker, upon the occurrence at any time of any of the following
events of default (individually, "an Event of Default" and collectively,
"Events of Default"):
(a) If a default shall occur in the payment of principal
or interest then due on this Note, as and when the same shall become due and
payable; or
<PAGE>
(b) If Maker shall (i) apply for or consent to the
appointment of a receiver, trustee or liquidator of its assets or any of its
property; (ii) admit in writing its inability to pay its debts as they mature;
(iii) make a general assignment for the benefit of creditors; (iv) be
adjudicated a bankrupt or insolvent; or (v) file a voluntary petition in
bankruptcy, or make a plan with creditors or take advantage of any bankruptcy,
reorganization, insolvency, or readjustment of debt law or other similar law,
or file an answer admitting the material allegations of any petition filed
against it in any proceeding under any such law, or if any action be taken by
it for the purpose of effecting any of the foregoing; or
(d) If a court of competent jurisdiction shall enter an
order, judgment or decree appointing a receiver for the assets or affairs, or
any part of the assets or affairs, of the undersigned and such order, judgment
or decree shall continue unstayed and in effect for a period of thirty (30)
days.
3. Voluntary Prepayment.
This Note (including any accrued interest) may be prepaid at
any time or times in whole or in part without premium or penalty.
4. Miscellaneous.
(a) Maker hereby waives presentment, demand, notice, protest
and all other forms of demand and notice concerning this Note and consents to
each and every extension or postponement to this Note (and any such extension
may be made without notice to the Maker and without in any way affecting or
discharging this liability) and to the addition, substitution or release of any
person primarily or secondarily liable hereunder. No delay or omission by the
Payees or any other holder hereof in exercising any right or power hereunder
shall operate as a waiver of such right or power, and a waiver on one occasion
shall not be construed as a waiver or a bar to the exercise of any right on any
other occasion. The right to plead any and all statutes of limitation as a
defense to demand hereunder is hereby waived to the extent permitted by law.
(b) All notices, requests, demands and other communications
hereunder shall be deemed to have been given if the same shall be in writing
and shall be delivered personally or sent by confirmed facsimile or confirmed
courier, and addressed as set forth below:
(i) if to the Maker, to:
Entertainment/Media Acquisition Corporation
8800 Sunset Boulevard
Los Angeles, CA 90069
(with such notices, after the date hereof,
addressed to "Overseas Filmgroup, Inc.",
Attention: Chief Financial Officer)
<PAGE>
(ii) if to the Payees, to
Ellen Dinerman Little
Robert B. Little
12309 Viewcrest Road
Studio City, CA 91604
(c) Any provision in this Note which is prohibited by law
shall be ineffective, but only to the extent of such prohibition, without
invalidating any other provision hereof.
(d) Notwithstanding any contrary provision herein, Payees
shall not at any time charge, and Maker shall not be required to pay, interest
which exceeds the maximum rate of interest applicable to this Note that is
permissible under the laws of the State of Delaware. If any interpretation of
the provisions of this Note would require Maker to pay interest or other fees
or sums the payment of which would, in the opinion of Payees or their counsel,
constitute a violation of the above-stated intention of the parties, such
payment shall be applied to reduce the principal balance hereunder unless
Payees shall otherwise advise Maker in writing as to what reduced amount of
interest or other charges or fees shall be paid. Thereupon, this Note shall be
deemed to be interpreted and intended to read as set forth herein as the true
intention of the parties.
(e) This Note shall be governed by, and construed and
enforced in accordance with, the internal laws of the State of Delaware,
without giving effect to its conflicts of law provisions.
(f) This Note shall be binding upon and enforced against the
undersigned and its successors and assigns and shall inure to the benefit of
the Payees of this Note and their respective successors and assigns. This Note
may not be assigned or any interest in this Note transferred by Maker except
upon the express prior written permission of Payees. No change in this Note
shall be effective unless made in a writing duly executed by both Maker and
Payees.
(g) Maker agrees to pay all costs, charges and expenses
incurred by the Payees and its assigns (including, without limitation, costs of
collection, court costs, and reasonable attorneys' fees and disbursements) in
connection with the enforcement of the Payees' rights under this Note, all of
which are hereby deemed additions to the principal amount due pursuant to this
Note.
(h) 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.
[Remainder of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the undersigned has duly executed this
Note as of the date first set forth above.
MAKER:
ENTERTAINMENT/MEDIA ACQUISITION CORPORATION
By: /s/ Scot K. Vorse
Name: Scot K. Vorse
Title: Vice President
STOCKHOLDERS' VOTING AGREEMENT
------------------------------
This Stockholders' Voting Agreement (the "Agreement") is made and
entered into as of this ____ day of October, 1996, by and among Overseas
Filmgroup, Inc., a Delaware corporation (the "Company"), Ellen Dinerman Little
("EDL"), Robert B. Little ("RBL") (EDL and RDL are referred to collectively as
the "Littles") and William F. Lischak (each of EDL, 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 as of July 2,
1996, as amended as of September 20, 1996, among Entertainment/Media
Acquisition Corporation (as the Company was known), 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 constituted approximately nineteen percent (19%) of the
outstanding shares of Common Stock of the Company prior to the Merger; and
currently constitutes 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
acquired 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 immediately following the Merger;
3. Pursuant to Section 7.7 of the Merger Agreement, the
following number of designees were 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;
<PAGE>
4. The Company's Restated Certificate of Incorporation, as in effect
upon consummation of the Merger, provides for a seven (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) were
designated Class I directors; Ellen Dinerman Little (a designee of the Littles)
and Scot K. Vorse (a designee of the Founders) were designated Class II
directors; and William F. Lischak and Alessandro Fracassi (designees of the
Littles) and Jeffrey A. Rochlis (a designee of the Founders) were 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.
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 was approved, each Stockholder
shall vote or cause to be voted all Shares (as defined in Section 8 below)
owned by him, her or it, or over which he, she or it has voting control, and
2
<PAGE>
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. 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;
(b) All acts, conditions and things required to be done,
fulfilled and performed and (except as disclosed in writing
3
<PAGE>
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:
OVERSEAS FILMGROUP, INC.
By: /s/ Scot K. Vorse
----------------------------------
Name: Scot K. Vorse
-------------------------
Title: Vice President
-------------------------
OVERSEAS STOCKHOLDERS:
/s/ Ellen Dinerman Little
-------------------------------------
Ellen Dinerman Little
/s/ Robert B. Little
-------------------------------------
Robert B. Little
FOUNDERS:
/s/ Jeffrey A. Rochlis
-------------------------------------
Jeffrey A. Rochlis
/s/ Barbara Boyle
-------------------------------------
Barbara Boyle
/s/ Berbard G. Hoberman
-------------------------------------
Hoberman Family Trust Dated
9/18/92, Bernard G. Hoberman
and Jacklyn A. Hoberman, as
Trustees
/s/ John Hyde
-------------------------------------
John Hyde
10
<PAGE>
/s/ Stephen K. Bannon
-------------------------------------
Stephen K. Bannon
/s/ Scot K. Vorse
-------------------------------------
Scot K. Vorse
/s/ Gary M. Stein
-------------------------------------
Gary M. Stein
SPARTA PARTNERS III
By: /s/ Scot K. Vorse
----------------------------------
Name: Scot K. Vorse
-------------------------
Title: General Partner
-------------------------
11
<PAGE>
OVERSEAS STOCKHOLDERS
/s/ William F. Lischak
-------------------------------------
William F. Lischak
12
<PAGE>
SCHEDULE A
Founder Shares of Common Stock
------- ----------------------
Barbara Boyle 25,000
Hoberman Family Trust
Dated 9/18/92, Bernard G.
Hoberman and Jacklyn, A.
Hoberman, as Trustees 25,000
John Hyde 25,000
Jeffrey A. Rochlis 132,353
Sparta Partners III 292,647
13
-----------------------------
LOCK-UP AND REGISTRATION RIGHTS AGREEMENT
-----------------------------
October 31, 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 31st day of October, 1996, by and between Overseas Filmgroup,
Inc., 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, as of dated July 2, 1996, as amended
pursuant to that certain Amendment to the Merger Agreement dated as of
September 20, 1996 (as so amended, 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"),
- 1 -
<PAGE>
and the declaration or ordering of effectiveness of such registration statement
or document by the Securities and Exchange Commission;
(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;
- 2 -
<PAGE>
(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 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
- 3 -
<PAGE>
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. 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
- 4 -
<PAGE>
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 Registrable Shares
included in such registration is less then 66 2/3% 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 other than a registration of securities (except a registration
pursuant to Form S-4), 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 Securities
requested to be included in such registration by the Initiating Holders shall
not be reduced or limited, without such Initiating Holders' consent, as a
result of the inclusion of persons other than Initiating Holders, below 66 2/3%
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 3.9, 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
- 5 -
<PAGE>
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.
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.
- 6 -
<PAGE>
(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 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.
- 7 -
<PAGE>
(i) Otherwise comply with all applicable rules and
regulations of the Securities and Exchange Commission and applicable blue sky
authorities.
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 including, without limitation, the exercise by any holder of Unit
Purchase Options, as defined in the Merger Agreement, of any registration
rights pursuant thereto (in which each such 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
- 8 -
<PAGE>
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, 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.
- 9 -
<PAGE>
(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 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.
- 10 -
<PAGE>
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 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
- 11 -
<PAGE>
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; and provided, further, that this
Section 3.8 shall not apply with respect to an underwritten registration
statement filed pursuant to the exercise of, or in which securities are
included pursuant to, the demand registration rights in the Unit Purchase
Options.
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.
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, in connection with a
registration pursuant to Section 3.2, 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 for such offering, 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 materially
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 owned by each selling stockholder or in such other
proportions as shall mutually be agreed to by such selling stockholders). If
the Holders have validly requested registration of more than 250,000
Registrable Securities and at least 250,000 Registrable Securities are not
included in such registration statement for sale (either upon effectiveness or
ninety (90) days thereafter), then such Holders shall receive one additional
demand registration for their Registrable Securities on the terms set forth in
Section 3.1 hereof which, without regard to the 18-month restriction in such
Section, may be exercised after ninety days after the effectiveness of the
registration statement from which their securities were excluded. 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
- 12 -
<PAGE>
pro rata reduction with respect to such "selling stockholder" shall be based
upon the aggregate amount of shares 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 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.
- 13 -
<PAGE>
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 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.
- 14 -
<PAGE>
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 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.
- 15 -
<PAGE>
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.
IN WITNESS WHEREOF, the parties have executed this Lock-Up
and Registration Rights Agreement as of the date first above written.
OVERSEAS FILMGROUP, INC.
By: /s/ Scot K. Vorse
----------------------------
Name: Scot K. Vorse
Title: Vice President
OVERSEAS STOCKHOLDERS:
/s/ Ellen Dinerman Little
-------------------------------
Ellen Dinerman Little
/s/ Robert B. Little
-------------------------------
Robert B. Little
/s/ William F. Lischak
-------------------------------
William F. Lischak
- 16 -
NON-COMPETITION AGREEMENT
This Non-Competition Agreement is entered into as of October 31, 1996
among Ellen Dinerman Little ("Little") and Overseas FilmGroup, Inc., a Delaware
corporation ("OFG"). OFG is hereinafter referred to as the "Company."
Company and Little are parties to the Agreement of Merger, dated as of
July 2, 1996, as amended as of September 20, 1996 (as amended, the "Merger
Agreement"), pursuant to which OFG will be merged with Entertainment/Media
Acquisition Corporation ("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"). The Business is conducted
throughout each of the counties in the
<PAGE>
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 Company, or other party with whom Company has
an advantageous
2.
<PAGE>
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 misuse,
use for the benefit of any other person or entity, or
3.
<PAGE>
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 addition to the
Merger Agreement and Company's rights and
4.
<PAGE>
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 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
/s/ Ellen Dinerman Little
Ellen Dinerman Little
OVERSEAS FILMGROUP, INC.
By: /s/ Scot K. Vorse
Name: Scot K. Vorse
Title: Vice President
8.
NON-COMPETITION AGREEMENT
This Non-Competition Agreement is entered into as of October 31, 1996
among Robert B. Little ("Little") and Overseas FilmGroup, Inc., a Delaware
corporation ("OFG"). OFG is hereinafter sometimes referred to as the
"Company."
Company and Little are parties to the Agreement of Merger, dated as of
July 2, 1996, as amended as of September 20, 1996 (as amended, the "Merger
Agreement"), pursuant to which OFG will be merged with Entertainment/Media
Acquisition Corporation, a
Delaware corporation ("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
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 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
/s/ Robert B. Little
---------------------------------------
Robert B. Little
OVERSEAS FILMGROUP, INC.
By: /s/ Scot K. Vorse
----------------------------------------
Name: Scot K. Vorse
----------------------------------
Title: Vice President
---------------------------------
8.
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 31st day of
October, 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
October 31, 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,
warrants, covenants and agrees that within fourteen calendar days of the date
hereof the Company shall have registered under the Securities Act of 1933, as
amended (the "Act"), this Plan Agreement and the shares of the Company's common
stock , $.001 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 any
restriction whatsoever 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
-1-
<PAGE>
registration, keep the applicable registration statement effective and
otherwise permit the transferability by Optionees 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 July 2, 1996 as amended by that certain Amendment
to Agreement of Merger dated as of September 20, 1996 by and among the same
parties (as so amended, 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),
-2-
<PAGE>
(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 (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
October 30, 1997 87,500
October 30, 1998 87,500
October 30, 1999 87,500
October 30, 2000 87,500
October 30, 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
------------ --------------------
October 30, 1997 112,500
October 30, 1998 112,500
October 30, 1999 112,500
October 30, 2000 112,500
October 30, 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 October 30, 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.
-5-
<PAGE>
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 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.
-6-
<PAGE>
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
-7-
<PAGE>
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 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
-8-
<PAGE>
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 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
-9-
<PAGE>
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.
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
Ellen Dinerman Little: Ellen Dinerman Little
12309 Viewcrest Road
Studio City, CA 91604
The Company: OVERSEAS FILMGROUP, INC.
8800 Sunset Boulevard
Los Angeles, California 9069
Attention: Corporate Secretary
(fax) (310) 855-0719
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.
-10-
<PAGE>
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: /s/ Scot K. Vorse
-------------------------------
Name: Scot K. Vorse
Title: Vice President
/s/ Robert B. Little
----------------------------------
ROBERT B. LITTLE
Social Security No.:
--------------
/s/ Ellen Dinerman Little
----------------------------------
ELLEN DINERMAN LITTLE
Social Security No.:
--------------
-11-
<PAGE>
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.
-12-
<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.
-13-
Entertainment/Media Acquisition
closes merger with Overseas Filmgroup
Shares Expected to Trade as "OSFG" Next Week
Los Angeles -- October 31, 1996 -- Entertainment/Media Acquisition Corporation
(Nasdaq BB: EMAC, EMACU, EMACW) announced today that it has completed the merger
with Overseas Filmgroup, Inc. The combined corporation is named Overseas
Filmgroup, Inc., and its common shares and warrants are expected to trade next
week under the symbols "OSFG" and "OSFGW," respectively.
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 Overseas has focused on international distribution, in 1994
First Look Pictures, its domestic theatrical releasing operation was launched.
Since its formation, Overseas has built a feature film library of distribution
rights to over 175 titles.
Contact:
Entertainment/Media Acquisition Corporation
Stephen K. Bannon, 310/276-3555
or
Overseas Filmgroup, Inc.
William F. Lischak, 310/85-1475
or
Jaffoni & Collins Incorporated
Joseph N. Jaffoni/David C. Collins
212/505-3015 or [email protected]
