SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
S C H E D U L E 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
DOVE ENTERTAINMENT, INC. (f/k/a Dove Audio, Inc.)
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(Name of Issuer)
COMMON STOCK, $0.01 PAR VALUE
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(Title of Class of Securities)
259901106
(CUSIP Number)
Copy to:
Mr. Terrence A. Elkes Peter D. Weinstein, Esq.
Media Equities International, LLC Morrison Cohen Singer & Weinstein, LLP
One Stamford Plaza, 12th Floor 750 Lexington Avenue
Stamford, CT 06901 New York, New York 10022
Telephone (203) 323-1263 Telephone (212) 735-8600
- --------------------------------------------------------------------------------
(Name, Address and Telephone Number of Persons
Authorized to Receive Notices and Communications)
March 28, 1997
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(Date of Event which Requires Filing this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following space .
NOTE: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d-1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes). (Continued on following page(s))
1
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CUSIP
No. 259901106 13D
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Media Equities International, LLC
- --------------------------------------------------------------------------------
2 Check the Appropriate Box if a Member of a Group* (a) | |
(b) | |
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3 SEC Use Only
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4 Source of Funds* WC
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5 Check Box if Disclosure of Legal Proceedings is Required | |
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6 Citizenship or Place of Organization New York
7 Sole Voting Power
4,000,000 shares 42.9%
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 0 shares 0%
Owned By -----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 2,000,000 shares 27.3%
Person -----------------------------------------------------------------
With 10 Shared Dispositive Power
0 shares 0%
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
2,000,000 shares
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12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* | |
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
27.3%
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14 Type of Reporting Person*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP
No. 259901106 13D
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Apollo Partners LLC
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2 Check the Appropriate Box if a Member of a Group* (a) | |
(b) | |
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3 SEC Use Only
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4 Source of Funds* OO
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5 Check Box if Disclosure of Legal Proceedings is Required | |
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6 Citizenship or Place of Organization Connecticut
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7 Sole Voting Power
0 shares 0%
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 4,000,000 shares 42.9%
Owned By -----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 0 shares 0%
Person -----------------------------------------------------------------
With 10 Shared Dispositive Power
2,000,000 shares 27.3%
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11 Aggregate Amount Beneficially Owned By Each Reporting Person
2,000,000 shares
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12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* | |
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
27.3%
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14 Type of Reporting Person*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP
No. 259901106 13D
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Terrence A. Elkes
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2 Check the Appropriate Box if a Member of a Group* (a) | |
(b) | |
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3 SEC Use Only
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4 Source of Funds* OO
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5 Check Box if Disclosure of Legal Proceedings is Required | |
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6 Citizenship or Place of Organization United States
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7 Sole Voting Power
0 shares 0%
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 4,000,000 shares 42.9%
Owned By -----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 0 shares 0%
Person -----------------------------------------------------------------
With 10 Shared Dispositive Power
2,000,000 shares 27.3%
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11 Aggregate Amount Beneficially Owned By Each Reporting Person
2,000,000 shares
- --------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* | |
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
27.3%
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14 Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP
No. 259901106 13D
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Kenneth F. Gorman
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2 Check the Appropriate Box if a Member of a Group* (a) | |
(b) | |
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3 SEC Use Only
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4 Source of Funds* OO
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5 Check Box if Disclosure of Legal Proceedings is Required | |
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6 Citizenship or Place of Organization United States
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7 Sole Voting Power
0 shares 0%
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 4,000,000 shares 42.9%
Owned By -----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 0 shares 0%
Person -----------------------------------------------------------------
With 10 Shared Dispositive Power
2,000,000 shares 27.3%
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11 Aggregate Amount Beneficially Owned By Each Reporting Person
2,000,000 shares
- --------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* | |
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
27.3%
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14 Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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CUSIP
No. 259901106 13D
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
H.A.M. Media Group LLC
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2 Check the Appropriate Box if a Member of a Group* (a) | |
(b) | |
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3 SEC Use Only
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4 Source of Funds* OO
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5 Check Box if Disclosure of Legal Proceedings is Required | |
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6 Citizenship or Place of Organization New York
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7 Sole Voting Power
0 shares 0%
Number of
Shares
Beneficially
Owned By
Each
Reporting
Person
With
8 Shared Voting Power
4,000,000 shares 42.9%
9 Sole Dispositive Power
0 shares0%
10 Shared Dispositive Power
2,000,000 shares27.3%
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned By Each Reporting Person
2,000,000 shares
- --------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* | |
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
27.3%
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6
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14 Type of Reporting Person*
OO
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
7
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CUSIP
No. 259901106 13D
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
John T. Healy
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2 Check the Appropriate Box if a Member of a Group* (a) | |
(b) | |
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3 SEC Use Only
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4 Source of Funds* PF, OO
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5 Check Box if Disclosure of Legal Proceedings is Required | |
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6 Citizenship or Place of Organization United States
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7 Sole Voting Power
5,000 shares 0.1%
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 4,000,000 shares 42.9%
Owned By -----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 5,000 shares 0.1%
Person -----------------------------------------------------------------
With 10 Shared Dispositive Power
2,000,000 shares 23.7%
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11 Aggregate Amount Beneficially Owned By Each Reporting Person
2,005,000 shares
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12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* | |
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
27.4%
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14 Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
8
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CUSIP
No. 259901106 13D
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Bruce Maggin
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2 Check the Appropriate Box if a Member of a Group* (a) | |
(b) | |
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3 SEC Use Only
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4 Source of Funds* PF, OO
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5 Check Box if Disclosure of Legal Proceedings is Required | |
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6 Citizenship or Place of Organization United States
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7 Sole Voting Power
32,500 shares 0.6%
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 4,000,000 shares 42.9%
Owned By -----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 32,500 shares 0.6%
Person -----------------------------------------------------------------
With 10 Shared Dispositive Power
2,000,000 shares 27.3%
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11 Aggregate Amount Beneficially Owned By Each Reporting Person
2,032,500 shares
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12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* | |
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13 Percent of Class Represented by Amount in Row (11)
27.8%
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14 Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
9
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CUSIP
No. 259901106 13D
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1 Name of Reporting Person
S.S. or I.R.S. Identification No. of Above Person
Ronald Lightstone
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2 Check the Appropriate Box if a Member of a Group* (a) | |
(b) | |
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3 SEC Use Only
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4 Source of Funds* PF
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5 Check Box if Disclosure of Legal Proceedings is Required | |
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6 Citizenship or Place of Organization United States
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7 Sole Voting Power
0 shares 0%
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power
Beneficially 4,000,000 shares 42.9%
Owned By -----------------------------------------------------------------
Each 9 Sole Dispositive Power
Reporting 0 shares 0%
Person -----------------------------------------------------------------
With 10 Shared Dispositive Power
2,000,000 shares 27.3%
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11 Aggregate Amount Beneficially Owned By Each Reporting Person
2,000,000 shares
- --------------------------------------------------------------------------------
12 Check Box if the Aggregate Amount in Row (11) excludes Certain Shares* | |
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)
27.3%
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14 Type of Reporting Person*
IN
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*SEE INSTRUCTIONS BEFORE FILLING OUT!
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This statement, dated March 28, 1997, relates to the reporting persons
ownership of certain securities of Dove Entertainment, Inc. (the "Issuer").
ITEM 1. Security and Issuer
(a) Common Stock, $0.01 par value per share (CUSIP No. 259901106)
("Common Stock").
(b) Warrant ("Warrant") entitling the holder to purchase 1,500,000
shares of Common Stock, exercisable immediately upon issuance, pursuant to which
the following exercise prices and expiration dates are applicable, respectively,
with respect to three equal tranches of the underlying shares of Common Stock:
(i) $2.00 per share with an expiration date of the third anniversary from the
date of issuance; (ii) $2.50 per share with an expiration date of the third
anniversary from the date of issuance; and (iii) $3.00 per share with an
expiration date of the fourth anniversary from the date of issuance;
(c) Warrant entitling the holder to purchase 500,000 shares of Common
Stock, exercisable immediately upon issuance, pursuant to which the following
exercise prices and expiration dates are applicable, respectively, with respect
to three equal tranches of the underlying shares of Common Stock: (i) $2.00 per
share with an expiration date of the third anniversary from the date of
issuance; (ii) $2.50 per share with an expiration date of the third anniversary
from the date of issuance; (iii) $3.00 per share with an expiration date of the
fourth anniversary from the date of issuance;
(d) Series B Preferred Stock, $0.01 par value (the "Preferred Stock")
entitling the holder to convert one share of Preferred Stock into 500 shares of
Common Stock, following the date of six months after issuance, at a conversion
price of $2.00 per share, and redeemable at the option of the Issuer, in whole
or in part, at any time after the fifth anniversary of the date of the
Certificate of Determination relating to the issuance of the Preferred Stock,
subject to certain conditions. The holders of the Preferred Stock are entitled
to vote as a single class together with all other voting classes and stock on
all actions to be taken by the stockholders of the Issuer except with respect to
voting for the election of directors, in which case, so long as the reporting
persons hereunder own at least 750,000 shares of Common Stock (assuming for
these purposes that the shares of Preferred Stock were converted in their
entirety) and so long as Media Equities holds a majority of the initially issued
shares of Preferred Stock, the holders of the Preferred Stock are entitled to
elect one third of the directors of the Issuer.
(e) Dove Entertainment, Inc.
8955 Beverly Boulevard
Los Angles, California 90048
ITEM 2. Identity and Background
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1. (a) Media Equities International, LLC ("Media Equities"), a limited
liability company organized under the Limited Liability Company Law of the
State of New York.
(b) Address: One Stamford Plaza, 12th Floor Stamford, Connecticut 06901
(c) Principal Business: Investments and consulting.
(d) Within the last five (5) years, Media Equities has not been
convicted in any criminal proceeding.
(e) Within the last five (5) years, Media Equities has not been a party
to any civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree, or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or a finding of a violation with respect to such laws.
The members of Media Equities are Apollo Partners LLC, H.A.M. Media
Group LLC and Ronald Lightstone.
2. (a) Apollo Partners LLC ("Apollo"), a limited liability company
organized under the Limited Liability Company Act of the State of Connecticut,
and a member of Media Equities.
(b) Address:
One Stamford Plaza
Stamford, Connecticut 06901
(c) Principal Business: Investments
(d) Within the last five (5) years, Apollo has not been convicted in
any criminal proceeding.
(e) Within the last five (5) years, Apollo has not been a party to any
civil proceeding of a judicial or administrative body of competent jurisdiction
which resulted in a judgment, decree, or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or state
securities laws or a finding of a violation with respect to such laws.
Terrence A. Elkes and Kenneth F. Gorman are the members and managers of Apollo.
3. (a) Terrence A. Elkes, a member and manager of Apollo.
(b) Address:
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One Stamford Plaza - 12th Floor
Stamford, Connecticut 06901
(c) Principal occupation: Investor
(d) Within the last five (5) years, Terrence Elkes has not been
convicted in any criminal proceeding (excluding traffic violations and similar
misdemeanors, if any).
(e) Within the last five (5) years, Terrence Elkes has not been a party
to any civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree, or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or a finding of a violation with respect to such laws.
(f) Citizenship: United States.
Terence A. Elkes is a member and a manager of Media Equities.
4. (a) Kenneth F. Gorman, a member and manager of Apollo.
(b) Address:
One Stamford Plaza - 12th Floor
Stamford, Connecticut 06901
(c) Principal occupation: Investor
(d) Within the last five (5) years, Kenneth Gorman has not been
convicted in any criminal proceeding (excluding traffic violations and similar
misdemeanors, if any).
(e) Within the last five (5) years, Kenneth Gorman has not been a party
to any civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree, or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or a finding of a violation with respect to such laws.
(f) Citizenship: United States.
Kenneth F. Gorman is a member and a manager of Media Equities and
a newly elected director of the Issuer. See Item 4.
5. (a) H.A.M. Media Group LLC ("H.A.M. Media") a limited liability company
organized under the Limited Liability Company Law of the State of New York and a
member of Media Equities.
(b) Address:
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305 Madison Avenue, Suite 3016
New York, New York 10017
(c) Principal business: Investments
(d) Within the last five (5) years, H.A.M. Media has not been convicted
in any criminal proceeding.
(e) Within the last five (5) years, H.A.M. Media has not been a party
to any civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree, or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or a finding of a violation with respect to such laws.
John T. Healy and Bruce Maggin are the members and managers of H.A.M.
Media.
6. (a) John T. Healy, a member and manager of H.A.M. Media.
(b) Address:
305 Madison Avenue, Suite 3016
New York, New York 10017
(c) Principal occupation: Investor
(d) Within the last five (5) years, John T. Healy has not been
convicted in any criminal proceeding (excluding traffic violations and similar
misdemeanors, if any).
(e) Within the last five (5) years, John T. Healy has not been a party
to any civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree, or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or a finding of a violation with respect to such laws.
(f) Citizenship: United States.
John T. Healy is a member and a manager of Media Equities and is a
newly elected director of the Issuer. See Item 4.
7. (a) Bruce Maggin, a member and manager of H.A.M. Media.
(b) Address:
305 Madison Avenue, Suite 3016
New York, New York 10017
(c) Principal occupation: Investor
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(d) Within the last five (5) years, Bruce Maggin has not been convicted
in any criminal proceeding (excluding traffic violations and similar
misdemeanors, if any).
(e) Within the last five (5) years, Bruce Maggin has not been a party
to any civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree, or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or a finding of a violation with respect to such laws.
(f) Citizenship: United States.
Bruce Maggin is a member and manager of Media Equities.
8. (a) Ronald Lightstone
(b) Address:
400 Parkwood Drive
Los Angeles, California 90077-3530
(c) Principal occupation: Investor
(d) Within the last five (5) years, Ronald Lightstone has not been
convicted in any criminal proceeding (excluding traffic violations and similar
misdemeanors, if any).
(e) Within the last five (5) years, Ronald Lightstone has not been a
party to any civil proceeding of a judicial or administrative body of competent
jurisdiction which resulted in a judgment, decree, or final order enjoining
future violations of, or prohibiting or mandating activities subject to, federal
or state securities laws or a finding of a violation with respect to such laws.
(f) Citizenship: United States.
Ronald Lightstone is a member and manager of Media Equities, and is a
newly elected director of the Issuer. See Item 4.
ITEM 3. Source and Amounts of Funds or Other Consideration
Media Equities obtained funds for the purchase of the Warrant and the
Preferred Stock from its working capital, which in turn was obtained from
contributions from the individual reporting persons from personal funds.
15
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The amount of funds used in making the purchase of the Warrant and the
Preferred Stock, pursuant to the stock purchase agreement (the "Stock Purchase
Agreement"), dated March 27, 1997 among the Issuer, Media Equities and certain
other purchasers is set forth below:
Name Amount of Consideration
---- -----------------------
Media Equities $3,001,500
ITEM 4. Purpose of Transaction.
The reporting persons acquired their shares for purposes of investment.
On March 27, 1997, Media Equities entered into the Stock Purchase
Agreement pursuant to which it became obligated, subject to the terms and
conditions therein, to purchase the Preferred Stock and Warrants of the Issuer.
The transaction contemplates two closings for the purchase of the securities.
The first closing occurred March 28, 1997 pursuant to which Media Equities
purchased (a) 3,000 shares of Preferred Stock and (b) a Warrant to purchase
1,500,000 shares of Common Stock, of the Issuer. The second closing is expected
to occur no later than May 25, 1997 pursuant to which Media Equities will
purchase (a) 1,000 shares of Preferred Stock, and (b) a Warrant to purchase
500,000 shares of Common Stock, of the Issuer.
Media Equities and certain other purchasers entered into a pledge
agreement, dated March 27, 1997, with the Issuer pursuant to which it agreed to
pledge certain of the shares of Preferred Stock as collateral to secure the
payment for the securities to be purchased in the second closing, described
above.
Pursuant to the terms of the Stock Purchase Agreement and the terms of
the Preferred Stock, so long as Media Equities owns 750,000 shares of Common
Stock of the Issuer (assuming for these purposes that the shares of Preferred
Stock were converted in their entirety), (i) so long as Media Equities holds a
majority of the initially issued shares of Preferred Stock, the holders of the
Preferred Stock have the right to elect one third of the board of directors, and
(ii) if Media Equities no longer owns a majority of the initially issued shares
of the Preferred Stock, Media Equities has the right to nominate, and the Issuer
is obligated to use its best efforts to have elected as management nominees, one
third of the Board of Directors of the Issuer. The Stock Purchase Agreement
fixes the number of directors at nine. In addition, in the event of the default
by the Issuer in the observance of certain covenants enumerated in the Stock
Purchase Agreement, Media Equities has the right to appoint two additional
directors, effectively giving Media Equities the right to nominate a majority of
the Board of Directors, which directors shall continue to serve until the
earlier of the next occurring annual meeting of the shareholders of the Issuer
following the cure of any default or until Media Equities no longer owns at
least 750,000 shares of Common Stock (assuming for these purposes that the
shares of Preferred Stock were converted in their entirety).
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In connection with the transaction, in order to fulfill the Issuer's
obligations, the number of directors constituting the Board was increased from
six to nine, and Messrs. Gorman, Maggin and Lightstone were elected to the Board
of Directors of the Issuer.
The Stock Purchase Agreement also provides that one of the Media
Equities' nominee directors shall be a member of the Executive Committee. The
current nominee to the executive committee of the Board of Directors is Ronald
Lightstone.
Concurrently with the closing under the Stock Purchase Agreement, Media
Equities entered into a shareholders voting agreement (the "Shareholders Voting
Agreement"), dated March 27, 1997, among Media Equities, Michael Viner ("Viner)
and Deborah Raffin ("Raffin", and together with Viner, "Viner") pursuant to
which Viner has agreed to vote, and to use his reasonable best efforts to cause
all of his affiliates to vote, all of the shares of Common Stock of the Issuer
beneficially owned thereby and entitled to vote thereon for the election of the
requisite number of director designees of Media Equities then required pursuant
to Section 6.3 or 7.2 of the Stock Purchase Agreement, and to take all actions
to cause the election of such designees, including seeking the resignation of
current directors of the Issuer.
Pursuant to the Stock Purchase Agreement, Media Equities will enter
into a three year consulting agreement (the "Consulting Agreement"), dated as of
April 1, 1997, between Media Equities and the Issuer, pursuant to which Media
Equities will provide substantial general management consulting advice relating
to the business of Media Equities, in exchange for which the Issuer will pay
Media Equities annual compensation in the amount of $300,000 per year as
follows: $200,000 in cash payable quarterly in advance and $100,000 in Common
Stock of the Issuer valued at current market value on the date of payment,
payable quarterly in arrears.
Pursuant to the Stock Purchase Agreement, Media Equities was also
granted registration rights under a registration rights agreement (the
"Registration Rights Agreement"), dated March 27, 1997 among the Issuer, Media
Equities, Viner and Raffin. Pursuant to the Registration Rights Agreement, the
Issuer has agreed to prepare and file with the Securities and Exchange
Commission, by not later than July 31, 1997, one or more registration statements
providing, among other things, for the sale by Media Equities or its principal,
of the shares of Common Stock issuable upon exercise of the Warrants, upon
conversion of the Preferred Stock and upon issuance of the shares of Common
Stock pursuant to the Consulting Agreement.
ITEM 5. Interests in Securities of the Issuer.
(a) The following list sets forth the aggregate number and percentage
(based on 5,313,240 shares of Common Stock outstanding as set forth in Section
2.3 of the Stock Purchase Agreement) of outstanding shares of Common Stock owned
beneficially by each reporting person named in Item 2, as of March 28, 1997:
17
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Shares of Percentage of Shares % of
Common Stock of Common Stock Shared Voting
Name Beneficially Owned(1) Beneficially Owned(1) Power (2)(3)(4)
- ---- --------------------- --------------------- ---------------
Media Equities 2,000,000 27.3% 42.9
Apollo(5) 2,000,000 27.3% 42.9
Terrence A. Elkes(5) 2,000,000 27.3% 42.9
Kenneth F. Gorman(5) 2,000,000 27.3% 42.9
H.A.M. Media(5) 2,000,000 27.3% 42.9
Jack Healy(5) 2,005,000 27.4% 42.9
Bruce Maggin(5) 2,032,500 27.8% 42.9
Ronald Lightstone(5) 2,000,000 27.3% 42.9
(b) Media Equities has sole power to vote 4,000,000 shares (which
includes 2,000,000 shares of underlying Common Stock issuable upon exercise of
the Warrants, including for this purpose the Warrant for 500,000 shares of
Common Stock to be purchased at the second closing, and, with respect to the
Preferred Stock, for voting purposes only, the equivalent of 2,000,000 shares of
Common Stock calculated based on a conversion ratio of 500 shares of Common
Stock to one share of Preferred Stock, including for this purpose, the 500,000
shares of Common Stock issuable upon conversion of the 1,000 shares of Preferred
Stock to be purchased at the second closing), representing approximately 42.9%
of the outstanding Common Stock. Media Equities has sole power to dispose of
2,000,000 shares of Common Stock, issuable upon exercise of the Warrants
(including for this purpose the Warrant for 500,000 shares of Common Stock to be
purchased at the second closing), representing approximately 27.3% of the
outstanding Common Stock.
- ----------
(1) Includes shares of Common Stock issuable upon exercise of the
Warrants, including for this purpose the Warrant for 500,000 shares of Common
Stock to be purchased at the second closing. Does not include shares of Common
Stock to be acquired pursuant to the Consulting Agreement referenced in Item
6(f), the amount of which is indeterminable as of the date hereof.
(2) Includes for purposes of calculating shared voting power (a) 2,000,000
shares of Common Stock issuable upon exercise of the Warrants, including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing and (b) 2,000,000 shares of Common Stock issuable to holders
of the Preferred Stock calculated based on a conversion ratio of 500 shares of
Common Stock for one share of Preferred Stock, including for this purpose, the
500,000 shares of Common Stock issuable upon conversion of the 1,000 shares of
Preferred Stock to be purchased at the second closing. Does not include shares
of Common Stock to be acquired pursuant to the Consulting Agreement referenced
in Item 6(f), the amount of which is indeterminable as of the date hereof.
(3) The Common Stock issuable upon conversion of the Preferred Stock is
not considered beneficially owned because the Preferred Stock is not convertible
into Common Stock until six months following the issuance of the Preferred
Stock.
(4) Does not include shares of Common Stock owned by Michael Viner and
Deborah Raffin subject to the Shareholders Voting Agreement in Item 6(e).
(5) Except for Media Equities, each reporting person disclaims beneficial
ownership of 2,000,000 shares of Common Stock issuable upon exercise of the
Warrants owned by Media Equities and the voting rights associated with the
Preferred Stock.
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By virtue of being a member of Media Equities, Apollo may be deemed to
have shared power to vote of 4,000,000 shares (which includes 2,000,000 shares
of underlying Common Stock issuable upon exercise of the Warrants, including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing, and, with respect to the Preferred Stock, for voting
purposes only, the equivalent of 2,000,000 shares of Common Stock calculated
based on a conversion ratio of 500 shares of Common Stock to one share of
Preferred Stock, including for this purpose, the 500,000 shares of Common Stock
issuable upon conversion of the 1,000 shares of Preferred Stock to be purchased
at the second closing), representing approximately 42.9% of the outstanding
Common Stock and may be deemed to have shared power to dispose of 2,000,000
shares of Common Stock, issuable upon exercise of the Warrants (including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing), representing approximately 27.3% of the outstanding Common
Stock.
By virtue of being a member and a manager of Apollo, a member of Media
Equities, and a manager of Media Equities, Terrence A. Elkes may be deemed to
have shared power to vote 4,000,000 shares (which includes 2,000,000 shares of
underlying Common Stock issuable upon exercise of the Warrants, including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing, and, with respect to the Preferred Stock, for voting
purposes only, the equivalent of 2,000,000 shares of Common Stock calculated
based on a conversion ratio of 500 shares of Common Stock to one share of
Preferred Stock, including for this purpose, the 500,000 shares of Common Stock
issuable upon conversion of the 1,000 shares of Preferred Stock to be purchased
at the second closing), representing approximately 42.9% of the outstanding
Common Stock and may be deemed to have shared power to dispose of 2,000,000
shares of Common Stock issuable upon exercise of the Warrants (including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing), representing approximately 27.3% of the outstanding Common
Stock.
By virtue of being a member and a manager of Apollo, a member of Media
Equities, and a manager of Media Equities, Kenneth F. Gorman may be deemed to
have shared power to vote 4,000,000 shares (which includes 2,000,000 shares of
underlying Common Stock issuable upon exercise of the Warrants, including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing, and, with respect to the Preferred Stock, for voting
purposes only, the equivalent of 2,000,000 shares of Common Stock calculated
based on a conversion ratio of 500 shares of Common Stock to one share of
Preferred Stock, including for this purpose, the 500,000 shares of Common Stock
issuable upon conversion of the 1,000 shares of Preferred Stock to be purchased
at the second closing), representing approximately 42.9% of the outstanding
Common Stock and may be deemed to have shared power to dispose of 2,000,000
shares of Common Stock issuable upon exercise of the Warrants (including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing), representing approximately 27.3% of the outstanding Common
Stock.
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By virtue of being a member of Media Equities, H.A.M. Media may be
deemed to have shared power to vote of 4,000,000 shares (which includes
2,000,000 shares of underlying Common Stock issuable upon exercise of the
Warrants, including for this purpose the Warrant for 500,000 shares of Common
Stock to be purchased at the second closing, and, with respect to the Preferred
Stock, for voting purposes only, the equivalent of 2,000,000 shares of Common
Stock calculated based on a conversion ratio of 500 shares of Common Stock to
one share of Preferred Stock, including for this purpose, the 500,000 shares of
Common Stock issuable upon conversion of the 1,000 shares of Preferred Stock to
be purchased at the second closing), representing approximately 42.9% of the
outstanding Common Stock and may be deemed to have shared power to dispose of
2,000,000 shares of Common Stock, issuable upon exercise of the Warrants
(including for this purpose the Warrant for 500,000 shares of Common Stock to be
purchased at the second closing), representing approximately 27.3% of the
outstanding Common Stock.
By virtue of being a member and a manager of H.A.M. Media, a member of
Media Equities, and a manager of Media Equities, John T. Healy may be deemed to
have shared power to vote 4,000,000 shares (which includes 2,000,000 shares of
underlying Common Stock issuable upon exercise of the Warrants, including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing, and, with respect to the Preferred Stock, for voting
purposes only, the equivalent of 2,000,000 shares of Common Stock calculated
based on a conversion ratio of 500 shares of Common Stock to one share of
Preferred Stock, including for this purpose, the 500,000 shares of Common Stock
issuable upon conversion of the 1,000 shares of Preferred Stock to be purchased
at the second closing), representing approximately 42.9% of the outstanding
Common Stock and may be deemed to have shared power to dispose of 2,000,000
shares of Common Stock issuable upon exercise of the Warrants (including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing), representing approximately 27.3% of the outstanding Common
Stock. Jack Healy has sole power to vote and dispose of 5,000 shares of the
Common Stock, representing approximately 0.1% of the outstanding Common Stock.
By virtue of being a member and manager of H.A.M. Media, a member of
Media Equities, and a manager of Media Equities, Bruce Maggin may be deemed to
have shared power to vote 4,000,000 shares (which includes 2,000,000 shares of
underlying Common Stock issuable upon exercise of the Warrants, including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing, and, with respect to the Preferred Stock, for voting
purposes only, the equivalent of 2,000,000 shares of Common Stock calculated
based on a conversion ratio of 500 shares of Common Stock to one share of
Preferred Stock, including for this purpose, the 500,000 shares of Common Stock
issuable upon conversion of the 1,000 shares of Preferred Stock to be purchased
at the second closing), representing approximately 42.9% of the outstanding
Common Stock and may be deemed to have shared power to dispose of 2,000,000
shares of Common Stock issuable, upon exercise of the Warrants (including for
this purpose the Warrant for 500,000 shares of Common Stock to be purchased at
the second closing), representing approximately 27.3% of the outstanding Common
Stock. Bruce Maggin has sole power to vote and dispose of 32,500 shares of the
Common Stock, representing approximately 0.6% of the outstanding Common Stock.
By virtue of being a member and a manager of Media Equities, Ronald
Lightstone may be deemed to have shared power to vote 4,000,000 shares (which
includes 2,000,000 shares of underlying Common Stock issuable upon exercise of
the Warrants, including for this purpose the Warrant for 500,000 shares of
Common Stock to be purchased at the second closing, and, with respect to the
Preferred Stock, for voting purposes only, the equivalent of 2,000,000 shares of
Common Stock calculated based on a conversion ratio of 500 shares of Common
Stock to one share of Preferred Stock, including for this purpose, the 500,000
shares of Common Stock issuable upon conversion of the 1,000 shares of Preferred
Stock to be purchased at the second closing), representing approximately 42.9%
of the outstanding Common Stock and may be deemed to have shared power to
dispose of 2,000,000 shares of Common Stock issuable upon exercise of the
Warrants (including for this purpose the Warrant for 500,000 shares of Common
Stock
20
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to be purchased at the second closing), representing approximately 27.3% of the
outstanding Common Stock.
(c) The following is a description of all transactions in the Warrant
and the Preferred Stock of the Issuer by the persons identified in Item 2 of
this Schedule 13D effected from January 28, 1997 through March 28, 1997
inclusive.
Number of shares
underlying Warrant (W)
and number of shares of
Preferred Stock (P)
Name of Shareholder Purchase Date Purchased Purchase Price
- ------------------- ------------- ----------- --------------
Media Equities 3/28/97 1,500,000 (W) $1,500
Media Equities 3/28/97 3,000 (P) $3,000,000
Media Equities acquired the securities of the Issuer in a private
placement pursuant to the Stock Purchase Agreement. See Item 4 herein.
(d) No other person has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of such securities.
(e) Not applicable.
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ITEM 6. Contracts, Arrangements, Understandings or
Relationships with Respect to Securities
of the Issuer
(a) Media Equities is a limited liability company established and
governed by the Limited Liability Company Law of the State of New York and an
Operating Agreement. Pursuant to such agreement, voting and investment power
over the securities of the Issuer held by Media Equities is vested in its
members - Apollo, H.A.M. Media and Ronald Lightstone.
(b) Apollo is a limited liability company established and governed by
the Limited Liability Company Act of the State of Connecticut and an Operating
Agreement. Pursuant to such agreement, voting and investment power over the
shares of Common Stock of the Issuer held by Apollo through its interest in
Media Equities is vested in the members of Apollo. The members of Apollo are
Terrence A. Elkes and Kenneth F. Gorman.
(c) H.A.M. Media is a limited liability company established and
governed by the Limited Liability Company Law of the State of New York and an
Operating Agreement. Pursuant to such agreement, voting and investment power
over the shares of Common Stock of the Issuer held by H.A.M. Media through its
interest in Media Equities is vested in the members of H.A.M. Media. The members
of H.A.M. Media are Jack Healy and Bruce Maggin.
(d) The reporting persons acquired the securities of the Issuer
pursuant to the Stock Purchase Agreement, among the Issuer, Media Equities,
Michael Viner ("Viner") and Deborah Raffin ("Raffin"). See Item 4.
(e) Concurrently with the closing under the Stock Purchase Agreement,
Media Equities entered into a shareholders voting agreement (the "Shareholders
Voting Agreement") dated March 27, 1997, among Media Equities and Viner and
Raffin (Viner and Raffin, together "Viner") pursuant to which Viner has agreed
to vote, and to use his reasonable best efforts to cause all of his affiliates
to vote, all of the shares of Common Stock of the Issuer beneficially owned
thereby and entitled to vote thereon for the election of the requisite number of
director designees of Media Equities then required pursuant to Section 6.3 or
7.2 of the Stock Purchase Agreement, and to take all actions to cause the
election of such designees, including seeking the resignation of current
directors of the Issuer. See Item 4.
(f) Pursuant the Stock Purchase Agreement, Media Equities will enter
into a three year consulting agreement (the "Consulting Agreement"), dated as of
April 1, 1997, between Media Equities and the Issuer, pursuant to which Media
Equities will provide substantial general management consulting advice relating
to the business of Media Equities, in exchange for which the Issuer will pay to
Media Equities annual compensation in the amount of $300,000 per year as
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follows: $200,000 in cash payable quarterly in advance and $100,000 in Common
Stock of the Issuer valued at current market value on the date of payment,
payable quarterly in arrears. See Item 4.
(g) Pursuant to the Stock Purchase Agreement, Media Equities was also
granted registration rights under a registration rights agreement (the
"Registration Rights Agreement"), dated March 27, 1997, among the Issuer, Media
Equities, Viner and Raffin. Pursuant to the Registration Rights Agreement, the
Issuer has agreed to prepare and file with the Securities and Exchange
Commission, by not later than July 31, 1997, one or more registration statements
providing, among other things, for the sale by Media Equities or its principal,
of the shares of Common Stock issuable upon exercise of the Warrants, upon
conversion of the Preferred Stock and upon issuance of the shares of Common
Stock pursuant to the Consulting Agreement. See Item 4.
(h) Except for the circumstances discussed or referred to in paragraphs
(a) through (g) above, there are no contracts, arrangements, understandings, or
relationships with respect to the securities of the Issuer among any of the
persons reporting in this Schedule 13D.
23
<PAGE>
ITEM 7. Material to be Filed as Exhibits
Exhibit A - Agreement dated March 28, 1997, among the reporting persons
by which they have agreed to file this Schedule 13D and all necessary
amendments, as required by Rule 13d-1(f).
Exhibit 1 - Stock Purchase Agreement, dated March 27, 1997, among Dove
Entertainment, Inc., a California corporation, Media Equities International,
LLC, a New York limited liability company, Michael Viner and Deborah Raffin.
Exhibit 2 - Stockholders Voting Agreement, dated March 27, 1997, among
Media Equities International, LLC, a New York limited liability company, Michael
Viner and Deborah Raffin.
24
<PAGE>
Signature
After reasonable inquiry and to the best of their knowledge and belief,
each of the undersigned hereby certifies that the information set forth in this
Schedule is true, complete, and correct.
Date: MEDIA EQUITIES INTERNATIONAL, LLC
By:___________________________________
Name:
Title:
APOLLO PARTNERS LLC
By:___________________________________
Name:
Title:
______________________________________
Terrence A. Elkes
______________________________________
Kenneth F. Gorman
25
<PAGE>
H.A.M. MEDIA GROUP LLC
By:___________________________________
Name:
Title
______________________________________
Bruce Maggin
______________________________________
John T. Healy
______________________________________
Ronald Lightstone
ATTENTION: INTENTIONAL MISSTATEMENTS OR OMISSIONS OF FACT CONSTITUTE FEDERAL
CRIMINAL VIOLATIONS (SEE 18 U.S.C. 1001).
26
<PAGE>
Exhibit A
AGREEMENT PURSUANT TO RULE 13d l(f)
OF THE SECURITIES AND EXCHANGE COMMISSION
AGREEMENT, to be effective as of March 28, 1997, among MEDIA EQUITIES
INTERNATIONAL, LLC, a New York limited liability company with its principal
office at One Stamford Plaza - 12th Floor, Stamford, Connecticut 06901, APOLLO
PARTNERS LLC a Connecticut limited liability company with its principal office
at One Stamford Plaza - 12th Floor, Stamford, Connecticut 06901, TERRENCE A.
ELKES, residing at One Stamford Plaza, 12th Floor, Stamford, Connecticut, 06901,
KENNETH F. GORMAN, residing at One Stamford Plaza, 12th Floor, Stamford,
Connecticut, 06901, H.A.M. MEDIA GROUP LLC, a New York limited liability company
with its principal office at 305 Madison Avenue, Suite 3016, New York, New York
10017, JOHN T. HEALY, residing at 305 Madison Avenue, Suite 3016, New York, New
York 10017, BRUCE MAGGIN , residing at 305 Madison Avenue, Suite 3016, New York,
New York 10017 and RONALD LIGHTSTONE, residing at 400 Parkwood Drive, Los
Angeles, California 90077-3530.
WHEREAS, for convenience and expediency, each party hereto desires to
file the statements required by ss.13(d) of the Securities Exchange Act of 1934,
as amended, jointly with all other parties hereto; and
WHEREAS, Rule 13D-1(f) promulgated by the Securities and Exchange
Commission requires that this Agreement be set forth in writing and filed with
the Commission;
NOW THEREFORE, it is hereby agreed as follows:
27
<PAGE>
1. Each party hereto agrees that it will file all statements and
reports required under ss.13(d) of the Securities Exchange Act of 1934, as
amended, including without limitation, Schedule 13D, and all amendments of all
such statements and/or reports, jointly with all other parties hereto.
2. Any party hereto may hereafter terminate this Agreement, with
respect to itself only, by giving written notice thereof to all other parties
hereto, and to DOVE ENTERTAINMENT, INC., the NASD, and the Securities and
Exchange Commission. The withdrawal of any one or more parties shall not cause
the termination of this Agreement with respect to the parties not giving notice
of termination as aforesaid.
3. Unless sooner terminated as provided in paragraph 2 above, this
Agreement shall be for a period of one (1) year from the date hereof, and shall
be automatically renewable for successive one (1) year periods, unless
terminated by any party, as to such party, on sixty (60) days notice.
4. This Agreement may be executed in counterparts, each of which shall
be deemed an original and all of which shall constitute one and the same
instrument.
28
<PAGE>
IN WITNESS WHEREOF, we have executed this Agreement with the intention
that it shall be binding upon us as of the day and year set forth above.
MEDIA EQUITIES INTERNATIONAL, LLC
By:___________________________________
Name:
Title:
APOLLO PARTNERS LLC
By:___________________________________
Name:
Title:
______________________________________
Terrence A. Elkes
______________________________________
Kenneth F. Gorman
29
<PAGE>
H.A.M. MEDIA GROUP LLC
By:___________________________________
Name:
Title:
______________________________________
Bruce Maggin
______________________________________
John T. Healy
______________________________________
Ronald Lightstone
30
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (the "Agreement") made as of March 27, 1997 among
Dove Entertainment, Inc., a California corporation (the "Company"), and the
persons listed on Appendix I hereto (each a "Purchaser" and collectively the
"Purchasers")
WITNESSETH:
WHEREAS, the Company desires to sell, and Media Equities International, LLC
("MEI") desires to purchase, subject to the terms and conditions of this
Agreement, shares of the newly designated Series B Preferred Stock of the
Company, par value $.01 per share (the "Series B Preferred Stock");
WHEREAS, the Company desires to sell, and Michael Viner and Deborah Raffin
("Viner/Raffin") desire to purchase, subject to the terms and conditions of this
Agreement, shares of the newly designated Series C Preferred Stock of the
Company, par value $.01 per share (the "Series C Preferred Stock" and together
with the Series B Preferred Stock, the "Preferred Stock"); and
WHEREAS, MEI will not purchase the Series B Preferred Stock unless
Viner/Raffin purchase the Series C Preferred Stock.
NOW, THEREFORE, in consideration of the foregoing and the covenants,
agreements, representations and warranties herein contained, and intending to be
legally bound, the parties hereby mutually agree as follows:
SECTION 1
SALE AND PURCHASE OF THE COMPANY'S SECURITIES; CLOSING
1.1. Sale of the Securities.
(a) Subject to the terms and conditions herein set forth, the Company
agrees to sell and issue to the Purchasers, and each Purchaser agrees to
purchase from the Company, securities of the Company as follows:
(i) on the Initial Closing Date (as hereinafter defined), MEI
shall purchase (A) that number of shares (the "Initial Series B
Preferred Shares") of Series B
1
<PAGE>
Preferred Stock set forth on Appendix I for a purchase price of $1,000
per share (the "Purchase Price") or an aggregate of $3,000,000, and
(B) a warrant (the "Initial MEI Warrant") to purchase the number of
shares of common stock of the Company, par value $.01 per share (the
"Common Stock") set forth on Appendix I (the "Initial MEI Warrant
Shares"), which warrant shall be in the form of Exhibit A-1 annexed
hereto for a purchase price of $.001 per Initial MEI Warrant Share
subject to the Warrant (the "Warrant Purchase Price");
(ii) On the Initial Closing Date, Viner/Raffin will purchase (A)
that number of shares (the "Initial Series C Preferred Shares") of
Series C Preferred Stock set forth on Appendix 1 for the Purchase
Price, or an aggregate of $920,000, and (B) a warrant (the "Initial
Viner/Raffin Warrant") to purchase the number of shares of Common
Stock set forth on Appendix 1 (the "Initial Viner/Raffin Warrant
Shares"), which warrants shall be in the form of Exhibit A-2 annexed
hereto for the Warrant Purchase Price;
(iii) on the Second Closing Date (as hereinafter defined) MEI
will purchase (A) that number of shares (the "Second Series B
Preferred Shares") of Series B Preferred Stock set forth on Appendix I
for the Purchase Price or an aggregate of $1,000,000 and (B) a warrant
(the "Second MEI Warrant") to purchase the number of shares of Common
Stock set forth on Appendix I for the Warrant Purchase Price; and
(iv) On the Second Closing Date, Viner/Raffin will purchase (A)
that number of shares (the "Second Series C Preferred Shares") of
Series C Preferred Stock set forth on Appendix I for the Purchase
Price or an aggregate of $1,000,000, and (B) a warrant (the "Second
Viner/Raffin Warrant") to purchase the number of shares of common
stock set forth on Appendix I (the "Second Viner/Raffin Warrant
Shares").
(b) The following additional defined terms have the following meanings:
(i) "Initial Preferred Shares" means the Initial Series B
Preferred Share or the Initial Series C Preferred Shares, or any of
them.
(ii) "Initial Warrants" means the Initial MEI Warrant or the
Initial Viner/Raffin Warrant, or any of them.
(iii) "Initial Warrant Shares" means the Initial MEI Warrant
Shares or the Initial Viner/Raffin Warrant Shares, or any of them.
(iv) "Preferred Shares" means the Initial Preferred Shares or the
Second Preferred shares, or any of them.
(v) "Second Preferred Shares" means the Second Series B Preferred
Shares or the Second Series C Preferred Shares, or any of them.
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<PAGE>
(vi) " Second Warrants" means the Second MEI Warrant or the
Second Viner/Raffin Warrant Shares, or any of them.
(vii) "Second Warrant Shares" means the Second MEI Warrant Shares
or the Second Viner/Raffin Warrant, or any of them.
(viii) "Warrants" means the Initial Warrants or the Second
Warrants, or any of them.
(ix) "Warrant Shares" means the Initial Warrant Shares or the
Second Warrant Shares, or any of them.
(c) In connection with the purchase of the Preferred Shares and Warrants,
each of MEI and Viner/Raffin shall each have the right to assign, all or a
portion of its rights (but not its obligation) to purchase such securities from
the Company under this Agreement to any person, provided, such person submits to
the Company at the Initial Closing or Second Closing, as the case may be, a
certificate setting forth the representations in Sections 3.2, 3.3 and 3.4
hereinbelow.
(d) In connection with the sale and issuance of the Preferred Shares and
Warrants the Company agrees to register the shares of Common Stock issuable upon
conversion of the Preferred Shares (the "Common Shares") and Warrant Shares as
set forth in the form of Registration Rights Agreement annexed hereto as Exhibit
B (the "Registration Rights Agreement").l
1.2. Closing. The closing of the issuance and sale of the Initial Preferred
Shares and Initial Warrants to the Purchasers (the "Initial Closing")
shall take place at the offices of the Company on the date of this
Agreement or on such other date as shall be mutually agreed upon by
the parties to this Agreement (the date on which the Initial Closing
actually takes place being referred to as the "Initial Closing Date")
and the closing of the issuance and sale of the Second Preferred
Shares and Second Warrants (the "Second Closing") shall take place at
the offices of the Company as soon as practicable after the Initial
Closing Date but in any event not later than May 25, 1997 or on such
other date as shall be mutually agreed upon by the parties to this
Agreement (the date on which the Second Closing actually takes place
being referred to as the "Second Closing Date").
1.3. Delivery.
(a) At the Initial Closing, the Company shall issue and deliver to each
Purchaser (i) a certificate or certificates, registered in the name of the
Purchaser, representing the Initial Preferred Shares being purchased by such
Purchaser, against delivery to the Company of the Purchase Price therefor by
wire transfer except as provided in Appendix I and (ii) the Initial Warrant
being purchased by such Purchaser against the delivery of the Initial Warrant
Purchase Price therefore by wire transfer and shall execute and deliver the
Registration Rights Agreement; and
3
<PAGE>
(b) At the Second Closing, the Company shall issue and deliver to each
Purchaser (i) a certificate or certificates registered in the name of such
Purchaser, representing the Second Preferred Shares being purchased by such
Purchaser against delivery to the Company of the Purchase Price therefor by wire
transfer except as provided in Appendix I and (ii) the Second Warrant against
the delivery of the Warrant Purchase Price by wire transfer.
SECTION 2
THE COMPANY'S REPRESENTATIONS AND WARRANTIES
The Company represents and warrants to the Purchasers the following
(provided, that the representations and warranties to the Purchasers who are
current members of management of the Company are limited to matters affecting
the authorization and validity of the Preferred Shares, Common Shares, Warrants
and Warrant Shares issuable to such Purchasers):
2.1. Organization and Standing of the Company. The Company is a corporation
duly incorporated, validly existing and in good standing under the
laws of the State of California, and has all requisite corporate power
and authority to own and lease its properties and assets and to
conduct its business as currently conducted. The Company is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each jurisdiction where its ownership,
lease or operation of property in the course of its business requires
such qualification, except where the failure to so qualify would not
have a material adverse effect on the business, operations or
financial condition of the Company and its subsidiaries taken as a
whole (a "MAE").
2.2. Authorization.
(a) The Company has all requisite corporate power and authority to execute
and deliver this Agreement, the Warrants, the Registration Rights Agreement, the
Pledge Agreement and the Consulting Agreement (as hereinafter defined), and to
carry out the transactions contemplated hereby and thereby. The terms and
provisions of this Agreement, the Warrants and the Registration Rights
Agreement, the Pledge Agreement, the Certificate of Determination of the Series
B Preferred Stock, and the Certificate of Determination of the Series C
Preferred Stock have been reviewed by the independent directors of the Company
who have unanimously recommended to the Board of Directors that they be approved
and that this Agreement, the Warrants, the Registration Rights Agreement, the
Pledge Agreement and the Consulting Agreement, be executed and delivered. The
execution, delivery and performance of this Agreement, the Warrants, the
Registration Rights Agreement, the Pledge Agreement and the Consulting Agreement
by the Company have been duly authorized by all requisite corporate action, and
this Agreement, the Warrants, the Registration Rights Agreement and the Pledge
Agreement have been, and the Consulting Agreement when executed and delivered by
the Company will, be duly executed and delivered by the Company and constitute
the valid and binding obligations of
4
<PAGE>
the Company, enforceable against the Company in accordance with their respective
terms, except as enforcement may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws relating to or affecting the
enforcement of creditors' rights generally and general equitable principles.
(b) The Company has reserved from its authorized but unissued shares of
Common Stock sufficient shares of Common Stock for issuance upon the conversion
of the Preferred Shares into Common Shares and Warrant Shares issuable upon the
date hereof, and the Consulting Shares issuable under the Consulting Agreement
2.3. Capital Stock. The authorized shares of the Company consist of
20,000,000 shares of Common Stock and 2,000,000 shares of preferred
stock, $.01 par value per share, of which 400,000 shares have been
designated Series A Preferred Stock, 5,000 shares have been designated
Series B Preferred Stock, and 5,000 shares have been designated Series
C Preferred Stock. The voting rights, preferences, limitations and
special rights of the Series B Preferred Stock are set forth in the
resolutions adopted by the Board of Directors of the Company on March
27, 1997, a copy of which is annexed hereto as Schedule 2.3(a). The
voting rights, preferences, limitations and special rights of the
Series C Preferred Stock are set forth in resolutions adopted by the
Board of Directors of the Company on March 27, 1997, a copy of which
is annexed hereto as Schedule 2.3(b). As of the date hereof, there are
5,313,240 shares of Common Stock and 214,113 shares of Series A
Preferred Stock of the Company outstanding and 2,819,120 shares of
Common Stock issuable upon execution of currently outstanding options
and warrants and conversion of convertible securities, as set forth in
Schedule 2.3(c). Also set forth on Schedule 2.3(c) is the number of
shares of Common Stock which will be issuable upon exercise of
currently outstanding options and warrants and conversion of
convertible securities after giving affect to the transactions
contemplated by this Agreement, including the issuance of the Warrant
Shares. Except as set forth in Schedule 2.3(c) or contemplated hereby,
there are no outstanding subscriptions, warrants, options or other
rights or commitments of any character to subscribe for or purchase
from the Company, or obligating the Company to issue, any shares of
any class of the Company's Common Stock or any securities convertible
into or exchangeable for such shares of Common Stock. There are no
voting trusts or other agreements or understandings known to the
Company with respect to the voting of the capital stock of the
Company.
2.4. Issuance of the Preferred Shares, the Common Shares, the Warrants and
the Warrant Shares.
(a) The sale, issuance and delivery of the Preferred Shares in accordance
with the terms of this Agreement have been duly authorized by all necessary
corporate action, and the Preferred Shares, when so sold, issued and delivered,
against the full payment of the Purchase Price will be duly and validly issued,
fully paid and nonassessable.
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(b) The issuance and delivery of the Common Shares have been duly
authorized by all necessary corporate action, and the Common Shares, when so
issued and delivered upon conversion of the Preferred Shares, will be duly and
validly issued, fully paid and nonassessable.
(c) The issuance and delivery of the Warrant Shares have been duly
authorized by all necessary corporate action, and the Warrant Shares, when so
issued and delivered in accordance with the terms of the Warrants, including
payment of the purchase price therefor, will be duly and validly issued, fully
paid and nonassessable.
(d) The issuance and delivery of the shares issuable pursuant to the
Consulting Agreement (the "Consulting Shares") have been duly authorized by all
necessary corporate action; and the Consulting Shares, when so issued and
delivered in accordance with the terms of the Consulting Agreement, will be duly
and validly issued, fully paid and nonassessable.
(e) Neither the sale, issuance and delivery of the Preferred Shares nor the
Common Shares nor the Warrants nor the Warrant Shares nor the Consulting Shares
are subject to any preemptive rights of stockholders of the Company or to any
right of first refusal or other similar right in favor of any person.
2.5. Consents and Approvals. Except for filings under Federal and
applicable state securities laws and the filing of the Certificates of
Determination of the Preferred Stock with the Secretary of State of
the State of California which shall be accomplished as required prior
or subsequent to the issuance of the Preferred Shares, no permit,
consent, approval or authorization of, or declaration to or filing
with any governmental or regulatory authority or other person, not
made or obtained, is required in connection with the execution or
delivery of this Agreement by the Company, the offer, sale, issuance
or delivery of the Preferred Shares, the Common Shares, the Warrants
or the Warrant Shares, or the carrying out by the Company of the other
transactions contemplated hereby.
2.6. Private Offering.
(a) Neither the Company nor anyone acting on behalf of the Company has
offered the Preferred Shares, the Common Shares, the Warrants or the Warrant
Shares for sale to, or solicited offers to buy from, or otherwise approached or
negotiated with, any individual or entity in connection with the sale of such
securities other than a limited number of investors, including the Purchasers.
Assuming the accuracy of each Purchaser's representations contained in Section 3
of this Agreement, the offer, issuance and delivery of the Preferred Shares, the
Common Shares, the Warrants and the Warrant Shares are exempt from registration
under the Securities Act of 1933, as amended (the "1933 Act"), and all action
required to be taken prior to the offer or sale of the Preferred Shares, the
Common Shares, the Warrants and the Warrant Shares has been taken under the
applicable state securities laws.
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(b) The Company represents and warrants to the Purchasers that it has not
since September 30, 1996 completed any financing, except as set forth on
Schedule 2.6.
2.7. Articles of Incorporation and By-Laws.
(a) True, correct and complete copies of the Company's Articles of
Incorporation, including all amendments and restatements to the date hereof (as
amended, the "Articles of Incorporation"), as filed with the Secretary of State
of the State of California, have been delivered to the Purchasers and remain
true, correct, complete and in effect.
(b) True, correct and complete copies of the Company's By-Laws, including
all amendments and restatements to the date hereof (as amended, the "By-Laws"),
have been delivered to the Purchasers and remain true, correct, complete and in
effect.
2.8. No Conflict with Law or Documents. Except as set forth on Schedule
2.8, the execution, delivery and performance by the Company of this
Agreement, the Warrants and the Registration Rights Agreement, and the
performance by the Company of its obligations under such documents,
and the sale, issuance and delivery of the Preferred Shares, the
Common Shares, the Warrants and Warrant Shares, will not violate any
provision of law, any order of any court or other agency of
government, the Articles of Incorporation or By-Laws, or any provision
of any indenture, agreement or other instrument by which the Company
or any of its properties or assets is bound or affected, or conflict
with, result in a breach of, result in or permit the termination of or
acceleration of rights or obligations under, or constitute (with due
notice or lapse of time or both) a default under any such indenture,
agreement or other instrument, or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company.
2.9. Operations. The Company has not carried on any business except as set
forth in its Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1995, its Form 10-KSB/A for the fiscal year ended
December 31, 1995, its Quarterly Reports on Form 10-QSB for the
quarters ended March 31, June 30 and September 30, 1996 and its Proxy
Statement relating to its Annual Meeting of Shareholders in November,
1996 (collectively, the "SEC Documents"), true, correct and complete
copies of which have been delivered to the Purchasers.
2.10. Subsidiaries. Except set forth on Schedule 2.10, the Company has no
subsidiaries and does not own any interest, directly or indirectly,
in any other corporation, partnership, joint venture or other
enterprise or entity.
2.11. Litigation. Except as set forth in Schedule 2.11 hereof, there are no
(a) actions, suits, customer claims individually in excess of $50,000
or in the aggregate
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in excess of $150,000, or any proceedings or investigations at law or
in equity or by or before any governmental instrumentality or other
agency now pending or to the Company's knowledge, threatened against
or adversely affecting the Company, or (b) judgments, decrees,
injunctions or orders of any court, governmental department,
commission, agency, instrumentality or arbitrator against or
affecting the Company, except as in all matters under (a) and (b)
which, are not reasonably expected to result in a MAE, or are covered
by appropriate amounts of insurance.
2.12. Intellectual Property.
(a) Set forth on Schedule 2.12 is a true and complete list of the Company's
library and audio titles, books, films and television products as of December
31, 1996 (the "Products"), except for Products ("Nonmaterial Products") which in
the aggregate do not generate a material amount of revenues for the Company or
for which the Company is not obligated to pay in the aggregate a material amount
in connection with obtaining or retaining the rights thereto. The Company owns,
is licensed or otherwise has the right to all intellectual property relating to
the Products, and all rights to use all patents, trademarks, service marks,
trade names, copyrights, licenses, franchises and other rights (collectively
including with respect to the intellectual property relating to the Products,
the "Rights") being used to conduct its business as now operated. The Company
has provided, or made available, the Purchasers with a complete set of all such
agreements permitting the Company to use the Rights of third parties or allowing
third parties to use the Rights of the Company except agreements which relate to
Nonmaterial Products. Set forth in Schedule 2.12 is a complete list of licenses
or other contracts relating to the Rights and of registration of patents,
trademarks, service marks and copyrights including any application therefor
constituting the Rights as of December 31, 1996 except for licenses or other
contracts relating to Nonmaterial Products.
(b) No Right or Product presently sold by or employed by the Company, or
which the Company contemplates selling or employing, infringes upon the Rights
that are owned by any third party except as would not result in a MAE.
(c) No litigation is pending and no claim has been made against the
Company, or to the best of Company's knowledge, is threatened, contesting the
right of the Company to sell or use any Right or Product presently sold or
employed by the Company except as disclosed in Schedule 2.11.
(d) Except as set forth on Schedule 2.12, no employee, officer or
consultant of the Company has any proprietary, financial or other interest in
any Right owned or used by the Company which entitles such person to the payment
of an amount in excess of $10,000 with respect to any single Right, or $25,000
with respect to all Rights in which such person has an interest.
(e) The Company has taken reasonable measures to protect and preserve the
security, confidentiality and value of its Rights, including trade secrets and
other confidential information.
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2.13. Undisclosed Liabilities. Except for the agreements and obligations
listed in Schedule 2.13 or on the balance sheet for the Company
included in its Quarterly Report on Form 10-QSB for the three months
ended September 30, 1996, the Company does not have any outstanding
liability except for liabilities incurred in the ordinary course of
business which are either for amounts less than $50,000 or are
cancelable on not more than 30 days notice. The Company is not in
default in the performance, observance or fulfillment of any of the
obligations, covenants or conditions contained in any agreement or
instrument to which it is a party that could reasonably be expected
to result in a MAE.
2.14. Financial Statements. The Company has furnished to the Purchasers the
audited consolidated balance sheets of the Company as of December 31,
1995 and the unaudited consolidated balance sheets of the Company as
of September 30, 1996 and the related consolidated statements of
operations, stockholders' equity (net capital deficiency), and cash
flows of the Company for the fiscal year ended December 31, 1995 and
the nine months ended September 30, 1996 (unaudited) which audited
financial statements include the report of the Company's independent
auditors, KPMG Peat Marwick LLP. The financial statements as of and
for the nine months ended September 30, 1996 have been certified by
the principal financial officer of the Company. Such financial
statements are complete and correct, have been prepared in accordance
with generally accepted accounting principles ("GAAP"), consistently
applied, and present fairly the consolidated financial position of
the Company as of such respective dates, and the consolidated results
of its operations and cash flows for the respective periods then
ended, subject with respect to the nine month financial statements to
normal year end and audit adjustments.
2.15. Events Subsequent to September 30, 1996. Except as set forth in
Schedule 2.15, since September 30, 1996, there has not been any
material adverse change in the assets, liabilities, income, business,
operations or prospects of the Company. Since September 30, 1996,
other than the disclosure set forth in Schedule 2.15 hereto, the
Company has not (i) issued any stock, bonds or other securities, (ii)
borrowed any amount or incurred any liabilities (absolute or
contingent), except current liabilities incurred, and liabilities
under contracts entered into, in the ordinary course of business,
(iii) discharged or satisfied any lien or incurred or paid any
obligation or liability (absolute or contingent) other than current
liabilities shown on its balance sheet as of September 30, 1996,
referred to in Section 2.13 hereof and current liabilities incurred
since that date in the ordinary course of business, (iv) declared or
made any payment or distribution to stockholders as such or purchased
or redeemed any shares of its capital stock or other securities or
interests, (v) mortgaged, pledged or subjected to lien any of its
assets, tangible or intangible, other than liens of current real
property taxes not yet due and payable, (vi) sold, assigned or
transferred any of its tangible assets, except in the ordinary course
of business, or canceled any debts or claims, (vii) sold, assigned or
transferred any patents, trademarks, trade names,
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copyrights, trade secrets or other intangible assets outside the
ordinary course of business, (viii) made any changes in officer
compensation, or (ix) entered into any transaction except in the
ordinary course of business.
2.16. Title to Properties. The Company has good and marketable title to all
of its owned properties and assets, free and clear of all mortgages,
pledges, security interests, liens, charges and other encumbrances,
except for Permitted Encumbrances (as defined below). The Company
enjoys peaceful and undisturbed possession under all leases relating
to real property and all other leases (other than immaterial leases
which can be replaced on substantially the same terms) necessary for
the operation of the business; and all such leases are valid and
subsisting and in full force and effect. As used herein, "Permitted
Encumbrances" means any mortgages, pledges, security interests,
liens, charges and other encumbrances (i) as described in Schedule
2.16 hereto, (ii) liens for current taxes, assessments and other
governmental charges not overdue (other than liens, assessments or
charges being contested in good faith), (iii) mechanic's,
materialmen's and similar liens which may have arisen in the ordinary
course of business and which, in the aggregate, would not be material
to the financial condition of the Company, (iv) security interests
securing indebtedness not in default for the purchase price of or
lease rental payments on property purchased or leased under capital
lease arrangements in the ordinary course of business, and (v) minor
imperfections of title, if any, not material in amount and not
materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed
operations of the Company.
2.17. Real Property. Other than the premises containing the Company's
headquarters located at 8955 Beverly Boulevard, Los Angeles,
California, the Company owns no real property.
2.18. Taxes.
(a) The Company has timely filed all federal, state and local income tax
returns and has timely filed with all appropriate governmental agencies all
sales, ad valorem, franchise and other tax, license, gross receipts and other
similar returns and reports required to be filed by the Company. The Company has
reported all taxable income and losses on those returns on which such
information is required to be reported, and paid or provided for the payment of
all taxes on said returns or taxes due pursuant to any assessment received by
it, including without limitation, any taxes by law to be withheld and/or paid in
connection with any officer's or employee's compensation or due pursuant to any
assessment received by it. There are no agreements for the extension of time for
the assessment or payment of any amounts of tax. The Company has made available
to the Purchasers for inspection copies of income tax returns that are true and
complete copies of the federal and applicable state, local or other income tax
returns filed by the Company.
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(b) The Company has paid all tax liabilities of the Company arising through
the end of the taxable year ended December 31, 1995. All tax liabilities of the
Company arising after December 31, 1995 have been paid or adequately disclosed
and properly reserved for on the books and records and financial statements of
the Company. No federal or applicable state, local or other tax return of the
Company for any period has been or is currently under audit by the Internal
Revenue Service or any state, local or other tax authorities. Except for an
intangible tax assessment by Florida for approximately $11,000 (inclusive of
accrued interest), no claim has been made by federal, state, local or other
authorities relating to such returns or any audit. For purposes of this section,
the word "timely" shall mean that such returns were filed within the time
prescribed by law for the filing thereof, including the time permitted under any
applicable extensions. The Company is not aware of any facts which it believes
would constitute the basis for the proposal of any material tax deficiencies for
any unexamined year. All taxes which the Company is required by law to withhold
and collect have been duly withheld and collected, and has been timely paid over
to the proper authorities to the extent due and payable.
2.19. Environmental Matters. The Company has complied with each and is not
in violation of any, federal, state or local law, regulation, permit,
provision or ordinance relating to the generation, storage,
transportation, treatment or disposal of hazardous, toxic or
polluting substances, except where such noncompliance or violation
could not reasonably be expected to result in a MAE. The Company has
obtained and adhered to all necessary permits and other approvals
necessary to store, dispose, and otherwise handle hazardous, toxic
and polluting substances, the failure of which to obtain or adhere to
could not reasonably be expected to result in a MAE. The Company has
reported, to the extent required by federal, state and local law, all
past and present sites where hazardous, toxic or polluting
substances, if any, from the Company have been treated, stored or
disposed. The Company has not transported any hazardous, toxic or
polluting substances or arranged for the transportation of such
substances to any location which is the subject of federal, state or
local enforcement actions or other investigations which may lead to
claims against the Company for clean-up costs, remedial work, damages
to natural resources or for personal injury claims, including, but
not limited to, claims under the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended which
claims would result in a MAE.
2.20. Use of Proceeds. The Company will apply the proceeds of the issuance
and sale of the Preferred Shares and Warrant Shares for working
capital purposes.
2.21. Compliance with Law.
(a) The Company is not in default under any order of any court,
governmental authority or arbitration board or tribunal to which the Company is
or was subject or in violation of any laws, ordinances, governmental rules or
regulations (including, but not limited to, those relating to environmental,
safety, building, product safety or health standards or employment matters) to
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which the Company is or was subject, in each case, that could reasonably be
expected to result in a MAE. The business is being conducted in compliance with
all applicable laws, ordinances, rules and regulations applicable to the
Company, the non-compliance with which could reasonably be expected to have a
MAE. The Company has not failed to obtain any licenses, permits, franchises or
other governmental authorizations necessary to the ownership of its properties
or to the conduct of its business, which failure could have a MAE.
(b) The Company has filed all documents (the "Filings") required to be
filed with the Securities and Exchange Commission (the "Commission") pursuant to
the 1933 Act and the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and true, correct and complete copies of the Filings have been made
available to the Purchasers. The Filings complied in all material respects with
the requirements of the 1933 Act and the Exchange Act, as applicable, and did
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary in order the render the
statement not misleading in light of the circumstances in which they were made.
Except as set forth on Schedule 2.21, the Company has filed in a timely manner
all reports required to be filed since May 1, 1996.
2.22. Employee Benefit Plans.
(a) The Company has complied and currently is in compliance, both as to
form and operation, with the applicable provisions of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and the Internal Revenue
Codes of 1954 and/or 1986, as amended, respectively (the "Code"), with respect
to each "employee benefit plan" as defined under Section 3(3) of ERISA ("Plan")
which the Company (i) has ever adopted, maintained, established or to which the
Company has ever been required to contribute or to which the Company has ever
contributed or (ii) currently maintains or to which the Company currently
contributes or is required to contribute or (iii) currently participates in or
is required to participate in, except in each case or all cases in the aggregate
where such noncompliance would not result in a MAE.
(b) Except as set forth on Schedule 2.22, the Company has never maintained,
adopted or established, contributed or been required to contribute to, or
otherwise participated in or been required to participate in, a "multi-employer
plan" (as defined in Section 3(37) of ERISA). No amount is due or owing from the
Company on account of a "multi-employer plan" (as defined in Section 3(37) of
ERISA) or on account of any withdrawal therefrom.
(c) Notwithstanding anything else set forth herein, the Company has not
incurred any material liability with respect to a Plan, including, without
limitation, under ERISA (including, without limitation, Title I or Title IV of
ERISA and other than liability for premiums due to the Pension Benefit Guaranty
Corporation), the Code or other applicable law, which has not been satisfied or
reserved in full, and no event has occurred, and except as set forth on Schedule
2.22 there exists no condition or set of circumstances which could result in the
imposition of any material liability with respect to the Plan, including,
without limitation, under ERISA (including, without limitation, Title I or Title
IV of ERISA), the Code or other applicable law with respect to the Plan.
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(d) Except as set forth on Schedule 2.22, the Company has not committed
itself, orally or in writing, to (i) provide or cause to be provided to any
person now or at any time covered by any Plan any payments or benefits, which
are material either singly or in the aggregate, in addition to, or in lieu of,
those payments or benefits set forth under any Plan, or (ii) continue the
payment of, or accelerate the payment of, benefits, which are material either
singly or in the aggregate, under any Plan, except as expressly set forth
thereunder. Complete and correct copies of all written arrangements described in
the preceding sentence as in effect on the date hereof have been delivered to
the Purchasers.
(e) Except as set forth on Schedule 2.22, the Company has not committed
itself, orally or in writing, to provide or cause to be provided any severance
or other post-employment benefit, salary continuation, termination, disability,
death, retirement, health or medical benefit, or similar benefit to any person
(including, without limitation, any former or current employee) except as set
forth under any Plan, except for such benefits which individually or in the
aggregate are not material. Complete and correct copies of all written
arrangements described in the preceding sentence as in effect on the date hereof
have been delivered to the Purchasers.
2.23. Insurance. All policies of liability, theft, fidelity, business
interruption, life, fire, product liability, workmen's compensation,
health and other forms of insurance held by the Company are valid and
enforceable policies and are outstanding and duly in force and all
premiums with respect thereto are paid to date. To the best of the
Company's knowledge, the amounts of coverage under such policies of
insurance for the assets and properties of the Company are adequate
against risks usually insured against by persons operating similar
businesses and operating similar properties.
2.24. Registration Rights. Except as contemplated by or described in the
Registration Rights Agreement and other than as set forth on Schedule
2.24, no person has any right to cause the Company to effect the
registration under the 1933 Act of any of the Company's debt or
equity securities.
2.25. Compensation Arrangements. Except as contemplated by this Agreement
or as set forth in Schedule 2.25 hereto, (i) the Company is not a
party to any employment or deferred compensation agreements that
require payments by the Company to any individual in excess of
$100,000 in any year, (ii) the Company does not have any bonus,
incentive or profit-sharing plans that would require payments by the
Company to any individual in an amount equal to or exceeding $10,000,
and (iii) there are no existing material arrangements or proposed
material transactions between the Company and any officer or director
or holder of more than 5% of the capital stock of the Company.
Complete and correct copies of all written arrangements described in
the preceding sentence as in effect on the date hereof have been
delivered to the Purchasers.
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2.26. Key Employees. The persons listed on Schedule 2.26 hereto are all
persons considered "key employees" by the Board of Directors. All of
such persons are parties to confidentiality customary for employees
of comparable responsibility and value. All copies of key man life
insurance policies, if any, have been delivered to the Purchasers.
2.27. Labor Matters. Except as set forth on Schedule 2.27, the Company is
not a party to any collective bargaining agreement with any labor
union or association. There are no discussions, negotiations, demands
or proposals that are pending or have been conducted or made with or
by any labor union or association, and there are no pending or
threatened labor disputes, strikes or work stoppages that may have a
material adverse effect upon the continued business or operation of
the Company, other matters of an industry-wide level. The Company is
in compliance in all material respects with all federal and state
laws respecting employment and employment practices, terms and
conditions of employment and wages and hours, and is not engaged in
any unfair labor practices.
2.28. Disclosure. Neither this Agreement nor any other document,
certificate, instrument or statement furnished or made to the
Purchasers by or on behalf of the Company in connection with the
transactions contemplated hereby contain any untrue statement of a
material fact or omits to state a material fact necessary in order to
make the statements contained herein and therein not misleading in
light of the circumstances under which they were made.
SECTION 3
PURCHASERS' REPRESENTATIONS AND WARRANTIES
Each Purchaser represents and warrants to the Company the following:
3.1. Authorization. Such Purchaser has all requisite power and authority to
execute this Agreement and the Registration Rights Agreement and the
Pledge Agreement, and to carry out the transactions contemplated
hereby and thereby. The execution, delivery and performance of this
Agreement by such Purchaser have been duly authorized by all requisite
corporate action, and this Agreement has been duly executed and
delivered by such Purchaser and the Pledge Agreement when duly
executed and delivered by such Purchaser will constitutes its valid
and binding obligation, enforceable against such Purchaser in
accordance with its terms, except as enforcement may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws
relating to or affecting the enforcement of creditors' rights
generally and general equitable principles.
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3.2. Purchase for Investment. The Preferred Shares, Common Shares, Warrants
and the Warrant Shares are being acquired by such Purchaser for its
own account, not as a nominee or agent, for investment and not with a
view to resale or distribution within the meaning of the 1933 Act, and
the rules and regulations thereunder, and such Purchaser will not
distribute the Preferred Shares, Common Shares, the Warrants or the
Warrant Shares in violation or contravention of the 1933 Act. Such
Purchaser is not aware of any facts or circumstances that contradict
the representation in the first sentence of Section 2.6(a).
3.3. Restrictions on Transfer. The Purchaser acknowledges that (a) the
Preferred Shares, Common Shares, the Warrants and the Warrant Shares
are not registered under the 1933 Act as of the Closing Date, (b) the
Preferred Shares, Common Shares, Warrants and Warrant Shares will not
be transferable unless so registered or unless an exception for such
registration is applicable and (c) the certificates representing the
Preferred Shares and the Common Shares, the Warrants, and the
certificates representing the Warrant Shares will bear a legend
substantially in the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR
APPLICABLE STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE,
SOLD, PLEDGED, ASSIGNED OR OTHERWISE DISPOSED OF, AND NO TRANSFER OF
THE SECURITIES MAY BE MADE BY THE COMPANY OR ITS TRANSFER AGENT, IN
THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM."
3.4. Sophistication; Access to Information.
(a) Such Purchaser represents and warrants to the Company, that such
Purchaser and if such Purchaser is a corporation each shareholder of Purchaser
(i) is an "accredited investor" as defined in the 1933 Act and is financially
able to purchase the Preferred Shares, the Common Shares, the Warrants and the
Warrant Shares issuable upon exercise of the Warrant subscribed for hereunder,
(ii) is fully capable of understanding the type of investment being made
pursuant to this Agreement and the risks involved in connection therewith, (iii)
believes that the nature of the Preferred Shares, the Common Shares, the
Warrants and the Warrant Shares are consistent with their overall investment
programs and financial position, (iv) recognizes that there are substantial
risks involved in their purchase of the Preferred Shares, the Common Shares, the
Warrants and the Warrant Shares, (v) is capable of bearing the economic risk of
its investment for an indefinite period of time and can afford a complete loss
of its investment, (vi) has adequate means of providing for their current
liquidity needs, (vii) has no need for liquidity of their investment, (viii) is
not expecting any short term income from their investment and (ix) has no reason
to anticipate any change in personal circumstances, financial or otherwise,
which may cause or require any sale of the Preferred Shares, the Common Shares,
the Warrants or the Warrant Shares.
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(b) Such Purchaser acknowledges to the Company that it has had the
opportunity to ask questions of and receive answers from the Company's officers
and directors concerning the terms and conditions of the (i) purchase and
delivery of the Preferred Shares, the Common Shares, the Warrants and Warrant
Shares and (ii) business and financial conditions of the Company; and such
Purchaser has received to its satisfaction, such additional information about
the business and financial conditions of the Company and the terms and
conditions of the purchase and delivery of the Preferred Shares, the Common
Shares and the Warrants, as it has requested.
SECTION 4
CONDITIONS PRECEDENT TO PURCHASERS' OBLIGATIONS
A. The Purchasers' obligation to purchase the Initial Preferred Shares and
Initial Warrants on the Initial Closing Date is subject to the fulfillment to
their respective satisfaction of the following conditions:
4.1. Representations and Warranties. On the Initial Closing Date, the
representations and warranties contained in Section 2 hereof made to
such Purchaser shall be true and correct with the same effect as
though made on and as of the Closing Date (except for representations
and warranties limited to a specific time).
4.2. Compliance with this Agreement. All the covenants, agreements and
conditions contained in this Agreement to be performed or complied
with by the Company on or prior to each Closing Date shall have been
performed or complied with or waived to each Purchaser's satisfaction.
4.3. Closing Certificate. The Company shall have delivered to the
Purchasers a certificate, dated the Initial Closing Date and the
Second Closing Date, as the case may be, and signed by the Company's
Chief Executive Officer, President and Chief Financial Officer,
certifying that the Company has satisfied the conditions set forth in
this Agreement applicable to such Purchaser, including by reference
the conditions specified in Sections 4.1 and 4.2.
4.4. Secretary's Certificate. At the Initial Closing Date, the Purchasers
shall have received a certificate from the Company, dated the Initial
Closing Date and signed by the Secretary of the Company, certifying
(i) that the attached copies of the Articles of Incorporation, By-Laws
and resolutions of the Board of Directors of the Company authorizing
the execution of this Agreement by the Company, the sale, issuance and
delivery by the Company to the Purchasers of the Preferred Shares, the
Common Shares, the Warrants and the Warrant Shares and reserving for
issuance the Common Shares, the Warrant Shares and the Consulting
Shares are all true, correct and complete and remain unamended and in
full force and effect and (ii) as to the
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incumbency of all officers of the Company executing any document
signed on behalf of the Company in connection with the transaction
contemplated hereby.
4.5. No Litigation, Material Judgments or Orders. On the Initial Closing
Date, there shall not be any pending or threatened suit, action or
litigation, or administrative, arbitration or other proceeding or
governmental inquiry or investigation questioning the validity of this
Agreement or the transactions contemplated hereby.
4.6. Opinion. At the Initial Closing, the Purchasers shall have received an
opinion of Steve Soloway, general counsel to the Company,
substantially in the form of Exhibit C hereto.
4.7. Consents and Approvals. All consents, waivers, exemptions,
authorizations or other actions by, or notices to, or filings with
governmental authorities or third parties regarding applicable laws
and contractual obligations related, necessary or required in
connection with the execution, delivery or performance of this
Agreement and the sale, issuance and delivery of the Preferred Shares,
Common Shares, Warrants and the Warrant Shares by the Company to the
Purchasers, shall have been obtained and be in full force and effect;
and the Purchasers shall have been furnished with the appropriate
evidence thereof, and all waiting periods imposed on the Company shall
have lapsed without extension or the imposition of any conditions or
restrictions.
4.8. Investment by Other Purchasers. Each Purchaser's obligation to
purchase the Initial Preferred Shares and Initial Warrants subscribed
for by such Purchaser hereunder on the Initial Closing Date is subject
to the fulfillment by each other Purchaser of its obligation to
purchase the Initial Preferred Shares and Initial Warrants subscribed
for by such other Purchaser on the Initial Closing Date.
B. MEI's obligation to purchase the Initial MEI Preferred Shares and the Initial
MEI Warrant on the Initial Closing Date is subject to the fulfillment to its
satisfaction of the following additional conditions:
4.9. Series A Amendment. The voting rights, preferences, limitations and
special rights of the Series A Preferred Stock of the Company shall
have been amended to increase the number of shares of preferred stock
designated as Series A Preferred Stock, to fix the conversion ratio at
1.20497 subject to antidilution protection, to provide for the payment
of dividends at the Company's option in the form of Series A Preferred
Stock, to eliminate any prohibition on a series or class of securities
ranking equal to the Series A Preferred Stock with respect to a
liquidation preference or the issuance of dividends, and to change the
antidilution protection relating to
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future sales of securities of the Company to be consistent with such
protections set forth in the Series B Preferred Stock.
4.10. Stock Incentive Plan. The Stock Option Committee or the Board of
Directors of the Company shall have taken all action necessary under
the 1994 Stock Incentive Plan (the "Plan") of the Company to assure
that the transactions contemplated by this Agreement, including
without limitation, the issuance of the Preferred Shares, Common
Shares, Warrants, Warrant Shares and Consulting Shares, and the
election to the Board of Directors of representatives of MEI, whether
pursuant to the terms of the Series B Preferred Stock or pursuant to
this Agreement, including pursuant to the terms of Section 7.2
hereinbelow, will not constitute an "Event" under the terms of the
Plan such that, among other things, the vesting of all options issued
thereunder would be accelerated.
4.11. Employment Agreements. The Company shall have received from each of
Michael Viner, Deborah Raffin, Gerald Leider, and Steven Soloway, his
or her agreement under which each such person shall agree that for
purposes of their respective employment agreement that (i) the
acquisition by MEI or its Principals or any of their affiliates in
the aggregate of not more than 40% of the outstanding shares of
Common Stock of the Company, including without limitation, by way of
open market purchases, or the issuance of the Preferred Shares,
Common Shares, Warrants, Warrant Shares or Consulting Shares,
pursuant to this Agreement, and (ii) the election to the Board of
Directors of representatives of MEI pursuant to or as contemplated in
this Agreement, whether pursuant to the terms of the Series B
Preferred Stock or Section 6.3 or Section 7.2 hereinbelow, will not
constitute an "Event" triggering any rights under their respective
employment agreements, such waiver agreements to be in form and
substance acceptable to MEI. It is expressly acknowledged by MEI that
the foregoing waiver will not extend to the election to the Board of
Directors of representatives of MEI constituting more than one third
of the total number of directors constituting the entire Board of
Directors, except if elected pursuant to Section 7.2 hereinbelow or
otherwise nominated by the Board of Directors, and in the event of
such election, director representatives of MEI will not constitute
continuing directors for purposes of determining whether an "Event"
has occurred under such employment agreement.
4.12. Voting Agreement. Michael Viner and Deborah Raffin shall have
executed and delivered the Voting Agreement substantially in the form
of Exhibit F.
C. The Purchasers' obligation to purchase the Second Preferred Shares and the
Second Warrants on the Second Closing Date is subject to the fulfilment to their
respective satisfaction of the following conditions:
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4.13. Investment by Other Purchasers. Each Purchaser's obligation to
purchase the Second Preferred Shares and Second Warrants subscribed
for by such Purchaser hereunder on the Second Closing Date is subject
to the fulfilment by each other Purchaser of its obligation to
purchase the Second Preferred Shares and Second Warrants subscribed
for by such other Purchaser on the Second Closing Date.
SECTION 5
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The Company's obligation to sell, issue and deliver the Initial Shares and
the Initial Warrants on the Initial Closing Date and the Second Shares and
Second Warrants on the Second Closing Date as specifically provided, is subject
to the fulfillment to its satisfaction of the following conditions:
5.1. Representations and Warranties. On the Initial Closing Date and the
Second Closing Date, the representations and warranties contained in
Section 3 hereof shall be true and correct with the same effect as
though made on and as of the Closing Date.
5.2. Compliance with this Agreement. All the covenants, agreements and
conditions contained in this Agreement to be performed or complied
with by the Purchasers on or prior to the Initial Closing Date shall
have been complied with or performed.
5.3. No Injunction. There shall not be any pending or threatened suit,
action or litigation, or administrative, arbitration or other
proceeding or governmental inquiry or investigation questioning the
validity of this Agreement or the transactions contemplated hereby.
5.4. Pledge Agreement. Each Purchaser shall have executed and delivered to
the Company a pledge agreement substantially in the form of Exhibit E
hereto (the "Pledge Agreement").
SECTION 6
COVENANTS OF THE COMPANY
6.1. Financial Statements and Reports. For so long as MEI or its Principals
(as hereinafter defined) continue to hold in the aggregate at least 1%
of the outstanding shares of Common Stock (assuming for this purpose
that the Preferred Shares are converted in their entirety), the
Company shall furnish to MEI the following financial statements and
reports:
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(a) Within the period prescribed by the Securities and Exchange Commission
(the "Commission"), an audited balance sheet, and related audited statements of
income, cash flows and shareholders' equity of the Company as of and for such
fiscal year prepared in accordance with GAAP, consistently applied, and
accompanied by the opinion of the Company's regularly engaged firm of
independent certified public accountants.
(b) Within the period prescribed by the Commission, a quarterly balance
sheet and statements of income, cash flows and stockholders' equity of the
Company as of and for such quarter and the year to date and as of and for the
corresponding periods of the preceding fiscal year. The interim statements
described above shall be unaudited, but prepared in accordance with GAAP,
subject only to normal year-end audit adjustments and shall be certified by the
Chief Financial Officer of the Company; and
(c) Promptly upon their becoming available, the Company shall deliver to
the Purchasers copies of (i) all financial statements, reports, notices and
proxy statements sent or made available to shareholders by the Company, (ii) all
regular and periodic reports and all registration statements and prospectuses,
if any, filed by the Company with any securities exchange or with the Commission
or any governmental or private regulatory authority, and (iii) all press
releases and other statements made available by the Company to the public
concerning material developments in the business of the Company.
6.2. Access. The Company shall during usual business hours and upon
reasonable notice, permit the Purchasers' duly authorized
representatives to visit and inspect the properties of the Company, to
examine the stock register, books and records of account and records
of the proceedings of the incorporators, stockholders and directors
and to make copies or extracts therefrom, and to discuss the Company's
business with its officers and directors.
6.3. Appointment to the Board of Directors; By-Law Amendments.
(a) The number of directors constituting the Board of Directors shall be
fixed at no more than nine, and the Company shall, concurrently with the Closing
or as soon as practicable thereafter, elect to its Board of Directors nominees
designated by MEI to constitute not less than one third of the members of the
entire Board of Directors, each of whom shall be a principal of MEI as of the
date hereof (each a "Principal"), which directors may be newly created
vacancies, which directors shall constitute the directors entitled to be elected
by the holders of Series B Preferred Stock.
(b) So long as MEI or its Principals continue to hold not less than an
aggregate of 750,000 Common Shares (assuming for this purpose that the Preferred
Shares are converted then in their entirety to Common Shares and subject to
adjustment for stock splits or combinations), if the holders of Series B
Preferred Stock are for any reason not entitled to elect directors as
contemplated in the Certificate of Determination relating to the Series B
Preferred Stock or because
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no Series B Preferred Stock is at such time outstanding, the Company shall
continue to include as management nominees in the slate of persons proposed to
be elected directors with respect to all future elections of directors, whether
at an annual or special meeting or otherwise, and use its reasonable best
efforts to have elected to its Board of Directors nominees designated by MEI to
constitute not less than one third of the members of the entire Board of
Directors, each of whom shall be a Principal, except to the extent necessary to
comply with the provisions of Subparagraph (e) below.
(c) In the event that the Company fails for a period of more than 30 days
at any time to abide by the terms of this provision, the then exercise price of
the Initial MEI Warrants and the Second MEI Warrants, including all tranches,
shall be reduced by 5% for each full month of such non-compliance until cured.
(d) The directors nominated by MEI shall receive such standard compensation
in accordance with the Company's regular policy for directors.
(e) Concurrently with the Initial Closing, the Company's Board of Directors
shall establish an Audit Committee to the extent not already established, and so
long as MEI or its Principals continue to hold not less than an aggregate of
750,000 Common Shares (assuming for this purpose that the Preferred Shares are
converted then in their entirety to Common Shares and subject to adjustment for
stock splits or combinations), at least one-half of the designees thereof shall
be directors designated by MEI of which at least one director shall be required
to qualify as an "independent" director for purposes of meeting any requirements
with respect to such committee imposed for continued listing on NASDAQ or any
national securities market on which the Company's Common Stock is then listed.
The By-laws of the Company shall be amended to the extent necessary to establish
the audit committee and to insure the appointment of designees of MEI as
members.
(f) The By-Laws of the Company shall be amended to the extent necessary to
provide that the Audit Committee shall be responsible for approving, from time
to time, the Chief Financial Officer of the Company.
6.4. Other Filings and Dissemination of Material. For so long as the
Preferred Shares, Common Shares, Warrants or Warrant Shares remain
owned by MEI or its Principals:
(a) The Company shall make and keep public information available as those
terms are understood and defined in Rule 144 promulgated under the 1933 Act.
(b) The Company shall file with the Commission in a timely manner all
reports and other documents as the Commission may prescribe under the Exchange
Act at any time.
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(c) The Company shall furnish to MEI and its Principals a written statement
by the Company as to its compliance with the reporting requirements of the
Exchange Act as such holder may reasonably request to avail itself of any rule
or regulation of the Commission allowing such holder to sell any such securities
without registration.
6.5. Announcements. The Purchasers acknowledge that the Company may be
required by law to make certain announcements regarding the
transaction contemplated hereby. The content of any such public
announcement by either party will be subject to review and approval of
the other party, such delivery and review of content constituting such
public announcement shall be timely and approval shall not be
unreasonably withheld.
6.6. Indemnification.
(a) The Company (together with its successors and assigns, the
"Indemnifying Party") shall indemnify and hold harmless each Purchaser, its
principals, employees (each, an "Indemnified Party") to the fullest extent
permitted by law from and against any and all losses, claims, damages, expenses
(including, without limitation, reasonable fees, disbursements and other charges
of counsel incurred by an Indemnified Party in any action or proceeding between
an Indemnifying Party and Indemnified Party (or Indemnified Parties) or between
an Indemnified Party (or Indemnified Parties) and any third party or otherwise,
or other liabilities (collectively, the "Liabilities") resulting from or arising
out of any breach of any representation or warranty, covenant or agreement of an
Indemnifying Party to such Indemnified Party in this Agreement, or any legal,
administrative or other actions (including actions brought by any equity holder
of the Company) or derivative actions brought by any third party claiming
through or in Indemnifying Party's name), proceedings or investigations (whether
formal or informal), or written threats thereof, based upon, relating to or
arising out of any breach of any representation or warranty, covenant or
agreement of an Indemnifying Party to such Indemnified Party in this Agreement.
(b) To the extent that such indemnification is unenforceable for any
reason, the Indemnifying Party shall make the maximum contribution to the
payment and satisfaction of the Liabilities which shall be permissible under
applicable laws.
(c) In connection with the obligation of the Indemnifying Party to
indemnify for or contribute towards expenses as set forth above, the
Indemnifying Party further agrees, upon presentation of appropriate invoices
containing reasonable detail, to reimburse each Indemnified Party for all such
expenses (including fees, disbursements and other charges of counsel incurred by
an Indemnified Party in any action or proceeding between the Indemnifying Party
and such Indemnified Party, or Parties, and any third party otherwise) as they
are incurred by such Indemnified Party subject to an undertaking to reimburse
such amounts if determined not entitled to it.
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6.7. Consulting Agreement. Not later than April 1, 1997, the Company shall
execute and deliver a consulting agreement with MEI containing the
terms and provisions set forth on Exhibit D hereto (the "Consulting
Agreement").
6.8. Marketing of Assets. The Company shall use its reasonable best efforts
to sell or license the North American distribution rights to the
"Wilde feature film" for an amount at least equal to that discussed
between the Company and MEI and to reduce its audiotape inventory
through the sale thereof by at least $500,000.
SECTION 7
NEGATIVE COVENANTS
7.1. Negative Covenants.
(a) So long as MEI or its Principals continue to hold not less than an
aggregate of 750,000 Common Shares (assuming for this purpose that the Preferred
Shares are converted in their entirety to Common Shares and subject to
adjustment for stock splits and combinations), the Company hereby covenants and
agrees with MEI that without the consent of MEI, which right of consent shall be
exercised in good faith and in a commercially reasonable manner,
(i) the Company will not:
A. adopt an annual budget;
B. incur any debt for borrowed money or sell and issue and debt
or equity securities other than compensation for employees, directors
and consultants or pursuant to the options, warrants or convertible
securities listed on Schedule 2.3(c);
C. change or alter its principal business or enter into any new
business (it being understood that exploiting ancillary rights shall
not be considered a new business).
(ii) no executive officer of the Company, will knowingly:
A. hire any executive that earns in excess of $100,000 per year;
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B. make any financial commitment for personnel in excess of the
approved budget other than minor salary adjustments or raises within
the budget year;
C. make any changes or additions in the Company's auditors,
consultants or principal outside counsel;
D. commence any litigation not in the ordinary course of
business or settle any litigation not in the ordinary course of
business or where the amount to be paid by the Company is $25,000 or
more;
E. acquire any assets where the required payment by the Company
is in excess of $155,000 or sell or license outside of the ordinary
course of business assets where the payment to the Company is in
excess of $155,000, including film, audio or publishing rights;
F. commence active preproduction for (A) any television
movie-of-the-week, special or mini-series, unless the license fee
payable (or previously paid) for such program by the U.S. broadcast or
cable network together with bankable foreign licenses is at least
equal to the budgeted negative cost (including all normal and
customary production budget items including for functions performed by
the Company and including customary contingency of 10%), minus
$250,000 and the Company reasonably believes that additional revenues
from uncommitted territories is reasonably likely to generate revenues
in excess of $250,000 in the two years from the date of commencement
of such preproduction, (B) any episodic television series unless the
budgeted negative cost (including all normal and customary production
budget items including for functions performed by the Company and
including customary contingency of 10%) per episode is less than
$150,000 and at least 80% of such budgeted negative cost will be
funded by a U.S. broadcast or cable network and the Company reasonably
believes that additional revenues from uncommitted territories is
reasonably likely to generate revenues in excess of the unfunded
amount within two years from the date of commencement of such
preproduction; or (C) engage in the production of a theatrical feature
film, except to the extent the Company's commitments are less than
$250,000 and the Company reasonably believes that expected
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revenue from such film will be in excess of all costs relating
thereto, including the amount of the Company's commitment;
G. issue any financial press releases or publicly issue or
otherwise publicly discuss the Company's projected financial results
(it being understood that the foregoing is not intended to restrict
comments in general terms as to the anticipated success of any
particular project).
(b) For purposes of this Section 7.1 only, MEI shall from time to time
designate a person (the "MEI Representative") by notice to the Company, who
shall be appointed a member of the Executive Committee of the Board of
Directors, who shall have the authority as between the Company and MEI to give
or withhold MEI's consent as contemplated in this Section 7.1, which MEI
Representative shall, until further notice, be Ronald Lightstone. The person
designated as the MEI Representative may be changed from time to time by like
notice.
7.2. Remedy. In the event that the Company breaches any of the covenants
set forth in Section 7.1., and such breach is continuing uncured for a
period of thirty (30) days after notice thereof is given to the
Company by MEI or any Principal (with a copy thereof to Michael
Viner), then the Company shall immediately upon demand by MEI or any
Principal take all steps necessary or appropriate to elect to its
Board of Directors two additional directors nominated by MEI or its
Principals, including calling a special meeting for such purpose,
which directors shall continue to serve until the earlier of the
annual meeting of the shareholders of the Company next following the
cure of the breach which gave rise to the exercise of rights under
this Section 7.2, or until MEI and its Principals no longer own at
least 750,000 Common Shares (assuming for this purpose that the
Preferred Shares are converted in their entirety to Common Shares and
subject to adjustment for stock splits and combinations). The rights
afforded to MEI hereunder shall arise each time there is a breach of
the covenants set forth in Section 7.1 and shall be severable with
respect thereto, provided in no event shall this Section entitled MEI
to have more than two additional directors designated at any one time.
SECTION 8
MISCELLANEOUS
8.1. Registered Owner of the Preferred Shares, The Common Shares, the
Warrants and the Warrant Shares. The Company may deem and treat the
registered holder of the Preferred Shares and the Warrants as the
absolute owner thereof for all purposes whatsoever, and the Company
shall not be affected by any notice to the contrary.
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8.2. Payment of Expenses; Counsel. The Company and the Purchasers shall pay
their own expenses, including the fees and expenses of their
respective counsel (if any) incurred by them in connection with the
sale, issuance and delivery of the Shares, the Warrants and the
Warrant Shares and the execution, delivery and performance of this
Agreement. Michael Viner and Deborah Raffin acknowledge and understand
that they have not been personally represented by the Company's inside
or outside counsel in connection with this Agreement and the matters
contemplated hereby
8.3. Transfer Taxes. The Company will pay, and hold the Purchasers harmless
against, liability for the payment of any transfer or similar taxes
payable in connection with the initial sale, issuance and delivery of
the Shares and the Warrants.
8.4. Broker or Finder. Except as expressly provided in this Section, the
Parties individually represent and warrant that, to the best of their
individual knowledge, no broker or finder has acted for it in
connection with this Agreement or the transactions contemplated by
this Agreement and that no broker or finder is entitled to any
broker's or finder's fee or other commission in respect thereof based
in any way on agreements, arrangements or understandings made by such
party. The Company shall indemnify MEI, and the Purchasers shall
indemnify the Company against, and hold it harmless from, any claim,
liability, cost or expense (including reasonable attorneys' fees and
expenses) resulting from any agreement, arrangement or understanding
made by the Company or the Purchasers, as the case may be.
Notwithstanding the foregoing, the parties acknowledge that Artie Ripp
has made a claim for compensation as a broker or finder in connection
with the transaction contemplated herein. Compensation which shall
consist of options to purchase 50,000 shares exercisable at the market
price thereof on the date granted to be paid to Mr. Ripp shall be paid
by the Company. This provision is for the benefit of the Purchasers
and the Company in deciding which party will pay any compensation if
determined to be due to Mr. Ripp, and is not intended to, and shall
not confer any right on Artie Ripp.
8.5. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, without
reference to conflict of law provisions.
8.6. Notice. Any notice or other communication required or permitted
hereunder shall be sufficiently given only if sent by facsimile
transmission or by registered or certified mail, postage prepaid,
addressed as follows or to such other address or addresses as may
hereafter be furnished in writing by notice similarly given by one
party to the other:
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To the Company: Dove Entertainment, Inc.
8955 Beverly Boulevard
Los Angeles, CA 90048
Facsimile: (310) 724-7146
The Purchasers: The addresses set forth on Appendix I.
With a required
copy if to MEI to: Morrison Cohen Singer & Weinstein, LLP
750 Lexington Avenue
New York, New York 10022
Attn: Peter D. Weinstein, Esq.
Jack Levy, Esq.
Telephone: 212-734-8600
Facsimile: 212-735-8708
8.7. Entire Agreement. This Agreement, including the Appendix, Schedules
and Exhibits hereto, contains the entire agreement and understanding
among the Parties with respect to the subject matter hereof and
supersedes the letter agreement dated March 3, 1997 between MEI and
the Company, and shall not be modified or affected by any offer,
proposal, statement or representation, oral or written, made by or for
any party in connection with the negotiation of the terms hereof. All
references herein to this Agreement shall specifically include,
incorporate and refer to the Appendix, Schedules and Exhibits attached
hereto which are hereby made a part hereof. There are no
representations, promises, warranties, covenants, undertakings or
assurances (express or implied) other than those expressly set forth
or provided for herein and in the other documents referred to herein.
This Agreement may not be modified or amended orally, but only by a
writing signed by the Parties.
8.8. Severability. If any part of this Agreement is held to be
unenforceable or invalid under, or in conflict with, the applicable
law of any jurisdiction, the unenforceable, invalid or conflicting
part shall, to the extent permitted by applicable law, by narrowed or
replaced, to the extent possible, with a judicial construction in such
jurisdiction that effects the intent of the Parties regarding this
Agreement and such unenforceable, invalid or conflicting part. To the
extent permitted by applicable law, notwithstanding the
unenforceability, invalidity or conflict with applicable law of any
part of this Agreement, the remaining parts shall be valid,
enforceable and binding on the parties.
8.9. Headings. The headings of the Sections of this Agreement are inserted
for convenience of reference only and shall not be considered a part
hereof.
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8.10. Counterparts. This Agreement may be simultaneously executed in
several counterparts, each of which shall be an original and all of
which shall constitute but one and the same instrument.
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IN WITNESS WHEREOF, each of the parties hereto has executed this Agreement
as of the date first set forth above.
The Company:
DOVE ENTERTAINMENT, INC.
By:_______________________________
Name:
Title:
The Purchasers:
MEDIA EQUITIES INTERNATIONAL LLC
By:________________________________
Name:
Title:
________________________________________
Michael Viner
________________________________________
Deborah Raffin
29
Shareholders Voting Agreement
This Shareholders Voting Agreement ("Agreement"), dated as of March 27,
1997, by and between Michael Viner and Deborah Raffin (collectively, "Viner") on
the one hand and Media Equities International, LLC, a New York limited liability
company ("MEI"), with its principal office at 1 Stamford Plaza, Stamford,
Connecticut 16901, on the other hand.
WHEREAS, on March 27, 1997, MEI, Viner and Dove Entertainment, Inc. a
California corporation ("Dove"), executed and delivered a stock purchase
agreement (the "Stock Purchase Agreement") pursuant to which MEI agreed to
acquire from Dove 4,000 shares (the "MEI Purchase Shares") of newly issued Dove
Series B Preferred Stock and an option to purchase up to 2.0 million shares of
Common Stock, subject to anti-dilution adjustment (the "MEI Option Shares") and
Viner agreed to acquire from Dove 2,000 shares (the "Viner Purchase Shares") of
newly issued Dove Series C Preferred Stock and an option to purchase up to 1.0
million shares of Common Stock , subject to anti-dilution adjustment (the "Viner
Option Shares") and to amend the terms of Dove's Series A Preferred Stock (all
of such Series A Preferred Stock, Series B Preferred Stock and Series C
Preferred Stock, collectively, the "Purchase Shares;" and all of such MEI Option
Shares and Viner Option Shares, the "Option Shares"); and
WHEREAS, Viner is the beneficial owner of, and has the power to vote
directly or indirectly, approximately 1,525,811 currently outstanding shares of
Common Stock;
NOW, THEREFORE, the parties hereto, intending to be legally bound hereby,
agree as follows:
Section 1. Election of Directors.
In the event that MEI shall be entitled to have representation on the
Company's Board of Directors pursuant to Section 6.3(b) or 7.2 of the Stock
Purchase Agreement, at MEI's request, Viner shall, and shall use his reasonable
best efforts to cause each of his affiliates to, vote all of the voting
securities of Dove beneficially owned thereby and entitled to vote thereon for
the election of the requisite number of director designees of MEI then required
by such Section 6.3(b) or 7.2. In addition, Viner shall use their reasonable
efforts to take all steps necessary to cause the election of such designees,
including seeking the resignation of current directors of the Company; however
nothing herein shall require Viner to take or fail to take any action which
would, as a matter of law, have a reasonable probability of causing a breach of
any fiduciary or similar duty of Viner to the Company and the Company's
shareholders, other than MEI.
Section 2. General Provisions.
(a) If at any time either MEI shall notify Dove of its desire to have any
of its director designees removed, each of Viner and MEI shall, and shall use
his or its reasonable best efforts to cause each of their respective affiliates
to, subject to all applicable requirements of law, vote all of the voting
securities of Dove owned by them and entitled to vote thereon for the removal of
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such director at any meeting of the shareholders of Dove or by written consent
of the holders of voting securities of Dove without a meeting.
(b) Whenever any director designee of MEI ceases to serve on the board of
directors of Dove (whether by reason of death, resignation, removal or
otherwise), MEI shall be entitled, as between Viner and MEI, to designate a
successor director to fill the vacancy so created by giving notice in the manner
provided in Section 1(a) above. Each of Viner and MEI shall, and shall use his
or its reasonable best efforts to cause their respective affiliates to, vote for
such director designee in the manner provided for in Section 1(a) above.
(c) MEI and Viner agree to jointly request the Secretary of the Company to
call a special meeting of shareholders of Dove if either Viner or MEI requests
such a meeting.
(d) MEI acknowledges that the listing criteria of the Nasdaq market (as
contemplated to be amended) may require the Company to have at least two
"independent" directors, and an audit committee, a majority of whose members
must be "independent" directors. Accordingly, notwithstanding anything to the
contrary herein or in the Stock Purchase Agreement, in the event the provisions
of Section 1(c) apply, MEI shall designate at least one "independent" director
to the extent required by such listing criteria.
Section 3. Termination. This Agreement shall terminate on the earlier of
(a) the close of business on the tenth anniversary hereof and (b) the date on
which MEI or its Principals beneficially owns in the aggregate less than 750,000
shares of Common Stock (subject to adjustment for stock splits or combinations
and assuming the Series B Preferred Stock held by MEI is converted into Common
Stock).
Section 4. After-Acquired Shares. All of the provisions of this Agreement
shall apply to and shall include all shares of Common Stock or other voting
securities of Dove now beneficially owned by any of the parties hereto
(including, without limitation, the Purchase Shares being acquired concurrently
with the execution and delivery of this Agreement) and all shares of Common
Stock and other voting securities of Dove issued to (including, without
limitation, the Option Shares), purchased by (whether purchased through
open-market purchases, privately negotiated transactions or otherwise) or which
otherwise become beneficially owned by any of the parties hereto except as
otherwise provided herein.
Section 5. Transfer of Shares. During the term of this Agreement, the
parties shall be free to transfer shares of Common Stock to any person (in which
event such shares will no longer be subject to any restriction under this
Agreement), except that no such transfer shall be made to a Related Person (as
defined in the next sentence) unless prior thereto the other parties shall have
been notified of such proposed transfer and the transferee Related Person shall
have agreed n writing to be bound by the provisions of this Agreement as if a
party named herein. For purposes of the foregoing sentence, the term "Related
Person," when used to indicate a relationship with a party, means any of (a) a
corporation or organization of which such party or any such person referred to
in clause (c) is an officer or partner or is, directly or indirectly, the
beneficial owner of
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25 percent or more of any class of equity securities, (b) any trust or other
estate in which such party or any person referred to in clause (c) has at least
a 25 percent beneficial interest or as to which such party serves as trustee or
in a similar capacity, and (c) any relative in the immediate family (i.e.,
children or step-children) or spouse of such party or any relative in the
immediate family of such spouse.
Section 6. Owner of Shares. Each party to this Agreement may deem and treat
the person in whose name shares of securities are registered in the stock books
of Dove as the owner thereof for all purposes, including, without limitation,
for the giving of notices under this Agreement.
Section 7. Legend. A copy of this Agreement shall be filed with the
Secretary of Dove and shall be kept at its principal executive office. Upon the
execution of this Agreement, each of the parties hereto shall cause each
certificate representing shares of voting securities now or hereafter owned by
it to carry a legend as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO THE
PROVISIONS OF A SHAREHOLDERS' VOTING AGREEMENT, DATED AS OF MARCH 27, 1997,
AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
AS THEREIN PROVIDED. A COPY OF SUCH AGREEMENT IS ON FILE AT THE OFFICES OF
THE COMPANY.
Section 8. Notices. All notices and other communications shall be effective
(a) upon receipt if (i) hand delivered or (ii) sent by facsimile transmission
and confirmed by mail, (b) the third day after mailing, postage prepaid return
receipt requested and (c) one day after sending by recognized "over-night"
delivery service. Any notice not contemplated above shall be effective upon
receipt. For the purposes of this Section 8, the addresses of the parties to
which notices shall be sent shall be as follows:
If to Viner:
------------
1072 Beverly Drive
Beverly Hills, CA 90210
If to MEI or any MEI Shareholder:
---------------------------------
At the address set forth in the preamble hereto.
Each of the parties hereto may change the address to which such
communications are to be directed by notice to the other parties as provided in
this Section 8.
Section 9. Complete Agreement. This is the complete agreement between the
parties with respect to the subject matter hereof and supersedes all prior
negotiations and agreements
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with respect thereto. There are no representations, warranties, covenants,
conditions, terms, agreements, promises, understandings, commitments or other
arrangements with respect to the subject matter hereof other than those
expressly set forth herein.
Section 10. Governing Law. This Agreement shall be governed by, construed
under and enforced in accordance with, the laws of the State of California
without regard to any conflict of law principles thereof.
Section 11. Binding Agreement; Successors. This Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto, and,
except as provided in Section 5 hereof, each of their respective successors,
assigns, heirs and other representatives.
Section 12. Headings. The section headings herein are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement, nor are they deemed to constitute a part of this Agreement.
Section 13. Counterparts. This Agreement may be executed in tow or more
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
Section 14. Attorneys' Fees. In any action or proceeding brought to enforce
any provision of this Agreement, or where any provision hereof is validly
asserted as a defense, the successful party shall be entitled to recover
reasonable and actual attorneys' fees (including any such fees incurred in
connection with enforcement of any judgments) in addition to its or his costs
and expenses and any other available remedies.
Section 15. Waiver; Amendment. Any waiver of any provision or breach of
this Agreement must be in writing, executed by the waiving party. No waiver of
any provision or breach of this Agreement shall be a waiver of any other
provision or breach of this Agreement or any subsequent breach. Any amendment or
modification of this Agreement must be in writing and executed by all of the
parties hereto.
Section 16. Specific Performance. Each of the parties hereto acknowledges
that money damages would be both incalculable and an insufficient remedy for any
breach of this Agreement by a party hereto and that any such breach would cause
the other party hereto irreparable harm. Accordingly, each party hereto agrees
that in the event of any actual or threatened breach of this Agreement by any
party hereto, the other parties hereto shall be entitled to specific
performance. Such remedy shall not be the exclusive remedy for any breach of
this Agreement, but shall be in addition to all other remedies available at law
or equity to such party.
Section 17. Interpretation. The parties hereto agree that each party has
participated in the drafting and preparation of this Agreement, and,
accordingly, in any construction of the meaning herein, no party shall be deemed
to be the drafter hereof.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
MEDIA EQUITIES INTERNATIONAL, _______________________________
LLC Michael Viner
By: _______________________________ _______________________________
Name: Deborah Raffin Viner
Title:
Acknowledgment of Shareholders' Voting Agreement
Dove Entertainment, Inc. hereby acknowledges the existence of the foregoing
Shareholders' Voting Agreement
Dove Entertainment, Inc.
By: _______________________________
Name:
Title:
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