-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, G0o0F2alw46mILLyNUOhbM/DfKPz7EDpRqevq555GJVzR74/xGp2VCo1rNrWSdlR 52V3KwIhBJ7k6BGhrtqd6A== 0001013708-98-000118.txt : 19981130 0001013708-98-000118.hdr.sgml : 19981130 ACCESSION NUMBER: 0001013708-98-000118 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 5 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981127 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: KINGS ROAD ENTERTAINMENT INC CENTRAL INDEX KEY: 0000773588 STANDARD INDUSTRIAL CLASSIFICATION: 7812 IRS NUMBER: 953587522 STATE OF INCORPORATION: DE FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-37118 FILM NUMBER: 98753015 BUSINESS ADDRESS: STREET 1: 1901 AVE OF THE STARS STE 1545 CITY: LOS ANGELES STATE: CA ZIP: 90067 BUSINESS PHONE: 3105520057 MAIL ADDRESS: STREET 1: 1901 AVE OF THE STARS STREET 2: SUITE 1545 CITY: LOS ANGELES STATE: CA ZIP: 90067 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: RAS SECURITIES CORP/ CENTRAL INDEX KEY: 0000940614 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 133533608 STATE OF INCORPORATION: NY FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 50 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10004 MAIL ADDRESS: STREET 1: 50 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10004 SC 13D 1 SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 SCHEDULE 13D Under the Securities Exchange Act of 1934 Kings Road Entertainment, Inc. - - - -------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $.01 par value - - - -------------------------------------------------------------------------------- (Title of Class of Securities) 496162 20 7 - - - -------------------------------------------------------------------------------- (CUSIP NUMBER) Phillip Cook, President 1901 Avenue of the Stars Los Angeles, California 90067 (310) 552-0057 - - - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) November 6, 1998 - - - -------------------------------------------------------------------------------- (Date of Event which Requires Filing of 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 box [ ]. 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. SCHEDULE 13D CUSIP NO. 496162 20 7 1. Name of Reporting Person; S.S. or I.R.S. Identification No. of Above Person RAS Securities Corp. I.D. No.: 2. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] 3. SEC Use Only ................................................. 4. Source of Funds: OO 5. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) ..........................[ ] 6. Citizenship or Place of Organization: New York Number of 7. Sole Voting Power: 100 Shares Beneficially 8. Shared Voting Power: 0 Owned By 9. Sole Dispositive Power: 100 Each Reporting Person With 10. Shared Dispositive Power: 0 11. Aggregate Amount Beneficially Owned by Each Reporting Person: 100 12. Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) ........................[ ] 13. Percent of Class Represented by Amount In Row 11: 0% 14. Type of Reporting Person: BD 2 CUSIP NO. 496162 20 7 15. Name of Reporting Person; S.S. or I.R.S. Identification No. of Above Person FAB Capital Corporation I.D. No.: 16. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] 17. SEC Use Only ................................................ 18. Source of Funds: OO 19. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e)..........................[ ] 20. Citizenship or Place of Organization: Idaho Number of 21. Sole Voting Power: 1,082,580 Shares Beneficially 22. Shared Voting Power: 0 Owned By 23. Sole Dispositive Power: 1,082,580 Each Reporting Person With 24. Shared Dispositive Power: 0 25. Aggregate Amount Beneficially Owned by Each Reporting Person: 1,082,580 Shares 26. Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) .......................[ ] 27. Percent of Class Represented by Amount In Row 11: 31.9% 28. Type of Reporting Person: CO 3 CUSIP NO. 496162 20 7 29. Name of Reporting Person; S.S. or I.R.S. Identification No. of Above Person MBO Music Verlag GmbH I.D. No.: 30. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] 31. SEC Use Only ................................................ 32. Source of Funds: OO 33. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) .........................[ ] 34. Citizenship or Place of Organization: Germany Number of 35. Sole Voting Power: 950,829 Shares Beneficially 36. Shared Voting Power: 0 Owned By 37. Sole Dispositive Power: 950,829 Each Reporting Person With 38. Shared Dispositive Power: 0 39. Aggregate Amount Beneficially Owned by Each Reporting Person: 950,829 Shares 40. Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) .......................[ ] 41. Percent of Class Represented by Amount In Row 11: 28.1% 42. Type of Reporting Person: CO 4 CUSIP NO. 496162 20 7 43. Name of Reporting Person; S.S. or I.R.S. Identification No. of Above Person Western Union Leasing Ltd. I.D. No.: 44. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] 45. SEC Use Only ................................................ 46. Source of Funds: OO 47. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) .........................[ ] 48. Citizenship or Place of Organization: Ireland Number of 49. Sole Voting Power: 406,418 Shares Beneficially 50. Shared Voting Power: 0 Owned By 51. Sole Dispositive Power: 406,418 Each Reporting Person With 52. Shared Dispositive Power: 0 53. Aggregate Amount Beneficially Owned by Each Reporting Person: 406,418 Shares 54. Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) .......................[ ] 55. Percent of Class Represented by Amount In Row 11: 12.0% 56. Type of Reporting Person: CO 5 CUSIP NO. 496162 20 7 57. Name of Reporting Person; S.S. or I.R.S. Identification No. of Above Person Christoph Martin I.D. No.: 58. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] 59. SEC Use Only ................................................ 60. Source of Funds: OO 61. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) .........................[ ] 62. Citizenship or Place of Organization: Germany Number of 63. Sole Voting Power: 406,418 Shares Beneficially 64. Shared Voting Power: 0 Owned By 65. Sole Dispositive Power: 406,418 Each Reporting Person With 66. Shared Dispositive Power: 0 67. Aggregate Amount Beneficially Owned by Each Reporting Person: 406,418 Shares 68. Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) .......................[ ] 69. Percent of Class Represented by Amount In Row 11: 12.0% 70. Type of Reporting Person: IN 6 CUSIP NO. 496162 20 7 71. Name of Reporting Person; S.S. or I.R.S. Identification No. of Above Person Michael Berresheim I.D. No.: 72. Check the Appropriate Box if a Member of a Group (a) [ ] (b) [ ] 73. SEC Use Only ................................................ 74. Source of Funds: OO 75. Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e) .........................[ ] 76. Citizenship or Place of Organization: Germany Number of 77. Sole Voting Power: 950,829 Shares Beneficially 78. Shared Voting Power: 0 Owned By 79. Sole Dispositive Power: 950,829 Each Reporting Person With 80. Shared Dispositive Power: 0 81. Aggregate Amount Beneficially Owned by Each Reporting Person: 950,829 Shares 82. Check if the Aggregate Amount in Row 11 Excludes Certain Shares (See Instructions) .......................[ ] 83. Percent of Class Represented by Amount In Row 11: 28.1% 84. Type of Reporting Person: IN 7 Item 1. Security and Issuer This statement relates to the common stock, $.01 par value ("Common Stock"), of Kings Road Entertainment, Inc. (the "Issuer"), with its principal executive offices at 1901 Avenue of the Stars, Los Angeles, California 90067. Item 2. Identity and Background (a) This statement is filed by FAB Capital Corporation, an Idaho corporation ("FAB"), RAS Securities Corp., a New York corporation which is expected to become a wholly-owned subsidiary of FAB ("RAS"), MBO Music Verlag GmbH, a German corporation ("MBO"), and Western Union Leasing Ltd., a trust incorporated in Ireland ("Western") (collectively, the "Acquirors"). This statement is also filed by Christoph Martin, the sole shareholder and sole trustee of Western and Michael Berresheim, the sole shareholder of MBO. (b) The addresses of each of the Acquirors' and Mr. Martin's and Mr. Berresheim's principal place of business and principal office are as follows: for FAB, 1461 First Avenue, New York, New York 10021; for RAS, 50 Broadway, New York, New York 10004; for MBO and Mr. Berresheim, Gerauer Street, 58A Moerfelden - - - - Walldorf, Germany 64546; and for Western and Christoph Martin, the principal business address is Rothhaus Street 1, 67348 Bad Hamburg Germany and the principal office of Western is 10 Greycoat Place, 1 Premier House, London SW1 England. (c) The principal businesses of the Acquirors are as follows: FAB is a private investment firm and holding company with diverse business interests; RAS is a broker dealer and investment banking firm; MBO is a music publisher, primarily receiving royalties from recorded music; and Western is an offshore private financing company. Information with respect to the officers, directors and principal stockholders of each of the Acquirors (the "Individual Affiliates") is set forth in the following Schedule A. 8
SCHEDULE A RAS SECURITIES CORP. Executive Officers; Directors; Other Principal Controlling Shareholders Occupation/Name (name and addressees) Citizenship Capacity, Title of Employer - - - ------------------------------- ----------- --------------- --------------- 1. Robert A. Schneider USA 100% n/a 21 East 66th Street Common Stock New York, NY ownership 2. Gerald Heilpern USA President n/a 50 Broadway New York, NY 3. David Parsons USA Vice President & n/a 50 Broadway Director of New York, NY Compliance 4. Julia Mold-Torres USA Chief Financial n/a 50 Broadway Officer New York, NY FAB is the sole preferred shareholder of RAS with a call option on 100% of the outstanding common stock of RAS pursuant to a transaction among Robert Schneider, RAS and FAB.
9
MBO Music Verlag GmbH Executive Officers; Directors; Other Principal Controlling Shareholders Occupation/Name (name and addresses) Citizenship Capacity, Title of Employer - - - ------------------------------ ----------- --------------- --------------- Michael L. Berresheim Germany Managing Director; n/a Eppsteiner Strasse 55 100% D60323 Frankfurt shareholder
WESTERN UNION LEASING LTD. Executive Officers; Directors; Other Principal Controlling Shareholders Occupation/Name (name and addresses) Citizenship Capacity, Title of Employer - - - ------------------------------ ----------- --------------- ------------------- Western is a trust with Christoph Martin as sole trustee Attorney with Christoph Martin Germany Trustee own practice Rathausstrabe 1, for Mr. Martin 61348 Bad Homburg v.d.H.
10
FAB CAPITAL CORPORATION Executive Officers; Directors; Other Principal Controlling Shareholders Occupation/Name (name and addresses) Citizenship Capacity, Title of Employer - - - ------------------------------ ----------- --------------- --------------- 1. Philip G. Cook Australia Chairman; CEO; Private Investor 50 Broadway Director New York, NY 10004 25% shareholder 2. Randy Strausberg USA Chief Financial n/a 50 Broadway Officer New York, NY 10001 3. Marc Greenspan USA Director n/a 50 Broadway New York, NY 4. Mercury Blaze Limited an Ireland 32% n/a Irish Trust Shareholder Trustee is Colin Pearse
11 (d) None of the Acquirors or the Individual Affiliates has, during the last five years, been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors). (e) None of the Acquirors or the Individual Affiliates has, during the last five years, been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and, as a result of such proceeding, was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws, or finding any violation with respect to such laws. Item 3. Source and Amount of Funds By agreement dated November 6, 1998 (the "Agreement," which is Exhibit 10(a) of this Schedule), FAB purchased 421,949 shares, MBO purchased 373,350 shares, Western purchased 159,461 shares and RAS purchased 100 shares of Common Stock from the Estate of Stephen Friedman (the "Estate"), and FAB simultaneously acquired 7,500 shares of Common Stock from Christopher Trunkey. The purchase price for each such purchase was $2.35 per share or $2,261,546 in the aggregate. RAS is expected to become a wholly-owned subsidiary of FAB upon the consummation of a pending transaction. Each of the Acquirors disclaims beneficial ownership of the shares of Common Stock acquired by the other Acquirors. For each of the Acquirors, the source and the amount of the funds used in acquiring shares of Common Stock from the Estate and Mr. Trunkey were as follows: As described below, FAB, MBO and Western borrowed $991,580.15, $877,372.50 and $374,733.35, respectively, to fund their respective purchases of shares from the Estate. FAB used internal working capital ($17,625) to acquire 7,500 shares of Common Stock from Mr. Trunkey as did RAS ($235) to acquire 100 shares of Common Stock from the Estate. FAB, MBO and Western borrowed an aggregate of $2,243,686 as follows: $1,500,000 from Riverrock Ltd.; $200,000 from Long Valley Associates; and $543,686 from North American International Capital, Inc. FAB, MBO and Western borrowed 44.2%, 39.1% and 16.7%, respectively, of the amount loaned by each of these lenders. The entire amount loaned by North American International Capital, Inc. was first borrowed by FAB and FAB loaned $212,673 to MBO and $90,835 to Western. FAB, MBO and Western each has repaid such loans described above. In addition, Music Action Ltd., a German corporation ("MAC"), agreed that it will, as soon as practicable but in any event within 120 days after November 6, 1998, make or cause to be made an offer to each of the Company's shareholders, other than the Estate and Mr. Trunkey, for the purchase of up to ninety 12 percent (90%) of such shareholder's shares at the price of $2.35 per share (the "Purchase Offer"). MAC has agreed that, in the event the Purchase Offer is not made within ninety (90) days after November 6, 1998, it will deposit $1,800,000 into escrow to be applied toward the Purchase Offer. FAB has agreed to make the $1,800,000 deposit into escrow in the event MAC does not do so. Also pursuant to the Agreement, the Issuer entered into a consulting agreement with Kenneth Aguado, the former Chief Executive Officer of the Issuer, providing him with a fee of $10,000 per month, plus certain other incentive fees for projects, for a term of one year, renewable by mutual consent of the parties. Item 4. Purpose of Transaction The purposes of the Acquirors in purchasing shares of Common Stock from the Estate and Mr. Trunkey were to acquire collectively over 50% of the outstanding shares of the Issuer, to cause the appointment of the designees of the acquirors as the members of the Board of Directors of the Issuer, to expand and diversify the Issuer's operations and to involve the Company in future stock purchase, asset purchase, merger or acquisition transactions, including with Immediate Entertainment Group, Inc., a Nevada corporation ("Immediate"). Such transactions may require the Company to amend its Certificate of Incorporation to authorize additional shares of capital stock. MAC has agreed to make or cause to be made the Purchase Offer as described in Item 3, above. MAC has agreed that, in the event the Purchase Offer is not made within ninety (90) days after November 6, 1998, it will deposit $1,800,000 into escrow to be applied toward the Purchase Offer. FAB has agreed to make the $1,800,000 deposit into escrow in the event MAC does not do so. Effective November 9, 1998, the Issuer acquired 20% of the common stock of Immediate at a price of $2.50 per share, paid with a combination of stock of the Issuer and cash. Pursuant to such transaction, Western sold 400,000 Immediate shares for $419,650.00 and 246,957 shares of Common Stock; FAB sold 1,057,885 Immediate shares for $1,109,853.60 and 653,131 shares of Common Stock; and MBO sold 935,350 Immediate shares for $981,299.07 and 577,479 shares of Common Stock. The Issuer also entered into a non-binding Letter of Intent with Immediate pursuant to which Immediate will merge into a newly formed, wholly owned subsidiary of the Issuer in a proposed tax-free transaction. The merger is conditioned upon the negotiation and execution of definitive final agreements and the satisfaction of any legal requirements including the consent of shareholders, if required. Immediate is a diversified entertainment holding company that provides services relating to music production, audio recording, CD manufacturing, film soundtrack and script development, and operates a mail order music club. 13 Pursuant to the Agreement, the existing members of the Issuer's Board of Directors resigned and elected in their place Phillip Cook and James Leaderer, who constitute the Board of Directors. It is anticipated that additional members will be elected to the Board. In addition, the existing management of the Company, except Christopher Trunkey, the Chief Financial Officer of the Company, resigned and Phillip Cook was appointed President and James Leaderer was appointed Senior Vice President of the Company. Except as set forth above in this Item 4, each of the Acquirors does not have any present plans or proposals which would relate to or result in any of the events or actions described in subparagraphs (a) through (j) of this Item 4. Nothing set forth above should be interpreted to preclude the Acquirors from making any plans or proposals which would relate to or result in any of the events or actions described in subparagraphs (a) through (j) of this Item 4. Item 5. Interest in Securities of the Issuer FAB beneficially owns 1,082,580 shares of Common Stock (31.9% of the outstanding), MBO and Mr. Berresheim each beneficially owns the same 950,829 shares of Common Stock (28.1% of the outstanding), Western and Mr. Martin each beneficially owns the same 406,418 shares of Common Stock (12.0% of the outstanding) and RAS beneficially owns 100 shares of Common Stock, which together constitute 2,439,927 shares, or 72.0% of the outstanding. Each of Acquirors disclaims beneficial ownership of the shares of Common Stock acquired by the other Acquirors. RAS is expected to become a wholly-owned subsidiary of FAB upon the consummation of a pending transaction. Each of the Acquirors has the sole power to vote and dispose of the shares of Common Stock acquired and beneficially owned by it. Mr. Martin and Mr. Berresheim have the power to control the voting and disposition of Western's shares and MBO's shares, respectively, of Common Stock. Other than the transactions described above, none of the Acquirors has effected any transaction involving the Issuer's securities within the preceding sixty (60) days. Item 6. Contracts, Arrangements, Understandings or Relationships, with Respect to Securities of the Issuer RAS is expected to become a wholly-owned subsidiary of FAB upon the consummation of a pending transaction. Mr. Martin is the sole trustee and shareholder of Western and Mr. Berresheim is the sole shareholder of MBO. 14 Item 7. Material to be filed as Exhibits Exhibit Numbers Exhibit ------- ------- A Joint Acquisition Statement, dated November 13, 1998, by RAS Securities Corp., Western Union Leasing Ltd., Christoph Martin, Michael Berresheim, FAB Capital Corporation and MBO Music Verlag GmbH. 10(a) Stock Acquisition Agreement, dated November 6, 1998, by and among the Estate of Stephen Friedman, RAS Securities Corp., Kings Road Entertainment, Inc., FAB Capital Corporation and Christopher Trunkey. 10(b) Stock Purchase Agreement, dated November 9, 1998, by and among, Western Union Leasing Ltd., FAB Capital Corporation, MBO Music Verlag GmbH, Kings Road Entertainment, Inc. and Immediate Entertainment Group, Inc. 10(c) Form of Demand Promissory Note and Pledge Agreement, dated November 9, 1998, entered into by each of Riverrock Ltd., Long Valley Associates with FAB Capital Corporation, MBO Music Verlag GmbH and Western Union Leasing Ltd. and North American International Capital, Inc. with FAB Capital Corporation. 15 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. November 13, 1998 RAS SECURITIES CORP. By:/s/ ----------------------------------- Gerald Heilpern, Vice President 16 EX-99 2 EXHIBIT A Exhibit A JOINT ACQUISITION STATEMENT PURSUANT TO RULE 13d-1(k) (1) The undersigned acknowledge and agree that the foregoing statement on Schedule 13D is filed on behalf of each of the undersigned and that all subsequent amendments to this statement on Schedule 13D shall be filed on behalf of each of the undersigned without the necessity of filing additional joint acquisition statements. The undersigned acknowledge that each shall be responsible for the timely filing of such amendments, and for the completeness and accuracy of the information concerning him or it contained therein, but shall not be responsible for the completeness and accuracy of the information concerning the other, except to the extent that he or it knows or has reason to believe that such information is inaccurate. Dated: November 13, 1998 RAS SECURITIES CORP. By: /s/ ---------------------------------- Gerald Heilpern, Vice President WESTERN UNION LEASING LTD. By: /s/ Attorney-in-fact ---------------------------------- Christopher Martin, Managing Director FAB CAPITAL CORPORATION By: /s/ ---------------------------------- Phillip Cook, President MBO MUSIC VERLAG GmbH By: /s/ ---------------------------------- Michael Berresheim, President By: /s/ ---------------------------------- Christoph Martin By: /s/ ---------------------------------- Michael Berresheim EX-10 3 EXHIBIT 10(A) EXHIBIT 10(a) ------------- STOCK ACQUISITION AGREEMENT --------------------------- This AGREEMENT (this "Agreement"), dated November 6, 1998, is made and entered into by and among the Estate of Stephen Friedman, C/O William Immerman, Executor (the "Seller"); RAS Securities Corp., a New York corporation ("RAS"), acting for itself and certain of its customers or designees, if any, listed on Exhibit F hereto (the "Buyer"); Kings Road Entertainment, Inc., a Delaware corporation (the "Company"); FAB Capital Corporation, an Idaho corporation ("FAB"); and the party or parties, listed on Exhibit A hereto (the "Other Selling Shareholders"). WHEREAS, the Buyer desires to purchase from the Seller, and the Seller desires to sell to the Buyer, 954,860 shares (the "Shares") of the Company's common stock, $.01 par value ("Common Stock"), comprising approximately 90% of the shares of Common Stock beneficially owned by the Seller and 49.9% of the 1,911,748 shares of Common Stock issued and outstanding on the date hereof; WHEREAS, the Buyer also desires to purchase additional shares of Common Stock (the "Additional Shares"), comprising 90% of the shares of Common Stock beneficially owned by each of the Other Selling Shareholders, set forth with respect to each Other Selling Shareholder and in the aggregate on Exhibit A hereto; WHEREAS, each of the Buyer and the Company desires that, subsequent to the execution of this Agreement, a bona fide offer be made to purchase from all shareholders of the Company (other than the Seller and the Other Selling Shareholders) up to 90% of the shares owned by each of them at the same price offered to the Seller and the Other Selling Shareholders; WHEREAS, the Buyer, in anticipation of its purchases of Common Stock as set forth herein, has been actively exploring the possibility of stock purchase, asset purchase, merger or acquisition transactions between the Company and Immediate Entertainment Group, Inc., DCC Compact Classics, Inc. and potentially other entities (the "Acquisitive Transactions"); and the Board of Directors of the Company (the "Board") is aware that the Acquisitive Transactions could occur subsequent to the date hereof but the Board has no knowledge of the nature of, and has not reviewed any information regarding or conducted any investigation of, the Acquisitive Transactions; and WHEREAS, the members of the Board are resigning simultaneously with the execution of this Agreement and, after reviewing the professional biographies of certain individuals nominated by the Buyer, are electing such individuals to serve on the Board; NOW, THEREFORE, the parties hereto agree as follows: 1. Purchase of Stock. Subject to the terms and conditions herein set forth ----------------- and in reliance on the representations, warranties and agreements of the Company, the Buyer, the Seller and each of the Other Selling Shareholders herein contained, the Buyer agrees to purchase from the Seller and each of the Other Selling Shareholders, and each of the Seller and the Other Selling Shareholders agrees to sell to the Buyer, the Shares and the Additional Shares, as the case may be, at a per share price equal to the Purchase Price (as defined below) as hereinafter set forth. Immediately upon execution of this agreement, each of the Seller and the Other Selling Shareholders shall execute an order through the Buyer, as its broker, to sell the Shares or the Additional Shares, as the case may be, to the Buyer after the close of trading on The Nasdaq SmallCap Market on the date hereof (i.e. in an aftermarket trade) at an asking price of $2.35 per share (the "Purchase Price"), or $2,261,546 in the aggregate. The Buyer shall simultaneously execute an order for the Buyer to buy from the Seller and the Other Selling Shareholders the Shares and the Additional Shares, as the case may be, at the Purchase Price after the close of trading on the date hereof. The parties understand that RAS may purchase the Shares or the Additional Shares hereunder for its own account and for the account of certain of its customers or designees, if any (the "RAS Clients"), listed on Exhibit F hereto. Notwithstanding anything to the contrary in this Agreement, the parties to this Agreement acknowledge and agree that the Seller may deliver some or all of the Additional Shares on behalf of the Other Selling Shareholders (such shares, the "Loaned Shares"), in which case the proceeds from the sale of the Loaned Shares shall be delivered to the Seller pending receipt of replacement shares by the Seller from the Other Selling Shareholders. Each Other Selling Shareholder on whose behalf Loaned Shares are delivered to the Buyer by the Seller shall promptly deliver an equal number of shares of Common Stock to the Seller in exchange for the related proceeds. If such delivery does not occur within 15 days from the date hereof, the Seller may at its option either keep the proceeds from such Loaned Shares or sue for delivery of a number of shares equal to the number of Loaned Shares attributable hereunder to the non-delivering Other Selling Shareholder. In any case, the Buyer shall have no obligation or liability of any kind to such Other Selling Shareholder after the Buyer makes the payments required hereunder to the Seller with respect to the Loaned Shares. 2. Change in the Board. Simultaneously with the execution of this --------------------- Agreement, all of the existing members of the Board will resign and elect in their place Phillip G. Cook (as Chairman of the Board) and James P. Leaderer, each of whose professional biographies are attached hereto as Exhibit B, all of --------- the officers of the Company, except Christopher Trunkey, shall resign and the authority of all existing officers to act on behalf of the Company or to manage the Company assets or operations, including cash on hand, shall cease except as determined by the newly elected Board and all existing bank signature cards will be canceled and reissued at the direction of the newly elected Board. -2- 3. Purchase Offer. a. The Buyer has arranged for the execution and --------------- delivery, on the date hereof, of the letter of Music Action Ltd. ("MAC") to the Company, the form of which is attached hereto as Exhibit C (the "Commitment --------- Letter"). The Buyer agrees to cause the Company to cooperate with MAC to complete the Purchase Offer (as defined in the Commitment Letter) and not to cause the Board to take any action inconsistent with the completion of the Purchase Offer as contemplated herein. b. Each of FAB and the Company hereby covenants that it will cause the Purchase Offer to be made as soon as practicable but in any event within 120 days following the date hereof. FAB represents, warrants and covenants that it has a net worth of at least $5,000,000 and has, and will have for at least 120 days, cash, cash equivalents and/or credit lines equal to not less than $1,800,000. In the event that within 90 days of the date hereof the Purchase Offer is not made and MAC has failed to deposit not less than $1.8 million into an irrevocable escrow account to be established by the Company with a bank with assets of not less than $500,000,000 (the proceeds of which will be reserved for and applied to consummate the Share Purchase, as defined in the Commitment Letter) (the "Escrow Account"), FAB will immediately deposit not less than $1.8 million into the Escrow Account. This covenant to deposit $1,800,000 into the Escrow Account and to cause the consummation of the Purchase Offer will be enforceable against FAB only if the conditions to MAC's obligations set forth in the Commitment Letter have been satisfied. c. Each of the Buyer, FAB and the Company acknowledges that, notwithstanding anything to the contrary in this Agreement, the shareholders of the Company (other than the Seller and the Other Selling Shareholders) are intended by FAB and the Company to be third party beneficiaries of the provisions of this Section 3. 4. Acquisitive Transactions. The Company has been informed that the Buyer, ------------------------ in anticipation of its purchases of Common Stock as set forth herein, has been actively exploring the Acquisitive Transactions (which may be with entities having affiliations with the Buyer) and the Company is aware that the Acquisitive Transactions may occur subsequent to the date hereof although the Company has no knowledge of the nature of, and has not reviewed any information regarding or conducted any investigation of, the Acquisitive Transactions. 5. Consulting Agreement. Simultaneously with the execution of this --------------------- Agreement, the Company and Kenneth Aguado shall enter into a consulting agreement, the form of which is attached hereto as Exhibit D. --------- -3- 6. Representations and Warranties ------------------------------ a. Representations and Warranties by the Seller and Other Selling ------------------------------------------------------------------ Shareholders. The Seller, with respect to the Shares, and each of the Other - - - ------------ Selling Shareholders, with respect to the Additional Shares set forth in Exhibit ------- A in relation to each, represent and warrant to the Buyer that: - - - - (1) Good Title to Shares. Each of the Seller and the Other ----------------------- Selling Shareholders has good and valid title to the Shares and the Additional Shares, as the case may be, free and clear of all claims, liens and encumbrances; and upon delivery of the Shares and Additional Shares and payment therefor pursuant hereto, good and valid title to the Shares and Additional Shares, free and clear of all claims, liens and encumbrances, will pass to the Buyer. (2) Due Authorization. Each of the Seller and Other Selling ------------------ Shareholders has full right, power and authority to sell the Shares and the Additional Shares, as the case may be, on the terms set forth herein, to enter into this Agreement and to perform all of its obligations hereunder as contemplated hereby. All necessary actions, including estate and other proceedings of the Seller, and each Other Selling Shareholder, have been duly taken to authorize the execution, delivery, and performance by each of them of this Agreement. This Agreement has been duly authorized, executed and delivered by the Seller and each Other Selling Shareholder, is the legal, valid, and binding obligation of each of them, and is enforceable as to each of them in accordance with its terms (subject to applicable bankruptcy, insolvency, and other laws affecting the enforceability of creditors' rights generally and to general equitable principles). No consent, authorization, approval, order, license, certificate or permit of or from, or registration, qualification, declaration or filing with, any federal, state, local, foreign, or other governmental authority or any court or other tribunal is required by the Seller or Other Selling Shareholder for the execution, delivery, or performance by each of them of this Agreement. No consent of any party to any contract, agreement, instrument, lease, license, arrangement, or understanding to which the Seller or the Other Selling Shareholders is a party, or to which any of their properties or assets are subject, is required for the execution, delivery, or performance of this Agreement, or the consummation of the transactions contemplated hereby and the execution, delivery and performance of this Agreement, and the consummation of the transactions contemplated hereby, will not violate, result in breach of, conflict with, or (with or without the -4- giving of notice or the passage of time or both) entitle any party to terminate or call a default under any such contract, agreement, instrument, lease, license, arrangement, or understanding, (except for any such violation, breach or conflict which has been properly waived thereunder) or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment or decree binding on the Seller or each of the Other Selling Shareholders, as the case may be, or to which any of their properties, or assets are subject. (3) Finder's Fees; Other Arrangements. Each of the Seller and the --------------------------------- Other Selling Shareholders is not obligated to pay a finder's fee to anyone in connection with the introduction of the Seller or the Other Selling Shareholders to the Buyer or to pay for any other arrangements, agreements or understanding relating to the Seller or the Other Selling Shareholders. b. Representations and Warranties by the Buyer. Contemporaneously ---------------------------------------------- herewith, each RAS Client, if any, shall deliver a letter, the form of which is attached hereto as Exhibit G. The Buyer represents and warrants to the Seller, the Other Selling Shareholders and the Company as follows: (1) Due Authorization. Each of RAS and the RAS Clients has full right, ----------------- power and authority to purchase the Shares and the Additional Shares on the terms set forth herein. RAS has full right, power and authority to enter into this Agreement and to perform all of its obligations hereunder as contemplated hereby. (2) Finder's Fees; Other Arrangements. Each of RAS and the RAS Clients --------------------------------- is not obligated to pay a finder's fee to any third party in connection with the introduction of the Company, the Seller or the Other Selling Shareholders to RAS or the RAS Clients or to pay any third party for any other arrangements, agreements or understanding relating to the Company, the Seller or the Other Selling Shareholders. (3) Investment. The Shares are being acquired for the accounts of RAS ---------- and/or the RAS Clients and not with a view to distribution of all or any part thereof. (4) Not Registered. Each of RAS and the RAS Clients understands that -------------- the Shares are neither registered under the Securities Act of 1933 nor qualified under any applicable state laws. (5) Sophistication of Buyer. Each of RAS and the RAS Clients has the ------------------------ requisite knowledge and experience to assess the relative merits and risks of an acquisition of the Shares. -5- (6) Legends. Each of RAS and the RAS Clients understands that each ------- certificate for the Shares will bear the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION WITH RESPECT TO THE TRANSACTION OR AN OPINION OF THE COMPANY'S COUNSEL THAT REGISTRATION IS NOT REQUIRED. c. Representations and Warranties by the Company and the Seller. ----------------------------------------------------------------- Except as otherwise contemplated by this Agreement, each of the Seller and the Company jointly and severally represents and warrants to the Buyer as follows (provided that each of the following representations and warranties are to the knowledge of the Seller): (1) Due Incorporation and Qualification. The Company has been -------------------------------------- duly incorporated, is validly existing and is in good standing under the laws of the State of Delaware and is duly qualified (except where the failure to so qualify would not reasonably be expected to have a material adverse effect on the business of the Company) for the transaction of business and is in good standing in each jurisdiction in which the ownership or leasing of its properties or the conduct of its business requires such qualification. The Company has all requisite corporate power and authority and all necessary consents, authorizations, approvals, orders, licenses and permits of and from any governmental authority or agency or any court or other tribunal necessary (collectively, the "Permits") to own or hold its properties and conduct its business as described in its Annual Report on Form 10-KSB for the fiscal year ended April 30, 1998 and its Quarterly Report on Form 10-QSB for the quarter ended July 31, 1998 (collectively, the "Disclosure Documents") (except where the failure to have any of such Permits would not reasonably be expected to have a material adverse effect on the business of the Company). (2) Authorized and Outstanding Capital Stock. The Company has an ----------------------------------------- authorized and outstanding capitalization as follows: 1,911,748 shares of Common Stock, and no other shares of capital stock, outstanding; 12,000,000 shares of Common Stock, and no other class of capital stock, authorized under the Company's certificate of incorporation; and no shares of capital stock subject to issuance upon exercise of options, warrants or other securities or instruments convertible or exchangeable into capital stock of the Company. All of the issued and outstanding shares of capital stock have been duly and validly authorized and issued and are fully paid and non- assessable. None of -6- the holders of such outstanding shares of capital stock is subject to personal liability solely by reason of being such a holder. The offers and sales of all the Company's outstanding securities were at all relevant times either registered under the Securities Act of 1933, as amended, and the applicable state securities or Blue Sky laws, or exempt from such registration. (3) No Preemptive Rights; Plans for Issuance. There is no --------------------------------------------- commitment, plan, or arrangement to issue any share of capital stock of the Company or any security or other instrument which by its terms is convertible into, exercisable for, or exchangeable for capital stock of the Company, except as may be set forth in Schedule 6.c.(3) ----------------- attached hereto. Except as described in the Disclosure Documents no holder of any of the Company's securities has any rights, "demand," "piggyback" or otherwise, to have such securities registered or to demand the filing of a registration statement. The Company has reserved for issuance a sufficient number of shares of capital stock to be issued under its stock option plan. (4) No Material Adverse Changes. Except as set forth in Schedule --------------------------- -------- 6.c.(4) attached hereto, since the date of the Company's Quarterly ------- Report on Form 10-QSB for the quarter ended July 31, 1998, there has not been any change in the condition, financial or otherwise, of the Company which would reasonably be expected to have a material adverse effect upon the operations, business, properties or assets of the Company. (5) Finder's Fees; Other Arrangements. The Company is not ------------------------------------ obligated to pay a finder's fee to anyone in connection with the introduction of the Company to the Buyer or to pay for any other arrangements, agreements or understanding relating to the Buyer. (6) No Pending Actions. Except as set forth in the Disclosure -------------------- Documents, there are no actions, suits, proceedings, filed claims or hearings of any kind or nature or, to the knowledge of the Company, any investigations or inquiries, before or by any court, governmental authority, tribunal or instrumentality (or to the knowledge of the Company, any state of facts which would reasonably be expected to give rise thereto), pending or threatened against the Company, or involving the properties of the Company, which would reasonably be expected to have a material adverse effect upon the operations, business, properties, or assets of the Company. The Company is not in violation of, or in default with respect to, any law, rule, regulation, order, judgment, or decree, except as may be described in the Disclosure -7- Documents or such as in the aggregate do not have a material adverse effect upon the operations, business, properties, or assets of the Company. (7) Disclosure Documents. The Disclosure Documents, as of their -------------------- respective dates, did not contain an untrue statement of a material fact or omit to state a material fact necessary in order to make the statement therein, in the light of the circumstances under which they were made, not misleading. During the twelve month period ending on the date hereof, the Company has timely made all disclosure filings required by the federal securities laws. (8) Due Authorization. The Company has full right, power and ------------------ authority to enter into this Agreement and to perform all of its obligations hereunder as contemplated hereby. All necessary corporate proceedings of the Company have been duly taken to authorize the execution, delivery, and performance by the Company of this Agreement. This Agreement has been duly authorized, executed and delivered by the Company, is the legal, valid, and binding obligation of the Company, and is enforceable as to the Company in accordance with its terms (subject to applicable bankruptcy, insolvency, and other laws affecting the enforceability of creditors' rights generally and to general equitable principles). No consent, authorization, approval, order, license, certificate or permit of or from, or registration, qualification, declaration or filing with, any federal, state, local, foreign, or other governmental authority or any court or other tribunal is required by the Company for the execution, delivery, or performance by the Company of this Agreement. No consent of any party to any material contract, agreement, instrument, lease, license, arrangement, or understanding to which the Company is a party, or to which any of its properties or assets are subject, is required for the execution, delivery, or performance of this Agreement, or the consummation of the transactions contemplated hereby and the execution, delivery, and performance of this Agreement, and the consummation of the transactions contemplated hereby, will not violate, result in breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any such contract, agreement, instrument, lease, license, arrangement, or understanding, (except for any such violation, breach or conflict which has been properly waived thereunder or would not reasonably be expected to have a material adverse effect on the Company) or violate or result in breach of any term of the certificate of incorporation or by-laws of the Company, or violate, result in a breach of, or conflict with any material law, -8- rule, regulation, order, judgment, or decree binding on the Company or to which any of its operations, businesses, properties, or assets are subject (except where such violation, breach or conflict would not reasonably be expected to have a material adverse effect on the Company). (9) No Subsequent Actions. Subsequent to the dates as of which ----------------------- information is given in the Disclosure Documents, except as set forth in Schedule 6.c.(9) hereto, the Company has not (A) issued any ----------------- securities or incurred any liability or obligation, primary or contingent, for borrowed money, (B) entered into any material transaction not in the ordinary course of business, or (C) declared or paid any dividend on its capital stock. (10) No Defaults; Violations. Except as described in the -------------------------- Disclosure Documents, no default exists in the due performance and observance by the Company of any term, covenant or condition of any material license, contract, indenture, mortgage, deed of trust, note, loan or credit agreement, or any other material agreement or instrument evidencing an obligation for borrowed money, or any other material agreement or instrument to which the Company is a party or by which the Company may be bound or to which any of properties or assets of the Company is subject, except where such default is not reasonably expected to have a material adverse effect on the Company. The Company is not in violation of any term or provision of its Certificate of Incorporation or By-Laws or, to the Company's knowledge, in violation of any material franchise, license, permit, applicable law, rule, regulation, judgment or decree or any governmental agency or court, domestic or foreign, having jurisdiction over the Company or any of its properties or business, except as described in the Disclosure Documents or where such violation has no material adverse effect on the business, operations, financial condition and assets of the Company. (11) Conduct of Business. The Company has all requisite corporate ------------------- power and authority, and has all material authorizations, approvals, orders, licenses, certificates and permits of and from all governmental regulatory officials and bodies required by the Company to own or lease properties and conduct its business as described in the Disclosure Documents, and the Company is and has been doing business in compliance with all such material authorizations, approvals, orders, licenses, certificates and permits and all federal, state and local laws, rules and regulations (except for matters which are not reasonably expected to have a material adverse effect on the Company). -9- (12) Title to Property; Insurance. The Company has good title to, ---------------------------- or valid and enforceable leasehold estates in, all items of real and personal property (tangible and intangible) owned or leased by it, free and clear of all liens, encumbrances, claims, security interests, defects and restrictions of any material nature whatsoever, other than those set forth in the Disclosure Documents, and liens for taxes not yet due and payable (except for matters which are not reasonably expected to have a material adverse effect on the Company). The Company has adequately insured its properties against loss or damage by fire or other reasonably foreseeable casualty. (13) Intangibles. Except for matters which are not reasonably ----------- expected to have a material adverse effect on the Company or as set forth in the Disclosure Documents, to the Company's knowledge, (i) the Company owns or possesses the requisite licenses or rights to use all trademarks, service marks, service names, trade names, patents, patent applications, copyrights and other rights (collectively, "Intangibles") described as used or owned by it in the Disclosure Documents, (ii) there is no pending or threatened claim or action by any person pertaining to, or which challenges the exclusive right of the Company with respect to any Intangibles used in the conduct of the Company's business, (iii) the Intangibles and the Company's current, products, services and processes do not infringe on any intangibles rights held by any third party, and (iv) no others have infringed upon the Intangibles of the Company. (14) Nasdaq Listing. Except as set forth on Schedule 6.c.(14) --------------- hereto and other than the direct results of the transactions contemplated herein, the Company is not aware of any circumstances which would result in the Common Stock being de-listed from The Nasdaq SmallCap Market and the Company meets all of the maintenance criteria for maintaining the listing of the Common Stock on such market. The other representations and warranties contained in this Section 6.c. are qualified to the extent affected by the matters set forth in Schedule 6.c.(14) hereto. (15) Hart-Scott-Rodino. Each of the Company and the Seller is not ----------------- a $10 million person under the Hart-Scott- Rodino Antitrust Improvements Act of 1976. (16) Resignation of the Board. Simultaneously with the execution ------------------------ of this Agreement, the directors of the Company shall have submitted their resignations to the Company and shall have elected new members to the Board, as contemplated in Section 2 hereof. -10- 7. Beneficiaries of the Seller. Upon the execution of this Agreement, each --------------------------- of the beneficiaries of the Seller shall have duly executed and delivered the letter, the form of which is attached hereto as Exhibit E, pursuant to which --------- each represents and warrants to the Buyer that, with respect to Seller and the Shares (but not as to the Other Selling Shareholders and the Additional Shares), the representations set forth in Section 6.a.(1) and 6.a.(2) herein are true and the Seller confirms that there are no beneficiaries of the Seller who have any claim to the Shares other than the signatories to such Exhibit E. --------- 8. Survival; Indemnification ------------------------- a. Survival. The representations and warranties of the parties hereto -------- contained in this Agreement shall survive until the first anniversary of the date hereof and a party seeking indemnity under this Agreement must commence a claim for indemnification pursuant to Section 8.e. prior to the first anniversary of the date hereof, in which case, with respect to such claim, the representation or warranty in respect of which indemnity is sought under this Agreement shall survive the time at which it would otherwise terminate until such time as the claim for which indemnification is sought has been finally resolved and indemnified. b. Indemnification of Buyer. The Seller, at its sole expense, hereby ------------------------ agrees to indemnify the Buyer and its affiliates against and agree to hold each of them harmless from any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding) (collectively, "Loss") incurred or suffered by the Buyer or any of its affiliates arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by the Seller pursuant to this Agreement. The Company, at its sole expense, hereby agrees to indemnify the Buyer and its affiliates against and agree to hold each of them harmless from any and all Loss incurred or suffered by the Buyer or any of its affiliates arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by the Company pursuant to this Agreement. Each of the Other Selling Shareholders, at its sole expense, hereby agrees to indemnify the Buyer and its affiliates against and agrees to hold each of them harmless from any and all Loss incurred or suffered by the Buyer or any of its affiliates arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by the respective Other Selling Shareholder pursuant to this Agreement. -11- c. Indemnification of Seller and Other Selling Shareholders. Buyer, at -------------------------------------------------------- its sole expense, hereby agrees to indemnify the Seller, the Other Selling Shareholders and their affiliates against and agrees to hold each of them harmless from any and all Loss incurred or suffered by any of them arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Buyer pursuant to this Agreement. d. Minimum Loss. Notwithstanding anything to the contrary in this ------------- Agreement, (i) neither the Seller, the Other Selling Shareholders or the Company, on the one hand, nor the Buyer, on the other hand, shall be required to indemnify the other under the terms of this Agreement unless and until the aggregate amount of Loss of the other (which, in the case of the Buyer, includes the collective Losses of RAS and the RAS Clients) exceeds $100,000, in which case such indemnification obligations shall apply to all Loss in excess of such threshold, and (ii), with respect to each of the Seller and the Other Selling Shareholders, the Buyer may not recover more than the amount of money paid by the Buyer to such party in consideration for such party's transfer to the Buyer of the Shares or the Additional Shares, as applicable, pursuant to this Agreement. e. Procedures; Exclusivity of Remedies. The party seeking ----------------------------------------- indemnification (the "Indemnified Party") agrees to give prompt notice to the party against whom indemnity is sought (the "Indemnifying Party") of the assertion of any claim, or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under such Section. The Indemnifying Party shall have the right to, and at the request of the Indemnified Party shall, participate in and control the defense of any such suit, action or proceeding at its own expense; provided, however, that the failure by the -------- ------- Indemnified Party to give prompt notice shall not release the Indemnifying Party of its indemnification obligations hereunder, except to the extent such failure actually prejudices the Indemnifying Party. If the Indemnifying Party does not so assume control of the defense, the Indemnified Party shall have the right to defend, contest, settle or compromise such Claim or defend in the exercise of its exclusive discretion and the Indemnifying Party shall, upon request from any Indemnified Party, promptly pay to such Indemnified Party the amount of any Loss as incurred. If the Indemnifying Party does assume control of the defense, the Indemnifying Party shall have the right to undertake, conduct and control, through counsel of its own choosing and at its sole expense, the conduct and settlement of such Claim or demand, and the Indemnified Party shall cooperate with the Indemnifying Party in connection therewith. The Indemnifying Party may contest or settle any third-party Claim on such terms as the Indemnifying Party may choose; however, the Indemnifying Party will not have the right, without the Indemnified Party's written consent, to settle any such Claim if such settlement (i) arises from or is part of any criminal action, suit or proceeding, (ii) contains an admission of wrongdoing on the part of the Indemnified Party, (iii) provides for injunctive relief which is binding on the Indemnified Party, or -12- (iv) does not fully and unconditionally release the Indemnified Party with respect to such Claim. For the purposes of this Agreement, "Claim" means any claim, lawsuit, demand, suit, hearing, governmental investigation, notice of a violation, litigation, proceeding, arbitration or other dispute, whether civil, criminal, administrative or otherwise. The Indemnifying Party and the Indemnified Party shall cooperate in determining the validity of any Claim for any Loss for which a Claim of indemnification may be made hereunder. Each party shall also use all reasonable efforts to minimize all Loss. In any case, the Indemnifying Party and the Indemnified Party shall cooperate and assist each other in such defense, and shall make available to the other all records, documents and information (written or otherwise) relevant to such defense. 9. Miscellaneous ------------- a. Notices. Any notices or other communications required or permitted ------- hereunder shall be in writing and shall be deemed to have been duly given or made as of the date of receipt and shall be delivered personally or mailed by registered or certified mail (postage prepaid, return receipt requested), sent by overnight courier or sent by telecopy, in the case of the Seller and the Beneficiaries of the Estate of Stephen Friedman, to c/o William Immerman, Executor, 1999 Avenue of the Stars, Suite 1250, Los Angeles, CA 90067, attention: William Immerman, facsimile: 310-277- 0653, in the case of the Buyer, to RAS Securities Corp., 50 Broadway, New York, New York, attention: Fredrick Schulman, Executive Vice President, facsimile: 212-785-3331 with a copy to Fischbein Badillo Wagner Harding, 909 Third Avenue, New York, NY 10022, Attention: Joseph L. Cannella, Esq., facsimile: (212) 644- 3603, in the case of the Company, to Guth Rothman & Christopher LLP, 10866 Wilshire Boulevard, Suite 1250, Los Angeles, CA 90024, Attn: Theodore E. Guth, Esq., facsimile: (310) 470-8354, in the case of FAB Capital Corporation, 1461 First Avenue, Suite 293, New York, New York 10021, attention: Phillip Cook, President, facsimile 212-785-3232, with a copy to c/o RAS Securities Corp., 50 Broadway, New York, New York, facsimile: 212-785-3331 and with a copy to Fischbein Badillo Wagner Harding, 909 Third Avenue, New York, NY 10022, Attention: Joseph L. Cannella, Esq., facsimile: (212) 644-3603, and in the case of the Other Selling Shareholders, to the addresses set forth with respect to each in Exhibit A --------- hereto. b. Amendment. This Agreement may not be amended or modified except by --------- an instrument in writing signed by the parties or third party beneficiaries hereto who are affected by such amendment or modification. c. Governing Law. This Agreement shall be governed by the laws of the ------------- State of New York without regard to conflicts of law principles. -13- d. Submission to Jurisdiction. Each party hereby consents to the ---------------------------- jurisdiction of the United States District Court for the Central District of California and any of the courts of the State of California in Los Angeles County in connection with any dispute arising under this Agreement; provided, however, that, in connection with any claim or dispute brought by or against the RAS Clients under this Agreement, each party hereby consents to the jurisdiction of the United States District Court for the Southern District of New York and any of the courts of the State of New York in New York County. e. Entire Agreement. This Agreement sets forth the entire agreement ----------------- and understanding of the parties hereto in respect of the subject matter contained herein, and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by the parties hereto or their representatives. f. Singular/Plural Tense. In the event there is only one Other Selling --------------------- Shareholder listed on Exhibit A hereto, reference to more than one Other Selling --------- Shareholder in this Agreement should be construed in the singular and, in the event no Other Selling Shareholder is listed in Exhibit A hereto, reference to --------- Other Selling Shareholders in this Agreement shall have no effect. g. Third Party Benefits. RAS and each of the RAS Clients shall be ---------------------- beneficiaries of the representations, warranties and covenants made to the Buyer herein and the rights of indemnification accruing to the Buyer hereunder. Except as provided by this Section 9.g., by Section 3 and by Exhibits C and F to this ---------------- Agreement, none of the provisions of this Agreement shall be for the benefit of, or enforceable by, any third party beneficiary. h. No Assignment. Except as may otherwise be contemplated herein, none ------------- of the parties may assign any of his or its rights under this Agreement without the prior written consent of the other parties, which shall not be unreasonably withheld; provided, however, that any assignment of rights will not relieve the assigning party of any liabilities or obligations under this Agreement. i. Successors and Assigns. Except as provided herein to the contrary, ---------------------- this Agreement shall be binding upon and inure to the benefit of the parties, their respective successors and permitted assigns. j. Attorneys' Fees. In any dispute between the parties hereto or their --------------- representatives concerning any provision of this Agreement or the rights and duties of any person or entity hereunder, the party or parties prevailing in such dispute shall be entitled, in addition to such other relief as may be -14- granted, to the attorneys' fees and court costs incurred by reason of such dispute. k. Waivers Strictly Construed. With regard to any power, remedy or ---------------------------- right provided herein or otherwise available to any party hereunder (i) no waiver or extension of time will be effective unless expressly contained in a writing signed by the waiving party; and (ii) no alteration, modification or impairment will be implied by reason of any previous waiver, extension of lime, delay or omission in exercise, or other indulgence, l. Severability. The validity, legality or enforceability of the ------------ remainder of this Agreement will not be affected even if one or more of the provisions of this Agreement will be held to be invalid, illegal or unenforceable in any respect. m. Counterparts; Facsimile Signatures. This Agreement may be executed ----------------------------------- simultaneously in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument, and delivery of executed copies hereof shall be deemed made upon delivery of signatures by facsimile transmission. -15- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. THE SELLER: ESTATE OF STEPHEN FRIEDMAN /s/ By: __________________________ Name: William Immerman Title: Executor of the Will of Stephen J. Friedman THE BUYER: RAS SECURITIES CORP. /s/ By: ____________________________ Name: Fredrick Schulman Title: Executive Vice President THE COMPANY: KINGS ROAD ENTERTAINMENT, INC. /s/ By: ________________________________ Name: Kenneth Aguado Title: Chief Executive Officer AGREED ONLY AS TO SECTION 3: FAB CAPITAL CORPORATION /s/ By: ______________________________ Name: Phillip G. Cook Title: President -16- OTHER SELLING SHAREHOLDERS: /s/ ______________________________ CHRISTOPHER TRUNKEY -17- EXHIBIT A OTHER SELLING SHAREHOLDERS Total Shares to be Shares Purchased Address Name Owned by Buyer (90%) for Notice - - - ---------------------- ----------- ---------------- ------------------------- Christopher Trunkey 8,333 7,500 c/o Kings Road, Entertainment, Inc. (same as address for the Company) Totals 8,333 7,500 EXHIBIT B Professional Biographies of New Directors [Biographies of Phillip Cook and James Leaderer have been excluded from filing.} EXHIBIT C MUSIC ACTION LTD. Paul-Ehrlich-Str. 16-20/A2 63322 Rodermark, Germany [ ], 1998 Kings Road Entertainment, Inc. 1901 Avenue of the Stars, Suite 1545 Los Angeles, California 90067 Dear Sirs: In connection with the Stock Acquisition Agreement (the "Acquisition Agreement"), dated the date hereof, by and among the Estate of Stephen Friedman, RAS Securities Corp. (acting for itself and the RAS Clients), Kings Road Entertainment, Inc., certain of its shareholders and FAB Capital Corporation, we hereby agree, on our own behalf and on behalf of the MAC Fund (the "Fund") for which we serve as exclusive manager with discretionary authority to commit and invest Fund assets, that we, or the Fund will make or cause to be made a bona fide offer to purchase (the "Purchase Offer") from each shareholder of record of the Company other than the Seller, and the Additional Selling Shareholders, RAS, the RAS Clients and any shareholder who directly or indirectly obtains any shares from RAS or the RAS Clients (except to the extent such shareholder holds shares acquired from a person other than RAS or the RAS Clients) (the "Record Shareholders") up to 90% of each Record Shareholder's shares of Common Stock at a per share price equal to the Purchase Price, or an aggregate purchase price (assuming that all such shareholders elect to sell 90% of their shares of Common Stock) equal to approximately $1,800,000. The purchase of the Record Shareholder's shares as contemplated hereunder is referred to as the "Share Purchase." The Purchase Offer will be made as soon as practicable but in any event within the 120-day period immediately following the date hereof provided that the Purchase Offer is conditioned on (i) the absence of an injunction from a court of competent jurisdiction enjoining the Share Purchase and (ii) there being no breaches of representations and warranties of the Seller, the Other Selling Shareholders or the Company which, in the aggregate, are reasonably likely to result in collective damages or losses to the Company in excess of $500,000. Notwithstanding anything to the contrary in this letter, in the event that the Purchase Offer cannot be made within ninety (90) days of the date hereof, we will immediately cause a deposit of not less than $1,800,000 to be made into an escrow account to be established by the Company, the proceeds of which will be reserved for and applied to consummate the Share Purchase, upon the making of which deposit we will be released from all obligations under this letter. Music Action Ltd., on its own behalf and on behalf of the Fund, represents, warrants and covenants to you that Music Action Ltd. has a net worth of at least $2,000,000 and the Fund has the ability to invest up to $40 million of irrevocably committed funds and Music Action Ltd. has, and will have for at least 120 days, cash, cash equivalents and/or credit lines equal to $1,800,000 and will use such $1,800,000 for the Share Purchase unless other funds become available to us to pay for the Share Purchase. We intend that the Record Shareholders will be third party beneficiaries of our obligations set forth in this letter. This letter shall be governed by the laws of the State of New York without regard to conflicts of law principles. We consent to the jurisdiction of any federal or state court located in the State of California in connection with any dispute arising under this letter. Capitalized terms used and not defined herein have the meanings ascribed to them in the Acquisition Agreement. Very truly yours, MUSIC ACTION LTD. By: Name: Bernd Schmidt Title: Managing Director EXHIBIT D CONSULTING AGREEMENT WITH KENNETH AGUADO CONSULTING AGREEMENT CONSULTING AGREEMENT, dated as of November ___, 1998, by and between Kings Road Entertainment, Inc., a Delaware corporation having offices at 1901 Avenue of the Stars, Los Angeles. CA 90067 (the "Company"), and Kenneth Aguado, having an address at ("Consultant"). WHEREAS, Consultant has previously served as Chief Executive Officer of Company; and WHEREAS, Company wishes Consultant to provide certain services to Company, and Consultant wishes to provide such services to Company; NOW, THEREFORE, in consideration of the premises and the mutual covenants herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows: 1. Purpose. Company hereby retains Consultant and Consultant hereby agrees to be retained by Company to render non-exclusive consulting services ("Services") in connection with the acquisition and development by Company of new literary properties for development as theatrical and/or television motion pictures ("Projects"), upon the terms and conditions set forth hereinbelow. 2. Term. The term of this Agreement shall be effective for the period of one year commencing on the date hereof and ending on the first anniversary of such date and shall thereafter be extended for successive one-year periods upon the mutual consent of the parties hereto, evidenced in writing, (the "Term"). 3. Duties of Consultant. a. During the Term, Consultant shall provide Company with the Services and agrees to perform the Services to the best of his ability and in accordance with the reasonable directions of Company, and shall report directly to the President, or if the President so directs, to Company's Board of Directors. Services shall include Consultant submitting in writing proposals ("Proposals") to Company for its review, involving literary properties which Consultant wishes to develop as theatrical and/or television motion pictures and which Consultant believes in good faith are freely available for acquisition by Company. Consultant shall submit all such Proposals to Company in writing and shall not present such Proposals to third parties except as set forth herein. Each such proposal shall be a bonafide submission made in good faith as to Consultant's intent to develop the Project and set forth the manner (as of the date of such Submission) that Consultant would like to develop such project (i-e., as opposed to Consultant just submitting a list of such Projects). b. It is understood and acknowledged by the parties hereto that Consultant shall be obligated to render the Services in good faith, provided, however, that nothing contained herein shall be deemed to bar Consultant from submitting Proposals concerning Projects to third parties in compliance with the terms of Sections 4.c, and 4.d hereof. However, all Proposals concerning Projects shall first be submitted to the Company as provided herein. c. Consultant shall not have any authority to bind Company by any promise or representation or otherwise. 4. Compensation; Benefits; Expenses. a. As compensation for all of the Services required to be rendered to Company by Consultant during the Term, Company shall pay Consultant a fee of Ten Thousand Dollars ($10,000.00) per month (the "Consulting Fee"). The Consulting Fee shall be paid by Company to Consultant on the first business day of each month in arrears throughout the Term or, at the option of Company, may be prepaid for any number of months. In connection with any Project Proposed by Consultant pursuant to Paragraph 4.c. and 4.d. hereof, and developed by the Company pursuant to such Proposal, including, without limitation, Projects (i) currently owned and/or controlled by Company and listed on Schedule "A" and (ii) to be acquired (to the extent not already owned and/or controlled by Company) and/or accepted for development by Company, Consultant shall be engaged as a producer (if a theatrical or direct-to-video motion picture) or an executive producer (if a television motion picture or series) with respect to each such Project in accordance with terms and conditions (other than terms and conditions related to Consultant's compensation and credit which are addressed below) customary in the motion picture industry for a person of Consultant's stature (e.g., taking into account Consultant's then current deals), Consultant shall be accorded on-screen and paid ad credit as a producer of each such Project developed as a theatrical or direct-to-video motion picture and as an executive producer of each such Project developed as a television motion picture or series and Company shall pay to Consultant such additional compensation as may be agreed upon by the parties after good faith negotiation, but, except for (i) Projects currently owned and/or controlled by the Company and listed on Schedule "A" (the "Schedule A Projects") and (ii) the Projects referred to in Paragraph 4.e., in no event less than the following: 2 i. A fixed producer fee equal to the amount that is 4% of the final budget for the applicable motion picture (but in no event shall such fixed fee be less than $25,000); and ii. A contingent fee as follows: A. 2 1/2% of 100% of all gross receipts after initial breakeven, initial breakeven to be determined based on a 20% distribution fee notwithstanding that a higher fee applies; B. Escalating to 5% of 100% of all gross receipts after initial breakeven, breakeven to be based on a 25% distribution fee notwithstanding that a higher fee applies; and C. Applicable against 50% of 100% of all net profits reduced by all gross and net profit participations payable to third parties providing services or rights in connection with the applicable motion picture to a "soft floor" of 20% and a "hard floor" of 10%. b. At the option and upon request of Consultant, Company shall provide Consultant with a private office at the Company's headquarters, telephone and other general office support services. Such office, telephone and office support services shall be at a level consistent with those currently being provided to Consultant as Chief Executive Officer of Company. c. Company shall have a period of ten (10) business days (reducible to not less than two (2) business days for so-called "hot properties" (e.g., properties submitted by multiple third-party producers simultaneously, etc.)) following Consultant's submission to Company of a Proposal with respect to any Project not currently owned and/or controlled by Company to commit in writing to pursue the acquisition of such Project and the development of such Project as a theatrical, direct-to-video and/or television motion picture or television series. If Company does not elect in writing to pursue such Project in any of such mediums by the close of business on the last day of such period (or if after pursuing such Project in good faith Company is unable to acquire such Project after a reasonable time), such Project shall be deemed rejected by Company and Consultant shall have no further obligations to Company with respect to such Project, except that if Consultant introduces a substantial change to such project (for example, change of director, budget or cast, but excluding changes to Consultant's compensation with respect to such Project, unless the fixed portion of such Consultant's compensation with respect to such Project is computed as a percentage of the final budget and such percentage is a lesser percentage than as set forth in Paragraph 4.a. hereof before such Project is optioned or acquired by a third party, Consultant shall resubmit such project to Company with such substantial change in accordance with this Paragraph 4.c. except that the period of Company's review for such resubmission shall be reduced to no more than five (5) business days. 3 d. Consultant may also submit to Company Proposals with respect to one or more of the Schedule A Projects which are currently owned and/or controlled by Company. Notwithstanding anything to the contrary herein contained, Consultant shall not submit any such Schedule A Projects to Company earlier than thirty (30) days after the date hereof and Consultant shall not submit to Company more than three (3) such Projects in each month of the Terms thereafter. Company shall have a period of thirty (30) days following Consultant's submission to Company of a Proposal with respect to a Schedule A Project to commit in writing to pursue the active development of such Project as a theatrical, direct-to-video and/or television motion picture and/or as a television series. If Company does not elect in writing to so commit to such Project in any of such mediums by the close of business on the last day of such period, Consultant shall have an irrevocable, exclusive option for a period equal to the earlier of (i) two (2) years from the last day of such period; or (ii) the expiration of the six (6) month period referenced in Paragraph 15 hereof to acquire all of Company' s fights to such Project or to convey to a third party production company, distributor, financier, etc. ("Third Party Buyer") an exclusive and irrevocable option for a period of up to one (1) year (extendable by an additional period of up to one (1) year) to acquire Company's rights to such Project with such options, whether to Consultant or such Third Patty Buyer, being exercisable upon repayment to Company of an amount not less than all of its actual unrecouped out-of-pocket expenses with respect to such Project and upon such repayment to Company Consultant shall have no further obligations to Company with respect to the applicable Project except as set forth in Paragraph 4.e. hereof. e. All monies and other items of value actually received by Company and/or Consultant from a Third Patty Buyer with respect to the rights to a Project referenced in Paragraph 4.d. above (and from Regal Productions and/or its successors and assigns with respect to the "Kickboxer" project currently in development with Regal Productions and from PolyGram and/or its successors and assigns with respect to the "Winesburg, Ohio" project currently in development with PolyGram) and including with respect to the provision by Consultant of producing Services or for any other reason, excluding amounts paid to Consultant as reimbursement of out-of-pocket expenses paid to third parties in connection with such Project, shall as between Company and Consultant be allocated, paid and accounted for as follows: (i) The first $50,000 shall be paid 1/2 to Consultant and 1/2 to Company; (ii) Such monies thereafter received shall be paid to Company until it has recouped its theretofore unrecouped, actual, direct, out-of-pocket expenses with respect to the acquisition and/or development of such Project excluding interest, overhead, or other non-direct charges; 4 (iii) Such monies thereafter received shall be paid to Consultant until Consultant has actually received pursuant to this Paragraph 4.e.(iii) an aggregate amount equal to the aggregate amount theretofore paid to Company pursuant to Paragraphs 4.e.(ii) above; and (iv) The balance of such monies thereafter received shall be paid 1/2 to Consultant and 1/2 to Company. f. In addition to the Consulting Fee, Company shall reimburse Consultant for all out-of-pocket expenses incurred in performing Services pursuant to this Agreement ("Monthly Expenses"), subject, however, to Company's prior written authorization with respect to travel expenses and for any expenses exceeding an aggregate of $1,000 in any one-month period. g. At the end of each month, Consultant shall submit a report detailing his Monthly Expenses, together with the receipts therefor, to Company and Company shall thereafter provide reimbursement by the thirtieth (30th)] day of the immediately following month. h. Consultant shall be responsible for the payment of all federal, state and local taxes, including F.I.C.A. and income taxes, payable on any fees paid by Company to Consultant hereunder. i. Company shall pay or, at Consultant's election, reimburse Consultant for the cost of medical insurance for Consultant and his family during the Term. Such medical insurance shall be on terms at least as favorable to Consultant and his family as the medical insurance currently being provided to Consultant by Company. j. Notwithstanding anything to the contrary herein contained, Consultant may submit written proposals to Company with respect to Projects owned and/or controlled by Company but not listed on Schedule "A," including for the development of Projects based upon the ancillary and subsidiary rights (e.g., remake, sequel and series rights) to motion pictures currently owned and/or controlled by the Company. In such case, if the Company decides to proceed with any such Project, the Company will pay to Consultant such additional compensation and accord Consultant such credit as agreed upon. If Company elects not to pursue the active development of any such Projects, Consultant shall not obtain any right to option or acquire and/or convey to a Third Party Buyer the right to option or acquire Company's rights to such project. 5. Confidential Information. Consultant acknowledges that he has had access to and has become acquainted with, and during the Term will have access to and become acquainted with, Company's confidential records, secrets and other proprietary information not readily available to the public, 5 including, without limitation, business plans, Projects in which Company has rights, is developing or licensing (whether alone or in conjunction with others) or which are or have been under consideration by Company, names of Company's employees, customer and supplier lists and other matters. Except as set forth herein to the contrary, Consultant hereby agrees that all such information is the sole and exclusive property of Company, regardless of whether or not Consultant developed such information for Company before or during the Term and that Consultant will not use any such confidential information other than in the course of providing the Services to Company pursuant to this Agreement. Consultant further agrees that upon expiration or termination of this Agreement, Consultant shall not take or use ally such confidential information, records or files of Company, and Consultant will return to Company all such records and files that it may have previously removed to assist in providing the Services pursuant to this Agreement. Anything contained herein to the contrary notwithstanding, Consultant shall have the right to present or recommend Projects, including without limitation Projects currently owned and/or controlled by Company and listed on Schedule "A," to others as provided in Sections 4.c. and, 4.d. hereof and to advise third parties as to the amount of monies expended by Company in connection with such Projects, and to provide third parties with copies of all agreements, including without limitation, chain-of- title agreements, pertaining or relating to such Projects, and with copies of all literary materials, budgets, location information, and other materials and information concerning such Projects in order to enable such third parties to acquire, finance, develop, produce, produce, market and exploit such Projects. 6. Restrictive Covenants. a. Except as otherwise specified herein, during the Term and at all times thereafter, Consultant agrees not to (i) disclose or divulge to any person or entity any trade secret or know-how relating to the business or operations of Company (the "Business"), or any of Company's confidential or proprietary information, including, without limitation, the information referred to in Section 5 hereof, or (ii) engage in any willful act which is materially adverse to the business interests of Company. b. Consultant hereby specifically acknowledges and agrees that the restrictive covenants set forth in Section 5 hereof and this Section 6 are material provisions relied upon by Company in entering into this Agreement. c. Consultant specifically acknowledges that it has been advised by Company to review this Agreement with its counsel, and that Consultant has satisfied itself that the restrictive covenants set forth in this Agreement are reasonable in all respects. 6 d. Consultant acknowledges and agrees that a violation of any covenant contained in this Agreement shall cause irreparable harm to Company, and that Company shall be entitled to specific performance of this Agreement or an injunction without proof of special damages, together with the costs and reasonable attorney's fees incurred by Company in enforcing its rights and to prevent or halt a violation of Consultant's obligations under this Agreement. It is expressly understood and agreed by the parties hereto that nothing contained herein shall be construed as prohibiting Company from pursuing any other remedies available for a breach or threatened breach of this Agreement, including without limitation, the recovery of damages by Company. 7. Notices. Any notice or other communication given under this Agreement shall be in writing and shall be deemed given to a party three (3) days following the deposit thereof in the U.S. mail if sent from the Continental United States by certified or registered mail, return receipt requested, postage prepaid, or the next following business day after being sent by a nationally recognized overnight courier service, if addressed to such party at the address of such party set forth below, or such other address which such party may Specify by notice given pursuant to this Section 7: If to Company: Kings Road Entertainment 1901 Avenue of the Stars Los Angeles, CA 90067 Attention: With a copy to: Fischbein Badillo Wagner Harding 909 Third Avenue New York, NY 10022 Attention: Joseph L. Cannella, Esq. If to Consultant: Kenneth Aguado With a copy to: Manart, Phelps & Phillips, LLP 11355 West Olympic Boulevard Los Angeles, CA 90064 Attention: Laurence M. Marks, Esq. 7 8. Independent Contractor. It is expressly understood and agreed by the parties hereto that Consultant's relationship to Company is that of an independent contractor and that neither this Agreement nor the Services to be rendered hereunder shall, for any purpose whatsoever, or in any way or manner or for any purpose constitute "wages" or create an employer-employee relationship between Company and Consultant. 9. Non-Waiver. The failure or refusal of any party hereto to insist upon the strict performance of any provision of this Agreement, or to exercise any right in any one or more instances or circumstances shall not be construed as a waiver or relinquishment of such provision or right, nor shall such failure or refusal be deemed a custom or practice contrary to such provision or right. 10. Severability. If any section, term or provision of this Agreement shall be held or determined to be unenforceable, the balance of this Agreement shall nevertheless continue in full force and effect unaffected by such holding or determination. In addition, in any such event, the parties hereto agree that it is their intention and agreement that any such section, term or provision which is held or determined to be unenforceable as written, shall nonetheless be enforced and binding to the fullest extent permitted by law as though such section, term or provision had been written in such a manner and to such an extent as to be enforceable under the circumstances. Without limitation of the foregoing, with respect to any restrictive covenant contained herein, if it is determined that any such provision is excessive as to duration or scope, it is intended that it nonetheless be enforced for such shorter duration or with such narrower scope as will render it enforceable. 11. Assignability. No party hereto may assign this Agreement, but as contemplated hereunder Consultant may exercise or permit third parties to exercise Consultant's option to acquire the Schedule A Projects and/or convey to Third Party Buyer(s) exclusive options to acquire Company's fights in such Projects, provided that in such case such Third Party Buyer assumes Consultants obligation with respect to such Project hereunder. Consultant may not delegate the performance of any of its duties hereunder. Any such purported delegation or assignment shall be null and void and of no force or effect. 8 12. Public Disclosure: Statements. Consultant agrees that it shall make no statement which detracts from the reputation or is otherwise critical of, or is in any manner harmful to, Company, any of its affiliates or any director, officer, consultant, employee or other agent of Company or any of its affiliates. As used in the Agreement, the term "affiliate" shall mean any person, corporation, partnership, trust or other entity controlling, controlled by, or under common control with, Company. 13. Governing Law. This Agreement has been prepared and negotiated in the State of California and shall be governed by and construed in accordance with the laws of the State of California, without giving effect to the principles thereof relating to the conflict of laws. Each party hereto consents to the service of process in any action or legal proceeding on such party by means of registered or certified mail, return receipt requested, in care of the address for such party set forth in Section 9 hereof or such other address as such party may designate for notice pursuant to the terms of said Section 9. 14. Headings. The headings herein are for reference purposes only and shall not affect in any way the meaning and interpretation of this Agreement. 15. Termination; Survival. a. If Consultant actually renders exclusive services to a third party other than with respect to Projects referenced in Paragraph 4.d. hereof Company shall have the right, but not the obligation, to terminate the agreement within five (5) business days of being advised or made aware that Consultant is rendering such exclusive services. b. The provisions of Sections 4.h., 5 through 10, and 12 through 17 and Consultant's options to acquire Company's Projects pursuant to the terms hereof shall survive the termination of this Agreement, in whatever manner it may occur, for a period of six (6) months. Notwithstanding anything herein to the contrary including, without limitation the preceding sentence, (i) If Consultant is in active negotiations with a Third Party Buyer for the acquisition and/or option by such Third Party Buyer of a Schedule A Project at the end of such six month period then Consultant shall have a period of up to 60 days to complete such negotiations and enter into an agreement with such Third Patty Buyer for such acquisition and/or option; and 9 (ii) Consultant's rights with respect to Projects "set-up" (e.g., placed in development) with Company prior to the termination of this Agreement shall survive the termination of this Agreement (e.g., the right to be employed as a producer (or executive producer) and be compensated and accorded credit it in accordance with this Agreement; and (iii) Third Party Buyer's rights to Company's Projects as provided in this Agreement shall not be changed, modified and/or affected in any way by the termination of this Agreement, including without limitation, Consultant's rights to be employed as producer (or executive producer), and be compensated and accorded credit in accordance with this Agreement. 16. INTENTIONALLY DELETED. 17. Entire Agreement. This Agreement sets forth the entire agreement among the parties hereto with respect to the matters set forth herein. This Agreement, and any provisions hereof, may not be changed, altered, waived, modified or amended except in a writing signed by both parties. This Agreement may be executed in counterparts, which together shall constitute one and the same document. (SIGNATURES ON NEXT PAGE) 10 IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of the day and year first above written. COMPANY: KINGS ROAD ENTERTAINMENT, INC. By:/s/ James Leaderer Name: James Leaderer Title: CONSULTANT: /s/ ------------------------------ KENNETH AGUADO EXHIBIT E [ ], 1998 RAS Securities Corp. 50 Broadway New York, NY 10004 The RAS Clients Dear Sirs: In connection with the Stock Acquisition Agreement (the "Acquisition Agreement"), dated the date hereof, by and among the Estate of Stephen Friedman, RAS Securities Corp. (acting for itself and the RAS Clients), Kings Road Entertainment, Inc., certain of its shareholders and FAB Capital Corporation, each of the undersigned, being all of the beneficiaries of the Seller having any rights to the Shares, jointly and severally represent and warrant to each of RAS and the RAS Clients that, with respect to the Seller and the Shares (but not as to the Other Selling Shareholders and the Additional Shares), the representations set forth in Section 6.a.(1) and 6.a.(2) of the Acquisition Agreement are true correct as of the date hereof and there are no residual beneficiaries with regard to the Shares. This letter shall be governed by the laws of the State of New York without regard to conflicts of law principles. We consent to the jurisdiction of any federal or state court located in the State of California in connection with any dispute arising under this letter. Capitalized terms used and not defined herein have the meanings ascribed to them in the Acquisition Agreement. Very truly yours, THE BENEFICIARIES: -------------------------- KENNETH AGUADO -------------------------- SUSAN AGUADO --------------------------- JOAN SHAPIRO EXHIBIT F LIST OF RAS CLIENTS Western Union Leasing Ltd. FAB Capital Corp. MBO Music Verlag GmbH EXHIBIT G [ ], 1998 Kings Road Entertainment, Inc. 1901 Avenue of the Stars Los Angeles, California 90067 The Estate of Stephen Friedman The Other Selling Shareholders Dear Sirs: In connection with the Stock Acquisition Agreement (the "Acquisition Agreement"), dated the date hereof, by and among the Estate of Stephen Friedman, RAS Securities Corp. (acting for itself and the RAS Clients), Kings Road Entertainment, Inc., certain of its shareholders and FAB Capital Corporation, each of the undersigned, being the RAS Clients, represents and warrants to the Company, the Seller and each of the Other Selling Shareholders, with respect to the Shares being purchased by each under the Acquisition Agreement, the representations set forth in Section 6.b. of the Acquisition Agreement are true correct as of the date hereof. This letter shall be governed by the laws of the State of New York without regard to conflicts of law principles. We consent to the jurisdiction of any federal or state court located in the State of New York in connection with any dispute arising under this letter. Capitalized terms used and not defined herein have the meanings ascribed to them in the Acquisition Agreement. Very truly yours, ------------------------- -------------------------- Schedule 6.c.(3) The Company's 1998 Stock Option Plan authorizes 400,000 shares of Common Stock to be issued pursuant to such plan. Contemporaneously with the execution of this Agreement, the Company is making an aggregate cash payment of $113,754 to the holders of options to purchase 100,667 shares of Common Stock and such cash payment shall be in complete satisfaction of such options. No other options are outstanding. Schedule 6.c.(4) ---------------- None. Schedule 6.c.(9) ---------------- See Schedule 6.c.(3) Schedule 6.c.(14) ----------------- The matters described in the attached letter from the Nasdaq Stock Market to the Company, dated October 9, 1998. [The text of the letter from Nasdaq to the Company has been excluded from filing.] EX-10 4 EXHIBIT 10(B) EXHIBIT 10(b) STOCK PURCHASE AGREEMENT STOCK PURCHASE AGREEMENT, dated November 9, 1998, by and among WESTERN UNION LEASING LTD., an Irish corporation, having an address at 10 Greycoat Place, 1 Premier House, London SW1 England ("Western"), FAB CAPITAL CORP., an Iowa corporation, having an address at 1461 First Avenue, Suite 293, New York, NY 10021 ("FAB"), MBO MUSIC VERLAG GmbH, a German company organized under the laws of the Federal Republic of Germany, having an address at Gerauer Street 58, Moerfelden-Waldorf, Germany 64546 ("MBO"), KINGS ROAD ENTERTAINMENT, INC., a Delaware corporation, having an address at 1901 Avenue of the Stars, Los Angeles, CA 90067 ("Buyer"), and IMMEDIATE ENTERTAINMENT GROUP, INC., a Nevada corporation, having an address at Paul- Erlich-Str. 16-20/AZ D-63322 Rodermak, Germany (the "Company"). WHEREAS, Buyer wishes to purchase from each of Western, FAB and MBO (each, a "Seller," and collectively, "Sellers"), and each Seller wishes to sell to Buyer, the number of shares of common stock of the Company, par value $.001 per share ("Common Stock"), set forth opposite such Seller's name on Exhibit A, attached hereto and made a part hereof, (collectively, the "Shares"); NOW, THEREFORE, the in consideration of the premises and the mutual covenants and agreements contained herein, the parties hereto do hereby agree as follows: 1. Purchase of Shares. a. Subject to the terms and conditions set forth herein, and in reliance upon the representations, warranties and agreements of the Company and each Seller contained herein, Buyer agrees to purchase from each Seller, and each Seller, in reliance upon the representations, warranties and agreements of Buyer and the Company contained herein, agrees to sell to Buyer, at a closing (the "Closing") to take place on the date hereof (the "Closing Date"), the number of Shares owned by such Seller (such "Seller's Shares") for the Purchase Price, as defined below. b. Purchase Price. Simultaneously with the execution and delivery hereof, as consideration for the Shares, Buyer shall pay to Sellers, an aggregate of Two Million Five Hundred Ten Thousand Eight Hundred and Two and 67/100 Dollars ($2,510,802.67), to be paid to each Seller as set forth the under the heading "Seller's Cash Price" on Exhibit A hereto, and an aggregate of 1,477,567 shares of common stock of Buyer, par value $.01 per share (collectively, "Buyer's Shares"), to be issued to each Seller as set forth under the heading "No. of Buyer's Shares" on Exhibit A hereto. For this purpose, the Buyer and the Sellers have valued the Buyer's Shares at an aggregate of Three Million Four Hundred Seventy-Two Thousand Two Hundred Eighty-Four and 90/100 Dollars ($3,472,284.90). At the Closing, the cash portion of the Purchase Price shall be paid by Buyer to each Seller in the amount set forth under the heading "Seller's Cash Price" opposite each Seller's name (such "Seller's Cash Price") on Exhibit A hereto. At the Closing, each Seller shall transfer to Buyer the number of Seller's Shares set forth opposite such Seller's name under the heading "No. of Seller's Shares" on Exhibit A hereto. c. Deliveries at Closing. At Closing or as soon as practicable thereafter, Buyer shall pay to each Seller such Seller's Cash Price by delivery to such Seller, at such Seller's option, either a certified or bank check or by wire transfer to an account designated by such Seller in the amount of such Seller's Cash Price. At Closing or as soon as practicable thereafter, Buyer shall issue such number of Buyer's shares to each Seller as set forth under the heading "No. of Seller's Shares" set forth opposite each Seller's name on Exhibit A hereto by delivering to each Seller the stock certificate(s) representing number of Buyer's Shares to be issued to such Seller hereunder. At Closing, each Seller shall deliver to Buyer the stock certificate(s) representing such Seller's Shares, with stock power(s) duly endorsed in blank, for transfer with all necessary stock transfer stamps affixed. 2. Board Approvals. At or prior to the Closing, the Board of Directors of the Company shall approve the sale of the Shares by Sellers to Buyer pursuant to the terms of this Agreement, and at or promptly after the Closing, the Company shall deliver to Buyer resolutions of the Company's Board of Directors evidencing such authorization, which resolutions shall be certified to be true and correct by the Secretary of the Company. At or prior to the Closing, the Board of Directors of Buyer shall approve the issuance of Buyer's Shares to Sellers pursuant to the terms of this Agreement, and at or promptly after the Closing, Buyer shall deliver to the Company resolutions of Buyer's Board of Directors evidencing such authorization, which resolutions shall be certified to be true and correct by the Secretary of Buyer. 3. Representations and Warranties a. Representations and Warranties of Each Seller. Each Seller hereby represents and warrants to Buyer that: (i) Title to Shares. Immediately prior to the transfer of such Sellers Shares pursuant hereto, such Seller will have good and valid title to such Seller's Shares, free and clear of all liens, claims and encumbrances of any nature, and upon delivery of certificates representing such Seller's Shares and payment therefor pursuant to the terms of this Agreement, good and valid title to such Sellers' Shares will be transferred to Buyer free and clear of all liens, claims and encumbrances. (ii) Due Authorization. Each Seller has full right, power and authority to sell such Seller's Shares on the terms set forth herein, to execute and deliver this Agreement and to enter into the transactions contemplated hereby and to perform all of its obligations hereunder. This Agreement has been duly authorized, executed and delivered by such Seller and constitutes the legal, valid, and binding obligation of such Seller, enforceable against such Seller in accordance with the -2- termshereof (subject only to applicable bankruptcy, insolvency, and other laws affecting the enforceability of creditors' rights generally and to general equitable principles). No consent, authorization, approval, order, license, certificate or permit of or from, or registration, qualification, declaration or filing with, any federal, state, local, foreign, or other governmental authority or any court or other tribunal is required to be obtained by such Seller for its execution and delivery hereof or the performance by such Seller of such Seller's obligations under this Agreement. No consent of any party to any contract, agreement, instrument, lease, license, arrangement and no or understanding to which such Seller is a party or to which any of such Seller's properties or assets is or may be subject, is required for the execution, delivery or performance by such Seller of this Agreement or the consummation of the transactions contemplated hereby which has not been or will not be obtained prior to the Closing, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by such Seller will not violate, result in breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any such contract, agreement, instrument, lease, license, arrangement, or understanding to which such Seller is a party or by which it may be bound (except for any such violation, breach or conflict which has been duly waived thereunder) or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment or decree binding on such Seller or to which Seller or any of such Sellers' properties or assets is or may be subject. (iii) Restricted Securities; Investment Intent. Each Seller hereby acknowledges that Buyer's Shares are "restricted securities" under the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the "Securities Act"), and is purchasing the such Buyer's Shares for investment purposes only and not with a view to the distribution thereof. (iv) Such Seller has access to copies of Buyer's public filings with the SEC, has had an opportunity to review the same, has been afforded an opportunity to speak with executive officers of Buyer and to review its files, and such Seller has otherwise conducted and is relying solely upon its own due diligence with respect to Buyer's Shares and Buyer. b. Representations and Warranties of Buyer. Buyer represents and warrants to each Seller and the Company, as follows: (i) Title to Shares. Upon delivery of stock certificate(s) representing Buyer's Shares pursuant to the terms of this Agreement, such Buyer's Shares will be duly authorized, validly issued, fully paid and non-assessable. (ii) Due Authorization. Buyer has full right, power and authority to issue Buyer's Shares on the terms set forth herein, to execute and deliver this Agreement, to enter into the transactions contemplated hereby and to perform all of its obligations -3- hereunder. This Agreement has been duly authorized, executed and delivered by Buyer and constitutes the legal, valid, and binding obligation of Buyer enforceable against Buyer in accordance with the terms hereof (subject only to applicable bankruptcy, insolvency, and other laws affecting the enforceability of creditors' rights generally and to general equitable principles). No consent, authorization, approval, order, license, certificate or permit of or from, or registration, qualification, declaration or filing with, any federal, state, local, foreign, or other governmental authority or any court or other tribunal is required to be obtained by Buyer for its execution and delivery of this Agreement or the performance by Buyer of its obligations hereunder. No consent of any party to any contract, agreement, instrument, lease, license, arrangement and no or understanding to which Buyer is a party or to which its properties or assets is or may be subject is required for the execution, delivery or performance by Buyer of this Agreement or the consummation of the transactions contemplated hereby which has not been or will not be obtained prior to the Closing, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by Buyer, will not violate, result in breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any such contract, agreement, instrument, lease, license, arrangement, or understanding to which such Seller is a party or by which it may be bound (except for any such violation, breach or conflict which has been duly waived thereunder) or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment or decree binding on Buyer or to which its or any of its properties or assets is or may be subject. (iii) Buyer is relying on its own due diligence with respect to the Company and Buyer's purchase of the Sellers' Shares. c. Representations and Warranties of the Company. The Company represents and warrants to Buyer, as follows: (i) Due Authorization. The Company has full right, power and authority to execute and deliver this Agreement, to perform all of its obligations hereunder and to consummate the transactions contemplated hereby. All necessary corporate proceedings of the Company have been duly taken to authorize the execution, delivery and performance by the Company of its obligations hereunder and its consummation of the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company, enforceable as to the Company in accordance with its terms (subject only to applicable bankruptcy, insolvency, and other laws affecting the enforceability of creditors' rights generally and to general equitable principles). No consent, authorization, approval, order, license, certificate or permit of or from, or registration, qualification, declaration or filing with, any federal, state, local, foreign, or other governmental authority or any court or other tribunal is required to be obtained or delivered by the Company for the -4- execution or delivery of this Agreement, or performance by the Company of its obligations hereunder or consummation by the Company of the transactions contemplated hereby. No consent of any party to any contract, agreement, instrument, lease, license, arrangement, or understanding to which the Company is a party or to which the Company or any of its properties or assets is or may be subject, is required for the execution and delivery of this Agreement or the consummation by the Company of the transactions contemplated hereby which has not been or will not be obtained prior to the Closing, and the execution, delivery and performance of this Agreement and the consummation of the transactions contemplated hereby by the Company will not violate, result in breach of, conflict with, or (with or without the giving of notice or the passage of time or both) entitle any party to terminate or call a default under any such contract, agreement, instrument, lease, license, arrangement, or understanding (except for any such violation, breach or conflict which has been properly waived thereunder) or violate or result in breach of any term of the certificate of incorporation or by-laws of the Company, or violate, result in a breach of, or conflict with any law, rule, regulation, order, judgment, or decree binding on the Company or to which any of its operations, businesses, properties, or assets is or may be subject. (ii) As soon as practicable, after the purchase of the Sellers' Shares by the Buyer, the Company will record said transaction on its books and records. 4. Conditions to Closing. a. Conditions to Obligations of Buyer. The obligations of Buyer to purchase the Shares and pay the Purchase Price to Sellers on the date hereof are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions: (i) Representations, Warranties and Covenants. The representations and warranties of each Seller and the Company contained in this Agreement shall be true and correct in all material respects on the Closing Date, and each of the Company and each Seller shall have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by the Company and each Seller, respectively, on or prior to the Closing Date. (ii) No Proceeding or Litigation. No action, suit or proceeding shall have been commenced in a court of competent jurisdiction or by or before any governmental authority against any of the Company, any other Seller or Buyer seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonable, good faith determination of Buyer, is likely to prevent Buyer from consummating, or make it unlawful for Buyer to consummate, such transactions. b. Conditions to Obligations of Each Seller. The obligation of each Seller to sell such Seller's Shares to Buyer on the Closing Date is subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions: -5- (i) Representations, Warranties and Covenants. The representations and warranties of Buyer contained in this Agreement shall be true and correct in all material respects at the Closing Date hereof and Buyer and the Company shall each have performed or complied in all material respects with all agreements and covenants required by this Agreement to be performed or complied with by it on or prior to the Closing Date. (ii) No Proceeding or Litigation. No action, suit or proceeding shall have been commenced in a court of competent jurisdiction or by or before any governmental authority against the Company, any other Seller or Buyer seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonably, good faith determination of such Seller is likely to prevent such Seller from consummating or make it unlawful for such Seller to consummate such transactions. c. Conditions to Obligations of the Company. The obligations of the Company to record or cause to be recorded the transfer of the Shares on its books and records and perform its other obligations hereunder on the Closing Date are subject to the fulfillment, prior to or on the Closing Date, of each of the following conditions: (i) Representations, Warranties and Covenants. The representations and warranties of Buyer and the Seller each contained in this Agreement shall be true and correct in all material respects on the Closing Date and Buyer and each Seller shall each have performed or complied in all material respects with all agreements and covenants required to be performed by this Agreement or complied with by it on or prior to the Closing Date. (ii) No Proceeding or Litigation. No action, suit or proceeding shall have been commenced in a court of competent jurisdiction or by or before any governmental authority against the Company, any Seller or Buyer seeking to restrain or materially and adversely alter the transactions contemplated by this Agreement which, in the reasonably, good faith determination of the Company is likely to prevent the Company from consummating or make it unlawful for the Company to consummate such transactions. 5. Survival; Indemnification a. Survival. The representations and warranties of the parties contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive until the third anniversary of the Closing Date. Notwithstanding the preceding sentence, any representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy thereof giving rise to such right to indemnity shall have been given to the party against whom such indemnity may be sought prior to such time. b. Indemnification of Buyer. Each Seller, at its sole expense, hereby agrees to indemnify Buyer and its affiliates against and agrees to hold -6- each of them harmless from any and all damage, loss, liability and expense (including, without limitation, reasonable expenses of investigation and reasonable attorneys' fees and expenses in connection with any action, suit or proceeding) (collectively, "Loss") incurred or suffered by Buyer or any of its affiliates arising out of any misrepresentation or breach of any warranty, covenant or agreement made or to be performed by such Seller pursuant to this Agreement. The Company, at its sole expense, hereby agrees to indemnify Buyer and its affiliates against and agrees to hold each of them harmless from any and all Loss incurred or suffered by Buyer or any of its affiliates arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by the Company pursuant to this Agreement. c. Indemnification of Sellers. Buyer, at its sole expense, hereby agrees to indemnify each Seller and such Seller's affiliates against and agrees to hold each of them harmless from any and all Loss incurred or suffered by any of them, respectively, arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Buyer pursuant to this Agreement. The Company, at its sole expense, hereby agrees to indemnify each Seller and such Seller's affiliates against and agrees to hold each of them harmless from any and all Loss incurred or suffered by any of them, respectively, arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Company pursuant to this Agreement. d. Indemnification of the Company. Buyer, at its sole expense, hereby agrees to indemnify the Company and its affiliates and agrees to hold each of them harmless from any and all Loss incurred or suffered by them arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by Buyer pursuant to this Agreement. Each Seller, at its sole expense, hereby agrees to indemnify the Company and its affiliates and agrees to hold each of them harmless from any and all Loss incurred or suffered by them arising out of any misrepresentation or breach of warranty, covenant or agreement made or to be performed by such Seller pursuant to this Agreement. e. Procedures; Exclusivity of Remedies. The party seeking indemnification hereunder (the "Indemnified Party") agrees to give prompt notice to the party against whom indemnity is sought (the "Indemnifying Party") of the assertion of any claim or the commencement of any suit, action or proceeding in respect of which indemnity may be sought under this Section 5. The Indemnifying Party shall have the right to, and at the request of the Indemnified Party shall, participate in and control the defense of any such suit, action or proceeding at its own expense; provided, however, that the failure by the Indemnified Party to give prompt notice shall not release the Indemnifying Party of its indemnification obligations hereunder, except to the extent such failure actually prejudices the Indemnifying Party. If the Indemnifying Party does not so assume control of the defense, the Indemnified Party shall have the right to defend, contest, settle or compromise such claim or defend in the exercise of its exclusive discretion and the Indemnifying Party shall, upon request from any Indemnified Party, promptly pay to such Indemnified Party the amount of any Loss as incurred. If the Indemnifying Party does assume control of the defense, the Indemnifying Party -7- shall have the right to undertake, conduct and control, through counsel of its own choosing and at its sole expense, the conduct and settlement of such claim or demand, and the Indemnified Party shall cooperate with the Indemnifying Party in connection therewith. 6. Miscellaneous a. Notices. Any notice or other communication required or permitted hereunder shall be in writing and shall be deemed given to a party on the date delivered personally to such party, on the third day following the sending thereof by registered or certified mail (postage prepaid, return receipt requested), on the next business day following the sending thereof by overnight courier, or on the day on which it is sent by telecopy with confirmation of delivery and addressed to such party at the address set forth in the prologue of this Agreement. b. Amendment. This Agreement may not be amended or modified except by an instrument in writing signed by the parties hereto that are affected by such amendment or modification. c. Governing Law. This Agreement has been prepared, negotiated and delivered in the State of New York, and shall be governed by, and construed in accordance with, the laws of the State of New York without giving effect to the principles thereof relating to the conflict of laws. d. Submission to Jurisdiction. Each party hereby (i) consents to the jurisdiction of the United States District Court for the Southern District of New York and any of the courts of the State of New York located in New York County in connection with any dispute arising under this Agreement and (ii) waives objection to venue. e. Entire Agreement. This Agreement sets forth the entire agreement and understanding of the parties hereto in respect of the subject matter hereof, and supersedes all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by the parties hereto or their representatives. -8- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. SELLERS: WESTERN UNION LEASING LTD. By: /s/ ------------------------------- Name: Phillip Cook Title: FAB CAPITAL CORP. By: /s/ ------------------------------- Name: Phillip Cook Title: MBO MUSIC VERLAG GmbH By: /s/ ------------------------------- Name: Michael Berresheim Title: Managing Director BUYER: KINGS ROAD ENTERTAINMENT, INC. By: /s/ ------------------------------- Name: James Leaderer Title: THE COMPANY: IMMEDIATE ENTERTAINMENT GROUP, INC. By: /s/ ------------------------------- Name: Michael Berresheim Title: Chairman -9- EXHIBIT A SELLERS AND SELLERS' SHARES
Percentage of Seller's Cash No. of Seller's No. of Buyer's Name of Seller Seller's Shares Price Shares Shares - - - ---------------------------------------------------------------------------------------------------- Western 16.7% $419,650.00 400,000 246,957 FAB 44.2% $1,109,853.60 1,057,885 653,131 MBO 39.1% $981,299.07 935,350 577,479 - - - ---------------------------------------------------------------------------------------------------- TOTALS: 100% $2,510,802.67 2,393,235 1,477,567 ====================================================================================================
-10- EX-10 5 EXHIBIT 10(C) EXHIBIT 10(c) DEMAND PROMISSORY NOTE AND PLEDGE AGREEMENT [ ] November 9, 1998 FOR VALUE RECEIVED [ ] (hereinafter called the ("Borrower"), hereby promises to pay to [ ], with an address at [ ] (the "Holder"), the principal amount of [ ($[ ])], together with interest on the unpaid principal balance at an annual rate of two percent above the prime rate of Citibank, N.A. on the date of this Note, promptly after demand is made therefor by the Holder. The Borrower, at its election may prepay this Note at any time or from time to time, in whole or in part, at the principal amount hereof, together with accrued interest thereon to the date of such prepayment, and without premium. Defaults: Remedies. Each of the following shall constitute an event of default hereunder (an "Event of Default"): (a) the failure by the Borrower to pay in full any sum when due under this Note ; (b) any representations or warranties made herein by the Borrower shall prove to have been false or misleading as of the time made in any material respect; (c) the material breach of any covenant of the Borrower contained herein; (d) the Borrower makes an assignment for the benefit of creditors; (e) the Borrower commences any proceeding for, or suffers, the appointment of a custodian, receiver, liquidator or trustee for itself or all or a substantial portion of its assets; or (f) the Borrower petitions or otherwise seeks relief under or otherwise takes advantage of or becomes the subject of any proceeding under any bankruptcy, reorganization, insolvency, arrangement, readjustment of debt, dissolution, winding up or liquidation or any similar law or statute of any jurisdiction, whether now or hereafter in effect. Upon the occurrence of an Event of Default: (i) all sums due hereunder shall become immediately due and payable; (ii) the Borrower shall be obligated to reimburse the Holder for all costs, including reasonable attorneys' fees, incurred to collect any payment due hereunder and not paid when due; and (iii) the Holder shall have all of the remedies available under applicable law to the holder of a note and/or a secured party. Pledge of Securities. As security for each and every obligation of the Borrower hereunder, the Borrower herewith deposits and pledges and with the Holder, in form transferable for delivery, and grants to the Holder a security interest in the [ ] shares of common stock, $.01 par value, of Kings Road Entertainment, Inc., owned by the Borrower, and the certificates or other instruments or documents evidencing same and such additional property at any time and from time to time receivable by the Holder or otherwise distributed to the Holder in respect of or in exchange for any or all such shares or interests (herein collectively called the "Pledged Securities"). The Borrower represents and warrants that the Pledged Securities are, and will be on deposit hereunder, duly and validly issued and duly and validly pledged to the Holder in accordance with law, and agrees to defend the Holder's right, title lien and security interest in and to the Pledged Securities against the claims and demands of all persons whomsoever. The Borrower also represents and warrants to the Holder that it has, and will have on deposit hereunder, good title to all of the Pledged Securities/ free and clear of all claims, mortgages, pledges, liens, encumbrances and security interests of every nature whatsoever except the pledge hereunder and that no consent or approval of any governmental or regulatory authority, or of any securities exchange which has not been obtained, was or is necessary to the validity of this pledge. So long as there shall exist no condition, event or act which constitutes, or with notice or lapse of time, or both, would constitute an Event of Default, the Borrower shall be entitled to exercise, as it shall deem necessary, the voting power with respect to the Pledged Securities, and for that purpose the Holder shall execute or cause to be executed from time to time, at the expense of the Borrower, such proxies or other instruments in favor of the Borrower or its nominee, in such form and for such purposes as shall be reasonably required by the Borrower to enable it to exercise such voting power with respect to the Pledged Securities. So long as there is any balance due to the Holder under this Note, (a) the Holder may cause all or any of the Pledged Securities to be transferred to or registered in its name or the name of its nominee or nominees, and/or (b) the Holder shalt be entitled, to receive and retain, as additional collateral hereunder, any and all dividends at any time and from time to time declared or paid upon any of the Pledged Securities. Except as otherwise provided for herein in the case of the occurrence of an Event of Default, the Pledged Securities and/or any additional collateral shall be held by the Holder as collateral securing the obligations of the Borrower under this Note and shall be held by the Holder far the benefit of the Borrower which shall remain the beneficial owner of the Pledged Securities and any such additional collateral. If an Event of Default shall occur and be continuing the Holder, without obligation to resort to other security, shalt have the right at any time and from time to time to sell, resell, assign and deliver, in its discretion, all or any of the pledged Securities, in one or more parcels at the same or different times, the proceeds of which shall be credited toward the repayment of this Note. Upon repayment of this Note, the Borrower shalt be entitled to the prompt return of all of the Pledged Securities to, or at the direction of, the Borrower and of all other property and cash pledged hereunder which have not been used or applied toward the payment of this Note. Failure or Indulgency Not A Waiver. No failure or delay on the part of the Borrower or the Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. Notices. All notices or other communications given or made hereunder shall be in writing and shall be deemed delivered the day telecopied (or, if telecopy is not available, mailed by overnight courier) to the party to receive the same at its telecopy number, if available, and address set forth below or to such other telecopy number, if available, and address as either party shall hereafter give to the other by notice duly made under this paragraph; (i) if to the Holder, to [ ] and (ii) if to the Borrower, to the name, address and telecopy number, if available, of the Borrower set forth in the records of the Holder. Assignability. This Note shall be binding upon the Borrower and its successors and permitted assigns and shall inure to the benefit of the Holder and the successors and permitted assigns of the Holder. Governing Law. This Note has been executed in and shall be governed by the internal laws of the State of New York, without regard to the principles of conflict of laws. -2- IN WITNESS HEREOF, the Borrower has caused this Note and Pledge Agreement to be executed in its corporate name by its duly authorized officer as of the date first written above. [ ] By: Name: Title: AGREED WITH RESPECT TO PROVISIONS CONCERNING PLEDGED SECURITIES: THE HOLDER: [ ] By: Name: Title: GUARANTY : Payment of all amounts due under this Note is hereby unconditionally guaranteed by FAB Capital Corporation, an Idaho corporation, as co-obligor of this Note, as of the date first written above: FAB CAPITAL CORPORATION By: ----------------------------- Name: Title: Witness: - - - -------------------------- -3- Schedule A to Exhibit 10 (c) The foregoing Exhibit 10 (c) to the Schedule 13D is the form of Demand Promissory Note and Pledge Agreement entered into by each of FAB Capital Corporation, MBO Music Verlag GmbH and Western Union Leasing Ltd. (each as the "Borrower") with each of Riverrock Ltd. and Long Valley Associates (each as the "Holder"). FAB, as Borrower, also entered into such an Agreement with North American International Capital, Inc., as Holder. In each of the Agreements, the Borrower pledged to the Holder the number of shares of Kings Road Entertainment, Inc. common stock equal to the amount of the Note divided by $2.35. The terms of the Agreements are as follows: (1) Riverrock to MBO: $586,500 principal (2) Riverrock to FAB: $663,000 principal (3) Riverrock to Western Union: $250,500 principal (4) Long Valley to MBO: $ 78,200 principal (5) Long Valley to FAB: $ 88,400 principal (6) Long Valley to Western Union $ 33,400 principal (7) North American to FAB: $543,921 principal A portion of the amount loaned by North American to FAB was in turned loaned by FAB to MBO ($212,673) and to Western Union ($90,835). -4- -----END PRIVACY-ENHANCED MESSAGE-----