-----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, Dfyn4at/B0L9em5z/9EVs+SP1Ngx3goXy7ACjCIj6y84G5toj1gf1mq8tc/hdRQQ tN4i7AHKAY0W1sLML4DPRg== /in/edgar/work/0001019687-00-001423/0001019687-00-001423.txt : 20001016 0001019687-00-001423.hdr.sgml : 20001016 ACCESSION NUMBER: 0001019687-00-001423 CONFORMED SUBMISSION TYPE: SB-2/A PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 20001013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALPINE ENTERTAINMENT INC CENTRAL INDEX KEY: 0001078722 STANDARD INDUSTRIAL CLASSIFICATION: [7812 ] IRS NUMBER: 522143186 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SB-2/A SEC ACT: SEC FILE NUMBER: 333-73213 FILM NUMBER: 740124 BUSINESS ADDRESS: STREET 1: 6919 VALJEAN AVENUE CITY: VAN NUYS STATE: CA ZIP: 91406 BUSINESS PHONE: 818-809-52 MAIL ADDRESS: STREET 1: 6919 VALJEAN AVE CITY: VAN NUYS STATE: CA ZIP: 91406 SB-2/A 1 0001.txt ALPINE ENTERTAINMENT, INC. AMENDMENT #2 As filed with the Securities and Exchange Commission on October 13, 2000 Registration No. 333-73213 ================================================================================ U.S. SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------------------- AMENDMENT NO. 2 TO FORM SB-2 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 -------------------------- ALPINE ENTERTAINMENT, INC. -------------------------- (Name of small business issuer as specified in its charter)
Delaware 52-2143196 7812 - ------------------------------- ---------------------- ----------------------------- (State or other jurisdiction of (IRS Employer (Primary Standard Industrial incorporation or organization) Identification Number) Classification Code Number)
--------------------------------------------------------------- 6919 Valjean Avenue Van Nuys, California 91406 818/909-5207 ---------------------------------------------------------------- (Address and telephone number of registrant's principal executive offices) -------------------------------------------------------------------------- Roland Carroll, 6919 Valjean Avenue, Van Nuys, California 91406, 818/909-5207 ----------------------------------------------------------------------------- (Name, address and telephone number of agent for service) Copies to: Gerard N. Casale Jr. Joseph A. Tagliaferro III Davidson Casale Nojima, LLP 11755 Wilshire Boulevard, Suite 1200 Los Angeles, California 90025 ------------------------------------------------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE. 1 If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. /X/ If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. / / If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier registration statement for the same offering. / / If this Form is a post effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective Registration Statement for the same offering. / / If the delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. / / CALCULATION OF REGISTRATION FEE
- -------------------------------------- ------------------- ---------------------- ------------------ ----------------- Title of Each Class of Securities to Amount to be Proposed Proposed Amount of be Registered registered (1) Maximum Maximum Registration Offering Aggregate Fee) Price per Share (2) Offering Price (3) - -------------------------------------- ------------------- ---------------------- ------------------ ----------------- Units 1,250,000 $6.00 $7,500,000 $1,980 - -------------------------------------- ------------------- ---------------------- ------------------ ----------------- Common stock contained in units 1,250,000 N/A N/A -- - -------------------------------------- ------------------- ---------------------- ------------------ ----------------- Warrants contained in units 1,250,000 N/A N/A -- - -------------------------------------- ------------------- ---------------------- ------------------ ----------------- Common stock underlying warrants 1,250,000 N/A N/A -- - -------------------------------------- ------------------- ---------------------- ------------------ ----------------- Convertible Promissory Note N/A N/A N/A -- - -------------------------------------- ------------------- ---------------------- ------------------ ----------------- Common Stock underlying Promissory 4,380,000 $0.90 $3,942,000 $936.62 Note - -------------------------------------- ------------------- ---------------------- ------------------ ----------------- TOTAL 6,880,000 $9,552,000 $2,763 (4) - -------------------------------------- ------------------- ---------------------- ------------------ -----------------
(1) In the event of a stock split, stock dividend, or similar transaction involving common stock of the Registrant, in order to prevent dilution, the number of shares registered will be automatically increased to cover the additional shares in accordance with Rule 416(a) under the Securities Act. (2) There is no current market for the securities and the per share book value of the common stock is $(.0268). Consequently the proposed per share offering price for the common stock held by the Selling Security holders is estimated for purposes of calculating the amount of registration fee. (3) Estimated solely for the purpose of calculating the registration fee based on Rule 457(0). (4) $2,363 previously paid by electronic transfer and $400 paid simultaneously with the filing hereof. THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT WILL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT WILL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. 2 PROSPECTUS SUBJECT TO COMPLETION, OCTOBER 13, 2000 The information in this prospectus is incomplete and may be changed. These securities may not be sold until the registration statement that has been filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and it is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted. ALPINE ENTERTAINMENT, INC. MINIMUM OFFERING OF 250,000 UNITS; MAXIMUM OFFERING OF 1,250,000 UNITS; CONVERTIBLE PROMISSORY NOTE INTERESTS UP TO THE AMOUNT OF $3,942,000 TO BE DISTRIBUTED BY THE HOLDER THEREOF; AND 4,380,000 SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF SUCH PROMISSORY NOTE This is our initial public offering of our common stock. We are offering for sale a minimum of 250,000 units and a maximum of 1,250,000 units. Each unit consists of one share of common stock and one warrant exercisable to purchase one share of common stock at an exercise price of $6.00 per share for a period of 36 months from the effective date of this prospectus. INVESTING IN THE UNITS INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 5. RH Investment Corporation is the representative of the underwriters of this offering. The offering is being made by the underwriters on a "best efforts" basis. The underwriters must sell the minimum number of securities offered, 250,000 units if any are sold. The underwriters are required to use only their best efforts to sell the maximum number of securities offering, 1,250,000. As part of the consideration to the underwriter representative, we have agreed to sell to the representative for the benefit of the underwriters, Warrants to purchase up to 10% of the number of units sold at a price of $.01 per warrant. These Warrants are non-redeemable and may be exercised at a price per share equal to 135% of the initial public offering price of the common stock. See "UNDERWRITING". All funds received from the sale of the first 250,000 units will be deposited in an escrow account to be established at a federally insured national bank. If 250,000 units are not sold within 180 days following the effective date of this prospectus (the "Effective Date"), the offering will automatically terminate and all funds received from the sale of the units will be returned to the purchasers. We are also registering the common stock underlying the promissory note interests for up to an aggregate of $3,942,000 convertible into 4,380,000 shares of our common stock. We have executed promissory notes totaling $ 3,942,000 in favor of Alpine Pictures, Inc., Upon effectiveness of this registration statement, Alpine Pictures, Inc. (the "Selling Security holder") will distribute the promissory note to all of its shareholders, except Ryan Carroll and Roland Carroll, without cost to such shareholders as a dividend distribution. Alpine Pictures will not receive any proceeds from the distribution of the promissory note. The shareholders of Alpine Pictures may convert to shares of common stock at a conversion ratio of $0.90 per share that portion of the promissory note distributed to them at such time or times at their sole discretion. Before this offering, there hasn't been a public market for our common stock nor is our stock listed on any national securities exchange. No assurances can be given that a public market will ever develop following completion of this offering or that, if a market does develop, it will be sustained.
- ------------------------------------ -------------------------- ------------------------ ---------------------------- PRICE TO PUBLIC UNDERWRITING PROCEEDS TO COMPANY DISCOUNTS AND OR OTHER PERSONS (2) COMMISSIONS - ------------------------------------ -------------------------- ------------------------ ---------------------------- Per Unit $6.00 $0.60 $5.40 - ------------------------------------ -------------------------- ------------------------ ---------------------------- Minimum Offering - 250,000 $1,500,000 $150,000 $1,350,000 - ------------------------------------ -------------------------- ------------------------ ---------------------------- Maximum Offering -1,250,000 $7,500,000 $750,000 $6,750,000 - ------------------------------------ -------------------------- ------------------------ ----------------------------
3 NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------------------------- RH Investment Corporation 15760 Ventura Blvd. Suite 1732 Encino, California 91436 ------------------------------------------- Footnotes from previous page: (1) Does not include additional compensation to be paid to the Representative, if the offering is consummated, in the form of: (a) a warrant to purchase up to 10% of the number of units sold to the public at an exercise price per unit of 120% of the public offering price exercisable on the first anniversary of the Effective Date and expiring on the fifth anniversary (the "Representative's Warrants"); and (b) a non-accountable expense allowance equal to three percent of the aggregate initial public offering price of the units, namely $45,000 if the minimum offering is sold and $225,000 if the maximum offering is sold. SEE "UNDERWRITING." (2) Does not include offering costs estimated to be $160,000 for both the minimum offering and maximum offering. Following the completion of this offering, certain broker-dealers may be the principal market makers for the securities offered hereby. Under these circumstances, the market bid and asked prices for the securities may be significantly influenced by decisions of the market makers to buy or sell the securities for their own account. No assurance can be given that any market making activities of the market makers, if commenced, will be continued. In connection with this offering, certain underwriters may engage in passive market making transactions in the company's common stock on NASDAQ in accordance with Rule 103 of Regulation M. See "Underwriting". For at least one year following closing of this offering, we will be required by the securities exchange act of 1934 to file periodic reports and other information with the securities and exchange commission. Such material may be inspected at the commission's principal offices at Judiciary Plaza, 450 fifth street, N.W, Washington, DC 20459 or at its web site at http://www.sec.gov and copies may be obtained on payment of certain fees prescribed by the commission. We will furnish to holders of our common stock annual reports containing audited financial statements examined and reported upon, and with an opinion expressed by an independent certified public accountant. We may issue other unaudited interim reports to our shareholders, as we deem appropriate. 4 RISK FACTORS An investment in our common stock is speculative in nature and involves a high degree of risk. You should consider very carefully the following risk factors, as well as all other information explained elsewhere in this prospectus and the information contained in the financial statements, including all footnotes. WE'VE INCURRED OPERATING LOSSES, EXPECT CONTINUED LOSSES AND MAY NOT ACHIEVE PROFITABILITY. IF WE CONTINUE TO LOSE MONEY, WE MAY HAVE TO CURTAIL OUR OPERATIONS. The audited financial statements of Alpine of December 31, 1999, reflect a net loss of $13,385,315 during the twelve month period ended December 31, 1999, and an accumulated deficit of $21,138,561 at December 31, 1999. These conditions raise substantial doubt about our ability to continue as a going concern and if substantial additional funding is not acquired or alternative sources developed to meet our working capital needs, we will be required to curtail our operations. BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE OUR BUSINESS OR ACHIEVE PROFITABILITY. We were formed in November 1998 to distribute motion pictures and other entertainment media programming. We have no previous operating history other than through our subsidiary, Alpine Pictures International, Inc. which has had operations but has reflected losses since it commenced operations in 1996. Our management team faces the challenge of successfully acquiring and distributing motion pictures as well as other entertainment media programming. We may not be able to successfully acquire and distribute motion pictures or other entertainment media in order to achieve or maintain profitability. ALPINE'S PRIOR LOSSES Our operating subsidiary has incurred losses since its inception. There is no assurance that our revenues will grow or be earned at current levels, or that we'll be profitable. There is no assurance that we will not incur operating deficits in the future. EXISTING DEBT OF ALPINE We have executed two non-interest bearing convertible promissory notes in favor of Alpine Pictures, Inc., one of our shareholders, up to an amount not greater than $3,942,000 the principal amount borrowed is payable in full on December 31, 2001. As of June 30, 2000, we have borrowed an aggregate of $2,192,861. Our ability to repay these notes is dependent on our ability to successfully manage our business, implement our business strategy and achieve profitability. There is a possibility that we won't be able to repay all or any portion of these promissory notes. Our inability to pay these promissory notes could have a material adverse impact on our financial condition as well as on our affiliate's financial condition. See "RELATED TRANSACTIONS" WE MAY NEED AND BE UNABLE TO OBTAIN ADDITIONAL FUNDING ON SATISFACTORY TERMS, WHICH COULD DILUTE OUR SHAREHOLDERS OR IMPOSE BURDENSOME FINANCIAL RESTRICTIONS ON OUR BUSINESS. Future events, including the problems, delays, expenses and other difficulties frequently encountered by movie production companies may lead to cost increases that could make the net proceeds of this offering insufficient to fund our proposed operations. We may require additional financing. This may not be available on a timely basis, in sufficient amounts or on terms acceptable to us. This financing may also dilute existing shareholders' equity. Any debt financing or other financing of securities senior to common stock will likely include financial and other covenants that will restrict our flexibility. Alpine may seek additional sources of capital, including an additional offering of its equity securities, an offering of debt securities or obtaining financing through a bank or other entity. If we need to obtain additional financing, there's no assurance that financing will be available. 5 WE'RE UNCERTAIN OF OUR ABILITY TO ACQUIRE DISTRIBUTION RIGHTS TO FILMS THAT ARE COMMERCIALLY MARKETABLE. Our revenue is intended to come from the distribution of motion picture rights which we acquire from producers and owners of motion pictures. Our business is dependent on our ability to acquire rights to those motion pictures, which will be commercially successful. We may not have the resources necessary to acquire commercially marketable motion pictures. The acquisition of such rights and the distribution of those motion pictures are highly speculative. Furthermore, because each motion picture is an individual artistic work, its commercial success is primarily determined by an unpredictable audience reaction and costs involved with a film may be greater than its economic return, there's no assurance as to the economic success of any motion picture. MOTION PICTURE PRODUCTION AND DISTRIBUTION ARE HIGHLY COMPETITIVE Our competition for the acquisition of distribution rights to entertainment properties, includes major film studios such as The Walt Disney Company, Paramount Pictures Corporation, MCA, Columbia Pictures, Tri-Star Pictures, Twentieth Century Fox, Warner Brothers Inc. and MGM/UA, as well as numerous independent motion picture and television companies, broadcast television networks and pay television systems. With greater resources, these companies are able to pay more to acquire film properties and to distribute films to a greater market. OUR SUCCESS IN THEATERS MAY DETERMINE OUR SUCCESS IN OTHER MEDIA MARKETS The entertainment business, and the film and video industry in particular, are undergoing significant changes such that ancillary markets, including home video, pay-per-view, cable television and public television, have become increasingly important sources of revenue for us. If programs aren't well received in theatrical distribution or are not exhibited in theaters, their value in the ancillary markets may also be diminished. Our inability to distribute our products in such ancillary markets could have a material adverse impact on our financial condition. TELEVISION DISTRIBUTION IS SPECULATIVE AND RISKY Television distribution is highly speculative and inherently risky. The success of our television distribution business is affected by the same factors described above and may also be impacted by prevailing and fluctuating advertising rates. There is a substantial risk that some or all of our television projects will not be commercially successful, resulting in costs not being recouped or anticipated profits not being realized. BECAUSE WE HAVE A LIMITED OPERATING HISTORY, WE MAY NOT BE ABLE TO ACQUIRE A VARIETY AND SUFFICIENT NUMBER OF FILMS WHICH COULD RESULT IN A MATERIAL ADVERSE IMPACT ON OUR FINANCIAL CONDITION. We may not have the ability or sufficient capital to acquire a variety of films for distribution. If we are unable to diversify and acquire a variety of different films for distribution, then the failure of one or two films could have a material adverse impact on our financial condition, causing our shareholders to lose all or a substantial amount of their investment. SINCE THE DOMESTIC THEATRICAL DISTRIBUTION CHANNELS ARE DOMINATED BY MAJOR STUDIOS, WE MAY NOT BE ABLE TO SUCCESSFULLY DISTRIBUTE, IN THE DOMESTIC MARKET, INDEPENDENTLY PRODUCED FEATURE FILMS THAT WE ACQUIRE. We'll attempt to gain distribution of our motion pictures in all media forms including domestic theatrical distribution. The domestic theatrical market is dominated by several major motion picture studios that place their own films and films they acquire into such theaters. Because the domestic theatrical distribution channels are dominated by the major studios, we may not be able to successfully distribute, in the domestic market, independently produced feature films that we acquire. 6 WE DISTRIBUTE OUR MOTION PICTURES INTERNATIONALLY AND AS A RESULT WE ARE SUBJECT TO THE RISKS INHERENT IN CONDUCTING BUSINESS INTERNATIONALLY. We distribute motion pictures in both the international and domestic markets. We anticipate that a significant percentage of our revenues and income may come from foreign sources because our motion pictures are more marketable in the international market. Like other distributors, we distribute our films by granting exhibitors licenses that entitle a particular exhibitor the exclusive right to exhibit one of our motion pictures in a particular geographic zone in exchange for a percentage of revenues from motion picture exhibition. We have no continuing agreements or arrangement with any exhibitor because each License Agreement is negotiated separately. We market our motion pictures to exhibitors by maintaining a strong presence at international film festivals and through similar direct marketing methods. Because of our involvement in foreign markets, we are subject to the risks inherent in conducting business across international borders, including, but not limited to, currency exchange rate fluctuations, international incidents, military outbreaks, economic downturns, government instability, nationalization of foreign assets, government protectionism and changes in governmental policy, any of which could have a material adverse effect on the our business, operations and our prospects for the future. SPECULATIVE NATURE OF INVESTMENT The entertainment industry is extremely competitive and the commercial success of any motion picture or other program is often dependent on factors beyond our control. We may not be able to sell or license our programs because of industry conditions, general economic conditions, competition from other producers and distributors, or lack of acceptance for our programs by studios, distributors, exhibitors and audiences. We enter into distribution agreements with licensees on a film-by-film basis and we has no guarantees or understandings with any distributor or licensee to ensure or require it to distribute any film before that licensee enters into such agreement. We may also incur uninsured losses for liabilities which arise in the ordinary course of business in the entertainment industry, or which are unforeseen, including but not limited to copyright infringement, product liability, and employment liability. BECAUSE WE WILL BE HOLDING ALL INVESTMENT FUNDS IN AN ESCROW ACCOUNT, INVESTORS WILL NOT BE ENTITLED TO RETURN OF THEIR INVESTMENT DURING THE OFFERING PERIOD. If the minimum offering (250,000 units) is not sold by the expiration date, all funds received will promptly be returned to the investors thereof with interest at the same rate as paid by the escrow bank. Investors should be aware that investment funds will be held in an escrow account and investors will not be entitled to a return of their investment during the offering period. FUTURE DOMESTIC AND FOREIGN GOVERNMENT REGULATION COULD ADVERSELY IMPACT OUR FINANCIAL CONDITION. We will be subject to and affected by significant domestic and foreign government regulation. Foreign governments have imposed restrictions on American programming in several foreign countries. Domestic regulation governs the content and rating of motion pictures and other programming. Motion picture piracy, especially in foreign countries, may significantly reduce anticipated revenues. Government laws and regulations, whether existing today or adopted in the future, could adversely affect our ability to market exhibit programs. 7 WE RELY HEAVILY ON OUR KEY EMPLOYEES, AND THE LOSS OF THEIR SERVICES COULD MATERIALLY AND ADVERSELY AFFECT OUR BUSINESS. Our success is highly dependent upon the continued services of key members of our management, including our Chief Executive Officer and Director, Ryan Carroll and our President and Director, Roland Carroll. Ryan Carroll and Roland Carroll are also officers and directors of our affiliate, Alpine Pictures, Inc.. Virtually all decisions concerning the conduct of the business of Alpine, including the properties and rights to be acquired by Alpine and the arrangements to be made for such distribution, are made by or controlled by Messrs. Carroll. Currently, both Ryan and Roland Carroll either directly or indirectly spend 100% of their time working for the Company and its affiliates and subsidiaries. These efforts are intended to ultimately accrue to the benefit of the Company as a whole. The loss either Ryan Carroll or Roland Carroll could have a material adverse effect on our Company. Currently, we do not have "key man" life insurance policies on any of our executive officers. CERTAIN OFFICERS OR DIRECTORS MAY PARTICIPATE IN POSSIBLE CONFLICTING ACTIVITIES Our officers and directors have participated in and may continue to participate in other entities that engage in activities similar to ours. As a result, conflicts of interest may arise. Ryan Carroll, who serves as our Chief Executive Officer and as one of our directors, is a director and principal shareholder in Alpine Pictures International, Inc.. He is also a director, and principal shareholder of Alpine Pictures, Inc., which is an affiliate of our company, in addition to serving as that company's secretary. Ryan Carroll is also a director and principal shareholder of Carroll Media, Inc., which is also an affiliate of our company. Mr. Carroll also serves as the Chairman of Teleshare, Inc.'s Board of Directors as well as being one of that company's principal shareholders. Roland Carroll, who serves as our President as well as one of our directors, is a principal shareholder and director of Alpine Pictures International, Inc.. Roland Carroll also serves as the President and Chairman of the Board for Alpine Pictures, Inc. in addition to being one of that company's principal shareholders. He is also a principal shareholder in Carroll Media, Inc. and serves as that company's Chairman of the Board and President. In addition to being a principal shareholder in Teleshare, Inc., Mr. Carroll serves as one of that company's directors. Greg Cozine, who serves as our Vice President of Finance and as one of our directors, is a director of Alpine Pictures International, Inc.. He also serves as a vice president of Alpine Pictures, Inc. and is a shareholder of that company. Rene Torres, who serves as our Vice President of Foreign and Domestic Sales, also serves as the President of Alpine Pictures International, Inc.. Tom Hamilton, who serves as our Vice President of Marketing and Production, is also the secretary and executive vice president of Alpine Pictures International, Inc. SEE "MANAGEMENT - Possible Conflicts of Interest." WE'VE NEVER PAID DIVIDENDS AND WE DON'T EXPECT TO PAY DIVIDENDS IN THE FUTURE Because we've incurred operating losses since inception, we haven't paid cash dividends on our common stock and we don't expect to pay cash dividends on our common stock in the foreseeable future. INVESTORS WILL SUFFER IMMEDIATE DILUTION IN VALUE OF THEIR SHARES PURCHASED. The initial public offering price of the units is $6.00. The price paid for the unit and the value ascribed to the share contained in this prospectus is greater than the net tangible book value of our common stock. Investors will sustain immediate dilution of between $3.86 (based on the maximum offering) and $6.73 (based on the minimum offering) per share based on our net tangible book value as of June 30, 2000. Existing shareholders acquired their shares at a price substantially lower than offering price paid by investors and, accordingly, the new investors will bear a disproportionate part of the financial risk associated with our business. In addition, we have executed convertible promissory notes for the aggregate amount of $3,942,000 at a conversion ratio of $0.90 of promissory note principal for each share of common stock. If all such shares are converted, we may issue 4,380,000 shares of common stock at a value of $0.90 per share, which will result immediate and substantial dilution of the value of the shares of common stock offered herein. SEE "DILUTION." 8 ISSUANCE OF ADDITIONAL COMMON STOCK WILL RESULT IN THE DILUTION OF EXISITING SHAREHOLDERS Our Certificate of Incorporation, as amended, authorizes the issuance of a maximum of 100,000,000 shares of common stock and 20,000,000 shares of "non-designated" preferred stock. There are currently 1,582,500 shares of common stock outstanding and no shares of preferred stock outstanding. The future issuance of all or part of the remaining authorized common stock could result in substantial reduction in the percentage of our common stock held by current shareholders, including the investors in this offering. In addition, we may issue an aggregate of 4,380,000 shares of our common stock upon conversion of the outstanding promissory note principal if we borrow the entire amount of funds available in the promissory note with Alpine Pictures. IF WE DECIDE TO ISSUE PREFERRED STOCK WITH CERTAIN RIGHTS AND PREFERENCES, SUCH AN ISSUANCE MAY DEPRESS THE MARKET PRICE OF OUR COMMON STOCK. We currently have 20,000,000 shares of non-designated preferred stock authorized by our amended and restated articles of incorporation. To date, we have not issued any shares our preferred stock. However, the Board of Directors may designate voting and other preferences without shareholder consent which designations may give the holders of the preferred stock voting control and other preferred rights such as liquidation and dividends. The authority of the Board of Directors to issue such stock without shareholder consent may depress the market price of our common stock. THE POSSIBILITY OF ISSUING PREFERRED STOCK FOR ANTI-TAKEOVER EFFECT COULD PREVENT TAKEOVERS FAVORED BY SHAREHOLDERS The Board of Directors has the authority, without further approval of our stockholders, to issue preferred stock, having such rights, preferences and privileges as the Board of Directors may determine. Any such issuance of shares of preferred stock could have the effect of delaying or preventing a change in control of Alpine or other take-over attempt and could adversely materially affect the rights of holders of shares of the common stock. OUR OFFICERS AND DIRECTORS HAVE LIMITED LIABILITY AND ARE INDEMNIFIED BY THE COMPANY Our Certificate of Incorporation, as amended, and By-Laws provide for indemnification of our officers and directors against losses sustained or liabilities incurred which arise from any transaction in such officer's or director's respective managerial capacity unless such officer or director violates a duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend, or derived an improper benefit from the transaction. Our Certificate of Incorporation, as amended, and By-Laws also provide for the indemnification of our officers and directors against any losses or liabilities incurred as a result of the manner in which such officers and directors operate our business or conduct our internal affairs, provided that in connection with these activities they act in good faith and in a manner which they reasonably believe to be in, or not opposed to, the best interests of the Company, and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations. BECAUSE OUR COMMON STOCK MAY BE SUBJECT TO PENNY STOCK REGULATION, THE LEVEL OF TRADING IN OUR COMMON STOCK MAY BE REDUCED Broker-dealer practices in connections with transactions in "penny stocks" are regulated by certain penny stock rules adopted by the Securities and Exchange Commission. There has been no public market for our common stock. If a market for our common stock develops we may be subject to the penny stock rules set forth by the Securities and Exchange Commission. Generally, penny stocks are equity securities with a price of less than $5.00 per share (other than securities registered on certain national securities exchanges or quoted on the NASDAQ). The penny stock rules require a broker-dealer, before a transaction in a penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, and if the brker-dealer is the sole market maker, the broker-dealer must disclose this fact and the broker dealer's presumed control over the market, and monthly account statements showing the market value of each penny stock held in the customer's account. In addition, broker-dealers who sell these securities to persons other than established customers and "accredited investors" must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction. Consequently, these requirements may have the effect of reducing the level of trading activity, if any, in the secondary market for a security subject to the penny stock rules, and investors in our common stock may find it difficult to sell their shares. 9 ADDITIONAL SHARES WILL COME INTO MARKET AS SHARES BECOME AVAILABLE FOR RESALE UNDER RULE 144 All of our issued and outstanding shares are "restricted securities" as such term is defined in Rule 144 ("Rule 144") promulgated under the Securities Act of 1933 (the "1933 Act"). In general, under Rule 144, if adequate public information is available with respect to a company, a person who has satisfied a one year holding period as to his restricted securities or an affiliate who holds unrestricted securities may sell, within any three month period, a number of that company's shares that does not exceed the greater of one percent of the then outstanding shares of the class of securities being sold or, if the security is trading on the NASDAQ Stock Market or on an exchange, the average weekly trading volume during the four calendar weeks before such sale. Sales of restricted securities by a person whom is not an affiliate of the Company (as defined in the 1933 Act) and who has satisfied a two-year holding period may be made without any volume limitation. The outstanding restricted securities of the Company may become eligible for sale in the public market pursuant to Rule 144 without additional capital contribution to the Company. Possible or actual sales of our outstanding common stock by all or some of the present stockholders may have a material adverse effect on the market price of our common stock should a public trading market develop. NO ASSURANCE THAT A PUBLIC MARKET WILL DEVELOP FOR OUR COMMON STOCK. There is no assurance that a public trading market for our common stock will develop or that a public trading market, if developed, will be sustained. If for any reason our common stock is not listed on the NASD's OTC Bulletin Board or a public trading market does not otherwise develop, investors may have difficulty selling their common stock or warrants should they desire to do so. WE WILL LIMIT THE NUMBER OF STATES IN WHICH WE REGISTER OUR SHARES. We anticipate that we will primarily sell the Shares in a limited number of states, depending on the location and registration of any selling broker or dealer that we locate. We have not yet ascertained which states we'll qualify and/or register the sale of the units. We may be limited in our ability to achieve registration and qualification in some states. We can't guarantee that all states will approve our registration or qualification. We will not accept subscriptions from investors residing in other states unless we effect a registration therein or determines that no such registration is required. Furthermore, in order to comply with the applicable securities laws, if any, of certain states, the securities will be offered or sold in such states through registered or licensed brokers or dealers in those states. In addition, in certain states, the securities may not be offered or sold unless they have been registered or qualified for sale in such states or an exemption from such registration or qualification requirement is available and with which we have fully complied. FORWARD LOOKING STATEMENTS This prospectus contains forward-looking statements. These forward-looking statements include, but are not limited to, statements about our industry, plans, objectives, expectations, intentions and assumptions and other statements contained in the prospectus that are not historical facts. When used in this prospectus, the words "expect," "intend," "expect," "may," "seek," "believe," "estimate," "should," "plan," "projected," "contemplates," "anticipate," and similar expressions are generally intended to identify forward-looking statements. Because these forward-looking statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by these forward-looking statements. AVAILABLE INFORMATION We have filed with the Securities and Exchange Commission (the "Commission") a registration statement on Form SB-2 under the Securities Act with respect to the securities offered hereby. This prospectus does not contain all the information contained in that registration statement. For further information regarding the Company and the securities offered hereby, reference is made to the registration statement, including all exhibits and schedules thereto, which may be inspected without charge at the public reference facilities of the Commission's Washington, D.C. office, 450 Fifth Street, N.W., Washington, D.C. 20549. Each statement contained in this prospectus with respect to a document filed as an exhibit to the registration statement is qualified by reference to the exhibit for its complete terms and conditions. 10 We will be subject to the informational requirements of the Securities Exchange Act of 1934 ("Exchange Act") and in accordance therewith will file reports and other information with the Commission. Reports, proxy statements and other information filed by the Company can be inspected and copied on the Commission's home page on the World Wide Web at http://www.sec.gov or at the public reference facilities of the Commission, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, as well as the following Regional Offices: 7 World Trade Center, Suite 1300, New York, N.Y. 10048; and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois. 60661-2511. Copies can be obtained from the Commission by mail at prescribed rates. Request should be directed to the Commission's Public Reference Section, Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. We intend to furnish our stockholders with annual reports containing audited financial statements and such other reports as may be required by law. USE OF PROCEEDS If the maximum offering is sold, the proceeds to the Company will be $6,750,000 and if the minimum offering is sold, the proceeds to Company will be $1,350,000. We will use the proceeds from this offering to acquire distribution rights to motion pictures or other entertainment media properties and to develop our business plan by participating other aspects of the film industry such as the acquisition, production and sale of entertainment media properties, companies, or the assets of companies through affiliates or joint venture or other relationships. We may engage in such activities through subsidiaries. We intend to use the net proceeds as described in the following table: Minimum Offering Maximum Offering Total Proceeds $1,500,000 $7,500,000 Commissions or underwriting fees $ 150,000 $ 750,000 Offering expenses $ 160,000 $ 160,000 Administrative and marketing expenses $ 480,000 $ 660,000 Acquisition of entertainment media properties $ 461,500 $3,854,500 Co-production $ 142,000 $1,186,000 Development $ 35,500 $ 296,500 Contingency $ 71,000 $ 593,000 Our primary focus is to expand and implement our business model through the acquisition of media properties. We may use the proceeds of this offering toward operating expenses as necessary and in accordance with our business plan. We believe that the proceeds from the minimum offering in addition to the current revenues from our operations will be sufficient to fund our operations for the next 12 months. If an amount less than maximum offering is raised, we may be required to delay, scale back or eliminate parts of our development plan or obtain funds through additional financing, including loans or additional offerings of our securities. We have executed non-interest bearing convertible promissory notes in favor of one of our shareholders, Alpine Pictures, Inc., for an aggregate of $3,942,000 against which we has borrowed for the benefit of APII, as of the date hereof, a total of $2,192,861. We expect to utilize the full proceeds of the promissory note to further its business plan through program rights acquisition and subsequent development. The promissory note is convertible into shares of our common stock at a conversion ratio of $.90 of outstanding loan amount per share converted. If we receive revenues greater than the minimum offering amount, then we will be able to implement our business plan fully and expeditiously. 11 Our primary goal is to increase our inventory and ownership percentage of film and/or television properties. This is done through acquisition, development and co-production. As evidenced in the use of proceeds chart, the majority allocation of proceeds is intended for the acquisition of entertainment and media properties. Generally speaking, with regards to our industry, it can be said that the acquisition of properties carries with it far less risk than the actual production of such properties. However, we do intend to use a portion of the proceeds for the co-production of properties. The strength of our subsidiary, Alpine Pictures International Inc., is in the international market where our executive in charge have established business relationships with most all of the major buyers and distributors. These relationships enable us to enter into co-production deals with domestic buyers/distributors with the domestic partner concentrating on the market in the United States and Alpine Pictures International, Inc., focusing on the international market. This co-production model was a contributing factor to the formation of our wholly owned subsidiary, Alpine Television, Inc.. We will also use development money to gain equity interest and distribution rights in a project from the very beginning. These monies are used to lock down a script or buy an option on a certain property for a certain amount of time. This allows us to shop the project to our international and domestic buyers. If there is enough interest from our buyers to warrant further investment, we will use some of these proceeds to attach a director, producer, and talent to the project. DETERMINATION OF OFFERING PRICE We anticipate that the initial offering price of the Units will be $6.00 per unit. The exercise price for the Warrant contained in each Unit is also $6.00. We have ascribed an offering price value or $5.00 per share and $1.00 per warrant or $6.00 per unit. The offering price of the Units and the exercise price of the Warrants were arbitrarily determined by our management and RH Investment Corporation and are not necessarily related to asset or book value, net worth or any other established criteria of value. We have ascribed an offering price value of $5.00 per share and $1.00 per warrant contained in the Units for a Unit offering price of $6.00. DILUTION As of June 30, 2000, we had a net tangible book value of ($2,561,118) or ($1.62) per share. This represents an immediate dilution to investors in the offering of between $3.86 per share (based on the maximum offering ) and $6.73 per share (based on the minimum offering) assuming a $6.00 per Unit offering price, and an aggregate increase in net tangible book value to present shareholders of $3.76 and $2.35 per share (based on the maximum and minimum offering respectively). The following table illustrates such effect: Maximum Minimum Offering Offering Initial public price per unit $6.00 $6.00 Net tangible book value before offering $(1.62) $(1.62) Increase per share attributable to new investors $3.76 $2.35 Net tangible book value per share after offering $2.14 $(.73) Dilution per share to new investors $3.86 $6.73 12 The following table sets forth, on a pro forma basis, the differences between existing shareholders, new investors and promissory note holders, assuming conversion of the full amount of the available promissory notes, in the offering with respect to the number of shares of common stock purchased from Alpine, the total consideration paid to Alpine and the average price per share paid by existing shareholders and by new investors (assuming a $5.00 per share offering price): Minimum Offering:
- ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Number Percentage of Consideration Percentage Average Outstanding Paid Of Total Price per Shares Paid Consideration Share - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Existing Shareholders 1,582,500 25.5% $503 *% $0.00032 - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- New Investors 250,000 4% $1,250,000 24.1% $5.00 - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Conversion of Notes 4,380,000 70.5% $3,942,000 75.9% $0.90 - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Total 6,212,500 100% $5,192,503 100% - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Maximum Offering: - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Number Percentage of Consideration Percentage Average Outstanding Paid Of Total Price per Shares Paid Consideration Share - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Existing Shareholders 1,582,500 21.9% $503 *% $0.00032 - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- New Investors 1,250,000 17.3% $6,250,000 61.3% $5.00 - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Conversion of Notes 4,380,000 60.7% $3,942,000 38.7% $0.90 - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- Total 7,212,500 100% $10,192,503 100% - ---------------------------------- -------------- ---------------- ----------------- ------------------- ------------- * Less than .01%
SELLING SECURITY HOLDER On August 6, 1999 and May 5, 2000, we executed convertible promissory notes, without interest, in favor of Alpine Pictures, Inc., for an amount up to $3,942,000. The notes are payable in full on December 31, 2001. As of the date hereof, we have borrowed an aggregate of $2,192,861. Upon effectiveness of this registration statement, Alpine Pictures, Inc., intends to distribute promissory note interests for the full amount of the promissory notes to all of its 2,149 shareholders with the exception of Messrs. Ryan Carroll and Roland Carroll. Although Messrs. Roland and Ryan Carroll are directors, officers and controlling shareholders of Alpine Pictures, Inc. they will not receive a proportionate interest in the promissory notes. The holders of the promissory notes may convert their interest into shares of our common stock at a conversion ratio of $0.90 of promissory note principal for each share of common stock. The distribution of the securities by Alpine Pictures, Inc., and the possible conversion thereof by the shareholder receiving such distribution into shares of common stock of the Company will likely have an adverse effect on the market price of the common stock being offered for sale by the Company. The freely tradable shares of common stock (the "public float") upon effectiveness of this registration statement (other than exercise of the Warrants), assuming all Units are sold and the full amount of the outstanding promissory note are converted, will be 7,212,500 shares of common stock, of which 4,380,000 are to be distributed by Alpine Pictures to its shareholders without remuneration assuming conversion. 13 UNDERWRITING - PLAN OF DISTRIBUTION Subject to the terms and conditions set forth in the Underwriting Agreement by and among the Company, RH Investment Corporation (as the representative of the underwriters) and the underwriters (the "Underwriting Agreement"), the underwriters, as explained below, have agreed to make a best efforts offering of the our units, each unit consisting of one share of common stock and one warrant for the purchase of one share of common stock at an exercise price of $6.00 per share for a exercise period of 36 months commencing on the Effective Date of this prospectus. The warrants may be separated and sold separately from the common stock after sale. Underwriter Number Of Units -------------------------------------------------------------------- RH Investment Corporation 250,000 TOTAL: 250,000 The following summaries of certain terms and conditions of the Underwriting Agreement and the Representative's Warrants do not purport to be complete statements of the terms and/or contents of such agreements. Copies of the Underwriting Agreement and Representative's Warrants have been filed with the Commission as exhibits to the registration statement and are also on file at the offices of the Representative and Alpine. Reference is hereby made to each such exhibit for a detailed description of the provisions thereof which have been summarized above. SEE "AVAILABLE INFORMATION." Minimum Offering And Escrow Account In order to effect the offering, the underwriters must sell at least the minimum number of units within 180 days of the effectiveness of this registration statement. Our officers, directors and affiliates may not purchase the units in this offering in order to reach the minimum offering amount. If the minimum number of units is not sold by that date, then the offering will terminate and all funds received from sales of the units will be promptly returned to the purchasers. Funds received from the sale of the first 250,000 units will be deposited in a special escrow account to be established at City National Bank, a federally insured national bank. After the minimum offering has been sold, funds received from additional sales will be sent directly to the Company. At the time that the 250,000 units have been sold (the minimum offering) before the termination date, we will release the funds from the escrow account for deposit into our working account. Although the Underwriters will continue to sell the Offering, on a best efforts basis, to attempt to reach the maximum offering (1,250,000 units), we will use the released funds, at that time, as described herein. Maximum Offering No more than 1,250,000 units will be sold. The offering will automatically terminate when purchases for such number of units have been made. Underwriters Compensation We have agreed to give to the underwriters, as a commission for the sale of the units, an amount equal to 10% of the aggregate purchase price of the units sold by the underwriters. We have agreed to pay the Representative a Non-Accountable Expense Allowance equal to 3% of the aggregate offering price of the units of which $5,000 per month, commencing May, 1999, of which $20,000 has been advanced to the Representative. In accordance with the provisions of the Underwriting Agreement, in the event that the public offering is terminated for any reason, the Representative will be reimbursed for all accountable expenses incurred by it not to exceed an aggregate of $85,000. Any amounts previously paid will be credited against any amounts due. 14 As part of the consideration to the Representative for its services in connection with the public offering described in this prospectus, we have agreed to sell to the Representative for the benefit of the Underwriters, Warrants to purchase an aggregate of up to 10% of the number of units sold in this offering at a price of $0.01 per warrant ("Warrant Price"). The Representative's Warrants will be non-redeemable and will be exercisable at an exercise price per share equal to 135% of the initial public offering price of the common stock. The Representative's Warrants will be restricted from exercise, sale, transfer, assignment or hypothecation, except to officers of the Representative and members of the selling group and/or their officers or partners, for a period of one year from the Effective Date and will, thereafter, be exercisable for a period of four years. We, together with the Representative, have arbitrarily determined the exercise price of the Representative's Warrants. The exercise price should not be deemed to reflect any estimate of the intrinsic value of either the Representative's Warrants, the units or the common stock. The Representative's Warrants will contain anti-dilution and adjustment provisions in the event of any merger, acquisition, recapitalization, split-up of shares, stock dividend, sales or issuance of stock or securities convertible into stock by the company at a price or conversion price less than the exercise price of the Representative's Warrants or less than the market price of the common stock at the time of such sale or indebtedness or similar event, except for dilution which would result from issuance under any stock incentive or option plan, reasonably acceptable to the Representative. In connection with the underwriting of the our public offering, we granted to the Representative certain "piggy back" and "demand" registration rights. Under the terms of the Underwriting Agreement, we granted to the Representative, for five years from the Effective Date, the right to include for registration, the Representative's Warrants (including the underlying common stock) if we file a registration statement under the Securities Act of 1933 relating to the public sale of any of its securities. Consequently, the "piggy back" registration rights are only operative if we otherwise file a registration statement. In addition, we agreed to register under the Securities Act, at its expense, the Representative's Warrants (including the underlying common stock), upon the request of the holders of 50% or more of the Representative's Warrants. Consequently, the "demand" registration rights may be exercised only if the requisite percentage of holders of the Representative's Warrants request registration thereof. Such request may be made at any time during the exercise period of the Representative's Warrants. During the period in which the Representative's Warrants are exercisable, the holders thereof are given the opportunity to profit from a rise in the market price of the units, the common stock and the warrants which may result in a dilution of the interest of the stockholders. We may find it more difficult to raise additional equity capital if it should be needed for its business while the Representative's Warrants are outstanding. At any time when the holders thereof might be expected to exercise such warrants, the company would probably be able to obtain additional equity capital on terms more favorable than those provided by the Representative's Warrants. Any profit realized on the sale of securities issuable upon the exercise of the Representative's Warrants may be deemed additional underwriting compensation. Lock Up Agreement The Company has agreed that it will cause its officers, directors and holders of more than 5% of its common stock, to enter into an agreement not to sell or otherwise dispose of, without the consent of the Representative, any of the Company's equity securities for one year following the Effective Date. For five years from the Effective Date, the Company, its officers, directors and holders of more than 5% of its common stock will provide the Representative with prior notice of any sales of the Company's equity securities to be made under Rule144. As of the date of this prospectus, none of the Company's officers, directors or beneficial owners have executed the lock up agreement. 15 The Underwriters We are offering the units to the public at a price of $6.00 per unit. The units are offered by the Underwriters subject to receipt and acceptance by them, to the Underwriters' right to reject any order in whole or in part, to approval of certain legal matters by counsel and to certain other conditions. The Representative has advised us that sales to certain dealers may be made at the public offering price less a concession not in excess of 10% or $.60 per unit. After our public offering of the units, the public offering price and other selling terms may be changed by the Representative. The Representative does not intend to confirm sales of more than one percent of the units offered hereby to any accounts over which it exercises discretionary authority. Indemnification We have agreed to indemnify the Representative and others against certain liabilities, including liabilities under the Securities Act. Insofar as indemnification for liabilities arising under the Securities Act may be provided to our officers, directors or control persons, We have been informed that, in the opinion of the Commission, such indemnification is against public policy and is therefore unenforceable. The Representative has agreed to not indemnify the Company, its directors, and each person who controls it within the meaning of Section 15 of the Securities Act with respect to any statement in or omission from the registration statement or the prospectus or any amendment or supplement thereto if such statement or omission was made in reliance upon information furnished in writing to the Company, or any of its agents, by the Representative specifically for or in connection with the preparation of the registration statement, the prospectus, or any such amendment or supplement thereto. On October 29, 1998, a principal of the Representative, Stuart S. Greenberg, was given a 10 day suspension from association with any NASD member firm, a censure and a $10,000 fine for failure to maintain sufficient net capital in the brokerage firm's account. Mr. Greenberg was not in the employ of the Representative at the time of the action by the regulatory agencies. Market Making Upon meeting certain requirements of the NASDAQ SmallCap Market, we intend to apply for NASDAQ listing. If we are accepted for listing then certain underwriters may engage in passive market making transactions in our Common Stock in accordance with Rule 103 of Regulation M. Following the completion of this offering, certain broker-dealers may be the principal market makers for the securities offered hereby. Under these circumstances, the market bid and asked prices for the securities may be significantly influenced by decisions of the market makers to buy or sell the securities for their own account. No assurance can be given that any market making activities, if commenced, will be continued. LEGAL MATTERS LEGAL PROCEEDINGS We are not a party to any litigation and management has no knowledge of any threatened or pending litigation against us. SECURITIES AND EXCHANGE COMMISSION AND STATE INVESTIGATIONS OF AFFILIATES In 1996, the United States Securities and Exchange Commission began investigating Alpine Pictures, Inc., and several partnerships in which it was involved to determine whether Alpine Pictures fully complied with the registration provisions of the Securities Act of 1933 in connection with the offering of securities. Alpine Pictures, Inc. settled the dispute by consenting to an injunction against future violations of securities laws. It did not, however, admit nor deny the allegations of the Securities and Exchange Commission. 16 In January, 1998, Cavalier Partners L.P. consented to an order from the State of Michigan to cease and desist from any violation of the Michigan securities laws and paid administrative costs in the amount of $750. Paul Miller, an officer of Alpine, served as general partner of Cavalier Partners L.P. On November 17, 1997, the Department of Corporations for the State of California issued a desist and refrain order against Alpine Pictures, Inc., Roland Carroll, Ryan Carroll and Carroll Media, Inc., which requires them to desist and refrain from the offer or sale in California of any unqualified or non-exempt security. The order does not address any specific offering. On July 9, 1999, the State of California filed a complaint against Teleshare, Inc., a California telecommunications company for which Messrs. Roland and Ryan Carroll served as directors, Alpine Pictures, Lord Protector, Cavalier Partners, Roland Carroll, Ryan Carroll and Stewart Whipple (the president of Teleshare) alleging violations of the California Corporation Code and seeking a permanent injunction against the defendants against further violations of the California Corporation Code; rescission offers to certain purchasers of the Lord Protector and Cavalier Partners partnership interests; and payment of fees to offset the court administrative and investigative costs. The parties have filed a stipulation to entry of final judgment of permanent injunction and ancillary relief without admitting or denying the allegations in the complaint. In accordance with the stipulation to entry of final judgment, the parties consented to a final judgment of permanent injunction and agreed to pay administrative fees, payable in installments. Alpine Pictures, Inc., is current in all payment installments to be paid to the California Commissioner of Corporations. The injunction prevents Alpine Pictures, Inc., Lord Protector Partners, Cavalier Partners, Stewart Whipple, Roland Carroll and Ryan Carroll from offering to sell, selling, or engaging in the business of selling any securities of any kind in violation of the qualification or exemption requirements of the California Corporations Code Section 251110. On June 23, 1999, Alpine Pictures entered into a settlement agreement with the State of Illinois agreeing to make a rescission offer to three investors in regard to such investors' purchase of securities of Alpine Pictures aggregating less then $10,000 which sales were made in reliance on certain exemptions from registration in Illinois before completion of the required filings thereto. In accordance with the settlement agreement, Alpine Pictures offered rescission to each of the three investors within 5 business days after the entry of the Order to Dismiss and Settlement Agreement. None of the investors requested the return of their investment. Accordingly, none of the proceeds from this offering will be used in the rescission. 17 MANAGEMENT OFFICERS AND DIRECTORS The executive officers and directors of our Company and their ages are as follows: Name Age Position - -------------------------------------------------------------------------------- Ryan Carroll 43 Chief Executive Office, Chairman of Board Roland Carroll 46 President, Director Greg Cozine 43 Vice President of Finance and Sales Director Rene Torres 45 Vice President of Foreign/ Domestic Sales Tom Hamilton 58 Vice President of Marketing and Production Ernani V. Di Massa 55 Director of Television Operations Scott Towle 55 Executive Programming Consultant All directors hold office until the next annual meeting of stockholders and until their successors are elected. Officers are elected to serve, subject to the discretion of the Board of Directors, until their successors are appointed. Ryan J. Carroll has served as a directors and our Chief Executive Officer since 1998. Mr. Carroll has been a director and principal shareholder of Alpine Pictures International, Inc. since its inception in July 1996. Since its inception in September, 1995, Mr. Carroll has been the secretary, a director and a principal shareholder of Alpine Pictures, Inc., an affiliated motion picture production company. Mr. Carroll is also a 50% shareholder and serves as a director and secretary of Carroll Media, Inc., an affiliated California corporation engaged in the entertainment business, since its inception in January 1994. From February 1996 to the present, Mr. Carroll has served as chairman of the board and a principal shareholder of Teleshare, Inc., a California telecommunications corporation. In 1981, Mr. Carroll was appointed Artistic Director of Chicago's Mantisis Theater Company. From 1985 to 1986, Mr. Carroll served as Artistic Director with Paragon Arts International, Inc., a Los Angeles based independent finance, production and distribution company. From 1986 to 1988, Mr. Carroll served as president of G.C.O. Pictures, Incorporated, an independent film production company he co-founded with Roland Carroll. Mr. Carroll was an executive producer of Season of Fear, a film distributed by MGM/UA. Mr. Carroll received his C.F.A. degree in 1982 from the Goodman School of Drama at DePaul University in Chicago, Illinois. On November 17, 1997, the Department of Corporations for the State of California issued a desist and refrain order against Alpine Pictures, Inc., Roland Carroll, Ryan Carroll and Carroll Media, Inc., which requires them to desist and refrain from the offer or sale in California of any unqualified or non-exempt security. The order does not address any specific offering. On July 9, 1999, the State of California filed a complaint against Teleshare, Inc., Alpine Pictures, Lord Protector, Cavalier Partners, Roland Carroll and Ryan Carroll alleging violations of the California Corporation Code and seeking (i) a permanent injunction against the defendants against further violations of the California Corporation Code (ii) recission offers to certain purchasers of the Lord Protector and Cavalier Partners partnership interests and (iii) payment of fees to offset the court administrative and investigative costs. The defendants have filed a stipulation with the court for entry of a permanent injunction and the other requested relief. 18 Roland Carroll has served as a director and our President since 1998. Mr. Roland has been a principal shareholder and director of Alpine Pictures International, Inc. since its inception in July 1996. Since its inception in September 1995, Mr. Carroll has served as the president, chairman of the board and a principal shareholder of Alpine Pictures, Inc., an affiliated motion picture production company. Mr. Carroll is also a 50% shareholder, chairman of the board and president of Carroll Media, Inc., an affiliated California corporation engaged in the entertainment business, since its inception in January 1994. From February 1996 to the present, Mr. Carroll has served as a director and a principal shareholder of Teleshare, Inc., a California telecommunications corporation. In 1985, Mr. Carroll co-founded and served as president of Paragon Arts International, a Los Angeles based independent finance, production and distribution company. From 1986 to 1988, Mr. Carroll served as an executive producer at G.C.O. Pictures, located in Los Angeles, California, overseeing the production of the feature length film Season of Fear. Mr. Carroll has served from time to time as an independent consultant for the production of television programming. Mr. Carroll attended the University Southern California School of Cinema/Television from 1979 to 1981. On November 17, 1997, the Department of Corporations for the State of California issued a desist and refrain order against Alpine Pictures, Inc., Roland Carroll, Ryan Carroll and Carroll Media, Inc., which requires them to desist and refrain from the offer or sale in California of any unqualified or non-exempt security. The order does not address any specific offering. On July 9, 1999, the State of California filed a complaint against Teleshare, Inc., Alpine Pictures, Lord Protector, Cavalier Partners, Roland Carroll and Ryan Carroll alleging violations of the California Corporation Code and seeking a permanent injunction against the defendants against further violations of the California Corporation Code; recession offers to certain purchasers of the Lord Protector and Cavalier Partners partnership interests; and payment of fees to offset the court administrative and investigative costs. The defendants have filed a stipulation with the court for entry of a permanent injunction and the other requested relief. Greg Cozine has served as a director and our Vice President of Finance since 1998. In addition, Mr. Cozine has served as a director of Alpine Pictures International, Inc. since March, 1997. Since January 1996, Mr. Cozine has served as a vice president and a shareholder of Alpine Pictures, Inc., an affiliated motion picture production company. From 1990 to 1992, Mr. Cozine was manager of operations and senior marketing consultant for Gold Shore Land Corporation, Los Angeles, California where he managed all sales for a real estate development project located north of Los Angeles, California. From 1987 to 1990, Mr. Cozine was founder and chief executive officer of NCN Financial Group, Inc. where he handled various financial products including energy related joint ventures and feature film venture capital projects. Rene Torres has served as president of Alpine Pictures International, Inc., since 1996. From 1996 to 1999, Mr. Torres served as President of Meridian Pictures, Inc., an independent film company located in Irvine, California. While at Meridian, Mr. Torres was responsible for the implementation and supervision of limited partnership offerings that funded film production. In 1985, Mr. Torres was a founding member of Paragon Arts International, a Los Angeles based independent finance, production and distribution company. In 1990, Mr. Torres served as the president of Box Office Partners, located in Los Angeles, California, which company participated in the acquisition of The Kid, starring C. Thomas Howell, Metamorphosis, The Alien Factor, a high-tech science fiction film, and The Treasure, a family adventure. Mr. Torres received his Bachelor of Arts degree in Marketing from Milwaukee Area Technical College in 1976. Tom Hamilton has served as secretary and executive vice president of Alpine Pictures International, Inc. From 1985 to 1990, Mr. Hamilton has worked as an associate producer of motion pictures at Paragon Arts International, a Los Angeles based independent finance, production and distribution company. From 1990 to 1992, Mr. Hamilton was the executive vice president-director of European operations for Euro-Films, Inc., a Franco American international film finance and distribution company. Mr. Hamilton was based in Paris, France where he was responsible for all European markets. Mr. Hamilton attended the University of Grenoble in Grenoble, France in 1969. Ernani V. Di Massa has served as the Director of Television Operations for our wholly owned subsidiary, Alpine Television, Inc., since September, 1998. From 1996 to 1998, Mr. Di Massa was an independent producer and formed Di Massa Productions, Inc. Mr. Di Massa is currently working on several television projects including a new talk show, a variety show, a medical series, and a game show. From 1989 to 1996, Mr. De Massa was vice president of programming development and later senior vice president of programming and development for KingWorld. From 1982 until 1989, Mr. Di Massa produced and wrote for several television executives and television talent. Before 1982, Mr. Di Massa worked for the NBC Television Network where he produced the Regis Philbin Show and helped create the network daytime hour Fantasy. Mr. Di Massa obtained his Bachelors of Science in Psychology from LaSalle University in 1969. He obtained a Masters Degree in clinical psychology from Temple University in 1971. Scott Towle has been an Executive Programming Consultant for our wholly-owned subsidiary, Alpine Television, Inc., since March, 1999. Before joining the Company, Mr. Towle was the President of Domestic Distribution for KingWorld, a domestic supplier of first run programming for television. From 1986 to 1990, Mr. Towle was the president of Domestic Distribution for Orion Television. 19 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The following table sets forth certain information as of the Effective Date of this Prospectus regarding the beneficial ownership of our Common Stock by each officer and director of the Company and by each person who owns in excess of five percent of our Common Stock. Each of the beneficial owners listed below has sole voting power over their shares.
Name, Position and Address Shares of Common Stock Percentage of Shares -------------------------- Beneficially Owned Before After ---------------------- Offering (1) Offering (2) ------------------------- Ryan Carroll (3) 232,500 14.7% 8.2% Chief Executive Officer Chairman of Board 21111 Celtic Street Chatsworth, California 91311 Roland Carroll (4) 232,500 14.7% 8.2% President, Director 11319 Dona Teresa Studio City, California 916104 Greg Cozine 105,000 6.6% 3.7% Vice President, Director 1810 Bentley Avenue Los Angeles, California 90034 Tom Hamilton 105,000 6.6% 3.7% Executive Vice President, Secretary, Alpine Pictures International, Inc. 10082 Stony Brook Drive Huntington Beach, California 92646 Rene Torres 105,000 6.6% 3.7% President, Alpine Pictures International, Inc. 6656 Columbus Avenue Van Nuys, California 91405 All officers and directors 570,000 36% 20.1% as a group (3 persons)(5) Alpine Pictures, Inc. 645,000 40.8% 22.8% 6919 Valjean Avenue Van Nuys, California 91406 --------------
(1) Based upon 1,582,500 shares of Common Stock outstanding before the offering. (2) Assuming Maximum Offering sold (1,250,000) resulting in 2,832,500 shares of Common Stock outstanding. (3) Ryan Carroll is a controlling shareholder of Alpine Pictures, Inc. which owns 540,000 shares of Alpine's outstanding common stock. Ryan Carroll owns 1,078,415 shares of Alpine Pictures, Inc., which constitutes 13.7% of the issued and outstanding shares of Alpine Pictures, Inc. (4) Roland Carroll is a controlling shareholder of Alpine Pictures, Inc. which owns 540,000 shares of Alpine's outstanding common stock. Roland Carroll owns 1,078,415 shares of Alpine Pictures, Inc., which constitutes 13.7% of the issued and outstanding shares of Alpine Pictures, Inc. (5) All officers and directors of Alpine Entertainment, Inc. 20 DESCRIPTION OF SECURITIES AUTHORIZED CAPITAL We currently have one hundred million (100,000,000) shares of Common Stock authorized with a par value of $.0001 per share and twenty million (20,000,000) shares of non-designated preferred shares with a par value of $.0001 per share. INCORPORATION We were incorporated under the laws of Delaware in 1998. Our Certificate of Incorporation, as amended, by-laws and corporate governance, including matters involving the issuance, redemption and conversion of securities, are subject to the provisions of the Delaware General Corporation Law, as amended and interpreted from time to time. COMMON STOCK Our Certificate of Incorporation, as amended, authorizes the issuance of 100,000,000 shares of Common Stock, $.0001 value per share, of which 1,582,500 shares were outstanding as of December 31, 2000. Holders of shares of Common Stock are entitled to one vote for each share on all matters to be voted on by the stockholders. Holders of Common Stock do not have cumulative voting rights. Holders of Common Stock are entitled to share pro rata in dividends, if any, as may be declared from time to time by the Board of Directors in its discretion from funds legally available therefor. In the event of a liquidation, dissolution or winding up of Alpine, the holders of Common Stock are entitled to share pro rata all assets remaining after payment in full of all liabilities. All of the outstanding shares of Common Stock are, and the shares of Common Stock offered by the Company under this Offering will be, when issued and delivered, fully paid and non-assessable. Holders of Common Stock have no preemptive rights to purchase our Common Stock. There are no conversion or redemption rights or sinking fund provisions with respect to the Common Stock. All outstanding shares of Common Stock are validly issued, fully paid and nonassessable, and all Shares to be sold and issued as contemplated hereby will be fully paid and nonassessable when sold in accordance with the terms hereof and in accordance with a valid and current prospectus. The Board of Directors is authorized to issue additional shares, on such terms and conditions and for such consideration as the Board may deem appropriate without further stockholder action. NONCUMULATIVE VOTING Each holder of Common Stock is entitled to one vote per share on all matters on which such stockholders are entitled to vote. Shares of Common Stock do not have cumulative voting rights. The holders of more than 50 percent of the shares voting for the election of directors can elect all the directors if they choose to do so and, in such event, the holders of the remaining shares will not be able to elect any person to the Board of Directors. PROMISSORY NOTES The Company is also registering for distribution by the holder thereof to its shareholders promissory notes in the amount of $3,942,000 and the 4,380,000 shares of common stock issuable upon conversion of the full amount of the promissory notes. Upon effectiveness of this registration statement, the holder of the promissory notes, Alpine Pictures, Inc., an affiliate of Alpine, will distribute the promissory notes to its shareholders as a dividend distribution without cost to the shareholders. Alpine Pictures and Messers. Carroll, will not receive any proceeds from the distribution of the promissory notes. The shareholders of the Alpine Pictures may convert to shares of common stock at a conversion ratio of $0.90 per share that portion of the promissory notes distributed to them at such time or times at their sole discretion. The promissory notes are payable to the holders thereof on December 31, 2001 in an amount equal to the principal held by that shareholder less deduction for any shares converted. 21 PREFERRED STOCK Our Certificate of Incorporation, as amended, authorizes the issuance of 20,000,000 shares of preferred stock, $0.0001 par value per share. As of the date hereof, no preferred stock has been designated or issued. The designation of such issued preferred stock provides that each such share of preferred stock will have one vote on all matters on which shareholders are entitled to vote. Preferred stock provides for liquidation and dividend preference, if any dividends were to be declared by the Board of Directors. In the case of voluntary or involuntary liquidation, dissolution or winding up of the Company, holders of shares of preferred stock are entitled to receive the liquidation preference before any payment or distribution is made to the holders of Common Stock or any other series or class of our stock hereafter issued that ranks junior as to liquidation rights to the preferred stock, but holders of the shares of the preferred stock will not be entitled to receive the liquidation preference of such shares until the liquidation preference of any other series or class of our stock hereafter issued that ranks senior as to liquidation rights to the preferred stock ("senior liquidation stock") has been paid in full. The holders of preferred stock and all series or classes of the Company's stock hereafter issued that rank on a parity as to liquidation rights with the preferred stock are entitled to share ratable, in accordance with the respective preferential amounts payable on such stock, in any distribution (after payment of the liquidation preference of the senior liquidation stock) which is not sufficient to pay in full the aggregate of the amounts payable thereon. After payment in full of the liquidation preference of the shares of the preferred stock, the holders of such shares will not be entitled to any further participation in any distribution of assets by the Company. Neither a consolidation or merger of the Company with another corporation, nor a sale or transfer of all or part of our assets for cash, securities or other property will be considered a liquidation, dissolution or winding up of the Company. The Board of Directors is authorized to provide for the issuance of additional shares of preferred stock in series and, by filing a certificate in accordance with the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualifications, limitations or restrictions thereof without any further vote or action by the shareholders. Any shares of preferred stock so issued would have priority over the Common Stock with respect to dividend or liquidation rights. Any future issuance of preferred stock may have the effect of delaying, deferring or preventing a change in control of Alpine without further action by the shareholders and may adversely affect the voting and other rights of the holders of Common Stock. At present, Alpine has no plans to issue any preferred stock or adopt any series, preferences or other classification of preferred stock. DIVIDEND POLICY We have not paid cash dividends on our common stock since inception and we do not anticipate paying any cash dividends on our common stock in the future. We intend to reinvest earnings, if any, in the development and expansion of our business. Our board of directors will determine, in its sole discretion, whether to declare any dividends on our common stock in the future, based on our earnings, capital requirements, financial position, general economic conditions, and other pertinent factors. REVERSE SPLIT In June 2000, our shareholders gave their written consent to amend our Articles of Incorporation to effectuate a 3 for 10 reverse split of our common stock. The reverse split will affect all shareholders of the issued and outstanding common stock of the Company and will become effective October 2000. Alpine declared a reverse split of 3 for 10 effective June 2000, which will affect all shareholders of, issued and outstanding common stock of Alpine. Thisreverse split will become effective before the effective date of this filing, and whereupon a controlling quorum of the shareholders declare the reverse split effective, and shall be notified to all shareholders within reasonable means. An amendment to this filing regarding the reverse split will accompany the final mailing to shareholders. All share and per share amounts in this filing have been retroactively restated to reflect the reverse split as of June 2000. 22 TRADING OF SHARES There are no outstanding options, options to purchase, or securities convertible into, our shares which are not being registered hereby. We have not agreed with any shareholders, to register their shares for sale, other than for this registration. We do not have any other public offerings in process or proposed. TRANSFER AGENT AND REGISTRAR Although, we currently do not have a transfer agent, we intend to hire a transfer agent in the near future. We currently serve as our own transfer agent. REPORTS TO SHAREHOLDERS We will furnish to holders of the Shares annual reports containing audited financial statements examined and reported upon, and with an opinion expressed by, an independent certified public accountant. We may issue other unaudited interim reports to our shareholders as we deem appropriate. INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS Our Certificate of Incorporation and Bylaws, as amended, provide that we will indemnify all of our directors, officers or employees as agreed to the fullest extent permitted by law. Section 145 of the Delaware General Corporation Law ("DGCL") empowers a corporation to indemnify its directors and officers and to purchase insurance with respect to liability arising out of their capacity or status as directors and officers provided that this provision will not eliminate or limit the liability of a director for any breach of the director's duty of loyalty to the corporation or its stockholders; For acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; Under Section 174 (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) of the General Corporation Law of the State of Delaware; or For any transaction from which the director derived an improper personal benefit. The Delaware General Corporation Law provides further that the indemnification permitted thereunder will not be deemed exclusive of any other rights to which the directors and officers may be entitled under the corporation's by-laws, any agreement, vote of shareholders or otherwise. The effect of the foregoing is to require the Company to indemnify its officers and directors for any claim arising against such persons in their official capacities if such person acted in good faith and in a manner that he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers or persons controlling our Company in accordance with the foregoing provisions, it is the opinion of the Securities and Exchange Commission that such indemnification is against public policy as expressed in the act and is therefore unenforceable. 24 THE COMPANY: ALPINE ENTERTAINMENT, INC. ALPINE ENTERTAINMENT, INC. Our Company, Alpine Entertainment, Inc., is a Delaware corporation formed in 1998 to distribute domestically and internationally motion pictures or other entertainment media programming. We have two subsidiaries, Alpine Pictures International, Inc., an operating California independent film distribution company and Alpine Television, Inc. which is a newly formed Delaware corporation and not yet operational. We currently only have operations through our subsidiary, Alpine Pictures International, Inc. through which we have entered into oral or written distribution agreements for over ten motion pictures. Since some of these distribution agreements are for films that are produced by our affiliates, we are distributing quality films in various domestic and international markets. These markets include: theatrical exhibition, home videos, network television, cable television, pay per view cable television, and non-theatrical exhibitors such as airlines, schools, hospitals, libraries, hotels, syndicated television and related markets. We may also have the right to license for distribution, under our distribution agreements, soundtrack music, CD-ROMs, interactive games and other merchandising items. ALPINE PICTURES INTERNATIONAL, INC. Alpine Pictures International, Inc. ("APII") is an operating California corporation formed in August, 1996 engaged in the distribution domestically and internationally of full length motion pictures, made-for-television movies, home videos, televisions series, mini-series, CD-ROM programming and interactive games based on the literary properties it licenses through its distribution agreements. APII served as the general partner of Alpine Releasing Partners I, L.P., formed in July, 1996. On February 18, 1998, the Alpine Releasing Partners I, L.P. was merged into APII with the issuance of one share of APII common stock for each $0.85 of limited partnership interest resulting in a total issuance of 1,344,804 shares of common stock of APII. On February 10, 1999, we entered into An Agreement and Plan of Reorganization with APII. Under the terms of the Reorganization Agreement, we acquired 69.9% of the outstanding shares of APII, through the exchange of shares of common stock of APII from consenting shareholders for common stock of Alpine Entertainment, Inc. Under the terms of the Agreement, shares were exchanged at a ratio of one share of Alpine Entertainment, Inc., for one shares of APII. APII has an authorized capitalization of 20,000,000 shares of common stock, no par value, of which 7,181,441 are outstanding to date, including 5,025,000 held by Alpine, and 10,000,000 shares of non-designated preferred stock, no par value, of which no shares have been designated or issued. The directors of APII are Tom Hamilton, Rene Torres, Roland Carroll, Ryan Carroll, and Greg Cozine. Rene Torres serves as President and Tom Hamilton serves as Secretary of APII. ALPINE TELEVISION, INC. Our wholly owned subsidiary, Alpine Television, Inc., ("ATI") was incorporated in Delaware in February, 1999, to distribute and develop entertainment media projects for presentation on television, including pay-per-view, pay, network, syndication or basic cable television. ATI has an authorized capitalization of 100,000,000 shares, par value $0.0001, of common stock of which 1,000 shares are outstanding and 20,000,000 shares of non-designated preferred stock of which none are outstanding. Currently, we own all 1,000 outstanding shares of ATI. Ernani Di Massa, Jr., serves as chief executive officer of ATI and David Craddick serves as its president. ATI is currently developing and producing a series of first0run television programming. These formats include: game shows, reality-based shows, talk shows, and court shows. The development/production process includes the production of the pilot/presentation videos and attending major international and domestic television sales markets. ATI is developing these products for broadcast, cable, pay per view, and other ancillary markets. EMPLOYEES As of October 1, 2000, we have eleven full-time employees, including our executive officers. We utilize independent contractors and consultants from time to time to assist in promoting, marketing, and distributing motion pictures. Our independent contractors are generally paid on a commission, hourly or job-related basis, depending on the service being performed. Our future success will depend, in part, on our ability to continue to attract, retain and motivate highly qualified technical, marketing and management personnel. Our employees are not represented by any collective bargaining unit. We have never experienced a work stoppage. We believe our relationship with our employees is good. 25 BUSINESS Our current principal business consists of acquiring distribution and ancillary rights and distributing motion pictures and entertainment media properties domestically and internationally. Motion Picture Industry Overview Production and distribution are the two principal activities of the motion picture industry. The "major" studios dominate the motion picture industry in the United States by controlling the distribution of films that they produce as well as films that are produced by "independent" studios. These major studios include among others: The Walt Disney Company, Paramount Pictures Corporation, Warner Brothers, Inc., MCA, Twentieth Century Fox, Columbia Pictures, Tri-Star Pictures and MGM/UA. Beginning in 1996, the distribution of independent films brought increasing commercial success to the "major" studios that were distributing them. Our management believes that this increasing commercial success of independent films will create a greater demand for independent films in both the international and domestic market. Motion Picture Production And Financing Production, the first of the two principal activities of the film industry, consists of four steps: development, pre-production, production and post-production. Development begins when the producer commissions or acquires the screenplay. Once in possession of the screenplay, the producer typically seeks production financing and tentative commitments from a director, the principal cast members and other creative personnel. By "pre-licensing" a motion picture, a producer licenses a third party to exploit the completed motion picture in various markets and media in exchange for financing some or all of the motion picture's direct production costs. While the producer seeks financing, it also prepares a tentative production schedule and budget. Pre-production begins when the screenplay is completed and the financing commitments have been arranged. During pre-production, the producer engages creative personnel to the extent not previously committed; finalizes the filming schedule and production budget; obtains insurance; establishes filming locations; secures whatever studio facilities are required; and, if necessary, secures completion guarantees. Production begins when principal photography begins and ends when principal photography ends, which is generally less than three months. Independent production companies generally attempt to obtain all or a substantial portion of their financing of a motion picture before commencement of principal photography, at which point substantial production costs begin to be incurred and require payment. Post-production begins upon completion of principal photography. During post-production, the producer edits the motion picture, adds audio effects, and synchronizes the audio tracks with the pictures. Upon completion of post-production, the producer has a negative, which he will use to make release prints of the motion picture. Motion Picture Distribution Distribution, the second of the two principal activities of the film industry, consists of selling domestic and international licenses that entitle a third party to exploit a motion picture and its underlying intellectual property in various markets and media. 26 A distributor acquires from a motion picture producer a right to distribute a picture in one or more markets and/or media in exchange for a certain minimum advance or guarantee upon the delivery of the completed motion picture. After the distributor has recouped the amount advanced plus its distribution costs, it may retain ongoing distribution fees, which are computed as a percentage of the gross revenues generated from the distributor's distribution of the motion picture. All revenues beyond the distributor's ongoing distribution fee belongs to the producer. A motion picture typically generates a substantial portion of its total revenue during its initial distribution cycle, which is generally the first five years after a motion picture's initial domestic theatrical release. However, some commercially successful motion pictures may continue to generate revenue after their initial distribution cycle from the re-licensing of distribution rights in certain media and from the licensing of distribution rights with respect to new media and technologies. Theatrical Distribution The theatrical distribution of a motion picture involves the licensing and booking of the motion picture to theatrical exhibitors, the promotion of the picture through advertising and publicity campaigns and the manufacture of release prints from the film negative. These activities cause a distributor incur substantial costs before the first weekend of a film's domestic theatrical release and significantly impact the ultimate success of the film's theatrical release. When a film is screened in a cinema, the cinema owner retains a fixed amount of proceeds from ticket sales for the film and a percentage of the proceeds that escalates over time. After the remainder of the ticket sale proceeds is remitted to the distributor, the distributor retains a distribution fee and recoups the costs incurred in distributing the film. The remaining proceeds are then remitted to the film's producer. THE ANCILLARY MARKETS In recent years, licensing the distribution of motion pictures in markets other than domestic theatrical markets (i.e., in ancillary markets) has created increasingly more revenue for producers of such motion pictures. The rights to ancillary markets, including non-theatrical, video, cable, television, music and merchandising, are generally sold for distribution after initial theatrical distribution. The sale or licensing of ancillary rights continues to be a growing source of revenue for motion pictures. These rights can be sold as a package or individually as follows: o HOME VIDEOS. A motion picture typically becomes available for videocassette distribution within four to six months after its initial domestic theatrical release. Home video distribution consists of the promotion and sale of videocassettes to local, regional and national video retailers that rent or sell videocassettes to consumers. We anticipate that our films may be released directly to the home video market. o TELEVISION. Television rights are generally licensed first to pay-per-view for an exhibition period within six to nine months following initial domestic theatrical release, then to pay television approximately twelve to fifteen months after initial domestic theatrical release, thereafter in certain cases to free television for an exhibition period, and then to pay television again. These films are then syndicated to either independent stations or basic cable outlets. Since groups of motion pictures are typically packaged and licensed as a group for exhibition on television over a period of time, revenues from these television licensing "packages" may be received over a period that extends beyond five years from the initial domestic theatrical release of a particular film. Television rights can include the following: 27 o Pay Television - The right to broadcast the motion picture over cable systems nationwide as part of a paid subscription to the cable channels or via other media such as direct broadcast satellite. o Pay-Per-View Cable - The right to broadcast the motion picture over cable systems for a fee on a per-viewing basis. o Network Television - The right to license to one of the major television networks for one or more broadcasts of the motion picture. o Syndicated Television - The right to market television rights on a market-by-market basis to individual television stations around the country for a specific number of broadcasts or for an unlimited number of broadcasts over a period of time. o NON-THEATRICAL. The rights to distribute the film to the armed services, airlines, schools, hospitals, cruise ships, correctional facilities, community groups, libraries, hotels and motels in other than 35mm gauge release prints or in video format. o OTHER RIGHTS. Music contained in a film may be licensed for sound recording, public performance and sheet music publication. Rights in motion pictures may be licensed to merchandisers for the manufacture of products such as video games, toys, T-shirts, posters and other merchandise. Rights may also be licensed to create novelizations of the screenplay and other related book publications. o FOREIGN MEDIA. The right to market all of the above rights, including theatrical exhibition, on a territory-by-territory basis in foreign countries. In addition to their domestic distribution activities, motion picture producers and distributors generate substantial revenues from distribution of motion pictures in international markets (in the same media in which films are distributed in the domestic market). Through a subsidiary, Alpine has primarily concentrated its distribution operations in the international market and anticipates that it will continue to do so. Based upon its distribution of films in the past two years, Alpine distributes approximately 52% of its films in the European market, 17% in Mexico and Latin America, 8.5% in Hong Kong and Taiwan and less than 8% in Turkey, India, Malaysia, India and the Philippines. Foreign distributors often pay a fixed price up front and collect all gross revenues from the exhibition of the film in their territory for their own account. OVERVIEW OF CURRENT OPERATIONS OF ALPINE As of the date of this prospectus, our operations have primarily been focused on the distribution of motion pictures. We concentrate on the distribution of films ranging between $1,000,000 to $5,000,000 in production costs. Generally, we enter into an agreement with an owner or producer of a motion picture which provides for our Company to serve as the exclusive distributor agent for the owner/producer in designated territories for a specified term (the "Sales Agency Agreement"). The Sales Agency Agreement may also grant our Company certain other rights to distribute the motion picture in all media, including but not limited to, theatrical exhibition, non-theatrical exhibition, all forms of television, and home video. We also attempt to acquire the merchandizing, publication and sound track rights to the motion picture. In consideration for these rights, we usually pay the owner/producer of the film a cash advance, which is reimbursable from the gross receipts, derived from the film in such designated territory. We usually agree to pay for distribution costs, including reworking the film to meet foreign country standards, which are reimbursed from gross receipts to a certain agreed upon maximum level. After reimbursement of the cash advance and distribution costs, we receive a percentage of the gross receipts derived from the film. The remaining gross receipts are paid to the owner/producer. The owner/producer receives a certain percentage from gross receipts before the reimbursement of the cash advance or distribution costs or payment of our percentage. 28 Generally, for each picture which we have agreed to distribute, we will enter into agreements with subdistributors allowing the subdistributor to license certain rights to the film in certain specified territories for a designated period of time (the "License Agreement"). The License Agreement stipulates exactly which rights are licensed including; cinematic rights, video rights, ancillary rights and/or television rights. For such licensing rights, the subdistributor will pay our Company a certain guaranteed amount. After payment of such guaranteed amount and recoupment of certain costs by the subdistributor, we receive a percentage of the gross receipts received by the subdistributor in the exploitation of the film. Although we may use certain subdistributors for several of our film projects, each transaction is separately negotiated and we have no continuing agreements or arrangements with any subdistributors to give them exclusive or first rights to the distribution of any particular film. CURRENT OPERATIONS SPECIFIC PROJECTS We have entered into Sales Agency Agreements for the following motion pictures.
Sales Agent Fee As Percent Expense Of Gross Revenues From The Reimbursement Titles From The Motion Picture(1) Ceiling (2) - -------------------------------------------------------------------------------------------------------------- Lord Protector(3)(4) 20% $50,000 Destiny of Marty Fine(4) 25% (of 60% of gross) $50,000 The Maze(4) 25% $70,000 Killers(4) 30% $70,000 Paper Dragon (4) 20% $50,000 Resolution (4) 20% (Domestic) $50,000 25% (Foreign) Tear It Down (4) 20% $50,000 Salmon Run (4) 25% $75,000 Good Bye Paradise (4) 25% $75,000 Lancelot-Guardian of Time 20% $50,000 An Angel's Gift(3)(5) 20% $50,000 Final Game(3)(5)(6) 20% $50,000 Shalakan (3)(5)(6) 20% $50,000 An Angel on Abbey Street(3)(5)(6) 20% $50,000 Dead Homiez 30% N/A Rebel(3)(5)(6) 20% $50,000 - -----------------------------------------------------------------------------------------------------------
(1) In accordance with the typical Sales Agency Agreement, APII is entitled to receive a percentage of the gross receipts from the licensing of the motion picture before the payment of any other expenses or any distributions to the producer. (2) The Sales Agency Agreements typically provide a ceiling for reimbursable costs. These expense ceilings do not include cash advances, which may be made by Alpine to the owner/producer which, are generally repayable to Alpine from the gross revenues earned by the motion picture. (3) This motion picture(s) was or is being produced or co-produced by an affiliate of Alpine. (4) This motion picture is completed. (5) This motion picture(s) is in pre-production or production phase. (6) The capital or financing for the production of this motion picture has not yet been raised or is only partially raised as of the date hereof. 29 LICENSE AGREEMENTS (see Appendix (B)) MARKETING AND SALES PLANS FOR DOMESTIC AND INTERNATIONAL DISTRIBUTION We intend to distribute programming in the domestic United States market and throughout the international market, either directly or through other distribution companies. We distribute films and programs by marketing them to exhibitors in trade shows and by other direct marketing methods. Film distributors may give minimum guarantees for sales volumes and commit to pay a minimum amount regardless of actual sales. Television programs are generally sold directly to television stations and networks in return for licensing fees, whereby the producer can retain the right to sell the program in other markets and in syndication after its initial showing. Once full-length motion pictures have had a theatrical release, they often can be distributed to television stations, cable television operators and home video sales and rental companies. In this regard we intend to acquire all of the ancillary rights to the programming distributed by it, including the right to distribute home videos, CD-ROM programs, interactive games, soundtracks, sequels and other applications based on the programming. We may distribute projects produced by our affiliates, or by unaffiliated producers. The terms and conditions of the Sales Agency Agreement are negotiated by management in arms length transactions with unaffiliated producers, or determined in our discretion when entered into with our affiliates. TRADE SHOW MARKETING We intend, either by ourselves or with an affiliate, to maintain an office at each of the major film markets (AFM in Los Angeles, during late February early March; MIP, in Cannes, France during April; Cannes Film Festival and Market in Cannes, France during May; MIPCOM in Cannes, France during early October; and MIFED in Milan, Italy during late October and early November). We will attempt to establish a presence at the numerous film festivals and minor markets held throughout the world each year such as the USA Film Festival in Park City, Utah and the IFP in New York City. COMPETITION We compete with several "major" film studios (the Walt Disney Company, Paramount Pictures Corporation, Universal Pictures, etc.) which are dominant in the motion picture industry, as well as numerous independent motion picture and television production and distribution companies. There can be no assurance of the economic success of any entertainment project since revenues depend primarily upon the project's or film's acceptance by the public. Due to technical developments, the entertainment industry in general is continuing to undergo significant changes. These developments have resulted in the availability of alternative and competing forms of leisure time entertainment, including pay/cable television services and home entertainment equipment such as videocassette, video games and computers. Such technological developments have also resulted in the creation of additional revenue sources through the licensing of rights with respect to such new media. Due to the rapid growth of technology, shifting consumer tastes, and the popularity and availability of other forms of entertainment, it is impossible to predict the overall effect these factors will have on the potential revenue from and profitability of feature-length motion pictures. 30 Because our operations have focused on the international distribution of films, we anticipate that our business relationships combined with the acquisition of quality media properties will enable us to compete internationally. The distribution of theatrical motion pictures is also a highly competitive and speculative business involving a high degree of risk relative to the marketing, releasing, distribution, and other exploitation of films. Furthermore, each market and territory for the distribution of films is generally independent of all other markets, so that obtaining an agreement for the exploitation of films in one market or territory does not necessarily mean that a similar agreement will be obtained in other markets and territories. It is impossible to accurately predict the effects that any of these competitive factors may have on the success of films distributed by Alpine. INTELLECTUAL PROPERTY As of the date of this prospectus, we do not have any registered trademarks. We may apply for a registered trade name on the Principal Register of the United States Patent and Trademark Office for our subsidiary "Alpine Pictures International, Inc." We intend to pursue the registration of our trademarks wherever possible and to oppose vigorously any infringement of our marks. We are not aware of any infringing uses that could materially affect our business or any prior claim to trademarks that would prevent us from using trademarks in our business. Copyrights to the motion pictures and programs will, in most all cases, remain with the producer of the film or program. We expect that only the distribution rights relating to the films will be acquired by the Company. We intend to take all steps necessary to protect our interest in any copyrights. GOVERNMENT REGULATION In 1994, the United States was unable to reach agreement with its major international trading partners to include audiovisual works, such as television programs and motion pictures, under the terms of the General Agreement on Trade and Tariffs Treaty ("GATT"). The failure to include audiovisual works under GATT allows many countries (including members of the European Union) to continue enforcing quotas that restrict the amount of American programming which may be aired on television in such countries. The Council of Europe has adopted a directive requiring all member states of the European Union to enact laws specifying that broadcasters must reserve a majority of their transmission time (exclusive of news, sports, game shows and advertising) for European works. The directive does not itself constitute law, but must be implemented by appropriate legislation in each member country. In addition, France requires that original French programming constitute a required portion of all programming aired on French television. These quotas generally only apply to television programming and not to theatrical exhibition of motion pictures. Additional or more restrictive quotas or more stringent enforcement of existing quotas could materially and adversely affect the our business by limiting our ability to fully exploit the programs internationally. The Code and Ratings Administration of the MPAA assigns ratings indicating age-group suitability for theatrical distribution of motion pictures. We expect that the program producers will follow the practice of submitting the programs for such ratings. United States television stations and networks, as well as foreign governments, impose additional restrictions on the content of motion pictures that may restrict in whole or in part theatrical or television exhibition in particular territories. Management's current policy is to distribute motion pictures for which there will be no material restrictions on exhibition in any major territories or media. This policy often requires production of "cover" shots or different photography and recording of certain scenes for insertion in versions of a motion picture exhibited on television or theatrically in certain territories. There can be no assurance that content restrictions on the programs will not limit or affect our ability to exhibit it in certain territories and media. 31 MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONDITION AND RESULTS OF OPERATIONS OVERVIEW We were formed to acquire the rights to and to distribute in the domestic or international markets motion pictures or other entertainment media programming. We are engaged in the production and distribution of quality films in domestic and international markets including theatrical exhibition, home videos, network television, cable television, pay per view cable television, and non-theatrical exhibitors such as airlines, schools, cruise ships, correctional facilities, etc. We anticipate that we may participate in other aspects of the film industry, including the acquisition, production and sale of entertainment media properties or the acquisition of companies, or the assets of companies, involved in the development, production, distribution, acquisition or sale of entertainment media properties either by itself or through affiliates or joint venture or other relationships. We enter into Sales Agency Agreements with the owners or producers of a motion picture for the exclusive rights to distribute and market films. Typically, we agreed to pay a production fee to the owner/producer for such rights. We receive reimbursement of this production fee and reimbursement of its distribution costs (up to a negotiated ceiling amount) as well as an agreed percentage of the revenues derived from the exploitation of the film. For each motion picture that we intend to distribute, we enter into licensing agreements with one or more "subdistributors" for licensing rights in specified geographical locations to certain specified rights such as theatrical rights, non-theatrical rights, home video rights, television rights, or other media rights (sound recording, public performance, sheet music publication, merchandising). We receive a fee from each "subdistributor" as well as a percentage of the revenues derived from the use of the licensed rights. RESULTS AND PLAN OF OPERATIONS We currently have two subsidiaries, both of which have operations. Alpine Pictures International, Inc., has suffered losses from operations since inception. Alpine Pictures International, Inc. has entered into distribution agreements for over 10 movies and has entered into over 30 "subdistributor" agreements through its newly-created subsidiary, Alpine Television, Inc. Currently, Alpine Pictures International has four productions on its 2001 Production Slate. One of the four projects is already in production, and one of the four projects is in pre-production. The remaining two products are in development. Alpine Television, Inc. is currently involved with four projects: a promotional video, a court show, a game show, and a health program. LIQUIDITY AND CAPITAL RESOURCES We have executed two non-interest bearing convertible promissory notes in favor of one of our shareholders, Alpine Pictures, Inc., for an aggregate up to $3,942,000. To date, we have borrowed a total of $2,192,861 for the benefit of APII. We utilized the $2,192,861, with an imputed interest rate of 6%, for day to day operations and program rights acquisitions as described within our business plan. We expect to utilize the full proceeds of the promissory notes to further our business plan through program rights acquisition and future development. The promissory notes are convertible into shares of our common stock at a conversion ratio of $0.90 of outstanding loan amount per share converted. Alpine Pictures will distribute the promissory notes among its shareholders upon effectiveness of this registration statement and such shareholders will have the right to convert any or all of the distribution. Messrs. Carroll will not participate in the distribution of the proceeds of the promissory notes. We believe that the proceeds of this offering in addition to the revenues from our current operations and the proceeds from the promissory notes will be sufficient to fund our operations for the next 12 months. If we receive revenues greater than the minimum offering amount, then we'll be able to implement our business plan fully and expeditiously. 32 We anticipate revenues to increase as a result of acquisitions of higher quality films and television products made from the proceeds of this offering. Our marketing plan anticipates that the proceeds from this offering will also permit us to increase our national exposure by enabling us to attend additional trade shows and film festivals. FISCAL YEAR ENDED DECEMBER 31, 1998 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 1997 APII had an decrease in revenues for the year ended December 31, 1998 compared to the year ended December 31, 1997 resulting from a decrease in the number of film license sales. Operating expenses increased from $3,660,849 for the year ended December 31, 1997 to $4,204,143 for the year ended December 31, 1998 primarily due to an increase in non-cash stock based compensation of approximately $365,000, a increase in direct film costs of approximately $90,000 and an increase in employee and employee related compensation/ benefits of $87,294. Because of the increase in operating expenses, APII had an increase in net loss from $3,582,408 for the year ended December 31, 1997 to $4,153,625 for the year ended December 31, 1998. FISCAL YEAR ENDED DECEMBER 31, 1999 COMPARED TO FISCAL YEAR ENDED DECEMBER 31, 1998 APII had an increase in revenues for the year ended December 31, 1999 compared to the year ended December 31, 1998 resulting from an increase in film license sales. Operating expenses decreased from $4,204,143 for the year ended December 31, 1998 to $1,834,077 for year ended December 31, 1999. Because of the increase in interest expense APII had an increase in net loss from $4,153,625 for year ended December 31, 1998 to $13,385,315 for the year ended December 31, 1999 due to a decrease in non cash stock based compensation of approximately $3,240,000 and increases in consulting and professional fees of approximately $390,000, increases in rent of $35,000, increases in marketing of $60,000, and increases in general and administrative expenses of $50,000. DESCRIPTION OF PROPERTY We currently occupy office space at 6919 Valjean Avenue, Van Nuys, California 91406 from our affiliate, Alpine Pictures, Inc. We sublease this space for $2912.08 per month on month to month basis. Our wholly owned subsidiary, Alpine Television, Inc., ("ATI") currently occupies 4989 square feet of office space in Manhattan Beach, California. ATI currently subleases this space for $11,772.50 per month. The sublease expires April 14, 2003. ATI has the option to extend the lease for one two year period, subject to a 5% rent increase per year. 33 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS RELATIONSHIP WITH ALPINE PICTURES, INC. Our officers and directors may be subject to various conflicts of interest, including among others, the negotiation of agreements between our Company and Alpine Pictures, Inc., for the distribution rights of films produced by Alpine Pictures, Inc.. Roland Carroll serves as president and a director, and Ryan Carroll serves as chief financial officer and a director of Alpine Pictures, Inc., an operating California motion picture production company formed in 1995. Messrs. Carroll are controlling shareholders of Alpine Pictures, Inc. Messrs. Cozine, Torres and Hamilton are also directors of Alpine Pictures, Inc. Alpine Pictures, Inc. was a shareholder of Alpine Pictures International, Inc., representing 25% of the then issued and outstanding shares of Alpine Pictures International, Inc., before acquisition by Alpine of such shares. Alpine Pictures, Inc. has produced or is in the process of producing the following full length motion pictures An Angel's Gift, An Angel On Abbey Street, Shalakan, Rebel, Lancelot - Guardian of Time, and Lord Protector. Through our subsidiary, we have entered into distribution agreements with Alpine Pictures, Inc. for the distribution rights of certain of these films. SEE "BUSINESS Current Operations". We anticipate that we will continue to distribute films produced by Alpine Pictures, Inc. or affiliates thereof. The distribution agreements entered into will not be negotiated on an arms-length basis, however, we anticipate that the terms of such agreements will be favorable to the Company. We anticipate that we will distribute those motion picture projects and theatrical projects which Alpine Pictures, Inc., will produce. However, there is no assurance that certain opportunities may be presented to Alpine Pictures, Inc. which because not then available to Alpine would be detrimental to Alpine. MERGER WITH ALPINE RELEASING PARTNERSHIPS L.P. Alpine Pictures International, Inc. served as the general partner Alpine Releasing Partners L.P., a California limited partnership. On February 15, 1998, Alpine Releasing Partners L.P. ("ARPLP") merged into Alpine Pictures International Inc. ("APII"). Under the terms of the merger agreement, APII issued one share of its common stock for each $0.85 of limited partnership interests in ARPLP. At the time of the merger, ARPLP had issued an aggregate of $1,138,000 limited partnership interests. As a result of the conversion of ARPLP interests into API's common stock, APII issued an aggregate of 403,441 shares of Alpine to the limited partners of ARPLP. COMPENSATION OF OFFICERS AND DIRECTORS OFFICER COMPENSATION Because we are a newly formed company, we have not paid salaries to date. However, salaries have been paid in our operating subsidiary, Alpine Pictures International, Inc.. We have agreed to compensate Ryan Carroll, our Chief Executive Officer, with an annual salary of $78,000 and Roland Carroll, our President , with an annual salary of $78,000. In addition, we provide health insurance coverage and a 401(k) plan for our employees as well as a car allowance. As of the date of this prospectus, we have not entered into any employment agreements with our executive officers or other employees. We anticipate that we will enter into employment agreements with our employees and executive officers in the future. We currently have no written employment agreements with our employees. Our Board of Directors may at their option determine additional compensation or benefits to be granted to one or all of our employees. DIRECTOR COMPENSATION Our directors do not receive cash compensation for their services as directors. However, our directors are reimbursed for expenses actually incurred in connection with attendance at Board of Directors meetings. No officers or directors will benefit directly from the Promissory Notes or the Offering other than through their normal compensation arrangements. 34 EXPERT AND LEGAL OPINION LEGAL OPINION Through a majority vote of our shareholders, we changed corporate securities Counsel to the firm of Davidson Casale Nojima, LLP, formerly known as Casale Coffee Nojima, LLP. Davidson Casale Nojima, LLP, of , Los Angeles, California has given its opinion as attorneys-at-law that the Units, and the securities comprising the Units, when issued under the terms hereof will be fully paid and non-assessable. Davidson Casale Nojima, LLP has passed on the validity of the securities being issued but purchasers of the securities offered by this prospectus should not rely on Davidson Casale Nojima, LLP with respect to any other matters. EXPERT OPINION The financial statements in this Prospectus have been included in reliance upon the report of Weinberg & Company, P.A., Certified Public Accountants, and upon the authority of such firm as expert in accounting. APPENDIX (1) DILUTION Dilution represents the difference between the initial public offering price per share paid by the purchasers in the Offering and the net tangible book value per share immediately after completion of the offering. Net tangible book value per share represents the net tangible assets of Alpine (total assets less total liabilities), divided by the number of shares outstanding upon closing of the offering. We are a new company without operations or revenues except through its operating subsidiary. APPENDIX (2) LICENSE AGREEMENTS We have entered into several License Agreements providing for the international distribution of our films as follows: On or about May 14, 1998, APII licensed the following rights in Poland to Nuvola Corporation A.V.V. for seven years with respect to "Lancelot: Guardian of Time" for a licensing fee of U.S. $6,500: (a) cinematic rights, theatrical,non-theatrical, and public video; (b) video rights, home video cassette,commercial video, and home sell-thru; (c) ancillary rights, hotels, airlines,and ships flying the Polish flag and without bookings in the United States; (d) television rights, pay TV (terrestrial, cable, and satellite), and free TV (terrestrial, cable, and satellite); and (e) pay per-view rights, residential,non-residential, and demand view. On or about May 13, 1998, APII licensed the following rights in Yugoslavia to TUCK for seven years with respect to "Tear it Down" and "Killers" for an aggregate licensing fee of U.S. $6,000: (a) cinematic rights, theatrical,non-theatrical, and public video; (b) video rights, home video cassette,commercial video, and home sell-thru; (c) ancillary rights, hotels, airlines,and ships flying the Yugoslavian flag and without bookings in the United States; (d) television rights, pay TV (terrestrial, cable, and satellite), and free TV (terrestrial, cable, and satellite); and (e) pay-per-view rights, residential,non-residential, and demand view. 35 On or about May 18, 1998, APII licensed the following rights in Spain to Telesis, S.L. for seven years with respect to "Killers" for a licensing fee of U.S. $15,000: (a) cinematic rights, theatrical, non-theatrical, and publicvideo; (b) video rights, home video cassette, commercial video, and home sell-thru; (c) ancillary rights, hotels, airlines, and ships flying the Spanish flag and without bookings in the United States; (d) television rights, pay TV(terrestrial, cable, and satellite), and free TV (terrestrial, cable, and satellite); and (e) pay-per-view rights, residential, non-residential, anddemand view. On or about May 19, 1998, APII licensed the following rights in the United Kingdom, Republic of Ireland, Malta, and Gibraltar to Third Millennium for seven years with respect to "Killers" for a licensing fee of U.S. $15,000: video rights, home video cassette, commercial video, and home sell-thru. On or about November 3, 1998, APII licensed the following rights in Spain to V.F. Multimedia, S.L. for ten years with respect to "Tear It Down," "Resolution," "Paper Dragons," "Lord Protector," "Lancelot," and "Tiger Street" for a licensing fee of U.S. $70,000: (a) pay-per-view rights, residential,non-residential, and demand view; (b) pay TV rights, terrestrial, cable, andsatellite; and (c) free TV rights, terrestrial, cable, and satellite. 36 On or about November 3, 1998, APII licensed the following rights in the Philippines to Conrad Luzon for eight years with respect to "Paper Dragons" and "Lancelot" for a licensing fee of U.S. $2,000: (a) video rights, home video cassette, commercial video, and home sell-thru; (b) pay-per-view rights,residential, non-residential, and demand view; (c) pay TV rights, terrestrial,cable, and satellite; and (d) free TV rights, terrestrial, cable, and satellite. On or about November 3, 1998, APII licensed the following rights in Turkey to Inter Medea Teacart, Ltd. for seven years with respect to "Tear It Down" for a licensing fee of U.S. $5,000: (a) video rights, home video cassette,commercial video, and home sell-thru; (b) ancillary rights, hotels, airlines,and ships flying with the Turkish flag and without bookings in the United States; (c) pay-per-view rights, residential, non-residential, demand view; (d) pay TV rights, terrestrial, cable, and satellite; and (e) free TV rights, terrestrial, cable, and satellite. On or about November 3, 1998, APII licensed the following rights in Turkey to SAR-An International Co., Ltd. for five years with respect to "Tiger Street," "Paper Dragons," and a third film to be named for a licensing fee of U.S. $10,000: (a) video rights, home video cassette, commercial video, and home sell-thru; (b) pay-per-view rights, residential, non-residential, and demand view; (c) pay TV rights, terrestrial, cable, and satellite; and (d) free TVrights, terrestrial, cable, and satellite. On or about November 3,1998, APII licensed the following rights in the United Kingdom, Erie, Malta, and Gibraltar to Marquee Pictures for nine years with respect to "Dead Homes" for a licensing fee of U.S. $10,000: (a) videorights, home video cassette, commercial video, home sell-thru, and DID; (b) ancillary rights, hotels and ships flying the territory flag and without bookings in the United States; and (c) television rights, if Distributor securesan agreement for all television rights, Licensor will split minimum guarantee 50/50 with Distributor. On or about October 5, 1998, APII licensed the following rights in the United Kingdom, Republic of Ireland, Malta, and Gibraltar to Third Millennium Distribution Ltd. for five years with respect to "Tear It Down" for a licensing fee of U.S. $15,000: video rights, home video cassette, commercial video, and home sell-thru. On or about March 2, 1998, APII licensed the following rights in Turkey to Yen Taal Film for seven years with respect to "Paper Dragons" for a licensing fee of U.S. $3,000: television rights, pay TV (terrestrial, cable, and satellite), free TV (terrestrial, cable, and satellite), pay-per-view (residential, non-residential, and demand view). On or about February 27,1998, APII licensed the following rights in Latin America to Global Communications for seven years with respect to "Paper Dragons" for a licensing fee of U.S. $35,000: (a) video rights, home videocassette, commercial video, and home sell-thru; (b) pay TV rights, terrestrial,cable, and satellite; and (c) free TV rights, terrestrial, cable, and satellite. On or about March 2, 1998, APII licensed the following rights in the Philippines with Conrad Luzon for eight years with respect to "Lord Protector" for a licensing fee of U.S. $1,500: (a) video rights, home video cassette,commercial video, and home sell-thru; (b) pay-per-view rights, residential,non-residential, and demand view; (c) pay TV rights, terrestrial, cable, andsatellite; and (d) free TV rights, terrestrial, cable, and satellite. On or about March 2, 1998, APII licensed the following rights in Malaysia to Suraya Film Production for seven years with respect to "The Gift" (U.S. $2,000), "Lord Protector" (U.S. $2,000), "Lancelot" (U.S. $2,000) "Salmon Run" (U.S. $1,000), and "Goodbye Paradise" (U.S. $1,000) for a licensing fee of U.S. $8,000: (a) video rights, home video cassette, commercial video, and home sell-thru; (b) ancillary rights, hotels, airlines, and ships flying theMalaysian flag and without booking in the United States; (c) pay-per-viewrights, residential, non residential, and demand view; (d) pay TV rights,terrestrial, cable, and satellite; and (e) free TV rights, terrestrial, cable,and satellite. On or about February 27, 1998, APII licensed the following rights in Mexico to Duplitek S.A. De C.V. for seven years with respect to "Paper Dragons" for a licensing fee of U.S. $2,500: video rights, home video cassette, commercial video, and home sell-thru. 37 On or about February 27, 1998, APII licensed the following rights in Mexico to Duplitek S.A. De C.V. for seven years with respect to "Killers" for a licensing fee of U.S. $7,500: (a) video rights, home video cassette, commercialvideo, and home sell-thru; (b) pay TV rights, cable; and (c) free TV rights,terrestrial, cable, and satellite. On or about March 2,1998, APII licensed the following rights in Hong Kong and Macau to Mel Ah (HK) Co. Ltd. for seven years with respect to "Killers" and "Resolution" for a licensing fee of U.S. $7,000: (a) video rights, homevideo cassette, commercial video, home sell-thru, VCD, DID, and LO; (b) ancillary rights, hotels, airlines, and ships flying the territory flag and without bookings in the United States; (c) pay-per-view rights, residential,non-residential, and demand view; (d) pay TV rights, terrestrial, cable, andsatellite; and (e) free TV rights, terrestrial, cable, and satellite. On or about March 1, 1998, APII licensed the following rights in India to Global Film Distributors, Inc. for seven years with respect to "Killers" for a licensing fee of U.S. $6,100: (a) cinematic rights, theatrical,non-theatrical, and public video; (b) video rights, home video cassette,commercial video, and home sell-thru; (c) ancillary rights, hotels, airlines,and ships flying the Indian flag and without bookings in the Units States; (d) pay-per-view rights, residential, non-residential, and demand view; and (e) payTV rights, terrestrial, cable, and satellite; and (0 free TV rights, terrestrial, cable, and satellite. On or about February 27,1998, APII licensed the following rights in Russia, CIS, and the Baltic States in Worldvision Communications for seven years with respect to "Goodbye Paradise" (U.S. $5,000), "Paper Dragons" (U.S. $5,000), "Resolution" (U.S. $5,000), and "Pink As The Day She Was Born" (U.S. $5,000) for a licensing fee of U.S. $20,000: (a) cinematic rights, theatrical,non-theatrical, and public video; (b) video rights, home video cassette andcommercial video; (c) ancillary rights, hotels, airlines, and ships flying the territory flag and without bookings in the United States; (d) pay TV rights,terrestrial, cable, and satellite; and (e) free TV rights, terrestrial, cable, and satellite. On or about November 3,1998, APII licensed the following rights in Malaysia to Suraya Film Production for five years with respect to "Tear It Down" and "Resolution" for a licensing fee of U.S. $2,500: (a) video rights,home video cassette, commercial video, and home sell-thru; (b) pay-per-viewrights, residential, non-residential, and demand view; (c) pay TV rights,terrestrial, cable, and satellite; and (d) free TV rights, terrestrial, cableand satellite. 38 On or about March 25, 1998, APII licensed the following rights in Taiwan to Ta Lai Hwa Jaan Films Co., Ltd. for seven years with respect to "Killers" for licensing fee of U.S. $7,000: (a) cinematic rights, theatrical,non-theatrical, and public video; (b) video rights, home video cassette, commercial video, home sell-thru, and video gram; (c) ancillary rights, hotelsairlines, and ships flying the Taiwanese flag and without bookings in the United States; (d) pay-per-view rights, residential, non-residential, and demand view; (e) pay TV rights, terrestrial, cable, and satellite; and (f) free TV rights,terrestrial, cable, and satellite. On or about May 20, 1998, APII licensed the following rights in Taiwan to Hwa Jaan Films Co. for seven years with respect to "Paper Dragon" for a licensing fee of U.S. $5,000: (a) video rights, home video cassette, commercialvideo, home sell-thru, video gram, and public video; (b) ancillary rights,hotels, airlines, and ships flying the Taiwanese flag and without bookings in the United States; (c) pay-per-view rights, residential, non-residential and demand view; (d) pay TV rights, terrestrial, cable, and satellite; and (e) free TV rights, terrestrial, cable, and satellite. The following table categorizes the above information by motion picture, licensed country, licensee and date:
Lord Protector Italy La Italiana Produzioni SAS 10/30/96 Poland Novola Corp. A.V.V. 10/30/96 Russia Dream Co. Ltd. 10/30/96 Taiwan USR Entertainment Inc. 10/30/96 Latin America Global Communications 11/18/97 Turkey Yen Guven Filmcilik 11/10/97 Indonesia Indo-American Entertain, Inc. 03/18/97 Thailand Right Pictures Co., Ltd. 03/17/97 Hungary Power Video 03/05/97 Malaysia Suraya Film Production 03/02/98 Philippines Conrad Puzonnn 03/02/98 39 The Maze Latin America Global Communications 11/18/97 Russia Worldvision Communications 11/06/97 Italy Glickson Investments Ltd. 06/02/97 Lancelot Latin America Global Communications 11/19/97 Indonesia Pt Parkit Films 11/10/97 Turkey Yen Guven Filmcilik 11/10/97 Russia Worldvision Communications 11/06/97 Poland Nuvola Corporation AVV 05/14/98 Malaysia Suraya Film Production 03/02/98 Dead Homes Latin America Global Communications 11/18/97 Thailand Right Pictures Public Company 11/04/97 Destiny of Marty Fine Latin America Global Communications 11/18/97 Killers Uruguay Mark Findley International Corp 11/11/97 France Metropolitan Film Export 06/21/97 Brazil Park Pictures & Entertainment Corp. 06/24/97 Germany Splendid Film Gkein BmbH 06/06/97 Benelux Exclusive Film and Video 05/28/97 Malaysia Sunny Film Corporation Sdn Bhd 05/28/97 Peru, Ecuador Columbia Aiwastar Ltd. 05/28/97 Korea Oz Cinema 03/17/97 Thailand Right Pictures Co., Ltd. 03/17/97 Japan Pueblo Film Distribution Hungary Kft 03/01/97 United Kingdom Third Millennium 05/19/98 Spain Higher Dreams 09/01/98 Former Yugoslavia Zvammir Djordavic 06/15/98 Hong Kong Mei Ah International 03/02/98 Taiwan Ta Lai Hwa Jaaan Films 03/25/98 India Global Film Dispural 03/01/98 Final Game Indonesia Pt. Parkit Films 11/10/97 Hollywood Blvd. Russia Worldvision Communications 11/06/97 Paper Dragon Taiwan HWA Jaan Films Co. 05/20/98 Turkey Yen Taal Film 03/02/98 Mexico Duplitek 03/03/98 Russia Worldvision Communications 02/27/98 Latin America Global Communications 02/27/98 The Gift Malaysia Suraya Film Production 03/02/98 Salmon Run Malaysia Suraya Film Production 03/02/98 Goodbye Paradise Malaysia Suraya Film Production 03/02/98 Russia Worldvision Communications 02/27/98 Resolution Russia Worldvision Communications 02/27/98
40 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999 41 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999 2000 1999 ASSETS CURRENT ASSETS Cash and cash equivalents 141,908 38,049 Due from non-consolidated affiliates 1,091 1,091 Employee Advances 1,500 1,500 Prepaid Taxes 800 800 Prepaid Expenses 8,650 17,175 Total Current Assets 153,949 58,615 PROPERTY AND EQUIPMENT, NET 9,907 9,222 OTHER ASSETS Deferred Offering Costs 73,030 50,530 Total Other Assets 73,030 50,530 TOTAL ASSETS 236,886 118,367 - ------------ LIABILITIES AND EQUITY CURRENT LIABILITIES Accounts payable and accrued expenses 37,507 39,985 Accounts payable - related parties 552,621 300,322 Distributor deposits 15,015 15,015 Total Current Liabilities 605,143 355,322 CONVERTIBLE PROMISSORY NOTE PAYABLE 2,192,861 1,702,061 TOTAL LIABILITIES 2,798,004 2,057,383 STOCKHOLDERS DEFICIENCY Preferred stock, $0.0001 par value, 20 million shares authorized, zero issued and outstanding - - Common stock,$0.0001 par value, 100 million shares authorized, 1,582,500 and 1,582,500 shares issued and outstanding as of June 30, 2000 and 1999, respectively 158 158 Additional paid-in capital 19,199,387 19,199,387 Accumulated deficit (21,760,663) (21,138,561) TOTAL STOCKHOLDERS DEFICIENCY (2,561,118) (1,939,016) TOTAL LIABILITIES AND STOCKHOLDERS DEFICIENCY 236,886 118,367 - --------------------------------------------- 42 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND JUNE 30, 1999 2000 1999 -------------- -------------- REVENUES Film license sales $ 56,396 $ 31,302 -------------- -------------- Total Revenue 56,396 31,302 OPERATING EXPENSES Salaries and Wages 90,209 271,967 Professional Fees 30,680 35,490 General and Administrative 26,294 13,286 General Marketing 5,296 2,271 Direct Film Marketing, Advertising, Distribution and Rework Expenses 80,640 219,197 Rental Expenses 43,681 26,209 Depreciation Expense 1,698 1,698 -------------- -------------- Total Operating Expenses 678,498 570,118 LOSS FROM OPERATIONS (622,102) (538,816) OTHER EXPENSES Interest Expense 10,710,000 - NET LOSS $ (11,332,102) $ (538,816) - -------- ============== ============== NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (7.16) $ (0.34) ============== ============== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING DURING THIS PERIOD - BASIC AND DILUTED 1,582,500 1,576,130 43 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED INTERIM STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2000 (UNAUDITED) AND 1999 2000 1999 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES: Net Loss $ (11,332,102) (538,816) Depreciation Expense 1,698 1,698 Non Cash Interest Expense 10,710,000 - Changes in operating assets and liabilities: Decrease (increase) in: Employee advances - 19 Due from affiliates - 75,409 Prepaid Expenses 8,525 - Increase (decrease) in: Accounts payable and accrued expenses 249,821 142,021 -------------- -------------- Total adjustments 10,970,044 219,147 Net cash used in operating activities (362,058) (319,669) -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES: Fixed Assets Purchased (2,383) - -------------- -------------- Net cash provided by investing activities (2,383) - -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from convertible promissory note 490,800 368,000 Deferred offering costs (22,500) (12,430) -------------- -------------- Net cash used in financing activities 468,300 355,570 -------------- -------------- Net increase in cash 103,859 35,901 Cash and Cash equivalents-beginning 38,049 2,087 -------------- -------------- Cash and Cash equivalents-ending $ 141,908 $ 37,988 ============== ============== 44 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF JUNE 30, 2000 AND 2000 ---------------------------- NOTE 1 BASIS OF PRESENTATION - ------ --------------------- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles and the rules and regulations of the Securities and Exchange Commission for interim financial information. Accordingly, they do not include all the information and footnotes necessary for a comprehensive presentation of financial position and results of operations. It is management's opinion, however, that all material adjustments (consisting of normal recurring adjustments) have been made which are necessary for a fair financial statements presentation. The results for the interim period are not necessarily indicative of the results to be expected for the year. For further information, refer to the audited financial statements and footnotes included in the company's Form SB-2 for the years ended December 31, 1999 and 1998. NOTE 2 CONVERTIBLE PROMISSORY NOTE - ------ --------------------------- On May 5, 2000, the Company issued to an affiliate, Alpine Pictures, Inc. ("API"), a non-interest bearing promissory note (the "Note") for $1,890,000 due December 31, 2001. The principal amount to be repaid will be based on the total of periodic amounts drawn from the Note, which was $140,861 at June 30, 2000. In accordance with the Note, API agrees to provide the Company with $778,000 in postproduction services in addition to $37,000 per week to be funded beginning May 26, 2000 through November 17, 2000. The Note is convertible immediately in part or in whole, to the common stock of the Company at a price of $0.90 per share or a total of 2,100,000 shares, as amended for a three-for-ten reverse stock split, for the $1,890,000. (See Below) In addition, API may use or assign the Note in part or in full to pay a dividend to its shareholders or satisfy API's creditors. The Note contains a beneficial conversion feature whereby the intrinsic value is computed at the IPO price of $6.00 less the $0.90 conversion price of the debt or $5.10 per share. Consequently, the Company will recognize non-cash interest expense in the aggregate of $10,710,000 on the funding dates. NOTE 3 RECAPITALIZATION - ------ ---------------- In June 2000, the Company's Board of Directors authorized a three-for-ten reverse stock split of the Company's issued and outstanding shares. All share quantities, amounts, and per share data have been retroactively restated in the accompanying financial statements to give effect to the reverse to stock split. NOTE 4 NON-CASH CHARGES TO OPERATIONS - ------ ------------------------------ As reflected in the consolidated statements of operations and cash flows, the Company has incurred significant non-cash charges to operations during the six months ended June 30, 2000. These charges to operations amounted to $10,710,000 in the first six months of 2000 for a beneficial conversion feature on a convertible promissory note (See Note 2). 45 NOTE 5 GOING CONCERN - ------ ------------- The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of $11,332,102 during the six months ended December 31, 1999, and has an accumulated deficit of $21,760,663 at December 31, 1999. These conditions raise substantial doubt about the Company's ability to continue as a going concern and if substantial additional funding is not acquired or alternative sources developed to meet the Company's working capital needs, management will be required to curtail its operations. The Company intends to raise between $1.5 million (minimum) and $7.5 million (maximum) in the initial public offering which was submitted in 1999. In addition, the Company will receive funds and working capital advances from its affiliate at various dates during 2000 in exchange for a $1,890,000 promissory note. Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. 46 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONTENTS -------- PAGE 1 INDEPENDENT AUDITORS' REPORT PAGE 2 CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998 PAGE 3 CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 PAGE 4 CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 PAGES 5 - 6 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 PAGES 7 - 18 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS AS OF DECEMBER 31, 1999 AND 1998 INDEPENDENT AUDITORS' REPORT ---------------------------- To the Board of Directors of: Alpine Entertainment, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheets of Alpine Entertainment, Inc. and Subsidiaries as of December 31, 1999 and 1998 and the related consolidated statements of operations, changes in stockholders' deficiency, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Alpine Entertainment, Inc. and Subsidiaries as of December 31, 1999 and 1998 and the results of their operations and their cash flows for the years then ended in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 13 to the consolidated financial statements, the Company has suffered recurring losses from operations and has a large accumulated deficit that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 13. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. WEINBERG & COMPANY, P.A. Boca Raton, Florida June 6, 2000 1 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS AS OF DECEMBER 31, 1999 AND 1998 -------------------------------- 1999 1998 -------------- -------------- ASSETS ------ CURRENT ASSETS Cash and cash equivalents $ 38,049 $ 2,087 Due from non-consolidated affiliates 1,091 76,000 Employee advances 1,500 1,519 Prepaid taxes 800 800 Prepaid expenses 17,175 - -------------- -------------- Total Current Assets 58,615 80,406 -------------- -------------- PROPERTY AND EQUIPMENT, NET 9,222 10,837 -------------- -------------- OTHER ASSETS Deferred offering costs 50,530 23,100 -------------- -------------- Total Other Assets 50,530 23,100 -------------- -------------- TOTAL ASSETS $ 118,367 $ 114,343 - ------------ ============== ============== LIABILITIES AND STOCKHOLDERS' DEFICIENCY ---------------------------------------- CURRENT LIABILITIES Accounts payable and accrued expenses $ 39,985 $ 35,986 Accounts payable - related parties 300,322 243,556 Distributor deposits 15,015 16,682 -------------- -------------- Total Current Liabilities 355,322 296,224 CONVERTIBLE PROMISSORY NOTE PAYABLE 1,702,061 - -------------- -------------- TOTAL LIABILITIES 2,057,383 296,224 -------------- -------------- STOCKHOLDERS' DEFICIENCY Preferred stock, $0.0001 par value, 20 million shares authorized, zero issued and outstanding - - Common stock, $0.0001 par value, 100 million shares authorized, 1,582,500 and 1,507,500 shares issued and outstanding as of December 31, 1999 and 1998, respectively 158 151 Additional paid-in capital 19,199,387 7,571,394 Accumulated deficit (21,138,561) (7,753,246) -------------- -------------- (1,939,016) (181,701) Less subscriptions receivable - 180 -------------- -------------- TOTAL STOCKHOLDERS' DEFICIENCY (1,939,016) (181,881) -------------- -------------- TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIENCY $ 118,367 $ 114,343 - ---------------------------------------------- ============== ============== See accompanying notes to consolidated financial statements. 2 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 ---------------------------------------------- 1999 1998 -------------- -------------- REVENUES Film license sales $ 76,762 $ 50,518 -------------- -------------- Total Revenues 76,762 50,518 -------------- -------------- OPERATING EXPENSES Compensation 665,012 3,610,197 Consulting 299,147 - Professional fees 188,734 98,420 Direct film marketing, advertising, distribution and rework expenses 395,295 360,800 General marketing 70,059 11,615 Rental expenses 88,354 45,433 Depreciation 2,815 2,264 General and administrative 124,661 75,414 -------------- -------------- Total Operating Expenses 1,834,077 4,204,143 -------------- -------------- LOSS FROM OPERATIONS (1,757,315) (4,153,625) OTHER EXPENSES Interest expense 11,628,000 - -------------- -------------- NET LOSS $ (13,385,315) $ (4,153,625) - -------- ============== ============== NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (8.50) $ (2.76) ============== ============== WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING DURING THE PERIOD - BASIC AND DILUTED 1,574,075 1,507,500 ============== ============== See accompanying notes to consolidated financial statements. 3 ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIENCY FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 ----------------------------------------------
Additional Common Stock Limited Partnership Interest Paid-in Shares Amount Units Amount Capital -------------- -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1997 967,500 $ 97 228.60 $ 1,024,742 $ 3,008,500 Capital from private placement to minority interest - - - - 588,937 Merger of limited partnership representing minority interests - - (228.60) (1,024,742) 964,478 Issuance of common stock to affiliate 540,000 54 - - 3,239,946 Subscriptions received - - - - - Write-off of deferred offering costs - - - - (230,467) Net loss 1998 - - - - - -------------- -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1998 1,507,500 151 - - 7,571,394 Recapitalization: Shares issued to original shareholders of Alpine Entertainment, Inc. 75,000 7 - - (7) Subscriptions received - - - - - Beneficial conversion feature - - - - 11,628,000 Net loss 1999 - - - - - -------------- -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1999 1,582,500 $ 158 - $ - $ 19,199,387 - -------------------------- ============== ============== ============== ============== ============== (CONTINUED) Corporation Partnership Accumulated Accumulated Subscription Deficit Deficit Receivable Total --------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1997 $ (3,599,621) $ (60,264) $ (323) $ 373,131 Capital from private placement to minority interest - - - 588,937 Merger of limited partnership representing minority interests - 60,264 - - Issuance of common stock to affiliate - - (180) 3,239,820 Subscriptions received - - 323 323 Write-off of deferred offering costs - - - (230,467) Net loss 1998 (4,153,625) - - (4,153,625) --------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1998 (7,753,246) - (180) (181,881) Recapitalization: Shares issued to original shareholders of Alpine Entertainment, Inc. - - - - Subscriptions received - - 180 180 Beneficial conversion feature - - - 11,628,000 Net loss 1999 (13,385,315) - - (13,385,315) --------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1999 $ (21,138,561) $ - $ - $ (1,939,016) - -------------------------- =============== ============== ============== ============== See accompanying notes to consolidated financial statements. 4
ALPINE ENTERTAINMENT, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998 ---------------------------------------------- 1999 1998 -------------- -------------- CASH FLOWS FROM OPERATING ACTIVITIES Net Loss $ (13,385,315) $ (4,153,625) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 2,815 2,264 Compensation from capital stock issuance - 3,239,820 Interest expense 11,628,000 - Changes in operating assets and liabilities: (Increase) decrease in: Prepaid expenses (17,175) - Increase (decrease) in: Bank overdraft - (6,518) Accounts payable and accrued expenses 3,999 (985) Accounts payable - related parties 56,766 - Other liabilities - (8,591) Distributor deposits (1,667) 14,676 -------------- -------------- Net cash used in operating activities (1,712,577) (912,959) -------------- -------------- CASH FLOWS FROM INVESTING ACTIVITIES Employee advances 19 440 Due from non-consolidated affiliates 74,909 275,715 Purchase of property and equipment (1,200) (5,573) -------------- -------------- Net cash provided by investing activities 73,728 270,582 -------------- -------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from the issuance of common stock 180 424,008 Due to affiliate 1,702,061 243,556 Deferred offering costs (27,430) (23,100) -------------- -------------- Net cash provided by financing activities 1,674,811 644,464 -------------- -------------- NET INCREASE IN CASH AND CASH EQUIVALENTS 35,962 2,087 CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,087 - -------------- -------------- CASH AND CASH EQUIVALENTS - END OF YEAR $ 38,049 $ 2,087 - --------------------------------------- ============== ============== See accompanying notes to consolidated financial statements. 5 SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: - --------------------------------------------------------- During 1999, the Company issued 75,000 shares of its common stock under an agreement and plan of reorganization (See Note 12). During 1998, 540,000 shares of common stock were issued to certain directors, officers, and affiliates of APII, which in turn were recorded as subscriptions receivable at 1998, and paid in the following year. Non-cash compensation expense was recognized in accordance with SFAS 123. During 1998, APII issued 403,441 shares of common stock in exchange for partnership units in accordance with an Agreement of Merger (See Note 6). The $964,478 value is reflected in the statement of changes in stockholders' deficiency as additional paid-in capital from merger with limited partnership minority stockholders. 6 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - ------ ------------------------------------------ (A) DESCRIPTION OF BUSINESS --------------------------- Alpine Entertainment, Inc. ("AEI") was incorporated in Delaware on November 5, 1998 to serve as a vehicle to effect a merger, exchange of capital stock, asset acquisition or other business combination with a domestic or foreign private business. On February 9, 1999, AEI acquired 69.9% of Alpine Pictures International, Inc. ("APII") in a transaction accounted for as a recapitalization of APII (See Note 12). The accompanying consolidated financial statements reflect the historical operations of APII for the periods presented and those of AEI from the recapitalization date. APII is a California corporation formed in August 1996 and engaged in the business of distributing, marketing, licensing, and selling motion picture in all markets, including domestic and international theatrical exhibition, home video, network television, cable television, pay per view cable television, non-theatrical exhibitors such as airlines, schools, hospitals, libraries, hotels, syndicate television and related markets. APII may also have the right to license the ancillary rights for motion pictures for which it enters into distribution agreements, including soundtrack music and merchandising items. APII enters into distribution agreements with affiliated and unaffiliated motion picture producers. The distribution agreements generally provide for APII to be allocated a percentage of gross revenues from the motion pictures which it licenses and distributes, as well as to be repaid advances, if any, which it makes to producers and to be reimbursed its distribution and film rework expenses (See Note 10(A). In February 1999, Alpine Television, Inc. ("ATI"), a wholly owned subsidiary of AEI, was incorporated in Delaware to distribute and develop entertainment media projects for presentation on television, including pay-per-view, pay, network, syndication or basic cable television. The consolidated entities are hereinafter referred to as the "Company." (B) PRINCIPLES OF CONSOLIDATION ------------------------------- The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant inter-company balances and transactions are eliminated in consolidation. (C) USE OF ESTIMATES -------------------- In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. (D) CASH AND CASH EQUIVALENTS ----------------------------- For purpose of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at time of purchase to be cash equivalents. 7 (E) PROPERTY AND EQUIPMENT -------------------------- Property and equipment are stated at cost, less accumulated depreciation. Expenditures for maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful lives of the assets as follows: Equipment 5 Years Furniture and fixtures 7 Years (F) DEFERRED OFFERING COSTS --------------------------- Direct offering costs of equity offerings are deferred and charged to equity as proceeds are received. Deferred offering costs at December 31, 1999 relate to the Form SB-2 offering (See Note 8). (G) INCOME TAXES ---------------- The Company accounts for income taxes under the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("Statement No. 109"). Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those measured using enacted tax rates expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates in recognized is income in the period that includes the enactment date. (H) REVENUE RECOGNITION ----------------------- The Company recognizes revenue in accordance with Statement of Financial Standards No. 53, "Financial Reporting by Producers and Distributors of Motion Picture Films" ("SFAS 53"). Under SFAS 53, a producer or distributor recognizes revenue when the license fee is known, the film costs have been reasonably determined, the film has been shipped and accepted by the sub-licensee distributor and is available for showing, and collectibility of the full license fee is assured. Based on Company experience, collectibility of the full license fee is assured only upon cash receipt from the sub-licensee distributor. Therefore, under the Company's flat fee type contracts, revenue is recognized upon receipt of final payment from and the shipment to and acceptance by the sub-licensee distributor. Under revenue sharing type contracts, revenue is recognized as payments are received from the sub-licensee distributor. Initial deposits on sub-licensee distributor contracts are recorded as distributor deposits and recognized when the final payment is received and the film is shipped to and accepted by the sub-licensee distributor. (I) DIRECT FILM MARKETING, ADVERTISING, DISTRIBUTION, AND --------------------------------------------------------- REWORK EXPENSE -------------- The Company incurs certain film pre-release and post-release marketing and advertising expenses, distribution expense, and film rework expenses such as adding subtitles or dubbing or other editing required to prepare the films for distribution in foreign geographic markets. The Company considers such 8 expenses to be period costs and accordingly expenses them in the period incurred. Contractual terms with each film producer allow the Company to recoup its marketing, advertising, distribution and rework costs, subject to limitations as defined in each contract, from future revenues generated from the film. Such recoupment amounts, when received, are recorded as an offset against the current film marketing, advertising, and rework expense. (J) CONCENTRATIONS ------------------ There were no financial instruments that potentially subject the Company to significant concentration of credit risk at December 31, 1999 and 1998. The following is an approximate summary of the percentage of film sales by geographic region. 1999 1998 ----------- ----------- Japan 25% - France 20% 6% Spain 18% - United States 13% - Latin America 10% 20% Netherlands 6% - England 3% 8% Hong Kong 2% - Indonesia 1% - Thailand 1% 5% Philippines 1% 10% Italy - 25% Germany - 12% Argentina - 7% Taiwan - 4% Russia - 3% ----------- ----------- 100% 100% =========== =========== (K) PER SHARE DATA ------------------ Net loss per common share for the years ended December 31, 1999 and 1998 is computed by dividing net loss by the weighted average common shares outstanding during the year as defined by Financial Accounting Standards, No. 128, "Earnings per Share". The weighted average shares at December 31, 1998 have been retroactively restated to reflect a nominal issuance of 540,000 shares on December 31, 1998 as if the issuance occurred on January 1, 1998, in accordance with SAB Topic 4-D (See Note 4(B)). In addition the weighted average shares at December 31, 1998 and 1999 have been retroactively restated to reflect only the common shares issued to the majority shareholders of APII at the recapitalization date (See Notes 1(A) and 12) and the three-for-ten reverse stock split authorized in June 2000, before the issuance of the accompanying consolidated financial statements. (See Note 15) As of December 31, 1999, there were 2,280,000 shares for a convertible promissory note that could potentially dilute basic EPS in the future which were not included in the computation of diluted earnings per share due to their anti-dilutive effect. (L) RECLASSIFICATIONS --------------------- Certain amounts in 1998 financial statements have been reclassified to conform to the 1999 presentation. 9 NOTE 2 PROPERTY AND EQUIPMENT - ------ ---------------------- Property and equipment at December 31, 1999 and 1998 consists of the following: 1999 1998 -------------- -------------- Equipment $ 11,722 $ 10,522 Furniture and fixtures 4,377 4,377 -------------- -------------- 16,099 14,899 Less accumulated depreciation (6,877) (4,062) -------------- -------------- $ 9,222 $ 10,837 ============== ============== NOTE 3 CONVERTIBLE PROMISSORY NOTE - ------ --------------------------- On August 6, 1999, the Company issued to an affiliate, Alpine Pictures, Inc., a non-interest bearing convertible promissory note (the "Note") for $2,052,000 due December 31, 2001. The principal amount to be repaid is based on the total of periodic cash amounts drawn from the Note, which was $1,702,061 at December 31, 1999. The remaining amount was funded after December 31, 1999. The Note is convertible immediately in part or in whole to common stock of the Company for the price of $0.90 per share or a total of 2,280,000 shares, amended for a three-for-ten stock split, (See Notes 4(B) and 15). In addition, Alpine Pictures, Inc. may use or assign the Note in part or in full to pay a dividend to its shareholders or satisfy Alpine Pictures, Inc.'s creditors. The Note contains a beneficial conversion feature whereby the intrinsic value is computed at the proposed IPO price of $6.00 less the $0.90 conversion price of the debt or $5.10 per share (See Note 8). Consequently, the Company recognized non-cash interest in the aggregate of $11,628,000 during 1999 based on the commitment to fund the $2,052,000 as of December 31, 1999 (See Note 15 for additional convertible promissory note after year end). NOTE 4 STOCKHOLDERS' DEFICIENCY - ------ ------------------------ (A) PREFERRED STOCK ------------------- The Company is authorized to issue 20,000,000 shares of preferred stock at $.0001 par value, with such designations, voting and other rights preferences as may be determined from time to time by the Board of Directors. No preferred shares have been issued through the date of this report. (B) COMMON STOCK ---------------- The Company is authorized to issue 100,000,000 shares of common stock at $.0001 par value. The Company authorized a three-for-ten reverse stock split during June 2000, before the issuance of the accompanying financial statements. All share quantities and amounts in the accompanying consolidated financial statements have been retroactively restated to effect the reverse stock split. (See Note 15) During 1999, the Company issued 75,000 shares of its common stock to acquire 69.9% of Alpine Pictures International, Inc. (See Note 12). 10 During 1998, APII issued 540,000 common shares to an affiliate for a $180 subscription receivable. APII recognized $3,239,820 in compensation expense based upon the proposed $6.00 public offering price as effected by a three-for-ten reverse stock split on the issued and outstanding shares. (See Note 15) The resulting valuation price is $1.80 per share. NOTE 5 PARTNERSHIP AGREEMENT - ------ --------------------- In 1996, a limited partnership was formed known as Alpine Releasing Partners I, LP ("ARP") (See Note 6). Alpine Pictures International, Inc. ("APII") was named as general partner. Under the terms of the partnership agreement, (a) the partnership shall continue for ten (10) years unless terminated sooner by the partners, (b) in general, income and loss shall be allocated annually to the general partner 1% and limited partners 99%. In February 1998 ARP was merged into APII (See Note 6). NOTE 6 MERGER OF ALPINE PICTURES INTERNATIONAL, INC. AND ALPINE - ------ -------------------------------------------------------- RELEASING PARTNERS I, LP ------------------------ On December 17, 1997, APII entered into an Agreement of Merger (the "Agreement") to merge ARP into APII with APII as the surviving entity. Under the terms of the Agreement, the effective date of the merger was February 15, 1998 and APII issued one share of its common stock for each $0.85 of limited partnership interest. This resulted in a total issuance by APII of 403,441 shares of its common stock to the limited partners. The $964,478 value is reflected in the statement of changes in stockholders deficiency as additional paid-in capital from merger with limited partnership minority shareholders. NOTE 7 PRIVATE PLACEMENTS - ------ ------------------ In July 1997 the APII issued a Private Placement Memorandum (the "Placement") under the Securities and Exchange Commission Regulation CE Section 3(b), Rule 1001, of the Securities Act of 1933, as amended, and under Section 25102(n) of the California Corporations Code to offer 294,000 shares of its common stock, no par value, with an option to increase the offering by up to an additional 36,000 shares for a maximum offering of 330,000 shares. Under terms of the Placement, the shares were offered on a "best efforts" basis at $1.00 per share in minimum units of 20,000 shares with no minimum capitalization required by APII. Under the Placement, which terminated in 1998, APII issued 243,491 shares of common stock for total proceeds of $811,637 of which 176,681 shares were issued during 1998 for proceeds to APII of $588,937. In addition, offering expenses of $319,605 were incurred under the private placement, of which $230,467 was charged against equity in 1998. These share quantities have been adjusted for the reverse stock split. (See Note 15) NOTE 8 LETTER OF INTENT FOR INITIAL PUBLIC OFFERING - ------ -------------------------------------------- In May 1999, the Company executed a letter of intent (the "Letter") with an investment banking firm whereby the investment banking firm is to make a best efforts initial public offering (the "offering") of units of common stock and warrants of the Company at $6.00 per unit, aggregating between 11 $1.5 million (minimum) and $7.5 million (maximum). Under the Letter, the Company is committed to pay the investment banking firm $5,000 per month. In addition, certain offering expenses incurred by the investment banking firm, up to $85,000, are reimbursable by the Company whether or not the offering is consummated. On September 9, 1999, Form SB-2/A was filed relating to the above offering. As of December 31, 1999, no shares were issued under this offering. As of the date of the accompanying audit report the Form SB-2/A has not become effective and is pending further comments from the Securities and Exchange Commission. NOTE 9 INCOME TAXES - ------ ------------ There was no current income tax expense or benefit in 1999 and 1998 due to the Company's net losses. The tax effects of temporary differences that give rise to significant portions of deferred tax assets at December 31 are as follows: 1999 1998 -------------- -------------- Deferred tax assets: Net operating loss carryforward $ 1,100,000 $ 513,000 Stock based compensation 2,078,941 2,078,941 -------------- -------------- Total gross deferred tax assets 3,188,941 2,591,941 Less valuation allowance (3,188,941) (2,591,941) -------------- -------------- Net deferred tax assets $ - $ - ============== ============== At December 31, 1999, the Company had net operating loss carryforwards of approximately $3,265,000 for income tax purposes, available to offset future taxable income expiring on various dates through 2019. The valuation allowance for deferred tax assets as of January 1, 1999 was approximately $2,591,941. The net change in the total valuation allowance for the year ended December 31, 1999 was an increase of approximately $597,000. NOTE 10 OPERATING AGREEMENTS - ------- -------------------- (A) AGREEMENTS WITH PRODUCERS/OWNERS ------------------------------------ As part of its primary operations, the Company enters into agreements with various producers/owners (the "owner") of feature films (the "film") to act as distributor agent of the owner for the sales, collections and servicing of the film in specified media and geographic territories, for a stipulated term. Under the agreements, various provisions exist for extension and/or cancellation of the contracts, limited reworking of the film to meet local country requirements, and sublicensing of distribution by the Company. The Company generally retains a percentage fee based on gross receipts from film sales, as defined in the agreements, and is allowed reimbursement of out-of-pocket sales, marketing, distribution, servicing, rework technical materials, and other customary expenses incurred up to a stipulated cap from the remaining gross receipts. The balance after the Company's fee and out-of-pocket expenses is payable to the owner. Under certain agreements the owner is paid a stipulated percentage out of gross receipts before any fee and/or expense distributions to the Company. 12 (B) LICENSING AGREEMENTS WITH DISTRIBUTORS ------------------------------------------ The Company enters into licensing agreements with sub-distributors for distribution of films for which the Company is the agent of producers/owners, as discussed above. The agreements generally stipulate a fixed fee and less commonly, royalty fees or a combination thereof allowing the sub-distributor to distribute certain films within a specified territory. The Company generally obtains a non-refundable deposit from distributors, which is recorded as a deposit liability until the film is delivered to and balance received from the distributor, or the agreement is canceled. (C) CONSULTING AGREEMENT ------------------------ In August 1998, APII entered into an agreement with a firm whereby the firm was to provide certain stipulated services relating to positioning APII to enter the public capital markets. The firm provided a holding company to effect a business combination (See Note 12). The holding company was 100% owned by the firm before the business combination. In consideration for these services APII paid the firm $60,000 in 1998 and $40,000 in 1999 which is included in the statement of operations as professional fees. In addition, the firm was to receive a five-year transferable warrant to acquire up to 250,000 shares of the holding company's common stock at the purchase price of $1.00 per share. As of the date of the accompanying audit report the Company has not issued these warrants and has not amended the agreement to change the quantity of warrants pursuant to the reverse stock-split. (See Note 15) (D) OPERATING LEASE ------------------- On August 3, 1999, ATV entered into an operating lease agreement commencing on April 15, 2000 and terminating on April 14, 2003 for $11,772 per month. The lease contains an option to extend for a two-year period. Future minimum lease payments at December 31, 1999 are as follows: December 31, 2000 $ 94,176 2001 141,264 2002 141,264 2003 47,088 -------------- $ 423,792 ============== (E) SERVICE AGREEMENTS ---------------------- On September 27, 1999, ATV entered into a service agreement with a company (the "Lender") for the services of an individual (the "Artist") to serve as an officer of ATV. The agreement is for a three-year period commencing October 1, 1999. The compensation for these services is as follows: Year #1 ------- The Artist will receive a $250,000 annual salary. The Lender will receive 150,000 options to purchase shares of the Company's common stock at the pre IPO price of $3.00 per share to be exercised when fully vested but not before October 1, 2000. In addition, the Lender will also be awarded 150,000 shares of the Company's common stock upon the official date of the IPO. 13 Year #2 ------- The Artist will receive a $375,000 annual salary. The Lender will receive 150,000 options to purchase the Company's common stock at the IPO price of $3.00 per share to be exercised when fully vested but not before October 1, 2001. In addition, the Lender will be awarded 150,000 shares of common stock in October 1, 2000. Year #3 ------- The Artist will receive a $400,000 annual salary. The Lender will receive 200,000 options to purchase the Company's common stock at the IPO price of $3.00 per share to be exercised when fully vested but not before October 1, 2002. In addition, the Lender will be awarded 200,000 shares of common stock in October 1, 2001. In addition, the Lender will receive certain contingent payments as follows: (a) 8% of ATV's share of the net profits derived for all projects developed and (b) contingent payments upon the obtaining by the Lender/Artist of investment capital for ATV starting at 5% for the first one million dollars and decreasing by 1% for each subsequent one million dollars. (F) EMPLOYMENT AGREEMENT ------------------------ On September 27, 1999, ATV entered into an employment agreement with an individual to serve as an officer of ATV. The agreement is for a three-year period commencing October 1, 1999. The compensation for these services is as follows: Year #1 ------- The individual will receive a $250,000 annual salary and will receive 150,000 options to purchase shares of the Company's common stock at the pre IPO price of $3.00 per share to be exercised when fully vested but not before October 1, 2000. In addition, the individual will also be awarded 150,000 shares of the Company's common stock upon the official date of the IPO. Year #2 ------- The individual will receive a $375,000 annual salary and will receive 150,000 options to purchase the Company's common stock at the IPO price of $3.00 per share to be exercises when fully vested but not before October 1, 2001. In addition the individual will be awarded 150,000 shares of common stock in October 1, 2000. Year #3 ------- The individual will receive a $400,000 annual salary and will receive 200,000 options to purchase the Company's common stock at the IPO price of $3.00 per share to be exercised when fully vested but not before October 1, 2002. In addition, the individual will be awarded 200,000 shares of common stock in October 1, 2001. 14 In addition, the individual will receive certain contingent payments as follows: (a) 8% of ATV's share of the net profits derived for all projects developed and (b) contingent payments upon the obtaining by the individual of the investment capital for ATV starting at 5% for the first one million dollars and decreasing by 1% for each subsequent one million dollars. NOTE 11 RELATED PARTY TRANSACTIONS - ------- -------------------------- During 1998 and 1997 investor lead lists were purchased from a non-combined affiliate, First National Information Network, Inc. (FNIN) for an aggregate amount of $163,457. Such investor lists were used in marketing campaigns to sell shares of common stock under the private placements (See Note 7). Accordingly, $118,604 was charged against equity in 1998. The Company also periodically advanced funds to FNIN. The net effect of amounts due to FNIN for investors lead list purchases and advances due from FNIN totaled $76,000 at December 31, 1998, and is reflected as due from non-combined affiliates in current assets at that date. The amount of $76,000 was repaid in January 1999. During 1998 the Company issued 540,000 shares of common stock to an affiliate, Alpine Pictures, Inc. (See Note 3(B)). The Company's affiliate, Alpine Pictures, Inc. borrows funds from, or lends funds to, and pays certain shared office expenses of the Company. The net effect of these transactions resulted in a due to affiliate of $300,322 and $243,556 at December 31, 1999 and 1998, respectively. See Notes 3 and 15 for the issuance of convertible promissory notes to Alpine Pictures, Inc. The Company periodically enters into distribution agreements with Alpine Pictures, Inc. to distribute films produced by this affiliate. NOTE 12 AGREEMENT AND PLAN OF REORGANIZATION - ------- ------------------------------------ Under an agreement dated February 9, 1999, effective February 10, 1999, (the ("Effective Date"), Alpine Entertainment, Inc., ("AEI") acquired approximately 69.9% of the issued and outstanding shares of common stock of Alpine Pictures International, Inc. ("APII") from consenting stockholders in exchange for common stock of AEI. The 30.1% minority interest of non-consenting stockholders is comprised of the shares held by the former limited partners of ARP (See Note 5) that they received from APII under the terms of the Merger Agreement discussed in Note 6 and all shares issued under the private placements. (See Note 7) Under the terms of the agreement, shares were exchanged at a ratio of one share of AEI for every share of the APII. As a result of the exchange, APII became a majority owned subsidiary of AEI and the consenting stockholders of APII became stockholders of approximately 96% of AEI. Generally Accepted Accounting Principles require that the company whose shareholders retain a majority interest in a combined business be treated as the acquirer for accounting purposes. As a result, the acquisition was treated as an acquisition of AEI by APII and a recapitalization of APII. The 15 Company's financial statements include the following: (1) The Balance Sheet consists of APII's net assets at historical cost and AEI's net assets at historical cost, (2) the non-consenting stockholders are treated in the consolidated financial statements as minority stockholders of APII, the legal subsidiary, and (3) the Statement of Operations includes APII's operations for the period presented and AEI's operations from the date of acquisition. At the Effective Date, a minority interest value was not recorded since there was a net stockholders' deficiency in APII. The Company decreased the carrying value of the common stock by $65 to reflect the issuance of 1,507,500 shares only to majority stockholders of APII and charged the $65 to additional paid-in capital. As of December 31, 1999, due to continuing losses in 1999, there is no liability to the minority stockholders of APII since AEI acquired the net liabilities of APII and APII incurred a net loss for the year ended December 31, 1999. NOTE 13 GOING CONCERN - ------- ------------- The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of $13,385,315 during the year ended December 31, 1999, had a negative cash flow from operating activities of $1,712,577, and has an accumulated deficit of $21,138,561 at December 31, 1999. These conditions raise substantial doubt about the Company's ability to continue as a going concern and if substantial additional funding is not acquired or alternative sources developed to meet the Company's working capital needs, management will be required to curtail its operations. The Company intends to raise between $1.5 million (minimum) and $7.5 million (maximum) in the initial public offering which was submitted in 1999 (See Note 8). In addition, the Company will receive funds and working capital advances from its affiliate at various dates during 2000 in exchange for a $1,890,000 promissory note (See Note 15). Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. NOTE 14 NON-CASH CHARGES TO OPERATIONS - ------- ------------------------------ As reflected in the consolidated statements of operations and cash flows, the Company has incurred significant non-cash charges to operations during the years ended December 31, 1999 and 1998. These charges to operations amounted to $3,239,820 in 1998 for stock based compensation (See Note 4(B)) and $11,628,000 in 1999 for a beneficial conversion feature on a convertible promissory note (See Note 3). In addition, the Company will recognize approximately $10,710,000 of non-cash interest expense in 2000 relating to a beneficial conversion feature (See Note 15). NOTE 15 SUBSEQUENT EVENTS - ------- ----------------- On May 5, 2000, the Company issued to an affiliate, Alpine Pictures, Inc. ("API"), a non-interest bearing promissory note (the "Note") for $1,890,000 due December 31, 2001. The principal amount to be repaid will be based on the total of periodic amounts drawn from the Note, which was $150,000 at May 1, 2000. Pursuant to the Note, API agrees to provide the Company with $778,000 in postproduction services in addition to $37,000 per week to be funded beginning May 26, 2000 through November 17, 2000. The Note is convertible immediately 16 in part or in whole, to the common stock of the Company at a price of $0.90 per share or a total of 2,100,000 shares, as amended for a three-for-ten reverse stock split, for the $1,890,000. (See Below) In addition, API may use or assign the Note in part or in full to pay a dividend to its shareholders or satisfy API's creditors. The Note contains a beneficial conversion feature whereby the intrinsic value is computed at the IPO price of $6.00 less the $0.90 conversion price of the debt or $5.10 per share. Consequently, the Company will recognize non-cash interest expense in the aggregate of $10,710,000 on the funding dates. In June 2000, the Company's Board of Directors authorized a three-for-ten reverse stock split of the Company's issued and outstanding shares. All share quantities, amounts, and per share data have been retroactively restated in the accompanying financial statements to give effect to the reverse to stock split. 17 ALPINE PICTURES INTERNATIONAL, INC. ----------------------------------- (FORMERLY ALPINE PICTURES ------------------------- INTERNATIONAL, INC. AND AFFILIATE --------------------------------- (A LIMITED PARTNERSHIP)) ------------------------ FINANCIAL STATEMENTS -------------------- AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- CONTENTS -------- PAGE 1 - INDEPENDENT AUDITORS REPORT PAGE 2 - BALANCE SHEETS AS OF DECEMBER 31, 1998 AND 1997 PAGE 3 - STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 PAGE 4 - STATEMENT OF CHANGES IN EQUITY FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 PAGE 5 - 6 - STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 PAGE 7 - 16 - NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 INDEPENDENT AUDITORS REPORT --------------------------- INDEPENDENT AUDITORS' REPORT To the Board of Directors of: Alpine Pictures International, Inc. We have audited the accompanying balance sheet of Alpine Pictures International, Inc. as of December 31, 1998 and the combined balance sheet of Alpine Pictures International, Inc. and affiliate (a limited partnership) as of December 31, 1997 and the related statements of operations, changes in equity (deficit), and cash flows for the year ended December 31, 1998 and the related combined statements of operations, changes in equity (deficit), and cash flows for the year ended December 31, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Alpine Pictures International, Inc. as of December 31, 1998 and the financial position of Alpine Pictures International, Inc. and affiliate (a limited partnership) as of December 31, 1997 and the results of their operations and their cash flows for the two years then ended in conformity with generally accepted accounting principles. The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 11 to the financial statements, the Company has suffered recurring losses from operations and has a large accumulated deficit that raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 11. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. WEINBERG & COMPANY, P.A. Boca Raton, Florida June 6, 1999 (except for Note 12(c) as to which the date is October 15, 1999 1 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) BALANCE SHEETS DECEMBER 31, 1998 AND 1997 -------------------------- ASSETS ------ 1997 1998 Combined -------------- -------------- CURRENT ASSETS Cash and cash equivalents $ 2,087 $ - Due from non-combined affiliates 76,000 260,715 Employee advances 1,519 1,959 Prepaid taxes 800 800 -------------- -------------- Total Current Assets 80,406 263,474 -------------- -------------- DUE FROM NON-COMBINED AFFILIATE - 91,000 -------------- -------------- PROPERTY AND EQUIPMENT, NET 10,837 7,528 -------------- -------------- OTHER ASSETS Deferred offering costs 23,100 65,215 -------------- -------------- Total Other Assets 23,100 65,215 -------------- -------------- TOTAL ASSETS $ 114,343 $ 427,217 - ------------ ============== ============== LIABILITIES AND EQUITY (DEFICIT) -------------------------------- CURRENT LIABILITIES Bank overdraft $ - $ 6,518 Accounts payable and accrued expenses 35,986 36,971 Due to affiliate 243,556 - Other current liabilities - 8,591 Distributor deposits 16,682 2,006 -------------- -------------- Total Current Liabilities 296,224 54,086 -------------- -------------- TOTAL LIABILITIES 296,224 54,086 -------------- -------------- COMMITMENTS AND CONTINGENCIES EQUITY (DEFICIT) (181,881) 373,131 -------------- -------------- TOTAL LIABILITIES AND EQUITY (DEFICIT) $ 114,343 $ 427,217 - -------------------------------------- ============== ============== See accompanying notes to financial statements. 2 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) STATEMENTS OF OPERATIONS FOR THE YEARS ENDED DECEMBER 31, 1998 AND 1997 ---------------------------------------------- 1997 1998 Combined -------------- -------------- REVENUES Film license sales $ 50,518 $ 74,532 -------------- -------------- Total Revenues 50,518 74,532 -------------- -------------- OPERATING EXPENSES Compensation 3,610,197 3,104,239 Commissions - 20,628 Professional fees 98,420 101,787 General and administrative 75,414 138,146 General marketing 11,615 10,953 Direct film marketing, advertising, distribution and rework expenses 360,800 270,554 Rental expenses 45,433 12,744 Depreciation 2,264 1,798 -------------- -------------- Total Operating Expenses 4,204,143 3,660,849 -------------- -------------- NET LOSS FROM OPERATIONS (4,153,625) (3,586,317) -------------- -------------- OTHER INCOME Other income - 3,909 -------------- -------------- NET LOSS $ (4,153,625) $ (3,582,408) - -------- ============== ============== Net loss per common share basic and diluted $ (0.61) $ (1.66) ============== ============== Weighted average number of shares outstanding during the period basic and diluted 6,858,349 2,150,000 ============== ============== See accompanying notes to financial statements. 3 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) STATEMENTS OF CHANGES IN EQUITY (DEFICIT) FOR THE PERIOD FROM DECEMBER 31, 1996 TO DECEMBER 31, 1998 ----------------------------------------------------------
COMMON STOCK LIMITED ------------------------------ PARTNERSHIP INTEREST SHARES AMOUNT UNITS AMOUNT -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1996 350,000 $ 35 48.93 $ 225,972 Issuance of common stock pursuant to private placement 222,700 222,700 - - Issuance of limited partnership units - - 179.67 898,341 Issuance of common stock to employees 2,875,000 2,875,000 - - Write-off of deferred offering costs - (89,138) - (99,571) Net loss 1997 - - - - -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1997 3,447,700 $ 3,008,597 228.60 $ 1,024,742 Issuance of common stock pursuant to private placement 588,937 588,937 - - Issuance of common stock in exchange for partnership units 1,344,804 964,478 - - Cancellation of partnership units - - (228.60) (1,024,742) Issuance of common stock to affiliate 1,800,000 3,240,000 - - Subscriptions received - - - - Write-off of deferred offering costs - (230,467) - - Net loss 1998 - - - - -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1998 7,181,441 $ 7,571,545 - $ - - -------------------------- ============== ============== ============== ============== (CONTINUED) CORPORATION PARTNERSHIP ACCUMULATED ACCUMULATED SUBSCRIPTION DEFICIT DEFICIT RECEIVABLE TOTAL -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1996 $ (53,289) $ (24,188) $ (35) $ 148,495 Issuance of common stock pursuant to private placement - - - 222,700 Issuance of limited partnership units - - - 898,341 Issuance of common stock to employees - - (288) 2,874,712 Write-off of deferred offering costs - - - (188,709) Net loss 1997 (3,546,332) (36,076) - (3,582,408) -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1997 $ (3,599,621) $ (60,264) (323) $ 373,131 Issuance of common stock pursuant to private placement - - - 588,937 Issuance of common stock in exchange for partnership units - - - 964,478 Cancellation of partnership units - 60,264 - (964,478) Issuance of common stock to affiliate - - (180) 3,239,820 Subscriptions received - - 323 323 Write-off of deferred offering costs - - - (230,467) Net loss 1998 (4,153,625) - - (4,153,625) -------------- -------------- -------------- -------------- BALANCE, DECEMBER 31, 1998 $ (7,753,246) $ - (180) $ (181,881) - -------------------------- ============== ============== ============== ==============
See accompanying notes to financial statements. 4 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) STATEMENTS OF CASH FLOWS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- 1997 1998 Combined -------------- -------------- Cash flows from operating activities: Net loss $ (4,153,625) $ (3,582,408) -------------- -------------- Adjustments to reconcile net loss to net cash used in operating activities: Depreciation 2,264 1,798 Compensation expense on capital stock issuances 3,239,820 2,874,712 Changes in operating assets and liabilities: (Increase) decrease in: Prepaid taxes - (800) Increase (decrease)in: Bank overdraft (6,518) 6,518 Accounts payable and accrued expenses (985) 33,371 Other liabilities (8,591) 8,591 Distributor deposits 14,676 2,006 -------------- -------------- Total adjustments 3,240,666 2,926,196 -------------- -------------- Net cash used in operating activities (912,959) (656,212) -------------- -------------- Cash flows from investing activities: Employee advances 440 (1,959) Due from non-combined affiliates 275,715 (253,348) Purchase of property and equipment (5,573) (9,326) -------------- -------------- Net cash provided by (used in) investing activities 270,582 (264,633) -------------- -------------- Cash flows from financing activities: Proceeds from the issuance of common stock 424,008 133,562 Proceeds from the issuance of limited partnership units - 798,770 Due to affiliate 243,556 - Deferred offering costs (23,100) (60,798) -------------- -------------- Net cash provided by financing activities 644,464 871,534 -------------- -------------- Net increase (decrease) in cash 2,087 (49,311) Cash and cash equivalents-beginning - 49,311 -------------- -------------- CASH AND CASH EQUIVALENTS-ENDING $ 2,087 $ - - -------------------------------- ============== ============== See accompanying notes to financial statements. 5 SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES: - --------------------------------------------------------- During 1997 and 1998 2,875,000 and 1,800,000 shares, respectively of common stock were issued to certain directors, officers, and affiliates of the Company, which in turn were recorded as subscriptions receivable at December 31, 1997 and 1998, and paid in the following year. Non-cash compensation expense was recognized pursuant to SFAS 123. (See Note 3) During 1998, the Corporation issued 1,344,804 shares of common stock in exchange for the partnership units pursuant to the merger (See Note 5). See accompanying notes to financial statements. 6 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - --------------------------------------------------- (A) Description of Business --------------------------- Alpine Pictures International, Inc. (the "Corporation") is a California corporation formed in August 1996 and engaged in the business of distributing, marketing, licensing, and selling motion pictures in all markets, including domestic and international theatrical exhibition, home video, network television, cable television, pay per view cable television, non-theatrical exhibitors such as airlines, schools, hospitals, libraries, hotels, syndicated television and related markets. The Corporation may also have the right to license the ancillary rights for motion pictures for which it enters into distribution agreements, including soundtrack music and merchandising items. The Corporation enters into distribution agreements with affiliated and unaffiliated motion picture producers. The distribution agreements generally provide for the Corporation to be allocated a percentage of gross revenues from the motion pictures which it licenses and distributes, as well as to be repaid advances, if any, which it makes to producers and to be reimbursed its distribution and film rework expenses. (See Note 8). Alpine Releasing Partners I, L.P., the Corporation's controlled affiliate, was a California Limited Partnership (the "Partnership") formed in July 1996 to finance the acquisition and distribution of certain feature length motion pictures principally in conjunction with the Corporation who was the general partner. The partnership was merged into the Corporation in February 1998. (See Note 5). The combined entities are hereafter referred to as the "Company." In February 1999, the Company was acquired by Alpine Entertainment, Inc. ("AEInc.") in a transaction accounted for as a recapitalization of the Company. (See Note 12) (B) PRINCIPLES OF COMBINATION ----------------------------- The combined financial statements as of December 31, 1997 included the accounts of the Corporation and its controlled affiliate, Alpine Releasing Partners I, L.P. All significant intercompany balances and transactions were eliminated in combination. (C) USE OF ESTIMATES -------------------- In preparing financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reported period. Actual results could differ from those estimates. 7 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- (D) CASH AND CASH EQUIVALENTS ----------------------------- For purpose of the cash flow statements, the Company considers all highly liquid investments with original maturities of three months or less at time of purchase to be cash equivalents. (E) PROPERTY AND EQUIPMENT -------------------------- Property and equipment are stated at cost, less accumulated depreciation. Expenditures from maintenance and repairs are charged to expense as incurred. Depreciation is provided using the straight-line method over the estimated useful life's of the assets as follows: Equipment 5 years Furniture and fixtures 7 years (F) DEFERRED OFFERING COSTS --------------------------- Direct offering cost of equity offerings are deferred and charged to equity as proceeds are received. Deferred offering costs at December 31, 1998 relate to the Form SB-2 offering (See Note 12(B)) while deferred offering costs at December 31, 1997 related to the private placement and were fully charged to equity in 1998 (See Note 6). (G) INCOME TAXES ---------------- The Company accounts for income taxes under the Financial Accounting Standards Board Statement of Financial Accounting Standards No. 109. "Accounting for Income Taxes" ("Statement No.109"). Under Statement 109, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those measured using enacted tax rates expected to be recovered or settled. Under Statement 109, the effect on deferred tax assets and liabilities of a change in tax rates in recognized is income in the period that includes the enactment date. (H) REVENUE RECOGNITION ----------------------- The Company recognizes revenue in accordance with Statement of Financial Standards No. 53, "Financial Reporting by Producers and Distributors of Motion Picture Films" ("SFAS 53"). Under SFAS 53, a producer or distributor recognizes revenue when the license fee is known, the film costs have been reasonably determined, the film has been shipped and accepted by the sub-licensee distributor and is available for showing, and collectability of the full license fee is assured. Based on Company experience, collectability of the full license fee is assured only upon cash receipt from the sub-licensee distributor. Therefore, under the Company's flat fee type contracts, revenue is recognized upon receipt of final payment from and the shipment to and acceptance by the sub-licensee distributor. Under revenue sharing type contracts, revenue is recognized as payments are received from the sub-licensee distributor. Initial deposits on sub-licensee distributor contracts are recorded as distributor deposits and recognized when the final payment is received and the film is shipped to and accepted by the sub-licensee distributor. 8 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- (I) DIRECT FILM MARKETING, ADVERTISING, DISTRIBUTION AND REWORK EXPENSE ----------------------------------------------------------------------- The Company incurs certain film pre-release and post-release marketing and advertising expenses, distribution expense, and film rework expenses such as adding subtitles or dubbing, or other editing required to prepare the films for distribution in foreign geographic markets. The Company considers such expenses to be period costs and accordingly expenses them in the period incurred. Contractual terms with each film producer allow the Company to recoup its marketing, advertising, distribution and rework costs, subject to limitations as defined in each contract, from future revenues generated from the film. Such recovered amounts, when received, are recorded as an offset against the current film marketing, advertising and rework expense. (J) CONCENTRATIONS ------------------ There were no financial instruments which potentially subject the Company to significant concentration of credit risk at December 31, 1998 and 1997. The following is an approximate summary of the percentage of film sales by geographic region. 1998 1997 ---- ---- Italy 25% 45% Latin America 20% - Germany 12% 19% Philippines 10% - England 8% - Argentina 7% - France 6% - Indonesia - 8% Poland - 7% Thailand 5% 2% Taiwan 4% - Peru - 1% Russia 3% 18% ---- ---- 100% 100% ==== ==== (K) PER SHARE DATA ------------------ Net loss per common share for the year ended December 31, 1998 and 1997 is required to be computed by dividing net loss by the weighted average common shares outstanding during the year as defined by Financial Accounting Standards, No. 128, "Earnings per Share". However, the weighted average shares have been retroactively restated to reflect a nominal issuance of 1,800,000 shares on December 31, 1998 as if the issuance occurred on January 1, 1997 pursuant to SAB Topic 4-D and to reflect only the majority shareholders outstanding common stock pursuant to the reorganization. (See Note 12) 9 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- (L) RECLASSIFICATIONS --------------------- Certain amounts in 1997 financial statements have been reclassified to conform to the 1998 presentation. NOTE 2 - PROPERTY AND EQUIPMENT - ------------------------------- Property and equipment at December 31, 1998 and 1997 consists of the following: 1998 1997 -------------- -------------- Equipment $ 10,522 $ 8,142 Furniture and fixtures 4,377 1,184 -------------- -------------- 14,899 9,326 Less accumulated depreciation (4,062) (1,798) -------------- -------------- $ 10,837 $ 7,528 ============== ============== NOTE 3 - EQUITY - --------------- In July 1997 the Corporation amended its articles of incorporation to increase the authorized no par value common stock to 20,000,000 from 10,000,000 and to authorize 2,000,000 shares of no par value preferred stock. The Board of Directors of the Corporation may designate different series of preferred stock and may fix the authorized number of shares for each series. The holders of each series of preferred stock shall have such rights, preferences and privileges as may be determined by the Board of Directors prior to the issuance of such shares. As of December 31, 1998 and 1997, there were no preferred shares issued or outstanding. During 1997, the Company issued 2,875,000 common shares to officers and employees for prior services rendered. The employees and officers paid $288 for the shares and the Company recognized $2,874,712 in compensation expense, based upon the then recent $1.00 cash offering price, pursuant to SFAS 123. During 1998, the Company issued 1,800,000 common shares to an affiliate for a $180 subscription receivable. The Company recognized $3,239,820 compensation expense based upon the proposed $6.00 public offering price as effected by a proposed three-for-ten reverse stock split on the issued and outstanding shares. The resulting valuation price is $1.80 per share. NOTE 4 - PARTNERSHIP AGREEMENT - ------------------------------ In 1996, a limited partnership was formed known as Alpine Releasing Partners I, L.P. (see Note 6). Alpine Pictures International, Inc. was named as general partner. Under the terms of the partnership agreement, (a) the partnership shall continue for ten (10) years unless terminated sooner by the partners, (b) in general, income and loss shall be allocated annually to the general partner 1% and limited partners 99%. In February 1998 Alpine Releasing Partners I, L.P. was merged into Alpine Pictures International, Inc. (See Note 5) 10 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- NOTE 5 - MERGER OF ALPINE PICTURES INTERNATIONAL, INC. AND ALPINE RELEASING PARTNERS I, L.P. - -------------------------------------------------------------------------------- On December 17, 1997, the Corporation entered into an Agreement of Merger (the "Agreement") to merge the Partnership into the Corporation with the Corporation as the surviving entity. Under the terms of the Agreement, the effective date of the merger was February 15, 1998, and the Corporation issued one share of its common stock for each $0.85 of limited partnership interest resulting in a total issuance by the Company of 1,344,804 shares of its common stock to the limited partners. NOTE 6 - PRIVATE PLACEMENTS - --------------------------- In July 1997 the Corporation issued a Private Placement Memorandum (the "Placement") pursuant to the Securities and Exchange Commission Regulation CE Section 3(b), Rule 1001, of the Securities Act of 1933, as amended, and under Section 25102(n) of the California corporations code to offer 980,000 shares of its common stock, no par value, with an option to increase the offering by up to an additional 120,000 shares for a maximum offering of 1,100,000 shares. Under terms of the Placement, the shares were offered on a "best efforts" basis at $1.00 per share in minimum units of 20,000 shares with no minimum capitalization required by the Corporation. Under the Placement, which terminated in 1998, the Corporation issued 811,637 shares of common stock during 1998 and 1997 with gross proceeds to the Corporation of $811,637 and offering expenses of $319,605 of which $230,467 and $89,138 were charged against equity in 1998 and 1997, respectively. In July 1996, the Partnership issued a Private Placement Memorandum (the "Placement") under Rule 506 of Regulation D under Section 4(2) of the Securities Act of 1933, as amended, and under Section 25102(n) of the California Corporations Code to offer, on a "best efforts" basis, 200 limited partnership units at a subscription price of $5,000 per unit. Under terms of the Placement, the minimum investment was 5 units or $25,000 and no minimum capitalization was required. Additionally, the general partner was required to make a capital contribution equal to 1% of aggregate partnership capital at the termination of the offering. Under the Placement, the Partnership raised approximately $898,341 in 1997, and the placement was terminated in June 1997. Offering costs of the placement aggregated $118,267 of which $99,571 were charged against equity in 1997. 11 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- NOTE 7 - INCOME TAXES - --------------------- There was no current income tax expense or benefit in 1998 and 1997 due to the Company's net losses. The tax effects of temporary differences that give rise to significant portions of deferred tax assets at December 31, are as follows: 1998 1997 ---- ---- Deferred tax assets: Net operating loss carryforward $ 513,000 246,000 Stock based compensation 2,078,941 977,402 -------------- -------------- Total gross deferred tax assets 2,591,941 1,223,402 Less valuation allowance (2,591,941) (1,223,402) -------------- -------------- Net deferred tax assets $ - $ - ============== ============== At December 31, 1998, the Company had net operating loss carryforwards of approximately $2,232,300 for income tax purposes, available to offset future taxable income expiring on various dates through 2016. The valuation allowance for deferred tax assets as of January 1, 1998 was approximately $1,223,400. The net change in the total valuation allowance for the year ended December 31, 1998 was an increase of approximately $1,368,600. NOTE 8 - OPERATING AGREEMENTS - ----------------------------- (A) AGREEMENTS WITH PRODUCERS/OWNERS ------------------------------------ As part of its primary operations, the Company enters into agreements with various producers/owners (the "owner") of feature films (the "film") to act as distributor agent of the owner for the sales, collections and servicing of the film in specified media and geographic territories, for a stipulated term. Under the agreements, various provisions exist for extension and/or cancellation of the contracts, limited reworking of the film to meet local country requirements, and sublicensing of distribution by the Company. The Company generally retains a percentage fee based on gross receipts from film sales, as defined in the agreements, and is allowed reimbursement of out-of-pocket sales, marketing, distribution, servicing, rework, technical materials, and other customary expenses incurred up to a stipulated cap from the remaining gross receipts. The balance after the Company's fee and out-of-pocket expenses is payable to the owner. Under certain agreements the owner is paid a stipulated percentage out of gross receipts prior to any fee and/or expense distributions to the Company. (B) LICENSING AGREEMENTS WITH DISTRIBUTORS ------------------------------------------ The Company enters into licensing agreements with sub-distributors for distribution of films for which the Company is the agent of producers/owners, as discussed above. The agreements generally stipulate a fixed fee and less commonly, royalty fees or a combination thereof allowing the sub-distributor to distribute certain films within a specified territory. The Company generally obtains a non-refundable deposit from distributors which is recorded as a deposit liability until the film is delivered to and balance received from the distributor, or the agreement is canceled. 12 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- (C) CONSULTING AGREEMENT ------------------------ In August 1998 the Company entered into an agreement (the "Agreement") with a firm whereby the firm will provide certain stipulated services relating to positioning the Company to enter the public capital markets. (See Note 12(B)) The firm is to provide a holding company to which the firm will retain 250,000 common shares and warrants to purchase an additional 250,000 common shares at a price of $1.00 per share. In addition, the Company will pay the firm $100,000 for its services and the services of its affiliates. As of December 31, 1998, the Company paid $60,000 which is included in the statement of operations as professional fees. (See Note 12(A)) NOTE 9 - COMMITMENTS AND CONTINGENCIES - -------------------------------------- The Company is aware of the issues associated with the programming code in existing computer systems as the millennium (Year 2000) approaches. The "Year 2000" problem is pervasive and complex as virtually every computer operation will be affected in some way by the rollover of the two-digit year to 00. The issue is whether computer systems will properly recognize date-sensitive information when the year changes to 2000. Systems that do not properly recognize such information could generate erroneous data or cause a system to fail. The Company uses a standard off the shelf accounting software package for all of its accounting requirements. Management has contacted the software vendor and confirmed that the accounting software is Year 2000 compliant. Management has also verified that critical vendors' systems will be Year 2000 compliant. Costs of investigating Year 2000 compliance issues have not been material to date. As a result, management believes that the effect of investigating and resolving Year 2000 compliance issues will not have a material effect on the Company's future financial position or results of operations. NOTE 10 - RELATED PARTY TRANSACTIONS - ------------------------------------ During 1998 and 1997 investor lead lists were purchased from a non-combined affiliate, First National Information Network, Inc. (FNIN) for an aggregate amount of $163,457. Such investor lists were used in marketing campaigns to sell shares of common stock under the private placements (See Note 6). Accordingly, $118,604 and $44,853 were charged against equity in 1998 and 1997, respectively. The Company also periodically advances funds to FNIN. The net effect of amounts due to FNIN for investors lead list purchases and advances due from FNIN totaled $76,000 and $91,000 at December 31, 1998 and 1997, respectively, and are reflected as due from non-combined affiliates in current assets and due from non-combined affiliate-long term at those dates, respectively. The amount of $76,000 was repaid in January 1999. 13 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- During 1998 the Company issued 1,800,000 shares of common stock to its affiliate, Alpine Pictures, Inc. During 1997, 2,875,000 shares of common stock were issued to key officers and employees. The Company's affiliate, Alpine Pictures, Inc. borrows funds from, or lends funds to, and pays certain shared office expenses of the Company. The net effect of these transactions resulted in a due to affiliate of $243,556 at December 31, 1998 and a due from non-combined affiliates of $260,715 at December 31, 1997. The Company periodically enters into distribution agreements with its non-combined affiliate, Alpine Pictures, Inc. to distribute films produced by such affiliate. NOTE 11 - GOING CONCERN - ----------------------- The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. The Company incurred a net loss of $4,153,625 during the year ended December 31, 1998, had a negative cash flow from operating activities of $912,959 and has an accumulated deficit of $7,753,246 at December 31, 1998. These conditions raise substantial doubt about the Company's ability to continue as a going concern and if substantial additional funding is not acquired or alternative sources developed to meet the Company's working capital needs, management will be required to curtail its operations. The Company's current parent, AEInc., intends to raise between $1.5 million (minimum) and $7.5 million (maximum) in an initial public offering during 1999. (See Note 12(B)) Management believes that actions presently being taken to obtain additional funding provide the opportunity for the Company to continue as a going concern. NOTE 12 - SUBSEQUENT EVENTS - --------------------------- (A) AGREEMENT AND PLAN OF REORGANIZATION ---------------------------------------- Under an agreement dated February 9, 1999, effective February 10, 1999, Alpine Entertainment, Inc., ("AEInc.") a new corporation formed on November 5, 1998 under the laws of Delaware, acquired 69.9% of the issued and outstanding shares of common stock of the Company from consenting stockholders in exchange for common stock of AEInc. Under the terms of the agreement, the Company's shares were exchanged at a ratio of one share of AEInc. for every share of the Company. As a result of the exchange, the Company became a majority owned subsidiary of AEInc., and the consenting stockholders of the Company became stockholders of approximately 96% of AEInc. Generally Accepted Accounting Principles require that the Company whose shareholders retain a majority interest in a combined business be treated as the acquirer for accounting purposes. As a result, the acquisition will be treated as an acquisition of AEInc. by the Company, and a recapitalization of the Company. 14 ALPINE PICTURES INTERNATIONAL, INC. (FORMERLY ALPINE PICTURES INTERNATIONAL, INC. AND AFFILIATE (A LIMITED PARTNERSHIP)) NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1998 AND 1997 -------------------------------- The Company's financial statements immediately following the acquisition will be as follows: (1) The Balance Sheet will consist of the Company's net assets at historical cost and AEInc.'s net assets at historical cost, (2) the non-consenting stockholders will be treated in the consolidated financial statements as minority stockholders of Alpine Pictures International, Inc., the legal subsidiary, and (3) the Statement of Operations will include the Company's operations for the period presented and AEInc.'s operations from the date of acquisition. (B) LETTER OF INTENT FOR PUBLIC OFFERING ---------------------------------------- In May 1999, the Company's parent at that time, AEInc. executed a letter of intent (the "Letter") with an investment banking firm whereby the investment banking firm will make a best efforts underwritten public offering (the "offering") of units of common stock and warrants of AEInc. aggregating between $1.5 million (minimum) and $7.5 million (maximum). Under the Letter, AEInc. is committed to pay the investment banking firm $5000 per month, and certain offering expenses incurred by the investment banking firm, up to $85,000, are reimbursable by the Company whether or not the offering is consummated. (C) CONVERTIBLE PROMISSORY NOTES -------------------------------- On August 6, 1999, the Company issued to its affiliate, Alpine Pictures, Inc., a non-interest bearing convertible promissory note (the "Note") for $2,052,000 due December 31, 2001. The principal amount to be repaid will be based on the total of periodic amounts drawn from the note, which was $1,200,000 at August 6, 1999. Pursuant to the note, an additional $85,200 per week is to be funded beginning August 13, 1999 through October 15, 1999. All amounts were funded by October 15, 1999. The note is convertible immediately in part or in whole, to the common stock of Alpine Entertainment, Inc. at a price of $0.90 per share or a total of 2,280,000 shares for the $2,052,000. In addition, Alpine Pictures, Inc. may use or assign the note in part or in full to pay a dividend to its shareholders or satisfy Alpine Pictures, Inc.'s creditors. The note contains a beneficial conversion feature whereby the intrinsic value is computed at the IPO price of $6.00 less the $0.90 conversion price of the debt or $5.10 per share. The Company recognized non-cash interest expense in the aggregate of $11,628,000, on the funding dates. 15 No dealer, salesman or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and, if given or made, such information or representations may not be relied on as having been authorized by Alpine or by any of the underwriters. Neither the delivery of this prospectus nor any sale made hereunder will under any circumstances create an implication that there has been no change in the affairs of the Company since the date hereof. This prospectus does not constitute an offer to sell, or solicitation of any offer to buy, by any person in any jurisdiction in which it is unlawful for any such person to make such offer or solicitation. Neither the delivery of this prospectus nor any offer, solicitation or sale made hereunder, will under any circumstances create any implication that the information herein is correct as of any time subsequent to the date of the prospectus 250,000 Units Minimum Offering date of the Prospectus. 1,250,000 Units Maximum Offering convertible promissory note interests up to the amount of $2,052,000 to be distributed by the holder thereof; and 7,600,000 shares of common stock issuable upon conversion of the promissory notes TABLE OF CONTENTS Page Prospectus Summary Risk Factors Available Information The Company Use of Proceeds Dilution Dividend Policy Business Management's Discussion and Analysis of Financial Condition and Results of Operations Management Security Ownership of Certain Beneficial Owners and Management Related Transactions Selling Security holder PROSPECTUS Concurrent Distribution by Selling Security holder Underwriting Description of Securities Legal Proceedings Legal Matters September ___, 1999 Experts Financial Statements Until ________ all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligations to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. PART II INFORMATION NOT REQUIRED IN THE PROSPECTUS ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS Alpine is incorporated in Delaware. Under Section 145 of the General Corporation Law of the State of Delaware, a Delaware corporation has the power, under specified circumstances, to indemnify its directors, officers, employees and agents in connection with actions, suits or proceedings brought against them by a third party or in the right of the corporation, by reason of the fact that they were or are such directors, officers, employees or agents, against expenses incurred in any action, suit or proceeding. Our Certificate of Incorporation, as amended, and By-laws provide for indemnification of directors and officers to the fullest extent permitted by the General Corporation Law of the State of Delaware. The General Corporation Law of the State of Delaware provides that a certificate of incorporation may contain a provision eliminating the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director provided that such provision shall not eliminate or limit the liability of a director For any breach of the director's duty of loyalty to the corporation or its stockholders; For acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; Under Section 174 (relating to liability for unauthorized acquisitions or redemptions of, or dividends on, capital stock) of the General Corporation Law of the State of Delaware; or For any transaction from which the director derived an improper personal benefit. Our Certificate of Incorporation, as amended, contains such a provision. INSOFAR AS INDEMNIFICATION FOR LIABILITIES ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, MAY BE PERMITTED TO DIRECTORS, OFFICERS OR PERSONS CONTROLLING ALPINE PURSUANT TO THE FOREGOING PROVISIONS, IT IS THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION THAT SUCH INDEMNIFICATION IS AGAINST PUBLIC POLICY AS EXPRESSED IN THE ACT AND IS THEREFORE UNENFORCEABLE. ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following table sets forth the expenses in connection with this Registration Statement. All of such expenses are estimates, other than the filing fees payable to the Securities and Exchange Commission. Filing Fee - Securities and Exchange Commission $ 2,800 Fees and Expenses of Accountants 40,000 Fees and Expenses of legal counsel 100,000 Printing and Engraving Expenses 10,000 Miscellaneous Expenses 3,700 Total $ 160,000 ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES As listed below, Alpine issued shares of its Common Stock par value $.0001 per share to the following individuals or entities for the consideration as listed in cash or services. All sales made within the United States or to United States citizens or residents, were made in reliance upon the exemption from registration provided by Section 4(2) of the Securities Act of 1933. Date Shareholder Number of Consideration Shares 12/1/98 TPG Capital Corporation 37,500 $ 50.00 12/1/98 Brokerlink Capital, Research and Communication 37,500 $ 50.00 2/10/99 Rene Torres 105,000 $ 35.00* 2/10/99 Ryan Carroll 232,500 $ 77.50* 2/10/99 Roland Carroll 232,500 $ 77.50* 2/10/99 Tom Hamilton 105,000 $ 35.00* 2/10/99 Greg Cozine 105,000 $ 35.00* 2/10/99 Paul Miller 105,000 $ 35.00* 2/10/99 Linda McArthur 45,000 $ 15.00* 2/10/99 Phil Hammond 7,500 $ 2.50* 2/10/99 Neil Kaufman 7,500 $ 2.50* 2/10/99 Barnard Natalino 7,500 $ 2.50* 2/10/99 Jack Larson 7,500 $ 2.50* 2/10/99 Jack Phelan 7,500 $ 2.50* 2/10/99 Alpine Pictures, Inc. 540,000 $ 180.00* * These shares were originally purchased from Alpine Pictures International, Inc. and exchanged for shares of Alpine Entertainment, Inc. on February 10, 1999 at a share exchange ratio of one-for-one. ITEM 27. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES (a) Exhibits 1.1 Underwriting Agreement 1.2 Investment Banking Agreement 2.1* Plan of Regorganization 3.1** Certificate of Incorporation 3.2** By-Laws of Alpine 4.1 Form of Common Stock Certificate 4.2 Convertible Promissory Notes 5.1 Opinion of Davidson Casale Nojima, LLP 10.1 Sample Sales Agency Agreement 10.2 Sample International Distribution Agreement 10.3 Lease Agreement with Alpine Pictures Inc. 10.4 Lease Agreement with RP Holdings, Inc. 10.5 Form of Escrow Agreement 21.1* Subsidiaries of Alpine 24.1 Consent of Weinberg & Company, certified public accountants 24.2 Consent of Davidson Casale Nojima, LLP (included in Exhibit 5) 27.1* Financial Data Schedule ----- * To be filed by Amendment. ** Previously filed (b) The following financial statement schedules are included in this Registration Statement. None. ITEM 28. UNDERTAKINGS. The undersigned registrant hereby undertakes: (a) To file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) To include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information explained in the registration statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission is that such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. If a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrant hereby undertakes that: (i) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or 497(h) under the Securities Act will be deemed to be part of this registration statement as of the time it was declared effective. (ii) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus will be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, Alpine Entertainment, Inc. certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form SB-2 and has duly caused this Registration Statement on Form SB-2 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Van Nuys, California on the 12th day of October, 2000. ALPINE ENTERTAINMENT, INC. By: /s/ Roland Carroll ------------------ President Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated. Signature Title Date /s/ Ryan Carroll Chief Executive Officer October 13, 2000 ----------------------- Ryan Carroll Director /s/ Roland Carroll President October 13, 2000 ----------------------- Director Roland Carroll /s/ Greg Cozine Director October 13, 2000 ----------------------- Vice President, Director Greg Cozine EX-1.1 2 0002.txt MANAGING PLACEMENT AGENT AGREEMENT 1,000,000 SHARES ALPINE ENTERTAINMENT, INC. MANAGING PLACEMENT AGENT AGREEMENT September ____, 2000 RH Investment Corporation 15760 Ventura Boulevard Suite 1732 Encino, CA 91436 Gentlemen: Alpine Entertainment, Inc., a Delaware corporation ("Company"), hereby confirms its agreement with you, as Managing Placement Agent, as follows: SECTION 1. DESCRIPTION OF THE OFFERING. The Company proposes to offer for sale and sell to the public up to 1,250,000 shares of its common stock, par value $.0001 per share ("Common Stock"), at the price of $6.00 per share ("Offering"). All funds received from subscribers will be held in City National Bank ("Escrow Agent"), pursuant to an agreement among you, the Company and the Escrow Agent ("Escrow Agreement"). Although, the Escrow Agreement is not currently completed or executed, the Company intends to utilize City National Bank for this purpose. TheCompany will determine, in its sole discretion, to accept or reject subscriptions for Common Stock within five days following receipt thereof. Funds of an investor whose subscription is rejected will be promptly returned directly to such person by the Escrow Agent, without interest thereon or deduction therefrom, pursuant to the terms of the Escrow Agreement to be finalized. In the event that at least 250,000 shares of Common Stock have not been sold within 180 days from the initial effective date of the Registration Statement (as hereinafter defined) under the Securities Act of 1933, as amended ("Securities Act"), which period may be extended for an additional 60 days by you, the Offering will terminate and all funds received from subscribers will be promptly returned in full by the Escrow Agent directly to subscribers, without interest thereon or deduction therefrom, as provided in the will Agreement. Provided that at least 250,000 shares of Common Stock are sold within the foregoing period, the Company may continue to offer the Common Stock for sale until (i) 1,250,000 shares are sold or (ii) the 180 day time period is exceeded, whichever first occurs; the Offering may be terminated at any time prior thereto at the discretion of the Company. RH Investment Corporation June ___, 2000 Page 2 The Company reserves the right to refuse to sell shares of Common Stock to any person at any time. The Company, the Common Stock and the Offering are more fully described in the Registration Statement (as hereinafter defined) and the Prospectus (as hereinafter defined). All terms used in this Agreement, unless specifically defined herein, shall have the meanings set forth in such Registration Statement and Prospectus. SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to, and agrees with you, that: (a) The Company is duly organized and validly existing as a corporation in good standing under the laws of the State of California. The Company has the full power and authority and all necessary authorizations, approvals, orders, licenses, certificates and permits of and from all governmental and regulatory officials and bodies required to own its properties and conduct its business as described in the Prospectus (as herein defined); the Company is duly qualified to do business under the laws of (and is in good standing as such in) each jurisdiction in which it owns or leases property, has an office, or in which business is conducted and such qualification is required, except where the failure to so qualify would not have a material adverse effect on the business, assets or financial condition of the Company, and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. (b) The Company does not own or control, directly or indirectly, any corporation, association, partnership or other entity other than as identified in the Registration Statement (as herein defined). (c) The execution, delivery and performance by the Company of this Agreement has been duly authorized by all necessary action and will not (i) violate any provision of the Articles of Incorporation or Bylaws of the Company (in each case as amended at the time of this Agreement), (ii) result in the breach, or be in contravention, of any provision of any agreement, franchise, license, indenture, mortgage, deed of trust or other instrument to which the Company is a party or by which the Company or its property may be bound or affected, or any order, law, statute, rule or regulation applicable to the Company of any court or regulatory body, administrative agency or other governmental body having jurisdiction over the Company or any of its property, or any order of any court or governmental agency or authority entered in any proceeding to which the Company was or is now a party or by which it is bound or (iii) result in the creation of any lien, charge or encumbrance upon any property of the Company. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement by the Company, or the RH Investment Corporation June ___, 2000 Page 3 consummation by the Company of the transactions contemplated hereby, other than under the Securities Act, the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated by the Securities and Exchange Commission ("Commission") thereunder (collectively, the "Exchange Act"), state securities laws and regulations (collectively, the "Blue Sky Laws") applicable to the public offering of the Common Stock as described in the Registration Statement and the Prospectus (as hereinafter defined), and/or the rules of the National Association of Securities Dealers, Inc. ("NASD"). This Agreement has been duly executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable in accordance with its terms, except insofar as rights to indemnity or contribution may be limited by applicable law and subject to bankruptcy, insolvency or similar laws generally affecting the rights of creditors and equitable principles affecting the right to obtain specific enforcement or similar equitable relief. (d) A registration statement on Form SB-2 (Registration File No. 333-92299) and an Amendment No. 1 with respect to the Common Stock has been carefully prepared by the Company in conformity with the requirements of the Securities Act and the rules and regulations ("Rules and Regulations") of the Commission thereunder, and has been filed with the Commission; the Company has so prepared and has filed or proposes to file prior to the effective date of such registration statement or subsequent to such effective date pursuant to Rule 430A under the Rules and Regulations, an additional amendment or amendments to such registration statement. There have been delivered to you and your counsel two signed copies of such registration statement, as initially filed with the Commission and each amendment thereto, together with copies of each exhibit filed therewith, and two conformed copies of such registration statement, as initially filed with the Commission and each amendment thereto (but without exhibits) and of each related preliminary prospectus ("Preliminary Prospectus") and of the proposed final form of prospectus. As used in this Agreement, the term "Registration Statement" means such registration statement, including exhibits, financial statements and schedules and documents incorporated therein by reference, as finally amended and revised at the time such registration statement becomes effective, including the information, if any, deemed to be a part thereof pursuant to Rule 430A of the Rules and Regulations, and the term "Prospectus" means the related prospectus in the form first filed on behalf of the Company with the Commission pursuant to Rule 424(b) under the Securities Act. Any reference herein to any Registration Statement, Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents and information, if any, incorporated by reference therein. Any reference to any amendment or supplement to any Registration Statement, Preliminary Prospectus or Prospectus shall be deemed to refer to and include any documents filed after such date under the Exchange Act and incorporated therein by reference. RH Investment Corporation June ___, 2000 Page 4 (e) Neither the Commission nor any state securities or "blue sky" authorities has issued any order preventing or suspending the use of any Preliminary Prospectus, and each Preliminary Prospectus has conformed fully in all material respects with the requirements of the Securities Act, the Rules and Regulations and the Blue Sky Laws and, as of its date, has not included any untrue statement of a material fact or omitted to state a fact required to be stated therein or necessary to make the statements therein not misleading; when the Registration Statement becomes effective, and at all times subsequent thereto up to each Closing Date (as defined herein), the Registration Statement and the Prospectus, and any amendments or supplements thereto, will contain all statements that are required to be stated therein in accordance with the Securities Act, the Rules and Regulations and the Blue Sky Laws and will in all material respects conform to the requirements of the Securities Act, the Rules and Regulations and the Blue Sky Laws, and neither the Registration Statement nor the Prospectus, nor any amendment or supplement thereto, will include any untrue statement of a material fact or omit to state a fact required to be stated therein or necessary to make the statements therein not misleading; provided, however, that the Company makes no representation or warranty as to information contained in or omitted from any Preliminary Prospectus, the Registration Statement, the Prospectus, or any such amendment or supplement, in reliance upon and in conformity with written information furnished to the Company by you specifically for inclusion therein. (f) There are no contracts or other documents, transactions or relationships of or by and between the Company or any of the respective officers or directors of the Company required to be described in the Registration Statement or filed as exhibits to the Registration Statement by the Securities Act or the Rules and Regulations which have not been described or filed as required or incorporated by reference as permitted by the Securities Act and the Rules and Regulations. (g) The Company has authorized capital stock as set forth in the Prospectus. All outstanding shares of capital stock of the Company have been duly authorized, validly and legally issued and are fully paid and nonassessable; such shares have not been issued in violation of or subject to any preemptive rights provided for by law or by the Company's Articles of Incorporation or Bylaws. The Common Stock conforms in all material respects to all statements with respect thereto contained in the Prospectus, and such statements conform to the provisions set forth in the Articles of Incorporation and Bylaws of the Company. (h) The shares of Common Stock sold in the Offering, upon receipt of full payment therefor and delivery by the Company, will be duly authorized, validly and legally issued, fully paid and nonassessable, and will not have been issued in violation of or subject to any preemptive rights provided for by law or by the Company's Articles of Incorporation or Bylaws or be subject to any lien, claim, encumbrance, security interest, preemptive rights or any other claim of any third party. RH Investment Corporation June ___, 2000 Page 5 (i) Except as described in the Prospectus, there is not pending, or, to the knowledge of the Company, threatened, any action, suit, proceeding, inquiry or investigation to which the Company is a party, or to which the property of the Company is subject, before or brought by any court, governmental agency or body or arbitration tribunal, which, if determined adversely to the Company, would result in any material adverse change in the business, financial position, net worth, results of operations or prospects of the Company, or materially and adversely affect its property or assets. (j) The financial statements and the related notes included in the Registration Statement, in any Preliminary Prospectus or in the Prospectus present fairly the financial position, results of operations and cash flows of the Company at the dates and for the periods indicated and have been prepared in accordance with generally accepted accounting principles, except as otherwise stated therein. Weinberg & Company, P.A., who have audited certain financial statements as set forth in their report included in the Registration Statement and Prospectus and each Preliminary Prospectus, are independent accountants as required by the Securities Act and the Rules and Regulations. (k) The Company is not in violation of its Articles of Incorporation and Bylaws, or in default or breach under any court or administrative order or decree, or in default with respect to any provision of any lease, loan agreement, franchise, license, permit, agreement or other contractual obligation to which the Company is a party or by which the Company or any of its property is bound, and there does not exist any state of facts which constitutes an event of default or breach under such documents or which, upon notice or lapse of time or both, would constitute such an event of default or breach except those, if any, described in the Prospectus or such defaults or breaches which, individually or in the aggregate, are not, and with notice or lapse of time, or both, would not become, material to the Company. The Company is not in violation or breach of any law, order, rule, regulation, writ, injunction or decree of any governmental authority or instrumentality or any court, domestic or foreign, which violation would have a materially-adverse effect on its business as described in the Prospectus. (1) Neither the Company nor any of its affiliates, nor any director or officer of the foregoing, have taken and will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in (i) a violation of Rule 1Ob-6 under the Exchange Act or (ii) the manipulation of the price of the Common Stock facilitate the sale or resale of such securities. (m) The Company has good and marketable title to all the property and assets reflected as owned by it in the Prospectus, subject to no lien, mortgage, pledge, charge or encumbrance of any kind or nature whatsoever, except those, if any, reflected in the Prospectus, or which are not material to the Company and do not materially affect the value of such property and do not materially interfere with the use made or proposed to be made of such property; all properties held or used by the Company under leases, licenses, franchises or other agreements are held by it under valid, subsisting and enforceable leases, licenses, franchises or other agreements (subject to bankruptcy, reorganization, moratorium or similar laws affecting creditors' rights generally). RH Investment Corporation June ___, 2000 Page 6 (n) Since its inception, the Company has not sustained any material loss or interference with its business or property from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or court or governmental action, order or decree; and subsequent to the respective dates as of which information is given in the Registration Statement and Prospectus, the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, not in the ordinary course of business, and there has not been any material change in the capital stock or long-term debt of the Company, or any material adverse change, or any development involving a prospective material adverse change, in the business, financial position, net worth, results of operations or prospects of the Company, except in each case as described in or contemplated by the Prospectus. (o) The Company has filed all necessary federal, state and foreign income and franchise tax returns and has paid all taxes shown as due thereon, and has no knowledge of any tax deficiency which has been asserted or threatened against the Company which would materially adversely affect its business, operations or property. (p) The Company keeps accurate books and records and maintains internal accounting controls which provide reasonable assurance that (i) transactions are executed in accordance with management's authorization, (ii) transactions are recorded as necessary to permit preparation of its financial statements and to maintain accountability for its assets, (iii) access to its assets is permitted only in accordance with management's authorization and (iv) the reported accountability for its assets is compared with existing assets at reasonable intervals. (q) There are no holders of securities of the Company having rights to registration thereof under the Securities Act or preferential rights to purchase Common Stock or any other securities of the Company, except as disclosed in the Registration Statement and the Prospectus. (r) All documents delivered or to be delivered by the Company or its representatives in connection with the issuance and sale of the Common Stock were on the dates on which they were delivered or will be on the dates on which they are to be delivered, in all material respects, true, complete and correct. (s) The Company owns, or possesses the requisite licenses or other rights to use, all trademarks, service marks, service names and trade names necessary to conduct its business as described in or contemplated by the Prospectus; there is no claim or action by any person pertaining to (or proceeding pending or threatened which challenges) the rights of the Company with respect to any trademarks, service marks, service RH Investment Corporation June ___, 2000 Page 7 names or trade names used in the conduct of its business as described in or contemplated by the Prospectus; the products, services and processes of the Company have not infringed and do not infringe upon proprietary rights held or asserted by third parties which infringement, if resolved adversely to the Company, could materially affect its earnings, assets, affairs, business prospects or condition (financial and other). (t) The Company has not distributed and will not distribute prior to the final Closing Date (as hereinafter defined), any offering material in connection with the offer and sale of the Common Stock other than as permitted by the Securities Act. (u) The Company has not (i) had any material dealings within the twelve months prior to the date of this Agreement with any member of the NASD, or any person related to or associated with such member, other than discussions and meetings relating to the Offering, except as disclosed in writing to you prior to the date hereof; (ii) entered into a financial or management consulting agreement except as contemplated hereunder; or (iii) engaged any intermediary between you and the Company, and/or any of the affiliates of the Company, in connection with the Offering, and no person has been or will be compensated in any manner for such service. (v) Each of the Company's directors, executive officers and 10% shareholders shall have agreed in writing that, from the date hereof through the final Closing Date (as hereinafter defined), and for a period of 90 days thereafter, they will not, without your prior written consent, sell, offer or contract to sell, or grant any option to purchase, or otherwise dispose of, directly or indirectly, any shares of Common Stock owned by them (or any securities convertible into or exchangeable for any shares of Common Stock) except pursuant to this Agreement. Any certificate signed by any officer of the Company and delivered to you or to your counsel shall be deemed a representation and warranty of the Company to you as to the matters covered thereby and any certificate delivered by the Company to its counsel for purposes of enabling such counsel to render any opinion referred to in this Agreement will also be furnished to you and to your counsel and shall be deemed to be additional representations and warranties to you by the Company. SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE MANAGING PLACEMENT AGENT. You hereby represent and warrant to, and agree with, the Company as follows: (a) You are a corporation duly organized, validly existing under the laws of the State of California, with all requisite power and authority to enter into this Agreement and to carry out your obligations hereunder. RH Investment Corporation June ___, 2000 Page 8 (b) This Agreement (i) has been duly authorized, executed and delivered by you, (ii) constitutes your legal, valid and binding obligation, and (iii) subject to applicable bankruptcy, insolvency and other laws affecting the enforceability of creditors' rights generally, is enforceable as to you in accordance with its terms, specific performance hereof being limited by general principles of equity and the enforceability of the indemnification provisions hereof. (c) The execution, delivery and performance of this Agreement by you and the consummation by you of the transactions contemplated hereby and by the Prospectus will not conflict with or result in a breach or violation by you of any of the terms or provisions of, or constitute a default in any material respect under, (i) any indenture, mortgage, deed of trust, loan agreement, lease or other agreement or instrument to which you are a party or to which you or your property are subject, (ii) your Articles of incorporation or Bylaws or (iii) any statute, judgment, decree, order, rule or regulation applicable to you of any court or governmental agency or body having jurisdiction over you, your affiliates or your property. (d) You are, and at all times through the final Closing Date (as herein defined) shall remain, duly registered pursuant to the provisions of the Exchange Act as a broker-dealer; you are, and at all times through the final Closing Date shall remain, a member in good standing of the NASD; you will not reallow discounts or pay commissions or other compensation for participation in the distribution of the Offering to any broker-dealer which is not a member of the NASD, including foreign broker-dealers registered under the Exchange Act; you shall act as an independent contractor, and nothing herein shall constitute you an employee of the Company; you shall not make sales of Common Stock discretionary accounts. (e) In connection with the offer, offer for sale and sale of Common Stock, you (and your representatives and agents) shall conform to and comply with (i) the provisions of the Conduct Rules of the NASD, (ii) applicable provisions of federal law, including without limitation the Securities Act, the Rules and Regulations and the Exchange Act, and (iii) the Blue Sky Laws applicable to the Offering, relating to, among other things, the period during which and conditions under which the Common Stock may be offered, offered for sale and sold; you shall not distribute the Prospectus or otherwise commence the Offering without prior written confirmation from the Company or its counsel that the Offering may be commenced under applicable securities laws, rules and regulations. (f) Pursuant to your appointment made in Section 4 hereof, you will use your best efforts to procure subscribers for Common Stock will conduct the Offering in compliance with the provisions of the Securities Act, the Rules and Regulations, the Exchange Act, applicable Blue Sky Laws and the rules and regulations of the NASD; accordingly, as of each Closing Date (as herein defined), you will have: RH Investment Corporation June ___, 2000 Page 9 (1) not made any untrue statement of a material fact and not omitted to state a material fact required to be stated or necessary to make any statement made not misleading, to the extent, if any, that representations are made by you concerning the Offering or matters set forth in the Prospectus other than those set forth in the Prospectus; (2) prior to any sale of any Common Stock, reasonably believed that an investment in the Common Stock was suitable for each subscriber; (3) promptly distributed any amendment or supplement to the Prospectus provided to you pursuant to Section 5(b) of this Agreement to persons who had previously received a Prospectus from you and who you believed continued to be interested in Common Stock and have included such amendment or supplement in all deliveries of the Prospectus made after receipt of any such amendment or supplement; (4) only used sales materials other than the Prospectus which have been approved for use in the Offering by the Company, and refrained from providing any such materials to any offeree unless accompanied or preceded by the Prospectus; (5) prior to the sale of any Common Stock, reasonably believed that each subscriber met the investor standards and other requirements set forth in the Prospectus and the Blue Sky Letters (as hereinafter defined) and that an investment in the Common Stock was suitable for such subscriber; you will have prepared and maintained, for your benefit and the benefit of the Company, file memoranda and other appropriate records substantiating the foregoing and shall retain such records for the period required under Exchange Act Rule 17a-4 or the laws of any state in which you offer the Common Stock for sale, whichever is longer; and (6) not made any representations on behalf of the Company other than those contained in the Prospectus, nor shall you have acted as an agent of the Company, or for the Company in any other capacity, except as expressly set forth herein. SECTION 4. PURCHASE SALE AND DELIVERY OF COMMON STOCK. On the basis of the covenants, representations, and warranties herein contained and subject to the terms and conditions herein set forth: (a) The Company hereby engages you as its exclusive agent to solicit subscriptions for the Common Stock in accordance with the terms of the Registration Statement, the Prospectus and this Agreement, and you agree to use your best efforts to procure such subscriptions. You may, however, discharge your responsibilities under this Agreement by acting as a Managing Placement Agent and forming a group of securities dealers ("Selected Placement Agents" ), including you, to procure subscribers for the Common Stock. Any agreement between you and a securities dealer pursuant to which such securities dealer becomes a Selected Placement Agent shall require such dealer to represent and warrant that it will conduct the Offering in the manner set forth herein. The allocation of Common Stock among you and the Selected Placement Agents shall be made by you. RH Investment Corporation June ___, 2000 Page 10 (b) Subject to the terms and conditions set forth herein, in consideration of your execution of this Agreement and performance of your obligations hereunder, the Company agrees that, at each Closing (as defined herein), you shall receive (i) selling commissions in an amount equal to 10% of the aggregate purchase price of the Common Stock sold by you (or any Selected Placement Agent) and (ii) a nonaccountable expense allowance equal to 3% of the aggregate purchase price of the Common Stock sold by you (or any Selected Placement Agent). The aggregate commissions and expense allowance payable in connection with the sale of Common Stock will be disbursed to you, as provided herein and as will be provided in Escrow Agreement; thereupon, you shall pay to each of the other Selected Placement Agents, if any, in such amount (which shall not exceed commissions and expense allowance in the amounts of 10% and 3%, respectively, of the aggregate purchase price of the Common Stock sold by such Agent), at such times and upon such terms and conditions as shall have been agreed upon between you and such Selected Placement Agent, that portion of the aggregate commissions to which such Selected Placement Agent is entitled. (c) As additional consideration for your services rendered pursuant to this Agreement, on the final Closing Date (as hereinafter defined), the Company will sell to you or your designees, at a price of $0.01 per warrant ("Warrant Price"), warrants ("Underwriter's Warrants") to purchase shares of Common Stock, under the following terms and conditions: (1) The aggregate number of shares of Common Stock subject to Underwriter's Warrants will be equal to 10% of the shares of Common Stock sold by you (or any Selected Placement Agent) pursuant to this Agreement. (2) The Underwriter's Warrants may not be sold, hypothecated, exercised, assigned or transferred for a period of one year after the initial effective date of the Registration Statement, except to partners or officers of the Selected Placement Agents (including the Managing Placement Agent). (3) Underwriter's Warrants shall be exercisable during the 4-year period commencing on the first anniversary of the final Closing Date ("Warrant Exercise Term"), at any time and from time to time, in whole or in part, during the said Warrant Exercise Term, and shall grant to the holder the right to purchase one share of Common Stock for each Underwriter's Warrant at a price per share equal to 135% of the initial public offering price of the Common Stock. RH Investment Corporation June ___, 2000 Page 11 (4) The Underwriter's Warrants shall contain such other terms and conditions as are satisfactory, in form and substance to you and your counsel, including without limitation, adjustment and exercise provisions. (5) The Company agrees and undertakes, upon the expiration of a 12-month period after the final Closing Date, and at any time during the 4-year period thereafter, one time only, to register under the Securities Act all or any part of the Underwriter's Warrants and/or the shares issuable upon the exercise thereof ("Underlying Shares"), upon the written request of holders of a majority of such Warrants and Underlying Shares, at the Company's sole cost and expense, including "blue sky" fees for counsel and "blue sky" filing fees to qualify the Underwriter's Warrants and Underlying Shares for sale in those jurisdictions requested by you, at the time determined by you. (6) The Company agrees and undertakes, during the four-year period described in subsection 4(c)(3), above, that if the Company shall seek to register any of its securities under the Securities Act, each holder of the Underwriter's Warrants shall be notified and shall be entitled to elect to have included in such proposed registration, without cost or expense, any or all of his Underwriter's Warrants or Underlying Shares ("Piggy-Back Rights"). In the event of such a proposed registration, the Company shall furnish the holders of Underwriter's Warrants with no less than 30 days written notice prior to the proposed filing of a registration statement. Such notice shall continue to be given by the Company to such Warrantholders for each proposed registration by the Company until such time as all Underwriter's Warrants or Underlying Shares have been registered. Warrantholders shall exercise Piggy-Back Rights by giving written notice within 20 days of the receipt of the Company's notice of intention to file a registration statement. (d) Each subscriber for Common Stock must (i) complete and execute a Subscription Agreement (in the form included as Exhibit A to the Prospectus) and any other documents which may be required by you or the Company in connection with such subscription (collectively, "Subscription Documents") and (ii) tender payment in full for the Common Stock subscribed for ("Subscription Payment"); checks representing Subscription Payments should be made payable to "Business & Trust & Investment, Escrow Agent"; you shall deliver Subscription Payments received by you to the Escrow Agent, City National Bank, by 12:00, noon, on the business day following such receipt by you, together with a schedule setting forth the amount of each such Subscription Payment and the name, mailing address and state of residence of the subscriber. Concurrently with your delivery of each Subscription Payment to the Escrow Agent, you shall forward to the Company executed originals of all related Subscription Documents, retaining copies of all such Subscription Documents for your records. RH Investment Corporation June ___, 2000 Page 12 (e) Within five days following receipt by it of executed Subscription Documents, the Company shall determine to accept or reject each subscription and shall notify you and the Escrow Agent orally (to be confirmed in writing). If the Company elects to reject a subscription, the related Subscription Payment shall, upon receipt by the Escrow Agent of oral notice (to be confirmed in writing) from the Company of such rejection, promptly be returned directly to the rejected subscriber by the Escrow Agent, without interest thereon or deduction therefrom. (f) Subject to the terms hereof and of the Escrow Agreement, the first disbursement of subscription proceeds (including disbursement of amounts due to you hereunder) shall take place not less than 5 days nor more than 15 days following the date upon which cleared funds representing payment in full for at least 1,000 shares of Common Stock (or such lesser amount as may be agreed to in writing by the parties hereto, in their discretion) have been received by the Escrow Agent under the terms of the Escrow Agreement; such initial disbursement is referred to herein as the "Initial Closing," and the date thereof is referred to as the "Initial Closing Date." Following the Initial Closing, subscription proceeds shall be disbursed from time to time as agreed among you, the Company and the Escrow Agent; each such further disbursement of subscription proceeds is referred to herein as an "Additional Closing," and the date thereof as an "Additional Closing Date." The Initial Closing and Additional Closings are sometimes referred to herein as a "Closing" or "Closings"; and the Initial Closing Date and Additional Closing Dates are sometimes referred to herein as a "Closing Date" or "Closing Dates." (g) Each Closing shall take place at the offices of the Escrow Agent, in Beverly Hills, California, or, at your option, at such other place as you may agree upon in writing with the Company. (h) After the final Closing Date, you will not be considered to have any continuing or future duty or obligation of any kind to the Company. SECTION 5. COVENANTS OF THE COMPANY. The Company covenants and agrees that: (a) The Company will use its best efforts to cause the Registration Statement to become effective at the earliest possible time and will advise you promptly upon notification from the Commission of effectiveness. The Company will advise you promptly of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the institution of any proceedings for that purpose, or of any notification of the suspension of qualification of the Common Stock for sale in any jurisdiction or the initiation or threatening of any proceedings for that purpose, and will also advise you promptly of any request of the Commission for amendment or supplement to the Registration Statement (either before or after it becomes effective), to any Preliminary Prospectus or to the Prospectus, or for additional information, and will not file or make RH Investment Corporation June ___, 2000 Page 13 any amendment or supplement to the Registration Statement (either before or after it becomes effective), to any Preliminary Prospectus or the Prospectus of which you have not been furnished with a copy prior to such filing or to which you reasonably object; and the Company will file promptly and will furnish to you at or prior to the filing thereof copies of all reports and any definitive proxy or information statements required to be filed by the Company with the Commission pursuant to the Exchange Act subsequent to the date of the Prospectus, and for so long as the delivery of a prospectus is required in connection with the offer or sale of the Common Stock. If at any time the Commission shall issue any stop order suspending the effectiveness of the Registration Statement, the Company will make every reasonable effort to obtain the withdrawal of such order at the earliest possible time. The Company will file the Prospectus pursuant to Rule 424(b) under the Securities Act, if required, not later than the Commission's close of business on the second business day following the execution and delivery of this Agreement or, if applicable, such earlier time as may be required by Rule 430A of the Commission. (b) If at any time when a prospectus relating to the Common Stock is required to be delivered under the Securities Act, any event occurs as a result of which the Prospectus, including any amendments or supplements, would include an untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus, including any amendments or supplements, to comply with the Securities Act or the Rules and Regulations, the Company will notify you and request you to suspend (and to advise the other Selected Placement Agents, if any, to suspend) solicitation of offers to purchase Common Stock; and the Company will promptly prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance; and, in case any Selected Placement Agent (including you) is required to deliver a Prospectus nine months or more after the effective date of the Registration Statement, the Company upon request will prepare promptly and deliver to you such prospectus or prospectuses as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the Securities Act and applicable provisions of the Blue Sky Laws. (c) The Company will not, prior to the final Closing Date, incur any material liability or obligation, direct or contingent, or enter into any material transaction other than in the ordinary course of business, except as disclosed prior thereto in the Prospectus. (d) The Company shall promptly prepare and file with the Commission such reports as may be required to be filed under the Securities Act, the Rules and Regulations, the Exchange Act or the Blue Sky Laws. RH Investment Corporation June ___, 2000 Page 14 (e) Not later than 3 months after the end of the period referred to below, the Company will make generally available to you and to the Company's security holders an earnings statement (which need not be audited) covering a period of at least 12 months beginning with its first fiscal quarter occurring after the effective date of the Registration Statement, which will satisfy the provisions of the last paragraph of Section 11(a) of the Securities Act and Rule 158 promulgated thereunder. (f) The Company shall comply in all respects with the undertakings given by it in connection with the qualification or registration of the Common Stock under the Securities Act or the Blue Sky Laws. (g) During such period as a prospectus is required by law to be delivered in connection with sales by any Selected Placement Agent, the Company will furnish to you at its expense, copies of the Registration Statement, the Prospectus, any Preliminary Prospectus and all amendments and supplements to any such documents in such quantities as you may reasonably request, for the purposes contemplated by the Securities Act and the Rules and Regulations. (h) The Company shall promptly apply for and take such steps as may reasonably be necessary, to obtain and maintain the quotation of a Common Stock by the NASDAQ Small Cap Market and on the NASD OTC Bulletin Board. (i) During the period of 3 years following the date of this Agreement, as soon as practicable after the end of each fiscal year, the Company will furnish to you two copies, and to each of the other Selected Placement Agents one copy, of the Annual Report of the Company containing a balance sheet as of the close of such fiscal year and corresponding statements of income, members' equity and cash flows for the fiscal year then ended, such financial statements to be under the report of independent public accountants. During such period, the Company will also furnish to you, if applicable, one copy of (i) each report filed by the Company with the Commission, or with any exchange or quotation source pursuant to the requirements of, or any agreement with, such exchange or quotation source, as soon as practicable after the filing thereof and (ii) each report of the Company mailed to its shareholders, as soon as available. (j) The Company will apply the net proceeds from the sale of the Common Stock to be sold by it hereunder for the purposes set forth in the Prospectus. (k) The Company will not make any offer, sale, transfer, issuance or other disposition of any of its securities, other than grants of options, within 120 days following the final Closing Date, and will obtain the undertaking of each executive officer (as defined under the Securities Act), director and holder of 10% or more of the aggregate equity ownership of the Company immediately prior to such date not to make any such offer, sale or other disposition within such period, otherwise than hereunder or with your written consent or pursuant to bona fide gifts, provided, in the last case, that each donee agrees in writing with you to be bound by the same restrictions on the offer, sale and disposition of securities as are expressed in this Section 5(k). RH Investment Corporation June ___, 2000 Page 15 (1) The Company shall at all times reserve and keep available such number of authorized shares of Common Stock as are sufficient to permit the exercise of all Underwriter's Warrants; all shares of Common Stock issued upon the exercise of Underwriter's Warrants, upon receipt of full payment therefor and delivery to the purchaser, will be duly authorized, validly and legally issued, fully paid and nonassessable, and such Common Stock will not have been issued in violation of or subject to any preemptive rights provided for by law or by the Company's corporate charter or Bylaws or be subject to any lien, claim, encumbrance, security interest, preemptive rights or any other claim of any third party. (m) Prior to the final Closing Date, the Company will not issue, directly or indirectly, without your prior written consent, a press release or other communication or hold any press conference with respect to the Company, its activities or the Offering. (n) The Company will, promptly upon your request, prepare and file with the Commission any amendments or supplements to the Registration Statement or Prospectus, and take any other action, which, in your opinion or the opinion of your counsel, may be reasonably necessary or advisable in connection with the distribution of the Common Stock, and will use its best efforts to cause the same to become effective as promptly as practicable. SECTION 6. COVENANTS OF THE MANAGING PLACEMENT AGENT. You will use your best efforts to procure subscribers for Common Stock and will conduct the Offering in compliance with the provisions of the Securities Act, the Rules and Regulations, the Exchange Act, applicable Blue Sky Laws and the rules and regulations of the NASD; accordingly, as of each Closing Date (as herein defined), you will have (i) not made any untrue statement of a material fact and not omitted to state a material fact required to be stated or necessary to make any statement made not misleading, to the extent any representations are made by you concerning the Offering or matters set forth in the Prospectus other than those which are set forth in the Prospectus, and (ii) prior to any sale of Common Stock, reasonably believed that an investment in the Common Stock was suitable for the subscriber. SECTION 7. STATE QUALIFICATIONS. The Company further represents and warrants to, and agrees with, you as follows: (a) The Company will take all necessary action to either qualify or register the Common Stock for sale or exempt such securities from such qualification or registration in such states as you and the Company shall agree upon in writing. RH Investment Corporation June ___, 2000 Page 16 (b) The Company or its counsel will provide you or your counsel with copies, at the time they are filed, of all correspondence, applications, forms, and other documents filed with each jurisdiction where the Common Stock is to be registered or qualified or offered in an exempt transaction. (c) Upon receipt of notification by the Company of the qualification, registration, or exemption of the Common Stock by an applicable jurisdiction, the Company or its counsel will promptly notify you or your counsel in writing of such action, which writing shall summarize the conditions and other requirements imposed by such jurisdiction in granting such qualification, registration or exemption, including offeree qualification or suitability and broker-dealer and agent registration requirements applicable to the conduct of the Offering (collectively, the "Blue Sky Letters"); you shall not offer or sell the Common Stock in any jurisdiction until receipt of such Blue Sky Letters from the Company or its counsel. (d) In each jurisdiction where the Common Stock has been registered or qualified or is offered or sold in an exempt transaction as provided above, the Company will make and file such statements, documents, materials, and reports as are or may be required to be made or filed. (e) The Company will promptly provide to you for delivery to all offerees and purchasers of Common Stock any additional information, documents or instruments which you, the Company and/or your respective counsel deem necessary to comply with the rules, regulations, and judicial and administrative interpretations respecting compliance with such exemptions or qualifications and registrations in those jurisdictions where the Common Stock is to be offered or sold. SECTION 8. PAYMENT OF EXPENSES. (a) Whether or not the transactions contemplated hereunder are consummated or this Agreement becomes effective or is terminated for any reason, except as set forth below (and in addition to the nonaccountable expense allowance provided for in Section 4(b) of this Agreement), the Company will pay or cause to be paid all costs and expenses incurred in connection with the Offering, including without limitation (i) the Commission's registration fee, (ii) the expenses of printing and distributing this Agreement, the Selected Dealer Agreements, the Registration Statement, each Preliminary Prospectus, the Prospectus (and any amendments or supplements thereto) and the Blue Sky Memorandum (and any supplements thereto), (iii) fees and expenses of accountants and counsel for the Company. (iv) expenses of qualification of the Common Stock under state "blue sky" and securities laws, including the fees and disbursements of counsel to the Managing Placement Agent in connection therewith, (v) filing fees paid or incurred by the Managing Placement Agent in connection with filings with the NASD and (vi) the costs and charges of its transfer agent and registrar. RH Investment Corporation June ___, 2000 Page 17 (b) The Company and each Selected Placement Agent (including the Managing Placement Agent) will bear its own travel, lodging and living expenses incurred in connection with marketing, dealer and other meetings and the cost of all advertising, publicity and selling or promotional materials used in connection therewith. (c) Notwithstanding any other provision hereof to the contrary, whether or not this Agreement is terminated pursuant to Section 12 hereof or otherwise, the Company will pay or reimburse the Managing Placement Agent for the actual itemized out-of-pocket expenses incurred by it in connection with investigating, preparing to market and marketing of the Common Stock, including fees and expenses of its counsel (in accordance with the provisions of NASD Conduct Rule 2710); provided, however, that, without the consent of the Company, such reimbursement for legal fees shall not exceed in the aggregate $12,500, and reimbursement for other out-of-pocket expenses shall not exceed in the aggregate $5,000. SECTION 9. CONDITIONS OF THE OBLIGATIONS OF THE MANAGING PLACEMENT AGENT. Your obligations hereunder shall be subject to the condition that all of the representations and warranties of the Company herein as of the date hereof and as of each Closing Date are true and correct in all material respects and to the accuracy of the statements of the officers of the Company made pursuant hereto, to the performance by the Company of its obligations hereunder, and to the following conditions: (a) The Registration Statement shall have become effective not later than 1:00 P.M., Los Angeles, California, time, on the business day following the date hereof, unless otherwise effective prior hereto pursuant to Rule 430A of the Rules and Regulations or otherwise. The Prospectus shall have been filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations, if required, within the applicable time period prescribed for such filing by the Rules and Regulations and in accordance with Section 5(a) of this Agreement. Prior to each Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been instituted or shall be pending or, to the knowledge of the Company or you, shall be contemplated by the Commission or any "blue sky" authority, and any request of the Commission or any Blue Sky authority of any jurisdiction for additional information (to be included in the Registration Statement or Prospectus or otherwise) shall have been complied with to your reasonable satisfaction. (b) The Common Stock shall have been qualified or registered for sale under the Blue Sky Laws of such states as shall have been agreed upon between you and the Company, pursuant to and as provided in Section 7 of this Agreement. (c) The legality and sufficiency of the authorization, issuance and sale of the Common Stock pursuant to the Registration Statement, the validity and form of the certificates representing the Common Stock, the execution and delivery of this Agreement, and all proceedings and other legal matters incident thereto, and the form of the Registration Statement (except financial statements, if any, and other financial data included in such Registration Statement) shall have been approved by your counsel. RH Investment Corporation June ___, 2000 Page 18 (d) You shall not have advised the Company that the Registration Statement or Prospectus, or any amendment or supplement thereto, contains an untrue statement of fact, or omits to state a fact which is material and is required to be stated therein or necessary to make the statements therein not misleading, unless, in the opinion of your counsel, any such untrue statement or omission is not material. (e) Since the dates as of which information is given in the Registration Statement: (1) the Company shall not have sustained any material loss or interference with its business from any labor dispute, fire, explosion, flood or other calamity (whether or not insured), or from any court or governmental action, order or decree; and (2) there shall not have been any change in the equity ownership, short-term debt or long-term debt of the Company or a change, or a development involving a prospective change, in or affecting the ability of the Company to conduct its business (whether by reason of any court, legislative, other governmental action, order, decree, or otherwise), or in the general affairs, management, financial position, members' equity or results of operations of the Company, whether or not arising from transactions in the ordinary course of business, in each case other than as set forth in or contemplated by the Registration Statement and Prospectus, the effect of which on the Company, in any such case described in clause (1) or (2) of this Section 9(e), is, in your judgment (exercising your sole discretion), so material and adverse as to make it impracticable or inadvisable to proceed with the distribution of the Offering or the delivery of the Common Stock as contemplated by the Registration Statement and the Prospectus. (f) There shall have been furnished to you on the Initial Closing Date and the final Closing Date the written opinion of counsel to the Company, addressed to you and dated as of such Closing Date, to the effect that, as of each Closing which has then occurred: (1) the Company is duly organized and validly existing as a corporation in good standing under the laws of the State of California and possesses full power and authority to own its property and conduct its business as described in the Prospectus; (2) the Company is duly qualified to do business under the laws of (and is in good standing as such in) each jurisdiction in which it owns or leases property, has an office, or in which business is conducted and such qualification is required, except where the failure to so qualify would not have a material adverse effect on the conduct of its business, its assets or its financial condition; RH Investment Corporation June ___, 2000 Page 19 (3) the Registration Statement has become effective under the Securities Act and, to the best of the knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or is pending before, or threatened by, the Commission or any "blue sky" or securities authority; such counsel has no reason to believe that either the Registration Statement or the Prospectus, or any document incorporated by reference therein, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading (except for the financial statements and other financial data included therein, as to which such counsel need express no opinion); to the best knowledge of such counsel, all descriptions in the Registration Statement and the Prospectus of statutes, regulations and governmental proceedings are accurate and fairly present the information disclosed in all material respects, and such counsel does not know of any legal, governmental or regulatory proceedings, pending or threatened, required to be described in the Prospectus, nor of any contracts or documents of a character required to be described in or filed as exhibits to the Registration Statement, which are not so described or filed; (4) the Company has full power and authority to enter into and perform this Agreement; this Agreement, and the performance of the obligations of the Company hereunder, have been duly authorized by all necessary action and this Agreement has been duly executed and delivered by and on behalf of the Company, and is a legal, valid and binding agreement of the Company, enforceable in accordance with its terms, except that rights to indemnity or contribution may be limited by applicable law and enforceability of the agreement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally; and no approval, authorization or consent of any court, board, agency or instrumentality of the United States or of any state or other jurisdiction is necessary in connection with the execution and delivery of this Agreement, or in connection with the issue or sale of the Common Stock by the Company pursuant to this Agreement (other than under the Securities Act, applicable Blue Sky Laws and the rules of the NASD) or the consummation by the Company of any transaction contemplated by this Agreement; (5) the shares of Common Stock to be sold in the Offering have been duly authorized and, when issued and delivered by the Company, against full payment therefor, will be legally and validly issued, fully paid and nonassessable, to the best knowledge of such counsel, such securities will not have been RH Investment Corporation June ___, 2000 Page 20 issued subject to any lien, claim, encumbrance, security interest or any other claim of any third party, except as described in the Prospectus; and the Common Stock conforms as to legal matters in all material respects to the description thereof set forth contained in the Prospectus; (6) to the best knowledge of such counsel, the execution and performance of this Agreement will not contravene any of the provisions of, or result in a default under, any agreement, franchise, license, indenture, mortgage, deed of trust or other instrument to which the Company is a party, or by which the Company or its property is bound; or violate any of the provisions of the Articles of incorporation or Bylaws of the Company (in each case, as amended at the date of such opinion), or to the best knowledge of such counsel, violate any statute, order, rule or regulation of any regulatory or governmental body having jurisdiction over the Company; (7) to the best knowledge of such counsel, except as described in the Prospectus, there is not pending or threatened any action, suit, proceeding, inquiry or investigation to which the Company is a party, or to which the property of the Company is subject, before or brought by any court, governmental agency or body or arbitration tribunal, which, if determined adversely to the Company, would result in any material adverse change in the business, financial position, net worth, results of operations or prospects of the Company, or materially and adversely affect its properties or assets; (8) to the best knowledge of such counsel, the Company owns or possesses the requisite licenses or other rights to use, all trademarks, service marks, service names and trade names necessary to conduct its business as described in or contemplated by the Prospectus; to the best knowledge of such counsel, there is no claim or action by any person pertaining to (or proceeding pending or threatened which challenges) the rights of the Company with respect to any trademarks, service marks, service names or trade names used in the conduct of its business as described in or contemplated by the Prospectus; to the best knowledge of such counsel, the products, services and processes of the Company have not infringed and do not infringe upon proprietary rights held or asserted by third parties which infringement, if resolved adversely to the Company, could materially affect its earnings, assets, affairs, business prospects or condition (financial and other); (9) to the best knowledge of such counsel, the Company has good and marketable title to all the property and assets reflected as owned by it in the Prospectus, subject to no lien, mortgage, pledge, charge or encumbrance of any kind or nature whatsoever except those, if any, reflected in the Prospectus or which are not material to the Company and do not materially RH Investment Corporation June ___, 2000 Page 21 affect the value of such property and do not materially interfere with the use made or proposed to be made of such property; to the best knowledge of such counsel, all property held or used by the Company under leases, licenses, franchises or other agreements are held by it under valid, subsisting and enforceable leases, licenses, franchises or other agreements, subject to bankruptcy, insolvency or similar laws generally affecting the rights of creditors and equitable principles affecting the right to obtain specific enforcement or similar equitable relief; (10) to the best knowledge of such counsel, there are no holders of securities of the Company having rights to the registration of such securities, and there are no options, warrants or other rights to acquire any equity interest in the Company, or any security convertible into such equity interest, except as disclosed in the Prospectus; (11) the statements in the Registration Statement and Prospectus, insofar as they are descriptions of specific contracts, agreements or other documents, and the statements appearing in the Prospectus under the caption "Description of Securities," insofar as they refer to statements of law or legal conclusions, are accurate and present fairly the information required to be shown; (12) to the best knowledge of such counsel, the Company is not in violation of its Articles of Incorporation or Bylaws, or other organizational or charter documents or in default (nor has an event occurred which, with notice, lapse of time or both, would constitute such a default) in the performance of any obligation, agreement or condition contained in any bond, indenture, mortgage, deed of trust, note, bank loan or credit agreement or any other agreement or instrument to which the Company is a party or by which the Company or any of its property may be bound or affected, and to the best knowledge of such counsel, the Company is not in violation of any franchise, license, permit, judgment, decree, order, statute, rule or regulation, where such violation or default could have a material adverse effect on the respective business, property or operations of the Company; (13) to the best knowledge of such counsel, there are no legal, governmental or regulatory proceedings, pending or threatened, required to be described in the Prospectus, which are not so described; (g) There shall have been furnished to you on the Initial Closing Date and the final Closing Date the written opinion of the law firm of Casale, Coffee and Nojima, special securities counsel to the Company, addressed to you and dated as of such Closing Date, to the effect that, as of each Closing which has then occurred: RH Investment Corporation June ___, 2000 Page 22 (1) the Registration Statement and Prospectus, and each amendment or supplement thereto (except for the financial statements and other financial data therein, as to which such counsel need express no opinion), as of their respective effective or issue dates, comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations and any required filing of the Prospectus and any supplements thereto pursuant to Rule 424(b) of the Rules and Regulations have been made in the manner and within the time period required by such Rules and Regulations; and (2) to the best knowledge of such counsel, there are no contracts or other documents required to be summarized or described in the Registration Statement or to be filed as exhibits thereto which are not so summarized, described or filed, nor does such counsel know of any regulations required to be described or referred to in the Registration Statement or Prospectus which are not described or referred to in the Registration Statement or Prospectus. (h) If you shall so request in writing, you shall have received, on the Initial Closing Date, a survey prepared by The Law Offices of Casale, Coffee and Nojima, addressed to you and dated as of such Closing Date, relating to "blue sky" laws of such jurisdictions upon which you and the Company agree in writing ("B1ue Sky Survey"); the Blue Sky Survey will advise that the appropriate "blue sky" action, if any, was taken in each of such jurisdictions so as to permit such offers and sales as indicated in such Survey; the Blue Sky Survey may be based upon an examination of the statutes and regulations, if any, of such jurisdictions as reported in standard compilations and upon interpretive advice obtained from representatives of certain securities commissions. (i) If you so request in writing, there shall have been furnished to you, on each Closing Date an opinion of The Law Offices of Casale, Coffee and Nojima, addressed to you and dated as of each such Closing Date, with respect to the Common Stock, the Registration Statement and the Prospectus, and other related matters as you may reasonably require, and the Company shall have furnished to such counsel such documents and shall have exhibited to them such papers and records as they request for the purpose of enabling them to pass upon such matters. (j) There shall have been furnished to you, on the Initial Closing Date and the final Closing Date, a certificate of the principal executive officer and the principal financial officer of the Company, dated as of such Closing Date, to the effect that: (1) the representations and warranties of the Company which are set forth in Section 2 hereof are true and correct as of the date of this Agreement and as of each Closing Date, as if again made on and as of such Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such date; RH Investment Corporation June ___, 2000 Page 23 (2) to the best of their knowledge, the Commission has not issued an order preventing or suspending the use of the Prospectus or any Preliminary Prospectus filed as part of the Registration Statement or any amendment thereto, no stop order suspending the effectiveness of the Registration Statement or enjoining the use of the Prospectus has been issued, and no proceedings for that purpose have been instituted or are pending or contemplated under the Securities Act; (3) each of the respective signers of the certificate has carefully examined the Registration Statement and the Prospectus and, in his opinion and to the best of his knowledge, information and belief, the Registration Statement and the Prospectus and any amendments or supplements thereto contain all statements required to be stated therein, and neither the Registration Statement nor the Prospectus nor any amendment or supplement thereto includes any untrue statement of material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and, since the effective date of the Registration Statement, there has occurred no event required to be set forth in an amended or supplemented prospectus which has not been so set forth; and (4) since the effective date of the Registration Statement, there has not been any material adverse change or, to their knowledge, a development involving a prospective material adverse change in the business, properties, financial condition or earnings of the Company, whether or not arising from transactions in the ordinary course of business, except as disclosed in said Registration Statement theretofore amended including the proposed amendment thereto delivered to you prior to or contemporaneously with the execution of this Agreement or (but only if you expressly consent thereto in writing) delivered to you thereafter; since such date and except as so disclosed, or in the ordinary course of business, the Company has not incurred any liability or obligation, direct or indirect, or entered into any material transaction; since such date and except as so disclosed there has not been any material change in the equity ownership of the Company or its short-term debt or long-term debt; since such date and except as so disclosed, the Company has not incurred any material contingent obligations, and no material litigation is pending or, to their knowledge, threatened against the Company; and, since such date and except as so disclosed, the Company has not sustained a material loss or interference with its business from any labor dispute, fire, explosion, flood or other calamity (whether or not insured) or from any court or governmental action, order or decree. The delivery of the certificate provided for in this Section 9(k) shall be and constitute a representation and warranty of the Company as to the facts required in the immediately foregoing clauses (1), (2), (3) and (4) of this Section 9(j) to be set forth in said certificate. RH Investment Corporation June ___, 2000 Page 24 (k) There shall have been furnished to you, on or before the initial Closing Date, written agreements signed by the Company's directors, its executive officers and each holder of 10% or more of its equity securities to the effect that such persons will not make any offer, sale or other disposition of any equity interest in the Company for a period of 180 days after the final Closing Date, except with the prior written consent of the Managing Placement Agent or pursuant to bona fide gifts, provided, in the last case, that each donee agrees in writing with you to be bound by the same restrictions on the offer, sale or disposition of equity interests in the Company as are set forth in the agreements described in this Section 9(k). All such opinions, certificates, letters and documents shall be in compliance with the provisions hereof only if they are reasonably satisfactory to you and your counsel. The Company shall promptly furnish you with such manually signed or conformed copies of such opinions, certificates, letters and other documents as you may reasonably request from time to time. With respect to any Closing, by written instrument delivered to the Company, you may from time to time, in your sole discretion, waive any of the requirements imposed upon the Company pursuant to this Section, including without limitation the requirement that any opinion, certificate, survey or other document be delivered to you at any Closing or as of any Closing Date; any such waiver by you with respect to a Closing shall not in any way be construed as such waiver with respect to any other Closing. If any condition to your obligations hereunder to be satisfied prior to or a Closing Date is not so satisfied, this Agreement at your election will terminate upon notification to the Company without liability on the part of any Selected Placement Agent (including you) or the Company, except for the expenses or fees to be paid or reimbursed by the Company pursuant to Sections 4 and 8 hereof and except to the extent provided in Section 10 hereof. SECTION 10. INDEMNIFICATION. (a) The Company agrees to indemnify and hold harmless you, each of your officers, directors, employees and agents, and each person, if any, who controls you within the meaning of the Securities Act or the Exchange Act against any losses, claims, damages or liabilities, joint or several, to which you or each such officer, director, employee, agent or controlling person may become subject under the Securities Act, the Exchange Act, Blue Sky Laws or other federal or state laws or regulations, at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in or incorporated in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or in any application filed under any Blue Sky Law or other document executed by the Company specifically for that purpose or based upon written information furnished by the Company and filed in any state or other jurisdiction in order to qualify any or all of the RH Investment Corporation June ___, 2000 Page 25 Common Stock under the securities laws thereof (any such document, application or information being hereinafter referred to as a "Blue Sky Application") or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; the Company agrees to reimburse you and each such other indemnified person for any legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that: (1) any such loss, claim, damage or liability arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto or in any Blue Sky Application in reliance upon and in conformity with written information furnished to the Company by you specifically for use therein (but in no event shall the assistance in the drafting of all or any portion of the Registration Statement, any Preliminary Prospectus, the Prospectus, such amendment or supplement or such other document of the type referred to in the preceding paragraph by you or your counsel constitute such information); or (2) if such statement or omission was contained or made in a Preliminary Prospectus and corrected in the Prospectus and (i) any such loss, claim, damage or liability suffered or incurred by you (or any person who controls you) resulted from an action, claim or suit by any person who purchased Common Stock from you in the Offering, and (ii) you failed to deliver or provide a copy of the Prospectus to such person at or prior to the confirmation of the sale of such Common Stock in any case where such delivery is required by the Securities Act unless such failure was due to failure by the Company to provide copies of the Prospectus to you as required by this Agreement. The indemnification obligations of the Company as provided above (i) extend upon the same terms and conditions to, and shall inure to the benefit of, each Selected Placement Agent and each of its respective officers, directors and each person, if any, who controls such Selected Placement Agent within the meaning of the Securities Act or the Exchange Act and (ii) are in addition to any liabilities the Company may otherwise have under other agreements, under common law or otherwise. (b) You will indemnify and hold harmless the Company, each of the directors, officers, employees and agents of the Company, and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, against any losses, claims, damages or liabilities to which the Company or any such director, officer, employee, agent or controlling person may become subject under the Securities Act, the Exchange Act, Blue Sky Laws or other federal or RH Investment Corporation June ___, 2000 Page 26 state laws or regulations, at common law or otherwise (including in settlement of any litigation, if such settlement is effected with your written consent, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or in any Blue Sky Application, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or in any Blue Sky Application, in reliance upon and in conformity with any written information furnished to the Company by you specifically for use therein (but in no event shall the assistance in the drafting of all or any portion of the Registration Statement, any Preliminary Prospectus, the Prospectus, such amendment or supplement or such other document of the type referred above by you or your counsel constitute such information). You agree to reimburse the Company and each such other indemnified person for any legal or other expenses incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action. Your indemnification obligations as provided above (i) extend upon the same terms and conditions to, and shall inure to the benefit of, the Company and each of its respective officers, directors and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act and (ii) are in addition to any liabilities which you may otherwise have under other agreements, under common law or otherwise. (c) Promptly after receipt by an indemnified party under this Section 10 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section 10, notify the indemnifying party in writing of the commencement thereof, but the omission to so notify the indemnifying party will not relieve an indemnifying party from any liability which it or he may have to any indemnified party otherwise than under this Section 10. In case any such action is brought against any indemnified party, and such indemnified party notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate in, and to the extent that it may wish, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it or he and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election to assume the defense of such action and upon approval by the RH Investment Corporation June ___, 2000 Page 27 indemnified party of counsel to the indemnifying party, the indemnifying party will not be liable to such indemnified party under this Section 10 for any legal expenses subsequently incurred by such indemnified party as a result of or in connection with the defense of such action, unless: (1) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, in the event that you and one or more of your directors, officers or controlling persons are the indemnified parties); (2) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action; or (3) the indemnifying party has authorized the employment of counsel at the expense of the indemnifying party. (d) In order to provide for just and equitable contribution under the Securities Act or the Exchange Act in any case in which (1) any person who would be entitled to indemnification pursuant to this Section 10 if enforceable according to its terms makes a claim for indemnification pursuant to this Section 10, but it is judicially determined (by the entry of a final judgment or decree by a court of competent jurisdiction and the expiration of time to appeal or the denial of the last right of appeal) that such indemnification may not be enforced in such case notwithstanding the fact that the express provisions of this Section 10 provide for indemnification in such case, or (2) contribution under the Securities Act or the Exchange Act may otherwise be required, you shall contribute to the aggregate losses, claims, damages or liabilities incurred (which shall, for all purposes of this Agreement, include, but not be limited to, all costs of defense and investigation and all attorneys' fees) in either such case (after contribution from others) an amount equal to the product determined by multiplying the total amount of such losses, claims, damages or liabilities by a fraction, the numerator of which equals the fees paid to you under Section 4 plus the amount paid to you under Section 8, and the denominator of which is equal to the aggregate proceeds of the sale of Common Stock in the Offering (before deduction of commissions or expenses), and the Company shall be responsible for the balance of such losses, claims, damages or liabilities; provided, that with respect to the rescission of the sale of any Common Stock, your liability shall not exceed the compensation earned by you under this Agreement with respect to the rescinded sale. If the foregoing allocation is not permitted by law, there shall be considered, in determining the amount of contribution to which the respective parties are entitled, the relative benefits received by each party from the sale of Common Stock (taking into account the portion of the proceeds of the Offering RH Investment Corporation June ___, 2000 Page 28 realized by each), the parties' relative knowledge and access to information concerning the matter with respect to which the claim was asserted, the opportunity to correct and prevent any statement or omission, and any other equitable considerations appropriate in the circumstances. The Company and you agree that it would not be equitable if the amount of such contribution were determined by pro rata or pro capita allocation. Neither you nor any person controlling you shall be obligated to make contribution hereunder which in the aggregate exceeds the total purchase price of Common Stock sold to subscribers procured by you, less the aggregate amount of any damages which you and your controlling persons have otherwise been required to pay in respect of the same or any substantially similar claim. No person guilty of a fraudulent misrepresentation (within the meaning of Section 11 of the Securities Act) shall be entitled to contribution from any person who is not guilty of such fraudulent misrepresentation. The foregoing contribution agreement shall in no way affect the contribution liabilities of any persons having liability under Section 11 of the Securities Act other than those identified in this Section 10 as being entitled to indemnification. Any of the officers, directors or controlling persons of a Selected Placement Agent (including you) and any officers, directors or controlling persons of the Company shall be entitled to contribution to the same extent as you or the Company. SECTION 11. EFFECTIVE DATE. This Agreement shall become effective immediately upon execution as to Sections 4, 8 and 10 and, as to all other provisions, at 9:00 A.M., Los Angeles, California, time, on the day following the date upon which the Registration Statement becomes effective, unless such a day is a Saturday, Sunday or holiday (in which event this Agreement shall become effective at such hour on the business day next succeeding such Saturday, Sunday or holiday); notwithstanding the foregoing, this Agreement shall nevertheless become effective at such earlier time after the Registration Statement becomes effective as you may determine on and by notice to the Company (which notice may be oral, to be confirmed promptly in writing). SECTION 12. TERMINATION. Without limiting the right to terminate this Agreement pursuant to any other provision hereof: (a) This Agreement may be terminated by the Company by notice to you or by you by notice to the Company at any time prior to the time this Agreement shall become effective as to all its provisions, and any such termination shall be without liability on the part of the Company or you (except for the fees or expenses to be paid or reimbursed by the Company pursuant to Sections 4 and 8 hereof or paid by the Company pursuant to Section 10 hereof). (b) This Agreement may also be terminated by you prior to the final Closing Date if, in your judgment and discretion, the offer, offer for sale, sale and delivery of the Common Stock is rendered impracticable or inadvisable because: RH Investment Corporation June ___, 2000 Page 29 (1) additional material governmental restrictions or limitations, not in force on the date hereof, shall have been imposed upon trading in securities generally or minimum or maximum prices shall have been generally established on the New York Stock Exchange, the American Stock Exchange or over-the-counter, or trading in securities generally shall have been suspended or limited on either such exchange or over-the-counter or a general banking moratorium shall have been established by federal or New York authorities; (2) an outbreak or escalation of hostilities or other national or international calamity or any substantial change in political, financial or economic conditions shall have occurred or shall have accelerated to such extent as, in your judgment, to have a material adverse effect on the general securities market or make it impractical or inadvisable to proceed with the Offering; (3) any event shall have occurred or shall exist which makes untrue or incorrect in any material respect any statement or information contained in the Registration Statement or which is not reflected in the Registration Statement but should be reflected therein in order to make the statements or information contained therein not misleading in any material respect; (4) the Company shall have sustained a material loss, whether or not insured, by reason of fire, earthquake, flood, accident or other calamity or from any labor dispute or court or governmental action or decree; (5) the passage by the Congress of the United States or any state legislative body of any act or measure, or the adoption or any proposed adoption of any orders, rules, legislation or regulations by any governmental body, any authoritative accounting institute or board or any governmental executive which is reasonably believed likely by the representative to have a material impact on the business, financial condition or financial statements of the Company, taken as a whole, or the market for the Common Stock; or (6) any material adverse change having occurred since the respective dates as of which information is given in the Registration Statement and the Prospectus in the condition (financial or otherwise) of the Company, taken as a whole, or in the earnings, affairs or business prospects of the Company, taken as a whole, whether or not arising in the ordinary course of business. Any termination pursuant to this Section 12(b) shall be without liability on the part of any Selected Placement Agent (including you) to the Company, or on the part of the Company to any Selected Placement Agent (including you), except for expenses or fees to be paid or reimbursed by the Company pursuant to Section 4 and 8 hereof and except as to indemnification as provided in Section 10 hereof. RH Investment Corporation June ___, 2000 Page 30 SECTION 13. PARTIES. (a) This Agreement shall inure to the benefit of and be binding upon you, the Company, and the respective successors and assigns of each. (b) No purchaser of Common Stock from you shall be construed as a successor or assign by reason merely of such purchase. (c) Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person or corporation, other than the parties hereto and their respective successors and assigns and the controlling persons, officers and directors and counsel referred to in this Agreement, any legal or equitable right, remedy or claim under or in respect to this Agreement or any provision herein contained. SECTION 14. REPRESENTATIONS AND INDEMNITIES TO SURVIVE DELIVERY. (a) All representations, warranties, covenants and agreements of the Company and the Managing Placement Agent contained herein or in certificates of officers delivered pursuant hereto, and the indemnity agreement contained in Section 10 hereof, shall survive the delivery and execution of this Agreement and the final Closing Date and shall remain operative and in full force and effect regardless of any investigation made by or on behalf of you or any person controlling you, any Selected Placement Agent or any controlling person thereof, the Company or any of its officers, directors, or controlling persons. (b) The indemnification provisions of Section 10 hereof are in addition to any and all remedies or rights which either of the parties hereto may have, including the right to sue and recover damages for any breach of any representation, warranty or covenant made or given by either of the parties hereto to any other party. SECTION 15. NOTICES. All communications hereunder will be in writing and will be mailed, delivered, telegraphed or telecopied and confirmed as follows: If to the Managing Placement Agent: R.H. Investment Corporation 15760 Ventura Boulevard Suite 1732 Encino, CA 91403 If to the Company: Alpine Entertainment, Inc. 6919 Valjean Avenue Van Nuys, CA 91406 RH Investment Corporation June ___, 2000 Page 31 SECTION 16. INTEGRATION. This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matters hereof and supersedes all prior agreements and understandings among the parties both written and oral. SECTION 17 PARTIAL UNENFORCEABILITY. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, such determination shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. SECTION 18. APPLICABLE LAW. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California. RH Investment Corporation June ___, 2000 Page 32 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return the enclosed duplicate hereof, whereupon it will become a binding agreement between us in accordance with its terms. Very truly yours, ALPINE ENTERTAINMENT, INC. By: /s/ Rayan Carroll -------------------------------------- Ryan Carroll, President Accepted and agreed to as of the day and year first above written. RH INVESTMENT CORPORATION By: /s/ Stuart S. Greenberg -------------------------------------- Stuart S. Greenberg, Managing Director EX-1.2 3 0003.txt INVESTMENT BANKING AGREEMENT RH INVESTMENT CORPORATION MEMBER NASD, SIPC, CA. PSA (800) 890-1629 PH. (818) 386-6415 PH. (818) 386-6429 FX. INVESTMENT BANKING AGREEMENT This Investment Banking Agreement (the "Agreement") is made and entered into this ______ day of August 2000, between Alpine Entertainment Inc. ("Company"), on the one hand, and RH Investment Corporation which is a member in good standing of the National Association of Securities Dealers, Inc. ("Banker"), on the other hand. In consideration of and for the mutual promises and covenants contained herein, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: 1. PURPOSE: Company hereby employs Banker to render Investment Banking Services to Company relating to financial planning and capital procurement upon the terms and conditions as set herein. Banker intends to form a selling syndicate to raise, on a best efforts basis, an Initial Public Offering between ONE MILLION FIVE HUNDRED THOUSAND DOLLARS AND NO CENTS ($1,500,000.00) and SEVEN MILLION FIVE HUNDRED THOUSANDDOLLARS AND NO CENTS ($7,500,000.00). All monies raised during the Initial Public Offering shall be held in escrow until the minimum amount ($1,500,000.00) is met. Only after the minimum is met shall monies be released from the escrow to the Company. Fees paid to Banker by the Company, for the Initial Public Offering shall consist of 10% of the total dollars raised as commission, 3% non-accountable expenses plus 10% warrants. Any mergers, strategic partnerships, joint ventures or cooperatives of any type relating to the Company's business pursuits, that the Company enters into, becomes involves with or associates itself with, whether in whole or as an entity created from the whole, that is the result of the efforts, introductions or mediations of the Banker, pursuant to this Agreement, shall cause the Company to remit to the Banker a commission in an amount to be negotiated, but in no case to be less than 10% of the dollars involved. In the case of an exchange of securities or other non-dollar denominated medium of exchange between the Company and a third party Banker shall be compensated in kind. Banker reserves the right to employ sources, advisors, entities, persons, companies or organizations, not currently under the employ of RH Investment Corp, at Company expense, to bring to fruition Company's Business Plan and or facilitate the financing. Banker and its employees and agents shall be given reasonable access to Company's officers, premises and records. 1 However, Banker is under no obligation by virtue of this Agreement to undertake any offering on behalf of the Company. The details and commitment for any such undertaking will be pursuant to a separate agreement. Banker shall compensate any finder or introducer for which the Banker has a prior written agreement delineating terms and conditions of said relationship. Banker shall be the sole determining party as to the viability and enforceability of the compensation relationship or agreement that any finder and/or introducer may have pertinent to the transaction(s) outlined within this agreement. Disputes shall be settled by binding arbitration. (see Paragraph 9 below) The terms of this agreement shall remain in force for a period of six (6) months or until the conclusion of the financing described above. Either party may terminate this agreement, without prejudice, with sixty (60) days written notice. 2. DUTIES OF THE BANKER: In performing its duties pursuant to this Agreement, Banker shall provide Company with the benefits of its reasonable judgement and efforts. Banker's expertise, experience and professional contacts shall be utilized to further the goals outlined under the Company's Business Plan. 4. COMPENSATION: a) For this accommodation and other valued services rendered by the Banker to the Company pursuant to this Agreement, upon execution hereof, the Company shall pay to the Banker the sum of TWO THOUSAND FIVE HUNDRED DOLLARS AND NO CENTS ($2,500.00) per month commencing with the execution of this agreement. This monthly retainer shall be paid each month on the 15th of the month in advance. Said retainer shall terminate upon the statement of effectiveness from the regulatory agencies with respect to the Initial Public Offering. b) Company shall reimburse Banker for out-of-pocket expenses, including without limitation, reasonable attorney's and industry expert's fees, employment of outside experts, allocation of employee time and expertise, travel expenses, lodging, meals and reasonable non-accountable expenses while in pursuit of Company's interests, within 15 days after presentation of written invoice. Any expenditure in excess of SEVEN THOUSAND FIVE HUNDRED DOLLARS AND NO CENTS ($7,5000.00) will require Company approval. 2 c) Failure to pay to Banker, by Company, fees, expenses and other recompense due Banker, pursuant to this agreement, within thirty days after written notification of said delinquency shall constitute a breach of the agreement on the part of the Company. Banker shall reserve the right to obtain recompense through any means available. 5. PROPRIETARY INFORMATION: Banker agrees that it will not sell, use in any manner, not authorized in writing by Company, or disclose any of the Company's trade secrets or any other proprietary information obtained by Banker during its employment by Company pursuant to this Agreement including, without limitations, information concerning the Company's current or any future and proposed operations, services or products ("Confidential Information"). Confidential information shall not include information or material that (i) is now or later becomes generally known to the public (other that as a result of a breach of this Agreement); (ii) is independently developed by Banker without use of the Confidential Information; (iii) is lawfully obtained by Banker from a third party who has lawfully obtained such information; (iv) is later published or generally disclosed to the public by Company; (v) is already known or available to the Banker at the time of its disclosure; (vi) is approved for release by prior written authorization of Company; or (vii) is required to be disclosed pursuant to any applicable statute, law, rule or regulation of any governmental authority or pursuant to any order of any court of competent jurisdiction, provided that Banker shall advise Company of the requirement for disclosure in sufficient time to apply for such legal protection as may be available with respect to the confidentiality of the Confidential Information. 6. RIGHT OF FIRST REFUSAL: In consideration for the services to be rendered by the Banker pursuant to this Agreement, company agrees that, for a period of two (2) years following the execution of this Agreement, Banker shall have the RIGHT OF FIRST REFUSAL to be the Company's exclusive Banker and Investment Advisor with respect to any offer or sale of securities by Company, whether by means of public or private offering or a transaction pursuant to Regulation S under the Securities Act of 1933 as amended, or any capital financing, merger or acquisition the Company or its subsidiaries, departments or related entities undertakes. Company shall reasonably recompense Banker for the forfeiture of this RIGHT OF FIRST REFUSAL. 7. AVAILABILITY OF INFORMATION: It is understood and agreed between the Company and Banker that all documents and other information relating to the Company's affairs will be made available upon request to Banker and its counsel, and copies of any such documents will be furnished upon request to Banker or its counsel. 8. CONFLICT WITH LAW: It is understood that if any provision of this Agreement conflicts with the Securities Act of 1933, as amended, any rule or regulation under such Securities Act, the blue sky laws of any state in which the proposed offering is to be qualified, the National Association of Securities Dealers, Inc., or any other governmental authority either federal or state, possessing jurisdiction over the sale and issuance of such securities, the parties shall amend this Agreement to comply with such regulation. 3 9. ARBITRATION: Any controversy or claim arising out of or relating to the compensation to be paid by Company or the services rendered by Banker pursuant to the terms of this Agreement, or otherwise related to the compliance by either party with its obligations hereunder, shall be settled by binding arbitration in Los Angeles, California, in accordance with the rules of the American Arbitration Association, and judgement on the award rendered by the arbitrator(s) may be entered by any court having jurisdiction thereof. 10. ASSIGNMENT: This Agreement and the rights hereunder may not be assigned by either party (except by operation of law) without the prior written consent of the other party, but, subject to the foregoing limitation, this Agreement shall be binding upon and inure to the benefit of the respective successors, assigns and legal representatives of the parties. 11. CAPTIONS: The headings of the sections of this Agreement are intended solely for convenience of reference and are not intended and shall not be deemed for any purpose whatever to modify or explain or place any construction upon any of the provisions of this Agreement. 12. ATTORNEY'S FEES: In the event any party hereto shall institute an action to enforce any rights hereunder, the prevailing party in such action shall be entitled and the arbitrator(s) or Court shall award, in addition to any other relief awarded by the arbitrator(s) or the Court, reasonable attorney's fees, costs and expenses. 13. ENTIRE AGREEMENT: This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof and supersedes all prior and contemporaneous agreements and understanding of the parties, and there are no representations, warranties or other agreements between the parties in connection with the amendment, waiver or termination of the Agreement shall be binding unless executed in writing by the parties hereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any provision hereof (whether or not similar), nor shall waiver constitute a continuing waiver. 14. NOTICE: Any notice, instruction or communication required or permitted to be given under this Agreement to any party shall be in writing and shall be deemed received when personally delivered by the Federal Express or any other reputable overnight delivery service, or three days after deposit in the United States mail by certified or express mail, return receipt requested first class postage prepaid, to the address specified herein or otherwise as such party may request by written notice. 15. GOVERNING LAWS: The parties hereto hereby agree that this Agreement shall be governed by the Laws of the United States of America, the State of California, the National Association of Securities Dealers, the Securities Exchange Commission, the New York Stock Exchange and any Federal Agencies having jurisdiction over the sale or transmittal of securities, investments or financing outlined within this agreement. 4 16. INDEMNIFICATION: The undersigned as agent(s) for Company, agrees to hold harmless the Banker and all of its affiliates, attorneys, accountants, associates, employees, officers, directors and/or agents from any liability, claims, costs, damages, losses or expenses incurred or sustained by it or them as a result of Banker's actions, advice, consultations, representations, statements, introductions, performances, or the lack thereof. Company agrees to bear any costs Banker may incur investigating a claim or defending itself during an action if the events occur during the term of this agreement. 17. FRAUD: The undersigned agree and certify that all disclosures relating to the proposed financing and the general operation and structure of the Company, its subsidiaries, whether wholly or partially owned, investment or funding related activities and any other Company related enterprises, have been made to the Banker in a full and truthful manner whether or not requested by the Banker. The undersigned agree to hold blameless the Banker in the event that full and truthful disclosure, by the Company, has not occurred relating to any activities that may jeopardize the Banker's good standing with, federal and state regulatory agencies, law enforcement organizations or any other regulatory entity.. In the event that the Banker determines or has reasonable suspicion to believe that material information, that could potentially damage the Banker's good standing or involve the Banker or has involved the Company in illegal acts whether of a civil or criminal action, has been withheld or not communicated to the Banker, whether at Banker's express request or not, Banker reserves the right to vacate this and any other agreement entered into by the parties immediately without the statutory sixty (60) day notification period stated in paragraph one (1) above. Banker reserves the right to make any information that relates to potential or real violation(s) of the law or rules and regulations of the securities industry available to said law enforcement agencies or regulatory bodies. IN WITNESS WHEREOF, the parties hereto have executed this Agreement this day and year first above written. ALPINE ENTERTAINMENT INC, By: /S/ Roland Carroll By: /S/ Greg Cozine ------------------- ---------------- Roland Carroll Greg Cozine President Vice President of Finance Date: ________________ 5 RH INVESTMENT CORP. By: /S/ Stuart S. Greenberg ------------------------ Stuart S. Greenberg Managing Director -- Investment Banking Division Date:______________________ cc: A. L. "Bud" Byrnes - CEO RH Investment Corp EX-4.1 4 0004.txt SPECIMEN STOCK CERTIFICATE INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE NUMBER ________________ ________________ SHARES ALPINE ENTERTAINMENT, INC. Authorized Capital Stock: 120,000,000 Shares - Par Value $.001 100,000,000 Shares Common Stock 20,000,000 Shares Preferred Stock THIS CERTIFIES THAT___________________________________________ is the registered holder of ____________________________________________ Shares of Preferred Stock transferable only on the books of the Corporation by the holder hereof in person or by Attorney upon surrender of this Certificate properly endorsed. The Corporation will furnish at its principal office, without charge to each stockholder who so requests, a statement of the powers, designations, preferences and relative participating, optional or other special rights of each class of stock or series thereof and the qualifications, limitations or restrictions of such preferences and/or rights. In Witness Whereof, the said Corporation has caused this Certificate to be signed by its duly authorized officers and its Corporate Seal hereunto affixed. this ___________ day, of ______________ A.D. ____ ________________________ [seal here] ______________________ SECRETARY PRESIDENT For value received ________________ hereby sell, assign and transfer unto PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE ______________________________________ ________________________________________________________________________________ ________________________________________________________________________________ (NAME AND ADDRESS OF TRANSFEREE SHOULD BE PRINTED OR TYPEWRITTEN) ________________________________________________________________________________ _________________________________________________________________________ Shares represented by the within certificate and, if required, do hereby irrevocably constitue and appoint _________________________________________________ Attorney to transfer the said Shares on the books of the within named Corporation, with full power of substition in the premises. Dated ___________________________ In presendce of ______________________________, ___________________________ NOTICE: THE SIGNATURE ON THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER. EX-4.2 5 0005.txt PROMISSORY NOTE DATED AUGUST 6, 1999 PROMISSORY NOTE $2,052,000 August 6, 1999 Van Nuys, California FOR VALUE RECEIVED AND TO BE RECEIVED, Alpine Entertainment, Inc., a California corporation (the "Maker") hereby promises to pay to the order of Alpine Pictures, Inc., a California corporation ("Payee"), at 6919 Valjean Avenue, Van Nuys, California 91406, or at such other address as Payee shall notify Maker in writing, the principal sum Two Million, Fifty Two thousand dollars ($2,052,000.00) with no interest, payable principal in full on December 31, 2001. The actual to be repaid by Maker to Payee will equal the actual amount of advances by Payee to Maker's subsidiary pursuant to paragraph three of this note. 1. RIGHT OF CONVERSION. Payee and/or its successors may convert this note, in part or in whole, to the common stock of Alpine Entertainment, Inc., at a price of $.27 per share, or Seven million, Six hundred thousand (7,600,000) shares for the entire Two Million, Fifty Two thousand dollars ($2,052,000.00). 2. DIVISIBILTY OF NOTE. Payee may use or assign note, in part or in full, to declare a dividend to Payee's shareholders, and/or to satisfy Payee's creditors. This will result in additional administrative costs to the Maker. These costs shall be borne in full by the Maker. 3. FUNDING BY PAYEE. Payee has already advanced funds to Maker's Subsidiary, Alpine Pictures International, Inc. (APII). Payee and Maker agree that total debt from Maker's Subsidiary, APII to Payee is One Million, Two hundred thousand dollars ($1,200,000.00) as of August 6,1999. Payee agrees to continue funding Maker's Subsidiary, APII, at the rate of Eighty Five thousand, Two hundred dollars ($85,200.00) per week beginning on August 13, 1999, and ending on October 15, 1999, until the full $2,052,000 is received by Maker. 4. DEFAULT. Any of the following shall constitute a default by Maker hereunder: o The failure of the Maker to make any payment of principal required hereunder within 10 days of the due date for such payment; or o The failure of Maker to fully perform any other material covenants and agreements under this Note and continuance of such failure for a period of 30 days after written notice of the default by Payee to the Maker. 5. LIMITED RECOURSE OF NOTE. In the event that the Maker defaults on this Note, Payee shall look solely to the Maker and its assets for repayment and none of the shareholders, officers, directors or affiliates of the Maker shall have any personal liability for payment hereunder. 6. COSTS OF COLLECTIONS. Payee shall be entitled to collect from Maker all attorney's fees and costs incurred by Payee, as well as other costs and expenses incurred by Payee, incuring any default or attempting collection of any payment due on this Note, including, but not limited to all post judgment costs. 7. PAYMENT. This Note shall be payable in lawful money of the United States. 1 8. PLACE OF PAYMENT. All payments on this Note are to be made or given to Payee at the address provided to Maker or to such other place as Payee may from time to time direct written notice to Maker. 9. WAIVER. Maker, for itself and its successors, transfers and assigns, waives presentments, dishonor, protest, notice of protest, demand for payment and dishonor in nonpayment of this Note, bringing of suit or diligence of taking any action to collect any sums owing hereunder or in proceeding against any of the rights and properties securing payment hereunder. 10. SEVERABILITY. If any provision of this Note or the application thereof to any persons or entities or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Note shall not be deemed affected thereby and every provision of this Note shall be valid and enforceable to the fullest extent permitted by law. 11. NO PARTNER. Payee shall not become or be deemed to be a partner or joint venturer with Maker by reason of any provision of this Note. Nothing herein shall constitute Maker and Payee as partners or joint venturers or require Payee to participate in or be responsible or liable for any costs, liabilities, expenses or losses of Maker. 12. NO WAIVER. The failure to exercise any rights herein shall not constitute a waiver of the right to exercise the same or any other right at any subsequent time in respect of the same event or any other event. 13. GOVERNING LAW. This Note shall be governed by and construed solely in accordance with the laws of the State of California. IN WITNESS WHEREOF, Maker has executed this Note as of the date first hereinabove written. MAKER ALPINE PICTURES INTERNATIONAL, INC. A California corporation By: /S/ Rene A. Torres ------------------------------- Rene A. Torres, President PARENT COMPANY OF MAKER ALPINE ENTERTAINMENT, INC. A California corporation By: /S/ Ryan Carroll ------------------------------- Ryan Carroll, CEO PAYEE ALPINE PICTURES, INC. A California corporation By: /S/ Roland Carroll ------------------------------- Roland Carroll, President 2 PROMISSORY NOTE $1,890,000 May 5, 2000 Van Nuys, California FOR VALUE RECEIVED AND TO BE RECEIVED, Alpine Entertainment, Inc., a California corporation (the "Maker") hereby promises to pay to the order of Alpine Pictures, Inc., a California corporation ("Payee"), at 6919 Valjean Avenue, Van Nuys, California 91406, or at such other address as Payee shall notify Maker in writing, the principal sum One million, Eight hundred Ninety thousand dollars ($1,890,000.00) with no interest, payable principal in full on December 31, 2001. The actual to be repaid by Maker to Payee will equal the actual amount of advances by Payee to Maker and Maker's subsidiary pursuant to paragraph three of this note. This note is in addition to Maker's note to payer dated August 6,1999. 1. RIGHT OF CONVERSION. Payee and/or its successors may convert this note, in part or in whole, to the common stock of Alpine Entertainment, Inc., at a price of $.27 per share, or Seven million (7,000,000) shares for the entire One million, Eight hundred Ninety thousand dollars ($1,890,000.00). 2. DIVISIBILTY OF NOTE. Payee may use or assign note, in part or in full, to declare a dividend to Payee's shareholders, and/or to satisfy Payee's creditors. This will result in additional administrative costs to the Maker. These costs shall be borne in full by the Maker. 3. FUNDING BY PAYEE. Payee has already advanced funds to Makers Subsidiary, Alpine Pictures International, Inc. (APII). Payee and Maker agree that total debt from Makers Subsidiary, APII, to Payee is One hundred fifty thousand dollars ($150,000.00) as of May 1, 2000. Payee agrees to provide Maker and Maker's subsidiaries Seven hundred, Seventy Eight thousand dollars ($778,000.00) in pre-paid postproduction services. Payee agrees to continue funding Maker at the rate of Thirty Seven thousand dollars ($37,000.00) per week beginning on May 26, 2000, and ending on November 17, 2000, until the full $1,890,000 is received by Maker. 4. REVERSE STOCK SPLIT. Maker is planning a 3 for 10 reverse stock split which will decrease the number of shares that the note may be converted into by 70%. After reverse split Payer and/or Payer's assignees may convert note into Two million, One hundred thousand shares of post split stock. The effective post split price per share will be $.90. This split will also effect Maker's previous note, dated August 6, 1999. 5. DEFAULT. Any of the following shall constitute a default by Maker hereunder: o The failure of the Maker to make any payment of principal required hereunder within 10 days of the due date for such payment; or o The failure of Maker to fully perform any other material covenants and agreements under this Note and continuance of such failure for a period of 30 days after written notice of the default by Payee to the Maker. 6. LIMITED RECOURSE OF NOTE. In the event that the Maker defaults on this Note, Payee shall look solely to the Maker and its assets for repayment and none of the shareholders; officers, directors or affiliates of the Maker shall have any personal liability for payment hereunder. 7. COSTS OF COLLECTIONS. Payee shall be entitled to collect from Maker all attorney's fees and costs incurred by Payee, as well as other costs and expenses incurred by Payee, incuring any default or attempting collection of any payment due on this Note, including, but not limited to all post judgment costs. 1 8. PAYMENT. This Note shall be payable in lawful money of the United States. 9. PLACE OF PAYMENT. All payments on this Note are to be made or given to Payee at the address provided to Maker or to such other place as Payee may from time to time direct by written notice to Maker. 10. WAIVER. Maker, for itself and its successors, transfers and assigns, waives presentment, dishonor, protest, notice of protest, demand for payment and dishonor in nonpayment of this Note, bringing of suit or diligence of taking any action to collect any sums owing hereunder or in proceeding against any of the rights and properties securing payment hereunder. 11. SEVERABILITY. If any provision of this Note or the application thereof to any persons or entities or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Note shall not be deemed affected thereby and every provision of this Note shall be valid and enforceable to the fullest extent permitted by law. 12. NO PARTNER. Payee shall not become or be deemed to be a partner or joint venturer with Maker by reason of any provision of this Note. Nothing herein shall constitute Maker and Payee as partners or joint venturers or require Payee to participate in or be responsible or liable for any costs, liabilities, expenses or losses of Maker. 13. NO WAIVER. The failure to exercise any rights herein shall not constitute a waiver of the right to exercise the same or any other right at any subsequent time in respect of the same event or any other event. 14. GOVERNING LAW. This Note shall be governed by and construed solely in accordance with the laws of the State of California. IN WITNESS WHEREOF, Maker has executed this Note as of the date first hereinabove written. MAKER ALPINE PICTURES INTERNATIONAL, INC. A California corporation By: /S/ Rene A. Torres ------------------------------- Rene A. Torres, President PARENT COMPANY OF MAKER ALPINE ENTERTAINMENT, INC. A California corporation By: /S/ Ryan Carroll ------------------------------- Ryan Carroll, CEO PAYEE ALPINE PICTURES, INC. A California corporation By: /S/ Roland Carroll ------------------------------- Roland Carroll, President 2 EX-10.1 6 0006.txt INTERNATIONAL MULTIPLE RIGHTS DISTRIBUTION AGMT. INTERNATIONAL MULTIPLE RIGHTS DISTRIBUTION AGREEMENT This International Multiple Rights Distribution Agreement is made as of January 19, 1999 between ALPINE PICTURES INTERNATIONAL, INC., 6919 Valjean Ave., Van Nuys, CA 91406, Tel: (818) 909-5207, Fax: (818) 782-4565 ("Licensor") and _______________________________, 122, rue La Boetele 75008, Paris, France Tel: 01 56 69 29 30 Fax: 011 33 1 56 69 29 40 Contact(s): Mr. Yves Chevalier ("Distributor") relating to the motion picture entitled "_______________________". For reference purposes this Agreement is identified as follows: Reference Code: ___________________________ This Agreement is a new long form agreement that replaces the deal memo between Licensor and Distributor regarding the Picture. Subject to the terms this agreement, Licensor licenses exclusively to Distributor, and Distributor accepts from Licensor, the Licensed Rights in the Picture throughout the Territory for the Term in the Authorized Languages subject to the Holdbacks as identified below on all the terms and conditions of this Agreement. This Agreement consists of the following parts: this Cover Page; Table of Contents; Deal Terms; Standard Terms and Schedule of Definitions. All parts of this Agreement will be interpreted together to form one Agreement. If not defined where they first appear, words used in this Agreement are defined in the Standard Terms or in the Schedule of Definitions or, if not otherwise defined in this Agreement, in accordance with industry custom and practice. IN WITNESS WHEREOF, Licensor and Distributor have executed this Agreement as of the date first written above to constitute a binding contract between them. ALPINE PICTURES INT'L, INC. ____________________________________ ("Licensor") ("Distributor") By:____________________________ By:_____________________________ Tom Hamilton Its:____________________________ Its:______________________________ Senior Vice President TABLE OF CONTENTS Section Paragraph Deal Terms Basic License Terms I Licensed Rights II Financial Terms III Delivery Terms IV Additional Terms V Standard Terms and Conditions Definitions and Usage Picture and Version Licensed Rights And Reserved Rights Allied Rights Territory and Region Agreement Term and License Period Gross Receipts Recoupable Distribution Costs Payment Requirements Accountings Delivery and Returns General Exploitation Obligations Theatrical Exploitation Obligations Video Exploitation Obligations Televisions Exploitation Obligations Music Suspension and Withdrawal Default and Termination Anti-Piracy Provisions Licensor's Warranties Distributor's Warranties Indemnities Assignment and Sublicensing Miscellaneous Provisions Schedule Of Licensing Definitions Cinematic Rights Definitions A Video Rights Definitions B Ancillary Rights Definitions C Pay TV Rights Definitions D Free TV Rights Definitions E Other Rights Definitions F Additional Definitions G MULTIPLE RIGHTS DISTRIBUTION AGREEMENT I. BASIC LICENSE TERMS A. Picture: "__________________" Key Element(s): Allocation(s): B. Territory: ____________________________________ C. Agreement Term and License Period: Starting on the date of this Agreement and ending Fifteen (15) years from Initial Delivery of the Picture. D. Authorized Language(s): ________________(dubbing & subtitles) [Original Language Version (English)] II. LICENSED RIGHTS TERMS A Right is licensed to Distributor only if expressly so designated. Any Right not specifically designated is a Reserved Right of Licensor. A. Cinematic Rights: 1. Theatrical; 2. Non-Theatrical; & 3. Public Video. B. Video Rights: 1. Home Rental Video; 2. Home SellThru Video; & 3. Commercial Video. C. Ancillary Rights: 1. Airlines; 2. Hotels; & 3. Ships (flying the flag of the Territory only and without bookings in the United States). D. Television Rights: 1. Pay TV Rights: a. Terrestrial; b. Cable; & c. Satellite. 2. Free TV a. Terrestrial; b. Cable; & c. Satellite. E. PayPerView Rights 1. Residential; 2. Non-Residential; & 3. Demand View. Satellite Transmission Restriction: If delivery is to be made by Satellite, transmission must be encoded and/or encrypted to prevent and restrict substantial reception in countries outside of the licensed Territory. F. Video Format/Type: Beta/PAL G. Holdbacks: NONE. III. FINANCIAL TERMS A. Guarantee: 1. Amount: One Hundred Twenty Five Thousand U.S. Dollars (US $___________), payable as follows: a. _______% (US $_________) of the allocated amount for the Picture upon execution of the long form Agreement (Licensor hereby agrees that if Licensor is unable to deliver the finished Motion Picture in a reasonable period of time, Licensor will refund Distributor's ____________% deposit); and b. ________% (US $__________) of the allocated amount for the Picture upon Licensor's Notice of Initial Delivery in connection with the Picture. The Guarantee is a gross sum and no taxes or other charges of any kind may be deducted from it. Distributor must take Delivery within one month of receipt of Licensor's First Notice that Licensor can Deliver the Initial Materials. 2. Allocation: The entire Guarantee shall be deemed allocated to all above Rights. a. Cross Collateralization Allowed: The applicable portion of the Guarantee will first be recouped from the Licensed Rights to which it has been allocated. Any "Shortfall" from Distributor's share of gross receipts with respect to one Licensed Right shall be defined and recouped only to the extent allowed in Paragraph III(D). B. Payment Requirements: Timely payment of the minimum Guarantee due Licensor is the essence of this Agreement. Distributor will make payments of the installments of the Guarantee indicated in Paragraph III.A.1 and all overages and other payments due Licensor by telegraphic or other wire transfer of unencumbered and unconditional funds, free of any transmission charges to the following accounts: Bank: CITY NATIONAL BANK Address: 16133 Ventura Blvd. Encino, CA 91436 Telephone #: (818) 427-5050 Swift Code: CINAUS61, ABA Number: 122-016066 Account Name: Alpine Pictures International, Inc. Account #: 024766632 C. Disposition of Receipts: Distributor shall make the following continuing payments and recoupments; in the following order of priority from the Gross Receipts derived from each of the following designated Licensed Rights: 1. THEATRICAL/NON-THEATRICAL PUBLIC VIDEO: a. Until Full Recoupment of Recoupable Distribution Costs: Off The Top 100% of all Gross Receipts to Distributor, to be divided Percent ( %) as a fee and _____________ (65%) towards recoupment of minimum guarantee and prints and advertising. b. Sharing after Full Recoupment of Distribution Costs: ___________________ Percent (_________%) of remaining Gross Receipts to Licensor. ___________________ Percent (_________%) of remaining Gross Receipts to Distributor. 2. HOME VIDEO/COMMEERCIAL VIDEO: Recoupment of Recoupable Distribution Cost from Distributor's share Off the Top, then Twenty Five Percent (25%) of all Video Gross Receipts to Alpine Pictures International, and Seventy Five Percent (75%) of all Video Gross Receipts to Distributor. 3. PAY TELEVISION/FREE TELEVISION: Flat/No royalty 4. ANCILLARY (AIRLINES, SHIPS, HOTELS): N/A Flat/No royalty D. Cross-Collateralization: 1. "Shortfall" Defined: For purposes of this Agreement only, the "Shortfall" shall be the amount by which the Recoupable Distribution Costs with respect to a Licensed Right exceed Licensor's Share of the Gross Receipts with respect to such Licensed Right remaining after all authorized recoupments have been made with respect to such Licensed Rights." 2. Allowed Cross-Collateralization: All Rights crossed. A Shortfall with respect to any Licensed Right may only be recouped from Licensor's Share of Gross Receipts with other Licensed Rights within the same Picture. Cross-collateralization with another Motion Picture is specifically excluded. If this is insufficient to recoup any Shortfall the unrecouped Shortfall must be borne by Distributor. IV. DELIVERY TERMS A. Date for Notice of Initial Delivery: Licensor will give Distributor a Notice of Initial Delivery promptly after the Picture is ready for Delivery. B. Method of Delivery: By Physical Delivery, Laboratory Access, Loan of Materials, Satellite Delivery, or otherwise as Distributor may designate for each item. Licensor will make available to Distributor all Customary Materials required for release in the Theatrical, Television, Video and Ancillary markets. C. Material Payment Instructions: Distributor shall pay for all Materials and Shipping. Payment of any Material ordered by Distributor (except those Materials to be delivered on loan pursuant to Paragraph IV.B above) must be received together with Distributor's order. Licensor will not order Material from Vendors unless payment is first received. All Materials to be of commercially accepted quality. The cost of all delivery Materials shall fall within industry standards. D. Materials Shipping Instructions: To be issued in writing by Distributor. V. ADDITIONAL TERMS A. Jurisdiction/Governing Law: This Agreement shall be governed by and construed in accordance with the laws of the State of California and the jurisdiction shall be vested in the competent courts in Los Angeles, California AFMA(R) INTERNATIONAL MULTIPLE RIGHTS DISTRIBUTION AGREEMENT STANDARD TERMS AND CONDITIONS 1 DEFINITIONS AND USAGE 1.1 Definitions: Words and phrases which appear with initial letters capitalized are Defined Terms. If not defined where they first appear Defined Terms are defined either in the attached Schedule of Definitions or in accordance with industry custom and practice. 1.2 Usage: The use of any Defined Term or inclusion of any provision in this Agreement relating to rights not specifically licensed to Distributor in the Deal Terms does not grant to Distributor explicitly or by implication any rights not specifically licensed in the Deal Terms. 2. PICTURE AND VERSION 2.1 Picture: The Picture is the Motion Picture identified at least by its title in the Deal Terms which is currently completed or which Licensor currently intends to produce. Licensor reserves the right to change the title of the Picture. 2.2 Key Element: A Key Element if specified in the Deal Terms is a Person who must render services or materials on the Picture in a certain capacity as indicated in the Deal Terms. A Person will be deemed to have rendered the required services or materials if the Person receives credit for so doing in the main or end titles of the Picture. Where a director is a Material Element, this requirement will be satisfied if the director renders directing services through the end of Principal Photography. If any Key Element is unable fully to render services or materials on the Picture due to default, disability or death Licensor will have the right to substitute another Person in such capacity who is acceptable to the U.S. distributor scheduled first to release the Picture, and Distributor will not have the right to refuse to accept Delivery of the Picture or reduce the Guarantee because of such substitution. 2.3 Version: The Picture is only licensed in a linear form for continuous viewing from beginning to end. Licensor reserves all rights in all formats and Versions of the Picture other than its original linear form as Delivered to Distributor and authorized dubbed, subtitled or edited Versions of such original linear form made by Distributor for exploitation of its Licensed Rights as may be authorized under this Agreement. If during the Agreement Term Licensor elects to exploit another Version of the Picture in the Territory that incorporates a substantial portion of the linear form of the Picture licensed to Distributor, then Licensor will accord Distributor a right of First Negotiation to acquire any affected Licensed Rights in such new Version for the remainder of their License Period. If Distributor does not acquire the affected Licensed Rights in such new Version, then Licensor will be free to exploit such new Version in the Territory beginning six (6) months after the end of the Holdback for the affected Licensed Rights. 3. LICENSED RIGHTS AND RESERVED RIGHTS 3.1 License: Subject to the terms of this Agreement, Licensor exclusively licenses to Distributor the Licensed Rights in the Picture for the License Period throughout the Territory in the Authorized Language(s) as set forth in the Deal Terms. Distributor may only exploit the Licensed Rights: (i) in the Authorized Language(s) in a dubbed or subtitled version as specified in the Deal Terms; (ii) by means of the authorized Video Type(s) and Format(s) specified in the Deal Terms; (iii) for no more than the Run(s) or Playdate(s) authorized in the Deal Terms. 3.2 Vesting: Each Licensed Right will only vest in Distributor after: (i) Distributor accepts Initial Delivery of the Picture; and (ii) if the Deal Terms contain a Guarantee, Distributor pays Licensor when due the portion of the Guarantee allocated to such Licensed Right in the Deal Terms, or, if there is no allocation, the entire Guarantee. 3.3 Reservation: All rights not expressly licensed to Distributor are Reserved Rights. Licensor reserves all Reserved Rights designated in the Deal Terms and all other rights not expressly licensed to Distributor. Licensor may exploit the Reserved Rights without restriction except as otherwise expressly provided in this Agreement. 3.4 Reversion: Each Licensed Right will immediately revert to Licensor free of any claim by Distributor or any Person deriving any interest from Distributor on the earlier of the end of the License Period for such Licensed Right or the expiry of the Agreement Term under Paragraph 6.1. 4. ALLIED RIGHTS 4.1 Credit and Advertising: Distributor will comply with all required screen credits (if not already contained in the Picture), paid advertising, publicity and promotional requirements, name & likeness restrictions, and Videogram packaging credit requirements (if needed) supplied by Licensor at all times after their receipt. Upon Licensor's request Distributor will promptly submit to Licensor all advertising materials used by Distributor so that Licensor can determine whether its requirements are being met. 4.2 Dubbing, Subtitling and Editing: Distributor will comply with all dubbing, subtitling or editing requirements applicable to the Picture or its trailers supplied by Licensor in creating any authorized dubbed, subtitled or edited version of the Picture or its trailers. Except as expressly provided in this Agreement, each Picture and its trailers must be exhibited at all times in their original continuity, without alteration, interpolation, cut or elimination. 4.3 Exercise of Allied Rights: Subject to Licensor's requirements under Paragraphs 4.1 & 4.2 and the provisions of this Agreement, Distributor will have the nonexclusive right at its sole expense: 2 4.3.1 To advertise, publicize, and promote the Picture; 4.3.2 To include in all such advertising, promotion or publicity the name, voice and likeness of any Person rendering materials or services on the Picture but not as an endorsement for any product or service other than the Picture; 4.3.3 To include before the beginning or after the end of the Picture the credit or logo of Distributor; 4.3.4 To change the title of the Picture but only after first obtaining Notice of Licensor's approval of the change; 4.3.5 To dub the Picture but only in the Authorized Language(s); 4.3.6 To subtitle the Picture but only in the Authorized Language(s); 4.3.7 To edit the Picture but only for censorship purposes in accordance with a Censorship Rider if attached; 4.3.8 To include commercial announcements in the Picture as provided in Paragraph 15.5. 4.4 Limitations: In exercising the Allied Rights, Distributor may not: (i) alter or delete any credit, logo, copyright notice or trademark notice appearing on the Picture; or (ii) include any advertisements or other material before, during or after the Picture other than the credit or logo of Distributor, an approved anti-piracy warning, or commercials as authorized in Paragraph 15.5 of this Agreement. 5. TERRITORY AND REGION 5.1 Territory: The Territory means the countries or territories listed in the Deal Terms as their political borders exist on the date of this Agreement. The Territory excludes foreign countries' embassies, military and governmental installations, oil rigs and marine installations, airlines-in-flight and ships-at-sea located within the Territory. 5.1.1 In exploiting the Theatrical, Public Video, Home Video, Hotel, Pay TV or Free TV Rights, the Territory also excludes the countries' non-contiguous territories and possessions as well as military and governmental installations, oil rigs and other marine installations, and embassies located within the Territory but flying the flag of any country outside the Territory; and 5.1.2 In exploiting the Non-Theatrical, Commercial Video, Airline or Ship Rights, the Territory includes the countries' military and governmental installations, oil rigs and marine installations and embassies wherever located, but only to the extent that they may be exploited in accordance with such Rights. 3 5.2 Changes In Borders: If during the Agreement Term an area separates from a county in the Territory then the Territory will nonetheless include each separating area which formed one political entity as of the date of this Agreement. If during the Term an area is annexed by a country in the Territory then Distributor will promptly give Licensor Notice whether Distributor desires to exploit any Licensed Right in such new area. Licensor will then accord Distributor a right of First Negotiation Right to acquire such Licensed Right in the area for the remainder of its License Period subject to rights previously granted to other Persons in such area. 5.3 Region: The Region is the part of the world in which the Territory is located. The Region is defined in either in the Deal Terms or if not there defined in the AFMA Standard Definitions of Territories and Regions current as of the date of this Agreement. 5.4 Changes In Licensed Station: The "Licensed Station" means the terrestrial broadcaster, satellite broadcaster, cable system, pay television service or other transmitting service designated in the Deal Terms. Distributor may only telecast or authorize telecast of the Picture over the originating transmitting facilities of the Licensed Station existing on the date of this Agreement. If there is a material change in the number or kind of household television receivers capable of receiving the telecast from such transmitter (e.g., a change in signal amplitude or frequency, a material increase in the number of subscribers, use of a new satellite or transponder, change in a satellite's orbital position, or addition of new transmission channels), then Distributor will promptly give Licensor Notice of such change. Licensor then grants Distributor a right of First Negotiation regarding exploitation of any affected Licensed Rights in the Picture over such new facilities, taking into account rights previously granted to other Persons which might be affected by such change and an adjustment in the Minimum Guarantee in consideration of such change. If no agreement is reached within the First Negotiation period then Distributor may not exploit any Licensed Rights in the Picture over the new facilities and Licensor may withdraw the Picture under Paragraph 17. 6. AGREEMENT TERM AND LICENSE PERIOD 6.1 Agreement Term: The Agreement Term starts and ends on the dates set forth in the Deal Terms except in case of extension per Paragraph or early termination per Paragraphs 17.2, 18.2 or 18.4. 6.2 License Period: The License Period is the time period in the Deal Terms during which Distributor may exploit each Licensed Right, except that the License Period for any Pay TV Licensed Rights or Free TV Licensed Rights end after the last authorized Runs or Playdate as set forth in Paragraph 15.1.3, and provided Distributor may not exploit or authorize exploitation of any Licensed Right after the earlier of the expiry of its License Period or end of the Agreement Term per Paragraph 6.1. 6.3 Distributor Holdbacks: Where the Deal Terms indicate a Holdback on any Licensed Right, Distributor may not exploit or authorize exploitation of that Licensed Right until the end of its Holdback. However, during its License Period Distributor may enter into agreements to exploit a Licensed Right after the end of its Holdback. 4 6.4 Licensor Holdbacks: Where the Deal Terms indicate a Holdback on any of Reserved Right, Licensor may not exploit or authorize exploitation in the Territory of that Reserved Right until the end of its Holdback. However, Licensor may enter into agreements at any time to exploit a Reserved Right after the end of its Holdback. 6.5 Theatrical Release: Theatrical Release means the earlier of: (i) the date on which the Picture is first exhibited in theaters, including mini-theaters and MTV theaters, within the Territory to the paying public, including screenings to qualify for awards presentations by authority of Distributor; or (ii) the date if specified in the Deal Terms on which Distributor must cause the Theatrical Release of the Picture in the Territory; or (iii) six (6) months after Notice of Initial Delivery. 6.6 Video Release: Video Release means the earlier of: (i) the date on which Videograms embodying the Picture are first sold or rented to the paying public in the Territory for Home Video use by authority of Distributor; or (ii) the date on which Videograms embodying the Picture are first exhibited in places of public performance in the Territory for Commercial Video use by authority of Distributor; or (iii) the date if specified in the Deal Terms on which Distributor must cause the Video Release of the Picture in the Territory; or (iv) one (1) month after the end of the earliest Video Holdback; or (v) if there is no Theatrical Release of the Picture in the Territory, six (6) months after Notice of Initial Delivery. 6.7 Holdback Coordination: The Parties acknowledge that due to technological innovation or a Law in the Region it is possible that exploitation of a Licensed Right within the Territory can affect exploitation throughout the Region. Distributor therefore agrees that Licensee may shorten by up to three (3) months or extend by up to three (3) months any Holdback to coordinate the exploitation of the Picture within the Region. For example, Licensor may shorten or extend the Pay TV Holdback up to three (3) months in order to coordinate the Pay TV release of the Picture throughout the Region. Licensor will give Distributor prompt Notice of any adjusted Holdback period no later than the earlier of two (2) months before the end of the new Holdback period or the end of the Holdback period set forth in the Deal Terms. Licensor will use all reasonable good faith efforts to coordinate release patterns throughout the Region so that exploitation of the Picture in a particular medium outside the Territory will not unduly impact on its exploitation within the Territory and exploitation of the Picture in a particular medium within the Territory will not unduly impact its exploitation outside the Territory, provided that Licensor's goal will be to maximize its revenues and reduce its expenses within the entire Region and in case of any disagreement Licensor's decision will control. 6.8 Broadcast Overspill: Licensor does not warrant that it has granted or can grant exclusivity protection against reception in the Territory of a broadcast of the Picture originating outside the Territory. Licensor only agrees that during the License Period for any Pay TV or Free TV Licensed Right it will not broadcast or authorize a broadcast of the Picture in any Authorized Language which broadcast originates in the Region outside the Territory and is intended for primary reception within the Territory except this provision will not apply to broadcasts in the original unsubtitled English language even if English is an Authorized Language. This paragraph applies specifically, but without limitation, in cases where the Region includes any country in the European Union or European Economic Area. 5 6.9 Parallel Imports: Licensor does not warrant that it has granted or can grant exclusivity protection against sale or rental in the Territory of Videograms embodying the Picture imported from outside the Territory. Licensor only agrees that during the License Period for any Video Licensed Right it will not sell or authorize sale in any Authorized Language of Videograms embodying the Picture that are sold in the Region outside the Territory and intended for primary consumer sale or rental within the Territory except this provision will not apply to sales of original unsubtitled English language Videograms even if English is an Authorized Language. This paragraph applies specifically, but without limitation, in cases where the Region includes any country in the European Union or European Economic Area. 7. GROSS RECEIPTS 7.1 Gross Receipts - Defined: "Gross Receipts" means the sum on a continuous basis of the following amounts derived with respect to each and every Licensed Right: 7.1.1 All monies or other consideration of any kind (including all amounts from advances, guarantees, security deposits, awards, subsidies, and other allowances) received by, used by or credited to Distributor or any Distributor Affiliates or any approved subdistributors, or agents from the license, sale, lease, rental, lending, barter, distribution, diffusion, exhibition, performance, exercise or other exploitation of each Licensed Right in the Picture, all without any deductions; and 7.1.2 All monies or other consideration of any kind received by, used by or credited to Distributor or any Distributor Affiliates or any approved subdistributors or agents as recoveries for the infringement of any Licensed Right in the Picture; and 7.1.3 All monies or other consideration of any kind received by, used by or credited to Distributor or any Distributor Affiliates or any approved subdistributors or agents from any authorized dealing in trailers, posters, copies, stills, excerpts, advertising accessories or other materials used in connection with the exploitation of any Licensed Right in the Picture or contained on Videograms embodying the Picture. 7.2 Gross Receipts Calculated at Source: No Distributor Affiliates or any subdistributors or agents may deduct any fee from Gross Receipts in calculating all amounts due Licensor. For the purpose of determining Licensor's share of Gross Receipts, all Gross Receipts must be calculated at "source". This means that Gross Receipts derived from the exploitation of any the following Licensed Rights must be calculated at the following levels: (i) for any Theatrical Licensed Right, at the level at which payments are remitted by theaters; (ii) for any NonTheatrical or Ancillary Licensed Right, at the level at which payments are remitted by airlines, shipping companies, hotels or other entities that exhibit or make the Picture available directly to their patrons or customers; (iii) for any Home Video Licensed Right, at Wholesale Level or Direct Consumer Level as applicable; (iv) for any Commercial Video or Public Video Licensed Right at the level at which payments are remitted by local exhibitors of the Picture; and (vi) for any Television Licensed Right, at the level at which payments are remitted by terrestrial stations, cable systems, satellite telecasters or telephone systems that broadcast, cablecast or transmit the Picture. 6 7.3 Wholesale Level: The Wholesale Level means the level of Videogram distribution from which Videograms are shipped directly to retailers for ultimate sale or rental to the paying public. The Wholesale Level may include intermediate distribution levels between the manufacturer and the retailer, such as rack jobbers and the like, if such distribution is performed by a Distributor Affiliate, or if Distributor participates in the profits from such intermediate distribution, but then only to the extent of such participation. 7.4 Direct Consumer Level: The Direct Consumer Level means the level of Videogram distribution at which Videograms are sold or rented directly to the paying public. The "Direct Consumer Level" includes the sale or rental of Videograms by means of retail outlets, mail order, video clubs, and similar methods. Where Commercial Video or Public Video rights are licensed, the Direct Consumer Level also includes the authorized public performance, exhibition, or diffusion of Videograms in accordance with the such Licensed Right. Distributor will not be deemed to be engaged in distribution at the Direct Consumer Level unless such distribution is performed by a Distributor Affiliate, or unless Distributor participates in the profits from such distribution, and then only to the extent of such participation. 7.5 Royalty Income: All amounts collected by any collecting society, authors' rights organization, performing rights society or governmental agency that are payable to authors, producers, performers or other Persons and that arise from royalties, compulsory licenses, cable retransmission income, music performance royalties, tax rebates, exhibition surcharges, levies on blank Videograms or hardware, rental or lending royalties, or the like, will as between Licensor and Distributor be the sole property of Licensor and will not be included in or credited to any Gross Receipts. Licensor has the sole right to apply for and collect all these amounts. If any of them are paid to Distributor then Distributor will immediately remit them to Licensor with an appropriate statement identifying the payment. 7.6 Rebates and Subsidies: The following amounts, if received by used by or credited to Distributor, any Distributor Affiliate or any approved subdistributor or agent, will not be included in Gross Receipts but will be used to reduce Recoupable Distribution Costs: (i) print, publicity and similar subsidies for the cost of releasing, advertising or publicizing the Picture; (ii) income from publicity tie-ins; or (iii) freight, print, trailer, advertising and other cost recoveries, rebates, refunds or discounts from exhibitors, approved subdistributors or other Persons. 7 8. RECOUPABLE DISTRIBUTION COSTS 8.1 Recoupable Distribution Costs - Defined: "Recoupable Distribution Costs" mean all direct, auditable, out-of-pocket, reasonable and necessary costs, exclusive of salaries and overhead, and less any discounts, credits, rebates or similar allowances, actually paid by Distributor for exploiting each Licensed Right in arms-length transactions with third parties, all of which will be advanced by Distributor and recouped under this Agreement, for: 8.1.1 Customs duties, import taxes and permit charges necessary to secure entry of the Picture into the Territory; 8.1.2 Notarization, translation, registration and similar costs relating to obtaining or securing copyright registration, title registration, import clearances or similar activities for the importation, exploitation or protection of the Picture in the Territory but only to the extent reasonably pre-approved by Licensor and if Licensor advances any such fees or costs Distributor will promptly reimburse Licensor for them on demand; 8.1.3 Sales, use, VAT, admission and turnover taxes and related charges assessable against any Gross Receipts realized from the exploitation of the Licensed Right but not including corporate income, franchise or windfall profits taxes or remittance or withholding taxes assessable against amounts payable to Licensor; 8.1.4 Remittance and withholding taxes on amounts payable to Licensor but only to the extent allowed by Paragraph 9.5; 8.1.5 Shipping and insurance charges for Delivery of the Materials to Distributor but not including any amounts for shipping within the Territory or for returning the Materials to Licensor; 8.1.6 Manufacture of internegatives, CRIs, pre-print materials, positive prints, masters, tapes, trailers and other copies of the Picture in an amount reasonably preapproved by Licensor; 8.1.7 Costs of subtitling or dubbing, if authorized in the Deal Terms but only in the Authorized Language(s); 8.1.8 Costs of allowed advertising, promotion and publicity in the amount reasonably pre-approved by Licensor; 8.1.9 Legal costs and charges paid to obtain recoveries for infringement by a Third Party of the Licensed Right but only to the extent reasonably pre-approved by Licensor; 8.1.10 Actual and normal expenses incurred in recovering debts from defaulting licensees; 8.1.11 Costs of packaging for Videograms embodying the Picture but only to the extent reasonably pre-approved by Licensor; and 8.1.12 Censorship fees and costs of editing to meet censorship requirements as allowed pursuant to a Censorship Rider, if attached. 8 8.2 Limitations: Any cost that does not qualify as a Recoupable Distribution Cost under Paragraph 8.1 will be Distributor's sole responsibility unless Licensor gives prior Notice approving its recoupment. No cost item qualifying as a Recoupable Distribution Cost may be deducted more than once. Recoupable Distribution Costs must be calculated separately for each Licensed Right. Recoupable Distribution Costs for one Licensed Right may not be recouped from Gross Receipts for any other Licensed Right except as authorized in the Deal Terms. 8.3 Third Party Costs: If a Distributor Affiliate or approved subdistributor or agent pays a cost that would be a Recoupable Distribution Cost if paid by Distributor then such cost may be recouped as a Recoupable Distribution Cost. Otherwise no costs of any Third Party may be recouped from any monies due Licensor. 9. PAYMENT REQUIREMENTS 9.1 Timely Payment: Distributor will make payments to Licensor and retain recoupments from Gross Receipts only in the manner and sequence specified in the Deal Terms. Timely payment is of the essence of this Agreement. Payment will only be considered made when Licensor has immediate and unencumbered use of funds in the required currency in the full amount due. Distributor will use diligent efforts to obtain promptly all permits necessary to make all payments to Licensor. 9.2 Guarantee: The Guarantee is the amount payable to Licensor against Licensor's share of Gross Receipts as indicated in the Deal Terms. The Guarantee is nonreturnable but recoupable in conformity with this Agreement. The Guarantee is a minimum net sum and no taxes or charges of any sort may be deducted from it. The Guarantee may also be called the "Minimum Guarantee". 9.3 Guarantee Installments: Distributor will pay each installment of the Guarantee to Licensor in the time and manner specified in the Deal Terms. Where any installment is payable on events within Licensor's control, e.g. the start or end of Principal Photography, Licensor will give Distributor timely Notice of such event. Where any installment is payable on events within Distributor's control, e.g. Theatrical Release or Video Release, Distributor will give Licensor timely Notice of such event along with all payments then due Licensor. 9.4 Letter of Credit: If the Deal Terms indicate that a payment is to be secured by a Letter of Credit, then Distributor will open the Letter of Credit at a bank in the Territory designated by Licensor as a corresponding bank of Licensor's bank. While open the Letter of Credit will remain valid, negotiable, transferable, confirmed and irrevocable; it will be automatically renewable for any period specified in the Deal Terms if Licensor has not fully negotiated the Letter of Credit by its first expiry date. All costs for a Letter of Credit will be home solely by Distributor. 9.5 Limitation On Deductions: There will be no deductions from any payments due Licensor because of any bank charges, conversion costs, sales use or VAT taxes, "kontingents", quotas or any other taxes levies or charges unless separately agreed in writing by Licensor. No remittance or withholding taxes may be deducted from the Guarantee, but any such taxes paid by Distributor may be recouped as a Recoupable Distribution Cost after Distributor provides Licensor with appropriate documentation. If Distributor is required to pay any remittance or withholding tax on amounts due Licensor other than the Guarantee, then Distributor will provide Licensor with all documentation indicating Distributor's payment of the required amount on Licensor's behalf before deducting Distributor's payment from any sums due Licensor. 9 9.6 Blocked Funds: If any Law prohibits remittance of any amounts to Licensor then Distributor will immediately give Licensor Notice of such Law. Distributor will then deposit such amounts in Licensor's name for Licensor's unencumbered use in a suitable depository designated by Licensor without any deductions for so doing. 9.7 Finance Charge On Late Payments: Any payment not made by its due date will, in addition to any other right or remedy of Licensor, incur a finance charge at the lesser of three hundred basis points over the 3-month LIBOR rate ("LIBOR+Y) on the date payment was due or the highest applicable legal contract rate. This finance charge will accrue from the date the payment was due until it is paid in full. 9.8 Exchange Provisions, Payment: All payments will be in United States dollars or other freely remittable currency designated by Licensor. All payments will be computed at the prevailing exchange rate on the date due at a bank timely designated by Licensor. For a late payment Licensor will be entitled to the most favorable exchange rate between the due date and the payment date. The parties agree that the risk of devaluation of the United States dollar or other currency designated by Licensor against the currency of the Territory will be Licensor's sole risk; the risk of the devaluation of the currency of the Territory against the United States dollar or other currency designated by Licensor will be Distributor's sole risk. 9.9 Exchange Provisions, Recoupment: Distributor will calculate and recoup the Guarantee and all Recoupable Distribution Costs only in the currency of the major country in Territory. Any payments not made in such currency will be converted to such currency for recoupment purposes using the exchange rate on the date the Guarantee was received by Licensor or the Recoupable Distribution Cost was paid. 9.10 Documentation: If any Law requires Distributor to obtain a permit or clearance to exploit any Licensed Right, then Distributor will use diligent efforts to do so promptly at its expense. Distributor will provide Licensor with copies of all documents indicating compliance with such Law. By way of illustration such Law may require obtaining certificates of local dubbing or copyright registration, acquiring quota permits or censorship clearances, filing author certificates, certificates of origin or music cue sheets with appropriate authorities, or obtaining permits or clearances for payment of any remittance taxes or other charges. Distributor will not undertake any such action before the entire Guarantee is paid without first receiving Notice of Licensor's approval to so. 10 10. ACCOUNTINGS 10.1 Limits On Cross-Collateralization: No payment for the Picture will be cross-collateralized with or set-off against any amounts for any other Motion Picture licensed to Distributor, whether in this Agreement or otherwise. Amounts due for the Picture may not be used to recoup amounts unrecouped for any other Motion Picture, or vice versa. Gross Receipts and Recoupable Distribution Costs may only be cross-collateralized among the Licensed Rights to the extent, if any, authorized in the Deal Terms. 10.2 Limits On Allocations: If the Picture is exploited with other Motion Pictures then Distributor will only allocate receipts and expenses among the Picture and the other Motion Pictures in the manner approved by Licensor in its sole discretion in advance. 10.3 Financial Records: Distributor will maintain complete and accurate records in the currency of the Territory of all financial transactions regarding the Picture in accordance with generally accepted accounting principles in the entertainment distribution business on a consistent, uniform and non-discriminatory basis throughout the Agreement Term and during any period while a dispute about payments remains unresolved. The records will include all Gross Receipts derived, all Recoupable Distribution Costs paid, all allowed adjustments or rebates made, and all cash collected or credits received. If any Video Rights are licensed the records will also include all Videograms manufactured, sold, rented, leased, returned, erased, recycled or destroyed. Unless Licensor gives Notice approving otherwise all records will be maintained on a cash basis, and if Distributor permits any off-set, refund or rebate of sums due Distributor such sums will nonetheless be included in Gross Receipts. Distributor will also keep complete and accurate copies of every statement, contract, voucher, receipt, computer record, audit report, correspondence and other writing from all Persons pertaining to the Picture. 10.4 Statements - Contents: In addition to any other reporting requirements in this Agreement, starting after Delivery of the Initial Materials Distributor will furnish Licensor with a statement in English (and, if requested, supporting documentation) for the Picture that identifies from the time of the immediately prior statement, if any, all Gross Receipts derived, all Recoupable Distribution Costs paid identifying to whom, and all exchange rates used. If any Video Rights are licensed the statements will also include: (i) all Videograms manufactured, sold, rented, leased, returned, erased, recycled or destroyed; (ii) the wholesale and retail selling prices of all Videograms; and (iii) all allowable deductions taken. If the Territory contains more than one country, the information will be reported separately for each country and consolidated for the entire Territory. The information will be provided in reasonable detail on a current and cumulative basis. Each statement must be accompanied by payment of all monies then due Licensor. Distributor may not withhold any Gross Receipts as a reserve against returned or defective Videograms for more than two (2) consecutive accounting periods and the amount withheld may not exceed ten percent (10%) of Video Gross Receipts derived for the two (2) accounting periods for which the reserve is retained. 11 10.5 Statements - When Rendered: Distributor will render statements for the following periods: (i) each of the twelve (12) months after the Theatrical Release, or, if there is none, the Video Release; (ii) each calendar quarter or other quarterly periods designated by Licensor through the end of the Agreement Term and as long thereafter as Gross Receipts are derived by Distributor; and (iii) one (1) month after the Video Release, the first Pay TV telecast of the Picture in the Territory and the first Free TV telecast of the Picture in the Territory. Each statement must be delivered to Licensor within one (1) month after the end of the period for which it is rendered. Each statement must be accompanied by payment of all monies then due Licensor. 10.6 Audit Rights: Continuing until three (3) years after the Agreement Term Licensor on ten (10) days' prior Notice may examine and copy, on its own or through its auditors, Distributor's financial records regarding the Picture. The examination will be at Licensor's expense unless it uncovers an uncontested underpayment of more than five percent (5%) of the amount shown due Licensor on the statements audited, in which case Distributor will pay the costs of the examination on demand. 11. DELIVERY AND RETURN 11.1 Terminology: "Delivery" of a Picture means delivery to Distributor of the Initial Materials, and, at a later time if and when mutually agreed, the Additional Materials, as provided in the Deal Terms and this Paragraph. "Initial Delivery" means delivery of the "Initial Materials" and "Additional Delivery" means delivery of the "Additional Materials." The "Delivery Materials" consist of the Initial Materials or Additional Materials as the context requires. 11.2 Initial Delivery: Licensor will give Distributor a "Notice of Initial Delivery" that it is prepared to deliver the Initial Materials by the date specified in the Deal Terms, or, if none is specified, promptly after the Picture is ready for Initial Delivery. Upon receipt of such Notice: 11.2.1 If the Initial Materials are identified in the Deal Terms, the Distributor will immediately pay for such Initial Materials and their cost of shipment. Payment and shipment will be made as specified in the Deal Terms or, if not there specified, as in Licensor's Notice of Initial Delivery. Licensor will then ship all Initial Materials to Distributor as specified in the Deal Terms or Licensor's Notice of Initial Delivery. 11.2.2 If the available Initial Materials are specified in Licensor's Notice of Initial Delivery, then within ten (10) days of receipt of this Notice Distributor will give Notice to Licensor stating the number of pre-print items, prints, trailers, advertising and promotional accessories, support items and other Initial Materials relating to the Picture that Distributor reasonably requires, all of which will be subject to Licensor's reasonable approval. Licensor will then give Distributor Notice of the cost of the approved Initial Materials and their shipment to Distributor. Distributor will immediately pay for such Initial Materials as specified in the Deal Terms or Licensor's Notice. Licensor will then deliver such Initial Materials to Distributor as specified in the Deal Terms or Licensor's Notice. 11.2.3 In all cases Distributor must take delivery of all approved Initial Materials within two (2) months of Licensor's Notice of Initial Delivery. 12 11.3 Additional Delivery: After completion of Initial Delivery: (i) if the Additional Materials are identified in the Deal Terms, then Licensor will give Distributor Notice that it is prepared to deliver the Additional Materials, including their cost and shipping charges; (ii) otherwise Distributor will give Licensor Notice of the number and type of the Additional Materials it desires, all of which will be subject to Licensor's reasonable approval, and Licensor will promptly send Distributor Notice of the cost of duplication and shipping of the approved Additional Materials. Distributor will immediately pay for such Additional Materials upon receipt of Licensor's Notice. Upon receipt of payment Licensor will make prompt Delivery of the Additional Materials to Distributor as specified in the Deal Terms or Licensor's Notice. 11.4 Delivery Of Physical Materials: Delivery of the Physical Materials will be accomplished by one of the following methods as specified in the Deal Terms or Licensor's Notice of Initial Delivery: 11.4.1 Where Physical Delivery is indicated Licensor will deliver to the delivery location specified in the Deal Terms the Physical Materials listed in the Deal Terms suitable for use as or manufacture of necessary exploitation materials. Unless otherwise specified in the Deal Terms, the Physical Materials will be shipped to Distributor by air transport. 11.4.2 Where Laboratory Access is indicated Licensor will provide Distributor with access to the Physical Materials listed in the Deal Terms suitable for use as or manufacture of necessary exploitation materials. Access will be on the terms of the attached AFMA Laboratory Access Letter, or other mutually approved access letter. The Physical Materials will always be held in a recognized laboratory or facility in Licensor's name and subject to the requirements of the Access Letter. Distributor may order prints and other exploitation materials for the Picture to be manufactured from the accessible Physical Materials at Distributor's sole expense. 11.4.3 Where Loan of Materials is indicated Licensor will deliver on loan to the delivery location specified by Distributor the Physical Materials listed in the Deal Terms suitable for manufacture of necessary preprint materials. Unless otherwise specified in the Deal Terms, the Physical Materials will be shipped to Distributor by air transport. These Physical Materials will only be used to make new preprint materials at Distributor's sole expense from which necessary exploitation materials can be made. These Physical Materials will always be held in a laboratory or facility subject to Licensor's reasonable approval and will be returned to Licensor within a reasonable time designated by Licensor. 11.4.4 Where Satellite Delivery is indicated Licensor may deliver the Physical Materials listed in the Deal Terms to Distributor by satellite transmission commensurate with available materials and Distributor's equipment. Licensor will be responsible for all uplinking transmission costs; Distributor will be responsible for arranging to receive the satellite reception and for all downlinking reception costs. Distributor's failure to make suitable downlinking receiving arrangements, or failure to receive a transmission of the Picture due to technical downlink or reception failure, will not affect Distributor's obligations under this Agreement. If Distributor experiences a technical failure of transmission or reception, Licensor upon receipt of timely notice will attempt to assist Distributor to receive the transmission. Distributor will pay for each missed satellite feed a charge equal to Licensor's actual cost of transmission. 13 11.5 Delivery Of Support Material: Licensor will also provide, at Distributor's request and expense, the Support Materials as specified in the Deal Terms or Licensor's Notice of Initial Delivery. Unless otherwise specified in the Deal Terms, all Support Materials will be shipped to Distributor by air transport. If Distributor does not use any of the Support Materials, then Distributor will obtain prior Notice of Licensor's approval before using any of its own servicing, advertising, promotional or other support material. 11.6 Evaluation and Acceptance: Distributor will evaluate all Delivery Materials for technical acceptance promptly after their receipt. All Delivery Materials will be considered technically satisfactory and accepted by Distributor unless within ten (10) days after receipt Distributor gives Licensor Notice specifying any technical defect. If Distributor's notice is accurate, then Licensor will, at its election, either: (i) timely correct the defect and redeliver the effected Delivery Materials; or (ii) deliver new replacement Delivery Materials; or (iii) exercise its rights of suspension or withdrawal pursuant to Paragraph 17. If Distributor has undertaken a Theatrical Release or Video Release of the Picture or begun exploiting any Licensed Right, then any alleged defect will be deemed waived by Distributor. 11.7 Ownership of Materials: Legal ownership of and title to all Delivery Materials will remain with Licensor subject to Distributor's right to use such Delivery Materials under this Agreement. Distributor will exercise due care in safe-guarding all Delivery Materials and will assume all risk for their theft or damage while they are in Distributor's possession. 11.8 Payment for Delivery Materials: Distributor will pay for all Delivery Materials as indicated in the Deal Terms or otherwise by Notice from Licensor. All costs of Delivery and Return (including shipping charges, import fees, duties, brokerage fees, storage charges and related charges) will be Distributor's sole responsibility unless otherwise specified in the Deal Terms. 11.9 Distributor Created Materials: Licensor will at all times have unrestricted free access to all alternate language tracks and dubbed versions, masters, advertising and promotional materials, artwork and other materials created by Distributor pursuant to this Agreement. Distributor will promptly give Licensor Notice of each Person who prepares any dubbed or subtitled tracks for the Picture and of each laboratory or facility where the tracks are located. Promptly after completion of any dubbed or subtitled version of the Picture, Distributor will provide Licensor with immediate unrestricted free access to all dubbed and subtitled tracks. Licensor will immediately become the owner of the copyright in all dubbed and subtitled tracks, subject to a non-exclusive free license in favor of Distributor to use such tracks during the Term solely for exploitation of the Licensed Rights. If such ownership is not allowed under a Law in the Territory, then Distributor will grant Licensor a non-exclusive free license to use such dubbed or subtitled tracks worldwide in perpetuity without restriction. 14 11.10 Return of Delivery Materials: Upon expiry of the Agreement Term Distributor will at Licensor's election either: (i) return all Delivery Materials to Licensor at Distributor's expense; or (ii) destroy all Delivery Materials and provide Licensor with a customary certificate of destruction. 12. GENERAL EXPLOITATION OBLIGATIONS 12.1 Obligations: In exploiting each Licensed Right Distributor will abide by the following obligations in addition to any other exploitation obligations in this Agreement: 12.1.1 Distributor will not exploit or authorize exploitation of any Licensed Right before the end of its Holdback Period; 12.1.2 Distributor will not discriminate against the Picture or use the Picture to secure more advantageous terms for any other Motion Picture, product or service; and 12.1.3 Upon Licensor's request Distributor will provide Licensor all information reasonably available to Distributor regarding the time and place of the anticipated and actual first exploitation of each Licensed Right. 12.2 Approvals: Licensor will have the following approval rights regarding the exploitation of each Licensed Right: 12.2.1 Licensor will have prior reasonable approval over the material terms of each license for exploitation of the Licensed Rights. Failure by Licensor to disapprove a proposed license within ten (10) days of Licensor's receipt of Notice of its material terms will be deemed approval. 12.2.2 Licensor will have prior approval in its sole discretion over the material terms of each subdistribution agreement or agency agreement for exploitation of the Licensed Rights. No such agreement will be deemed approved unless and until Distributor receives Notice of Licensor's approval. 12.3 Continuing Obligations: Throughout the Agreement Term Distributor will use its all diligent efforts and skill in the distribution and exploitation of the Licensed Rights to maximize Gross Receipts and minimize Recoupable Distribution Costs. The Picture will be distributed and exploited consistent with the quality standards of first-class distributors in the Territory. Distributor will maintain the Picture in continuous release throughout Territory for a period consistent with its reasonable business judgment. 13. THEATRICAL EXPLOITATION OBLIGATIONS 13.1 Licensor's Approval: Licensor will have prior approval on an on-going basis of all significant aspects of the exploitation of the Cinematic Rights throughout the Territory, including the initial release campaign, distribution policy, exhibition contract terms, minimum and maximum print order, the total amount and specific items of the advertising and publicity budget, the advertising and marketing campaign, the release dates, the release pattern, the theaters in key cities, marketing strategy, short subject allocations, and any modifications or amendments to them. Distributor will timely submit each item to Licensor for Licensor's prior approval. 15 13.2 Release Obligations: In undertaking the Theatrical release of the Picture: 13.2.1 Distributor will place the Picture in general theatrical release throughout the Territory in no less than the number of cities and theaters reasonably required by Licensor and no later than the Theatrical Release Date specified in the Deal Terms; 13.2.2 Distributor will order and pay for no less than the Minimum Prints and no more than the Maximum Prints specified in the Deal Terms, or, if none are specified, the number reasonably required by Licensor; 13.2.3 Distributor will comply with the advertising and marketing campaign reasonably pre-approved by Licensor and in so doing will spend no less than the Minimum Ad Commitment and no more than the Maximum Ad Commitment specified in the Deal Terms or, if none is specified, then no less and no more than the advertising budget reasonably approved by Licensor; 13.2.4 Distributor will give Licensor reasonable advance notice of all premieres of the Picture in the Territory; 13.2.5 Distributor will not enter the Picture in any festival, charitable screening or the like without Licensor's prior approval in its sole discretion. 13.3 Release Information: Promptly after Initial Delivery Licensor will provide Distributor with its reasonable release information requirements. Distributor will comply with these requirements. In addition, during the period between the Theatrical Release of the Picture in the Territory and the first accounting Statement, Distributor will give weekly Notice to Licensor setting forth all information available to Distributor regarding the results of such release, including exhibition terms, box office receipts as received, and expenses as incurred, on a weekly and cumulative basis. 13.4 Exhibition Obligations: In arranging for the exhibition of the Picture, Distributor will comply with all of the following: 13.4.1 All exhibition agreements for the Picture must be made separate and independent from exhibition agreements for any other picture, product or service; 13.4.2 Distributor will not authorize or allow the Picture during its first run to be exhibited on a flat license or 4-wall basis, or as part of a multiple feature engagement, unless Licensor has given prior Notice of its approval of all relevant terms of such proposed exhibition, including the proposed allocation to the Picture of box office receipts, permitted advertising costs, license fees and film rentals; 16 13.4.3 Distributor will not authorize or allow the Picture during its first theatrical run to be exhibited with any other feature or short subject, provided that, if required to do so by Law, then Distributor will only allocate to such feature or short subject for that exhibition run the least of: (i) one percent (1%) of net box office receipts per theater; (ii) the equivalent of Five Hundred Dollars (US$500) in the currency of the Territory per theater for each continuous playdate; or (iii) the equivalent of Twenty-Five Hundred Dollars (US $2,500) for the entire exhibition run in all theaters; 13.4.4 Distributor will not cancel or amend any exhibition agreement once made without Licensor's prior written approval, and any settlements submitted to Licensor for approval must be at rates no less than those for comparable Motion Pictures in the Territory; 13.4.5 Distributor will audit all exhibition engagements for the Picture consistent with the practices of first-class distributors in the Territory and will promptly supply Licensor with the results of such audits; and 13.4.6 Distributor will do all things reasonably necessary to maximize collections from exhibitors as quickly as is possible. 13.5 Controlled Theaters: A Controlled Theater is a theater in which Distributor, any Distributor Affiliate, or any officer, director, partner, owner or shareholder owning more than 10% of any of them, has any interest, direct or indirect, in its ownership or operation. Distributor will not license the Picture to a Controlled Theater except on terms consistent with arms-length transactions between such Controlled Theater and Third Party distributors for the exhibition of comparable Motion Pictures. Distributor will promptly provide Licensor with copies, certified to be accurate, of all agreements with Controlled Theaters for exhibition of any Picture. 14. VIDEO EXPLOITATION OBLIGATIONS 14.1 Video Release: Distributor will cause the Video Release of the Picture throughout the Territory by no later than the Video Release Date specified in the Deal Terms, if any. 14.2 Limits on Use: Distributor will only exploit Videograms of the Picture in the authorized Types and Formats in the Deal Terms. Distributor will not advertise or authorize advertising of the availability of Videograms of the Picture to the public until two (2) months before the end of the applicable Video Holdback. 14.3 Efforts and Quality: Distributor will use all diligent efforts and skill in the manufacture, distribution, and exploitation of Videograms of the Picture. The Videograms manufactured by Distributor will meet quality standards at least comparable to other Videograms commercially available through legitimate outlets in the Territory. 17 14.4 Catalogue Availability: From the end of the applicable Video Holdback until the expiry of the License Period for the Video Licensed Rights Distributor will make Videograms of the Picture available in the Territory through its catalogue and will not allow them to leave normal channels of distribution for a commercially unreasonable period of time. 14.5 Licensor's Ad Campaign Approval Rights: Licensor will have the right of prior approval of the advertising and marketing campaign for the exploitation of the Video Licensed Rights in the Picture. Distributor will submit all proposed advertising and artwork to Licensor for approval before it is used. Licensor's approval will be deemed given if Licensor does not give Notice to Distributor of an objection within one (1) month of Licensor's receipt of these items. 14.6 Licensor's Packaging Approval Rights: Distributor at its cost will provide Licensor for its reasonable approval one (1) prototype copy of each authorized format of Videogram and its packaging promptly after their manufacture and before their sale or disposition. Licensor's approval will be deemed given if Licensor does not give Notice to Distributor of an objection within ten (10) days of Licensor's receipt of these items. Distributor will provide Licensor with a reasonable number (not exceeding ten (10)) free copies of each authorized Format of Videogram and its packaging subject only to applicable duties. 14.7 Limits On Included Material: Distributor will not authorize or allow any other Motion Picture, advertising, or other material to be included on any Videogram of the Picture without prior Notice of Licensor's approval. 14.8 Minimum Retail Price: If a Minimum Retail Price is contained in the Deal Terms, Distributor, if not prohibited by Law, will not exploit or authorize exploitation of Videograms to the consumer at a price less than such Minimum Retail Price. In any case, for purposes of calculating Gross Receipts and amounts due Licensor, all Videograms will be deemed sold at retail for not less than the Minimum Retail Price in the Deal Terms. 14.9 Minimum Wholesale Price: If a Minimum Wholesale Price is contained in the Deal Terms, Distributor, if not prohibited by Law, will not exploit or authorize exploitation of Videograms at the Wholesale Level at a price less than such Minimum Wholesale Price. In any case, for purposes of calculating Gross Receipts and all amounts due Licensor, the wholesale price of all Videograms will be deemed to be the greater of either their actual wholesale selling price or the Minimum Wholesale Price in the Deal Terms. 14.10 Free Goods: Distributor will not dispose of more than the amount of Videograms set forth in the Deal Terms as promotional, discount, or free samples ("Free Goods") without Notice of Licensor's prior approval. Any sale, rental or other disposition of Videograms beyond such amount will be considered as if sold at not less than the Minimum Wholesale Price in the Deal Terms for purposes of computing any amounts due Licensor. 18 14.11 Sell-Off Period: During the last six (6) months of the License Period for the Video Licensed Rights Distributor will not manufacture Videograms in excess of those reasonably anticipated to meet normal customer requirements. During the three (3) month period following the end of the License Period for the Home Video Licensed Rights, and provided this Agreement has not been terminated under Paragraph 17.2, 18.2 or 18.4, Distributor will have the non-exclusive right to sell off its then existing inventory of Videograms for Home Video exploitation only. At the end of this three (3) month period Distributor will at Licensor's election either sell its remaining Videograms and their packaging to Licensor at Distributor's cost or destroy them and provide Licensor with a customary certificate of destruction. 14.12 Import/Export Restrictions: Distributor will not import or authorize importation of Videograms embodying the Picture into the Territory other than the Delivery Materials provided by Licensor. At no time will Distributor export or authorize exportation of Videograms embodying the Picture from the Territory. 15. TELEVISION EXPLOITATION OBLIGATIONS 15.1 Release Obligations: In exploiting the Television Licensed Rights in the Picture: 15.1.1 Distributor will notify Licensor in advance of the time and place of the expected first Pay TV and Free TV broadcast of the Picture in the Territory; 15.1.2 Distributor will not broadcast or authorize broadcast of the Picture by any form of Pay TV or Free TV in dubbed or subtitled version except as authorized in the Deal Terms; 15.1.3 Distributor will not broadcast or authorize broadcast of the Picture for more than the number of Run(s) or Playdate(s) authorized in the Deal Terms, or, if none are there authorized, for more than the number of Run(s) or Playdate(s) reasonably preapproved by Licensor; 15.1.4 Distributor will not broadcast or authorize broadcast of the Picture by any form of Pay TV other than an encrypted form, and Distributor will not sell, rent or export or authorize the sale, rental or export of decoders for such encryption outside the Territory; and 15.1.5 Distributor will not broadcast or authorize broadcast of the Picture by any means, including terrestrial, cable or satellite, from within the Territory where the broadcast is primarily intended for reception outside the Territory or is capable of reception by more than an insubstantial number of home television receivers outside the Territory. 15.2 Run - Defined: A Run means one (1) telecast of the Picture during a twenty-four (24) hour period over the non-overlapping telecast facilities of an authorized telecaster such that the Picture is only capable of reception on television receivers within the reception zone of such telecaster once during such period. A simultaneous telecast over several interconnected local stations (i.e. on a network) constitutes one (1) telecast; a telecast over non-interconnected local stations whose signal reception areas do not overlap constitutes a telecast in each station's local broadcast area. 19 15.3 Playdate - Defined: A Playdate means one or more telecasts of the Picture during a twenty-four (24) period over the non-overlapping telecast facilities of an authorized telecaster such that the Picture is only capable of reception on television receivers within the reception zone of such telecaster during such period. 15.4 Usage Reports: Upon Licensor's request Distributor will promptly provide Licensor with Notice of the title of the Picture in each Authorized Language used for each telecast of the Picture. Distributor will also provide the following information to the extent reasonably available to Distributor: (i) each person responsible for preparing a dubbed or subtitled version of the Picture; and (ii) the time and place of each telecast of the Picture since the last Notice to Licensor. 15.5 Commercials: In exploiting any Pay TV or Free TV Licensed Rights Distributor may insert or authorize insertion of commercial announcements in the Picture but only at those points designated by Licensor. Distributor will require each broadcaster to broadcast all credits, trademarks, logos, copyright notices and other symbols appearing on the Picture as furnished by Licensor. 15.6 Conclusion of Runs or Playdates: The License Period for each Pay TV or Free TV Licensed Right ends on the earlier of the end of the License Period specified in the Deal Terms or the conclusion of the last Authorized Run or Playdate for such Licensed Right. For example, if two (2) Runs are authorized for the Terrestrial Free TV Rights then its License Period expires at the end of the second Run even if a License Period continues for other Television Rights. A License Period will not be extended because Distributor failed to take all Authorized Runs or Playdates for the applicable Licensed Right. 15.7 Secondary Broadcasts: 15.7.1 "Secondary Broadcast" means the simultaneous, unaltered and unabridged retransmission by a cable, microwave or telephone system for reception by the public of an initial transmission, by wire or over the air, including by satellite, of a Motion Picture intended for reception by the public. 15.7.2 "Compulsory Administration" means any Law under which: (i) Secondary Broadcasts are subject to compulsory license; (ii) cable systems or other Persons may make Secondary Broadcasts without first obtaining authorization from rightsholders or Persons making originating broadcasts; or (iii) rightsholders may only grant or withhold authorization for Secondary Broadcasts through collective management societies or collective contractual agreements. 15.7.3 Licensor reserves all rights to make, authorize and collect royalties for any Secondary Broadcast of the Picture whether the primary broadcast originates inside or outside the Territory. Licensor does not grant any exclusivity protection against Secondary Broadcasts and no Secondary Broadcast of the Picture anywhere in the Territory at any time will be a breach of this Agreement by Licensor regardless of where the primary broadcast originated. 20 15.7.4 If during the Agreement Term Secondary Broadcasts are subject to Compulsory Administration in a country in the Territory, then Licensor reserves the right to collect all royalties for Secondary Broadcasts of the Picture in such country regardless of where the primary broadcast originated. If broadcasters may grant or withhold authorization for Secondary Broadcasts of their primary broadcasts in such country then: (i) Distributor will require each broadcaster in such country licensing the Picture to abide by Licensor's reasonable directions regarding Secondary Broadcasts of the Picture; (ii-78) such directions may require the broadcaster to prohibit Secondary Broadcasts of the Picture until after a date designated by Licensor; and (iii) Distributor will timely give Notice to Licensor of primary broadcasts to which Distributor reasonably believes this provision will apply. 16. MUSIC 16.1 Cue Sheets: To the extent required and available, Licensor will supply Distributor promptly after Delivery with available music cue sheets listing the composer, lyricist and publisher of all music embodied in the Picture. Distributor will as necessary promptly file with the appropriate governmental agency or music rights society in the Territory the music cue sheets supplied by Licensor without change. 16.2 Synchronization: Licensor represents and warrants to Distributor that Licensor controls all rights necessary to synchronize the music contained in the Picture on all copies exploited by Distributor throughout the Territory for the Agreement Term. Licensor authorizes Distributor to exploit such synchronization rights without charge in conjunction with its exploitation of the Picture. Licensor will be solely responsible for paying all royalties or charges necessary to obtain and control such synchronization rights for the Agreement Term and will hold Distributor harmless from any payments in this regard. 16.3 Mechanical: Licensor represents and warrants to Distributor that Licensor controls all rights necessary to make mechanical reproductions of the music contained in the Picture on all copies exploited by Distributor throughout the Territory for the Agreement Term. Licensor authorizes Distributor to exploit such mechanical rights without charge in conjunction with its exploitation of the Picture. Licensor will be solely responsible for paying all royalties or charges necessary to obtain and control such mechanical rights for the Agreement Term, and Licensor will hold Distributor harmless from any payments in this regard, provided if a mechanical or authors' right society in the Territory refuses to honor the authorization obtained by Licensor in the country of origin of the Picture then Distributor will be solely responsible for such royalties or charges. 16.4 Performance: Licensor represents and warrants to Distributor that the nondramatic ("small") performing rights in each musical composition embodied in the Picture are: either (i) in the public domain in the Territory; or (ii) controlled by Licensor sufficient to allow Distributor to exploit the Licensed Rights without additional payment for such rights; or (iii) available by license from the local music performing rights society(ies) in the Territory affiliated with the International Confederation of Authors and Composers Societies (CISAC). With regard to music in category (iii), Distributor will be solely responsible for obtaining a license to exploit such performance rights from the local music performing rights society(ies). 21 16.5 Publishing: As between Licensor and Distributor, Licensor will be solely entitled to collect and retain the publisher's share of any music royalties arising from Distributor's exploitation of any Licensed Rights in the Picture. 17. SUSPENSION AND WITHDRAWAL 17.1 Licensor's Right: Licensor may suspend Delivery or withdraw the Picture at any time: (i) if Licensor determines in good faith that its exploitation might infringe the rights of others or violate any Law; (ii) if Licensor determines in good faith that its Materials are unsuitable for the manufacture of first class commercial quality exploitation materials; (iii) due to Force Majeure; or (iv) if Distributor refuses to accept Delivery of the Picture for any reason. 17.2 Effect of Suspension: Distributor will not be entitled to claim any damages or lost profits for any suspension. Instead the Agreement Term will be extended for the length of each suspension. If any suspension lasts more than three (3) consecutive months, then either Party may terminate this Agreement on ten (10) days notice, in which case the Picture will be treated as withdrawn. 17.3 Effect Of Withdrawal: If the Picture is withdrawn or treated as withdrawn after a period of suspension, then Licensor must either substitute a Motion Picture of like quality mutually satisfactory to Licensor and Distributor, or must refund promptly all unrecouped amounts of the Guarantee paid to Licensor and all unrecouped Recoupable Distribution Costs. Distributor's sole remedy will be to receive this substitute or refund. In no case may Distributor collect any lost profits or consequential damages. 17.4 Force Majeure: Force Majeure means any fire, flood, earthquake, or public disaster; strike, labor dispute or unrest; unavailability of any major talent committed to the Product; unavoidable accident; breakdown of electrical or sound equipment; failure to perform or delay by any laboratory or supplier; delay or lack of transportation; embargo, riot, war, insurrection or civil unrest; any Act of God including inclement weather; any act of legally constituted authority; or any other cause beyond the reasonable control of Licensor. 18. DEFAULT AND TERMINATION 18.1 Distributor's Default: Distributor will be in default if: (i) Distributor fails to pay any installment of the Guarantee when due; (ii) Distributor becomes insolvent or fails to pay its debts when due; (iii) Distributor makes an assignment for the benefit of creditors, seeks relief under any bankruptcy law or similar law for the protection of debtors, or allows a petition of bankruptcy to be filed against it or a receiver or trustee to be appointed for substantially all of its assets that is not removed within thirty (30) days; (iv) Distributor breaches any material term, covenant or condition of this Agreement or any other agreement with Licensor; (v) a Distributor Affiliate breaches any material term, covenant or condition of any other agreement with Licensor; or (vi) Distributor attempts to make any assignment, transfer, sublicense or appointment of an agent without first obtaining Licensor's approval under Paragraph 23.1. 22 18.2 Notice To Distributor: Licensor will give Distributor Notice of any claimed default. If the default is capable of cure then Distributor will have ten (10) days after receipt of Licensor's Notice to cure a monetary default, and twenty (20) days after receipt to cure a non-monetary default. If the default is incapable of cure, or if Distributor fails to cure within the times provided, then Licensor may proceed against Distributor for available relief, including terminating this Agreement retroactive to the date of default, suspending Delivery of the Picture and declaring all unpaid amounts due Licensor immediately due and payable. 18.3 Licensor's Default: Licensor will be in default if: (i) Licensor becomes insolvent or fails to pay its debts when due; (ii) Licensor makes an assignment for the benefit of creditors, or seeks relief under any bankruptcy law or similar law for the protection of debtors, or allows a petition of bankruptcy to be filed against it or a receiver or trustee appointed for substantially all of its assets that is not removed within thirty (30) days; or (iii) Licensor breaches any material term, covenant, or condition of this Agreement. Any default by Licensor is limited to the Picture, and no default by Licensor as to any one agreement with Distributor will be a default as to any other agreement with Distributor. 18.4 Notice To Licensor: Distributor will give Licensor Notice of any claimed default. Licensor will have ten (10) days after receipt of Distributor's Notice to cure a monetary default, and twenty (20) days after receipt to cure a non-monetary default. If Licensor fails to cure within the times provided, then Distributor may proceed against Licensor for all available relief, provided, however, that in no case may Distributor collect any "lost profits" or consequential damages. 18.5 Arbitration: Any dispute under this Agreement will be resolved by final and binding arbitration under the Rules of International Arbitration of the American Film Marketing Association in effect when the arbitration is filed (the "AFMA Rules"). Each Party waives any right to adjudicate any dispute in any other court or forum, except that a Party may seek interim relief before the start of arbitration as allowed by the AFMA Rules. The arbitration will be held in the Forum designated in the Deal Terms, or, if none is designated, as determined by the AFMA Rules. The Parties will abide by any decision in the arbitration and any court having jurisdiction may enforce it. The Parties submit to the jurisdiction of the courts in the Forum to compel arbitration or to confirm an arbitration award. The Parties agree to accept service of process in accordance with the AFMA Rules. 19. ANTI-PIRACY PROVISIONS 19.1 Copyright Notice Requirements: Distributor will include on each Copy of the Picture distributed under its authority the copyright notice and anti-piracy warning supplied by Licensor. A Copy of the Picture includes all negatives, preprint materials, release prints, masters, tapes, cassettes, discs or Videograms and their packaging. 19.2 Anti-Piracy Warning: 19.2.1 The anti-piracy warning on each Copy of the Picture must read substantially as follows: 23 "WARNING THIS MOTION PICTURE IS PROTECTED BY LAW. Any unauthorized copying, distribution, performance, renting, lending, exporting, importing, dissemination or exhibition is prohibited by law. Violators will be subject to criminal prosecution and civil penalties. THIS MOTION PICTURE IS REGISTERED WITH THE AFMA ANTI-PIRACY PROGRAM" 19.2.2 Videograms and their packaging must contain this additional warning: "Licensed only for use in ____________________" 19.2.3 Videograms exploited for Home Video and their packaging must include: "Authorized For Private Home Use Only" 19.3 Enforcement: Distributor will take all reasonable steps to protect the copyright in the Picture and to prevent piracy. Licensor may participate in any anti-piracy action using counsel of its choice. Licensor's expenses will be reimbursed from any recovery in equal proportion with Distributor's expenses. If Distributor fails to take anti-piracy action, Licensor may do so in Licensor's or Distributor's name, with all recoveries belonging to Licensor. 19.4 New Technology: If during the Agreement Term new technology in use in the Territory inhibits the unauthorized duplication of copies of the Picture, interferes with the reception of broadcast signals without use of an authorized decoding device, or otherwise provides protection against unauthorized exploitation of the Picture, then Distributor will use such technology in a reasonable manner in exploiting the Picture. Distributor may deduct the cost of so doing as a Recoupable Distribution Cost after first obtaining Notice of Licensor's reasonable approval. 19.5 No Warranty Against Piracy: The Parties acknowledge that it is in their mutual interest to prevent piracy of the Picture in the Territory. Licensor has informed Distributor of any act of piracy of the Picture in the Territory of which Licensor is aware, and such information has been considered in determining the Guarantee along with the other terms of this Agreement. Distributor has also taken all necessary steps to inform itself of any piracy of the Picture in the Territory before executing this Agreement. No piracy of the Picture, whether occurring before or after execution of this Agreement, will allow Distributor to terminate this Agreement or reduce any amounts due Licensor. Licensor will cooperate with Distributor to prevent or remedy any such act of piracy. 24 20. LICENSOR'S WARRANTIES 20.1 As Principal: If the Cover Page indicates Licensor is a principal then Licensor represents and warrants to Distributor that the following are true and correct and will remain so throughout the Agreement Term: 20.1.1 Licensor has full authority and capacity to execute this Agreement and full legal and financial ability to perform all of its obligations under this Agreement; 20.1.2 There are no existing or threatened claims or litigation which would adversely affect or impair any of the Licensed Rights in the Territory during the Agreement Term; 20.1.3 Licensor has not licensed, encumbered or assigned and will not license, encumber or assign any Licensed Right to any other Person in the Territory during its applicable License Period; 20.1.4 Licensor will not exploit or authorize exploitation of any Reserved Right in the Territory before the end of the applicable Licensor Holdback period; 20.1.5 The Picture was produced by authors who are nationals of or have their habitual residence in, or was first published or simultaneously first published in, a country which at the time of such production or publication was a signatory to the Berne Convention for the Protection of Literary and Artistic Works or the Universal Copyright Convention or the Buenos Aires Convention, and Licensor has not done any act or omitted to do any act which would impair the copyright in the Picture within the Territory during the Agreement Term; and 20.1.6 Neither the Picture nor the exercise of any Licensed Rights does or will: (i) defame, or hold in a false light, or infringe any privacy or publicity or other personal right of any Person; or (ii) infringe any copyright, trademark, right of ideas, parent, or any other property right of any Person. 20.2 As Agent: If the Cover Page indicates Licensor is acting as an agent Licensor represents and warrants to Distributor that the following are true and correct and will remain so throughout the Agreement Term: 20.2.1 Licensor has full authority from its principal designated on the Cover Page to enter into this Agreement on behalf of its principal and Licensor's principal will be bound by this Agreement; 20.2.2 To the best of Licensor's knowledge there are no existing or threatened claims or litigation which would adversely affect or impair any of the Licensed Rights; 20.2.3 To the best of Licensor's knowledge there are no other agreements licensing, encumbering or assigning any Licensed Right to any other Person in the Territory during its License Period; 25 20.2.4 Licensor's principal has made to Licensor each of the representations and warranties in Paragraph 20.1 and has authorized Licensor to make those representations and warranties directly from the principal to Distributor on the principal's behalf. In case of a breach of any representation or warranty in Paragraph 20.1, Distributor agrees to look directly to the principal and not to Licensor for any remedies Distributor might have. 21. DISTRIBUTOR'S WARRANTIES 21.1 As Principal: Distributor represents and warrants to Licensor that the following are true and correct and will remain so throughout the Agreement Term: 21.1.1 Distributor has full authority and capacity to execute this Agreement and full legal and financial ability to perform all of its obligations under this Agreement; 21.1.2 There are no existing or threatened claims or litigation which would adversely affect or impair Distributor's ability to perform under this Agreement; 21.1.3 Distributor will honor all restrictions on the exercise of the Licensed Rights and the Allied Rights under this Agreement and will not exploit any Licensed Right outside the Territory, before the end of its Holdback or after its License Period. 21.2 As Assignor: In case of any assignment of this Agreement pursuant to Paragraph 23.1, Distributor makes the following additional representations and warranties to Licensor: 21.2.1 As a condition to the effectiveness of such assignment the assignee can and will make all of the representations and warranties set forth in Paragraph 21.1 directly to Licensor; and 21.2.2 If the assignee breaches any of those representations and warranties, then Licensor, in addition to any right or remedy, may proceed directly against Distributor for such breach without first proceeding against such assignee or exhausting any right or remedies against such assignee. 22. INDEMNITIES 22.1 By Licensor: Licensor will indemnify and hold harmless Distributor, including its officers, directors, partners, owners, shareholders, employees, attorneys and agents, from all claims, loss, liability, damages or expenses, including reasonable attorneys' fees, but not including lost profits, due to breach of any of Licensor's representations or warranties. Licensor will remain responsible for honoring Licensor's indemnities despite any assignment pursuant to Paragraph 23.2. If Licensor is acting as an agent, these indemnities are also made directly by Licensor's principal to Distributor, but Distributor will look only to Licensor's principal to honor these indemnities with regard to the principal's representations and warranties. 26 22.2 By Distributor: Distributor will indemnify and hold harmless Licensor, including its officers, directors, partners, owners, shareholders, employees, attorneys and agents, from all claims, loss, liability, damages or expenses, including reasonable attorneys' fees, but not including lost profits, due to breach of any of Distributor's representations or warranties. Distributor will remain responsible for honoring Distributor's indemnities despite any assignment, transfer, sublicense or appointment of an agent under Paragraph 23.1. 23. ASSIGNMENT AND SUBLICENSING 23.1 Distributor's Limitations: This Agreement is personal to Distributor. Distributor may not assign or transfer this Agreement, or sublicense or use an agent to exploit any Licensed Rights, whether voluntarily or involuntarily, without prior Notice of Licensor's approval in Licensor's sole discretion. A transfer of a controlling interest in Distributor's capital stock or other evidence of ownership will be a transfer for which prior Notice of Licensor's consent is required. If Licensor consents to an assignment, transfer, sublicense or agent then this Agreement will be binding on such authorized assignee, transferee, subdistributor or agent but will not release Distributor from its obligations under this Agreement. 23.2 Licensor's Rights: Licensor may freely assign or transfer this Agreement or any of its rights under this Agreement, but no such assignment or transfer will relieve Licensor of its obligations under this Agreement, unless it is to a company which acquires all or substantially all of Licensor's assets. 23.3 Licensor's Assignment For Financing Purposes: If Licensor pledges this Agreement or assigns its right to receive any payment to a lender, completion guarantor or other Person as security for or in connection with any loan or other obligation, then Distributor will promptly on request execute a reasonable and customary notice and acknowledgement of assignment and charge or similar document as necessary to establish or perfect the Person's interest or secure its rights. Distributor agrees to abide by consistent written instructions from Licensor and such Person in making any payments otherwise due Licensor directly to such Person. Distributor agrees not to assert any offset rights against such Person or to assert any rights it may have against Licensor to delay, diminish or excuse the payment of any sums pledged or assigned to such Person. Instead Distributor will only treat such offsets or other rights as a separate and unrelated matter solely between Licensor and Distributor. 24. MISCELLANEOUS PROVISIONS 24.1 Separability: In case of any conflict between this Agreement and any material Law the latter will prevail. 27 24.2 No Waiver: No waiver of any breach will waive any other breach. No waiver is effective unless in writing. The exercise of any right will not waive any other right or remedy. 24.3 Remedies Cumulative: All remedies are cumulative, and resorting to one will not preclude resorting to any other at any time. 24.4 Notices: All Notices must be in writing and sent to a Party at its address on the Cover Page by fax, telex, telegram or first class mail. Notice will be effective when received. Either Party may change its place for Notice by Notice duly given. 24.5 Entire Agreement: This Agreement contains the entire understanding of the Parties regarding its subject matter. It supersedes all previous written or oral negotiations, deal memos, understandings or representations between the parties regarding its subject matter, if any. Each Party expressly waives any right to rely on such negotiations understandings or representations, if any. 24.6 Modification: No modification or amendment of this Agreement will be effective unless in writing and signed by both Parties. 24.7 Captions: Captions and paragraph headings are for convenience only. 24.8 Terminology: As used in the Agreement "and" means all of the possibilities, "or" means any or all of the possibilities in any combination, and "either ... or" means only one of the possibilities. "Including" means "including without limitation." "Must" or "will" means a Party has the obligation to act or refrain from acting as indicated; "may" means a Party has the right but not the obligation to act or refrain from acting as indicated. 24.9 Governing Law: This Agreement will be governed by and interpreted under the laws of the state or jurisdiction specified as Governing Law in the Deal Terms. If none is specified, then the Governing Law will be the Laws of the State of California. 24.10 Forum: The Parties consent to the Forum designated in the Deal Terms as the place for resolving all disputes under this Agreement. If none is specified, then the Forum will be Los Angeles County, California, U.S.A. 28 AFMA(R) INTERNATIONAL SCHEDULE OF LICENSING DEFINITIONS A. Cinematic Rights Definitions: Cinematic means Theatrical, Non-Theatrical and Public Video exploitation of a Motion Picture. Theatrical means exploitation of a Motion Picture Copy only for direct exhibition in conventional or drive-in theaters, licensed as such in the place where the exhibition occurs, that are open to the general public on a regularly scheduled basis and that charge an admission fee to view the Motion Picture. NonTheatrical means exploitation of a Motion Picture Copy only for direct exhibition before an audience by and at the facilities of either organizations not primarily engaged in the business of exhibiting Motion Pictures, such as in educational organizations, churches, restaurants, bars, clubs, trains, libraries, Red Cross facilities, oil rigs and oil fields, or governmental bodies such as in embassies, military bases, military vessels and other governmental facilities flying the flag of the licensed territory. NonTheatrical does not include Commercial Video, Public Video, Airline, Ship or Hotel exploitation. Public Video means exploitation of a Motion Picture Copy embodied in a Videogram only for direct exhibition before an audience in a "mini-theater", an "MTV theater" or like establishment that charges an admission to use the viewing facility or to view the Videogram and that is not licensed as a traditional motion picture theater in the place where the viewing occurs. B. Video Rights Definitions Video means Home Video and Commercial Video exploitation of a Motion Picture. Home Video means Home Video Rental and Home Video SellThru exploitation of a Motion Picture. Home Video Rental means exploitation of a Motion Picture Copy embodied in a Videogram that is rented to the viewer only for non-public viewing of the embodied Motion Picture in a linear form within a private living place where no admission fee is charged for such viewing. Home Video SellThru means exploitation of a Motion Picture Copy embodied in a Videogram that is sold to the viewer only for non-public viewing of the embodied Motion Picture in a linear form within a private living place where no admission fee is charged for such viewing. Commercial Video means the exploitation of a Motion Picture Copy embodied in a Videogram only for direct exhibition in a linear form before an audience by and at the facilities of either organizations not primarily engaged in the business of exhibiting Motion Pictures, such as in educational organizations, churches, restaurants, bars, clubs, trains, libraries, Red Cross facilities, oil rigs and oil fields, or governmental bodies such as in embassies, military bases, military vessels and other governmental faculties 29 flying the flag of the licensed territory, but only to the extent that such exploitation is not otherwise utilized in the licensed territory as a form of Non-Theatrical exploitation. Commercial Video does not include Non-Theatrical, Public Video, Airline, Ship or Hotel exploitation. C. Ancillary Rights Definitions Ancillary means Airline, Ship and Hotel exploitation of a Motion Picture. Airline means exploitation of a Motion Picture Copy only for direct exhibition in airplanes that are operated by an airline flying the flag of any country in the licensed territory for which Airline exploitation is granted, but excluding airlines that are customarily licensed from a location outside the licensed territory or that are only serviced in but do not fly the flag of a country in the licensed territory. Ship means exploitation of a Motion Picture Copy only for direct exhibition in sea or ocean going vessels that are operated by an shipping line flying the flag of any country in the licensed territory for which Ship exploitation is granted but excluding shipping lines that are customarily licensed from a location outside the territory or that are only serviced in but do not fly the flag of a country in the licensed territory. Hotel means the exploitation of a Motion Picture Copy only for direct exhibition in temporary or permanent living places, such as hotels, motels, apartment complexes, cooperatives or condominium projects, by means of closed-circuit television systems where the telecast originates within or in the immediate vicinity of such living places. D. Pay TV Rights Definitions Pay TV means Terrestrial Pay TV, Cable Pay TV and Satellite Pay TV exploitation of a Motion Picture. Pay TV does not include any form of PayPerView. Terrestrial Pay TV means over-the-air broadcast of a Motion Picture Copy by means of encoded Hertzian waves for reception on television receivers where a charge is made: (i) to viewers in private living places for use of a decoding device to view a channel that broadcasts the Motion Picture along with other programming; or (ii) to the operator of a hotel or similar temporary living place located distant from where the broadcast signal originated for use of a decoding device to receive a channel that broadcasts the Motion Picture and other programming and retransmit it throughout the temporary living place for viewing in private rooms. Cable Pay TV means originating transmission of a Motion Picture copy by means of an encoded signal over coaxial or fiber-optic cable for reception on television receivers where a charge is made: (i) to viewers in private living places for use of a decoding device to view a channel that transmits the Motion Picture along with other programming; or (ii) to the operator of a hotel or similar temporary living place located distant from where the broadcast signal originated for use of a decoding device to receive a channel that broadcasts the Motion Picture and other programming and retransmit it throughout the temporary living place for viewing in private rooms. 30 Satellite Pay TV means the uplink broadcast of an encoded signal to a satellite and its down-link broadcast to terrestrial satellite reception dishes of a Motion Picture Copy for viewing on television receivers located in the immediate vicinity of their reception dishes where a charge is made: (i) to viewers in private living places for use of a decoding device to view a channel that broadcasts the Motion Picture along with other programming; or (ii) to the operator of a hotel or similar temporary living place located distant from where the broadcast signal originated for use of a decoding device to receive a channel that broadcasts the Motion Picture and other programming and retransmit it throughout the temporary living place for viewing in private rooms. E. Free TV Rights Definitions Free TV means Terrestrial Free TV, Cable Free TV, and Satellite Free TV exploitation of a Motion Picture. Free TV does not include any form of PayPerView. Terrestrial Free TV means over-the-air broadcast by Hertzian waves of a Motion Picture Copy for reception on television receivers in private living places without a charge to the viewer for the privilege of viewing the Motion Picture, provided that for this purpose government television receiver assessments or taxes (but not a charge for PayPerView or Pay TV) will not be deemed a charge to the viewer. Cable Free TV means the originating transmission by coaxial or fiber-optic cable of a Motion Picture Copy for reception on television receivers in private living places without a charge to the viewer for the privilege of viewing the Motion Picture, provided that for this purpose neither government television receiver assessments or taxes nor the regular periodic service charges (but not a charge for PayPerView or Pay TV) paid by a subscriber to a cable television system will be deemed a charge to the viewer. Satellite Free TV means the up-link broadcast to a satellite and its down-link broadcast to terrestrial satellite reception dishes of a Motion Picture Copy for viewing on television receivers in private living places located in the immediate vicinity of their reception dishes without a charge to the viewer for the privilege of viewing the Motion Picture, provided that for this purpose government satellite dish or television receiver assessments or taxes (but not a charge for PayPerView or Pay TV) will not be deemed a charge to the viewer. F. Other Rights Definitions: Demand View means the transmission of a Motion Picture Copy by means of an encoded signal for reception on television receivers in homes and similar permanent living places where a charge is made to the viewer for the right to use a decoding device to view the Motion Picture at a time selected by the viewer for each viewing. 31 Interactive Multimedia means exploitation of an Interactive Multimedia Work by means of a computing device that allows the Interactive Multimedia Work to be directly perceived and manipulated by the user of the computing device and that either stores the Interactive Multimedia Work on the user's computing device or accesses the Interactive Multimedia Work by electronic means from another computing device interconnected with and located in the immediate vicinity of the user's computing device. Interactive Networked Multimedia means exploitation of an Interactive Multimedia Work over the facilities of a communications system that allows the user of a computing device to engage in two-way transmissions over the system to access the Interactive Multimedia Work, irrespective of the operator of the system or the means by which signals are carried, and that stores the Interactive Multimedia Work for transmission over the system at a place distant from the place where the user's computing device is located. Live Performance means performance of a Motion Picture or its Underlying Material by live players, whether by reading, performance, musical or dramatic rendition or pantomime, where the performance occurs directly before a live audience or is broadcast live and without prerecorded material directly to the public, but excluding performances less than fifteen (15) minutes in length done for the purposes of advertising or publicizing the Motion Picture. Merchandising means exploitation of tangible goods that are based on or utilize names, likenesses or characteristics of artists in their roles in a Motion Picture or physical materials appearing in or used for a Motion Picture and that are made for sale to the general public. NonResidential PayPerView means the broadcast of a Motion Picture Copy by means of an encoded signal for reception on television receivers in hotels or similar temporary living places where a charge is made to the viewer for the right to use a decoding device to view the broadcast of the Motion Picture at a time designated by the broadcaster for each viewing. PayPerView means NonResidential PayPerView, Residential PayPerView and Demand View exploitation of a Motion Picture. PayPerView does not include any form of Pay TV or Free TV. Publishing means exploitation of hard cover or soft cover printed publications of a novelization of a Motion Picture or artwork, logos or photographic stills created for use in the Motion Picture that are included in such novelization. Residential PayPerView means the broadcast of a Motion Picture Copy by means of an encoded signal for reception on television receivers in homes or similar permanent living places where a charge is made to the viewer for the right to use a decoding device to view the broadcast of the Motion Picture at a time designated by the broadcaster for each viewing. 32 G. Additional Definitions: Affiliate means any Person, including any officer, director, employee or partner of a Person controlled by, controlling or under common control with a Party. Availability Date means the first day after the end of the Holdback Period for a Licensed Right. If the Availability Date refers to a category of Licensed Rights, it refers to the first date on which Distributor may exploit any Licensed Right in the category. For example, the Pay TV Availability Date is the first date on that Distributor may exploit the Pay TV Terrestrial, Pay TV Cable or Pay TV Satellite Right. Broadcast means the communication to the public of a Motion Picture by means of wire, cable, wireless diffusion or radio waves that allows the Motion Picture to be viewed on a television receiver. Broadcast means the same as telecast or diffusion. Cassette means the same as VideoCassette. CDI means the same as Compact Disc Interactive. Compact Disc means a combined optical and electronic storage device designed to be used in conjunction with a computer that causes a Motion Picture to be visible on the screen of a monitor or television receiver for viewing in a substantially linear manner. A Compact Disc does not include any type of VideoCassette or VideoDisc. Compact Disc Interactive when used as a Right is a type of Interactive Multimedia Right and when used to describe a Work is a type of Interactive MultiMedia Work. Disc means the same as VideoDisc. Exhibition means the same as public performance. First Negotiation means that, provided that Distributor is then actively engaged in the distribution business on a financially secure basis, Licensor will negotiate with Distributor in good faith for a period of ten (10) days regarding the matter for which Distributor has a First Negotiation right before entering into negotiations regarding the matter with any other Person. If no agreement is reached within this time period, then Licensor will be free to stop negotiations with Distributor and then to negotiate and conclude an agreement regarding the proposed matter with any other Person on any terms. Interactive Multimedia Work means a Work consisting primarily of a presentation communicated to a user through the combination of two or more media of expression, whether textual, audio, pictorial, graphical or audiovisual, where a significant characteristic of the presentation is the ability of the user to manipulate the content of the presentation by means of a computing device in real time and in a nonlinear fashion. 33 Laser Disc is a type of VideoDisc. Law means any statute or ordinance, whether municipal, state, national or territorial, any executive, administrative or judicial regulation, order, judgment or decree, any treaty or international convention, or any rule, custom or practice with force of law. Motion Picture means an audiovisual work consisting of a series of related images that, when shown in succession, impart an impression of motion, with accompanying sounds, if any. Motion Picture Copy means the embodiment of a Motion Picture in any physical form, including film, tape, cassette or disc. Where a specific medium is limited to exploitation by a specific physical form, for example, to Videograms, then Motion Picture Copy with respect to such medium is limited to such physical form. Party means either Licensor or Distributor. Pay-Cable TV means the same as Cable Pay TV. Person means any natural person or legal entity. Principal Photography means the actual photographing of a Motion Picture, excluding second-unit photography or special effects photography, requiring the participation of the director and the on-camera participation of a featured member of the principal cast. Remake means a new Motion Picture derived from an existing Motion Picture or its Underlying Material in which substantially the same characters and events as shown in the existing Motion Picture are depicted. Rights means rights, licenses and privileges under copyright, trademark, neighboring rights or other intellectual property rights with regard to any type of exploitation of a Motion Picture or its Underlying Material. Sequel means a new Motion Picture derived from an existing Motion Picture or its Underlying Material in which a character, event or locale depicted in the existing Motion Picture or its Underlying Material is shown engaged in or as the subject of substantially new and different events than those depicted in the existing Motion Picture. Underlying Material means the literary and other material from which a Motion Picture is derived or on which it is based, including all versions of the screenplay, all notes, memos, direction, comments, ideas, stage business and other material incorporated in any version of the Motion Picture, and, to the extent necessary rights and licenses have been duly obtained, all existing novels, stories, plays, songs, events, characters, ideas, or other works from which any version of the Motion Picture is derived or on which it is based. 34 VideoCassette means a VHS or Beta cassette or comparable magnetic storage device designed to be used with a reproduction apparatus that causes a Motion Picture to be visible on the screen of a television receiver for viewing in a substantially linear manner. A VideoCassette does not include any type of VideoDisc or Compact Disc. Videogram means any type of VideoCassette or VideoDisc, but only to the extent the specific Type of electronic storage device and its Format is authorized in the agreement of the parties. VideoDisc means a laser or capacitance disc or comparable optical or mechanical storage device designed to be used with a reproduction apparatus that causes a Motion Picture to be visible on the screen of a television receiver for viewing in a substantially linear manner. A VideoDisc does not include any type of VideoCassette or Compact Disc. Version means an adaptation of a Motion Picture that is not accomplished by merely mechanical reproduction or use of minimal originality but instead uses original artistic or intellectual expression to create a new Work in its own right which contains materials or expressions of authorship not found in the original Motion Picture. Work means an original expression of authorship in the literary, scientific or artistic domain whatever may be the mode or form of its expression. IN WITNESS WHEREOF, Licensor and Distributor have executed this Agreement as of the date first written above to constitute a binding contract between them. ALPINE PICTURES INT'L, INC. Cinema Consulting International ("Licensor") ("Distributor") By: /S/ Tom Hamilton By: /S/ Yves Chevalier ---------------- ------------------ Tom Hamilton Yves Chevalier Its: Senior Vice President Its: ___________________________ EX-10.2 7 0007.txt OUTRIGHT DISTRIBUTION AGREEMENT AFMA (R) INTERNATIONAL OUTRIGHT DISTRIBUTION AGREEMENT STANDARD TERMS AND CONDITIONS 1. DEFINITIONS AND USAGE 1.1 Definitions: Words and phrases which appear with initial letters capitalized are Defined Terms. If not defined where they first appear Defined Terms are defined either in the attached Schedule of Definitions or in accordance with industry custom and practice. 1.2 Usage: The use of any Defined Term or inclusion of any provision in this Agreement relating to rights not specifically licensed to Distributor in the Deal Terms does not grant to Distributor explicitly or by implication any rights not specifically licensed in the Deal Terms. 2. PICTURE AND VERSION 2.1 Picture: The Picture is the Motion Picture identified at least by its title in the Deal Terms. Licensor reserves the right to change the title of the Picture. 2.2 Version: The Picture is only licensed in a linear form for continuous viewing from beginning to end. Licensor reserves all rights in all formats and Versions of the Picture other than its original linear form as Delivered to Distributor and authorized dubbed, subtitled or edited Versions of such original linear form made by Distributor for exploitation of its Licensed Rights as may be authorized under this Agreement. If during the Agreement Term Licensor elects to exploit another Version of the Picture in the Territory that incorporates a substantial portion of the linear form of the Picture licensed to Distributor, then Licensor will be free to exploit such new Version in the Territory beginning six (6) months after the end of the Holdback for the affected Licensed Rights. 3. LICENSED RIGHTS AND RESERVED RIGHTS 3.1 License: Subject to the terms of this Agreement Licensor exclusively licenses to Distributor the Licensed Rights in the Picture for the Term throughout the Territory in the Authorized Language(s) as set forth in the Deal Terms. Distributor may only exploit the Licensed Rights in the Authorized Language(s) in a dubbed or subtitled version and by means of the authorized Video Type(s) and Format(s) as specified in the Deal Terms. 3.2 Vesting: Each Licensed Right will only vest in Distributor after: (i) Distributor accepts initial Delivery of the Picture; and (ii) Distributor pays Licensor when due the portion of the License Fee allocated to such Licensed Right in the Deal Terms, or, if there is no allocation, the entire License Fee. 3.3 Reservation: All rights not expressly licensed to Distributor are Reserved Rights. Licensor reserves all Reserved Rights designated in the Deal Terms and all other rights not expressly licensed to Distributor. Licensor may exploit the Reserved Rights without restriction except as otherwise expressly provided in this Agreement. 3.4 Reversion: Each Licensed Right will immediately revert to Licensor free of any claim by Distributor or any Person deriving any interest from Distributor on the expiry of the Term under Paragraph 6.1. 4. ALLIED RIGHTS 4.1 Credit and Advertising: Distributor will comply with all required screen credits (if not already contained in the Picture), paid advertising, publicity and promotional requirements, name & likeness restrictions, and Videogram packaging credit requirements (if needed) supplied by Licensor at all times after their receipt. Upon Licensor's request Distributor will promptly submit to Licensor all advertising materials used by Distributor so that Licensor can determine whether its requirements are being met. 4.2 Dubbing, Subtitling and Editing: Distributor will comply with all dubbing, subtitling or editing requirements applicable to the Picture or its trailers supplied by Licensor in creating any authorized dubbed, subtitled or edited version of the Picture or its trailers. Except as expressly provided in this Agreement, each Picture and its trailers must be exhibited at all times in their original continuity, without alteration, interpolation, cut or elimination. 4.3 Exercise of Allied Rights: Subject to Licensor's requirements under Paragraph & and the provisions of this Agreement, Distributor will have the non-exclusive right at its sole expense: 4.3.1 To advertise, publicize, and promote the Picture; 4.3.2 To include in all such advertising, promotion or publicity the name, voice and likeness of any Person rendering materials or services on the Picture but not as an endorsement for any product or service other than the Picture; 4.3.3 To include before the beginning or after the end of the Picture the credit or logo of Distributor; 4.3.4 To change the title of the Picture but only after first obtaining Notice of Licensor's approval of the change; 4.3.5 To dub the Picture but only in the Authorized Language(s); 4.3.6 To subtitle the Picture but only in the Authorized Language(s); 4.3.7 To edit the Picture but only for censorship purposes in accordance with a Censorship Rider if attached. 4.4 Limitations: In exercising the Allied Rights Distributor may not: (i) alter or delete any credit, logo, copyright notice or trademark notice appearing on the Picture; or (ii) include any advertisements or other material before, during or after the Picture other than the credit or logo of Distributor, an approved anti-piracy warning, or commercials as authorized in this Agreement. 5. TERRITORY AND REGION 5.1 Territory: The Territory means the countries or territories listed in the Deal Terms as their political borders exist on the date of this Agreement. The Territory excludes foreign countries' embassies, military and governmental installations, oil rigs and marine installations, airlines-in-flight and ships-at-sea located within the Territory. 5.1.1 In exploiting the Theatrical, Public Video, Home Video or Hotel Licensed Rights, the Territory also excludes the countries' non-contiguous territories and possessions as well as military and governmental installations, oil rigs and other marine installations, and embassies located within the Territory but flying the flag of any country outside the Territory; and 5.1.2 In exploiting the Non-Theatrical, Commercial Video, Airline or Ship Rights, the Territory includes the countries' military and governmental installations, oil rigs and marine installations and embassies wherever located, but only to the extent that they may be exploited in accordance with such Rights. 5.2 Changes in Borders: If during the Term an area separates from a country in the Territory then the Territory will nonetheless include each separating area which formed one political entity as of the date of this Agreement. If during the Term an area is annexed by a country in the Territory then Distributor will promptly give Licensor Notice whether Distributor desires to exploit any Licensed Right in such new area. Licensor will then accord Distributor a right of First Negotiation Right to acquire such Licensed Right in the area for the remainder of its License Period subject to rights previously granted to other Persons in such area. 5.3 Region: The Region is the part of the world in which the Territory is located. The Region is defined in either in the Deal Terms or if not there defined in the AFMA Standard Definitions of Territories and Regions current as of the date of this Agreement. 6. TERM AND LICENSE PERIOD 6.1 Term: The Term starts and ends on the dates set forth in the Deal Terms except in case of extension per Paragraph or early termination per Paragraphs or Distributor may not exploit or authorize exploitation of any Licensed Right after the end of the Term. 6.2 Licensor Holdbacks: Where the Deal Terms indicate a Holdback on any of Reserved Right, Licensor may not exploit or authorize exploitation in the Territory of that Reserved Right until the end of its Holdback. However, Licensor may enter into agreements at any time to exploit a Reserved Right after the end of its Holdback. 6.3 Theatrical Release: Theatrical Release means the earlier of: (i) the date on which the Picture is first exhibited in theaters, including mini-theaters and MTV theaters, within the Territory to the paying public, including screenings to qualify for awards presentations by authority of Distributor; or (ii) the date if specified in the Deal Terms on which Distributor must cause the Theatrical Release of the Picture in the Territory; or (iii) six (6) months after Notice of Initial Delivery. 6.4 Video Release: Video Release means the earlier of: (i) the date on which Videograms embodying the Picture are first sold or rented to the paying public in the Territory for Home Video use by authority of Distributor; or (ii) the date on which Videograms embodying the Picture are first exhibited in places of public performance in the Territory for Commercial Video use by authority of Distributor; or (iii) the date if specified in the Deal Terms on which Distributor must cause the Video Release of the Picture in the Territory; or (iv) one (1) month after the end of the earliest Video Holdback; or (v) if there is no Theatrical Release of the Picture in the Territory, six (6) months after Notice of Initial Delivery. 6.5 Holdback Coordination: The Parties acknowledge that due to technological innovation or a Law in the Region it is possible that exploitation of a Licensed Right within the Territory can affect exploitation throughout the Region. Distributor therefore agrees that Licensee may shorten by up to three (3) months or extend by up to three (3) months any Holdback to coordinate the exploitation of the Picture within the Region. For example, Licensor may shorten or extend the Pay TV Holdback up to three (3) months in order to coordinate the Pay TV release of the Picture throughout the Region. Licensor will give Distributor prompt Notice of any adjusted Holdback period no later than the earlier of two (2) months before the end of the new Holdback period or the end of the Holdback period set forth in the Deal Terms. Licensor will use all reasonable good faith efforts to coordinate release patterns throughout the Region so that exploitation of the Picture in a particular medium outside the Territory will not unduly impact its exploitation within the Territory and exploitation of the picture in a particular medium within the Territory will not unduly impact its exploitation outside the Territory, provided that Licensor's goal will be to maximize its revenues and reduce its expenses within the entire Region and in case of any disagreement Licensor's decision will control. 6.6 Broadcast Overspill: Licensor does not warrant that it has granted or can grant exclusivity protection against reception in the Territory of a broadcast of the Picture originating outside the Territory. This provision applies specifically but without limitation in cases where the Region includes any country in the European Union or European Economic Area. 6.7 Parallel Imports: Licensor does not warrant that it has granted or can grant exclusivity protection against sale or rental in the Territory of Videograms embodying the Picture imported from outside the Territory. Licensor only agrees that during the License Period for any Video Licensed Right it will not sell or authorize sale in any Authorized Language of Videograms embodying the Picture that are sold in the Region outside the Territory and intended for primary consumer sale or rental within the Territory except this provision will not apply to the sales of original unsubtitled English language Videograms even if English is an Authorized Language. This provision applies specifically, but without limitation, in cases where the Region includes any country in the European Union or European Economic Area. 7. PAYMENT REQUIREMENTS 7.1 Timely Payment: Distributor will make payments to Licensor in the manner and sequence specified in the Deal Terms. Timely payment is of the essence of this Agreement. Payment will only be considered made when Licensor has immediate and unencumbered use of funds in the required currency in the full amount due. Distributor will use diligent efforts to obtain promptly all permits necessary to make all payments to Licensor. 7.2 License Fee: The License Fee is the amount payable to Licensor as indicated in the Deal Terms. The License Fee is non-returnable but constitutes the entire payment for Distributor's exploitation of the Licensed Rights in accordance with this Agreement. 7.3 License Fee Installments: Distributor will pay each installment of the License Fee to Licensor in the time and manner specified in the Deal Terms. Where any installment is payable on events within Distributor's control, e.g. Theatrical Release or Video Release, Distributor will give Licensor timely Notice of such event along with all payments then due Licensor. 7.4 Letter of Credit: if the Deal Terms indicate that a payment is to be secured by a Letter of Credit, then Distributor will open the Letter of Credit at a bank in the Territory designated by Licensor as a corresponding bank of Licensor's bank. While open the Letter of Credit will remain valid, negotiable, transferable, confirmed and irrevocable; it will be automatically renewable for any period specified in the Deal Terms if Licensor has not fully negotiated the Letter of Credit by its first expiry date. All costs for a Letter of Credit will be borne solely by Distributor. 7.5 Limitation On Deductions: There will be no deductions from any payments due Licensor because of any bank charges, conversion costs, sales use or VAT taxes, "contingents", quotas or any other taxes levies or charges unless separately agreed in writing by Licensor. No remittance or withholding taxes may be deducted from the License Fee. 7.6 Blocked Funds: If any Law prohibits remittance of any amounts to Licensor then Distributor will immediately give Licensor Notice of such Law. Distributor will then deposit such amounts in Licensor's name for Licensor's unencumbered use in a suitable depository designated by Licensor without any deductions for so doing. 7.7 Finance Charge On Late Payments: Any payment not made by its due date will, in addition to any other right or remedy of Licensor, incur a finance charge at the lesser of three hundred basis points over the 3-month LIBOR rate ("LIBOR+3") on the date payment was due or the highest applicable legal contract rate. This finance charge will accrue from the date the payment was due until it is paid in full. 7.8 Exchange Provisions, Payment: All payments will be in United States dollars or other freely remittable currency designated by Licensor. All payments will be computed at the prevailing exchange rate on the date due at a bank timely designated by Licensor. For a late payment Licensor will be entitled to the most favorable exchange rate between the due date and the payment date. The parties agree that the risk of devaluation of the United States dollar or other currency designated by Licensor against the currency of the Territory will be Licensor's sole risk; the risk of the devaluation of the currency of the Territory against the United States dollar or other currency designated by Licensor will be Distributor's sole risk. 7.9 Documentation: If any Law requires Distributor to obtain a permit or clearance to exploit any Licensed Right, then Distributor will use diligent efforts to do so promptly at its expense. Distributor will provide Licensor with copies of all documents indicating compliance with such Law. By way of illustration such Law may require obtaining certificates of local dubbing or copyright registration, acquiring quota permits or censorship clearances, filing author certificates, certificates of origin or music cue sheets with appropriate authorities, or obtaining permits or clearances for payment of any remittance taxes or other charges. Distributor will not undertake any such action before the entire License Fee is paid without first receiving Notice of Licensor's approval to so. 7.10 Royalty Income: All amounts collected by any collecting society, authors' rights organization, performing rights society or governmental agency that are payable to authors, producers, performers or other Persons and that arise from royalties, compulsory licenses, cable retransmission income, music performance royalties, tax rebates, exhibition surcharges, levies on blank Videograms or hardware, rental or lending royalties, or the like, will as between Licensor and Distributor be the sole property of Licensor and will not be included in or credited to any Gross Receipts. Licensor has the sole right to apply for and collect all these amounts. If any of them are paid to Distributor then Distributor will immediately remit them to Licensor with an appropriate statement identifying the payment. 7.11 Limits On Cross-Collateralization: No payment for the Picture will be cross-collateralized with or set-off against any amounts for any other Motion Picture licensed to Distributor, whether in this Agreement or otherwise. Amounts due for the Picture may not be used to recoup amounts unrecouped for any other Motion Picture, or vice versa. 7.12. Limits On Allocations: If the Picture is exploited with other Motion Pictures then Distributor will only allocate receipts and expenses among the Picture and the other Motion Pictures in the manner approved by Licensor in its sole discretion in advance. 8. DELIVERY AND RETURN 8.1 Terminology: "Delivery" of a Picture means delivery to Distributor of the Initial Materials, and, at a later time if and when mutually agreed, the Additional Materials, as provided in the Deal Terms and this Paragraph. "Initial Delivery" means delivery of the "Initial Materials" and "Additional Delivery" means delivery of the "Additional Materials." The "Delivery Materials" consist of the Initial Materials or Additional Materials as the context requires. 8.2 Initial Delivery: Licensor will give Distributor a "Notice of Initial Delivery" that it is prepared to deliver the Initial Materials by the date specified in the Deal Terms, or, if none is specified, promptly after the Picture is ready for Initial Delivery. Upon receipt of such Notice: 8.2.1 If the Initial Materials are identified in the Deal Terms, the Distributor will immediately pay for such Initial Materials and their cost of shipment. Payment and shipment will be made as specified in the Deal Terms or, if not there specified, as in Licensor's Notice of Initial Delivery. Licensor will then ship all Initial Materials to Distributor as specified in the Deal Terms or Licensor's Notice of Initial Delivery. 8.2.2 If the available Initial Materials are specified in Licensor's Notice of Initial Delivery, then within ten (10) days of receipt of this Notice Distributor will give Notice to Licensor stating the number of pre-print items, prints, trailers, advertising and promotional accessories, support items and other Initial Materials relating to the Picture that Distributor reasonably requires, all of which will be subject to Licensor's reasonable approval. Licensor will then give Distributor Notice of the cost of the approved Initial Materials and their shipment to Distributor. Distributor will immediately pay for such Initial Materials as specified in the Deal Terms or Licensor's Notice. Licensor will then deliver such Initial Materials to Distributor as specified in the Deal Terms or Licensor's Notice. 8.2.3 In all cases Distributor must take delivery of all approved Initial Materials within two (2) months of Licensor's Notice of Initial Delivery. 8.3 Additional Delivery: After completion of Initial Delivery: (i) if the Additional Materials are identified in the Deal Terms, then Licensor will give Distributor Notice that it is prepared to deliver the Additional Materials, including their cost and shipping charges; (ii) otherwise Distributor will give Licensor Notice of the number and type of the Additional Materials it desires, all of which will be subject to Licensor's reasonable approval, and Licensor will promptly send Distributor Notice of the cost of duplication and shipping of the approved Additional Materials. Distributor will immediately pay for such Additional Materials upon receipt of Licensor's Notice. Upon receipt of payment Licensor will make prompt Delivery of the Additional Materials to Distributor as specified in the Deal Terms or Licensor's Notice. 8.4 Delivery Of Physical Materials: Delivery of the Physical Materials will be accomplished by one of the following methods as specified in the Deal Terms or Licensor's Notice of Initial Delivery: 8.4.1 Where Physical Delivery is indicated Licensor will deliver to the delivery location specified in the Deal Terms the Physical Materials listed in the Deal Terms suitable for use as or manufacture of necessary exploitation materials. Unless otherwise specified in the Deal Terms, the Physical Materials will be shipped to Distributor by air transport. 8.4.2 Where Laboratory Access is indicated Licensor will provide Distributor with access to the Physical Materials listed in the Deal Terms suitable for use as or manufacture of necessary exploitation materials. Access will be on the terms of the attached AFMA Laboratory Access Letter, or other mutually approved access letter. The Physical Materials will always be held in a recognized laboratory or facility in Licensor's name and subject to the requirements of the Access Letter. Distributor may order prints and other exploitation materials for the Picture to be manufactured from the accessible Physical Materials at Distributor's sole expense. 8.4.3 Where Loan Of Materials is indicated Licensor will deliver on loan to the delivery location specified by Distributor the Physical Materials listed in the Deal Terms suitable for manufacture of necessary preprint materials. Unless otherwise specified in the Deal Terms, the Physical Materials will be shipped to Distributor by air transport. These Physical Materials will only be used to make new preprint materials at Distributor's sole expense from which necessary exploitation materials can be made. These Physical Materials will always be held in a laboratory or facility subject to Licensor's reasonable approval and will be returned to Licensor within a reasonable time designated by Licensor. 8.4.4 Where Satellite Delivery is indicated Licensor may deliver the Physical Materials listed in the Deal Terms to Distributor by satellite transmission commensurate with available materials and Distributors equipment. Licensor will be responsible for all uplinking transmission costs; Distributor will be responsible for arranging to receive the satellite reception and for all downlinking reception costs. Distributor's failure to make suitable downlinking receiving arrangements, or failure to receive a transmission of the Picture due to technical downlink or reception failure, will not affect Distributor's obligations under this Agreement. If Distributor experiences a technical failure of transmission or reception, Licensor upon receipt of timely notice will attempt to assist Distributor to receive the transmission. Distributor will pay for each missed satellite feed a charge equal to Licensor's actual cost of transmission. 8.5 Delivery Of Support Material: Licensor will also provide, at Distributor's request and expense, the Support Materials as specified in the Deal Terms or Licensor's Notice of initial Delivery. Unless otherwise specified in the Deal Terms, all Support Materials will be shipped to Distributor by air transport. If Distributor does not use any of the Support Materials, then Distributor will obtain prior Notice of Licensor's approval before using any of its own servicing, advertising, promotional or other support material. 8.6 Evaluation and Acceptance: Distributor will evaluate all Delivery Materials for technical acceptance promptly after their receipt. All Delivery Materials will be considered technically satisfactory and accepted by Distributor unless within ten (10) days after receipt Distributor gives Licensor Notice specifying any technical defect. If Distributor's notice is accurate, then Licensor will, at its election, either: (i) timely correct the defect and redeliver the effected Delivery Materials; or (ii) deliver new replacement Delivery Materials; or (iii) exercise its rights of suspension or withdrawal pursuant to Paragraph. If Distributor has undertaken a Theatrical Release or Video Release of the Picture or begun exploiting any Licensed Right, then any alleged defect will be deemed waived by Distributor. 8.7 Ownership of Materials: Legal ownership of and title to all Delivery Materials will remain with Licensor subject to Distributor's right to use such Delivery Materials under this Agreement. Distributor will exercise due care in safe-guarding all Delivery Materials and will assume all risk for their theft or damage while they are in Distributor's possession. 8.8 Payment for Delivery Materials: Distributor will pay for all Delivery Materials as indicated in the Deal Terms or otherwise by Notice from Licensor. All costs of Delivery and Return (including shipping charges, import fees, duties, brokerage fees, storage charges and related charges) will be Distributor's sole responsibility unless otherwise specified in the Deal Terms. 8.9 Distributor Created Materials: Licensor will at all times have unrestricted free access to all alternate language tracks and dubbed versions, masters, advertising and promotional materials, artwork and other materials created by Distributor pursuant to this Agreement. Distributor will promptly give Licensor Notice of each Person who prepares any dubbed or subtitled tracks for the Picture and of each laboratory or facility where the tracks are located. Promptly after completion of any dubbed or subtitled version of the Picture Distributor will provide Licensor with immediate unrestricted free access to all dubbed and subtitled tracks. Licensor will immediately become the owner of the copyright in all dubbed and subtitled tracks, subject to a non-exclusive free license in favor of Distributor to use such tracks during the Term solely for exploitation of the Licensed Rights. If such ownership is not allowed under a Law in the Territory, then Distributor will grant Licensor a non-exclusive free license to use such dubbed or subtitled tracks worldwide in perpetuity without restriction. 8.10 Return of Delivery Materials: Upon expiry of the Term Distributor will at Licensor's election either: (i) return all Delivery Materials to Licensor at Distributor's expense; or (ii) destroy all Delivery Materials and provide Licensor with a customary certificate of destruction. 9. EXPLOITATION OBLIGATIONS 9.1 General: Distributor will not exploit or authorize exploitation of any Licensed Right before the end of its Holdback Period. Distributor will cause the Theatrical Release and the Video Release of Picture throughout the Territory by no later than the date specified in the Deal Terms, if any. Distributor will only exploit Videograms of the Picture in the authorized Types and Formats in the Deal Terms. 9.2 Licensor's Packaging Approval Rights: Distributor at its cost will provide Licensor for its reasonable approval one (1) prototype copy of each authorized format of Videogram and its packaging promptly after their manufacture and before their sale or disposition. Licensor's approval will be deemed given if Licensor does not give Notice to Distributor of an objection within ten (10) days of Licensor's receipt of these items. Distributor will provide Licensor with a reasonable number (not exceeding ten (10)) free copies of each authorized Format of Videogram and its packaging subject only to applicable duties. 9.3 Sell-Off Period: For any Video Licensed Rights during the last six (6) months of the Term Distributor will not manufacture Videograms in excess of those reasonably anticipated to meet normal customer requirements. During the three (3) month period following the end of the Term, and provided in Paragraph 6.1, Distributor will have the non-exclusive right to sell off its then existing inventory of Videograms for Home Video exploitation only. At the end of this three (3) month period Distributor will at Licensor's election either sell its remaining Videograms and their packaging to Licensor at Distributor's cost or destroy them and provide Licensor with a customary certificate of destruction. 9.4 Import/Export Restrictions: Distributor will not import or authorize importation of Videograms embodying the Picture into the Territory other than the Delivery Materials provided by Licensor. At no time will Distributor export or authorize exportation of Videograms embodying the Picture from the Territory. 10. MUSIC 10.1 Cue Sheets: To the extent required and available, Licensor will supply Distributor promptly after Delivery with available music cue sheets listing the composer, lyricist and publisher of all music embodied in the Picture. Distributor will as necessary promptly file with the appropriate governmental agency or music rights society in the Territory the music cue sheets supplied by Licensor without change. 10.2 Synchronization: Licensor represents and warrants to Distributor that Licensor controls all rights necessary to synchronize the music contained in the Picture on all copies exploited by Distributor throughout the Territory for the Term. Licensor authorizes Distributor to exploit such synchronization rights without charge in conjunction with its exploitation of the Picture. Licensor will be solely responsible for paying all royalties or charges necessary to obtain and control such synchronization rights for the Term and will hold Distributor harmless from any payments in this regard. 10.3 Mechanical: Licensor represents and warrants to Distributor that Licensor controls all rights necessary to make mechanical reproductions of the music contained in the Picture on all copies exploited by Distributor throughout the Territory for the Term. Licensor authorizes Distributor to exploit such mechanical rights without charge in conjunction with its exploitation of the Picture. Licensor will be solely responsible for paying all royalties or charges necessary to obtain and control such mechanical rights for. the Term, and Licensor will hold Distributor harmless from any payments in this regard, provided if a mechanical or authors' right society in the Territory refuses to honor the authorization obtained by Licensor in the country of origin of the Picture then Distributor will be solely responsible for such royalties or charges. 10.4 Performance: Licensor represents and warrants to Distributor that the nondramatic ("small") performing rights in each musical composition embodied in the Picture are: either (i) in the public domain in the Territory; or (ii) controlled by Licensor sufficient to allow Distributor to exploit the Licensed Rights without additional payment for such rights; or (iii) available by license from the local music performing rights society(ies) in the Territory affiliated with the International Confederation of Authors and Composers Societies (CISAC). With regard to music in category (iii), Distributor will be solely responsible for obtaining a license to exploit such performance rights from the local music performing rights society(ies). 10.5 Publishing: As between Licensor and Distributor, Licensor will be solely entitled to collect and retain the publisher's share of any music royalties arising from Distributor's exploitation of any Licensed Rights in the Picture. 11. SUSPENSION AND WITHDRAWAL 11.1 Licensor's Right: Licensor may suspend Delivery or withdraw the Picture at any time: (i) if Licensor determines in good faith that its exploitation might infringe the rights of others or violate any Law; (ii) if Licensor determines in good faith that its Materials are unsuitable for the manufacture of first class commercial quality exploitation materials; (iii) due to Force Majeure; or (iv) if Distributor refuses to accept Delivery of the Picture for any reason. 11.2 Effect Of Suspension: Distributor will not be entitled to claim any damages or lost profits for any suspension. Instead the Term will be extended for the length of each suspension. If any suspension lasts more than three (3) consecutive months, then either Party may terminate this Agreement on ten (10) days' notice, in which case the Picture will be treated as withdrawn. 11.3 Effect Of Withdrawal: If the Picture is withdrawn or treated as withdrawn after a period of suspension, then Licensor must either substitute a Motion Picture of like quality mutually satisfactory to Licensor and Distributor, or must refund promptly all unrecouped amounts of the License Fee paid to Licensor and all commercially reasonable and unrecouped distribution costs incurred by Distributor in exploiting any Licensed Rights. Distributor's sole remedy will be to receive this substitute or refund. In no case may Distributor collect any lost profits or consequential damages. 11.4 Force Majeure: Force Majeure means any fire, flood, earthquake, or public disaster; strike, labor dispute or unrest; unavailability of any major talent committed to the Picture; unavoidable accident; breakdown of electrical or sound equipment; failure to perform or delay by any laboratory or supplier; delay or lack of transportation; embargo, riot, war, insurrection or civil unrest; any Act of God including inclement weather; any act of legally constituted authority; or any other cause beyond the reasonable control of Licensor. 12. DEFAULT AND TERMINATION 12.1 Distributor's Default: Distributor will be in default if: (i) Distributor fails to pay any installment of the License Fee when due; (ii) Distributor becomes insolvent or fails to pay its debts when due; (iii) Distributor makes an assignment for the benefit of creditors, seeks relief under any bankruptcy law or similar law for the protection of debtors, or allows a petition of bankruptcy to be filed against it or a receiver or trustee to be appointed for substantially all of its assets that is not removed within thirty (30) days; (iv) Distributor breaches any material term, covenant or condition of this Agreement or any other agreement with Licensor; (v) a Distributor Affiliate breaches any material term, covenant or condition of any other agreement with Licensor; or (vi) Distributor attempts to make any assignment, transfer, sublicense or appointment of an agent without first obtaining Licensor's approval under Paragraph. 12.2 Notice To Distributor: Licensor will give Distributor Notice of any claimed default. If the default is capable of cure then Distributor will have ten (10) days after receipt of Licensor's Notice to cure a monetary default, and twenty (20) days after receipt to cure a non-monetary default. If the default is incapable of cure, or if Distributor fails to cure within the times provided, then Licensor may proceed against Distributor for available relief, including terminating this Agreement retroactive to the date of default, suspending Delivery of the Picture and declaring all unpaid amounts due Licensor immediately due and payable. 12.3 Licensor's Default: Licensor will be in default if: (i) Licensor becomes insolvent or fails to pay its debts when due; (ii) Licensor makes an assignment for the benefit of creditors, or seeks relief under any bankruptcy law or similar law for the protection of debtors, or allows a petition of bankruptcy to be filed against it or a receiver or trustee appointed for substantially all of its assets that is not removed within thirty (30) days; or (iii) Licensor breaches any material term, covenant, or condition of this Agreement. Any default by Licensor is limited to the Picture, and no default by Licensor as to any one agreement with Distributor will be a default as to any other agreement with Distributor. 12.4 Notice To Licensor: Distributor will give Licensor Notice of any claimed default. Licensor will have ten (10) days after receipt of Distributor's Notice to cure a monetary default, and twenty (20) days after receipt to cure a non-monetary default. If Licensor fails to cure within the times provided, then Distributor may proceed against Licensor for all available relief, provided, however, that in no case may Distributor collect any "lost profits" or consequential damages. 12.5 Arbitration: Any dispute under this Agreement will be resolved by final and binding arbitration under the Rules of International Arbitration of the American Film Marketing Association in effect when the arbitration is filed (the "AFMA Rules"). Each Party waives any right to adjudicate any dispute in any other court or forum, except that a Party may seek interim relief before the start of arbitration as allowed by the AFMA Rules. The arbitration will be held in the Forum designated in the Deal Terms, or, if none is designated, as determined by the AFMA Rules. The Parties will abide by any decision in the arbitration and any court having jurisdiction may enforce it. The Parties submit to the jurisdiction of the courts in the Forum to compel arbitration or to confirm an arbitration award. The Parties agree to accept service of process in accordance with the AFMA Rules. 13. ANTI-PIRACY PROVISIONS 13.1 Copyright Notice Requirements: Distributor will include on each Copy of the Picture distributed under its authority the copyright notice and anti-piracy warning supplied by Licensor. A Copy of the Picture includes all negatives, preprint materials, release prints, masters, tapes, cassettes, discs or Videograms and their packaging. 13.2 Anti-Piracy Warning: The anti-piracy warning on each Copy of the Picture must read substantially as follows: WARNING THIS MOTION PICTURE IS PROTECTED BY LAW. Any unauthorized copying, distribution, performance, renting, lending, exporting, importing, dissemination or exhibition is prohibited by law. Violators will be subject to criminal prosecution and civil penalties. THIS MOTION PICTURE IS REGISTERED WITH THE AFMA ANTI-PIRACY PROGRAM Videograms and their packaging must contain this additional warning: Licensed only for use in [Insert all countries in Territory] Videograms exploited for Home Video and their packaging must include: Authorized For Private Home Use Only 13.3 Enforcement: Distributor will take all reasonable steps to protect the copyright in the Picture and to prevent piracy. Licensor may participate in any anti-piracy action using counsel of its choice. Licensor's expenses will be reimbursed from any recovery in equal proportion with Distributor's expenses. If Distributor fails to take anti-piracy action, Licensor may do so in Licensor's or Distributor's name, with all recoveries belonging to Licensor. 13.4 New Technology: If during the Term new technology in use in the Territory inhibits the unauthorized duplication of copies of the Picture, interferes with the reception of broadcast signals without use of an authorized decoding device, or otherwise provides protection against unauthorized exploitation of the Picture, then Distributor will use such technology in a reasonable manner in exploiting the Picture. 13.5 No Warranty Against Piracy: The Parties acknowledge that it is in their mutual interest to prevent piracy of the Picture in the Territory. Licensor has informed Distributor of any act of piracy of the Picture in the Territory of which Licensor is aware, and such information has been considered in determining the License Fee along with the other terms of this Agreement. Distributor has also taken all necessary steps to inform itself of any piracy of the Picture in the Territory before executing this Agreement. No piracy of the Picture, whether occurring before or after execution of this Agreement, will allow Distributor to terminate this Agreement or reduce any amounts due Licensor. Licensor will cooperate with Distributor to prevent or remedy any such act of piracy. 14. LICENSOR'S WARRANTIES 14.1 As Principal: If the Cover Page indicates Licensor is a principal then Licensor represents and warrants to Distributor that the following are true and correct and will remain so throughout the Term: 14.1.1 Licensor has full authority and capacity to execute this Agreement and full legal and financial ability to perform all of its obligations under this Agreement; 14.1.2 There are no existing or threatened claims or litigation which would adversely affect or impair any of the Licensed Rights in the Territory during the Term; 14.1.3 Licensor has not licensed, encumbered or assigned and will not license, encumber or assign any Licensed Right to any other Person in the Territory during the Term; 14.1.4 Licensor will not exploit or authorize exploitation of any Reserved Right in the Territory before the end of the applicable Licensor Holdback period; 14.1.5 The Picture was produced by authors who are nationals of or have their habitual residence in, or was first published or simultaneously first published in, a country which at the time of such production or publication was a signatory to the Berne Convention for the Protection of Literary and Artistic Works or the Universal Copyright Convention or the Buenos Aires Convention, and Licensor has not done any act or omitted to do any act which would impair the copyright in the Picture within the Territory during the Term; and 14.1.6 Neither the Picture nor the exercise of any Licensed Rights does or will: (i) defame, or hold in a false light, or infringe any privacy or publicity or other personal right of any Person; or (ii) infringe any copyright, trademark, right of ideas, parent, or any other property right of any Person. 14.2 As Agent: If the Cover Page indicates Licensor is acting as an agent Licensor represents and warrants to Distributor that the following are true and correct and will remain so throughout the Term: 14.2.1 Licensor has full authority from its principal designated on the Cover Page to enter into this Agreement on behalf of its principal and Licensor's principal will be bound by this Agreement; 14.2.2 To the best of Licensor's knowledge there are no existing or threatened claims or litigation which would adversely affect or impair any of the Licensed Rights; 14.2.3 To the best of Licensor's knowledge there are no other agreements licensing, encumbering or assigning any Licensed Right to any other Person in the Territory during the Term; 14.2.4 Licensor's principal has made to Licensor each of the representations and warranties in Paragraph and has authorized Licensor to make those representations and warranties directly from the principal to Distributor on the principal's behalf. In case of a breach of any representation or warranty in Paragraph Distributor agrees to look directly to the principal and not to Licensor for any remedies Distributor might have. 15. DISTRIBUTOR'S WARRANTIES 15.1 As Principal: Distributor represents and Warrants to Licensor that the following are true and correct and will remain so throughout the Term: 15.1.1 Distributor has full authority and capacity to execute this Agreement and full legal and financial ability to perform all of its obligations under this Agreement; 15.1.2 There are no existing or threatened claims or litigation which would adversely affect or impair Distributor's ability to perform under this Agreement; 15.1.3 Distributor will honor all restrictions on the exercise of the Licensed Rights and the Allied Rights under this Agreement and will not exploit any Licensed Right outside the Territory, before the end of its Holdback or after the Term. 15.2 As Assignor: In case of any assignment of this Agreement pursuant to Paragraph, Distributor makes the following additional representations and warranties to Licensor: 15.2.1 As a condition to the effectiveness of such assignment the assignee can and will make all of the representations and warranties set forth in Paragraph directly to Licensor; and 15.2.2 If the assignee breaches any of those representations and warranties, then Licensor, in addition to any right or remedy, may proceed directly against Distributor for such breach without first proceeding against such assignee or exhausting any right or remedies against such assignee. 16. INDEMNITIES 16.1 By Licensor: Licensor will indemnify and hold harmless Distributor, including its officers, directors, partners, owners, shareholders, employees, attorneys and agents, from all claims, loss, liability, damages or expenses, including reasonable attorneys' fees, but not including lost profits, due to breach of any of Licensor's representations or warranties. Licensor will remain responsible for honoring Licensor's indemnities despite any assignment pursuant to Paragraph. If Licensor is acting as an agent, these indemnities are also made directly by Licensor's principal to Distributor, but Distributor will look only to Licensor's principal to honor these indemnities with regard to the principal's representations and warranties. 16.2 By Distributor: Distributor will indemnify and hold harmless Licensor, including its officers, directors, partners, owners, shareholders, employees, attorneys and agents, from all claims, loss, liability, damages or expenses, including reasonable attorneys' fees, but not including lost profits, due to breach of any of Distributor's representations or warranties. Distributor will remain responsible for honoring Distributor's indemnities despite any assignment, transfer, sublicense or appointment of an agent under Paragraph. 17. ASSIGNMENT AND SUBLICENSING 17.1 Distributor's Limitations: This Agreement is personal to Distributor. Distributor may not assign or transfer this Agreement, or sublicense or use an agent to exploit any Licensed Rights, whether voluntarily or involuntarily, without prior Notice of Licensor's approval in Licensor's sole discretion. A transfer of a controlling interest in Distributor's capital stock or other evidence of ownership will be a transfer for which prior Notice of Licensor's consent is required. If Licensor consents to an assignment, transfer, sublicense or agent then this Agreement will be binding on such authorized assignee, transferee, subdistributor or agent but will not release Distributor from its obligations under this Agreement. 17.2 Licensor's Rights: Licensor may freely assign or transfer this Agreement or any of its rights under this Agreement, but no such assignment or transfer will relieve Licensor of its obligations under this Agreement, unless it is to a company which acquires all or substantially all of Licensor's assets. 17.3 Licensor's Assignment For Financing Purposes: If Licensor pledges this Agreement or assigns its right to receive any payment to a lender, completion guarantor or other Person as security for or in connection with any loan or other obligation, then Distributor will promptly on request execute a reasonable and customary notice and acknowledgement of assignment and charge or similar document as necessary to establish or perfect the Person's interest or secure its rights. Distributor agrees to abide by consistent written instructions from Licensor and such Person in making any payments otherwise due Licensor directly to such Person. Distributor agrees not to assert any offset rights against such Person or to assert any rights it may have against Licensor to delay, diminish or excuse the payment of any sums pledged or assigned to such Person. Instead Distributor will only treat such offsets or other rights as a separate and unrelated matter solely between Licensor and Distributor. 18. MISCELLANEOUS PROVISIONS 18.1 Separability: In case of any conflict between this Agreement and any material Law the latter will prevail. 18.2 No Waiver: No waiver of any breach will waive any other breach. No waiver is effective unless in writing. The exercise of any right will not waive any other right or remedy. 18.3 Remedies Cumulative: All remedies are cumulative, and resorting to one will not preclude resorting to any other at any time. 18.4 Notices: All Notices must be in writing and sent to a Party at its address on the Cover Page by fax, telex, telegram or first class mail. Notice will be effective when received. Either Party may change its place for Notice by Notice duly given. 18.5 Entire Agreement: This Agreement contains the entire understanding of the Parties regarding its subject matter. It supersedes all previous written or oral negotiations, deal memos, understandings or representations between the parties regarding its subject matter, if any. Each Party expressly waives any right to rely on such negotiations understandings or representations, if any. 18.6 Modification: No modification or amendment of this Agreement will be effective unless in writing and signed by both Parties. 18.7 Captions: Captions and paragraph headings are for convenience only. 18.8 Terminology: As used in the Agreement "and" means all of the possibilities, "or" means any or all of the possibilities in any combination, and "either...or" means only one of the possibilities. "Including" means "including without limitation." "Must" or "will" means a Party has the obligation to act or refrain from acting as indicated; "may" means a Party has the right but not the obligation to act or refrain from acting as indicated. 18.9 Governing Law: This Agreement will be governed by and interpreted under the laws of the state or jurisdiction specified as Governing Law in the Deal Terms. If none is specified, then the Governing Law will be the Laws of the State of California. 18.10 Forum: The Parties consent to the Forum designated in the Deal Terms as the place for resolving all disputes under this Agreement. If none is specified, then the Forum will be Los Angeles County, California, U.S.A. AFMA [Registered Logo Here] INTERNATIONAL SCHEDULE OF LICENSING DEFINITIONS A. Cinematic Rights Definitions: Cinematic means Theatrical, Non-Theatrical and Public Video exploitation of a Motion Picture. Theatrical means exploitation of a Motion Picture Copy only for direct exhibition in conventional or drive-in theaters, licensed as such in the place where the exhibition occurs, that are open to the general public on a regularly scheduled basis and that charge an admission fee to view the Motion Picture. NonTheatrical means exploitation of a Motion Picture Copy only for direct exhibition before an audience by and at the facilities of either organizations not primarily engaged in the business of exhibiting Motion Pictures, such as in educational organizations, churches, restaurants, bars, clubs, trains, libraries, Red Cross facilities, oil rigs and oil fields, or governmental bodies such as in embassies, military bases, military vessels and other governmental facilities flying the flag of the licensed territory. NonTheatrical does not include Commercial Video, Public Video, Airline, Ship or Hotel exploitation. Public Video means exploitation of a Motion Picture Copy embodied in a Videogram only for direct exhibition before an audience in a "mini-theater", an "MTV theater" or like establishment that charges an admission to use the viewing facility or to view the Videogram and that is not licensed as a traditional motion picture theater in the place where the viewing occurs. B. Video Rights Definitions Video means Home Video and Commercial Video exploitation of a Motion Picture. Home Video means Home Video Rental and Home Video SellThru exploitation of a Motion Picture. Home Video Rental means exploitation of a Motion Picture Copy embodied in a Videogram that is rented to the viewer only for non-public viewing of the embodied Motion Picture in a linear form within a private living place where no admission fee is charged for such viewing. Home Video SellThru means exploitation of a Motion Picture Copy embodied in a Videogram that is sold to the viewer only for non-public viewing of the embodied Motion Picture in a linear form within a private living place where no admission fee is charged for such viewing. Commercial Video means the exploitation of a Motion Picture Copy embodied in a Videogram only for direct exhibition in a linear form before an audience by and at the facilities of either organizations not primarily engaged in the business of exhibiting Motion Pictures, such as in educational organizations, churches, restaurants, bars, clubs, trains, libraries, Red Cross facilities, oil rigs and oil fields, or governmental bodies such as in embassies, military bases, military vessels and other governmental faculties flying the flag of the licensed territory, but only to the extent that such exploitation is not otherwise utilized in the licensed territory as a form of Non-Theatrical exploitation. Commercial Video does not include Non-Theatrical, Public Video, Airline, Ship or Hotel exploitation. C. Ancillary Rights Definitions Ancillary means Airline, Ship and Hotel exploitation of a Motion Picture. Airline means exploitation of a Motion Picture Copy only for direct exhibition in airplanes that are operated by an airline flying the flag of any country in the licensed territory for which Airline exploitation is granted, but excluding airlines that are customarily licensed from a location outside the licensed territory or that are only serviced in but do not fly the flag of a country in the licensed territory. Ship means exploitation of a Motion Picture Copy only for direct exhibition in sea or ocean going vessels that are operated by an shipping line flying the flag of any country in the licensed territory for which Ship exploitation is granted but excluding shipping lines that are customarily licensed from a location outside the territory or that are only serviced in but do not fly the flag of a country in the licensed territory. Hotel means the exploitation of a Motion Picture Copy only for direct exhibition in temporary or permanent living places, such as hotels, motels, apartment complexes, cooperatives or condominium projects, by means of closed-circuit television systems where the telecast originates within or in the immediate vicinity of such living places. D. Pay TV Rights Definitions Pay TV means Terrestrial Pay TV, Cable Pay TV and Satellite Pay TV exploitation of a Motion Picture. Pay TV does not include any form of PayPerView. Terrestrial Pay TV means over-the-air broadcast of a Motion Picture Copy by means of encoded Hertzian waves for reception on television receivers where a charge is made: (i) to viewers in private living places for use of a decoding device to view a channel that broadcasts the Motion Picture along with other programming; or (ii) to the operator of a hotel or similar temporary living place located distant from where the broadcast signal originated for use of a decoding device to receive a channel that broadcasts the Motion Picture and other programming and retransmit it throughout the temporary living place for viewing in private rooms. Cable Pay TV means originating transmission of a Motion Picture copy by means of an encoded signal over coaxial or fiber-optic cable for reception on television receivers where a charge is made: (i) to viewers in private living places for use of a decoding device to view a channel that transmits the Motion Picture along with other programming; or (ii) to the operator of a hotel or similar temporary living place located distant from where the broadcast signal originated for use of a decoding device to receive a channel that broadcasts the Motion Picture and other programming and retransmit it throughout the temporary living place for viewing in private rooms. Satellite Pay TV means the uplink broadcast of an encoded signal to a satellite and its down-link broadcast to terrestrial satellite reception dishes of a Motion Picture Copy for viewing on television receivers located in the immediate vicinity of their reception dishes where a charge is made: (i) to viewers in private living places for use of a decoding device to view a channel that broadcasts the Motion Picture along with other programming; or (ii) to the operator of a hotel or similar temporary living place located distant from where the broadcast signal originated for use of a decoding device to receive a channel that broadcasts the Motion Picture and other programming and retransmit it throughout the temporary living place for viewing in private rooms. E. Free TV Rights Definitions Free TV means Terrestrial Free TV, Cable Free TV, and Satellite Free TV exploitation of a Motion Picture. Free TV does not include any form of PayPerView. Terrestrial Free TV means over-the-air broadcast by Hertzian waves of a Motion Picture Copy for reception on television receivers in private living places without a charge to the viewer for the privilege of viewing the Motion Picture, provided that for this purpose government television receiver assessments or taxes (but not a charge for PayPerView or Pay TV) will not be deemed a charge to the viewer. Cable Free TV means the Originating transmission by coaxial or fiber-optic cable of a Motion Picture Copy for reception on television receivers in private living places without a charge to the viewer for the privilege of viewing the Motion Picture, provided that for this purpose neither government television receiver assessments or taxes nor the regular periodic service charges (but not a charge for PayPerView or Pay TV) paid by a subscriber to a cable television system will be deemed a charge to the viewer. Satellite Free TV means the up-link broadcast to a satellite and its down-link broadcast to terrestrial satellite reception dishes of a Motion Picture Copy for viewing on television receivers in private living places located in the immediate vicinity of their reception dishes without a charge to the viewer for the privilege of viewing the Motion Picture, provided that for this purpose government satellite dish or television receiver assessments or taxes (but not a charge for PayPerView or Pay TV) will not be deemed a charge to the viewer. F. Other Rights Definitions: Demand View means the transmission of a Motion Picture Copy by means of an encoded signal for reception on television receivers in homes and similar permanent living places where a charge is made to the viewer for the right to use a decoding device to view the Motion Picture at a time selected by the viewer for each viewing. Interactive Multimedia means exploitation of an Interactive Multimedia Work by means of a computing device that allows the Interactive Multimedia Work to be directly perceived and manipulated by the user of the computing device and that either stores the G. Additional Definitions: Affiliate means any Person, including any officer, director, employee or partner of a Person controlled by, controlling or under common control with a Party. Availability Date means the first day after the end of the Holdback Period for a Licensed Right. If the Availability Date refers to a category of Licensed Rights, it refers to the first date on which Distributor may exploit any Licensed Right in the category. For example, the Pay TV Availability Date is the first date on that Distributor may exploit the Pay TV Terrestrial, Pay TV Cable or Pay TV Satellite Right. Broadcast means the communication to the public of a Motion Picture by means of wire, cable, wireless diffusion or radio waves that allows the Motion Picture to be viewed on a television receiver. Broadcast means the same as telecast or diffusion. Cassette means the same as VideoCassette. CDI means the same as Compact Disc Interactive. Compact Disc means a combined optical and electronic storage device designed to be used in conjunction with a computer that causes a Motion Picture to be visible on the screen of a monitor or television receiver for viewing in a substantially linear manner. A Compact Disc does not include any type of Videocassette or Videodisc. Compact Disc Interactive when used as a Right is a type of Interactive Multimedia Right and when used to describe a Work is a type of Interactive MultiMedia Work. Disc means the same as VideoDisc. Exhibition means the same as public performance. First Negotiation means that, provided that Distributor is then actively engaged in the distribution business on a financially secure basis, Licensor will negotiate with Distributor in good faith for a period of ten (10) days regarding the matter for which Distributor has a First Negotiation right before entering into negotiations regarding the matter with any other Person. If no agreement is reached within this time period, then Licensor will be free to stop negotiations with Distributor and then to negotiate and conclude an agreement regarding the proposed matter with any other Person on any terms. Exhibition means the same as public performance. First Negotiation means that Licensor will negotiate with Distributor in good faith for a period of ten (10) days regarding the matter for which Distributor has a First Interactive Multimedia Work on the user's computing device or accesses the Interactive Multimedia Work by electronic means from another computing device interconnected with and located in the immediate vicinity of the user's computing device. Interactive Networked Multimedia means exploitation of an Interactive Multimedia Work over the facilities of a communications system that allows the user of a computing device to engage in two-way transmissions over the system to access the Interactive Multimedia Work, irrespective of the operator of the system or the means by which signals are carried, and that stores the Interactive Multimedia Work for transmission over the system at a place distant from the place where the user's computing device is located. Live Performance means performance of a Motion Picture or its Underlying Material by live players, whether by reading, performance, musico-dramatic rendition or pantomime, where the performance occurs directly before a live audience or is broadcast live and without prerecorded material directly to the public, but excluding performances less than fifteen (15) minutes in length done for the purposes of advertising or publicizing the Motion Picture. Merchandising means exploitation of tangible goods that are based on or utilize names, likenesses or characteristics of artists in their roles in a Motion Picture or physical materials appearing in or used for a Motion Picture and that are made for sale to the general public. NonResidential PayPerView means the broadcast of a Motion Picture Copy by means of an encoded signal for reception on television receivers in hotels or similar temporary living places where a charge is made to the viewer for the right to use a decoding device to view the broadcast of the Motion Picture at a time designated by the broadcaster for each viewing. PayPerView means NonResidential PayPerView, Residential PayPerView and Demand View exploitation of a Motion Picture. PayPerView does not include any form of Pay TV or Free TV. Publishing means exploitation of hard cover or soft cover printed publications of a novelization of a Motion Picture or artwork, logos or photographic stills created for use in the Motion Picture that are included in such novelization. Residential PayPerView means the broadcast of a Motion Picture Copy by means of an encoded signal for reception on television receivers in homes or similar permanent living places where a charge is made to the viewer for the right to use a decoding device to view the broadcast of the Motion Picture at a time designated by the broadcaster for each viewing. Negotiation right before entering into negotiations regarding the matter with any other Person. If no agreement is reached within this time period, then Licensor will be free to stop negotiations with Distributor and then to negotiate and conclude an agreement regarding the proposed matter with any other Person on any terms. Interactive Multimedia Work means a Work consisting primarily of a presentation communicated to a user through the combination of two or more media of expression, whether textual, audio, pictorial, graphical or audiovisual, where a significant characteristic of the presentation is the ability of the user to manipulate the content of the presentation by means of a computing device in real time and in a nonlinear fashion. Laser Disc is a type of VideoDisc. Law means any statute or ordinance, whether municipal, state, national or territorial, any executive, administrative or judicial regulation, order, judgment or decree, any treaty or international convention, or any rule, custom or practice with force of law. Motion Picture means an audiovisual work consisting of a series of related images that, when shown in succession, impart an impression of motion, with accompanying sounds, if any. Motion Picture Copy means the embodiment of a Motion Picture in any physical form, including film, tape, cassette or disc. Where a specific medium is limited to exploitation by a specific physical form, for example, to Videograms, then Motion Picture Copy with respect to such medium is limited to such physical form. Party means either Licensor or Distributor. Pay-Cable TV means the same as Cable Pay TV. Person means any natural person or legal entity. Principal Photography means the actual photographing of a Motion Picture, excluding second-unit photography or special effects photography, requiring the participation of the director and the on-camera participation of a featured member of the principal cast. Remake means a new Motion Picture derived from an existing Motion Picture or its Underlying Material in which substantially the same characters and events as shown in the existing Motion Picture are depicted. Rights means rights, licenses and privileges under copyright, trademark, neighboring rights or other intellectual property rights with regard to any type of exploitation of a Motion Picture or its Underlying Material. Sequel means a new Motion Picture derived from an existing Motion Picture or its Underlying Material in which a character, event or locale depicted in the existing Motion Picture or its Underlying Material is shown engaged in or as the subject of substantially new and different events than those depicted in the existing Motion Picture. Underlying Material means the literary and other material from which a Motion Picture is derived or on which it is based, including all versions of the screenplay, all notes, memos, direction, comments, ideas, stage business and other material incorporated in any version of the Motion Picture, and, to the extent necessary rights and licenses have been duly obtained, all existing novels, stories, plays, songs, events, characters, ideas, or other works from which any version of the Motion Picture is derived or on which it is based. VideoCassette means a VHS or Beta cassette or comparable magnetic storage device designed to be used with a reproduction apparatus that causes a Motion Picture to be visible on the screen of a television receiver for viewing in a substantially linear manner. A Videocassette does not include any type of Videodisc or Compact Disc. Videogram means any type of Videocassette or Videodisc, but only to the extent the specific Type of electronic storage device and its Format is authorized in the agreement of the parties. VideoDisc means a laser or capacitance disc or comparable optical or mechanical storage device designed to be used with a reproduction apparatus that causes a Motion Picture to be visible on the screen of a television receiver for viewing in a substantially linear manner. A Videodisc does not include any type of Videocassette or Compact Disc. Version means an adaptation of a Motion Picture that is not accomplished by merely mechanical reproduction or use of minimal originality but instead uses original artistic or intellectual expression to create a new Work in its own right which contains materials or expressions of authorship not found in the original Motion Picture. Work means an original expression of authorship in the literary, scientific or artistic domain whatever may be the mode or form of its expression. ALPINE PICTURES INT'L, INC. XXXXXX ("Licensor") ("Distributor") By: By: ------------------------ ------------------------ Its: Its: ------------------------ ------------------------ EX-10.3 8 0008.txt LEASE AGREEMENT MONTHLY RENTAL AGREEMENT THIS AGREEMENT, entered into this 1 day of January, 1998 (year), by and between Alpine Pictures, Inc., hereinafter Lessor, and Alpine Pictures International, Inc. hereinafter Lessee. WITNESSETH: That for and in consideration of the payment of the rents and the performance of the Covenants contained on the part of Lessee, said Lessor does hereby demise and let unto Lessee, and Lessee hires from Lessor those premises described as: located at: 6919 Valjean Avenue, Van Nuys, California 91406 for a tenancy from month-to-month commencing on the 1 day of January , 1998 (year) and at a monthly rental of Two Thousand Nine Hundred Twelve and 08/100 Dollars ($ 2912.08 ) per month payable monthly in advance on the 1st day of each and every month, on the following TERMS AND CONDITIONS: 1. OCCUPANTS. The said premises shall be occupied by no more than Thirty adults and children. 2. PETS. No pets shall be brought on the premises without prior written consent of Lessor. 3. ORDINANCES AND STATUTES. Lessee shall comply with all statutes, ordinances and requirements of all municipal, state and federal authorities now in force, or which may hereafter be in force, pertaining to the use of the premises. 4. REPAIRS OR ALTERATIONS. Lessee shall be responsible for damages causes by his negligence and that of his family or invitees and guests. Lessee shall not paint, paper or otherwise redecorate or make alterations to the premises without the prior written consent of Lessor. All alterations, additions, or improvements made to the premises with the consent of Lessor shall become the property of Lessor and shall remain upon and be surrendered with the premises. 5. UPKEEP OF PREMISES. Lessee shall keep and maintain the premises in a clean and sanitary condition at all times, and upon the termination of the tenancy shall surrender the premises to Lessor in as good condition as when received, ordinary wear and damage by the elements excepted. 6. ASSIGNMENT AND SUBLETTING. Lessee shall not assign this Agreement or sublet any portion of the premises without prior written consent of Lessor. 7. UTILITIES. Lessor shall be responsible for the payment of all utilities and services. 8. DEFAULT. If Lessee shall fail to pay rent when due, or perform any term hereof, after not less than three (3) days written notice of such default given in the manner required by law, Lessor, at his option, may terminate all rights of Lessee hereunder, unless Lessee, within said time, shall cure such default. If Lessee abandons or vacates the property, while in default of the payment of rent, Lessor may consider any property left on the premises to be abandoned and may dispose of the same in any manner allowed by law. 9. SECURITY. The security deposit in the amount of $0, shall secure the performance of Lessee's obligations hereunder. Lessor may, but shall not be obligated to, apply all or portions of said deposit on account of Lessee's obligations hereunder. Any balance remaining upon termination shall be returned to Lessee. Lessee shall not have the right to apply the security deposit in payment of the last month's rent. 10. RIGHT OF ENTRY. Lessor reserves the right to enter the demised premises at all reasonable hours for the purpose of inspection, and whenever necessary to make repairs and alterations to the demised premises. Lessee hereby grants permission to Lessor to show the demised premises to prospective purchasers, mortgagees, tenants, workmen, or contractors at reasonable hours of the day. 11. DEPOSIT REFUNDS. The balance of all deposits shall be refunded within two (2) weeks (21 days in California) from date possession is delivered to Lessor, together with a statement showing any charges made against such deposits by Lessor. 12. TERMINATION. This agreement and the tenancy hereby granted may be terminated at any time by either party hereto by giving to the other party not less than one full month's prior notice in writing. 13. ATTORNEY'S FEES. The prevailing party in an action brought for the recovery of rent or other moneys due or to become due under this lease or by reason of a breach of any covenant herein contained or for the recovery of the possession of said premises, or to compel the performance of anything agreed to be dome herein, or to recover for damages to said property, or to enjoin any act contrary to the provision hereof, shall be awarded all of the costs in connection therewith, including, but not by way of limitation, reasonable attorney's fees. 14. LEAD PAINT DISCLOSURE. "Every purchaser of any interest in residential real property on which a residential dwelling was built prior to 1978 is notified that such property may present exposure to lead from lead-based paint that may place young children at risk of developing lead poisoning. Lead poisoning in young children may produce permanent neurological damage, including learning disabilities, reduced intelligence quotient, behavioral problems and impaired memory. Lead poisoning also poses a particular risk to pregnant women. The seller of any interest in residential real estate is required to provide the buyer with any information on lead-based paint hazards from risk assessments or inspection in the seller's possession and notify the buyer of any known lead-based paint hazards. A risk assessment or inspection for possible lead-based paint hazards is recommended prior to purchase. IN WITNESS WHEREOF, the parties hereto have executed this Agreement in duplicate the day and year first above written. Lessee --------------------------------------------- Lessor ----------------------------------------------- EX-10.4 9 0009.txt MEDIA CENTER OFFICE LEASE MEDIA CENTER OFFICE LEASE BETWEEN RP HOLDINGS, INC., A CALIFORNIA CORPORATION AS LANDLORD AND ALPINE TELEVISION, INC., A CALIFORNIA CORPORATION AS TENANT AUGUST 3, 1999 MEDIA CENTER OFFICE LEASE P R E A M B L E:.............................................................1 - --------------- 1. PRINCIPAL LEASE PROVISIONS..........................................1 1.1 Landlord's Address........................................1 2. PREMISES............................................................3 2.1 Premises..................................................3 2.2 Building Common Areas.....................................3 3. TERM AND POSSESSION.................................................3 3.1 Term......................................................3 3.2 Possession................................................3 3.3 Acceptance of Premises....................................3 3.4 Quiet Enjoyment...........................................3 3.5 Security Deposit..........................................3 4. RENT................................................................4 4.1 Payment of Rent...........................................4 4.2 Monthly Rental............................................4 4.3 Additional Rental.........................................4 4.4 Definitions...............................................5 4.5 Calculation and Payment of Additional Rental..............6 a) Calculation of Excess and Underage........................6 b) Statement of Actual Direct Expenses and Payment by Tenant.6 c) Statement of Estimated Direct Expenses....................6 4.6 Taxes and Other Charges for Which Tenant is Directly Responsible...............................................7 4.7 Payment for Additional Services...........................7 5. SERVICES AND UTILITIES..............................................8 5.1 Services by Landlord......................................8 5.2 Maintenance and Repair by Landlord........................8 5.3 Additional Services.......................................8 a) Parking........................................8 b) Telephone Service..............................8 c) Other Services.................................8 5.4 Interruption of Service...................................8 6. USE AND OCCUPANCY BY TENANT.........................................9 6.1 Use by Tenant.............................................9 6.2 Rules and Regulations.....................................9 6.3 Prohibited Uses...........................................9 6.4 Compliance With Laws......................................9 7. MAINTENANCE, REPAIRS AND ALTERATIONS...............................10 7.1 Maintenance and Repair...................................10 7.2 Alterations and Additions................................10 a) Landlord's Consent............................10 (I) Alterations Requiring Prior Notice...10 (II) Alterations Requiring Prior Consent..10 (III) Indemnity and Bond...................11 (IV) Construction Insurance...............11 (V) Other Terms..........................11 b) Ownership and Surrender.......................12 (I) Alterations..........................12 (II) Tenant's Property....................12 (III) Liens................................12 (IV) Additional Requirements..............13 8. INSURANCE AND INDEMNIFICATION......................................13 8.1 Landlord's Insurance and Waiver..........................13 8.2 Tenant's Insurance.......................................13 8.3 Indemnification..........................................15 8.4 Waiver of Subrogation....................................15 9. DAMAGE OR DESTRUCTION..............................................16 9.1 Notice of Casualty.......................................16 9.2 Repair of Damage.........................................16 9.3 Abatement................................................16 9.4 Termination of Lease in Event of Damage..................16 9.5 End of Term..............................................17 9.6 Terms of Master Lease....................................17 10. CONDEMNATION.......................................................17 11. ASSIGNMENT, SUBLETTING AND RECAPTURE...............................17 11.1 Consent Required.........................................17 11.2 Prohibitions.............................................18 11.3 Payments to Landlord.....................................18 11.4 Recapture................................................19 11.5 No Release...............................................19 11.6 Tenant's Remedies........................................19 12. DEFAULT AND REMEDIES...............................................19 12.1 Events of Default........................................19 12.2 Remedies.................................................20 12.3 Damages On Termination...................................20 12.4 Late Charge..............................................21 12.5 Past Due Obligations.....................................21 12.6 Application of Payments - Order of Precedence............21 12.7 Non-exclusive Remedies...................................22 13. ADDITIONAL RIGHTS OF LANDLORD......................................22 13.1 Entry by Landlord........................................22 13.2 Building Planning........................................22 13.3 Transfer by Landlord.....................................22 13.4 Default of Landlord......................................23 13.5 Subordination............................................23 13.6 Lender's Rights..........................................23 13.7 Estoppel Certificate.....................................24 13.8 Financial Information....................................24 14. MASTER LEASE.......................................................24 14.1 Subordination............................................24 14.2 Tenant Subordination.....................................24 14.3 Tenant's Estoppel........................................24 15. MISCELLANEOUS......................................................25 15.1 Brokers..................................................25 15.2 End of Term and Holding Over.............................25 15.3 Performance..............................................25 15.4 Notices..................................................25 15.5 Merger...................................................26 15.6 Termination..............................................26 15.7 Applicable Laws..........................................26 15.8 Professional Fees........................................26 15.9 Arbitration of Disputes..................................26 15.10 Modification.............................................26 15.11 Relationship of Parties..................................27 15.12 Waiver...................................................27 15.13 Partial Invalidity.......................................27 15.14 Interpretations..........................................27 15.15 Successors and Assigns...................................27 15.16 Tenant as Partnership....................................27 15.17 Tenant as Corporation....................................27 15.18 Right to Lease...........................................28 15.19 Landlord's Liability.....................................28 15.20 Exercise of Landlord's Rights............................28 15.21 Exhibits.................................................28 15.22 Time.....................................................28 MEDIA CENTER OFFICE LEASE ------------------------- THIS LEASE (the "Lease"), dated for reference purposes only as of the 3rd day of August, 1999, is entered into by and between RP Holdings, Inc., a California corporation ("Landlord"), and ALPINE TELEVISION, INC., a CALIFORNIA CORPORATION ("Tenant"); P R E A M B L E: ---------------- Landlord, in consideration of the rent to be paid and the covenants and agreements to be performed by Tenant, as hereinafter set forth, does hereby lease, demise and let unto Tenant and Tenant hereby leases and accepts from Landlord that certain office space in the "Building", as defined below, shown and designed on the floor plan attached hereto as Exhibit "A-1" (the "Premises") for the "Term", as defined below, unless sooner terminated as herein provided. The Building is part of that certain complex commonly known as the Raleigh Studios - Manhattan Beach ("Raleigh Studios") depicted on the attached Exhibit "A-2". Landlord, as tenant, leases Raleigh Studios from Shamrock MBS, L.L.C., a Delaware limited liability company ("Master Landlord") under that certain lease (the "Master Lease") dated July 1, 1998. This Lease is subject to and subordinate to the Master Lease. The Premises are leased by Landlord to Tenant and are accepted and are to be used and possessed by Tenant upon and subject to the following terms, provisions, covenants, agreements and conditions. 1. PRINCIPAL LEASE PROVISIONS: -------------------------- Each reference in this Lease to any of the terms described in this Article 1 shall mean and refer to the following; however, the other Articles of this Lease contain numerous refinements and exceptions which qualify the provisions of this Article; all other terms are as defined in this Lease: 1.1 Landlord's Address: RP HOLDINGS, INC. 5300 Melrose Boulevard Hollywood, California 90038 attention: Michael M. Moore with copy to: Terry Hughes, Esq. General Counsel RP Holdings, Inc. 100 Wilshire Boulevard, Eighth Floor Santa Monica, California 90401 1.2 Tenant's Address: 6919 Valjean Avenue with a copy to: Fran Freedman, Esq. Van Nuys, Ca. 91406 Alpine Entertainment Attn: Roland Carroll 6919 Valjean Avenue Van Nuys, CA 91406 1.3 Building: Media Center (which shall include the Building Common Areas). 1 1.4 Floor Number: Third 1.5 Suite Number: 310 - 4989 rentable square feet (Exhibit A) 1.6 Lease Term: Three years with an option to extend per paragraph 3.6 1.7 Commencement Date: April 15, 2000 1.8 Termination Date: April 14, 2003 1.9 Initial Monthly Rental: Eleven Thousand Seven Hundred Seventy Two Dollars and Fifty Cents ($11,772.50) 1.10 Base Year: 2000 1.11 Tenant's Share: 8.58% pro rata share 1.12 Security Deposit: Eleven Thousand Seven Hundred Seventy Two Dollars and Fifty Cents ($11,772.50) 1.13 Brokers: CB Richard Ellis, Inc. 1.14 Number of Parked Cars: Tenant shall have the right to rent up to 2.5 unreserved spaces per 1000 square feet at Landlord's current standard rates of $55.00 per unreserved parking space in the structure and 1.5 reserved spaces per 1000 square feet at Landlord's standard rates of $125.00 per reserved parking space. 1.15 Use of Premises: Office Use 2 2. PREMISES. --------- 2.1 PREMISES. Landlord hereby leases to Tenant and Tenant hereby leases from Landlord the Premises. 2.2 BUILDING COMMON AREAS. Tenant shall have, as appurtenant to the Premises, the non-exclusive right, in common with others, subject to rules attached hereto as Exhibit B, which may be changed from time to time by Landlord, to use the Building Common Areas as defined herein. The Building Common Areas shall consist of (i) areas surrounding or within the Building designated by Landlord that include the common entrances, lobbies, atrium areas, restrooms, elevators, stairways and access ways, ramps, drives, platforms, passage ways, service ways, loading and unloading areas, and trash areas servicing the Building; and (ii) areas within Raleigh Studios designated by Landlord for access to the Parking Area (as defined herein) and the Building by vehicles and pedestrian traffic ("Access Common Areas"). 3. TERM AND POSSESSION. -------------------- 3.1 TERM. The term of this Lease shall be for the term set forth in Section 1.6, commencing on the Commencement Date as set forth in Section 1.7 and ending on the Termination Date as set forth in Section 1.8 unless sooner terminated as provided in this Lease. 3.2 POSSESSION. Tenant agrees that if Landlord is unable to deliver possession of the Premises to Tenant on the Commencement Date, Landlord shall not be liable for any damage caused thereby, nor shall this Lease be void or voidable. Under such circumstances, the term of this Lease shall not commence and the rent and the payments for expenses which Tenant is obligated to pay shall not commence until the Premises are available for occupancy by Tenant, unless such delay is the fault of Tenant. If Landlord tenders possession of the Premises to Tenant prior to the Commencement Date and if Tenant elects to accept such prior tender, the term of this Lease shall commence on the date Tenant takes possession of the Premises and all of the terms, covenants and conditions of this Lease, including the payment of rent and other expenses, shall be effective as of such date. Notwithstanding the fact that the term of this Lease commences earlier or later than the Commencement Date, the term of this Lease shall end on the Termination Date set forth in Section 1.8. 3.3 ACCEPTANCE OF PREMISES. By taking possession of the Premises, Tenant accepts the Premises in its then "as is" condition and acknowledges that the Premises and the Building are in good and satisfactory condition at the time Tenant takes possession of the Premises. 3.4 QUIET ENJOYMENT. Upon Tenant's paying the rent and other expenses provided in this lease and observing and performing all of the terms, covenants and conditions to be observed and performed by Tenant hereunder, Tenant shall have possession of the Premises for the entire term hereof, subject to all of the provisions of this Lease. 3.5 SECURITY DEPOSIT. On delivery to Landlord of a copy of this Lease executed by Tenant, Tenant shall deposit with Landlord the amount set forth in Section 1.12 as security for the performance by Tenant of its obligations under this Lease. Upon any default by Tenant under this Lease, Landlord may, but shall not be obligated to, use, apply or retain all or any part of such security deposit for the payment of any 3 rent in default, or any other damage, loss, cost or expense which Landlord may incur as a result of, or in connection with, Tenant's default. If Landlord so applies any portion of such security deposit, Tenant shall within ten (10) days after written demand from Landlord, restore such deposit to the full amount provided in the Lease. Landlord shall not be required to pay interest to Tenant on such security deposit or to keep such security deposit separate from its general accounts. If Tenant complies with all of the provisions of this Lease, the unused portion of such security deposit shall be returned to Tenant (or, at Landlord's option, to the last assignee of Tenant's interest hereunder) within a reasonable time after the expiration or sooner termination of the Lease Term and the surrender of possession of the Premises to Landlord in the condition required hereby. Tenant hereby waives the provisions of Section 1950.7 of the California Civil Code, and all other provisions of law, now or hereafter in force, which provide that Landlord may claim from a security deposit only those sums reasonably necessary to remedy defaults in the payment of rent, to repair damage caused by Tenant or to clean the Premises, it being agreed that Landlord may, in addition, claim those sums reasonably necessary to compensate Landlord for any loss or damage, caused by the act or omission of Tenant or any officer, employee, agent or invitee of Tenant. No successor of Landlord's interest hereunder shall be liable for the return of any security deposit made by Tenant except to the extent such successor actually receives such deposit. 3.6 OPTION TO EXTEND At the end of the initial term, Tenant shall have the option to extend for one (1) two (2) year period. Tenant shall provide Landlord with no less than four (4) months prior written notice of its intent to extend. The rental rate for the extended term shall include a five (5%) percent increase for each year of the extended term. 4. RENT. ----- 4.1 PAYMENT OF RENT. Tenant shall pay the Monthly Rental without any prior demand therefor and without any deduction or offset whatsoever, in lawful money of the United States of America, to Landlord on the first day of each calendar month during the term of this Lease as rent for the Premises for such month. Tenant shall make all payments of rent and other expenses to Landlord at Landlord's address or at such other address as Landlord may from time to time request in writing. If the term of this Lease commences other than on the first day of the month or ends other than on the last day of a month, the rent for a partial month shall be prorated on a thirty (30) day month, based on the number of days in such month that this Lease is in effect. 4.2 MONTHLY RENTAL. The Monthly Rental for Months 1 through 36 beginning with the Commencement Date shall be the Initial Monthly Rental as provided in Section 1.9 hereof. 4.3 ADDITIONAL RENTAL. In addition to paying the Monthly Rental as specified in Section 4.1 of this Lease, Tenant shall pay Tenant's Share (as defined herein) of the annual Direct Expenses (as defined herein) which are in excess of Direct Expenses incurred in the Base Year (as defined herein); provided, however, that in no event shall any decrease in Direct Expenses entitle Tenant to any decrease in the Monthly Rental or any credit against sums due under this Lease. Such payments by Tenant together with any and all other amounts payable by Tenant to Landlord pursuant to the terms of this Lease, shall be hereinafter collectively referred to as the "Additional Rental". The Monthly Rental and Additional Rental are herein collectively referred to as "Rent" or "rent". All amounts due under this Article 4 as Additional Rental shall be payable for the same periods and in the same manner as the Monthly Rental. Without limitation on other obligations of Tenant which shall survive the expiration of the Lease Term, the obligations of Tenant to pay the Additional Rental provided for in this Article 4 shall survive the expiration of the Lease Term. 4 4.4 DEFINITIONS. As used in this ARTICLE 4, the following terms shall have the meanings hereinafter set forth: a) "Base Year" shall be the period set forth in Section 1.10. b) "Direct Expenses" shall mean "Operating Expenses" and "Tax Expenses". c) "Expense Year" shall mean each calendar year in which any portion of the Lease Term falls, through and including the calendar year in which the Lease Term expires, provided that Landlord, upon notice to Tenant, may change the Expense Year from time to time to any other twelve (12) consecutive month period, and in the event of any such change, Tenant's Share of Direct Expenses shall be equitably adjusted for any Expense Year involved in any such change. d) "Operating Expenses" shall mean all expenses, costs and amounts of every kind and nature which Landlord shall incur during any Expense Year, because of or in connection with Landlord's management, maintenance, repair, replacement, restoration or operation of the Building and the Building Common Areas, whether or not such expenses, costs and amounts are payable to the Master Landlord under the Master Lease. Operating Expenses shall include, without limitation: (i) the cost of operating, maintaining, repairing, renovating and managing the utility systems, mechanical systems, sanitary and any escalator and/or elevator systems, and the cost of supplies and equipment and maintenance and service contracts in connection therewith; (ii) the cost of licenses, certificates, permits and inspections and the cost of contesting the validity or applicability of any governmental enactments which may affect Operating Expenses , and the costs incurred in connection with the implementation and operation of a transportation system management program or similar program; (iii) the cost of insurance carried by Landlord, in such amounts as Landlord may reasonably determine (including without limitation the amounts required to maintained under the Master Lease); (iv) the cost of landscaping, relamping, and all supplies, tools, equipment and materials used; (v) the cost of parking area repair, restoration, and maintenance, including, but not limited to, resurfacing, repainting, restriping, and cleaning; (vi) fees, charges and other costs, including consulting fees, reasonable legal fees and reasonable accounting fees, of all contractors engaged by Landlord or otherwise reasonably incurred by Landlord; (vii) any equipment rental agreements or management agreements (including the cost of any management fee and the fair rental value of any office space provided thereunder); (viii) wages, salaries and other compensation and benefits of all persons engaged in the operation, management, maintenance or security, and employer's Social Security taxes, unemployment taxes or insurance, and any other taxes which may be levied on such wages, salaries, compensation and benefits; provided, that if any employees of Landlord provide services for more than one building of Landlord, then a prorated portion of such employees' wages, benefits and taxes shall be included in Operating Expenses based on the portion of their working time devoted to the Building and the Building Common Areas; (ix) operation, repair, maintenance and replacement of all "Systems and Equipment," as that term is defined below, and components thereof; (x) the cost of janitorial, alarm and security service, window cleaning, trash removal, parking lot sweeping, landscape maintenance, replacement of wall and floor coverings, ceiling tiles and fixtures in common areas, maintenance and replacement of curbs and walkways, repair to roofs and re-roofing; (xi) amortization (including interest on the unamortized cost) of the cost of acquiring or the rental expense of personal property; (xiii) the cost of any capital improvements or other costs made to the Building that are required under any governmental law or regulation, ^ provided, however, that if any such cost described above, is a capital expenditure, such cost shall be amortized (including interest on the unamortized cost) over its useful life as Landlord shall reasonably determine, and (xiv) all amounts of "Additional Rent" as defined in the Master Lease payable by Landlord under the Master Lease that are allocable to the Building and the Building Common Areas. If the Building is not at least ninety-five percent (95%) occupied 5 during all or a portion of any Expense Year, Landlord may make an appropriate adjustment to the variable components of Operating Expenses for such year or applicable portion thereof, employing sound accounting and management principles, to determine the amount of Operating Expenses that would have been incurred had the Building been ninety-five percent (95%) occupied; and the amount so determined shall be deemed to be the amount of Operating Expenses for such year, or applicable portion thereof. Notwithstanding anything to the contrary set forth in this ARTICLE 4, when calculating Direct Expenses for the Base Year, Operating Expenses shall exclude market-wide labor-rate increases due to extraordinary circumstances, including, but not limited to, boycotts and strikes, and utility rate increases due to extraordinary circumstances including, but not limited to, conservation surcharges, boycotts, embargoes or other shortages, or amortized costs relating to capital improvements. "Systems and Equipment" shall mean any plant, machinery, transformers, duct work, cable, wires, and other equipment, facilities, and systems designed to supply heat, ventilation, air conditioning and humidity or any other services or utilities, or comprising or serving as any component or portion of the electrical, gas, steam, plumbing, sprinkler, communications, alarm, security, or fire/life safety systems or equipment, or any other mechanical, electrical, electronic, computer or other systems or equipment which serve the Building in whole or in part. g) "Tax Expenses" shall mean all amounts charged to Landlord during any Expense Year as "Tax Expenses" under the Master Lease, which are attributable to the ownership, management, and operation of the Building and the Building Common Areas. h) "Tenant's Share" shall mean the percentage set forth in Section 1.11. 4.5 CALCULATION AND PAYMENT OF ADDITIONAL RENTAL. a) CALCULATION OF EXCESS AND UNDERAGE. If for any Expense Year ending or commencing within the Lease Term, Tenant's Share of Direct Expenses for such Expense Year exceeds Tenant's Share of Direct Expenses for the Base Year, then Tenant shall pay to Landlord, in the manner set forth in SECTION 4.5.(b), below, and as Additional Rental, an amount equal to the excess (the "Excess"). b) STATEMENT OF ACTUAL DIRECT EXPENSES AND PAYMENT BY TENANT. Following the end of each Expense Year, Landlord shall give to Tenant a statement (the "Statement") which Statement shall state the actual Direct Expenses incurred or accrued for such preceding Expense Year, and which shall indicate the amount, if any, of any Excess or underage. Upon receipt of the Statement for each Expense Year ending during the Lease Term, if an Excess is present, Tenant shall pay, with its next installment of Monthly Rental, the full amount of the Excess for such Expense Year, less the amounts, if any, paid during such Expense Year as "Estimated Excess", as that term is defined in SECTION 4.5.(c) below. Even though the Lease Term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant's Share of the Direct Expenses for the Expense Year in which this Lease terminates, if an Excess is present, Tenant shall, within thirty (30) days of receipt of a Statement setting forth the Excess, pay to Landlord an amount as calculated pursuant to the provisions of SECTION 4.5.(a) of this Lease. The provisions of this SECTION 4.5.(b) shall survive the expiration or earlier termination of the Lease Term. c) STATEMENT OF ESTIMATED DIRECT EXPENSES. Landlord, at Landlord's option, may elect to give Tenant a yearly expense estimate statement (the "Estimate Statement") which Estimate Statement shall set forth Landlord's reasonable estimate (the "Estimate") of what the total 6 amount of Direct Expenses for the then-current Expense Year shall be and the estimated Excess (the "Estimated Excess") as calculated by comparing Tenant's Share of Direct Expenses, which shall be based upon the Estimate, to Tenant's Share of Direct Expenses for the Base Year. The failure of Landlord to timely furnish the Estimate Statement for any Expense Year shall not preclude Landlord from enforcing its rights to collect any Estimated Excess under this ARTICLE 4. If pursuant to the Estimate Statement an Estimated Excess is calculated for the then-current Expense Year, Tenant shall pay, with its next installment of Monthly Rental due, a fraction of the Estimated Excess for the then-current Expense Year (reduced by any amounts paid pursuant to the last sentence of this SECTION 4.5.(c)). Such fraction shall have as its numerator the number of months which have elapsed in such current Expense Year, including the month of such payment, and twelve (12) as its denominator. Until a new Estimate Statement is furnished, Tenant shall pay monthly, with the Monthly Rental installments, an amount equal to one-twelfth (1/12) of the total Estimated Excess set forth in the previous Estimate Statement delivered by Landlord to Tenant. 4.6 TAXES AND OTHER CHARGES FOR WHICH TENANT IS DIRECTLY RESPONSIBLE. Tenant shall reimburse Landlord upon demand for any and all taxes or assessments required to be paid by Landlord (except to the extent included in Tax Expenses by Landlord), excluding state, local and federal personal or corporate income taxes measured by the net income of Landlord from all sources and estate and inheritance taxes, whether or not now customary or within the contemplation of the parties hereto, when: a) Said taxes are measured by or reasonably attributable to the cost or value of Tenant's equipment, furniture, fixtures and other personal property located in the Premises, or by the cost or value of any leasehold improvements made in or to the Premises by or for Tenant, to the extent the cost or value of such leasehold improvements exceeds the cost or value of a building standard build-out as determined by Landlord regardless of whether title to such improvements shall be vested in Tenant or Landlord; b) Said taxes are assessed upon or with respect to the possession, leasing, operation, management, maintenance, alteration, repair, use or occupancy by Tenant of the Premises or any portion of the Building or Building Common Areas; or c) Said taxes are assessed upon this transaction or any document to which Tenant is a party creating or transferring an interest or an estate in the Premises; or d) Said assessments are levied or assessed upon the Building or Building Common Areas or any part thereof or upon Landlord and/or by any governmental authority or entity, and relate to the construction, operation, management, use, alteration or repair of mass transit improvements. 4.7 PAYMENT FOR ADDITIONAL SERVICES. In addition to the payment set forth above, but not as additional rent, Tenant shall pay to Landlord such sums as may be due to Landlord for items and Additional Services, as generally described in Section 5.3 below, provided by Landlord to Tenant in the month previous to the one in which the monthly rental is due. Notwithstanding anything in this Lease to the contrary, any delay or failure of Landlord to provide notice of the additional cost due, or in billing therefor, shall not constitute a waiver of, or in any way impair, the obligation of Tenant to pay such additional cost. Tenant's failure to pay such additional charges shall, without impairment to any other of Landlord's rights and remedies at law or otherwise, entitle Landlord to immediately terminate the Additional Services for which payment has not been made in whole when due, and shall be subject to the same penalties, charges, and actions at law as a failure to pay other contractual obligations. Landlord shall provide janitorial 7 service equivalent to that furnished in comparable office buildings which shall consist essentially of a nightly clean-up five (5) days per week (excluding holidays) and window washing as reasonably required. Landlord shall replace fluorescent tubes and ballasts in the Landlord's building standard overhead fluorescent fixtures as required. Tenant shall pay for replacement of all other tubes, ballasts and bulbs as required. "Business Hours" shall mean Monday through Friday from 8 a.m. to 6 p.m., and on Saturday from 9:00 a.m. to 1:00 p.m., except for the date of observation of locally recognized holidays designated by Landlord (collectively, the "Holidays"). 5. SERVICES AND UTILITIES. ----------------------- 5.1 SERVICES BY LANDLORD. Landlord shall furnish to the Premises during Business Hours (as defined below) such amounts of air conditioning, heating and ventilation as may be reasonably necessary for the comfortable use and occupation of the Premises as office space. Landlord shall at all times furnish the Premises with elevator service and electricity adequate for normal lighting and office machines and shall furnish water for lavatory and drinking purposes. 5.2 MAINTENANCE AND REPAIR BY LANDLORD. Landlord shall use commercially reasonable efforts to repair and maintain the Building and Building Common Areas. 5.3 ADDITIONAL SERVICES. Landlord shall provide to Tenant, at additional cost to Tenant, the following Additional Services: a) PARKING. Landlord shall permit Tenant and its employees to park the number of cars set forth in Section 1.14 within the parking area designated by Landlord at Raleigh Studios and Tenant shall pay the monthly rate for parking from time to time applicable thereto. Tenant shall comply with rules and regulations applicable to the parking area. b) TELEPHONE SERVICE. Telephone service is provided through a privately owned telephone switch system and not by a public utility and shall be billed at the standard charges and rates established by Landlord for all Tenants having similar telephone usage and requirements. Telephone charges and rates shall be established at the time such service is ordered initially and shall apply in all months in which Tenant utilizes such service, subject to any price adjustments applicable to all users that Landlord in Landlord's sole discretion, may find it necessary to make. c) OTHER SERVICES. Use of Landlord's equipment, provision of maintenance services beyond those set forth in Section 5.2 above, provision of repair services, and use of conference rooms, as well as such other items and/or services as may be agreed to in writing between Landlord and Tenant. If Tenant requests, and Landlord elects to provide heating, ventilation and air-conditioning service after Business Hours, the delivery of such service shall be subject to such hourly rates, advance notice requirements and minimum period requirements as Landlord may establish. 5.4 INTERRUPTION OF SERVICE. Landlord shall not be liable and the Monthly Rental and other payment to Landlord shall not abate for interruptions to, without limitation, the telephone, plumbing, heating, ventilating, air conditioning, elevator, electrical or other mechanical systems or cleaning services, by reason of any casualty, accident, emergency, repairs, alterations, improvements or shortages, or lack of availability of materials or services. At any time during the term of this Lease, any utilities and\or services may be conserved by Landlord without abatement of rent or other expenses if undertaken by Landlord as required by any governmental agency or in a reasonable effort to reduce energy or other resource consumption. 8 6. USE AND OCCUPANCY BY TENANT. ---------------------------- 6.1 USE BY TENANT. Tenant shall use and occupy the Premises for office purposes and such other purpose as described in Section 1.15 and for no other purposes. Tenant shall operate its business on the Premises during normal business hours and shall maintain sufficient personnel on the Premises during normal business hours to receive and supervise visitors to the Premises. Tenant shall not do or permit anything to be done in or about the Premises which would constitute a nuisance to the other tenants or occupants of the building or significantly interfere with their use of any area of the Building other than the Premises. 6.2 RULES AND REGULATIONS. Tenant and its employees, agents and visitors shall observe faithfully the Rules and Regulations attached hereto as Exhibit "B" and made a part hereof, and such other and further reasonable Rules and Regulations as Master Landlord or Landlord may from time to time adopt. Landlord shall not be liable to Tenant for violation of any Rules and Regulations or the breach of any provision in any lease by any other tenant or other party in the Studios. 6.3 PROHIBITED USES. Tenant shall not use nor permit anything to be done in or about the Premises nor bring or keep anything therein which shall: (a) increase the existing rate of, cause the cancellation of, or otherwise adversely affect any casualty or other insurance for the Building or any part thereof or any of its contents; (b) impair the proper and economic maintenance, operation and repair of the Building or any portion thereof; (c) cause any nuisance in or about the Premises or the Building; or (d) obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them. Tenant shall not commit or allow to be committed any waste to the Premises or the Building. 6.4 COMPLIANCE WITH LAWS. Tenant shall not use the Premises or permit anything to be done in or about the Premises or Raleigh Studios which shall in any way conflict with or violate any present or future law, statute, ordinance, code, rule, regulation, requirement, license, permit, certificate, judgment, decree, order or direction of any present or future governmental or quasi-governmental authority, agency, department, board, panel or court (singularly and collectively "LAWS"). Tenant shall, at its expense, promptly comply with all Laws, and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to or affecting the condition, use or occupancy of the Premises, with respect to the Tenant Improvements located in or about the Premises or with respect to the Building Common Areas on the floor or floors containing the Premises. Tenant shall not use or allow another person or entity to use any part of the Premises for the storage, use, treatment, manufacture or sale of hazardous materials or substances as defined pursuant to any applicable federal, state or local governmental or quasi-governmental law, code, ordinance, rule, or regulation. Landlord acknowledges, however, that Tenant shall maintain products in the Premises which are incidental to the operation of its offices, such as photocopy supplies, secretarial supplies and limited janitorial supplies, which products contain chemicals which are categorized as hazardous materials. 9 7. MAINTENANCE, REPAIRS AND ALTERATIONS. ------------------------------------- 7.1 MAINTENANCE AND REPAIR. During the term of this Lease, Tenant shall take good care of the Premises and fixtures therein and maintain them in good order, condition and repair in a quality and class equal to the original work, ordinary and reasonable wear excepted. During the term of this Lease, Tenant shall maintain at its own expense all plumbing fixtures and the area in which such plumbing fixtures are located within the Premises, except the restrooms located in the core of the Building, in good order, condition and repair to the reasonable satisfaction of Landlord. Upon surrender of the Premises to Landlord, Tenant shall deliver the Premises to Landlord, broom clean, in as good order, condition and repair as they are on the commencement of the term of this Lease, ordinary and reasonable wear excepted. Without limiting the foregoing, Landlord may require that any such maintenance or repairs be performed by Landlord at Tenant's expense, but only in the event that Tenant shall fail, in Landlord's reasonable opinion, to maintain or repair the premises in a proper manner, and only after Landlord has provided Tenant with thirty (30) days prior written notice of the Landlord's objection to the method and manner in which the Tenant is maintaining the premises. In addition to the forgoing requirements of this Article 7.1. 7.2 ALTERATIONS AND ADDITIONS. a) LANDLORD'S CONSENT. (i) ALTERATIONS REQUIRING PRIOR NOTICE. Tenant shall not make or permit to be made any alterations, additions or improvements (singularly and collectively "Alterations") to or of the Building or the Premises or any part thereof without the prior written consent of Landlord in each instance. However, Landlord's consent shall not be required (but Tenant must provide prior written notice) for minor cosmetic decorations of the Premises such as wall coverings, wall hangings, nor for the installation of furnishings (collectively, "Cosmetic Alterations"). If tenant improvement work is to be performed to the Premises pursuant to the terms of a Work Letter attached hereto as an Exhibit, the initial installation and performance of such work shall be governed by the terms of such Work Letter and not by the terms of this Section 7.2 provided any addition, modification or removal of such work after its initial installation shall be governed by this Section 7.2. (ii) ALTERATIONS REQUIRING PRIOR CONSENT. Landlord shall not unreasonably withhold its consent to any Alterations provided and upon the condition that all of the following conditions (which shall not apply to Cosmetic Alterations) shall be satisfied: (a) the Alterations do not affect the outside appearance of the Building; (b) the Alterations are nonstructural and do not affect the water-tight nature of the Building; (c) the Alterations are to the interior of the Premises and do not affect any part of the Building outside of the Premises; (d) the Alterations do not affect the functioning of the heating, ventilating and air conditioning ("HVAC"), mechanical, electrical, sanitary or other utilities, systems and services of the Building, or increase the usage thereof by Tenant; (e) Landlord shall have approved the final plans and specifications for the Alterations and all contractors (including subcontractors) who shall perform them; (f) Tenant agrees to pay to Landlord (i) a fee for Landlord's indirect costs, field supervision or coordination in connection with the Alterations equal to five percent (5%) of the estimated cost of the Alterations, and (ii) the reasonable costs and expenses actually incurred by Landlord in reviewing Tenant's plans and specifications and 10 inspecting the Alterations to determine whether they are being performed in accordance with the approved plans and specifications and in compliance with Laws, including, without limitation, the fees of any architect or engineer employed by Landlord for such purpose; and (g) before proceeding with any Alteration Tenant shall comply with the lien obligations set forth in subsection (iii) below. Unless all of the foregoing conditions are satisfied, Landlord shall have the right to withhold its consent to the Alterations in Landlord's sole and absolute discretion. Tenant shall pay, when presented and as due, all claims for labor, services and/or materials furnished or alleged to have been furnished regarding Alterations, including, without limitation, as may become due, mechanics' or material men's liens against Raleigh Studios or any portion thereof or interest therein. Subject to the requirements of this Section 7.2 and all other applicable provisions of this Lease, Tenant shall have the right to contest in good faith the validity of any such lien, claim and/or demand. Tenant shall fully satisfy any judgment within five calendar days of its issuance that may be rendered against Landlord, Raleigh Studios and/or any portion thereof or interest therein. In order to appeal any judgment, Tenant shall first post an appeal bond within five calendar days of the issuance of the judgment in form, substance and amount as reasonably required by Landlord or any purchaser of Raleigh Studios or any portion thereof or interest therein and also as are required by any lender or title company. (iii) INDEMNITY AND BOND. Tenant shall defend and indemnify Landlord, Master Landlord and Raleigh Studios against any such lien, claim and/or demand in connection with any Alteration as provided in Section 8.3 herein. Tenant shall also furnish Landlord with both a lien release bond and a surety bond in an amount sufficient to cover all expenses, claims, losses, damages and/or liabilities that may be claimed against or suffered by Landlord, Master Landlord and Raleigh Studios or any of them by reason of Tenant's contest, including without limitation to satisfy Tenant's defense and indemnity of Landlord, Master Landlord and Raleigh. Such bonds shall be in form, substance and amount as are reasonably satisfactory to Landlord and also as are required by any lender or title company. The lien release bond shall also be in form, substance and amount sufficient to satisfy and remove of record the contested lien, claim and/or demand. (iv) CONSTRUCTION INSURANCE. Before construction begins, Tenant shall deliver to Landlord reasonable evidence that damage to, or destruction of, the Alterations during construction will be covered either by the policies that Tenant is required to carry under Article 8 or by a policy of builder's all-risk insurance in an amount reasonably approved by Landlord. If Landlord requires Tenant to provide builder's all-risk insurance for the proposed Alterations, Tenant shall provide a copy of the policy, any endorsements, and an original certificate of insurance that complies with Article 8. Tenant shall cause each contractor and subcontractor to maintain all worker's compensation insurance required by law and liability insurance (including property damage) in amounts reasonably required by Landlord. Landlord and Master Landlord shall be named as an additional insured on the contractor's liability insurance policy. (v) OTHER TERMS. Not more than twenty (20) days prior to commencement of any Alterations (including, without limitation, Cosmetic Alterations), Tenant shall notify Landlord of the work commencement date so that Landlord may post notices of non-responsibility about the Premises. All Alterations must comply with all Laws, the other terms of this Lease, and the final plans and specifications approved by Landlord, and Tenant shall fully and promptly comply with and observe the rules and regulations of Landlord then in force with respect to the making of Alterations. Landlord's review and approval of Tenant's plans 11 and specifications are solely for Landlord's benefit. Landlord shall have no duty toward Tenant, nor shall Landlord be deemed to have made any representation or warranty to Tenant, with respect to the safety, adequacy, correctness, efficiency or compliance with Laws of the design of the Alterations, the plans and specifications therefor, or any other matter regarding the Alterations. In addition, the performance of Alterations shall also be conditioned upon the following: (a) copies of Tenant's plans and specifications shall have been delivered to Landlord at least 15 calendar days before Tenant commences the Alterations, or if plans and specifications are not required by Laws and have not been prepared for such Alterations, Tenant shall deliver a written description of the Alterations to be performed; all required governmental approvals and permits have been obtained and copies have been delivered to Landlord; all requirements regarding insurance hereunder and all commercially reasonable requirements of Landlord's and Master Landlord's hazard insurance carriers have been satisfied, and a certificate of insurance showing Landlord and Master Landlord as additional insureds as required hereunder shall be delivered to Landlord. b) OWNERSHIP AND SURRENDER. (i) ALTERATIONS. Upon their installation, all Alterations, including, but not limited to, cabling, wall covering, paneling and built-in cabinetry, but excluding movable furniture, trade fixtures and office equipment ("Tenant's Property"), shall become a part of the realty and belong to Landlord and shall be surrendered with the Premises. However, upon the expiration or sooner termination of the Lease Term, Tenant shall, upon demand by Landlord, at Tenant's expense, immediately remove any Alterations made by Tenant which are designated by Landlord to be removed and repair any damage to the Premises caused by such removal. (ii) TENANT'S PROPERTY. Upon the expiration or sooner termination of the Lease Term, Tenant shall immediately remove Tenant's Property from the Premises and repair any damage to the Premises caused by the installation, use or removal of Tenant's Property. If Tenant fails to remove Tenant's Property on or before the expiration or sooner termination of the Lease Term, (i) Tenant's Property shall be, at Landlord's option, deemed abandoned by Tenant, (ii) Tenant hereby waives any statutory or common law rights to Tenant's Property or to assert the means by which Landlord disposes of Tenant's Property, (iii) Tenant agrees that Landlord may keep or dispose of Tenant's Property in any manner Landlord desires, without liability to Tenant therefor, and (iv) Tenant shall be obligated to promptly reimburse Landlord for any costs incurred by Landlord in removing and disposing of Tenant's Property (and for any costs incurred by Landlord in repairing the Premises as a result of the installation, use or removal of Tenant's Property). In no event shall Tenant's Property include any wall partitions ("Wall Partitions") installed at the Premises which permit the division of the Premises regardless of the fact that such partitions may be movable. All Wall Partitions shall be deemed Landlord's property and shall be surrendered with the Premises at the end of the Lease Term. (iii) LIENS. Tenant shall pay when due all claims for labor, materials and services furnished by or at the request of Tenant or Tenant's Affiliates. Tenant shall keep the Premises and the Building free from all liens, security interests and encumbrances (including, without limitation, all mechanic's liens and stop notices) created as a result of or arising in connection with the Alterations or any other labor, services or materials provided for or at the request of Tenant or Tenant's Affiliates, or any other act or omission of Tenant or Tenant's 12 Affiliates, or persons claiming through or under them (such liens, security interests and encumbrances singularly and collectively are herein called "Liens"). If Tenant fails to keep the Premises and the Building free from Liens, then, in addition to any other rights and remedies available to Landlord, Landlord may take any action necessary to discharge such Liens, including, but not limited to, payment to the claimant on whose behalf the Lien was filed. As used herein "Tenant's Affiliates" shall mean Tenant's owners, directors, officers and employees. (iv) ADDITIONAL REQUIREMENTS. Alterations shall comply with all Laws and Tenant shall be solely responsible for, shall comply with, and shall perform any work required by any and all Laws in any way arising out of or in connection with the Alterations. 8. INSURANCE AND INDEMNIFICATION. ------------------------------ 8.1 LANDLORD'S INSURANCE AND WAIVER. Landlord may obtain such liability insurance and such insurance for Raleigh Studios and the rents from Raleigh Studios against such other perils as Landlord considers appropriate and include such costs in Operating Expenses. Tenant acknowledges that it shall not be a named insured in such policy and that it has no right to receive any proceeds from any such insurance policies carried by Landlord. 8.2 TENANT'S INSURANCE. a) During the entire term of the Lease, Tenant shall obtain and keep in full force and effect, at its sole cost and expense, the following insurance: (i) Fire and extended coverage insurance with a water damage and sprinkler damage endorsement and with a vandalism and malicious mischief endorsement for the tenant improvements in the Premises and the property of Tenant located in the Building and in an amount not less than ninety percent (90%) of its cash value for the tenant improvements and for any property such as standard office furniture, furnishings, equipment, files and supplies and in an amount of one hundred percent (100%) of its cash value for any property such as cash, antiques, art objects and jewelry; (ii) Comprehensive general liability insurance, to include personal injury, bodily injury, broad form property damage, premises/operations, owner's protective coverage, blanket contractual liability, products and completed operations liability and owned/non-owned auto liability, insuring against all claims and liability arising out of the use or occupancy of the Premises, with limits as appropriate to Tenant's use of the Premises but not less than $2,000,000 inclusive. Such policy shall name Landlord, Master Landlord and Master Landlord's lender's, as applicable, as additional insured and shall contain substantially the following provision: "Such insurance as afforded by this policy for the benefit of Landlord (and the owner of the premises and such owner's lender holding a security interest in the premises as applicable) shall be primary as respects any claims, losses or liabilities arising out of the use of the Premises by the Tenant or by Tenant's operation and any insurance carried by Landlord or owner shall be in excess and non-contributing." 13 (iii) Insurance against interruption of Tenant's business and loss of Tenant's business records in such amount as appropriate to Tenant's business, unless Tenant shall provide, in writing, evidence of self insurance satisfactory to Landlord pertaining to interruption of Tenant's business and loss of Tenant's business records. b) All insurance policies of Tenant required by this Lease shall be taken out with insurers reasonably acceptable to Landlord and in form reasonably satisfactory to Landlord. All such policies shall contain a waiver by the insurance company of any right of subrogation, shall name the Landlord, Master Landlord, and any other person holding an interest in Raleigh Studios designated by Landlord as additional insured, as their interests appear, and shall contain a cross-liability endorsement. Tenant agrees that certificates of insurance on Landlord's standard form, or, if required by Landlord, certified copies of each such insurance policy, shall be delivered to Landlord as soon as practicable after the placing of - the required insurance, but in no event later than ten (10) days after Tenant takes possession of all or any part of the Premises. All policies shall contain an undertaking by the insurers to notify Landlord Master Landlord and any other person holding an interest in Raleigh Studios designated by Landlord in writing no less than thirty (30) days prior to any material change, reduction in coverage, cancellation, or other termination thereof. c) In the event of damage to or destruction of the Building entitling Landlord or Master Landlord to terminate this Lease, if the Premises have also been damaged, and if Landlord or Master Landlord terminates this Lease, Tenant shall immediately pay to Landlord, or if Landlord directs Tenant, to Master Landlord as the case may be, all of its insurance proceeds, if any, relating to the Tenant Improvements and Alterations (but not to Tenant's trade fixtures, equipment, furniture or other personal property of Tenant) in the Premises. If the termination of this Lease is due to damage to the Building or the Premises hereunder, Tenant shall deliver to Landlord, in accordance with the provisions of this Lease, the Tenant Improvements, the Alterations and the Premises. d) Tenant agrees that it shall not keep, use, sell or offer for sale in or upon the Premises any article which may be prohibited by any insurance policy in force from time to time covering Raleigh Studios. In the event Tenant's occupancy or conduct of business in or on the Premises, whether or not Landlord has consented to the same, results in any increase in premiums for the insurance carried from time to time by Landlord or any other person holding an interest in the Premises, Tenant shall pay any such increase in premiums as additional rent within ten (10) days after being billed therefore by Landlord. In determining whether increased premiums are a result of Tenant's use or occupancy of the Premises, a schedule issued by the organization computing the insurance rate on Raleigh Studios or the Tenant Improvements showing the various components of such rate, shall be conclusive evidence of the several items and charges which make up such rate. Tenant shall promptly comply with all requirements of the insurance authority or of any insurer now or hereafter in effect relating to the Premises. 14 8.3 RELEASE AND INDEMNIFICATION. a) Notwithstanding any contrary provision herein, Tenant hereby waives all claims against each of Landlord Parties (as defined below) for any injury or damage to any person or property or any other loss (including, but not limited to, loss of income) in or about the Premises or Raleigh Studios by or from any cause whatsoever, and, without limiting the generality of the foregoing, whether caused by water leakage, by gas, fire, oil or electricity, by any interruption of utilities or services, or by any tenant, occupant or other person, theft or damage to equipment, furniture, records and other property on or about the Premises, for loss or damage to Tenant's business or for death or injury to persons on or about the Premises or Raleigh Studios. Notwithstanding any contrary provisions in this Lease, in no event shall Landlord Parties be liable for incidental and/or consequential damages hereunder. As used herein Landlord Parties shall mean Landlord, Master Landlord, any lender holder holding a security interest in the Premises and their respective owner's directors, officers, agents and employees. b) Tenant shall indemnify, defend and hold harmless Landlord's Parties from and against any and all claims, demands, losses, damages, liabilities, costs and expenses (including, but not limited to actual attorneys' fees and costs) for the loss, theft or damage to property or for death or injury to persons on or about the Premises or arising from Tenant's use or enjoyment of the Premises or Raleigh Studios, from the conduct of any owner, director, officer, employee, agent, contractor, representative, licensee, guest, invitee or visitor of Tenant in or about the Premises, or from any breach or default under this Lease by Tenant. If any action or proceeding is brought against Landlord or any other person holding an interest in the Premises by reason of any such matter, Tenant shall, upon Landlord's request, defend same at Tenant's expense by counsel satisfactory to Landlord. Tenant, as a material part of the consideration to Landlord, hereby assumes all risk of damage to property of Tenant or injury to persons in or about the Premises, except to the extent arising from the gross negligence or willful misconduct of Landlord, and Tenant hereby waives all claims in respect thereof against Landlord, and any other person holding an interest in the Premises. The provisions of this Article shall survive the expiration or termination of this Lease with respect to any claims or liability arising from events occurring prior to such expiration or termination. Notwithstanding the foregoing, Tenant indemnification, defense and hold harmless obligations hereunder shall not extend to any of Landlord Parties to the extent of such party's gross negligence or willful misconduct. 8.4 WAIVER OF SUBROGATION. Without limiting the obligation of Tenant to maintain insurance which permits waiver of subrogation (unless otherwise approved in writing by Landlord), Landlord and Tenant hereby waive all causes of action and rights of recovery against each other, against all subtenants or assignees of Tenant, against all other tenants of Raleigh Studios and their assignees and sublessees and against Master Landlord, its lender holding security interest in the Property and any other party holding an interest in the Premises (together, the "Affected Parties"), and against the agents, owners, directors, officers and employees of the Affected Parties, for any loss occurring to the property of the Affected Parties resulting from any of the perils insured against under any and all casualty insurance policies in effect at the time of any such loss regardless of cause or origin of such loss, including the negligence of the Affected Parties or the agents, owners, directors, officers, or employees of the Affected Parties, to the extent of any recovery on such policies of insurance. 15 9. DAMAGE OR DESTRUCTION. ---------------------- 9.1 NOTICE OF CASUALTY. Tenant agrees to notify Landlord immediately in writing of any damage to the Premises resulting from fire, earthquake or any other identifiable event of a sudden, unexpected or unusual nature ("Casualty"). 9.2 REPAIR OF DAMAGE. If the Premises or the Building are damaged or destroyed by Casualty covered by the usual form of fire and extended coverage, Landlord shall commence repair or restoration within sixty days of such damage or destruction and shall diligently pursue such repair and restoration to completion unless this Lease is terminated as provided herein. Landlord shall pay the cost of repair to any damage or destruction of the Building or the Premises caused by the willful misconduct of Landlord, its owners, directors, officers, agents or employees. Tenant shall pay the cost of repair of any damage or destruction of the Premises except to the extent caused by defects in construction of the Building or the negligence or willful misconduct of Landlord, its owners, directors, officers, agents or employees. Tenant shall pay the cost of repair of any damage or destruction of the Studios caused by the negligence or willful misconduct of Tenant, its employees, owners, directors, officers, agents or visitors. The costs of repair of the Premises or the Studios shall include a reasonable overhead charge by Landlord. Tenant's obligation to pay the cost of repairs for damage or destruction to the Premises or the Studios shall be reduced by any insurance proceeds payable to Landlord for such damage or destruction, but only to the extent such insurance provides for a waiver of subrogation which permits such reduction of Tenant's obligations. Tenant shall vacate such portion of the Premises as Landlord reasonably requires to enable Landlord to repair the Premises or the Studios. 9.3 ABATEMENT. If the Premises are damaged or destroyed by Casualty not caused by the gross negligence or willful misconduct of Tenant, its owners, directors, officers, agents, employees or visitors, the Monthly Rental and the payment by Tenant of its share of Operating Expenses shall abate until such damage or destruction is repaired in proportion to the reduction of the area of the Premises usable by Tenant. Except as specifically provided in this Lease, this Lease shall not terminate, Tenant shall not be released from any of its obligations under this Lease, the rent and other expenses payable by Tenant under this Lease shall not abate and Landlord shall have no liability to Tenant for any damage or destruction to the Premises or the Building or any inconvenience or injury to Tenant by reason of any maintenance, repairs, alterations, decoration, additions or improvements to the Premises or the Building. Tenant hereby waives the provisions of subdivision 2 of Section 1932 and subdivision 4 of Section 1933 of the California Civil Code. 9.4 TERMINATION OF LEASE IN EVENT OF DAMAGE. a) TERMINATION BY LANDLORD. If the Building is damaged or destroyed by Casualty, Landlord shall have the option to terminate this Lease within sixty (60) days of such damage, if Landlord reasonably determines that the cost of repair to the Building exceeds fifty percent (50%) of the value of the Building exclusive of the land prior to such damage or the Building cannot be repaired within 120 days of damage or if the cost of repair of the Premises, as reasonably determined by Landlord, exceeds the insurance proceeds estimated by Landlord to be payable to Landlord for such damage or destruction, unless the Tenant agrees in writing to pay any costs or repairs of the Premises in excess of such insurance proceeds within fifteen (15) days of receipt by Tenant of written notice from Landlord of its intention to terminate this Lease pursuant to this section 9.4. 16 b) TERMINATION BY TENANT. If more than twenty-five percent (25%) of the Premises is damaged or destroyed by Casualty which damage is not attributable to the negligence or willful misconduct of Tenant, and Landlord reasonably determines, within thirty (30) days following Tenant's request for such determination, that such damage cannot be repaired within one hundred and twenty (120) days of such request, Tenant shall have the right to terminate this Lease by delivering written notice to Landlord of such election no later than thirty (30) days following Landlord's determination that the damage cannot be so repaired. 9.5 END OF TERM. Landlord shall not have any obligation to repair, reconstruct or restore the Premises during the last twelve (12) months of the term of this Lease or any extension thereof, as a result of any damage to the Premises if the cost of such repair, reconstruction or restoration as reasonably estimated by the Landlord exceeds the then Monthly Rental. If Landlord elects not to repair the Premises OR the Building pursuant to this Section 9.5, Tenant may elect to terminate this Lease within thirty (30) days of receipt of Landlord's notification of its election not to repair pursuant to this Section 9.5. If Tenant elects to terminate this Lease as provided in this Section, this Lease shall terminate thirty (30) days following the election by Tenant to terminate this Lease. If Tenant does not elect to terminate this Lease within such thirty (30) day period, the rent and other expenses payable by Tenant shall not abate, Landlord may repair the Premises at Tenant's cost and expense, and Tenant shall deposit with Landlord in advance an amount estimated by Landlord as the cost of such repair. 9.6 TERMS OF MASTER LEASE. The foregoing rights and obligations of Landlord and Tenant are subject to and subordinate to the terms of the Master Lease. 10. CONDEMNATION. ------------- 10.1 The term of this Lease shall terminate as to the portion of the Premises taken or condemned by any authority under power of eminent domain or transferred by Landlord or the owner of the Premises by agreement with such authority under threat of condemnation, with or without any condemnation action being instituted, as of the date such authority requests possession of such portion of the Premises. The Monthly Rental shall be adjusted in the proportion that the square footage of the portion of the Premises taken bears to the total square footage of the Premises prior to such taking. Tenant shall not be entitled to any compensation, allowance claim or offset of any kind against the Landlord or any condemning authority, as damages or otherwise, by reason of being deprived of the Premises or by the termination of this Lease, except that Tenant shall be entitled to such portion of any separate award for any improvements to the Premises paid for by Tenant in any amount not to exceed the unamortized cost of such improvements with such costs amortized over the term of this Lease without reference to any unexercised options. Any portion of the Building other than the Premises taken by eminent domain or dedicated to public use shall upon such taking or dedication be excluded from the area over which Tenant is granted rights hereunder, and this Lease shall continue in full force and effect without any reduction in rental. The foregoing rights and obligations of Landlord and Tenant are subject to and subordinate to the terms of the Master Lease. 11. ASSIGNMENT, SUBLETTING AND RECAPTURE. ------------------------------------- 11.1 CONSENT REQUIRED. Tenant shall not assign, sublease, encumber or otherwise transfer by operation of law or otherwise this Lease or any interest herein without the prior written consent of Landlord, which consent shall not be unreasonably withheld. If Tenant desires at any time to assign or otherwise transfer this Lease or sublease all or a 17 portion of the Premises, it shall first notify Landlord of its desire to do so and shall submit in writing to Landlord (i) the name of the proposed assignee or sublessee, (ii) the nature of the proposed assignee's or sublessee's business to be carried on in the Premises, (iii) a copy of the proposed assignment or sublease and any other agreements to be entered into concurrently with such assignment or sublease, and (iv) such financial information as Landlord may reasonably request concerning the proposed assignee or sublessee. Landlord may condition its consent to any assignment or sublease on the execution by such assignee or sublessee of a written assumption by such assignee or sublessee of the obligations of Tenant under this Lease. Without limiting Landlord's right to consider other matters, Tenant agrees that it shall be reasonable for Landlord to deny consent to an assignment or sublease, for the following reasons: (a) the proposed assignee or sublessee: (i) is of a character or reputation or engaged in a business which is not consistent with the quality of the Building, or would be a significantly less prestigious occupant of the Building than Tenant; (ii) intends to use the space for purposes which are not permitted under this Lease; (iii) is either a governmental agency or instrumentality thereof; (iv) is not a party of reasonable financial worth and/or financial stability in light of the responsibilities involved under the Lease on the date consent is requested; or (iv) occupies space in the Building, is negotiating with Landlord to lease space in the Building, or has negotiated with Landlord during the previous twelve (12) month period; (b) the proposed assignment or sublease would cause Landlord to be in violation of another lease or agreement to which Landlord is a party. A transfer of control or ownership of Tenant shall be deemed an assignment of this Lease and shall be subject to all of the provisions of this Article. Tenant shall pay to Landlord a reasonable fee and Landlord's expenses (including, without limitation, Landlord's attorneys fees) in reviewing such proposed assignment or sublease. This Lease may not be assigned or sublet without complying with the provisions of this Article in reliance on any law relating to bankruptcy or debtor's rights generally unless adequate assurance of future performance is provided Landlord including adequate assurance of the source of rent and other expenses due under this Lease for the entire term of this Lease and unless the assignee or sublessee and the proposed use of the Premises by the assignee or sublessee are consistent with the type of other tenants in the Building and the use by such tenants of their Premises. 11.2 PROHIBITIONS. Partial assignments of Tenant's interest in this Lease are prohibited. Any sale, assignment, encumbrance or other transfer of this Lease and any subleases or occupation of the Premises which does not comply with the provisions of this Article 11 shall be void and shall be a default under this Lease. 11.3 PAYMENTS TO LANDLORD. In the event of an assignment, Tenant shall pay to Landlord promptly, following receipt of any compensation in connection with such assignment under this Lease, fifty percent (50%) of the amount by which the value of such compensation exceeds Tenant's unamortized cost of Tenant's improvements in the Premises. In the event of a sublease, Tenant shall pay to Landlord promptly following receipt of the amount by which all sublease rental and other payments received by Tenant from any subtenant or any other person occupying any portion of the Premises exceeds the total of the rental or other amounts payable by Tenant pursuant to Article 4 and Article 5 for the portion of the Premises subleased with the rental or other amounts payable by Tenant for the Premises allocated on the basis of square footage. The provisions of this Section shall apply regardless of whether such assignment, subleasing or occupation is made in compliance with the terms of this Lease. Any payments made to Landlord pursuant to this Section, or Landlord's acceptance or endorsement thereof, shall not constitute a consent to any assignment, subleasing or occupation or cure any default under this Lease. 18 11.4 RECAPTURE. If Tenant requests Landlord's consent to any assignment or sublease of this Lease, Landlord shall have the right, to be exercised by giving written notice to Tenant within thirty (30) days of receipt by Landlord of the information concerning such assignment or sublease required by Section 11.1, to terminate this Lease effective as of the date Tenant proposes to assign this Lease or sublease all or a portion of the Premises. Landlord's right to terminate this Lease on assignment or sublease shall not terminate as a result of Landlord's consent to the assignment of this Lease or sublease of all or a portion of the Premises, or Landlord's failure to exercise this right with respect to an assignment or sublease. 11.5 NO RELEASE. Landlord's consent to any sale, assignment, encumbrance, subleasing, occupation or other transfer shall not release Tenant from any of Tenant's obligations hereunder or be deemed to be a consent to any subsequent assignment, subleasing or occupation. The collection or acceptance of rent or other payment by Landlord from any person other than Tenant shall not be deemed the acceptance of any assignee or subtenant as the tenant hereunder or a release of Tenant from any obligation under this Lease. If any assignee, sublessee or successor of Tenant defaults in the performance of any obligations under this Lease, Landlord may proceed directly against Tenant without the necessity of exhausting any remedies against such assignee, sublessee or successors. Landlord may consent to subsequent assignments or subleasing of this Lease or amendments or modifications of this Lease with the assignee, sublessees or successors of Tenant without notifying Tenant or such assignee, sublessee or successors and without obtaining their consent and such action shall not relieve Tenant or such assignee, sublessee or successors of any liability under this Lease. 11.6 TENANT'S REMEDIES. Notwithstanding anything to the contrary in this Lease, if Tenant or any proposed transferee of Tenant claims that Landlord has unreasonably withheld or delayed its consent or otherwise has breached or acted unreasonably under this Article 11, their sole remedies shall be a declaratory judgment and an injunction for the relief sought without any monetary damages and Tenant shall have no right and hereby waives any right under all Laws to terminate this Lease, and Tenant waives all other remedies on its own behalf and, to the extent permitted under all laws, on behalf of Tenant's proposed transferee. 12. DEFAULT AND REMEDIES. --------------------- 12.1 EVENTS OF DEFAULT. The occurrence of any one or more of the following events shall constitute an Event of Default: (i) the failure by Tenant to make any payment of rent or any other payments required to be made by Tenant under this Lease when due; (ii) the failure by Tenant to observe or perform any of the provisions of this Lease to be observed or performed by the Tenant if such failure continues for a period of ten (10) days, or such other period if this Lease specifically provides a different period for a particular failure, after written notice by Landlord to Tenant of such failure, provided, however, that with respect to any failure which cannot reasonably be cured within ten (10) days, an Event of Default shall not be considered to have occurred if Tenant commences to cure such failure within such ten (10) day period and continues to proceed diligently with the cure of such failure; (iii) the failure by Tenant to pay its obligations as they become due; the making of any general assignment or general arrangement for the benefit of creditors by Tenant, or the filing by or against Tenant of a petition to have Tenant adjudged a bankrupt or a petition for reorganization or arrangement under bankruptcy law or law affecting creditor's rights unless, in the case of a petition filed against Tenant, such petition is dismissed within sixty (60) days; the appointment of a trustee or a receiver to take possession of the Premises, where possession is not restored to Tenant within thirty (30) days; or the attachment, execution or other judicial seizure of substantially all of Tenant's assets located at the Premises or of Tenant's interest in this Lease, where such seizure is not discharged in thirty (30) days; or (iv) Tenant transfers or agrees to transfer this Lease or possession of all or any portion of the Premises without Landlord's prior written consent. 19 12.2 REMEDIES. On the occurrence of an Event of Default, Landlord may at any time thereafter, with or without notice or demand and without limiting Landlord in the exercise of a right or remedy which Landlord may have by reason of such default or breach, do the following: (a) Landlord may elect to continue the term of this Lease in full force and effect and not terminate Tenant's right to possession of the Premises, in which event Landlord shall have the right to enforce any rights and remedies granted by this Lease, by California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee's breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations) or by other law against Tenant, including, without limitation, the right to collect when due rental or other sums payable hereunder. Landlord shall not be deemed to have elected to terminate this Lease unless Landlord gives Tenant written notice of such election to terminate. Landlord's acts of maintenance or preservation of the Premises or efforts to relet the Premises shall not terminate this Lease. (b) Landlord may elect by written notice to Tenant to terminate this Lease at any time after the occurrence of an Event of Default, and in such event Landlord may, at Landlord's option, declare this Lease and Tenant's right to possession of the Premises terminated, re-enter the Premises, remove Tenant's property therefrom and store it for Tenant's account and at Tenant's expense (but Landlord shall not be required to effect such removal), eject all persons from the Premises and recover damages from Tenant as hereinafter provided. Any such re-entry shall be permitted by Tenant without hindrance. Landlord shall not thereby be liable in damages for such re-entry or be guilty of trespass, forcible entry or unlawful detainer. If Landlord elects to so terminate this Lease and Tenant's right to possession or if this Lease and Tenant's right to possession are terminated by operation of law, such termination shall cancel all Tenant's options, if any, to extend or renew the term of this Lease. (c) Landlord may notify any subtenant of the Premises of the existence of an Event of Default by Tenant in writing and thereafter all rent or other amounts due from any subtenant of the Premises shall be paid to Landlord and Landlord shall apply such rent or other amounts in payment of the amounts due from Tenant under this Lease. The delivery of such notice to any subtenant and the collection of such rent or other amounts by Landlord shall not terminate this Lease. 12.3 DAMAGES ON TERMINATION. On termination of this Lease by reason of Tenant's breach, Landlord may recover as damages from Tenant, in addition to all other remedies available, the worth at the time of award of the amount by which the unpaid rent and other sums payable by Tenant to Landlord which would have been earned after the date of termination of this Lease for the balance of the term of the Lease exceed the amount of such loss of rent and other sums for such period that Tenant proves could be reasonably avoided, all as provided in Section 1951.2 of the California Civil Code. The "worth at the time of award" for the period prior to the time of award and for the period after the time of award shall include interest on such award at 12% per annum, or the maximum rate allowable by law, whichever is less. On termination of this Lease by reason of Tenant's breach, Landlord may also recover as damages from Tenant that portion of any leasing commissions paid or payable by Landlord applicable to the unexpired term of this Lease and all costs incurred in releasing the Premises including advertising costs, the costs of refurbishment and alterations of the Premises and the cost of any concessions which the Landlord gives to release the Premises. If Landlord releases the Premises following a termination by reason of Tenant's breach, the rent charged by Landlord on such releasing shall be deemed to be the rental value of the Premises for the purpose of calculation of the damages which Landlord may recover from Tenant. 20 12.4 LATE CHARGE. If Tenant fails to make any payment of rent, expenses or other amounts required of Tenant under this Lease within ten (10) days of the date such amount is due as set forth in this Lease, then, in addition to any other amounts recoverable by Landlord hereunder, Tenant shall pay Landlord a late charge in an amount equal to $0.06 for each dollar past due. If Tenant fails, on five (5) separate occasions, to make any payment of rent, expenses or other amounts required of Tenant under this Lease within three (3) days of the date each such payment is due, then for the remainder of the Lease Term, Tenant shall pay a late charge in an amount equal to $0.06 for each dollar past due if Tenant thereafter fails to pay any payment of rent or other amount required under this Lease within five (5) days of when due. Such late charge shall be due notwithstanding the fact that no notice is given by Landlord to Tenant of such failure to pay. Notwithstanding the foregoing, if on three (3) separate occasions Tenant has received notice from Landlord that it has failed to pay rent, expenses or other amounts promptly when due, Tenant shall pay Monthly Rental for the balance of the Term of this Lease on a quarterly basis, in advance, on the first day of each such quarter. Landlord and Tenant agree that it would be extremely difficult and impractical to fix the actual damages sustained by Landlord for such default and that the late charge set forth in this Section is a reasonable estimate of such damages at this time. Landlord anticipates that such damage would include the administrative costs and expenses, the cost of arranging for borrowed funds and attorneys' fees. The late charge provided in this Section shall be the sole damages which Landlord may recover from Tenant for the delay by Tenant in making any payment within ten (10) days from the date such payment is due until thirty (30) days after the date such payment is due, but this Section shall not limit Landlord's right to recover any other amount due pursuant to this Lease, Landlord's damages equivalent to the amount of the rent or other payments if this Lease is terminated, Landlord's damages or costs for Tenant's failure to pay for a period beyond thirty (30) days from the date such payment is due, Landlord's cost and expense in connection with any litigation and Landlord's right to any other remedy such as terminating this Lease, recovering possession of the Premises or injunctive relief. 12.5 PAST DUE OBLIGATIONS. All amounts which Tenant is obligated to pay Landlord pursuant to this Lease or when due shall bear interest at the rate of fourteen percent (14%) per annum or the maximum interest rate chargeable by law, whichever is less, from the due date until paid, unless otherwise specifically provided herein. If a late charge is due with respect to such amount pursuant to Section 12.4, such interest shall commence to accrue thirty (30) days following the date such amount is due. The payment of such interest shall not excuse or cure any default by Tenant under this Lease. 12.6 APPLICATION OF PAYMENTS - ORDER OF PRECEDENCE. If Tenant is in default or delinquent in payment of any obligations under this Lease or any debts otherwise incurred and payable to Landlord, any payments thereafter received by Landlord from Tenant may be applied by Landlord without regard to any direction from Tenant, any indication upon a check or correspondence accompanying such payment, or any purpose to be implied from the time, type or amount of the payment, in the following order of precedence: first, to amounts owed to Landlord arising from matters outside the scope or parameters of this Lease; second, to collection costs, including attorneys' fees, incurred in the Landlord's attempts to obtain payment of amounts owed; third, to late charges due; fourth amounts due to Landlord for goods and services provided by Landlord as a complement or supplement to services supplied under this Lease; fifth, to payments due for Additional Services; sixth, to past due rent, starting with the rent due furthest back in time and seventh, to rent currently due at the time payment is received. 21 12.7 NON-EXCLUSIVE REMEDIES. The remedies of Landlord set forth in this Article 12 shall not be exclusive, but shall be cumulative and in addition to all rights and remedies now or hereafter provided or allowed by law or equity, including, but not limited to, the right of Landlord to seek and obtain an injunction and the right of Landlord to damages in addition to those specified herein, except that the provisions of Section 12.3 shall limit Landlord's right to damages as specified therein. Tenant hereby expressly waives any and all rights of redemption granted by or under any present or future law if Tenant is evicted or dispossessed for any cause or if Landlord obtains possession of the Premises by reason of the breach by Tenant of any of its obligations under this Lease. 13. ADDITIONAL RIGHTS OF LANDLORD. ------------------------------ 13.1 ENTRY BY LANDLORD. Landlord and Landlord's agents and employees shall have the right to enter the Premises at all times, to examine the same, to make such maintenance and repairs of the Premises and such maintenance, repairs, alterations, decorations, additions and improvements to other portions of the Building as Landlord requires and to show the Premises at reasonable times to prospective tenants during the last twelve (12) months of the term of this Lease, all such showings to require twenty-four (24) hours prior notice to Tenant. Landlord may erect, use and maintain pipes and conduits in and through the Premises provided such pipes and conduits do not detract materially from the appearance of the Premises. Landlord shall take reasonable precautions to minimize the disruption to Tenant of any entry to the Premises by Landlord except in case of emergency and as provided in this Section. 13.2 BUILDING PLANNING. Landlord shall have the right at any time during the term of this Lease, upon giving Tenant sixty (60) days notice in writing, to provide and furnish Tenant with like space elsewhere in the Building of approximately the same size and area as the Premises and to remove and place Tenant in such new space at Landlord's sole cost and expense. On such relocation, the terms and conditions of this Lease shall remain in full force and effect, save and except that the Premises shall be in such new location within the Building, a revised Exhibit "A" shall become part of this Lease and shall reflect the location of the new space, Article 1 of this Lease shall be amended to include and state all correct data as to the new space, and the Monthly Rental shall be reduced, but not increased, by the reduction of the area of Premises, if any, on such relocation. 13.3 TRANSFER BY LANDLORD. Landlord may transfer its interest in the Premises and this Lease without the consent of Tenant, at any time and from time to time. The obligations of Landlord pursuant to this Lease shall be binding upon Landlord and its successors only during their respective period of ownership except that Landlord and its successors shall be relieved of their obligation to refund security deposits and other funds to Tenant which they have received from Tenant or a predecessor Landlord to the extent they transfer such amounts to their respective transferees. In addition, Landlord may lease any portion of the Building to others on such terms and for such purposes as Landlord considers appropriate and may terminate or modify leases with others for any portion of the Building without any obligation to Tenant and without relieving Tenant of any obligation under this Lease. 22 13.4 DEFAULT OF LANDLORD. Landlord shall not be liable to Tenant if Landlord is unable to fulfill any of its obligations under this Lease if Landlord is prevented, delayed or curtailed from so doing by reason of any cause beyond Landlord's reasonable control. Landlord shall not be in default unless Landlord fails to perform obligations required of Landlord within a reasonable time, but in no event later than thirty (30) days after written notice by Tenant to Landlord, specifying Landlord's failure to perform such obligation; provided, however, that if the nature of Landlord's obligation is such that more than thirty (30) days are required for performance, then Landlord shall not be in default if Landlord commences performance within such thirty (30) day period and thereafter diligently prosecutes its efforts to satisfy such obligation. Tenant may not offset against any rent or other amount due from Tenant under this Lease any amount due or claimed to be due to Tenant from Landlord whether arising pursuant to this Lease or otherwise. Tenant waives the provisions of Section 1942 of the California Civil Code to the extent such Section permits the right of offset. Any notice to Landlord by Tenant of Landlord's default under this Lease shall also be concurrently provided by certified mail, to the Master Landlord and any holder of a mortgage or similar security instrument covering the Premises, whose address shall have been furnished to Tenant ("Mortgagee Notice"). The Mortgagee's Notice shall offer such mortgagee a reasonable opportunity to cure the default, including the time to obtain possession of the Premises by power of sale or judicial foreclosure, if such action should be necessary to cure Landlord's default. 13.5 SUBORDINATION. In addition to the provisions of Section 14 below with respect to the Master Lease, this Lease is subject and subordinate to any ground lease, mortgages, deeds of trust and matters of record which now affect Raleigh Studios or any part of Raleigh Studios and to all renewals, modifications, consolidations, replacements and extensions thereof and should any such underlying lease terminate, this Lease may be terminated. This Lease may, at the option of Landlord, be subordinate to any ground or underlying leases, mortgages, deeds of trust or other lien which may hereafter affect Raleigh Studios or any part thereof and Tenant shall execute and deliver upon the demand of Landlord from time to time any and all instruments desired by Landlord, subordinating, in the manner requested by Landlord, this Lease to such lease, mortgage, deed of trust or other lien, provided such lease, mortgage, deed of trust or lien provides that in the event of the termination of such lease or foreclosure of such mortgage, deed of trust or lien, any successor to any interest of Landlord in Raleigh Studios shall not disturb Tenant's possession of the Premises if Tenant attorns to such successor as Landlord and otherwise performs its obligations under this Lease. Tenant agrees that upon request Tenant shall attorn to any landlord under such ground lease, or in the event of the termination or cancellation of such ground lease or to any purchaser upon foreclosure or sale pursuant to any lien. In the event of termination of such ground lease or foreclosure of such mortgage, deed of trust or other lien, any successor to any interest of Landlord in Raleigh Studios shall have no liability to repay to Tenant any security deposit paid to any prior Landlord. Landlord may from time to time grant or declare such restrictions or covenants as may be reasonably required by Landlord or adopt and record such parcel maps, subdivision maps or condominium plans as may be reasonably required by Landlord relating to all or any portion of Raleigh Studios and the provisions of all such documents shall be senior to this Lease and Tenant shall sign any of such documents upon receipt from Landlord provided such documents do not unreasonably interfere with the use of the Premises by Tenant as permitted by this Lease. 13.6 LENDER'S RIGHTS. In addition to the provisions of Section 14 below with respect to the Master Landlord, on receipt of written request from Landlord, Tenant shall enter into a written agreement with Landlord and any lessor or any holder of any encumbrance on Raleigh Studios, including without limitation, any ground lessor, in a form satisfactory to such other lessor or holder which provides as follows: (i) Tenant shall attorn to such lessor or encumbrancer on termination of its lease or foreclosure of its encumbrance, (ii) without the written approval of such lessor or encumbrancer, Tenant shall not make any payments to Landlord more than thirty (30) days prior to the date such payment is due pursuant to this Lease, Tenant shall not subordinate its interest in this Lease to any subsequent lease or encumbrance and Landlord may not terminate this Lease or modify this Lease and (iii) any subordination, termination or modification in violation of such agreement shall be invalid. 23 13.7 ESTOPPEL CERTIFICATE. In addition to the provisions of Section 14 below with respect to the Master Landlord, Tenant shall upon five (5) days written notice from Landlord or the owner of the Premises execute, acknowledge and deliver to Landlord or the owner of the Premises, as applicable, a statement in writing (i) certifying that this Lease is unmodified and in full force and effect or, if modified, stating the nature of such modifications and certifying that this Lease as so modified is in full force and effect, (ii) acknowledging that there are not, to Tenant's knowledge, any uncured defaults on the part of the Landlord hereunder, or specifying such defaults if any are claimed, (iii) setting forth the date of commencement of rents and the date of expiration of the term of this Lease and setting forth any options of Tenant to extend the term of this Lease, the nature of such options and whether any such options have been exercised by Tenant, (iv) stating the amount of security deposit made by Tenant to Landlord and amount and period covered by any prepayments of rents or other charges by Tenant; and (v) certifying to such other matters as Landlord may reasonably request. Any such statement may be relied upon by any then existing or prospective lessor, purchaser or encumbrancer of all or any portion of the real property of which the Premises are a part. 13.8 FINANCIAL INFORMATION. From time to time from the date of execution of this Lease through the term of this Lease, Tenant shall, upon five (5) days prior written notice from Landlord, provide Landlord with a current financial statement and financial statements of the two (2) years prior to the current financial statement year. Such statement shall be prepared in accordance with generally accepted accounting principles, consistently applied, and, if such is the normal practice of Tenant, shall be audited by an independent certified public accountant. 14. MASTER LEASE. ------------- 14.1 SUBORDINATION. This Lease is subordinate and subject to the Master Lease and the performance of the rights and obligations of the Landlord and Tenant under this Lease are subject to and subordinate to the rights and obligations of "Landlord" and "Tenant" as those terms are defined under the Master Lease. 14.2 TENANT SUBORDINATION. Tenant agrees to subordinate its interest in this Lease to the Master Landlord in the same manner and to the same extent that Landlord is required to subordinate its interest in the Master Lease to Master Landlord under the Master Lease. 14.3 TENANT'S ESTOPPEL. Tenant agrees to deliver an estoppel certificate to Master Landlord in the same manner and to the same extent that Landlord is required to deliver an estoppel certificate to Master Landlord under the Master Lease. 14.4 The effectiveness of this Lease is conditioned on the execution and delivery by Tenant and Master Landlord of the Non-Disturbance and Attornment Agreement attached hereto as Exhibit "D". 24 15. MISCELLANEOUS. -------------- 15.1 BROKERS. Except as expressly set forth in Section 1.13, Tenant represents and warrants to Landlord that it has not had dealings with any broker or finder other than as listed in Section 1.13 hereof in locating the Premises and that it knows of no other person who is or might be entitled to a commission, finder's fee or other like payment in connection herewith and does hereby indemnify and agree to hold Landlord harmless from and against any and all claims, liabilities and expenses that Landlord may incur should such representation and warranty be incorrect. Landlord agrees to indemnify and hold Tenant harmless from any claims or liability to any broker or other person arising out of or relating to any agreement by Landlord to pay a brokerage commission, finder's fee or like payment to such broker or such person relating to the leasing of the Premises; provided, however, that Landlord shall not be obligated to Tenant for any claims or liability to any broker or other person with whom Tenant has dealing concerning Raleigh Studios whose identity Tenant has failed to disclose to Landlord as required by this Section 15.1. 15.2 END OF TERM AND HOLDING OVER. Upon the expiration or other termination of the Term of this Lease, Tenant shall quit and surrender to Landlord the Premises, broom clean, in as good condition, order and repair as it now is or may hereafter be placed, ordinary wear and tear excepted. Tenant shall remove all property of Tenant as directed by Landlord. Any property left on the Premises at the expiration or other termination of this Lease, or after the happening of any of the events of default set forth herein may, at the option of Landlord, either be deemed abandoned or be placed in storage in a public warehouse in the name, for the account and at the expense and risk of Tenant or otherwise stored and/or disposed of by Landlord in any manner provided by law. Tenant expressly releases Landlord of and from any and all claims and liability for damage to or destruction or loss of property left by Tenant in the Premises at the expiration or other termination of this Lease and Tenant hereby indemnifies Landlord against any and all claims and liability with respect thereto. If Tenant, with or without Landlord's consent, remains in possession of the Premises or any part thereof after the expiration of the term hereof such occupancy shall be a tenancy from month to month subject to all the provisions of this Lease, except that the Monthly Rental during such tenancy shall be payable at one hundred fifty (150%) of the Monthly Rental for the last month of the term. If the Premises are not surrendered at the end of the term, Tenant shall be additionally responsible to Landlord for all damage (including but not limited to the loss of rent) which Landlord shall suffer by reason thereof, and tenant hereby indemnifies Landlord against all claims made by any succeeding Tenant against Landlord, resulting from delay by Landlord in delivering possession of the Premises to such succeeding tenant. 15.3 PERFORMANCE. All payments to be made under this Lease shall be made without prior legal notice or demand unless otherwise provided herein, in legal currency of the United States of America. Time is of the essence of each and every one and all of the terms, covenants and conditions to be kept, observed or performed under this Lease. 15.4 NOTICES. Any notices required or permitted to be given under this Lease shall be in writing and may be delivered personally or by certified mail to the Landlord at the address set forth in Section 1.1 and to Tenant at the address set forth in Section 1.2 and to such other parties at such addresses as Landlord or Tenant requests in writing. Any notice given by mail shall be deemed received two (2) business days following the date such notice and the required copies are mailed as provided in this Section. Either party may change its address for purposes of this Section by giving the other party written notice of the new address in the manner set forth above. Any notice required by this Lease shall be deemed to constitute the notice required by Section 1161 of the California Code of Civil Procedure provided such notice otherwise complies with the requirements of such Section and Section 1162 of the California Code of Civil Procedure. 25 15.5 MERGER. There shall be no merger of this Lease or of the leasehold estate hereby created with the fee estate in the Premises or any part thereof by reason of the fact that the same person, firm, corporation or other legal entity may acquire or hold, directly or indirectly, this Lease or the Leasehold estate and the fee estate in the Premises or any interest in such fee estate without the prior written consent of the holders of any mortgages or similar security instruments covering the leased Premises. 15.6 TERMINATION. On termination of the Lease, Tenant shall execute and deliver to Landlord immediately upon Landlord's request a quitclaim deed in recordable form transferring to Landlord any interest of Tenant in the Premises. 15.7 APPLICABLE LAWS. This Lease shall be governed by and construed in accordance with the laws of the State of California applicable to leases made and to be performed in that State. 15.8 PROFESSIONAL FEES. If Tenant or Landlord brings any action for any damages or other relief against the other or for a declaration or determination of any matter relating to this Lease, including a suit by Landlord for the recovery of rent or other payments from Tenant or for possession of the Premises, the losing party shall pay to the prevailing party its actual professional fees such as, without limitation, appraisers', accountants' and attorneys' fees, and such obligation shall be incurred on commencement of any action whether or not such action is prosecuted to judgment or other final determination. Should Landlord be named as a defendant in any suit brought against Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant shall pay to Landlord its costs and expenses incurred in such suit, including without limitation, its actual professional fees such as appraisers', accountants' and attorneys' fees. The obligations of the parties provided in this Section 15.8 shall survive the expiration or other termination of this Lease. 15.9 ARBITRATION OF DISPUTES. All matters regarding the validity, interpretation and performance of this Agreement shall be controlled and construed in accordance with the laws of the State of California and any controversy that cannot be settled directly shall be settled by arbitration by and in accordance with the rules then prevailing of the Alternative Resolution Center, and Section 1283.05 of the Code of Civil Procedures, and judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. 15.10 MODIFICATION. This Lease and any other written agreements dated as of the date of this Lease contain all of the terms and conditions agreed upon by the Landlord and Tenant with respect to the Premises and Raleigh Studios. All prior negotiations, correspondence and agreements are superseded by this Lease. No officer or employee of any party has any authority to make any representation or promise not contained in this Lease, and each of the parties hereto agrees that it has not executed this Lease in reliance upon any representation or promise not set forth in this Lease. This Lease may not be modified or changed except by written instrument signed by Landlord and Tenant. Notwithstanding the foregoing, if, in connection with obtaining construction, interim or permanent financing for Raleigh Studios, the lender shall request reasonable modifications in this Lease as a condition to such financing, Tenant shall not unreasonably withhold, delay or defer its consent therefor, provided that such modifications do not increase the obligations of Tenant hereunder or materially adversely affect the leasehold interest hereby created or Tenant's rights hereunder. 26 15.11 RELATIONSHIP OF PARTIES. Neither the method of computation of rent nor any other provisions contained in this Lease nor any acts of the parties shall be deemed or construed by the parties or by any third person to create the relationship of principal and agent or of partnership or of joint venture or of any association between Landlord and Tenant, other than the relationship of landlord and tenant. 15.12 WAIVER. The acceptance of rent or other payments by Landlord, or the endorsement or statement on any check or any letter accompanying any check for rent or other payment shall not be deemed an accord or satisfaction or a waiver of any obligation of Tenant regardless of whether Landlord had knowledge of any breach of such obligation. Failure to insist on compliance with any of the terms, covenants or conditions hereof shall not be deemed a waiver of such terms, covenants or conditions, nor shall any waiver or relinquishment of any right or power hereunder, at any one or more times, be deemed a waiver or relinquishment of such rights and powers at any other time or times or under any other circumstance(s). 15.13 PARTIAL INVALIDITY. If any term or provision of this Lease or the application thereof to any person or circumstances shall to any extent be invalid or unenforceable, the remainder of this Lease or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable shall not be affected thereby, and each term and provision of this Lease shall be valid and enforced to the fullest extent permitted by law. 15.14 INTERPRETATIONS. Any uncertainty or ambiguity existing herein shall not be interpreted against either party because such party prepared any portion of this Lease, but shall be interpreted according to the application of rules of interpretation of contracts generally. 15.15 SUCCESSORS AND ASSIGNS. This Lease shall be binding upon and shall inure to the benefit of the parties hereto and their respective permitted heirs, representatives, successors and assigns. 15.16 TENANT AS PARTNERSHIP. If a partnership or more than one legal person executes this Lease as Tenant, (i) each partner is jointly and severally liable for keeping, observing and performing all the terms, covenants, conditions, provisions and agreements of this Lease to be kept, observed or performed by Tenant, and (ii) the term "Tenant" as used in this Lease shall mean and includes each of them jointly and severally and the act of or notice from, or notice or refund to, or the signature of, any one or more of them, with respect to this Lease, including but not limited to, any renewal, extension, expiration, termination or modification of this Lease, shall be binding upon each and all of the persons constituting Tenant with the same force and effect as if each and all of them had so acted or so given or received such notice or refund or so signed. Termination of Tenant, if a partnership, shall be deemed to be an assignment jointly to all of the partners, who shall thereafter be subject to the terms of this Lease as if each and all such former partners had initially signed this Lease as individuals. 15.17 TENANT AS CORPORATION. If Tenant executes this Lease as a corporation, then Tenant and the persons executing this Lease on behalf of Tenant represent and warrant that the individuals executing this Lease on Tenant's behalf are duly authorized to execute and deliver this Lease on its behalf in accordance with a duly adopted resolution of the board of directors of Tenant, a copy of which is to be delivered to Landlord on execution hereof, and in accordance with the By-Laws of Tenant and that this Lease is binding upon Tenant in accordance with its terms. 27 15.18 RIGHT TO LEASE. Landlord reserves the absolute right to effect such other tenancies in the Building or Raleigh Studios as Landlord may, in the exercise of its sole business judgment, determine to best promote the interests of the Building. Tenant does not rely on the fact, nor does Landlord represent, that any specific tenant or type of number of tenants shall, during the Lease Term, occupy any space in the Building or Raleigh Studios. Landlord shall have the right at any time to change the name of the Building or Raleigh Studios and to install, affix and maintain any and all signs on the exterior and on the interior of the Building or Raleigh Studios as Landlord may, in Landlord's sole discretion, desire. 15.19 LANDLORD'S LIABILITY. Landlord shall not be personally liable for the performance of Landlord's obligations under this Lease. If Tenant acquires any rights or remedies against Landlord (including, but not limited to, the right to satisfy a judgment), these rights and remedies shall be satisfied solely from Landlord's interest in the Master Lease (or the proceeds therefrom), such rights and remedies shall not be satisfied, in any event, from any other property or assets of Landlord. 15.20 EXERCISE OF LANDLORD'S RIGHTS. Any right hereunder granted to Landlord may be assigned by Landlord to Master Landlord or may be exercised by Landlord at Master Landlord's direction. 15.21 EXHIBITS. All exhibits, riders and schedules, if any, attached hereto shall be deemed a part of this Lease. 15.22 TIME. Time is of the essence with respect to the performance of every provision of this Lease in which time of performance is a factor. [TEXT CONTINUES ON THE FOLLOWING PAGE.] 28 IN WITNESS WHEREOF, the parties hereto hereby execute this Lease, as of the day and year first above written. LANDLORD: RP HOLDINGS, INC., a California corporation By:______________________________________ Its Authorized Officer TENANT: Alpine Television, Inc., A California corporation By:______________________________________ Title:___________________________________ 29 EXHIBIT "B" ----------- RULES AND REGULATIONS --------------------- These Rules and Regulations are published by Landlord for the purpose of regulating the actions and deportment of the occupants and the use of the Building. The term "Tenants" shall refer to the Tenant under the Lease of which this Exhibit is a part and tenants or other occupants of the Building. Landlord reserves the right at any time to rescind any one or more of these Rules and Regulations, or to make such other and further reasonable Rules and Regulations as in the Landlord's judgment may from time to time be necessary for the safety, care and cleanliness of the Building, and for the preservation of order therein. Landlord may waive any one or more of these Rules and Regulations for the benefit of a particular Tenant or Tenants, but no such waiver by Landlord shall be construed as a waiver of such Rules and Regulations in favor of any other Tenant or Tenants, nor prevent Landlord from thereafter enforcing any such Rules and Regulations against any or all of the Tenants. These Rules and Regulations are in addition to and shall not be construed to in any way modify, alter or amend, in whole or in part, the covenants, agreements, terms and conditions of any Lease affecting the Building or any portion thereof. 1. All areas of the Building other than those under lease to Tenants, including public halls, lobbies and stairs, shall be under the sole and absolute control of the Landlord who shall have the exclusive right to regulate and control these areas. The sidewalks, halls, passages, exits, entrances, elevators, malls, escalators and stairways of the Building shall not be obstructed by any of the Tenants, or used by them for any purpose other than for ingress to and egress from any Premises. The halls, passages, exits, entrances, elevators, escalators and stairways are not for the use of the general public and Landlord shall in all cases retain the right to control and prevent access thereto by all persons whose presence the Landlord considers, in its sole and absolute discretion, to be prejudicial to the safety, quiet enjoyment, character, reputation and interests of the Building and Tenants; provided, however, that nothing contained herein shall be construed to prevent such access by persons with whom Tenant normally deals in the ordinary course of its business, except that Landlord reserves the right to exclude or expel from the Building any person who, in the judgment of Landlord, is intoxicated or under the influence of liquor or drugs, or who shall in any manner act in violation of any of the Rules and Regulations of the Building. Tenants and other persons may not go up on the roof of the Building. 2. Landlord reserves the right to exclude from the Building persons who do not present a pass or other identification acceptable to Landlord. If Landlord requires passes, Landlord shall furnish passes to persons for whom any Tenant requests a pass. Each Tenant shall be responsible for all persons for whom it requests passes or requests admission to the Building and Tenant shall be liable to the Landlord for all acts of such persons. Landlord shall not be liable for damages or for any error with regard to the admission or exclusion from the Building of any person. In the case of invasion, mob, riot, public excitement, or other circumstances rendering such action advisable in Landlord's sole and absolute discretion, Landlord reserves the right to prevent access to the Building during the continuance thereof by such actions as Landlord may deem appropriate, including closing and locking doors. 3. The normal business hours of the Building shall be the hours of 8:00 a.m. to 6:00 p.m. on weekdays, other than legal holidays and from 9:00 a.m. to 1:00 p.m. on Saturdays, other than legal holidays. However, Landlord may eliminate, increase or decrease the hours on Saturdays for which air conditioning, heating and ventilation are provided to the Premises and the Building to accommodate the regular Saturday usage by Tenants occupying two-thirds or more of the rentable space of the Building. In addition, Landlord may increase or decrease the hours for which air conditioning, heating and ventilation are provided to conform to practices of other buildings in the area comparable to the Building. Exhibit "B" - Page 1 of 6 4. Landlord retains absolute control over the exterior appearance of the Building and the exterior appearance of any Premises as viewed from the exterior of the Building, public halls, or passageways, and Tenants shall not, without Landlord's prior written consent, install or permit to be installed any lighting, paintings, drapes, blinds, shades, signs, lettering, placards, decorations or advertising media of any type which can be viewed from the exterior of the Building, public halls or passageways. If any Tenant obtains permission and installs any of the above items, such Tenant shall not make any changes, alterations or modifications to said installed items without the prior written consent of Landlord, and such Tenant shall maintain such items at its expense in a neat and orderly manner at all times. 5. The directory of the Building shall be provided for the display of the name and location of Tenant and its principal officers and Landlord may exclude any other names from the directory. 6. In the event any tenant fails to keep and perform any of the terms and conditions hereof, notwithstanding any provision to the contrary in its lease, immediately upon written notice from Landlord, Landlord may restore any Premises or Building to its original condition, and such tenant shall reimburse Landlord upon demand for such cost of restoration. Landlord may demand that such tenant immediately restore the Premises or Building to its original condition. Such a default shall constitute a default under such tenant's lease and Landlord may resort to any and all legal remedies which Landlord may desire to assert. 7. When electric wiring of any kind is introduced into the Building, it must be connected as directed by the Landlord, and no boring or cutting for wires shall be allowed without the consent of the Landlord. The location of telephones, telegraph instruments, electric appliances, call boxes and similar instruments shall be prescribed by the Landlord. No apparatus of any kind, other than normal office machines and equipment, shall be connected to the electrical system of the Building without the written consent of the Landlord. 8. Tenants shall not mark, paint, or drill into any part of the Premises or the Building without the prior written consent of Landlord. Tenants shall not string wires or use extension cords without the prior written consent of Landlord. 9. Tenants shall not do anything in the Building, or bring or keep anything therein, which shall in any way increase or tend to increase the risk of fire, or which shall conflict with the regulations of the Fire Department or the fire laws, or with any insurance policy on the Building or any part thereof, or with any rules or ordinances established by any other governmental agency. 10. Tenant shall be responsible for protecting its own property located on or about the Premises. 11. All removals, or the carrying in or out of any safes, freight, furniture or bulky matter of any description must take place during the hours which the Landlord may determine from time to time in its absolute discretion. The moving of safes or other fixtures or bulky matter of any kind must be made upon previous notice to the manager of the Building and under his supervision, and the persons employed by the Tenant for such work must be acceptable to the Landlord. The Landlord reserves the right to inspect all safes, freight, or other bulky articles to be brought into the Building and to exclude from the Building all safes, freight, or other bulky articles which violate any of these Rules and Regulations or the lease of which these Rules and Regulations are a part. Landlord shall prescribe the weight, size and position of all safes used in the Building, and such safes shall in all cases stand on wood or metal of such size as shall be designated by the Landlord. All damage done to the Building by installing, removing or maintaining a safe, shall be repaired at the expense of the Tenant in whose Premises such safe is located. Articles of unusual size or weight are not permitted in the Building. Tenants shall not use any machinery which may cause any objectionable noise or tremor to the floors or walls or which by its weight might injure the floors and the Building. Exhibit "B" - Page 2 of 6 12. Tenants shall not conduct any auction in the Building, shall not store goods, wares or merchandise on their Premises except for Tenant's personal use, and shall not manufacture any item on the Premises. Except with the prior written consent of Landlord, Tenants shall not sell or permit the sale of newspapers, magazines, periodicals, theater tickets or any other goods or merchandise in or on its Premises, nor shall any Tenant carry on, in or from its Premises, the business of stenography, typewriting or any similar business for the services or accommodation of other Tenants or others. 13. All freight and furniture must be moved into, within and out of the Building under the supervision of Landlord and according to such regulations as may be posted in the office of the Building, but the Landlord shall not be responsible for the loss or damage of such freight from any cause. Material, including beverages, food and supplies, shall not be transported within the Building except as Landlord may prescribe from time to time. 14. The requirements of any Tenant shall be attended to only upon application at the office of the Building. Employees of Landlord shall not perform any work, not do anything beyond their regular duties unless under special instruction from the office of the Building, and employees of Landlord shall not be obligated to admit any person (tenants or otherwise) to any office without specific instructions from the office of the Building. 15. All keys shall be obtained from Landlord and all keys pertaining to any Premises shall be returned to the Landlord upon termination of the Lease affecting such Premises. The Tenants shall not duplicate any keys or permit any keys to be duplicated. 16. Before any Tenant and its employees leave its Premises, such Tenant shall see that the doors of its Premises to common hallways of the Building are closed and securely locked and shall observe strict care and caution that all water faucets, water apparatuses and utilities are shut off so as to prevent waste or damage; and for any default or carelessness, such Tenant shall compensate the other tenants and Landlord for all damages sustained by them. On multiple tenant floors, Tenant shall keep the door or doors to the Building corridors closed at all times except for ingress and egress. 17. Tenants shall give prompt notice of any accident to, or defects in, the Building, including the plumbing, water pipes, electric wire or heating apparatus, so that same may be attended to promptly. 18. All cleaning and janitorial services for the Building and the Premises shall be provided exclusively through Landlord. 19. Tenants shall not use any method of heating or air conditioning other than that supplied by Landlord unless approved by Landlord in writing. 20. Tenants shall not install any radio or television antenna, loudspeaker or other device on the roof or exterior walls of its Premises. 21. No vending or coin-operated machines shall be placed or maintained by any tenant within its Premises without the prior written consent of Landlord. 22. Tenants shall cooperate with Landlord in obtaining maximum effectiveness of the cooling system by closing drapes and other window covering when the sun's rays fall on the windows of the Premises. Tenants shall not obstruct, alter or in any way impair the efficient operation of the Landlord's heating, ventilating, air conditioning, electrical, fire safety, or lighting systems. Tenants shall not tamper with or change the setting of any thermostats or temperature control valves. Exhibit "B" - Page 3 of 6 23. Canvassing, soliciting and peddling in the Building are prohibited without the written consent of Landlord and each tenant shall cooperate to prevent such activity. 24. Hand trucks not equipped with rubber tires and side guards shall not be used in any space, or in the public halls of the Building, either by Tenant or others. No bicycles, vehicles or animals of any kind shall be brought into or kept in or about the Premises. 25. The toilets, wash basins and other plumbing fixtures shall not be used for any purpose other than those for which they were constructed, and no sweeping, rubbish rags or other substances shall be thrown therein. All damage resulting from any misuses of fixtures shall be borne by the tenant who, or whose employees, agents or visitors, shall have caused the same. 26. No cooking shall be done or permitted by any tenant on the Premises; however, the preparation of coffee, tea, hot chocolate and similar items by a Tenant for its employees and business visitors shall be permitted. Tenants shall not use or keep in or about the Building any kerosene, gasoline or inflammable or combustible fluid or material. Tenant shall not use, keep or permit to be used or kept any foul or noxious gas or substance in or about the Building, or permit or suffer the Building to be occupied or used in a manner offensive or objectionable to Landlord by reason of noise, odors and/or vibrations, or interfere in any way with other tenants or those having business in the Building. No portion of the Building shall be used for lodging or sleeping or for any immoral or illegal purpose. 27. Tenant shall not engage in or permit any advertising or public relations which, in Landlord's opinion, tends to impair the reputation or the desirability of the Building or suggest that Tenant is anything other than a tenant in the Building. 28. No additional locks or bolts of any kind shall be placed upon any of the doors or windows by Tenant, nor shall any changes be made in existing locks or the mechanism thereof. Tenant must, upon the termination of his tenancy, restore to the Landlord all keys of stores, offices and toilet rooms, either furnished to, or otherwise procured by, Tenant and in the event of the loss of any keys so furnished, Tenant shall pay to the Landlord the cost of replacing the same or changing the lock or locks opened by such lost key if Landlord shall deem it necessary to make such change. 29. No tenant shall purchase spring water, ice, towels, janitorial or maintenance or other like services, from any company or persons not approved by Landlord. 30. The scheduling of moves of Tenant's furniture and equipment into or out of the Building is subject to the reasonable discretion of Landlord. 31. Tenant shall store all its trash and garbage within its Premises. No material shall be placed in the trash boxes or receptacles if such material is of such nature that it may not be disposed of in the ordinary and customary manner of removing and disposing of trash and garbage in the city of Los Angeles without being in violation of any law or ordinance governing such disposal. All garbage and refuse disposal shall be made only through entranceways and elevators provided for such purpose and at such times as Landlord shall designate. 32. These Rules and Regulations are in addition to and shall not be construed to in any way modify, alter or amend, in whole or in part, the terms, covenants, agreements and conditions of any lease of premises in the Building. Exhibit "B" - Page 4 of 6 33. Tenant shall not engage in any NR-Rated Activity (as defined herein) at the Premises but may engage in Permitted NR-Rated Activity (as defined herein). "NR-Rated Activity" shall mean Tenant or any sub-tenant engaging in any activity permitted under this Lease with respect to a theatrical motion picture, television mini-series, television series, so-called MOW or other motion picture project of any kind whatsoever that shall be accorded an "NR" rating or that would most likely be accorded an "NR" rating if rated or that shall purposely be left unrated because of its explicit depiction of sex or violence. "Permitted NR-Rated Activity" shall mean Tenant's engaging in any NR-Rated Activity in respect of any such project either produced by, produced for distribution by or actually distributed by a so-called "Major" or "Mini-Major" theatrical motion picture studio/distributor, a U.S. television network (i.e., ABC, CBS, NBC or Fox), or a major cable network (other than the Playboy Channel or the like) that is accorded such a rating or is left unrated for such reason (e.g., projects like "Last Tango In Paris," "Bonnie and Clyde" or "Heavy Traffic" but not projects like "Deep Throat"). Tenant hereby represents and warrants that, at all times prior to the execution of the Lease, NR-Rated Activity other than Permitted NR-Rated Activity has been an insignificant part of Tenant's business. Tenant agrees not to engage in NR-Rated Activity at the Project during the Lease Term. Tenant may engage in Permitted NR-Rated Activity at the Project throughout the Lease Term, as the same may be extended from time to time. This Section 33 shall be further subject to such changes as Landlord and Tenant may reasonably consent to following any change in the present system for rating motion pictures. 34. SECURITY (a) The security of Tenant's property requires that Tenant inform the gate guard when either a delivery or pick-up is to be made to the Premises. This notice shall enable guards to screen out unauthorized deliveries or pick-ups. If a truck does come to the gate with a delivery for Tenant and Landlord has not been notified, Landlord shall attempt to contact a member of Tenant's staff. Landlord, at its option, may refuse to accept any deliveries for which it has received no notification. In the event Landlord accepts a delivery for which it has received no notification, said delivery shall be accepted by Landlord solely at Tenant's risk and Landlord shall not be liable in the event of any loss or damage of any nature to said delivery. No pick-ups from the Premises shall be permitted without Tenant's prior consent or on the spot authorization. In this regard, Tenant shall furnish Landlord with a list of all personnel authorized to give such on the spot authorization. (b) The security of Landlord's property requires that Landlord's guards be permitted to reasonably search vehicles for any of Landlord's property before they leave Landlord's property, and Tenant hereby consents, on behalf of itself, its agents, representatives, guests, invitees and employees, to a reasonable search of their vehicles if reasonably requested to do so by Landlord's guards. Tenant, on behalf of itself, its agents, representatives and employees, waives any and all claims for any damages on account of such reasonable searches. Tenant shall notify all of its agents, representatives, employees, guests and invitees of this requirement. (c) Landlord reserves the right to refuse admittance to anyone for reasonable security purposes. 35. PARKING RULES AND REGULATIONS: (1) Vehicles must be parked entirely within the lines painted on pavement. (2) All directional signs and arrows must be observed. (3) The speed limit is 5 miles per hour. (4) Parking is prohibited: (a) in areas not striped for parking, (b) where "No Parking" signs are posted, (c) in cross-hatched areas, and (d) in such other areas as may be designated by Landlord. (5) Everyone is required to park and lock their own vehicle. ALL RESPONSIBILITY FOR LOSS OR DAMAGE IS ASSUMED BY THE PARKER. (6) Parking spaces are for the express purpose of parking one vehicle per space. Washing, waxing, cleaning or servicing a vehicle is prohibited. (7) Tenant shall acquaint all Exhibit "B" - Page 5 of 6 persons to whom Tenant assigns or permits parking privileges of these rules and regulations. (8) Vehicles improperly parked may be cited and/or towed at the owner's expense. (9) Violation of the Landlord's parking regulations by Tenant, its employees, agents, guests or invitees may result in suspension of Tenant's right to drive or park at Raleigh Studios' lot or parking structure. - ---------------------------------- Tenant - ---------------------------------- Exhibit "B" - Page 6 of 6 EXHIBIT "C" ----------- TENANT WORK LETTER ------------------ This TENANT WORK LETTER shall set forth the terms and conditions relating to the construction of the Premises. This Tenant Work Letter is essentially organized chronologically and addresses the issues of the construction of the Premises, in sequence, as such issues will arise during the actual construction of the Premises. All references in this Tenant Work Letter To Articles or Sections of "this Lease" shall mean the relevant portions of the Office Lease to which this Tenant Work Letter is attached as Exhibit C, and all references in this Tenant Work Letter to Sections of "this Tenant Work Letter-" shall mean the relevant portions of Sections 1 through 6 of this Tenant Work Letter. SECTION 1 LANDLORD'S INITIAL CONSTRUCTION IN THE PREMISES Landlord has constructed, at its sole cost and expense, the base, shell, and core (i) of the Premises and (ii) of the floor of the Building on which the Premises is located (collectively, the "BASE, SHELL, AND CORE"). Tenant accepts the Base, Shell and Core "as is" with all faults. SECTION 2 TENANT IMPROVEMENTS 2.1. TENANT IMPROVEMENT ALLOWANCE. Tenant shall be entitled to a one-time Tenant improvement allowance (The "Tenant Improvement Allowance") in the amount of ONE HUNDRED THIRTY THOUSAND SEVEN HUNDRED TEN DOLLARS AND NO/100 ($130.710.00) OR $30.00 PER USABLE SQUARE FOOT for the costs relating to the initial design and construction of Tenant's improvements which are permanently affixed to the Premises (the "Tenant Improvements"). In no event shall Landlord be obligated to make disbursements pursuant to this Tenant Work Letter in a total amount which exceeds the Tenant Improvement Allowance. If Tenant fails to utilize any portion of the Tenant Improvement Allowance on or before the date which is three (3) months after the Commencement Date, such unused portion shall revert to Landlord and Tenant shall have no further rights thereto. 2.2. DISBURSEMENT OF THE TENANT IMPROVEMENT ALLOWANCE. Except as otherwise set forth in this Tenant Work Letter, the Tenant IMPROVEMENT Allowance shall be disbursed by Landlord (each of which disbursements shall be made pursuant to Landlord's disbursement process) for costs related to the construction of the Tenant Improvements AND for the following items and costs (collectively, the "TENANT IMPROVEMENT ALLOWANCE ITEMS") (i) payment of the fees of the "Architect" and the "Engineers", as those terms are defined in Section 3.1 of this Tenant Work Letter, and payment of the fees incurred by, and the cost of documents and materials supplied by, Landlord and Landlord's consultants in connection with the preparation and review of the "Construction Drawings", as that term is defined in Section 3.1 of this Tenant Work, Letter; (ii) the cost of any changes in the Base, Shell and Core when such changes are required by the Construction Drawings, (iii) the cost of any changes to the Construction Drawings or Tenant Improvements required by all applicable building codes (the "CODE"); (iv) the cost of window coverings (if any) existing in the Premises; (v) the "Landlord Supervision Fee," as that term is defined in Section 4.3.2 of this Tenant Work Letter; and (vi) a portion of the costs of the tenant demising walls and public corridor walls and materials, if any, as designated by Landlord. Exhibit "C" - Page 1 of 7 2.3. STANDARD TENANT IMPROVEMENT PACKAGE. Landlord has established specifications (the "SPECIFICATIONS") for the Building standard components to be used in the construction of the Tenant Improvements in the Premises (collectively, the "STANDARD IMPROVEMENT PACKAGE"), which Specifications shall be supplied to Tenant by Landlord. The quality of Tenant Improvements shall be equal to or of greater quality than the quality of the Specifications, provided that the Tenant Improvements shall comply with certain Specifications as designated by Landlord. Landlord MAY make changes to the Specifications for the Standard Improvement Package from time to time. SECTION 3 CONSTRUCTION DRAWINGS 3.1. SELECTION OF ARCHITECT/CONSTRUCTION DRAWINGS. .Tenant shall retain an architect/space planner approved by Landlord (the "Architect") to prepare the "Construction Drawings" as that term is defined in this Section 3.1. Tenant shall retain the engineering consultants designated by Landlord (the "Engineers") to prepare all plans and engineering working drawings relating to the structural, mechanical, electrical, plumbing, HVAC, lifesafety, and sprinkler work in the Premises, which work is not part of the Base Building. The plans and drawings to be prepared by Architect and the Engineers hereunder shall be known collectively as the "CONSTRUCTION DRAWINGS". All Construction Drawings shall comply with the drawing format and specifications determined by Landlord, and shall be subject to Landlord's approval. Tenant and Architect shall verify, in the field, the dimensions and conditions as shown on the relevant portions of the Base Building plans, and Tenant and Architect shall be solely responsible for same, and Landlord shall have no responsibility in connection therewith. Landlord's review of the Construction Drawings as set forth in this Section 3 shall be for its sole purpose and shall not imply Landlord's review of the same, or oblige Landlord to review same for quality, design, Code compliance, or other like matters. Accordingly, notwithstanding that any Construction Drawings are reviewed by Landlord or its space planner, architect, engineers and consultants, and notwithstanding any advice or assistance which may be rendered to Tenant by Landlord or Landlord's space planner, architect, engineers, and consultants, Landlord shall have no liability whatsoever in connection therewith and shall not be responsible for any omissions or errors contained in the Construction Drawings, and Tenant's waiver and indemnity set forth in Section 8.3 of this Lease shall specifically apply to the Construction Drawings, 3.2. FINAL SPACE PLAN. On or before the date set forth in Schedule 1, attached hereto, Tenant and the Architect shall (i) prepare the final space plan for Tenant Improvements in the Premises (collectively, the "FINAL SPACE PLAN"), which Final Space Plan shall include a layout and designation of all offices, rooms and other partitioning their intended use, and equipment to be contained therein, and (ii) deliver four (4) copies of such Final Space Plan signed by the Tenant and the Architect to Landlord for Landlord's approval. 3.3. FINAL WORKING DRAWING. On or before the date set forth in Schedule 1, Tenant, shall cause the completion of the architectural and engineering drawings for the Premises, and the final architectural working drawings all in form which is complete to allow subcontractors to bid on the work and to obtain all applicable permits (collectively, the "FINAL WORKING DRAWINGS") and shall submit the same to Landlord for Landlord's approval. Exhibit "C" - Page 2 of 7 3.4. PERMITS. The Final Working Drawings shall be approved by Landlord (the "APPROVED WORKING DRAWINGS") prior to the commencement of construction of the Tenant Improvements. Tenant shall immediately submit the Approved Working Drawings to the appropriate municipal authorities for all applicable building permits necessary to allow "CONTRACTOR", as that term is defined in Section 4.1, below, to commence and fully complete the construction of the Tenant Improvements (the "PERMITS"), and, in connection therewith, Tenant shall coordinate with Landlord in order to allow Landlord, at its option, to take part in all phases of the permitting process and shall supply Landlord, as soon as possible, with all plan check numbers and dates of submittal and shall take all necessary actions, on or before the date set forth in Schedule I in order to allow Contractor to receive the Permits conditioned only upon the payment of the appropriate Permit fees. Notwithstanding anything to the contrary set forth in this Section 3.4, Tenant hereby agrees that neither Landlord nor Landlord's consultants shall be responsible for obtaining any building permit or certificate of occupancy for the Premises and that the obtaining of the same shall be Tenant's responsibility, provided however that Landlord shall, in any event, cooperate with Tenant in executing permit applications and performing other ministerial acts reasonably necessary to enable Tenant to obtain any such permit or certificate of occupancy. No changes, modifications or alterations in the Approved Working Drawings may be made without the prior written consent of Landlord, provided that Landlord may withhold its consent, in its sole discretion, to any change in the Approved Working Drawings if such change would directly or indirectly delay the "SUBSTANTIAL COMPLETION" of the Premises as that term is defined in Section 5.1 of this Tenant Work Letter 3.5. TIME DEADLINES. Tenant shall USE its best, good faith, efforts and all due diligence to cooperate with the Architect, the Engineers, and Landlord to complete all phases of the Construction Drawings and the permitting process and to receive the Permits, and with Contractor to obtain the "CONTRACT COST", as that term is defined in Section 4.2 of this Tenant Work Letter, as soon as possible after the execution of the Lease, and, in that regard, shall meet with Landlord on a scheduled basis to be determined by Landlord, to discuss Tenant's progress in connection with the same. The applicable dates for approval of items, plans and drawings as described in this Section 3, Section 4, below, and in this Tenant Work Letter are set forth and further elaborated upon in Schedule I (the "TIME DEADLINES"), attached hereto. Tenant agrees to comply with the Time Deadlines. SECTION 4 CONSTRUCTION OF THE TENANT IMPROVEMENTS 4.1. CONTRACTOR. As set forth in Section 4.2, below, a contractor designated by Landlord ("CONTRACTOR") shall construct the Tenant Improvements. 4.2. COMPETITIVE BIDDING. The Contractor shall be selected pursuant to a competitive bidding process. Landlord shall select three (3) qualified, licensed and reputable general contractors to participate in the process. Each such contractor shall be notified in the bidding package of the time schedule for construction of the Tenant Improvements and that, unless Landlord otherwise requires, such contractors shall be required to use the fire, lifesafety subcontractor designated by Landlord. The bids shall be submitted promptly to Landlord and a reconciliation shall be performed by Landlord to adjust inconsistent or incorrect assumptions so that a like-kind comparison can be made. Landlord shall make final selection of the contractor based on the contractors' qualifications (including financials and insurance and/or bonding capabilities), the contractors' understanding of scope of work and competitive bidding. The date of selection of such contractor shall be known hereafter as the "Selection Date" and the cost of all Tenant Improvement Allowance Items to be incurred by Tenant in connection with the construction of the Tenant Improvements may be referred to herein as the "Contract Cost". Exhibit "C" - Page 3 of 7 4.3 CONSTRUCTION OF TENANT IMPROVEMENTS BY CONTRACTOR UNDER THE SUPERVISION OF LANDLORD. 4.3.1. OVER-ALLOWANCE AMOUNT. Within three (3) business days after the Selection Date, Tenant shall deliver to Landlord cash in an amount (the "OVER-ALLOWANCE AMOUNT") equal to the difference between (i) the Contract Cost and (ii) the amount of the Tenant Improvement Allowance. The Over-Allowance Amount shall be disbursed by Landlord prior to the disbursement of any then remaining portion of the Tenant Improvement Allowance, and such disbursement shall be pursuant to the same procedure as the Tenant Improvement Allowance. In the event that, after the Selection Date, any revisions, changes, or substitutions shall be made to the Construction Drawings or the Tenant Improvements, any additional costs which arise in connection with such revisions, changes or substitutions or any other additional costs, shall be paid by Tenant to Landlord immediately upon Landlord's request as an addition to the Over-Allowance Amount. 4.3.2. LANDLORD'S RETENTION OF CONTRACTOR. Landlord shall independently retain Contractor, on behalf of Tenant, to construct the Tenant Improvements in accordance with the Approved Working Drawings and Landlord shall supervise the construction by Contractor, and Tenant shall pay a construction supervision and management fee (the "LANDLORD SUPERVISION FEE") to Landlord in an amount equal to Five Percent (5%) of the total of the following: (i) the Tenant Improvement Allowance plus (ii) the Over-Allowance Amount (as such Over Allowance Amount may increase pursuant to the terms of this Tenant Work Letter). 4.3.3. CONTRACTOR'S WARRANTIES AND GUARANTIES. Landlord hereby agrees to assign to Tenant, to the extent assignable and to the extent reasonably necessary in order to allow Tenant to pursue- the particular claim against Contractor, all warranties and guaranties by Contractor relating To the Tenant Improvements, and Tenant hereby waives all claims against Landlord relating to, or arising out of the construction of, the Tenant Improvements. 4.3.4. TENANT'S COVENANTS. Tenant hereby indemnifies Landlord for any loss, claims, damages or delays arising from the actions of Architect on the Premises or in the Building. Within ten (10) days after completion of construction of the Tenant Improvements, Tenant shall cause Contractor and Architect to cause a Notice of Completion to be recorded in the Office of the County Recorder of the county in which the Building is located in accordance with Section 3093 of the Civil Code of the State of California or any successor statute and furnish a copy thereof to Landlord upon recordation, failing which, Landlord may itself execute and file the same on behalf of Tenant as Tenant's agent for such purpose. In addition, immediately after the Substantial Completion of the Premises, Tenant shall have prepared and delivered to the Building a copy of the "as built" plans and specifications (including all working drawings) for the Tenant Improvements. Exhibit "C" - Page 4 of 7 SECTION 5 COMPLETION OF THE TENANT IMPROVEMENTS; COMMENCEMENT DATE 5.1. SUBSTANTIAL COMPLETION. For purposes of this Lease, "Substantial Completion" of the Premises shall occur upon the completion of construction of the Tenant Improvements in the Premises pursuant to the Approved Working Drawings, with the exception of any punch list items and any tenant fixtures, workstations, built-in furniture, or equipment to be installed by Tenant or under the supervision of Contractor. 5.2. DELAY OF THE SUBSTANTIAL COMPLETION OF THE PREMISES. Except as provided in this Section 5.2, the Commencement Date shall occur as set forth in the Lease and Section 5.1, above. If there shall be a delay or there are delays in the Substantial Completion of the Premises or in the occurrence of any of the other conditions precedent to the Commencement Date, as set forth in the Lease, as a direct, indirect, partial, or total result of: 5.2.1. Tenant's failure to comply with the Time Deadlines; 5.2.2. Tenant's failure to timely approve any matter requiring Tenant's approval; 5.2.3. breach by Tenant of the terms of this Tenant Work Letter or the Lease; 5.2.4. Changes in any of the Construction Drawings after disapproval of the same by Landlord or because the same do not comply with Code or other applicable laws; 5.2.5 Tenant's request for changes in the Approved Working Drawings; 5.2.6. Tenant's requirement for materials, components, finishes or improvements which are not available in a commercially reasonable time given the anticipated day of Substantial Completion of the Premises, as set forth in the Lease, or which are different from, or not included in, the Standard Improvement Package; 5.2.7. Changes to the Base, Shell and Core required by the Approved Working Drawings; or 5.2.8. Any other acts or omissions of Tenant, or its agents, or employees; then, notwithstanding anything to the contrary set forth in the Lease or this Tenant Work Letter and regardless of the actual date of the Substantial Completion of the Premises, the Commencement Date shall be deemed to be the date the Commencement Date would have occurred if no Tenant delay or delays, as set forth above, had occurred. SECTION 6 MISCELLANEOUS 6.1. TENANT'S ENTRY INTO THE PREMISES PRIOR TO SUBSTANTIAL COMPLETION. Provided that Tenant and its agents do not interfere with Contractor's work in the Building and the Premises, Contractor shall allow Tenant access to the Premises prior to the Substantial Completion of the Premises for the purpose of Tenant installing overstandard equipment or fixtures (including Tenant's data and telephone equipment) in the Premises. Prior to Tenant's entry into the Premises as permitted by the terms of this Section 6.1, Tenant shall submit a schedule to Landlord and Contractor, for their approval, which schedule shall detail the timing and purpose of Tenant's entry. Tenant shall hold Landlord harmless from and indemnify, protect and defend Landlord against any loss or damage to the Building or Premises and against injury to any persons caused by Tenant's actions pursuant to this Section 6. 1. Exhibit "C" - Page 5 of 7 6.2. FREIGHT ELEVATORS. Landlord shall, consistent with its obligations to other tenants of the Building, make the freight elevator reasonably available to Tenant in connection with initial decorating, furnishing and moving into the Premises. 6.3. TENANT'S REPRESENTATIVE. Tenant has designated [REPRESENTATIVE TO BE DETERMINED BY TENANT] as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Landlord, shall have full authority and responsibility to act on behalf of the Tenant as required in this Tenant Work Letter. 6.4. LANDLORD'S REPRESENTATIVE. Landlord has designated [REPRESENTATIVE TO BE DETERMINED BY LANDLORD] as its sole representative with respect to the matters set forth in this Tenant Work Letter, who, until further notice to Tenant, shall have full authority and responsibility to act on behalf of the Landlord as required in this Tenant Work Letter. 6.5. TIME OF THE ESSENCE IN THIS TENANT WORK LETTER. Unless otherwise indicated, all references herein to a "number of days" shall mean and refer to calendar days. In all instances where Tenant is required to approve or deliver an item, if no written notice of approval is given or the item is not delivered within the stated time period, at Landlord's sole option, at the end of such period the item shall automatically be deemed approved or delivered by Tenant and the next succeeding time period shall commence. 6.6. TENANT'S LEASE DEFAULT. Notwithstanding any provision to the contrary contained in this Lease, if an event of default as described in Section 12 of the Lease, or a default by Tenant under this Tenant Work Letter, has occurred at any time on or before the Substantial Completion of the Premises, then (i) in addition to all other rights and remedies granted to Landlord pursuant to the Lease, Landlord shall have the right to withhold payment of all or any portion of the Tenant Improvement Allowance and/or Landlord may cause Contractor to cease the construction of the Premises (in which case, Tenant shall be responsible for any delay in the Substantial Completion of the Premises caused by such work stoppage as set forth in Section 5 of this Tenant Work Letter), and (ii) all other obligations of Landlord under the terms of this Tenant Work Letter shall be forgiven until such time as such default is cured pursuant to the terms of the Lease. 6.7. OWNERSHIP OF TENANT IMPROVEMENTS. Upon installation, all Tenant Improvements (including, without limitation, any movable walls) shall be deemed Landlord's property, shall be deemed part of the Premises and shall be delivered by Tenant to Landlord at the end of the Lease Term. Exhibit "C" - Page 6 of 7 SCHEDULE 1 TIME DEADLINES DATES ACTIONS TO BE PERFORMED ----- ----------------------- A. August 23, 1999 Final Space Plan to be completed by Tenant and delivered to Landlord B. September 16, 1999 Tenant to deliver Final Working Drawings to Landlord. C. October 1, 1999 Tenant to cause Permits to be in position to be picked up by Contractor. Exhibit "C" - Page 7 of 7 EXHIBIT "D" ----------- NON-DISTURBANCE AND ATTORNMENT AGREEMENT ---------------------------------------- RECORDING REQUESTED BY AND WHEN RECORDED MAIL TO: - -------------------------------------------------------------------------------- SPACE ABOVE THIS LINE FOR RECORDER'S USE NON-DISTURBANCE AND ATTORNMENT AGREEMENT ---------------------------------------- THIS NON-DISTURBANCE AND ATTORNMENT AGREEMENT (this "AGREEMENT") is made and entered into as of this 3rd day of August, 1999 by and between Shamrock MBS, L.L.C., a Delaware limited liability company ("MASTER LANDLORD"), and Alpine Television, Inc. a California Corporation ("TENANT"). W I T N E S S E T H : -------------------- A. WHEREAS, Master Landlord has heretofore made that certain lease dated July 1, 1998 (the "MASTER LEASE") with RP Holdings Inc., a California corporation ("LANDLORD"), which Lease concerns that certain property (the "Property") situated in the County of Los Angeles, State of California, more particularly described on Exhibit "A" attached hereto and hereby made a part hereof. B. WHEREAS, Landlord and Tenant have heretofore entered into that certain lease (the "LEASE") dated August 3, 1999 pursuant to which Landlord has leased to Tenant a portion of the Property (the "DEMISED PREMISES") consisting of approximately 7922 rentable square feet on the Third floor of that certain office building (the "Building") commonly known as The Media Center and located at the Property. C. WHEREAS, Tenant and Master Landlord desire to enter into this Agreement to confirm their understanding with respect to their respective rights under the Lease, and to provide for certain contingencies, all as hereinafter set forth. NOW, THEREFORE, in consideration of the mutual promises hereinafter set forth and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows: 1. NON-DISTURBANCE. In the event of a Lease Termination and so long as Tenant is not in default (beyond any applicable cure period provided to Tenant pursuant to the terms of the Lease) in the payment of rent or in the performance of any of the terms, covenants or conditions of Tenant under the Lease, Master Landlord shall not interfere with or disturb Tenant's possession and occupancy of the Demised Premises during the term of the Lease or any extension thereof duly exercised by Tenant. As used herein, "Lease Termination" shall mean the termination of the Master Lease (i) by Master Landlord due to a default of Landlord as tenant under the Master Lease; or (ii) due to the expiration of the stated term of the Master Lease. Master Landlord consents to the Lease. Exhibit "D" - Page 1 of 6 NON-DISTURBANCE AND ATTORNMENT AGREEMENT - ---------------------------------------- 2. ATTORNMENT. (a) In the event of a Lease Termination, Tenant shall be bound to Master Landlord under all of the terms, covenants and conditions of the Lease, for the balance of the remaining term thereof and any extension thereof duly exercised by Tenant, with the same force and effect as if Master Landlord were the landlord under the Lease. In such event, Tenant shall, and hereby does, attorn to Master Landlord as its Landlord, said attornment to be effective and self-operative immediately upon the Lease Termination, without the execution of any further instruments on the part of any of the parties hereto. The respective rights and obligations of Tenant and Master Landlord upon such attornment, to the extent of the then remaining term of the Lease, and any such extension thereof, shall be and hereby are the same as those set forth in the Lease, the complete terms of which are incorporated herein by this reference. There shall be no merger of the lease or the leasehold estate created thereby with the fee estate in the Demised Premises or any part thereof by reason of the fact that the same person or entity may acquire or hold, directly or indirectly, the lease or such leasehold estate and the fee estate in the Demised Premises, without the prior written consent of the owner of such fee and the holder holders of any mortgages or similar security instruments covering the Demised Premises. (b) In the event of a Lease Termination, at Master Landlord's request, Tenant shall execute a new lease with respect to the Demised Premises on the same terms and conditions as are contained in the Lease and for a term equal to the term of the Lease then remaining. Tenant shall also execute and deliver, at any time and from time to time, upon the request of Landlord or Master Landlord, any such further instruments which, in the reasonable opinion of the requesting party, may be necessary or appropriate to evidence Tenant's attornment. (c) The obligation of Master Landlord to accept the attornment of Tenant and not to disturb Tenant's possession of the Demised Premises under the Lease, as set forth above, is expressly subject to the satisfaction of the following conditions at the time of such transfer of Landlord's interest in the Property: (i) Tenant shall not be in default under the Lease; (ii) Neither the rent nor any other charges or expenses payable by Tenant under the Lease shall have been reduced without Master Landlord's prior written consent, except as otherwise set forth in the Lease; (iii) The Lease shall not have been otherwise modified or supplemented by verbal agreement between Landlord and Tenant without Master Landlord's prior written consent; (iv) Tenant shall pay to Master Landlord all rental payments payable by Tenant under the Lease from and after receipt of notice from Master Landlord of the date of the transfer, which payments shall be made in the amounts and at the times set forth in the Lease, and Landlord releases Tenant from any liability for such payments paid to Master Landlord; and (v) Tenant shall duly confirm its attornment to Master Landlord by written instrument. Exhibit "D" - Page 2 of 6 3. LIMITATIONS. (a) If Master Landlord shall succeed to the interest of Landlord under the Lease, Master Landlord shall, subject to the last sentence of Paragraph 3(b), be bound to Tenant under all of the terms, covenants and conditions of the Lease; provided, however, that Master Landlord shall not be: (i) liable for any damages or other relief attributable to any act or omission of Landlord or any prior lessor under the Lease; (ii) liable for any damages or other relief attributable to any latent or patent defects in construction of the Demised Premises; (iii) liable for any damages or other relief attributable to any breach by Landlord or any prior lessor under the Lease of any representation or warranty contained in the Lease; (iv) subject to any offsets or defenses, unless such offsets or defenses are specifically provided for in the Lease, that Tenant may have against Landlord or any prior lessor under the Lease; (v) bound by any prepayment by Tenant to Landlord of more than one (1) month's installment of rent, which rent shall remain due and owing to Master Landlord notwithstanding such advance payment to Landlord; (vi) bound by any amendment or modification of the Lease made without Master Landlord's consent and written approval; or (vii) required to complete any building or tenant improvements or otherwise perform the obligations of Landlord under the Lease in the event of a Lease Termination. (b) Nothing in this Agreement shall be deemed or construed to be a covenant or agreement by Master Landlord to perform any covenant of Landlord under the Lease unless and until the Lease Termination occurs. Neither Master Landlord nor any other party who, from time to time, shall be included in the definition of Master Landlord hereunder shall have any liability or responsibility under or pursuant to the terms of this Agreement after Master Landlord or such party ceases to own a fee interest in or to the Property. 4. SUBORDINATION. Subject to the terms of this Agreement (including but not limited to Paragraphs 2 and 3 hereof), Tenant agrees that the Lease and the leasehold estate created in favor of Tenant thereunder now is, and shall at all times continue to be, subject and subordinate in each and every respect to the Master Lease. Nothing herein contained shall be deemed or construed to limit or restrict Master Landlord's ability to enforce the terms, covenants, provisions or remedies of the Master Lease, whether or not consistent with the Lease. This Agreement shall be the only agreement with regard to the subordination of the Lease to the lien or charge of the Master Lease and shall supersede and cancel any prior agreements as to such subjection or subordination, including, without limitation, any such agreements contained in the Lease, but only insofar as the same would affect the priority between the Lease and the leasehold estate created thereunder and the Master Lease. 5. NOTICE OF DEFAULT. In the event that Landlord shall default in the performance of any of the terms, provisions, conditions or agreements of Landlord contained in the Lease, Tenant shall give written notice of such default to Master Landlord and Master Landlord shall have the right (but not the obligation) to cure such default for a period ("Master Landlord's Cure Period") of thirty (30) days after Master Landlord's receipt of such written notice, and Tenant shall not take any action with respect to such default under the Lease during Master Landlord's Cure Period, including, without limitation, any action to terminate or rescind the Lease, or to withhold any rent thereunder; provided, however, that in the case of any default which cannot with diligence be cured within Master Landlord's Cure Period, if Master Landlord shall proceed promptly to cure such default with diligence and continuity, Master Landlord's Cure Period shall be extended for such a time as may be necessary for Master Landlord to fully cure such default with diligence and continuity. To facilitate the exercise of Master Landlord's rights under this Paragraph 5, Tenant hereby grants to Master Landlord the right to enter upon the Property and the Demised Premises for the purpose of effectuating the cure of any such default of Landlord under the Lease. Exhibit "D" - Page 3 of 6 NON-DISTURBANCE AND ATTORNMENT AGREEMENT - ---------------------------------------- 6. MISCELLANEOUS. (a) MASTER LANDLORD DEFINED. The term "Master Landlord" shall be deemed to include Master Landlord and any of its successors, assigns, or transferees, including, without limitation, any individual or entity which shall have succeeded to Landlord's interest by, through or under judicial or power-of-sale foreclosure, or by other proceedings brought pursuant to the Master Lease, or by deed in lieu of such foreclosure or otherwise. (b) MODIFICATION; SUCCESSORS AND ASSIGNS. This Agreement may not be modified orally or in any manner other than by an agreement in writing signed by the parties hereto, and/or their respective successors in interest. This Agreement shall inure to the benefit of and be binding upon the parties hereto, their successors and assigns. (c) COUNTERPARTS. This Agreement may be executed in several counterparts, which shall together constitute one agreement, binding upon all parties hereto, notwithstanding that all parties are not signatories to the original or the same counterpart. (d) NOTICES. All notices or other communications required or to be given pursuant to the provisions hereof shall be in writing and shall be considered properly given if: (i) mailed by first class United States mail, postage prepaid, registered or certified with return receipt requested; (ii) delivered by recognized overnight courier; (iii) hand delivered in person to the intended addressee; or (iv) sent by prepaid telegram. Notice so given in person or by telegram shall be effective upon its deposit. Notice so given by mail shall be effective two (2) days after deposit in the United States mail. Notice given in any other manner shall be effective only if and when received by the addressee. For purposes of notice, the addresses of the parties shall be: Tenant: Alpine Television, Inc. 6919 Valjean Avenue Van Nuys, CA 91406 Attn: Roland Carroll Master Landlord: Shamrock MBS, L.L.C. 4444 Lakeside Drive Burbank, California 91505 attention: ______________________ provided, however, that any party shall have the right to change its address for notice hereunder to any other location within the continental United States by giving thirty (30) days' written notice of such change to the other party in the manner set forth above. (e) CHOICE OF LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of California. (f) PARAGRAPH HEADINGS. Paragraph headings in this Agreement are for convenience of reference only and shall not be construed as part of this Agreement or as a limitation on any of the provisions hereof. Exhibit "D" - Page 4 of 6 NON-DISTURBANCE AND ATTORNMENT AGREEMENT - ---------------------------------------- (g) ATTORNEYS' FEES; COSTS. In the event that any legal action or proceeding is commenced by any party hereto to interpret or enforce the terms of or obligations arising from this Agreement, or to recover damages for the breach thereof, the party prevailing in such action or proceeding shall be entitled to recover from the non-prevailing party all reasonable attorneys' fees, costs and expenses incurred by such prevailing party in connection with such action or proceeding. IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first hereinabove written. "MASTER LANDLORD" Shamrock MBS, L.L.C., a Delaware limited liability company BY: --------------------------------------------------- ITS: --------------------------------------------------- "TENANT" ALPINE TELEVISION, INC. A CALIFORNIA CORPORATION BY: --------------------------------------------------- ITS: --------------------------------------------------- Exhibit "D" - Page 5 of 6 LEGAL DESCRIPTION ----------------- Exhibit "D" - Page 6 of 6 State of ) ----------------------------------------------------------------- ) SS. County of ) ---------------------------------------------------------------- On , before me, , ------------------------------ --------------------------------- DATE NAME, TITLE OF OFFICER - E.G., "JANE DOE, NOTARY PUBLIC" personally appeared , ------------------------------------------------- NAME(S) OF SIGNER(S) |_| personally known to me - OR - |_| proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY State of ) ----------------------------------------------------------------- ) SS. County of ) ---------------------------------------------------------------- On , before me, , ------------------------------ --------------------------------- DATE NAME, TITLE OF OFFICER - E.G., "JANE DOE, NOTARY PUBLIC" personally appeared , ------------------------------------------------- NAME(S) OF SIGNER(S) |_| personally known to me - OR - |_| proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY State of ) ----------------------------------------------------------------- ) SS. County of ) ---------------------------------------------------------------- On , before me, , ------------------------------ --------------------------------- DATE NAME, TITLE OF OFFICER - E.G., "JANE DOE, NOTARY PUBLIC" personally appeared , ------------------------------------------------- NAME(S) OF SIGNER(S) |_| personally known to me - OR - |_| proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY State of ) ----------------------------------------------------------------- ) SS. County of ) ---------------------------------------------------------------- On , before me, , ------------------------------ --------------------------------- DATE NAME, TITLE OF OFFICER - E.G., "JANE DOE, NOTARY PUBLIC" personally appeared , ------------------------------------------------- NAME(S) OF SIGNER(S) |_| personally known to me - OR - |_| proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS my hand and official seal SIGNATURE OF NOTARY EX-10.5 10 0010.txt ESCROW AGREEMENT ESCROW AGREEMENT THIS ESCROW AGREEMENT (this "Agreement") is entered into as of the _____ day of October, 2000, by and among Alpine Entertainment, Inc., a California corporation ("Issuer"), RH Investments Corporation ("Placement Agent"), and City National Bank ("Escrow Agent") R E C I T A L S: A. Issuer propose to offer for sale to subscribers an aggregate of 1,250,000 shares of the capital stock of Issuer, having no par value (the "Shares") at a price of $6.00 per Share, payable at the time of subscribing for a Share. 250,000 shares and the proceeds therefrom shall be subject to this Agreement. The payment of $1,500,000 for at least 250,000 Shares will be paid into the escrow created by this Agreement. B. Issuer intends to sell the Shares on a best-efforts "minimum or none" basis in a public offering (the "Offering") by delivering to each subscriber a Prospectus (the "Prospectus") describing the Offering. C. Issuer desires to establish an escrow account in which funds received from subscribers would be deposited pending completion of the period during which the Escrow Account shall be open (the "Escrow Period"). City National Bank, serve as Escrow Agent in accordance with the terms and conditions set forth herein. AGREEMENT: NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereby agree as follows: 1. Issuer hereby appoints City National Bank, as Escrow Agent and Escrow Agent shall establish an escrow account (the "Escrow Account") on its books styled "Alpine Entertainment Subscription Account." Commencing upon the execution of this Agreement, Escrow Agent shall act as Escrow Agent and hereby agrees to receive and disburse the proceeds from the offering of the Shares in accordance with the terms here of. Issuer agrees to notify the Escrow Agent promptly of the closing of the offering and sale of the Shares. 2. Issuer or Placement Agent shall cause all checks received from subscribers for Shares to be promptly deposited into the Escrow Account. Issuer or Placement Agent shall deliver to the Escrow Agent checks of the subscribers made payable to the Alpine Entertainment Subscription Account or endorsed to the Alpine Entertainment Subscription Account. Any checks that are received by Escrow Agent that are not made payable or endorsed to the Alpine Entertainment Escrow Account shall be returned to the Issuer. Issuer or Placement Agent shall furnish to the Escrow Agent at the time of each deposit of the above-mentioned funds a list containing the name of each subscriber, the subscriber's address, the number of Shares subscribed for, and the amount of the check being delivered to the Escrow Agent. Prior to the receipt of the Minimum (as described below), the Issuer is aware and understands that it is not entitled to any proceeds from subscriptions deposited into the Escrow Account and no amounts deposited in the Escrow Account during the Escrow Period shall become the property of the Issuer or any other entity, or be subject to the debts of the Issuer or any other entity. 3. The Escrow Period shall commence on the date hereof and shall terminate ten (10) Business Days (as defined below) following the earlier to occur of the following dates: (a) The date upon which Escrow Agent confirms upon written request of the Issuer that it has received into the Escrow Account and collected gross subscription proceeds from the sale of 250,000 Shares aggregating $1,500,000 in deposited funds (the "Minimum") assuming that, prior to such date, the SB-2 Registration Statement as amended, File Number 333-73213 has been declared effective by the Securities and Exchange Commission; or (b) The "Cessation Date," which for the purposes of this Agreement shall be May ___, 2001, except as extended in writing by the agreement of parties for a period not to exceed an additional sixty (60) days. (c) The date upon which a determination is made by the Issuer to terminate the Offering prior to the sale of the Minimum, as communicated to Escrow Agent in writing. Upon the occurrence of any of the events described in (a), (b) or (c) above, the Escrow Period shall continue for such ten (10) Business-Day period solely for the limited purposes of collecting subscribers' checks that have been deposited prior to such event and disbursing funds from the Escrow Account as provided herein. Escrow Agent will not accept deposits of subscribers' checks after notice that any of the events described in subparagraphs (a), (b) and (c) has occurred. "Business Day" shall mean a day on which commercial banks in Los Angeles, California, are open for the general transaction of business. If any action or time for performance pursuant to this Agreement is to occur on any Saturday, Sunday or holiday, such time for action or performance shall be extended to the next Business Day. 2 4. The Escrow Agent will deposit the subscribers' checks for collection and credit the proceeds to the Escrow Account to be held by it under the terms of this Agreement. Notwithstanding anything to the contrary contained herein, Escrow Agent is under no duty or responsibility to enforce collection of any checks delivered to Escrow Agent hereunder. The Escrow Agent hereby is authorized to forward each check for collection and deposit the proceeds in the Escrow Account. As an alternative, the Escrow Agent may telephone the bank on which the check is drawn to confirm that the check has been paid. Additionally, to insure that such funds have cleared normal banking channels for collection, Escrow Agent is authorized to hold for ten (10) Business Days funds to be released. Issuer shall immediately reimburse Escrow Agent any monies paid to it if thereafter the subscriber's check is returned unpaid. Any item returned unpaid to the Escrow Agent on its first presentation for payment shall be returned to Issuer and need not be again presented by the Escrow Agent for collection. Issuer agrees to reimburse Escrow Agent for the cost incurred with any returned check. The Escrow Agent shall not be required to invest any funds deposited in the Escrow Account and shall in no event be liable for any investment loss. For purposes of this Agreement, the term "collected funds" or the term "collected" when referring to the proceeds of subscribers' checks shall mean all funds received by Escrow Agent that have cleared normal banking channels and are in the form of cash 5. If prior to the Cessation Date, subscribers' checks in an amount of at least the Minimum have been deposited in the Escrow Account, upon request from Issuer, Escrow Agent will confirm the amounts collected by it from subscribers' checks. If such amount is at least equal to the Minimum, the Issuer may send Escrow Agent a written notice providing a list of all accepted subscribers, specifying the total amount of their subscription to be remitted to Issuer, and containing a request to terminate the Escrow Period and remit such amount, less any fees or other amounts then owing from Issuer to Escrow Agent hereunder, to the Issuer as promptly as possible, but in no event later than ten (10) Business Days after such termination, by issuing its bank check payable to the Issuer or by depositing such amount directly into the account of Issuer if maintained with City National Bank, as designated in writing by Issuer to Escrow Agent. The Escrow Period shall not terminate upon receipt by Escrow Agent of such notice, but shall continue for such (10) Business-Day period solely for the limited purposes of collecting subscribers' checks that have been deposited prior to Escrow Agent's receipt of such notice and disbursing funds from the Escrow Account as provided herein. Escrow Agent will not accept deposits of subscribers' checks after receipt of such notice. 3 If, on the Cessation Date, the Minimum Amount has not been deposited with the Escrow Agent and collected, or if Issuer notifies the Escrow Agent in writing that Issuer elects to terminate the Offering as provided in paragraph 3(c) above, the Escrow Agent shall then issue and mail its bank checks to the subscribers in the amount of the subscribers' respective checks, without deduction, penalty or expense to the subscriber, and shall, for this purpose, be authorized to rely upon the names and addresses of subscribers furnished it as contemplated above. No subscriber shall be paid interest with respect to such deposited funds. The purchase money returned to each subscriber shall be free and clear of any and all claims of the Issuer and any of its creditors. For each subscription for which the Escrow Agent has not collected funds but has submitted the subscriber's check for collection, the Escrow Agent shall promptly issue a check to such subscriber in the amount of the collected funds from such subscriber's check after the Escrow Agent has collected such funds. If Escrow Agent has not yet submitted such subscriber's check for collection, the Escrow Agent shall promptly remit the subscriber's check directly to such subscriber. At such time as Escrow Agent shall have made the payments and remittances provided in the Agreement, the Escrow Agent shall be completely discharged and released of any and all further liabilities and responsibilities hereunder. 6. As consideration for its agreement to act as Escrow Agent as herein described, Issuer agrees to pay the Escrow Agent an administration fee of $_______ upon execution of this Agreement, plus the fees described on the attached fee schedule. Further, Issuer agrees to pay all disbursements and advances incurred or made by the Escrow Agent in performance of its duties hereunder, including reasonable fees, expenses and disbursements of its counsel, all in accordance with the attached fee schedule or the other provisions of this Agreement. No such fees or reimbursements shall be paid out of or chargeable to the funds on deposit in the Escrow Account until such time as the Minimum has been collected. If the Issuer rejects any subscription for which Escrow Agent has already collected funds, the Escrow Agent shall promptly issue a refund check to the rejected subscriber in the amount of the subscriber's check. If the Issuer rejects any subscription for which the Escrow Agent has not yet collected funds but has submitted the subscriber's check for collection, the Escrow Agent shall promptly issue a check in the amount of the collected funds from the subscriber's check to the rejected subscriber after the Escrow Agent has cleared such funds. If Escrow Agent has not yet submitted a rejected subscriber's check for collection, the Escrow Agent shall promptly remit the subscriber's check directly to the subscriber. 7. This Agreement shall automatically terminate upon the earlier of (i) twenty (20) days after the Cessation Date or (ii) twenty (20) days after the date upon which the Escrow Agent has delivered the final portion of Escrow Account funds pursuant to the terms of this Agreement. 4 8. It is understood that the Escrow Agent reserves the right to resign as Escrow Agent at any time by giving written notice of its resignation, specifying the effective date thereof, to each other party hereto. Within thirty (30) days after receiving the aforesaid notice, the other party or parties hereto shall appoint a successor Escrow Agent to which the Escrow Agent may distribute the property then held hereunder, less its fees, costs and expenses (including counsel fees and expenses) which may remain unpaid at that time. If a successor Escrow Agent has not been appointed and has not accepted such appointment by the end of such thirty (30) day period, the Escrow Agent may apply to a court of competent jurisdiction for the appointment of a successor Escrow Agent and the fees, costs and expenses (including reasonable counsel fees and expenses) which it incurs in connection with such a proceeding shall be paid by the Company. 9. The parties hereto agree that the following provisions shall control with respect to the rights, duties, liabilities, privileges and immunities of the Escrow Agent: (a) Escrow Agent shall have no obligation to invest the Escrow Account. (b) The Escrow Agent shall have no responsibility except for the safekeeping and delivery of the amounts deposited in the Escrow Account in accordance with this Agreement. The Escrow Agent shall not be liable for any act done or omitted to be done under this Agreement or in connection with the amounts deposited in the Escrow Account, except as a result of the Escrow Agent's gross negligence or willful misconduct. The Escrow Agent is not a party to nor is it bound by, nor need it give consideration to the terms of provisions of, even though it may have knowledge of, (i) any agreement or undertaking by, between or among the Issuer and any other party, except this Agreement, (ii) any agreement or undertaking that may be evidenced by this Agreement, (iii) any other agreements that may now or in the future be deposited with the Escrow Agent in connection with this Agreement. The Escrow Agent is not a party to, is not responsible for, and makes no representation with respect to the offer, sale or distribution of the Shares including, but not limited to, matters set forth in any offering documents prepared and distributed in connection with the offer, sale and distribution of the Shares. The Issuer covenants that it will not commence any action against the Escrow Agent at law, in equity, or otherwise as a result of any action taken or thing done by the Escrow Agent pursuant to this Agreement, or for any disbursement made as authorized herein upon failure of the Issuer to give the notice within the times herein prescribed. The Escrow Agent has no duty to determine or inquire into any happening or occurrence of or of any performance or failure of performance of the Issuer or of any other party with respect to agreements or arrangements with any other party. If any question, dispute or disagreement arises among the parties hereto and/or any other party with respect to the funds deposited in the Escrow Account or the proper interpretation of this Agreement, the Escrow Agent shall not be required to act and shall not be held liable for refusal to act until the question or dispute is settled, and the Escrow Agent has the absolute right at its discretion to do either or both of the following: 5 (i) withhold and/or stop all further performance under this Agreement until the Escrow Agent is satisfied, by receipt of a written document in form and substance satisfactory to the Escrow Agent and executed and binding upon all interested parties hereto (who may include the subscribers), that the question, dispute, or disagreement had been resolved; or (ii) file a suit in interpleader and obtain by final judgment, rendered by a court of competent jurisdiction, an order binding all parties interested in the matter. In any such suit, or should the Escrow Agent become involved in litigation in any manner whatsoever on account of this Agreement or the Escrow Account, the Escrow Agent shall be entitled to recover from the Issuer its attorneys' fees and costs. The Escrow Agent shall never be required to post a bond in connection with any services hereunder. The Escrow Agent may consult with counsel of its own choice and shall have full and complete authorization and protection for and shall not be liable for any action taken or suffered by it hereunder in good faith and believed by it to be authorized hereby, nor for action taken or omitted by it in accordance with the advice of such counsel (who shall not be counsel for the Issuer). (c) The Escrow Agent shall be obligated only for the performance of such duties as are specifically set forth in this Agreement and may rely and shall be protected in acting or refraining from acting upon any written notice, instruction or request furnished to it hereunder and believed by it to be genuine and to have been signed or presented by the proper party or parties and to take statements made therein as authorized and correct without any affirmative duty of investigation. 6 (d) The Issuer hereby agrees to indemnify the Escrow Agent for, and to hold it harmless against, any loss, liability, or expense (including, without limitation, all legal expenses incurred in enforcing any of the provisions of this Agreement or otherwise in connection herewith) incurred without gross negligence or willful misconduct on the part of the Escrow Agent, arising out of or in connection with its entering into this Agreement and carrying out its duties hereunder, including the costs and expenses of defending itself against any claim of liability hereunder or arising out of or in connection with the sale of the Shares. This covenant shall survive the termination of this Agreement. (e) The Escrow Agent shall not be bound by any modification, amendment, termination, cancellation, rescission or supersession of this Agreement unless the same shall be in writing and signed by all of the other parties hereto and, if its duties as Escrow Agent hereunder are affected thereby, unless it shall have given prior written consent thereto. (f) Escrow Agent shall not be liable for any damage, loss, liability, or delay caused by accidents, strikes, fire, flood, war, riot, equipment breakdown, electrical or mechanical failure, acts of God or any cause which is reasonably unavoidable or beyond its reasonable control. 10. Notices required to be sent hereunder shall be delivered by hand, sent by an express mail service or sent via United States mail, postage prepaid, certified, return receipt requested, or via facsimile: to the following address: If to Placement Agent: RH Investment Corporation 15760 Ventura Boulevard Suite 1732 Encino, CA 91436 Attention: Stuart Greenberg Bruce C. Haapala If to Issuer: Alpine Entertainment, Inc. 6919 Valjean Ave Van Nuys, CA 91406 Attention: Greg Cozine If to Escrow Agent City National Bank Corporate Trust Services 400 North Roxbury Drive Beverly Hills, CA 90210 Attention: Phone: 310-888-6283 Fax: 310-888-6288 7 No notice to the Escrow Agent shall be deemed to be delivered until actually received by the Escrow Agent. From time to time any party hereto may designate an address other than the address listed above by giving the other parties hereto not less than five (5) days advance notice of such change in address in accordance with the provisions hereof. 11. This Agreement shall be construed, enforced and administered in accordance with the laws of the State of California. 12. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) the same with the same force and effect as if such facsimile signature page were an original thereof. [the remainder of this page left intentionally blank] 8 EXECUTED on the date first written above. ISSUER: Alpine Entertainment, Inc. By: /S/ Ryan Carroll ---------------- Name: Ryan Carroll Title: President ESCROW AGENT: City National Bank By: ------------------------- Name: Title: PLACEMENT AGENT: RH Investment Corporation By: /S/ Stuart Greenberg -------------------- Name: Stuart Greenberg Title: Managing Director 9 EX-24.1 11 0011.txt CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT WEINBERG & COMPANY, PA Town Executive Center 6100 Glades Road, Suite 314 Boca Raton, Florida 33434 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use in the Form SB-2 of Alpine Entertainment, Inc. our report for the years ended December 31, 1998 and 1997 dated June 6, 1999 relating to the financial statements of Alpine Pictures International, Inc. which appear in such Form SB-2. WEINBERG & COMPANY PA Certified Public Accountants Boca Raton, Florida July 7, 1999 EX-24.2 12 0012.txt CONSENT OF WEINBERG CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use in the Form SB-2 Registration Statement of Alpine Entertainment, Inc. our report as of December 31, 1998, dated February 4, 1999 (except for Notes 4A and 4B as to which the date is February 10, 1999) relating to the financial statements of Alpine Entertainment, Inc. which appear in such Form SB-2 and to the reference to our Firm under the heading "Experts" in the prospectus. /s/ WEINBERG & COMPANY, P.A. Certified Public Accountants Boca Raton, Florida October 4, 2000 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use in the Form SB-2 Registration Statement of Alpine Entertainment, Inc. our report as of December 31, 1998 and 1997, dated June 6, 1999 (except for Note 12(C) as to which the date is October 15, 1999) relating to the financial statements of Alpine Pictures International, Inc. for 1998 and Alpine Pictures International, Inc and Affiliate for 1997 which appear in such Form SB-2, and to the reference to our Firm under the heading "Experts" in the prospectus. /s/ WEINBERG & COMPANY, P.A. Certified Public Accountants Boca Raton, Florida October 4, 2000 CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT We hereby consent to the use in the Form SB-2 Registration Statement, as amended, of Alpine Entertainment, Inc. our report as of December 31, 1999 and 1998, dated June 6, 2000, relating to the consolidated financial statements of Alpine Entertainment, Inc. and Subsidiaries which appear in such Form SB-2 and to the reference to our Firm under the heading "Experts" in the prospectus. /s/ WEINBERG & COMPANY, P.A. Certified Public Accountants Boca Raton, Florida October 4, 2000 EX-27.1 13 0013.txt FINANCIAL DATA SCHEDULE
5 1 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 141,908 0 0 0 0 153,949 9,907 0 236,886 605,143 0 0 0 158 (2,561,276) 236,886 56,396 56,396 0 678,498 0 0 10,710,000 (11,332,102) 0 (11,332,102) 0 0 0 (11,332,102) (7.16) (7.16)
EX-99.1 14 0014.txt SHAREHOLDER LIST OF ALPINE PICTURES, INC. A.R. Dinicolantonio 7000 Edith Brogan 10000 A.T Janicki 4320 Edward E Munger 2000 Agatha Strates 10000 Edward L. Zagrodny 5000 Alan R. Siebold 5500 Eileen J. Schaffer 2000 Alan W. Uhl 5000 Elliott L. Polinsky 5000 Allen R. Bailey 5000 Eric Martinez 17890 Amar Shah 5000 Erwin J. Andersen 17000 Austin E. Smith 7000 Felix Sebastian 20000 Bernard H. Kozberg 10000 Francine Perkins 8500 Bernice A. Rivera 14000 Frederick C. Alley 10000 Bill J. Kirby 20000 Frederick Jenson 7000 Billy A. Barr 6660 Fuad Dirbas 19900 Billy W. Temme 10000 Galyn Clark 20000 Bruce D. Barr 10000 Gary Beams 15000 Carl R. Rickard 1160 Gary Chang 26000 Carleton K. Mathes 10000 Gary Dean 11000 Carole J. Chin 6500 Gary A. Ferguson 22640 Carolyn J. Baumhardt 7083 Gary Novak 1500 Carolyn Hill 20000 Gene W. Sidwell ,ttee 10000 Charles T. Hausladen 5000 Geoffrey W. Wiener 20200 Charles J. Hinn 7500 George Knighton 2000 Charles J. Keidel 11160 Glen Harris 10000 Charlotte Keller 6000 Glenn J. Mendoza 25000 Christopher H. Mccluer 16200 Gordon Fraser Brown 49952 Cleto R. Luartes 5000 Grace Zimmerman 6667 Connie L. Richards 6000 Greg Martin 10000 Cynthia M. Saitta 6160 Gregory A. Bliss 4167 Danny S. Felts 5000 Gregory J. Hendrickson 6000 Danny D. Walenta 5000 Gregory L. Johnson 22320 Darrell S. Face 7000 Gress Lemaistre 20000 David Batman 19900 H. Lawrence Hellman 18000 David J. Burnett 5000 Harold R. Attig Jr. 4810 David Ghahraman 64917 Hester W. Siebrecht 10000 David M. Harris 13334 Howard Banner 6000 David Pratt 5000 I.M. Ellis, Jr. 7000 David P. Reynolds 5000 Irene M. Guaraldi 3000 David M. Ulrich 5530 Irwin M. Overbach (tte) 15000 Dean Beolet 10000 J.C. Fisher, Jr. 20000 Dean Lacy 20000 James K Allbritten 7320 Deanna B. Mcduffie 10000 James R. Lamb 20000 Debbie D. Randolph 2000 James Lister 2000 Diana R. Hoy 7320 James Shoji Matsumoto 5500 Diana Roth 18000 James O'day 20000 Dixon T. Leung 2000 Jay Gospodnetich 7000 Marilynn D. Balke 11000 Jean Chatterton 5000 Donald C. Chichester 5000 Gregory Yokiel 4200 Donald W. Shelton 7000 Jeff Nelson 5000 Donald Weber 12320 Jeffrey E. Korbas 7000 Dore N. Rodine 12000 Jeffrey W. Londer 7320 Dorothy O. Wise 22000 Jeffrey K. Rosson 10000 Douglas E. Hardin 1000 Jeffrey I. Widjaja 18500 Earl T. Shimaoka 10160 Jere Strickland 10000 Jeremy Stanfield 1000 Jerry Hutchins 5000 N.J. Nowicki 5000 Jerry R. Lithman 21000 Natarajan Thavamani 20000 Larry Madick 11000 Nicholas Wigg 20000 John A. Berrero 5000 Norlen K. Dalton 12000 John J Connolly Jr 5000 Norma C. Davis 5000 John C. Galante 6000 Pam Hendricks 5000 John Markowski 8000 Patricia A. Easterling 11000 John D. Poitras 10000 Patricia A. Padilla 9900 John J. Robbins 19925 Patricia J. Vernor 14000 John L. Schlitzer 17000 Paul L Boatwright 12000 John J. Zammikiel 7000 Paul Degruchy 24760 Joseph M. Compofelice 11000 Paul D. Jaunich 1965 Joseph A. Defrancesco 12000 Paul Roth 6000 Joseph G. Muhlberger 10500 Pete A. Wilde 1666 Karl W. Entenmann 13000 Peter W. Coppola 5000 Katherine T. Greenberg Ttee Fbo 20000 Peter E. Harbath 13333 Katherine Peat 5000 Petter Svenkerud (tte) 9000 Kathryn A Moroney 21160 Philip A. Jackson 6000 Keith S. Blake 14800 Phillip R. Egan 10000 Kempaiah Jayadeva 11100 Ralph E. Barr 3000 Kenneth R. Carpenter 19900 Randall C. Riffe 20000 Kenneth T. Lim 10000 Randle W. Dick 10000 Kenneth E. Spaulding, Ttee 5000 Randy Skinner 10000 Kenneth R. Washer 5000 Rhea Woltman 22000 Kevin Cousineau 19833 Richard Anderson 10000 Kirsten Kohlwey 20000 Richard L. Demski 3000 Lawrence S. Yunker 3000 Richard W. Helmer 7320 Lee Keil 1250 Richard D. Karibian 10000 Lester R. Sinton 25200 Richard P. Saliga 5000 Lester Wolcott 33750 Robert J. Allison 41560 Lillian Y. Inatomi 5000 Robert F. Bland Ii 5000 Lloyd E. Gauntt 50000 Robert T. Cameron 10000 Lloyd Vye 2320 Robert Huffman 30000 Lloyd H. Warshauer 1000 Robert L. Townsend 32153 Long Su 2000 Robert J. Valley 6500 Lucian A. Gunter Iii 10000 Robert H. West 22500 Lucie Ryan Mclauchlan 23000 Robert Y. Wong (ttee) 11000 Marc Kadis 5000 Roger P. Lundberg 10000 Marc Samberg 10000 Rolinda A. Tzamaloukas 20000 Marcel Raoul 21017 Ronald J. Muzechuk 7000 Marcus D. Hodges 10800 Ronald Page 37320 Marek Mroz 5000 Ronald Veach 7000 Mark S. Wabalas 5000 Roy K. Pedersen 10000 Mark S. Walker 26833 Russell L. Johnson 7000 Martha B. Olson 10000 Russell Matthes 12000 Matthew R. Reeb 5300 Stacy B. Hess 5000 Maurice Gray 6000 Sterling M. Keen 2794 Michael A.R. Bate 3000 Steve Biebl 2320 Michael Klosinski 20000 Steven Doctorchik 6000 Michael R. Macfadden 10000 Steven R. Jensen 20000 Michael Richard Simon 20000 Steven J. Squires 6000 Michelle Wagner 10000 Steven A. Williams 6000 Mikal D. Barchenger 12000 Terence Getchman 6000 Terry L. Harper 15000 Christine A. Roche 30211 Thomas R R Carn 5000 Michael F Litke 5000 Thomas Osborn 30000 Joseph R Roche 33333 Timothy J. Feeser 18000 Ruth M Rogers 10000 Tom Herbert 12500 Charles F Touchton 6000 Tom Scholin 10000 Peter Karkoska 4000 Tyrus E. Cobb Jr. 10000 Dorothy Gianone 9916 Virgil Durso 5000 Karen Ricca 10000 W. Craig Thayer 10000 John P Nedtwig 5000 Wali Bilal 20000 Frank Pirrello 2000 Warne H. Stengel 8000 Rene Solc 10100 Wayne H. Benson 5000 Richard H Sterrett 20000 Wayne R. Gresham 2500 Michael C Tederman 3000 William H. Brinker 10000 Colin A Chin-a-loy 5000 William D. Burton 5000 Cecil J. Lee 10000 William A. Carroll 5000 Daniel R Tupy 9917 William Conrad 5000 Katheryn H. Pattishall 50000 William T. Massey 7640 Darryl Taylor 1924 William P. Powers 10000 Adrian Michael Mcdonald 962 William D. Ziegler 20000 Albert Ciabetti 7847 Wing Yan Lau 10000 Sara S. Chin -a - Loy 7000 Thomas J. Sheehan 5000 Donald Gibbs 15847 Robert D. May 3000 Chhay Hua Ung 962 Joseph B. Reagan 22000 Richard E. Frounfelker 20500 James S. Zifchock 6200 James N. Perkins 8500 Evelyn A. 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Meyerhofer 10000 Michael Tsianco 3000 James I Sagle 8000 Stanley P. Turel 3320 Iva Jane Sisler 2444 Joseph S. Valanzola 1000 Keith Stegath 2500 Stanley D. Vale 3200 Michael G. Strevy 19885 Gerald Verchick 1000 Gregory A. Stuart 4000 Michael F. Virgilio 3000 Howard Sweet 2000 Richard Wang 3000 James R. Yeater 9873 Mike W. Wanstrath 2320 Lyle Zinniel 10000 Dennis W. Watson 4000 Anthony Carp 1000 Wilhelm R. Wehner 2000 Rory Byrne 2000 Don O. Weide, Ttee 3000 Eric Chewing 1000 Barbara T. Wenders 1000 John Lash 2000 Robert B. Westerman 2000 Lyall Lunich 750 Keith H. Westphal 4000 Gus Mengler, Jr. 10000 William Wetherbee 2000 Jim Sakkas 5000 Tommy White 1100 Sherman L. Stone 5000 Roger D. Wibbenmeyer 1000 Paul Vallis 500 Richard J. Wiese 1000 Grant Croghan 500 Peter A Wilde 3480 Gail S. Willett 1000 Benjamin Joseph Wildstein 1000 John Rosenberg 41800 Edwin L. Williams 4000 Jed Nolan 35000 Brian R. Williamson 2000 Gary Small 500 Mitch Wilson 1000 Phillip Harrison 2000 Wayne D. 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Ltd 2000 Stephen C. Le Page 5000 Kerry Bignell 4000 George R. Ryan, Jr. 5500 Henry Ynema 11000 Jakub Coltun 2500 Vivian James 500 Jerry H. Tokos 5000 Brian Packer 1000 Valmond W. Rice 11667 Rodney D. Tweedle 500 Donald R. Barker 5000 Chandra Dahia 500 Douglas Watts 1000 Ame Systems Pty 1000 Robert K. Worthington 250 Michael Bell 500 David J. Pash 500 Alan Berriman 4000 Craig Bryson 500 Ronald Bogers 22500 James Burgin 500 Peter J. Bryant 1000 Susan Burton 6000 Richard Chapman 500 Antonio Clementi 2000 John Findlay 1000 C. P. I. Manage 2000 Julian Hodges 1000 Jeffrey Crone 500 Ian Jack 2000 Brett Dixon 500 Neill H. Johnes 14000 I T V Cabinets 4000 Greg Joice 20000 Philip Jackson 500 Garrick A. London 40000 Joe Johns 1000 Garry Mahon 1000 Bern Kasjan 500 William S. Mc Grotty 500 Gordon Kenton 1000 Philip J. Pereira 27000 William Lemon 1000 Gordon Pynt 1000 David Mc Gillicuddy 50500 Elizabeth G. 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Caldwell 5000 Nikolaos Ligakis 1500 Geoff Carthew 500 Arvid Linde 1000 Richard Harnett 5000 Igor Loutkovsky 6500 David Cogger 1000 Anthony John Mci Lvride 500 Russell John Dunne 500 Ian Alexander Mertell 750 Gregory Andrew Ellis 750 Susanne Pringle 500 Hilary Evans 5000 Guilherme Roque Rebello 1000 John Leslie Foster 1500 George C. Rennie 2000 Paul Eric Froiland 500 Kevin T. Ryan 3000 Stephen Graham 1000 Julia Eileen Sainsbury 1000 Kyra Natasha Haverhoek 400 Christopher Savage 10000 Rudi Haverhoek 500 Jaime Terauds 1000 Susan Kan 3000 Robert Vanderlaan 1000 John P. Kapeleris 1000 Joseph S. Aiello 5000 Derek Leathley 1000 Karen L. Aiello 5000 Philip Myers 1000 Tim M. Bondhus 2200 Robert Paton 1000 Tyrone R. Carter 10000 Christopher Rowe 1000 Gaylen Eilderts 4167 Bharat Shah 10000 Marc Elfenbein 500 Stewart Smith 1000 R. Goddard 2500 R H Tapley 500 Ralph Heinert Jr. 2000 Betsy F. Hill 2000 Robert W. Heinrich 30000 Rene Torres 27000 Stephen B. Jester 13500 Ryan Carroll 1078415 George L. 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Yebri 10000 Andrew C Forkert 2000 William Thomas Tomlin 1000 Peter John McDonald 1000 Wolfgang Schlimme 15000 Tom Brown 4000 Mark Phillips 500 Christopher Salter 22000 Priscilla Tan 10000 Christopher John O'Keefe 500 Denis O'Brien 1500 Charles F Weickhardt 500 Darryl John Heaphy 3000 John W Redmond 500 Daniel James Connelly 1000 Joanne Farr 300 Peter Boyle 10000 Gary Kenneth Parsons 1000 John Gavin 2000 Anthony J. Juliano 5000 Daryl Saunders 500 Stuart M Campbell 2000 Don Rixon 1000 Nick Arnold 1000 Geca Caldwell 5000 Spencer Frazer Moses 1000 Michael L Moore 2000 John Bridges 1000 Designers Touch 400 Henk Pasma 200 Giovanni Renato Martinazzo 2000 Scott Lusted 250 Tony Arnold 1000 Craig Maitland Meldrum 500 Damian Kerwin 500 Evangelos Kakoniktis 1500 Ned Coten 500 Michal Gratkowski 500 Robert Crawford 1000 Anthony Horton Hurdley 1000 Andrew Gotti 2000 Leslie James Coad 1200 Roger F Liddle 500 Allen Bruce Nickel 2000 Newton John Shore Spargo 32500 Ian Shaw 9000 Craig Brown 2000 Laurence Pace 0 Victoria Lendich 3000 William H Luff 9000 Paul H Quinn 1000 Tim Biddlecombe 70000 Christopher Neill 500 Darren Hitchon 1000 Greg McCormack 3146 Leslie Dychto 240 Allen J Walbridge 2000 Mark Butler 500 Richard J Jones 750 Kane William Dickie 1050 Michael C Hormann 1000 Robert Alan Landeros 500 Derek Brown 500 Narciso Natera 500 Peter Garnham 3300 Darien E.C. Beckett 2000 Maurice Clifford Harvey 1000 Timothy R Williams 1000 Dean A Rae 1000 Jennifer Anne Wiltshire 500 Bridget M. A. Musters 5000 Graham A Fricker 25000 John R Read 1000 Neil Hugh Hobson 10000 John R Wood 1000 Markham A Brown 1000 Judith Henry 500 John Armitage 1000 Troy Jason McGuinness 2000 William S Glasson 1000 Trung Duc Phan 9660 Gary Stent 1000 Raymond Harry Fright 2000 Suzanne Maree Russell 500 Paul Mendes Da Costa 1000 Brian Denny 1000 Michael Calyk 500 Jonathan Chi 1000 Geoff Stapleton 3000 Associated Pack 1000 Gregory R Brandtman 1000 Ian Bruce Kaldor 1000 Ron B. Larson 200 Ilaria Galimberti 9000 Joel W. Larson 200 John Hugh Neighbours 5000 Jennifer N. Larson 200 Bernard John Mc George 6000 Carrie E. Larson 200 Ian Devereux 1000 Scott Towle 2500 Richard J Smith 1000 Noel Richard Bare 500 George White 4000 Ian C Smith 1000 Simon Patrick Enright 1000 Mohan Seluaraj 1000 Lynette M Murphy 500 Alan John McLay 1000 Mary Ann Ucci 4167 Daniel Joseph McEvoy 2000 Serge Durilin Jr. 1000 Edward Keith Geddes 500 John L. Heidenreich 4000 Pace Family Tru 0 Stratton J. Michals 6000 Michael Richard Darrow 2000 Philip Plotkin 1600 John Peter Rochfort 1000 James C. Rorke 2500 Grant Murray Drinnan 1000 Rick Scott 1624 Beverly Ivaleen Prideux 2000 Ed Wright 2500 George Martin 7500 Shinichi Yabuki 5000 Ray Dolan 500 Robert P. Zeidler 1000 Colin Walker 1000 Phillip Little 5000 David West 4500 Charles Gray 4000 Leo Charles Spring 1000 James R Center 1500 Richard Grant Macoun 1000 Trevor W Sulzberger 1000 Nick L Tulitt 500 Graeme C Earl 1000 Terrance J Pember 500 Herbert Bernard Elphick 5000 Rupert J Northcott 7000 Graham Ross Nicolson 500 Ian J Sharp 500 Peter Clarence Donkin 500 Brian John Conley 1000 Thomas Anthony Carey 3000 Graham Stevens 4500 Teresa Hilda De La Woestyne 1000 Barbara Mary Boyce 10000 David Alan Green 1000 Silvia Figueroa 500 Graham Harris 9500 Chaton Anderson 500 John D. Moseley 2500 Giela Koket 10000 Dennis Saliba 2000 Mike Peterson 1000 D. Kilner 1000 Nigel J Howlett 1000 Desmond Rowley 5000 Sandeep Nambiar 500 Victor Barne Hill 1000 Marilla S Guss 1500 K. S. Finnimore 3000 Peter Frederick Roe 1000 Peter Shiel 4000 Phil Angel 1000 Desmond Shiel 4000 Peter E Hassett 500 Frederick J. Wakfer 1000 David Salvaterra 1000 Rhonda Robertson 2000 Stephen David Chancellor 1000 Jeff Mallen 1000 Russell Dowling 1500 Shirley Peters 3000 Christeen Dawn Dalzell 2000 Edward J. Micallef 1500 Bruce Neville England 55000 Anna Finikiotou 2000 Jimmy L. Craig 2500 Cameron Mark Fidler 1000 Noeline Chichonski 500 Paul Knight 1000 David Mayes 1000 Wendy Josephine Miller 1000 Geoffrey B. Churchman 3000 Helen Campbell 5000 Murray David McPherson 2000 Gerard Lowe 1000 Peter Derek Leslie 1000 Gayle D. Morris 1000 John Herbert Freeman 1000 Howard Rice 5000 Brian Michael Keegan 5000 Man Fai Choy 2000 Andre Paul Stokes 500 Smiti Shah 2000 Royden L. Shotter 500 Gerard Lowe 1000 Julian Francis Ph Proctor 4000 Joe S. Aliano 2500 Paul Ramsay 500 Armstrong Enter 1000 Darren Stevens 1000 Robert K. Borgers 1000 Karl Seglins 1000 Kevin J. Boyd 500 Greg R. Lewis 2000 Richard Brewer 5000 R. M. Stewart 15000 Belinda Brown 1000 Helen Lynette Hong 1000 Mario Castellari 1000 N. D. Otway 2000 Judith Patricia Cormack 2000 David Fairlie Cuninghame 10000 Andrew M. Garratt 11000 David Gray 2000 Colin W. George 1000 Maxwell Clarence Cooper 500 Sandy Gilbert 1000 Tom Kirkland 5000 Clinton B. Gunn 1000 Steve Johnson 3000 Dianne Gurr 1000 Richard Hudson 4000 Michael Haussegger 1000 Kaylene Joy Kerwell 1000 Patricia Hazell 2000 Anthony Fahd 250 Paul Healey 2000 Gerald J. Berg 9500 Gary John Jackson 500 Ronald E. Dornsife 25000 Richard Joseph 3500 Scott S. Gilbert 1000 John R. King 1000 Berthold A. Haller 3000 Suzanne Kirby 5000 Edmund J. Maher 3500 Lisa Knight 500 Patricia K. Senseney 36000 Tom Knight 500 Thomas Alexander McMicking 1000 Kerry Kyriacou 500 Richard A. Tastula 1000 Samuel Liuzzo 12500 Rowan Beijeling 500 Robyn Martin 500 Reno Furfaro 2000 Brian Douglas Mc Gruer 3500 Anthony David De Vere 1000 Denis Joseph McMahon 5000 Colin Alexander 100000 George Mitro 1000 Darren W. Muldoon 1000 Peter C. Tripodi 12000 Julian Paul Newman 2500 Christopher Charles Wheatley 3000 Steven Parker 500 John Atchison 7500 Hugh L. Richardson 1000 Geoffrey Atkins 1000 Theo Rigopoulos 4000 Christopher W. Chuck 250 Vanda Schirripa 3000 Paul R. Claringbold 12500 Siew Ping Tan 1000 Julie Ann Cordner 4000 Peter Terrett 1000 Brian Dwyer 30000 Michael Layn Vandenberg 500 John M. Halantas 1000 Lisa Vecchio 5000 Michael J. Hardy 1000 Leo M. Foster 2000 Siong Teck Lee 1000 Mervyn A. Warner 1500 Lionel Lim 1000 Steve Wood 5000 Andrew Mc Lean 500 Carl Wulff 1000 Stuart A. Ritchie 5000 Vincent Zammit 1700 Kevin Simionato 1000 Doris B. Miller 30000 Geoffrey A. Smith 2000 Edward L. Durbin 1000 James C. Benerofe 2500 Tony M. Bamer 5000 Sally A. Fonzi 1000 Bruce A. Michels 2750 Timothy K. Hutton 3000 Sara Khatami 1000 Michael A. McKnight 1500 Wayne Sharp 1000 William R. Shields 1000 Gordon Scheitlin 5000 Alex Campbell 1000 Peter O. Ozoh 634 Arduino De Cassan 500 George Nshanyan 2000 David Douglas 1000 Peter Grudner 250 Jeanette Chew 500 Grant Alexander 1000 Alfred Horvath 5000 Richard Ames 2000 Jaynell Investm 1000 Brett A. Bartram 1000 Gregory Russell Josephs 1000 Campbell Derek Batts 1000 David Low 2000 Robert Clarke 4000 Maitland Wiillo 1000 Glenn Cockerton 1000 Ian J. Miller 1000 Grant R. Connor 2000 Richard Neil Murdoch 1000 David Lloyd Cooper 1000 James Ponsonby 1000 Shane Corney 1000 Melahat Salih 1000 Richard Cropley 3000 Chris J. Swann 10000 John Cull 500 Stephen Unerkov 1000 Vivienne Culver 500 Deanne C. Weir 4000 Wendell K. Ellis 17500 Alfred C Wilson 3000 Andrew Glenn 500 Theodore O. Palm 2000 David Harley 1000 Phillip Brian Barker 5000 Dino Imbriano 1000 Andrew Bickle 3000 Sook Eng Low 500 Wayne Chappel 1000 John B. Lyle 1000 David G. Crowley 1000 Andrew Menzer 500 Peter Maurice Foster 1000 Halid Munir 1000 Sharon Foster 1000 Richard Denholm 5000 Rex Fowler 4000 Chris Ovens 4000 John Frederick France 3000 Barry Picket 2500 Bruce D. Fyfe 1000 Anthony Robert Quinney 10500 Grant Hancock 1000 Mamoonur Rashid 1500 Paul James Hansen 1500 Janne D. Scott 6000 Ivan Sai - Hong Ho 500 Wesley Sim 15000 Olga Kostovski 2000 Philip Slade 500 Jim Koutsomihalis 500 Patrick Murphy 1000 Dan X Procter 500 Joan E Panzer 1000 Neil Rickard 2000 David Michael Reid 1000 Peter Savage 4500 Mario Rosi 1000 David Scott 1000 Michael Ryder 6000 S.M.E.T. Nomine 3000 Joseph Stivala 2000 Stuart Steer 10000 Dave Tenni 5000 Karen Stewart 500 Trailmoss Super 1000 David Thomas 1000 Roger Ashley Vardy 5000 Glen Craig Van Hest 250 Owen C. Voyce 1000 Tony B. Walker 14000 Robert McWhirter 4000 Robert White 4000 Ronald George A. Williams 7000 Jeff Wiles 500 Darcy Byrnes 1000 Gillian Thorne Wilson 1000 Warwick M. Copeland 10000 Gerald R. Cardillo 2500 Mark Eyre 6000 Kenneth G. Flatt, Jr. 3000 Wendy Annette Puatjimi 2000 Larry L. Lambeth 2500 Thomas Kath 2000 Jerry N. Shepherd 6067 Andrew R. Kimpton 2000 Andrew Bantock 2000 George Arthur Lyddiard 7000 Michael Borrillo 2200 Peter Mathieson 1500 Craig Steven Carlson 2000 John Henry Park Pottis 1000 Mike Chadwin 3000 Victor T. Wang 25000 Jordan Harbinson 1000 Susan Weekes 2000 Dean Groening 1000 Shirley Jean Archer 6000 Rodney Matterson 2000 John J. Andre 2500 Norman Duncan McRae 1000 Roy Dale Johnson 7500 Ian Bruce Pirrett 1000 George Solomon 5000 Ian L. Turner 1000 Terry L. Taylor 1000 John Michael Warth 1000 John T. McGee 2000 Malcolm Willis 1500 Alan Kendrick Archer 500 Beth E. Steckler 1666 Jennifer Anne Binns 1000 Gary James Roper 2000 Ross Carter 1000 Trevor Stephenson 1000 Hung Kuen Chen 1500 Linda Ulonska 3300 Jo-Ann Louise Christie 250 Mark Ulonska 6600 Mark D' Mello 2000 Rolf Ulonska 4570 Simon Neil Dalrymple 6000 Jean L. Kelleher 1000 Steven Dowd 500 Greg Watson 12000 Endovasive Supe Endovasive Super. Robert W. Smith 4000 Fund 5000 Robert Bruce McHardie 4000 Lloyd Galpern 1000 Streets Super. 500 Simon Galpern 1000 Dale Neville England 8000 Eric Raymond Gibson 1000 Darren S. Moorman 2500 Brian Goy 15000 Kevin R. Royer 2000 Robert Scott Grant 10000 James Bouzios 500 Antony Hammond Grosse 6000 Jeremy Hope 2375 Bin Haga 1000 David Louis Martin 3000 Rodney Maurice Hall 1000 Paul R. Gardiner 1000 Roderick Harper 8000 Brett David McHardie 2000 Richard Wilton Hayman 750 Robert Singleton 2000 Greg McKeon 3000 Elizabeth B. Supinski 3333 Mark Meallin 3300 William A. Tracy 2000 John Negus 2000 Colin Nathaniel Stuart 3000 David Michael Nelson 6000 Edward D. Corbell 5000 E L Poole 500 P. Mark Weida 1200 William E. Smyser 1666 Matthew Paul Wilson 10000 Frederick R. Stahl, Jr. 3333 Richard Bauer 50 Douglas C. Erickson 665 Bernard Mc George 15000 W C Green 10000 Onkar N. Bhaskar 1500 Alyssa J. Miller 10000 Georges E. Bockstael 1000 Roger A. Williams 2500 George L. John 3000 Arthur Classey 1000 William George L. Cooper 1000 Anthony J. Morris 1666 John Kealy 75000 Rod Burns 11513 Domenic Jenko 75000 Frank Spinelli 1000 Ellissa Rebecca Moore 1000 Darrel A. Sudduth 15000 Bjorn Engelhardt 4000 Maxine M. Tomashefsky 500 Gordon H. Bell 5000 Reba S. Huncovsky 835 Jack D. Mackay 7000 Christopher E. Maple 1666 Robert E. Dettle 3500 John Mcllroy 1000 John A. Shaidnagle 4990 Dean Groening 500 Edward C. Craig 7000 Michael Giltrap 5000 Antonio Pavia 1000 Clarence W. Enyart 2500 Lisa Ann Freeman 1000 Clayton J. Price 3000 Michelle Linda Eaton 1000 Dominic L Conforti 5000 Rob Walsh 16667 Richard D. Pallett 1666 Richard Matthews 5000 Steve Crisafi 835 Robert Reis 10000 Robin Colman 2000 Janice A. Pepin 6000 Kenneth Y. Law 5000 Dan E. Rhodes 1100 Martin A. Mc Gowan 2500 Vincent Mancino 5000 David R. Iuppa 8334 Benjamin Yu Tan 1500 Peter De Lellis 5000 Ian H. Fraser 2000 Frank D. Pesik 2000 Ekber Ozbey 6000 John Borden 2000 Richard E. Kunz 5000 Paul Ling 500 Michel Kaplan 2000 Christopher James Ainsworth 6000 Kelly G. Higgins 15000 Ashley Hayden 8250 David M. Weiselman 3000 John P. Cerveny 5000 Terrell Lee Carter 750 Michael Owen Cload 2000 Karl Beckle 5000 Sirat Golden 5000 Richard E. Tweeten 7500 Brian Baldie 1000 Irena Rodin 15000 Ghassan Zalami 2000 Anthony Valdez 5000 Jo Ann Garner 2000 Janet Brien 5200 William S. Potter 835 Luciano F. Calubayan 2500 Paul Douglas Irving 1500 Zin Tsimberg 5000 Michael T. Repsold 1000 Chandra D. Waldroup 16667 Joseph Geisler 500 Barbara Mattison 5000 George Peirson 1200 Robert W. Roepke 1033 Rick Novell 25 Ervin Klein 5000 Alex Villagran 25 Glen A. Miller 1666 James Rainey 375 Charles H. Mchatton Jr. 1000 Don Bar Noah Allen Turnage 2500 Chai-ling Wong 20000 Gerald Blank 5000 Beverley Mclean 25000 Roger A. Crabb 3000 James Wilson 14500 -----END PRIVACY-ENHANCED MESSAGE-----