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EXHIBIT 10.23
[TEAM ENTERTAINMENT GROUP LOGO]
________________________________________________________________________________
JONATHAN D. (JODY) SHAPIRO
PRESIDENT AND CHIEF OPERATING OFFICER
June 25, 1999
Mr. David Black
Film Recoveries, Inc.
7069 So. Highland Drive, #250
Salt Lake City, UT 84121
RE: FILM LIBRARY
Dear Mr. Black:
Team Communications Group, Inc. ("TEAM") hereby makes the following firm
offer to acquire the Film Library as specified below:
1. Film Library: The 28 Films referenced on Exhibit 1.
2. Purchase price: $1.9 Million.
3. Rights to be acquired. All rights, title and interest in the
Library worldwide currently owned or controlled by Film Libraries,
Inc. ("FLI"), without limitation and as specified on Exhibit 1.
4. Purchase Allocation: $1.9 Million will be payable as follows:
$1,000,000 in cash and $900,000 payable in TEAM Common Stock, subject
only to any allocable reduction in the purchase price pursuant to the
delivery and acceptance provisions of Paragraph 5 below. The cash
portion of the Purchase Price shall be payable to the Film Recoveries
Trust Account at Brighten Bank (Account No. 41020645, ABA No.
124302503). The purchase price will be payable as follows:
a. Ten percent (10%) of the cash portion of the purchase price in
the amount of One Hundred Thousand Dollars ($100,000) shall be
placed into a mutually acceptable escrow upon execution of this
deal memo, such escrowed funds to be released to FLI pursuant to
the delivery provisions referenced below in Paragraph 5.
b. The balance of the cash portion of Nine Hundred Thousand Dollars
________________________________________________________________________________
12300 WILSHIRE BLVD. SUITE 400 - LOS ANGELES, CA 90025 -
(310) 442-3500 - FAX (310) 442-3501
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Mr. David Black
June 25, 1999
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($900,000) shall be payable pursuant to the delivery and acceptance
provisions referenced in Paragraph 5 below.
c. Certificates representing the stock portion of the purchase price
shall be placed in an escrow account in accordance with the provisions
of Paragraph 5. The value of each share representing the stock portion
shall be calculated based on the average bid price at closing for the
previous ten (10) trading days preceding the execution day of this
Agreement. TEAM agrees that all certificates of stock placed in the
escrow account shall be registered no later than six months following
the date on which such were placed in the escrow account.
5. Delivery, Acceptance and Payment: During the 30 day period commencing on
July 1, 1999 and ending on July 31, 1999 (the "Initial Delivery Period"), FLI
shall have the obligation to provide TEAM with (1) documentation of title
pursuant to Subparagraph 5 (a) below, and (2) access to Elements which meet the
standards set forth in Subparagraph 5(b) below. On the last day of the Initial
Delivery Period, all Films for which FLI has provided the necessary title
documents as well as Elements which meet the criteria of Subparagraph 5(b)
below shall be deemed accepted by TEAM. At such time during the Initial
Acceptance Period that two or more Films have been accepted, the $100,000
placed in the escrow account referenced above shall be released to FLI and
shall be applied against the purchase of said Films. The escrow account shall
contain strict instructions for the release of the funds upon acceptance of two
or more titles. All other Films which are accepted during the Initial Delivery
Period, shall be paid for by TEAM first in cash and than in stock, at a rate of
$76,000 per Film (after deducting any escrow funds released to Film Recoveries,
Inc.), with the cash portion to be wired directly to Film Recoveries, Inc. by
no later than the close of business on August 1, 1999 and the stock portion to
be placed in the escrow account to be established pursuant to Paragraph 4
(assuming that more than 12 Films have been accepted).
During the period commencing August 1, 1999 and ending August 31, 1999 (the
"Delivery Cure Period"), FLI shall provide TEAM with access to any additional
Elements and title documents which (1) were not supplied by FLI during the
Initial Delivery Period or (2) which would render a Film (which was rejected
during the Initial Delivery Period) acceptable. On September 1, 1999, TEAM
shall wire transfer a payment to Film Recoveries, Inc. for all additional Films
which have been accepted during the Delivery Cure Period. TEAM acknowledges
that there are 28 Films referenced on Exhibit 1 and hereby agrees that it shall
not have the right to reduce the Purchase Price unless less than 25 of the
Films are delivered. In the event less than 12 Films have been accepted during
the Initial Delivery Period and the Cure Delivery Period, the cash portion of
the purchase price will be reduced by $76,000 for each Film not accepted and
all stock certificates placed in the escrow account referenced above shall be
released to TEAM without further
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Mr. David Black
June 25, 1999
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obligation to FLI. In the event that more than 12, but less than 25 Films
have been accepted during the Initial Delivery Period and the Delivery Cure
Period, then TEAM shall be entitled to reduce the stock portion of the
purchase price by $76,000 for each said Film which was not accepted. All
expenses related to the laboratories examining the Elements shall be borne
by TEAM, provided that FLI shall pay all shipping costs to said
laboratories.
The criteria by which a Film will be judged acceptable are as follows:
a. Title: FLI shall have the obligation to provide TEAM with
documentation which establishes FLI's ownership or
control of the rights being granted to TEAM, as well as
the existence of any substantial encumbrances which
will affect the future marketability. Residual or
producer's share payments which will be triggered by
future exploitation of the Films shall not be
considered an encumbrance to a Film, provided that FLI
shall represent and warrant that all such payments
which may have been triggered in the past are its sole
responsibility. The parties hereby acknowledge that the
United States Bankruptcy Court has adjudicated and
deposed of various issues related to the Film Library,
and that both parties have reviewed the terms and
conditions of said bankruptcy documents and hereby
accept the judgment of the Court in connection with all
issues adjudicated by such.
b. Elements: With regard to the videotape masters and underlying
film elements (the "Elements") to be purchased by TEAM
with regard to the Film Library, TEAM and FLI hereby
agree that during the Initial Delivery Period, FLI
shall be responsible for shipping the Elements for each
Film to one of the film or video laboratories listed on
Exhibit 2 to this agreement. TEAM shall instruct each
laboratory to immediately commence a quality check on
the applicable Elements upon their receipt by the
laboratory. Delivery of a Film shall be deemed complete
at such time as FLI has provided access to either a
usable video master pursuant to the following provision
or has provided access to a print or film negatives
which meet the following criteria. The standard by
which the quality of the Elements shall be are as
follows:
i. Videotape Masters: A videotape master shall be
deemed acceptable and delivered if it lacks excessive
audio or video defects which would render it unusable
for "broadcast rerun" purposes in
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Mr. David Black
June 25, 1999
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either the United States or the United Kingdom. Minor defects which are
correctable at a reasonable cost shall not render a video master
unacceptable.
ii. Film Elements: Print and/or negative material for a Film shall be
deemed acceptable if the applicable Element lacks excessive scratches,
tears and audio problems which would render it unusable for creating a
video master. Film Elements which can be corrected by standard processes
such as wet-gate printing or manipulation of audio tracks shall be
deemed acceptable and delivered by TEAM. In the event usable visuals are
available on one Element and the audio is usable on another, the
combination of the two shall represent an accepted and delivered
Element, provided that the cost of combining such is not excessive. TEAM
and FLI acknowledge that foreign language tracks and M&E tracks are
available for a substantial number of the Films. TEAM agrees that said
Elements are to be transferred on an as-is basis with no reduction to
the purchase price based on existence or condition.
6. a. If at any time during the period commencing on the issuance of the stock
pursuant to this Agreement and ending on the one year anniversary of such
issuance ("Stock Escrow Period"), the value of the stock certificates placed
in the escrow account has dropped more than 25% below its $900,000 value for
a period of 10 consecutive trading days (based upon the value of the stock of
the stock on the execution day of this Agreement), TEAM shall have the choice
of immediately wiring a cash payment to FLI which represents the difference
in value, or to add additional registered stock to the escrow account to
bring the total value to $900,000, provided that TEAM shall only be obligated
to make said cash payment or add additional shares one time during the
initial six (6) months of the Stock Escrow Period and once during the second
six (6) month period. Notwithstanding the foregoing, in the event that at any
time during the Stock Escrow Period the stock value drops more than 50%, then
TEAM shall immediately wire said cash payment or add said additional
registered stock, at it's option. At anytime during the Stock Escrow Period,
TEAM shall have the right to purchase all shares and pay to FLI $900,000. In
the event that TEAM does not so purchase the shares, the shares will be
released to FLI from the escrow account on the first trading day following
the end of the Stock Escrow Period and the value of the each share
representing the stock portion of the Purchase Price shall be calculated
based on the average bid price at closing for the previous ten (10) trading
days. In the event the value of the shares is less than the original
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Mr. David Black
June 25, 1999
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$900,000, TEAM shall immediately wire said cash payment or add
additional registered and free trading stock, at it's option.
b. In the event that TEAM elects to provide FLI with any additional
shares of stock pursuant to section 6.a. above, and TEAM does not elect
to purchase any of the Stock and FLI ultimately sells such stock, any
portion of proceeds received by FLI in excess of $900,000 shall be due
and payable to TEAM upon receipt by FLI of such excess amount.
c. FLI and its assigns, successors and affiliates shall not engage is
any short selling transaction with respect to any of the Stock acquired
hereunder.
d. Film Libraries shall maintain a security interest in all of the
Films, licenses of the Films and proceeds such licenses, provided that
to such TEAM shall have the right to retain the first $1,350,000 in
revenue which it collects from any such licenses entered into during the
commencing upon execution of this Agreement and ending on the one year
anniversary date of the stock issuance. All revenue which TEAM collects
during this period which is in excess of $1,350,000 shall be received in
trust for the benefit of FLI and immediately placed in an escrow account
for Film Libraries benefit or, at TEAM's option, paid to Film Libraries
in cash to reduce the stock portion of the Purchase Price. Film
Libraries security in these revenues shall be secured by a letter(s) of
assignment which reflects TEAM's right to retain the first $1,350,000 in
revenue. In no event shall TEAM be required to place more than $900,000
in revenue collected from said licenses into the escrow account.
7. In the event TEAM violates any of the terms and conditions set out herein
and fails to cure such violation within fifteen (15) business days from the
date on which it receives written notice of said violation, Film Libraries
shall have the immediate right to declare the entire unpaid balance due and
payable, provided that TEAM shall be limited to a three (3) day cure period
with regard to the payments due at the end of the Initial Delivery Period
and the Delivery Cure Period. In the event that TEAM fails to cure a
violation within the applicable cure period, Film Libraries shall either
have the right to sell the library without court order or judicial
foreclosure of any kind and thereafter obtain ownership of all of the film
sold at public sale. Such sale shall take place in Salt Lake City, Utah.
Film Libraries shall be required, prior to the sale, to advertise the sale
for two consecutive weeks in the New York Times, The Los Angeles Times and
the Daily Variety. Libraries shall be entitled to make credit bid at the
sale. The proceeds of the sale shall first be applied to the unpaid balance
of Film Libraries, together with costs of the
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Mr. David Black
June 25, 1999
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sale and a reasonable attorneys fees, with the remainder payable to
TEAM. TEAM shall have the right to designate the order in which the
films shall be sold at the sale.
8. The parties further agree that in the event there is a dispute over
the terms and conditions contained herein, that said dispute will be
litigated in Third Judicial District Court in and for Salt Lake
County, State of Utah, and the parties specifically consent to the
jurisdiction of said court. Each of the parties agree to sign all
additional documents which are required to effectuate the terms and
conditions of this Agreement.
While the parties anticipate entering into a more formal purchase
agreement, this short form Agreement represents the agreement by TEAM to
purchase FLI's ownership and control of the Film Library and FLI's agreement to
sell such in accordance with the terms and conditions incorporated herein.
Thank you.
Sincerely,
/s/ JONATHAN D. SHAPIRO
Jonathan D. (Jody) Shapiro
President and Chief Operating Officer
Agreed to and accepted: 7-1-99
Film Libraries, Inc.
Subject to approval by Film Libraries, Inc. Partners
By:
/s/ JOHN L. HUELER
--------------------------------------------
John L. Hueler
President, on behalf of Film Libraries, Inc.
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- VIA FACSIMILE -
M E M O R A N D U M
TO: DAVID BLACK, FILM RECOVERIES, INC.
FROM: JOHN HEULER, FILM LIBRARY, INC.
RE: TEAM COMMUNICATIONS GROUP, INC.
Please be advised that Film Library, Inc. has obtained approval from their
partners to accept the offer dated June 25, 1999 from TEAM. Film Library, Inc.
removes the subject to restrictions indicated on the signature page of the
offer.
Film Library, Inc.
/s/ JOHN L. HEULER
- ----------------------------------
By: John L. Heuler
President
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[TEAM LETTERHEAD]
June 25, 1999
Messrs. Jesse Weatherby and Lance Thompson
Film Brokers, Inc.
3708 Barham Boulevard, Suite 109
Los Angeles, CA 90068
Re: Film Library
Dear Messrs. Weatherby and Thompson:
Reference is hereby made to the Purchase Agreement of even date herewith made
by Team Communications Group, Inc. ("TEAM") and Film Libraries, Inc. ("FLI"),
whereby TEAM is acquiring the rights in the above-referenced Film Library. This
letter represents the agreement between TEAM and you in connection with
commissions to be paid to you in connection with TEAM's purchase of the Film
Library. This Agreement shall become binding upon TEAM and you at such time as
the Purchase Agreement is executed between TEAM and Film Libraries, Inc. The
Purchase Agreement which is attached as Schedule 1, is incorporated into this
agreement by this reference. Terms defined in the Purchase Agreement shall have
the same meaning when used herein.
1. Commission total amount: $300,000.00
2. Payable: $200,000 in cash, $100,000 in TEAM Common Stock. The cash
portion of the commission shall be wire transferred to a bank account
to be designated by you.
3. Payment Terms: $300,000 will be payable as follows:
a. Ten percent (10%) of the cash portion of the commission in the amount
of Twenty Thousand Dollars ($20,000) shall be placed into a mutually
acceptable escrow upon Film Libraries' execution of the Purchase
Agreement. At such time during the Initial Acceptance Period that
two or more Films have been accepted, the $20,000 placed in the
escrow account referenced above shall immediately be released to you
and shall be applied against the commission due to you on the
purchase of said Films. The escrow account shall contain strict
instructions for the release of the funds upon acceptance of two or
more titles.
b. The balance of the cash portion of One Hundred Eighty Thousand Dollars
($180,000) shall be payable in two installments, with the first
payment of One Hundred Thousand Dollars
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Messrs. Jesse Weatherby and Lance Thompson
June 25, 1999
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($100,000) on August 1, 1999 and the remaining Eighty Thousand Dollars
($80,000) due on September 1, 1999, subject only to the reduction
provisions on Paragraph 5 below.
c. Certification representing the stock portion of the purchase price
shall be placed in a mutually acceptable escrow account, subject only
to the provisions of Paragraph 5. The value of each share representing
the stock portion shall be calculated based on the average bid price
at closing for the previous ten (10) trading days preceding the
execution day of this Agreement. TEAM agrees that all certificates of
stock placed in the escrow account shall be registered no later than
six months following the date on which such certificates were placed
in the escrow account. Until such time as such shares are registered
and become free trading, you shall retain a security interest in the
Film Library for the value of the stock. In the event that TEAM is
successful in raising in excess of $25,000,000 in any stock offering
during the one year period following the placement of the stock
certificates in the escrow account, TEAM shall immediately purchase
all stocks from you and wire $100,000 to your bank account, subject
only to any reduction pursuant to Paragraph 5. If at any time during
the period commencing on the issuance of the stock certificates
pursuant to this Agreement and ending on the one year anniversary of
such issuance ("Stock Escrow Period"), the value of the stock
certificates placed in the escrow account has dropped more than 25%
below it $100,000 value for a period of 10 consecutive trading days
(based upon the value of the stock on the execution day of this
Agreement), TEAM shall have the choice of immediately wiring a cash
payment to you which represents the difference in value, or to add
additional registered stock to the escrow account to bring the total
value to $100,000, provided that TEAM shall only be obligated to make
said cash payment or add additional shares one time during the initial
six (6) month period following the issuance of the stock and once
during the second six (6) month period. Notwithstanding the foregoing,
in the event that at any time during the Stock Escrow Period the stock
value drops more than 50%, then TEAM shall immediately wire said cash
payment or add said additional registered stock, at its option. At
anytime during the Stock Escrow Period, TEAM shall have the right to
purchase all shares and pay to you $100,000. In the event that TEAM
does not so purchase the shares, the shares will be released to you
from the escrow account on the first trading day following the end of
the Stock Escrow Period and the value of each share representing the
stock portion of the Purchase Price shall be calculated based on the
average bid prices at closing for the previous ten (10) trading days.
In the event the value of the shares is less than the original
$100,000, TEAM shall immediately wire said cash payment or add
additional registered and free trading stock, at its option.
d. In the event that TEAM elects to provide you with any additional
shares of stock pursuant to section a. above, and TEAM does not elect
to purchase any of the Stock and you ultimately sell such stock, any
portion of proceeds received by you in excess of $100,000 shall be due
and payable to TEAM upon receipt by you of such excess amount.
e. You and your assigns, successors and affiliates shall not engage in
any short selling transaction with respect to any of the Stock
acquired hereunder.
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Messrs. Jesse Weatherby and Lance Thompson
June 25, 1999
Page 3
4. Commission Reduction: TEAM hereby agrees that it shall not have the
right to reduce your commissions, unless FLI delivers less than 23
Films. In the event that less than 23 Films are delivered, TEAM shall
have the right to reduce your commissions by $12,000 for each Film
which FLI fails to deliver under 23. Reductions in your commissions
shall first be deducted from the stock portion of your commission and
shall only reduce the cash portion in the event that the stock portion
is reduced to a zero balance.
5. In the event that TEAM violates any of the terms and conditions set
out herein and fails to cure such violation within fifteen (15)
business days from the date on which it receives written notice of
said violation, you shall have the immediate right to declare the
entire unpaid balance due and payable, provided that TEAM shall be
limited to a three (3) day cure period with regard to the payments due
at the end of the Initial Delivery Period and the Delivery Cure
Period, as well as the $20,000 to be escrowed upon execution of the
Purchase Agreement with FLI. In the event that TEAM fails to cure a
violation within the applicable cure period and Film Libraries forces
a public sale of the Films, you shall receive any commissions owed to
you prior to TEAM collection and retaining any proceeds of the sale.
While the parties anticipate entering in to a more formal purchase
agreement, this short form Agreement represents the agreement by TEAM to pay
you the commission herein. Each of the parties agree to sign all additional
documents necessary to effectuate the terms and conditions of this Agreement.
Thank you.
Sincerely,
/s/ JONATHAN D. SHAPIRO
Jonathan D. (Jody) Shapiro
President and Chief Operating Officer
Agreed to and accepted:
Film Brokers, Inc.
By: /s/ JESSE WEATHERBY 7/2/99 /s/ LANCE THOMPSON
-------------------------- ------------------
Jesse Weatherby Lance Thompson
Any dispute that arises in connection with this agreement, will be submitted by
the applicable parties to the American Arbitration Association, whose judgement
shall be deemed final.