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EXHIBIT 10.35
September 12, 1996
Mr. Xxxxxxx Xxxxx
Ms. Xxxxxxx Xxxxxx
c/o Xxxx Audio, Inc.
0000 Xxxxxxx Xxxxxxxxx
Xxxx Xxxxxxxxx, XX 00000
Dear Xx. Xxxxx and Xx. Xxxxxx,
As an accommodation to Dove Audio, Inc., a California corporation ("Dove" or
"the Company"), you have recently provided or agreed to provide your personal
guarantee (collectively, the "Guarantees") of certain obligations of the
Company, namely certain obligations (the "Bank Obligations") of or guaranteed by
the Company to Sanwa Bank California and certain obligations (the "Wilde
Obligations") of the Company and/or its subsidiary to Xxxxxxxxx Entertainment
Limited ("SEL") or its assignees in connection with the financing of the
production of the feature film presently entitled "Wilde." The Company
acknowledges that you have no obligation to the Company to provide any of the
Guarantees, that your providing the Guarantees has substantial value to the
Company, in order, among other things, to avoid material potential defaults by
the Company and in consideration of your providing (or agreeing with any third
party to provide) any Guarantee, the Company agrees as follows:
(1) Company hereby grants to you a security interest in and to all
of the Company's Equipment, Inventory, Accounts and Contract
Rights, General Intangibles, Chattel Paper and Documents,
Monies and other Property (the "Security Interest") in the
amount of your total liabilities under the Guarantees. This
Security Interest shall be a continuing lien on all of the
aforementioned property and assets, including all proceeds
from such property and assets, until such time as all of your
obligations under the Guaranties are fully, finally and
completely exonerated. Company agrees to execute a standard
security agreement, UCC Financing Statements and all other
documents necessary to carry out the purpose of this
paragraph.
(2) Dove hereby agrees that any consideration received by you from
any third party unaffiliated with Dove in connection with the
Guarantee does not constitute a corporate opportunity and may
be indefeasibly retained by you.
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(3) If, at any time during the next three years, Dove or any of
its subsidiaries desire to sell, assign or transfer any asset
outside of the ordinary course of business to any person
(excluding Dove or any of its subsidiaries and any bona fide
grant of a security interest to third party financial
institutions in connection with the providing a line of credit
to Dove), Dove shall notify you of the identity of the
proposed purchaser, the price and other terms and conditions
of sale and give Xxxxxxx Xxxxx, in the first instance, and
Xxxxxxx Xxxxxx, secondarily if Xxxxxxx Xxxxx shall not so
elect, the right to buy such assets at the same price, terms
and conditions as Dove is willing to accept from such third
party. You shall have 30 days from the giving of such notice
in which to elect, by written notice to Dove, to purchase such
assets on such basis, and 30 days after giving notice of such
election to purchase in which to consummate such purchase
(subject to extension in the event there are delays due to
third-party or governmental consents required to be obtained
by the Company) to consummate such purchase. If you do not
elect to so purchase or fail to consummate the purchase within
the time period provided for herein, Dove may then sell such
assets to the third party on the basis offered within 90 days
of the date notice of the proposed sale was given to you.
(4) (a) Upon the occurrence and during the continuation of an
Event of Default (as hereinafter defined), or at any time
after demand has been made under any of the Guarantees, you
may, but shall not be obligated to, by written notice to the
Company, direct the Company to pay (and the Company agrees
that upon receipt of such notice it will pay) to you (x) all
amounts paid by you under any of the Guarantees and (y) such
additional amount, to be held as cash security in a cash
collateral account, equal to the maximum amount of the
Guarantees. Such cash security shall at all times be free and
clear of all rights or claims of third parties. The cash
collateral account shall be maintained in Dove's name but
under your sole dominion and control and Dove hereby pledges,
and grants a security interest in, such account and all
amounts from time to time held therein to you as security for
all the obligations, contingent or otherwise, of Dove to you
hereunder or in respect of the Guarantees. Dove and you agree
to take such further action and execute such documents as may
be reasonably requested by you to confirm the intent of this
provision. If at any time any amount shall have been paid
under or in respect of the Guarantees and shall not have been
repaid in full immediately upon demand, then notwithstanding
any other provision herein, you may, in your sole discretion,
but shall not be obligated to, apply all amounts then on
deposit in the cash collateral account, in such priority as
you may elect, toward the payment in full of any or all of the
Company's obligations secured thereby.
(b) As used herein, the term "Event of Default" shall mean (i)
Dove shall fail to make any payment required to be made by it
or perform any obligation required to be performed by it under
or in respect of the Guarantees, the Bank Obligations or the
Wilde Obligations; (ii) an "event of default" or "default"
shall occur and be continuing under any bank line of credit
entered into or guaranteed by the
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Company; (iii) an "Event" (as defined in the Company's 1994
Stock Incentive Plan as in effect on the date hereof) shall
have occurred, or (iv) you shall no longer be Chief Executive
Officer of the Company (in the case of Xxxxxxx Xxxxx) or as an
officer of the Company (in the case of Xxxxxxx Xxxxxx) unless
you shall have consented to your successor.
(c) In the event you elect to terminate your employment
agreement pursuant to Section 4.01 thereof (which permits you
to terminate such agreement, with or without cause, upon
delivery of 30 days' written notice of termination) within
twelve months of the occurrence of an "Event" or a "Material
Breach" by the Company (which shall consist of failure or
refusal by the Company to comply with a material term of such
employment agreement, such as but not limited to your right to
be Chief Executive Officer (in the case of Xxxxxxx Xxxxx) and
a member of the Board of Directors of the Company (in the case
of Xxxxxxx Xxxxxx), and in both cases, a member of the Board
of Directors of the Company, the Company shall for the
remainder of the Employment Period, pay to you the base
compensation, health insurance, life insurance, automobile
allowance and other benefits that you would have earned during
such period. Upon any such termination, you will be free to
establish, invest, or be employed by any business, whether or
not in competition with the Company. Should any payments from
the Company to you, in whatever form, made either hereunder or
under any other plan or arrangement (the "Payment"), be
subject to excise tax pursuant to Section 4999 of the Internal
Revenue Code or any successor or similar provision thereto, or
comparable state or local tax laws (an "Excise Tax"), the
Company shall pay you additional compensation equal to the
amount of the Excise Tax calculated with respect to the
Payment (but without any gross-up for any additional taxes to
which you are subject based on such additional compensation).
Very truly yours,
DOVE AUDIO, INC.
By: /s/ XXXXXX XXXXXXX
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Xxxxxx X. Xxxxxxx
Executive Vice President, General Counsel
Accepted and Agreed To:
/s/ Xxxxxxx Xxxxx /s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxx Xxxxxxx Xxxxxx
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