1
EXHIBIT 10.4
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement"), by and between THE
PRODUCERS ENTERTAINMENT GROUP, LTD. (the "Company"), a Delaware corporation,
and Xxxxxxx Xxxxx (the "Executive"), dated as of the 25th day of January, 1996.
W I T N E S S E T H
-------------------
WHEREAS, the County employs the Executive and desires to provide to the
Executive the opportunity to purchase shares of the Company's common stock, par
value $.001 per share (the "Common Stock"), in consideration of the past
services rendered by the Executive, and other good and valuable consideration
as provided herein; and
WHEREAS, the Executive desires to purchase certain shares of Common
Stock from the Company;
NOW THEREFORE, in consideration of the foregoing premises and the
mutual covenants herein contained, the parties agree as follows:
1. Sale And Purchase of Common Stock. Subject to the terms and
conditions of this Agreement and the Note (as defined below), (i) the Company
hereby sells to the Executive One Million Four Hundred Thousand (1,400,000)
shares of Common Stock (the "Shares") at a purchase price of $0.55 per share
(the "Purchase Price"), (ii) and the Executive hereby purchases such Shares
from the Company for such Purchase Price. The Executive shall pay the Purchase
Price by issuing to the Company, concurrently with the execution and delivery
of this Agreement, a promissory note substantially in the form attached as
Exhibit A hereto (the "Note"), and the Executive's sole liability to make
payments to the Company under this Agreement shall be his liability under the
Note. The Shares are duly authorized, validly issued, fully paid and
nonassessable, but the Shares are subject to the terms and conditions of this
Agreement. The Company issues concurrently herewith a duly executed
certificate evidencing the Shares purchased hereunder, with the legends
provided for herein, in exchange for the delivery by the Executive of the duly
executed Note.
2. Pledge.
(a) As security for the fulfillment of his obligations under
the Note, the Executive hereby pledges, hypothecates, assigns, transfers, set
over, delivers and grants to the Company a security interest and (i) the
Shares, (ii) all dividends, interest, cash, instruments and other property
from time to time received, receivable or otherwise distributed in respect of
or in exchange for any or all of the Shares, (iii) subject to the provisions of
Section 4 hereof, all rights and privileges of the Executive with respect to
the Shares and the other property referred to in clause (ii), and (iv) subject
to the provisions of Section 4 hereof, all proceeds of any of the foregoing and
any property of any character whatsoever into which any of the foregoing may be
converted (all items referrred to in clauses (i) through (iv) above being
transfer hereinafter collectively called the "Pledged Collateral").
TO HAVE AND TO HOLD the Pledged Collateral, together with all rights,
title, interests, powers, privileges and preferences pertaining or incidential
thereto, unto the Company, its successors and assigns, forever, subject,
however, to the terms, covenants and conditions hereinafter set forth; and
provided that such Pledged Collateral or a proportional amount thereof (based on
the ratio of the payments or principal on the Note to the total Purchase Price)
shall be released by the Company and returned to the Executive, without
representation to recourse, as the Executive shall make the payments required
to be made under the Note.
(b) the Executive hereby delivers, and agrees promptly to
deliver, to the Company any and all Pledged Collateral, and any and all
certificates or other instruments or documents
2
representing any of the Pledged Collateral, which shall be in or come into the
Executive's possession during the term of this Agreement.
(c) If the Executive shall not make any payment required to
be made on the Note at the time such payment is due, the Company may sell,
assign, transfer, endorse and deliver all, from time to time, any part of the
Pledged Collateral to any third party or to the Company at a price per Share
equal to $770,000.00 or, if less than $0.55 per share, at the fair market
value of a Share as determined in good faith by the Company. The proceeds of
the sale of all or any part of the Pledged Collateral shall be applied by the
Company first to accrued interest then to the then-outstanding principal amount
of the Note. Any remaining amount from such sale shall be paid over to the
Executive.
3. Executive's Representations; Sources of Funds.
(a) The Executive represents to the Company that he is
purchasing the Shares being purchased hereunder for his own account and not as
nominee or agent for any other person and not with a view to, or for offer or
sale in connection with, any distribution thereof (within the meaning of the
Securities Act of 1933 (the "Securities Act") which would be in violation of
the securities laws of the United States of America or any state thereof,
without prejudice, however, to his rights at all times to sell or otherwise
dispose of all or any part of said Shares under an effective registration
statement under the Securities Act, or under an exemption from such
registration available under the Securities Act and subject, nevertheless, to
the disposition of his property being at all times within his control (subject
to the restrictions of this Agreement).
(b) The Executive further represents that he is
knowledgeable, sophisticated and experienced in business and financial
matters; that he fully understands the limitations on transfer described
herein; that he is able to bear the economic risks of his investment in the
Shares and is presently able to afford the complete loss of such investment;
and that he has been afforded access to information about the Company, the
Company's financial condition, results of operations, business, property,
management and prospects sufficient to enable him to evaluate his investment
in the Shares.
(c) The Executive further represents that he is an
"accredited investor" as such term is defined in Rule (501(a) of Regulation D
under the Securities Act.
(d) The Purchaser will not Transfer the Shares in violation
of any federal or state securities law. For purposes of this Agreement,
"Transfer" shall mean any transfer, sale, assignment, pledge or other
disposition. If the Purchaser desires to sell or otherwise dispose of all or
any part of the Shares (other than a Transfer to the Company or a Transfer
pursuant to an effective registration statement under the Securities Act and
pursuant to registration or qualification under any applicable state securities
laws), if requested by the Company, it will deliver to the Company an opinion
of counsel, reasonably in form and substance to the Company, that an exemption
from registration is available. The stock certificate for the Shares shall
bear an appropriate legend reflecting such restriction.
4. Restrictions Applicable to the Shares.
(a) Unless vested earlier upon the happening of certain
events, as provided in section 4(c) hereof, the Purchaser's rights to retain
the Shares free of any rights of the Company with respect to the Shares (other
than the Company's rights to such portion of the Shares that is pledged as
security for the Note) shall vest in accordance with the following schedule if
the Purchaser is engaged to render services to the Company pursuant to the
Production Agreement between the Purchaser and Company (the "Production
Agreement") as of such date;
3
CUMULATIVE PERCENTAGE OF SHARES DATE OF VESTING
------------------------------- ---------------
50% April 1, 1996
75% June 30, 1996
100% June 30, 1997
Until the Shares have vested, the Purchaser may not Transfer the Shares and the
stock certificate representing the Shares shall bear an appropriate legend to
that effect.
(b) All cash dividends payable with respect to the Shares
will be paid directly to the Purchaser at the same time that dividends are paid
with respect to all other shares of Common Stock. The Purchaser will have the
right to vote the Shares.
(c) The Shares will be subject to the following provisions
upon a Change in Control of the Company or upon any other termination of the
Purchaser's engagement by the Company under the Production Agreement which may
occur before the Shares have vested in accordance with Section 4(a).
(i) Change in Control. Upon a Change in Control during the
Purchaser's engagement by the Company, all of the Shares which
have not vested in accordance with Section 4(a) shall
immediately vest in, and shall not be subject to forfeiture by,
the Purchaser. For purposes of this Agreement, a Change in
Control shall have the meaning provided in the Production
Agreement.
(ii) Death or Disability. If the Executive's employment by the
Company is terminated by reason of his death or Disability, all
of the Shares which have not previously vested in accordance
with Section 4(a) or Section 4(c)(i) shall immediately vest in,
and shall not be subject to forfeiture by, the Executive. For
purposes of this Agreement, "Disability" shall have the meaning
provided in the Employment Agreement.
(iii) Termination by the Company without Cause or by the Executive
for Good Reason or upon Retirement. If the Company terminates
the Executive's employment without Cause or if the Executive
terminates his employment for Good Reason or upon Retirement,
all of the Shares which have not vested in accordance with
Section 4(a) or Section 4(c)(i) shall immediately vest in, and
shall not be subject to forfeiture by, the Executive. For
purposes of this Agreement, "Cause" and "Good Reason" shall
have the meanings provided in the Employment Agreement and
"Retirement" shall mean retirement in accordance with any
retirement plan or policy of the Company.
(iv) Other Termination of Employment. If the Executive's
employment terminates before a Change in Control shall have
occurred for any reason other than death, Disability,
termination by the Company other than for Cause or termination
by the Executive for Good Reason or upon
4
Retirement, then the Executive shall forfeit to the Company
the Shares which have not previously vested in accordance
with Section 4(a), and the Executive's obligation under the
Note with respect to the payment of the Purchase Price (at
$0.50 per share plus interest accrued thereon in accordance
with the terms of the Note) for the number of Shares so
forfeited shall be forgiven by the Company and the Executive
shall have no further liability under the Note with respect to
the amount so forgiven.
5. Successors.
This Agreement is personal to the Executive and, without the prior
written consent of the Company, shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of the Company and its successors.
6. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed by
and construed in accordance with laws of New York, applied without reference to
principles of conflict of laws.
(b) Amendments. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the parties hereto
or their respective successors and legal representatives.
(c) Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given when
delivered or mailed to the other party by registered or certified mail, return
receipt requested, postage prepaid, addressed as follows:
If to the Executive:
Xxxxxxx Xxxxx
000 X. Xxxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
If to the Company:
The Producers Entertainment Group Ltd.
0000 Xxxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxx Xxxxx, XX 00000
or to such other address as either party shall have furnished to the other in
writing in accordance herewith, except that notice of change of address shall
be effective only when actually received by the addressee.
(d) Severability. The invalidity or unenforceability of
any provision of this Agreement shall not affect the validity or enforceability
of any other provision of this Agreement.
(e) Waiver. Waiver by any party hereto of any breach or
default by any other party of any of the terms of this Agreement shall not
operate as a waiver of any other breach or default, whether similar to or
different from the breach or default waived.
5
(f) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the matters referred to
herein other than the Employment Agreement, and no other agreement, verbal or
otherwise, shall be binding as between the parties unless it is in writing and
signed by the party against whom enforcement is sought. All prior and
contemporaneous agreements and understandings between the parties with respect
to the subject matter of this Agreement other than the Employment Agreement are
superseded by this Agreement.
(g) Survival. The respective rights and obligations of the
parties hereunder shall survive any termination of this Agreement to the extent
necessary to the intended preservation of such rights and obligations.
(h) Captions and References. The captions of the Agreement
are not part of the provisions hereof and shall have no force or effect.
References in this Agreement to a section number are references to sections of
the Agreement unles otherwise specified.
IN WITNESS WHEREOF, the Executive has hereunto set his hand and
the Company has caused this Agreement to be duly executed in its name on its
behalf all as of the day and year first above written.
THE PRODUCERS ENTERTAINMENT
GROUP LTD.
By:
--------------------------
Its: President and CEO
-------------------------
EXECUTIVE
Xxxxxxx Xxxxx
------------------------------
6
EXHIBIT A
PROMISSORY NOTE
Los Angeles, California
$_____________________ ______________ __, 19__
FOR VALUE RECEIVED, the undersigned, XXXXXXX XXXXX, (the "Promisor"),
hereby promises to pay to the order of THE PRODUCERS ENTERTAINMENT GROUP LTD.,
a Delaware corporation or its successors (the "Holder"), the principal sum of
SEVEN HUNDRED SEVENTY THOUSAND DOLLARS ($770,000.00) or such lesser amount as
may then be the unpaid principal balance hereof (the "Principal Amount"),
together with interest thereon, payable by certified or official bank check or
wire transfer of immediately available funds to an account designated by the
Holder in accordance with the following schedule: twelve and one-half pecent
(12-1/2%) of the Principal Amount plus all accrued but unpaid interest thereon
will be payable on April 1, 1997, twelve and one-half percent (12-1/2%) of the
Principal Amount (as calculated without regard to any prior payments thereof)
plus all accrued but unpaid interest thereon will be payable on October 1,
1998, and the balance of the Principal Amount plus all accrued but unpaid
interest thereon will be payable on October 1, 2000.
The Promisor promises to pay interest on the Principal Amount of this
promissory note (this "Note") for the date hereof until such Principal Amount
is paid in full at the fixed rate of 7% per annum compounded semiannually,
such interest payable in accordance with the foregoing schedule; provided,
however, that any Principal Amount hereof not paid when due and, to the fullest
extent permitted by applicable law, any overdue interest shall bear interest at
a rate per annum equal to 10% (after, as well as before, any judgment), payable
on demand. Interest shall be calculated on the basis of a 360-day year for the
actual number of days elapsed.
This Note is issued in connection with the transaction contemplated by
the Stock Purchase Agreement, dated as of the date hereof, between the Promisor
and the Holder.
This Note shall be binding upon the Promisor and his successors and
shall inure to the benefit of the Promisor and his successors; provided,
however, that the Promisor shall be personally liable to the Holder only with
respect to twenty-five percent (25%) of the portion of the Principal Amount
which shall remain unpaid at any time, plus accrued but unpaid interest
thereon. The Promisor shall not have any personal liability to the Company
with respect to the payment of the remaining portion of the Principal Amount
of accrued but unpaid interest thereon.
The Promisor hereby waives presentment, demand, notice, protest and all
other demands and notices in connection with the delivery, acceptance,
performance or enforcement of this Note.
The provisions of this Note may be amended, modified, changed or
terminated only by an agreement in writing signed by the Promisor and the
Holder.
If at any time the indebtedness evidenced by this Note is collected
through legal proceedings or this Note is placed in the hands of attorneys for
collection, the Promisor hereby agrees to pay all costs and expenses (including
attorneys' fees) incurred by the Holder in collecting or attempting to collect
such indebtedness.
If any payment on this Note becomes due and payable on a day other than
a Business Day (as hereinafter defined), the maturity thereof shall be extended
to the immediately following Business Day and interest shall continue to accrue
during such extension. "Business Day" means any day other than a Saturday or
7
Sunday or any other day on which commercial banks in New York, New York are
authorized or obligated by law to close.
This Note is non-transferable except to a person or entity that succeeds
(by transfer of assets, other reorganization or otherwise) to all or
substantially all of the business of Holder.
THE PROMISOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY
RIGHT HE MAY HAVE TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO
THIS NOTE AND AGREES THAT ANY SUCH DISPUTES SHALL BE TRIED BEFORE A JUDGE
SITTING WITHOUT A JURY.
THIS NOTE IS GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF CALIFORNIA WITHOUT REGARD TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
--------------------------
Xxxxxxx Xxxxx
