19STCV06482 Assigned for all purposes to: Stanley Mosk Courthouse, Judicial Officer: Elizabeth Feffer Electronically FILED by Superior Court of California, County of Los Angeles on 02/25/2019 05:44 PM Sherri R. Carter, Executive Officer/Clerk of Court, by H. Flores-Hernandez,Deputy Clerk 1 2 David Albert Pierce, Esq. SBN 162396 John R. Baldivia, Esq. SBN 313699 Dhara J. Patel, Esq. SBN 321776 PIERCE LAW GROUP LLP 9100 Wilshire Boulevard 3 Suite 225 East Tower Beverly Hills, California 90212-3415 4 Telephone (310) 274-9191 Facsimile (310) 274-9151 5 David@PierceLLP.com John@PierceLLP.com 6 Dhara@PierceLLP.com 7 Attorneys for Plaintiff CHRISTOPHER FENTON 8 SUPERIOR COURT OF THE STATE OF CALIFORNIA 9 FOR THE COUNTY OF LOS ANGELES 10 11 CHRISTOPHER FENTON, an individual, 12 Case No. Plaintiff, 13 COMPLAINT FOR: vs. 14 DMG ENTERTAINMENT, LLC, a Delaware limited liability company; DMG 15 ENTERTAINMENT HOLDING, LLC, a Delaware limited liability company; DMG 16 MANAGEMENT SERVICES, INC., a Delaware corporation; NEW ASIA SUCCESS 17 PARTNERS LIMITED, a British Virgin Islands corporation; HEALTHY SOAR INVESTMENT 18 LIMITED, a Hong Kong corporation; DANIEL MINTZ, an individual; BING WU, an 19 individual; PETER XIAO, an individual; and DOES 1 through 100, inclusive, 20 Defendants. 21 1. BREACH OF CONTRACT; 2. BREACH OF GOOD FAITH AND FAIR DEALING; 3. PROMISSORY ESTOPPEL; 4. PROMISSORY FRAUD; S. CONSTRUCTIVE DISCHARGE; 6. RETALIATION IN VIOLATION OF CALIFORNIA LABOR CODE§ 1102.S; 7. UNFAIR BUSINESS PRACTICES (CA BUS. & PROF. CODE §17200, et seq.). 22 Plaintiff CHRISTOPHER FENTON ("Plaintiff') hereby complains against Defendants DMG 23 24 ENTERTAINMENT, LLC, DMG MANAGEMENT SERVICES, INC., DMG ENTERTAINMENT HOLDING, LLC, NEW ASIA SUCCESS PARTNERS LIMITED, HEALTHY SOAR 25 26 27 INVESTMENT LIMITED ( collectively, "DMG"), as well as individuals DANIEL MINTZ ("Mintz"), BING WU ("Wu"), and PETER XIAO ("Xiao") as follows: III 28 I I I -1COMPLAINT 1 I. 2 SUMMARY OF CASE 3 1. This action arises out of false promises by DMG, in Plaintiff's written employment 4 agreement and elsewhere, to compensate Plaintiff "nicely" after the Initial Public Offering of DMG 5 6 7 8 on the Shenzhen Stock Exchange (the "IPO") and to make Plaintiff"rich" like Mintz, Wu and Xiao (Mintz, Wu and Xiao are collectively referred to herein as the "Founders"). Given Plaintiff's long, successful tenure with DMG, Plaintiff's prominent role within the organization, and the various representations made by the Founders, Plaintiff's damages for Defendants' failure to comply with its contractual obligations and oral promises are a minimum of $30 million. 9 2. 10 11 12 13 Over the course of the seventeen (17) years preceding Plaintiffs departure from DMG m February 2018, Plaintiff was an integral part of building DMG into a global media and entertainment powerhouse with over nine hundred (900) employees in the United States and China. As the President ofDMG's Entertainment Motion Picture Group, and the General Manager of DMG North America, Plaintiff helped to transform DMG into an industry leader in the financing, 14 production, marketing and distribution of American movies in China, with blockbuster films such as 15 Iron Man 3, Looper, Knowing, Twilight, Terminator 2-3D, Resident Evil 3D, Point Break, and 16 Transcendence. Plaintiff also spearheaded DMG' s relationship with the United States government 17 and regulators, including his participation as the face of DMG when the Securities and Exchange 18 Commission ("SEC") conducted a multi-year inquiry into DMG's business practices on the ground 19 in China. 20 3. Plaintiff's efforts significantly raised DMG's profile in Hollywood, both on a direct 21 business to business level and also publicly through consistent and high-profile press attention, and 22 more importantly in China, as Plaintiff was instrumental in generating ground-breaking opportunities 23 and historic partnerships with global media partners to access China's huge, previously untapped market for American films. On the heels of DMG's ground-breaking and historic release of Iron 24 Man 3 - which was the highest grossing film of 2013 and (at the time) the fifth highest grossing 25 movie of all time - DMG executed a wildly successful IPO in 2014. After the IPO, DMG's initial 26 27 market capitalization was $3 billion United States Dollars ("USD"), and skyrocketed to more than $5 billion USD at its peak. The IPO's success was due, in large part, to Plaintiff's stewardship of 28 -2COMPLAINT 1 DMG through Hollywood's film industry, transforming DMG from a local Chinese advertising 2 agency into the "gatekeeper" for American movies in China. 3 4. As anticipated, the IPO made the Founders extremely wealthy as they collectively 4 owned approximately seventy-four percent (74%) ofDMG's stock following the IP0.1 Among their 5 6 7 8 many lavish displays of incredulous wealth, DMG purchased: a multi-million dollar mansion in Beverly Hills (now estimated to be worth $50 million) paid for in cash and in which Mintz and Xiao resides, even though DMG is the registered owner of the property; multiple airplanes, including a $25 million Bombardier Challenger 850 private jet and a $30 million Bombardier Global Express private jet, as well as multiple collector-desired stunt planes; and numerous luxury cars, including 9 Rolls-Royces, Bentleys and Ferraris. 10 11 12 13 14 5. DMG also went on an intellectual property spending spree, including but not limited to the acquisition of Valiant Entertainment ("Valiant") - the comic book publisher with the thirdlargest universe of superhero characters behind Marvel Entertainment and DC Comics - for roughly $100 million. 6. In the process, DMG engaged in a variety of questionable business practices, 15 including highly leveraging DMG's stock by pledging more than seventy percent (70%) of the 16 outstanding shares as collateral for loans, and transfening some or all of the proceeds of those loans 17 (believed to be in the hundreds of millions of dollars) offshore and out of the reach of the Chinese 18 government and DMG' s creditors. These reckless business tactics contributed to the suspension of 19 trading ofDMG's stock on multiple occasions to prevent the collapse ofDMG's stock price in China 20 - a flawed strategy that eventually failed dramatically shortly after Plaintiff's departure from DMG, 21 diminishing the value of DMG to the point that Plaintiffs due compensation was materially 22 impacted. 23 24 25 7. DMG and its Founders made concerted efforts to conceal its reckless activities from Plaintiff while he was serving as General Manager of DMG North America, and Plaintiff did not become aware of them until near the end of his tenure with DMG and thereafter. Often, Plaintiff 26 1 Mintz is a citizen of the United States and his wife, Wu, is a dual-citizen of the United States and 27 China as a result of their marriage. Upon information and belief, due to Chinese restrictions 28 concerning the citizenship of shareholders in Chinese corporations, the shares of Mintz and Wu were held in Xiao's name as well as other designated Chinese surrogates who were employed by DMG. -3COMPLAINT 1 would learn about_DMG's questionable activities through unexpected cries for help from DMG's 2 employees because those employees had been wrongfully manipulated by Mintz, Wu, and/or Xiao.2 3 Plaintiff had addressed these incidents with Mintz and other senior executives, and all have regularly 4 turned a blind eye, answered with obvious deflection, feigned ignorance, nervous hesitation, silence, 5 6 7 or, in some cases, admitted to participating in these activities. In turn, Mintz and other DMG executives would respond with deep resentment towards Plaintiff for raising these alarming issues, despite the fact that it was a part of Plaintiff's duties as an executive with DMG to raise such issues. 8. 8 Meanwhile, DMG failed to comply with its contractual obligations to Plaintiff to compensate him for the IPO and make him "rich" like the Founders, as well as failing to pay "bonuses 9 for [Plaintiff's] contributions to DMG .... " Plaintiff demanded enforcement of provisions in his 10 employment agreement concerning bonus pay following the IPO. But rather than engage Plaintiff in 11 12 good faith, DMG terminated Plaintiff. As a result, Plaintiff has been left with no choice but to bring this action to recover the compensation that is rightfully owed to him. 13 14 II. 15 THE PARTIES 16 9. Plaintiff is an individual residing in the County of Los Angeles, State of California. 17 10. Plaintiff is informed and believes, and based thereon alleges, that defendant DMG 18 ENTERTAINMENT, 19 organized and existing under the laws of the State of Delaware, with its principal place of business 20 in the County of Los Angeles, State of California. 11. 21 22 23 24 LLC is, and at all times relevant hereto was, a limited liability company Plaintiff is informed and believes, and based thereon alleges, that defendant DMG MANAGEMENT SERVICES, INC. is, and at all times relevant hereto was, a corporation organized and existing under the laws of the State of Delaware, with its principal place of business in the County of Los Angeles, State of California. 12. 25 Plaintiff is informed and believes, and based thereon alleges, that defendant DMG 26 27 28 2 On several instances, DMG employees fell into legal trouble with the China Securities Regulatory Commission, Chinese banks, and/or other Chinese regulators and creditors because of DMG's actions. -4- COMPLAINT 1 ENTERTAINMENT 2 company organized and existing under the laws of the State of Delaware, with its principal place of 3 business in the County of Los Angeles, State of California. 4 5 6 7 8 13. HOLDING, LLC is, and at all times relevant hereto was, a limited liability Plaintiff is informed and believes, and based thereon alleges, that defendant NEW ASIA SUCCESS PARTNERS LIMITED is a now-defunct corporation that was organized and existing under the laws of the British Virgin Islands, and at all times relevant hereto, was regularly doing business in the County of Los Angeles, State of California. 14. Plaintiff is informed and believes, and based thereon alleges, that defendant HEALTHY SOAR INVESTMENT LIMITED is, and at all times relevant hereto was, a corporation 9 organized and existing under the laws of Hong Kong, and regularly doing business in the County of 10 11 12 13 14 15 Los Angeles, State of California. 15. Plaintiff is informed and believes, and based thereon alleges, that defendant DAN MINTZ is an individual residing in the County of Los Angeles, State of California. 16. Plaintiff is informed and believes, and based thereon alleges, that defendant BING WU is an individual residing in the County of Los Angeles, State of California. 17. Plaintiff is informed and believes, and based thereon alleges, that defendant PETER 16 XIAO is an individual residing in Macau, and doing business in the County of Los Angeles, State of 17 California. 18 18. Plaintiff is informed and believes, and based thereon alleges, that DMG employs an 19 advanced corporate web of shell companies, affiliates, and/or subsidiaries carefully designed to hide 20 DMG's true identity and shield the true identity from discovery by government regulators, creditors 21 and liability. 22 frequently, upon information and belief, with the express intent to avoid government regulation in 23 24 25 26 This web includes a number of defunct entities and new entities being formed China and the United States, evade tax and other liabilities, and hide assets from creditors. DMG's web of shell entities (any one of which may be the actual form of DMG) includes without limitation, DMG Entertainment, LLC (formed in Delaware), DMG Entertainment Holding, LLC (formed in Delaware), DMG Management Services, Inc. (formed in Delaware), New Asia Success Partners Ltd. (formed in the British Virgin Islands), Healthy Soar Investment Ltd. (formed in Hong Kong), DM 27 International Ltd. (formed in Malta), DMG Entertainment Ltd. (formed in Malta), DMG Partners 28 -5COMPLAINT 1 Ltd. (formed in Malta), Yinji Entertainment and Media Co., Ltd. (formed in China), DMG Yinji 2 (formed in China), DMG Entertainment 3 Investment, LLC (formed in Delaware), Shai Holdings II, LLC (formed in Delaware), DMG (Hong 4 Kong) Group Ltd. (formed in Hong Kong), DMG Partners Ltd. (formed in the Cayman Islands), 2709 5 6 7 8 and Media Co., Ltd. (formed in China), DMG Tech Pictures Ltd. (formed in Hong Kong), WBAC, LLC (formed in Delaware) and Pacific Metro Group (formed in the British Virgin Islands) (collectively, the "DMG Entities"). 19. Plaintiff is informed and believes, and based thereon alleges, that at all times mentioned herein, that there has existed a unity of interest and ownership by and between Mintz, Wu, Xiao and the DMG Entities, such that any individuality or separateness between and amongst them 9 has ceased and the DMG Entities are a mere shell and alter ego of Mintz, Wu and Xiao, and of each 10 11 12 13 other, in that Mintz, Wu and Xiao control and dominate the DMG Entities' business affairs and organization and operate the DMG Entities as a mere extension and subsidiary of their personal business endeavors. 20. Adherence to the fiction of the separate existence of the DMG Entities as entities 14 separate and distinct from Mintz, Wu and Xiao, and from each other, will permit an abuse of the 15 corporate privilege and will sanction and promote fraud and injustice in that it will allow Mintz, Wu, 16 Xiao and the DMG Entities to avoid indebtedness which Plaintiff is informed and believes has 17 accrued almost solely to further the personal business purposes of Mintz, Wu, and Xiao, and which 18 shields Mintz, Wu, Xiao and the DMG Entities from liabilities which they knowingly and willingly 19 incurred and had no intention of being held responsible for. 20 21. Plaintiff is further informed and believes, and based thereon alleges, that the DMG 21 Entities, and each of them, are the successor-in-interests 22 responsible and/or liable in some manner for the conduct of each of the other DMG Entities, as 23 24 25 26 to each other, and each of them are alleged herein. 22. Plaintiff is informed and believes, and based thereon alleges, that at all times mentioned herein, Mintz, Wu, Xiao and the DMG Entities were the agents, employees and partners of each other, and were acting within the scope and authority of such agency, employment and partnership and with the knowledge, consent, approval and ratification of each other. 27 23. Plaintiff is informed and believes, and based thereon alleges, that defendants, and each 28 -6COMPLAINT 1 of them, designated herein as DOES 1 through 100, inclusive, are responsible in some manner for 2 the occurrences and happenings herein alleged, and that Plaintiffs damages as herein alleged were 3 and are the direct and proximate result of the actions of said defendants, and each of them. Said 4 defendants are sued as principals or agents, partners, servants and employees of said principals, or 5 6 7 any combination thereof, and all of the acts performed by them as agents, partners, servants and employees were performed within the course and scope of their employment, and with the knowledge, consent, approval and ratification of said principals, and each of them. 24. 8 Whenever in this complaint reference is made to any act of a defendant, such allegation shall be deemed to mean the acts of the defendants named in the particular cause of action, 9 and each of them, acting individually, jointly and severally. 10 11 JURISDICTION AND VENUE 12 25. Jurisdiction is proper in this Court pursuant to California Code of Civil Procedure § 13 410.10 because the alleged acts and omissions complained of herein took place in the County of Los 14 15 Angeles, State of California, Mintz and Wu reside in the County of Los Angeles, State of California and Xiao, and the DMG Entities do business in the State of California. 16 26. Venue for this action in Los Angeles County is proper pursuant to, without limitation, 17 California Code of Civil Procedure § 395 in that, among other things, because Mintz and Wu reside 18 in the County of Los Angeles and most, if not all, of the DMG Entities have their principal place of 19 business in the County of Los Angeles. Furthermore, the contracts that are the subject of this dispute 20 were to be performed in the County of Los Angeles. 21 III. 22 FACTS COMMON TO ALL CAUSES OF ACTION 23 24 25 26 A. Background Facts 27. Mintz, Wu, and Xiao are founders of an advanced corporate web of shell companies, affiliates, and/or subsidiaries collectively known as "DMG," which includes but is not limited to the following: DMG Entertainment, LLC (formed in Delaware), DMG Entertainment Holding, LLC 27 (formed in Delaware), DMG Management Services, Inc. (formed in Delaware), New Asia Success 28 -7COMPLAINT 1 Partners Ltd. (formed in the British Virgin Islands), Healthy Soar Investment Ltd. (formed in Hong 2 Kong), DM International Ltd. (formed in Malta), DMG Entertainment Ltd. (formed in Malta), DMG 3 Partners Ltd. (formed in Malta), Yinji Entertainment and Media Co., Ltd. (formed in China), DMG 4 Yinji (formed in China), DMG Entertainment and Media Co., Ltd. (formed in China), DMG Tech 5 6 7 8 Investment, LLC (formed in Delaware), Shai Holdings II, LLC (formed in Delaware), DMG (Hong Kong) Group Ltd. (formed in Hong Kong), DMG Partners Ltd. (formed in the Cayman Islands), 2709 Pictures Ltd. (formed in Hong Kong), WBAC, LLC (formed in Delaware) and Pacific Metro Group (formed in the British Virgin Islands) (collectively, the "DMG Entities"). 28. Plaintiff is the former President of DMG Entertainment Motion Picture Group and 9 General Manager ofDMG North America, which are divisions within DMG. Plaintiff worked with 10 11 12 13 DMG in various senior-level or representative capacities over the course of seventeen (17) plus years, until his employment ended in or about February 2018. During that time, DMG grew from thirtyfive (35) employees to more than nine hundred (900), with its value increasing from $100 million USD to a peak of more than $5 billion USD, based in large part on Plaintiff's efforts. 14 29. Plaintiff's business relationship with DMG began in 1999 when he met Mintz while 15 working as a talent agent at William Morris. In 1999, DMG, known at the time as Pacesetter 16 Productions International or "PPI", was known as a China-based commercial production house3 that 17 catered to international companies, including Volkswagen, Fruit of the Loom, Nike, Mazda, and 18 Unilever, seeking to market their products and services in the fast-growing Chinese market. At the 19 time, DMG had no presence in the United States and engaged Plaintiff to tap into Hollywood's 20 entertainment industry and other U.S.-based business. 21 From that point until Plaintiff's departure from DMG in 2018, Plaintiff constructed partnerships, negotiated deals, and supervised the 22 development, financing, production, marketing, and distribution of DMG's entertainment content 23 among various other U.S.-based businesses and activities. 30. 24 In or about January 2004, Plaintiff - who had left the employ of William Morris to 25 3 26 27 28 DMG was formerly known as Pacesetter Productions International ("PPI''). Exhibit 1: Pacesetter International Inc., Nevada-register.com, https://www .nevada-register.com/3 85534-pacesetterinternational-inc/ (last visited Feb. 22, 2019); Google, https://books.google.com/books?id= Ny9AAQAAIAAJ&q=pacesetter+productions+dan+mintz&dq=pacesetter+productions+dan+mintz &hl=en&sa=X&ved=OahUKEwiCoajBwpHgAhXGHDQIHTGYCbIQ6AEIKjAA (last visited Jan. 28, 2019). -8- COMPLAINT 1 establish his own entertainment company, H2F Entertainment, Inc. ("H2F") - became the General 2 Manager of DMG North America. By that time, PPI had transformed from a commercial production 3 house to an independent full-service advertising agency and renamed the company to DMG, 4 eventually becoming the self-proclaimed largest independent full-service advertising agency in 5 China. 31. 6 7 8 Among Plaintiff's notable accomplishments over the following years as General Manager of DMG North America: in early-2004, Plaintiff arranged for DMG to be the first company to properly license American music for national advertisements in China, when DMG licensed a popular song by an American rock band, Hanson, for a Volkswagen brand campaign. 9 32. 10 11 12 In 2005, Plaintiff arranged for DMG to bring ESPN's World's Strongest Man competition to China for the first time. The competition was filmed and televised in China, garnering the highest television ratings for the competition to date, with an impressive forty (40) million viewers for the finals that aired on China Central Television network CCTV5. 13 33. In 2006, Plaintiff secured Mintz' s first feature article by a major western media 14 publication, Fast Company, entitled "The Mintz Dynasty: Dan Mintz Landed in Beijing Without a 15 College Degree, a Job, or a Word of Mandarin. Now He Heads Up the Hottest Advertising Shop in 16 the Country. How One Man Cracked the Chinese Market (by Really Really Trying)," A true and 17 correct copy of this article is attached hereto as Exhibit 2. 18 34. In 2008, in conjunction with the Summer Olympics in Beijing, Plaintiff negotiated 19 the largest ever Olympic Athlete endorsement deal in China for U.S. Olympian Michael Phelps, on 20 behalf ofDMG's client, Mazda Motor Corporation. 21 22 23 24 25 26 B. Plaintiff Oversees DMG's Transition Into Movie Production And Distribution 35. After the conclusion of the 2008 Summer Olympics in Beijing, the Chinese government began to focus on building a more robust international film industry within China. Given DMG's track record and roots in China, and Plaintiff's deeply rooted relationships in Hollywood, DMG was uniquely positioned to capitalize on this opportunity. 36. Initially, DMG (through Plaintiff's efforts) focused on acqumng rights from 27 Hollywood movie studios and financiers to market and distribute American movies theatrically in 28 -9COMPLAINT 1 China. Thereafter, DMG began to co-finance and co-produce American movies for distribution in 2 the Chinese market. 3 37. 4 marketing and distribution of American movies into China. 38. 5 6 7 8 Over time, Plaintiff helped DMG build its reputation as the "gatekeeper" for the Entertainment For example: in 2009, Plaintiff helped create a partnership with Summit (now a subsidiary of Lionsgate Films) such that DMG would provide Summit Entertainment with a direct channel for theatrical release in China. The first movie that DMG released in China under this partnership with Summit Entertaimnent was Knowing, starring Nicolas Cage. This was the first ever non-major Hollywood studio film to gamer one of China's twenty (20) 9 coveted "quota" slots that were allocated for the release of foreign movies.4 10 11 12 13 39. In 2010, Plaintiff arranged a trailblazing partnership with the makers of the movie Looper to incorporate enough Chinese cultural components into the movie, such that the Chinese regulatory body would recognize the film as a U.S.-China Co-Production or even a local Chinese production rather than a foreign film. The benefits of qualifying as either a co-production or local 14 production are numerous, including allowing producers to receive a larger revenue share with the 15 Chinese govemment and releasing the film without the normal blackout period required of foreign 16 films.5 17 40. Through Plaintiffs efforts, DMG produced, developed and financed Looper with 18 Endgame Entertainment, and subsequently marketed and distributed the movie in China. On 19 September 28, 2012, Looper opened in theaters globally and in China on the same day and date (a 20 rarity for Hollywood movies in China), and it was shown in thousands of Chinese theaters during a 21 period in which foreign films were typically subject to a blackout.6 During its theatrical run, which 22 23 24 25 26 27 28 China's regulatory body imposes quota restrictions on importation of foreign films, distinguished between "revenue-sharing" and "flat-fee" quotas. Only a limited amount of foreign films are imported into China in any given year. 5 Notably, by successfully classifying Looper as a U.S.-China Co-Production or alternatively a local Chinese production, Looper was not classified as a "foreign film," and therefore not subject to the quota restrictions for foreign films imported into China. 6 Among the many regulations that China imposes on foreign films, China's regulatory body also controls the release dates of foreign films to prevent foreign films :from directly competing with domestic film releases. More often than not, China will intentionally release an American film in China on a different and much later calendar-day than the American release date, for the reason that 4 -10- COMPLAINT 1 began the weekend of September 28-30, 2012, Looper generated more than $20 million USD in 2 earnings, placing it as one of the highest grossing Hollywood films of that year, and the highest 3 grossing Hollywood film of all time in China for its genre. 7 4 5 6 7 8 41. In addition, from 2009 through 2013, Plaintiff managed DMG's continuing partnerships with Summit Entertainment, and forged new partnerships with Sony Entertainment and Universal Pictures to secure revenue-sharing quota slots from the Chinese government. During that span, DMG distributed movies such as Twilight, Killers, Resident Evil: Afterlife, Red, The Eagle and Priest to the Chinese market. 42. Plaintiff was also instrumental in convincing Marvel, Disney, and Paramount to allow 9 DMG to co-finance, co-produce, market (in China) and distribute (in China) the movie Iron Man 3. 10 11 12 This deal required filming certain components of the movie in China to incorporate a sufficient amount of Chinese elements to qualify Iron Man 3 as a U.S.-China Co-Production. Their collective efforts resulted in an unprecedented revenue sharing deal with the Chinese government, a pre-United 13 States "day-and-date" release on May 1, 2013 (which was a Chinese national holiday), and the first14 ever televised Chinese movie premiere for a Hollywood film, which featured Robert Downey, Jr. on- 15 location in the Forbidden City. As a result, Iron Man 3 garnered revenues at a level never before 16 achieved by any Disney film in China, grossing five-times more in China than the first two 17 installments of Iron Man. Iron Man 3 remains in the top twenty of the highest grossing movies of 18 all time, with total box office receipts of over $1.2 billion USD, of which $121 million USD 19 originated from China. 8 20 43. Meanwhile, in or about April 2012, DMG learned of an SEC investigation into 21 potential violations of the Foreign Corrupt Practices Act ("FCPA") by the Hollywood Studios. Soon 22 after, DMG was notified by the SEC that it too was a target in the investigation, embroiling DMG 23 ( as well as Plaintiff personally) in the ongoing SEC investigation of potential FCP A violations by 24 DMG's China-based executives. With DMG squarely in the SEC's crosshairs, Plaintiff was 25 the American release date would compete with domestic Chinese films that are releasing in the same 26 week. 7 Looper went on to earn over $176 million USD worldwide as of January 2019. Looper, Box Office 27 28 Mojo,https://www.boxofficemojo.com/movies/?id=loopers.htm (last updated Jan. 28, 2019). 8 Iron Man 3, Box Office Mojo, https://www.boxofficemojo.com/movies/?page=intl&id= ironman3.htm (last updated Jan. 28, 2019). -11COMPLAINT 1 prevented from furthering DMG's alliances with the major studios, and even worse, many of 2 Plaintiffs ongoing discussions and/or negotiations with major studios were abruptly halted, so 3 Plaintiff had to find aggressive financiers who were willing to work with DMG to replicate the 4 success of Looper and Iron Man 3 with other films. 44. 5 6 7 8 As a result, Plaintiff oversaw DMG's partnership with Alcon Entertainment (which had an output deal through Warner Brothers) to distribute the hit 2013 film Prisoners and co-finance and co-produce Transcendence in 2014 and Point Break in 2015, and market and distribute each of those movies in China. In connection with the release of Transcendence, Plaintiff arranged for its star, Johnny Depp." to go on a two-day promotional tour in China, which included a starring-role on 9 a nation-wide primetime special on ZheJiangTV, a Chinese national network that broadcasts to 10 11 12 13 approximately 1.2 billion Chinese residents. As for Point Break, DMG was able to secure an unprecedented release date in China that was three weeks prior to its United States' release date. Plaintiff convinced his key senior relationships at both Warner Brothers and Alcon Entertaimnent to trust that the film would be secure from piracy if the films were released in China during a blackout 14 of other foreign films, which would occur in advance of the U.S. release. This was the first time an 15 American movie had obtained such a release date and the first time an American movie opened in 16 China so much earlier than its U.S. release date. As a result, the box office receipts in China for both 17 Transcendence and Point Break exceeded the receipts for all other individual markets worldwide. 18 And, Warner Brothers recently used the early-release-December-date-strategy 19 pioneered for its recent film Aquaman, which, as a result, became one of the highest grossing films 20 in China for 2018. in China that DMG 21 c. 22 Participation From The Founders 23 45. 24 25 26 Plaintiff Is Left To Manage The SEC's Investigation Into DMG Without Anv As previously mentioned, DMG became involved in an SEC investigation concerning alleged violations of the FCPA in 2012. The investigation focused on DMG's alleged bribery of Chinese officials, including Han Sanping, the chief executive of the China Film Group, which is a 27 28 9 Plaintiff was able to engage Depp's participation via Plaintiffs longtime relationship with the head ofDepp's company. -12COMPLAINT 1 state-owned entity that effectively controls the movie industry in China. The SEC investigation also 2 examined several Hollywood movie studios that engaged DMG to help navigate China's quota and 3 censorship systems, and to secure distribution of their movies in China. 46. 4 5 6 7 8 In or about March 2012, prior to the SEC informing DMG of its investigation of DMG, Mr. Sanping (who was accompanied by Mintz'") met with executives at Sony, Universal and Disney, and also met with Bruce Willis, who starred in Looper, in Los Angeles. At or around that time, Mintz was photographed with Mr. Sanping and several other unnamed officials from the China Film Group aboard a private jet flight that DMG organized to fly the individuals to Las Vegas for the weekend. 9 47. As the head ofDMG's operations in the United States, Plaintiff oversaw, coordinated 10 and became the face ofDMG during its response to the SEC investigation, despite having no personal 11 12 13 14 involvement in any of the events that gave rise to the investigation. At no point did Mintz, Wu or Xiao make themselves available to meet with the SEC for the investigation or alleviate the burden on Plaintiff. This caused Plaintiff substantial stress and exerted an immense toll on his family life, given that his personal and professional reputation (which he had worked decades to build) 15 was at risk of being destroyed. The investigation also negatively impacted Plaintiffs ability to 16 perform his job, as it tainted DMG's and Plaintiffs personal reputation with Hollywood studios, 17 production companies, banks and financiers, among others. 18 opportunities came with no explanation, since several of the Hollywood executives - whom Plaintiff 19 dealt with on a regular basis and were people whom Plaintiff considered close friends - were under 20 orders not to disclose the SEC inquiry of DMG as a reason for rejection. 21 confirmed his suspicions either when he learned of the hacked emails of Sony executives in late 2014 22 or when those executives came clean to Plaintiff after his departure from DMG in 2018. Meanwhile, 11 Even worse, many of the lost business Instead, Plaintiff later 23 24 According to The New York Times, Mintz accompanied Mr. Sanping in Los Angeles. Exhibit 3: Michael Cieply and David Barboza, In China, Foreign Films Meet a Powerful Gatekeeper, The New York Times (Apr. 29, 2012), https://www.nytimes.com/2012/04/30/business/media/china-film2 6 group-acts-as-a-powerful-gatekeeper.html. 11 The negative impact was so wide-reaching within the film industry that senior executives from 27 Hollywood studios such as Skydance, Sony, Lionsgate, Universal, Disney, and Paramount all 28 attempted to persuade Plaintiff to leave DMG, even offering to place him in touch with Hollywood's top recruiters or offer potential opportunities internally. 10 25 -13- COMPLAINT 1 during the majority of the investigation, Mintz, Wu and Xiao stayed out of the United States and had 2 no communications whatsoever with the SEC, leaving Plaintiff to manage the investigation on his 3 own. 48. 4 5 6 7 8 9 On February 28, 2013, Plaintiff met with members of the SEC's Los Angeles bureau. Plaintiff prepared and gave a presentation to educate the SEC on the workings of the Chinese film industry, and spent three and a half hours answering questions from the SEC about DMG's business, even though many of the questions pertained to events in China for which Plaintiff had no involvement. DMG's general counsel, Tim Shih, even praised Plaintiff for doing a "great job" during the presentation to the SEC. Throughout the investigation, Plaintiff handled DMG's response to the SEC's inquiries for information and documents. Plaintiff believed strongly in the purpose ofDMG's 10 mission of bridging China's and Hollywood's film industries - a mission that when successful, not 11 12 13 14 only provides innovative access for Hollywood to the Chinese audience, but also, most importantly, fosters cultural diplomacy between the United States and China in a very high-profile way. As a result, Plaintiff tirelessly responded to any concerns that the SEC had against DMG with regard to the alleged FCPA violations. Plaintiff's responses to the SEC were in accordance with what he 15 believed to be truthful at the time, although after seeing the reports ofDMG's troubles in China over 16 the course of 2018,12 Plaintiff has reason to believe that pertinent information was deliberately 17 withheld from him. 18 49. Ultimately, on September 2, 2015, due almost entirely to Plaintiff's efforts, the SEC 19 informed DMG in a written letter stating that the investigation into "DMG Media" was completed 20 and no enforcement action was recommended, though the matter was never officially closed. A true 21 and correct copy of the letter is attached hereto as Exhibit4. Thus, after enduring over three years 22 with the black cloud of an SEC investigation hanging over his personal and professional life (which 23 24 25 26 caused severe stress on both Plaintiff and Plaintiff's wife, as well as creating stress-related health issues to Plaintiff, and triggering long bouts of insomnia as evidenced by lengthy emails from Plaintiff to Mintz), Plaintiff had navigated the investigation to a best possible and successful conclusion, as described by DMG's counsel at Shepard Mullin and reiterated by Plaintiff's personal counsel at Caldwell Leslie & Proctor, PC. 27 28 12 DMG became the subject of China's regulatory bodies and intense scrutiny by the media in 2018. -14- COMPLAINT 1 2 D. 3 Promises To Compensate Plaintiff "Nicely" In The Event Of An Eventual IPO 50. 4 5 6 7 8 DMG Agrees To Purchase H2F, Promises To Pav Plaintiff Performance Bonuses, And In or about the summer of 2012, Mintz approached Plaintiff about purchasing H2F and hiring Plaintiff to work full-time for DMG. Up to that point, Plaintiff was operating H2F separately from DMG and developed projects unrelated to DMG, with the full knowledge, understanding and approval of Defendants. However, DMG had grown its movie business to the point where Mintz no longer wanted Plaintiff to represent two separate businesses simultaneously (i.e. DMG and H2F) and insisted that Plaintiff and H2F formally become DMG's Los Angeles-based, 9 North American headquarters. Mintz, Xiao, and Wu all strived for DMG to appear as an international 10 company with real infrastructure in the U.S. in order to prime for an eventual China-listed IPO or 11 12 reverse merger, and the acquisition ofH2F and Plaintiff was Defendants' means for accomplishing that goal. 13 51. At the time, DMG was also considering an Initial Public Offering or reverse merger 14 (to skip the queue of other !PO-interested companies) under the name "DMG Yinji"13 on the 15 Shenzhen Stock Exchange. During the negotiations for DMG to purchase H2F and hire Plaintiff as 16 a full-time employee, Mintz and Wu promised ( on numerous occasions) to compensate Plaintiff with 17 a bonus in the event of the IPO, along with performance bonuses. This negotiation occurred after 18 Plaintiff had secured the partnership with Marvel and Disney on Iron Man 3 (which became the 19 calling-card success-story that propelled DMG into a successful launch of its IPO). 52. 20 21 Specifically, in consideration for Plaintiff to agree to sell H2F to DMG and instead work full-time for DMG, beginning in or about the summer of 2012 and continuing 22 through November 2013, Mintz repeatedly promised Plaintiff that DMG would "take care of 23 24 25 him nicely in the event of an IPO." DMG's general counsel, Tim Shih, acknowledged this promise by Mintz to compensate Plaintiff in the event of an IPO, stating in a November 14, 2013 email: "Obviously there is an understanding between Dan and Chris regarding the IPO." A true and correct 26 Mintz and Wu later renamed DMG Yinji to "Yinji Entertainment And Media Co., Ltd." in a veiled attempt to segregate DMG's U.S. operations from DMG's China operations. Mintz and Wu have also unsuccessfully attempted to distance themselves from Xiao in the second half of 2018. Wu is publicly listed as chairman ofYinji Entertainment And Media Co., Ltd. (see Exhibit 16). -15COMPLAINT 13 27 28 1 copy of this email is attached hereto as Exhibit5. Due to the prohibition by the Chinese government 2 on the foreign ownership of stock in publicly traded companies, it was known and understood by 3 DMG that Plaintiffs compensation legally could not be provided in the form of DMG equity, 14 but 4 rather must be in the form of monetary compensation. 53. 5 6 7 8 Ultimately, Plaintiff and DMG agreed to the terms of the purchase and sale ofH2F in two (2) phases. First, on or about September 20, 2012, Plaintiff entered into an "Agreement for Purchase of Sale and Stock" with DMG (through DMG shell-entities New Asia Success Partners, and DMG (Hong Kong) Group Ltd.), whereby DMG agreed to purchase 49.9% ofH2F from Plaintiff for $1,000,000 (the "First Stock Purchase Agreement"). A true and correct copy of the First Stock 9 Purchase Agreement is attached hereto as Exhibit6. 10 11 12 54. Second, on or about November 18, 2013, Plaintiff entered into a second stock purchase agreement with DMG (through DMG shell-entity New Asia Success Partners Limited), whereby Plaintiff agreed to sell his remaining 50.1 % interest in H2F to DMG (the "Second Stock 13 Purchase Agreement"). In exchange, DMG agreed to pay $4,020,000 to Plaintiff, over the course of 14 five years at $800,000 per year (plus an additional $20,000 during the first year), pursuant to the 15 schedule set forth therein. The Second Stock Purchase Agreement was intentionally backdated by 16 DMG to January 1, 2013. A true and correct copy of the Second Stock Purchase Agreement is 17 attached hereto as Exhibit7. 18 55. In tandem with the Second Stock Purchase Agreement, Plaintiff entered into a 19 separate agreement dated November 18, 2013 with DMG (through DMG shell-entity New Asia 20 Success Partners Limited) for "Other Arrangements," which sets forth the terms of Plaintiffs full- 21 time employment with DMG from 2013 through 2017 (the "Employment Agreement"). Under the 22 Employment Agreement, Plaintiffs total annual compensation was $1,000,000 over five years, 23 which included the $800,000 per year that Plaintiff was to receive under the Second Stock Purchase Agreement in exchange for the remaining interest in H2F, and $200,000 per year paid through payroll 24 by DMG Management Services, Inc.15 DMG made each of the scheduled payments under the Second 25 26 14 As previously discussed, U.S. citizens are prohibited from owning equity in a company that is 27 publicly listed in China's stock exchange. 28 15 At all times, DMG interchanged which legal entity conducted certain activities. For example, Plaintiffs contract for "Other Arrangements" was entered into by New Asia Success Partners -16- COMPLAINT 1 Stock Purchase Agreement and Employment Agreement from 2013 to 2017. A true and correct copy 2 of the Employment Agreement is attached hereto as Exhibit 8. 56. 3 Pursuant to the ongoing conversations between Plaintiff, Mintz and Wu, Section 1 of 4 the Employment Agreement provides that Plaintiff"DMG agrees in good faith that [Plaintiff) 5 'shall be taken care of nicely' in the event of an initial public offering of DMG." Section 1 6 7 8 furtherstates that "DMG also recognizes and agrees in good faith that [Plaintiff) shall be paid bonuses for his contributions to DMG...." This provision was included in the numerous drafts of the Second Stock Purchase Agreement and Employment Agreement, each of them drafted by Tim Shih on DMG's behalf.16 9 10 11 **DMG's rati(ication o(the First Stock Purchase Agreement, Second Stock Purchase Agreement. and EmploFment Agreement** 12 13 57. Although Plaintiff never received counter-signed copies of the Second Stock Purchase Agreement or Employment Agreement from DMG, 17 Mintz confirmed ( and thereby ratified) DMG' s 14 acceptance of the agreements in a December 3, 2013 email, wherein Mintz stated: "OK from my 15 side!" 16 attached hereto as Exhibit 9. 17 A true and correct copy of the email exchange between Mintz, Plaintiff and Tim Shih is 58. The terms of the Employment Agreement were intended to be held confidential 18 between Plaintiff and DMG. However, after Plaintiff was forced to leave DMG in February of 2018, 19 Plaintiff discovered that the Employment Agreement had been shared with other DMG employees 20 who had no reason to possess such information. One of which was Eric Sullivan, who then further 21 22 23 24 25 26 27 28 Limited (and defined as DMG), but Plaintiff was on payroll through DMG Management Services, Inc. This further illustrates how each of the separate entities under the DMG umbrella operated as one cohesive unit and as alter-egos of one another. 16 For example, in one of the drafts, DMG stated: "It is further agreed in good faith that Fenton 'shall be taken care of nicely' in the event of an Initial Public Offering of DMG, presently scheduled for 2014 on a China exchange ... " 17 Most of DMG's documents and records were maintained in China, including the various agreements that Plaintiff entered into with DMG. DMG's failure to provide Plaintiff with fully executed copies of the various agreements was the result of the consistent disorganization ofrecord keeping on the China-side of DMG. -17- COMPLAINT I publicized the terms of the Employment Agreement with at least one other employee. 59. 2 18 On December 9, 2013, in response to Plaintiffs request for the first payment due 3 under the Second Stock Purchase Agreement and Employment Agreement (i.e. $500,000 on 4 November 15, 2013), Mintz reaffirmed his consent to both agreements, stating: "Please make sure 5 the wire goes out to Chris ASAP." In the same email chain, Tim Shih also confirmed that he had 6 7 8 made the application for the agreements to be "chopped," the method for executing contracts under Chinese custom and practice. A true and correct copy of the email exchange between Plaintiff, Mintz, Tim Shih and DMG's finance director is attached hereto as Exhibit 10. 60. On or about March 27, 2014, New Asia Success Partners and Healthy Soar Investment 9 Limited entered in an "Share Purchase Agreement," wherein DMG again acknowledged that DMG 10 11 12 was a party to both the First Stock Purchase Agreement and Second Stock Purchase Agreement, which includes the Employment Agreement. A true and correct copy of the "Share Purchase Agreement" is attached hereto as Exhibit 11. 13 61. In or about April 2014, Plaintiff, H2F, New Asia Success Partners Limited and 14 Healthy Soar Investment Limited, entered into an "Assignment and Assumption Agreement," 15 wherein DMG again acknowledged that DMG was a party to both the First Stock Purchase 16 Agreement and Second Stock Purchase Agreement, which includes the Employment Agreement. A 17 true and co1Tect copy of the "Assignment and Assumption Agreement" is attached hereto as Exhibit 18 12. 19 62. In a personally signed October 22, 2014 letter, Mintz again confirmed that DMG was 20 a party to the agreements, stating: 21 "Chris Fenton is DMG's GM of North America as well as President of DMG Entertaimnent's Motion Picture Group. Plaintiff is an essential part of our senior executive staff ... For the next 3.3 years of his present contract, Plaintiffs gross compensation will be a minimum of $1,000,000 USD, paid through an annual $800,000 purchase of his remaining personal shares in his former company, H2F Entertaimnent, and a $200,000 base. As evidenced by the last couple years, Mr. Fenton is also entitled to bonuses based on his annual performance." 22 23 24 25 26 27 28 18 That employee later called Plaintiff to discuss the specifics of the Employment Agreement, however, that information was never supposed to have become available to that employee. -18- COMPLAINT 1 63. In the October 22, 2014 letter, Mintz also states the following, which acknowledges 2 that Yinji Entertainment And Media Co., Ltd. is a part ofDMG as a whole: 3 "A privately owned Chinese company with large international reach since 1991, 4 DMG will become a publicly tradedcompany on the Shenzhen Stock Exchange next month with a projected market capitalization of roughly $4.2 billion USD. For international business transactions, DMG uses several offshore entities including the Hong Kong Corporation, Healthy Soar InvestmentLimited, as well as the BVI Corporation, New Asia Success PartnersLimited." 5 6 7 A true and correct copy ofMintz's October 22, 2014 letter is attached hereto as Exhibit13. 8 9 E. 10 DMG Successfully Executes The IPO And Breaches Its Promises To Plaintiff 64. In or about April 2014, DMG announced that it was planning the "back-door" IPO of l l DMG through a reverse merger with a meat processing company, Sichuan Gaojin Food.19 The "back12 door" listing allowed DMG move to the front of the line for the IPO, as the Chinese government had 13 only recently started allowing IPOs again after fourteen (14) months in which the market was dark. 14 There were reportedly six hundred (600) companies seeking an IPO in China at the time, including 15 several other entertainment industry companies, such as Shanghai Film Corporation and Wanda 16 Cinema Line. Both Looper and Iron Man 3 - massive, and very publicly reported, success stories 17 that were sourced, handled, and negotiated by Plaintiff- were major selling points for DMG's IPO 18 to Chinese investors. 65. 19 20 21 22 23 24 On or about November 14, 2014, DMG completed the IP020, when Sidman Gaojin Food issued 897.5 million new shares to the owners ofDMG. As part of this transaction, Xiao, who owned (with both Mintz and Wu) 91 % of DMG before the transaction, ultimately held 74% ownership of the newly-merged publicly traded company after the reverse-merger. Upon information and belief, Xiao was also holding respective ownership shares in trust for Mintz and Wu, 19 Sidman Gaojin Food was already listed on the Shenzhen Stock Exchange, and was to merge with 25 DMG under the name "Yinji Entertaimnent And Media Co., Ltd."; See also Exhibit 14: Julie Makinen, DMG Entertainment is going public on Shenzhen Stock Exchange, L.A. Times (Apr. 25, 26 27 2014), https://www.latimes.com/entertaimnent/envelope/cotown/la-fi-ct-china-dmg-20140426story.html. 20 Exhibit 15: Russell Flannery, DMG 's Backdoor Listing Turns Peter Xiao Into China's Latest 28 Billionaire, Forbes (Nov. 16, 2014), https://www.forbes.com/sites/russellflam1ery/2014/11/16/dmgsbackdoor-listing-turns-peter-xiao-into-chinas-latest-billionaire/#287d4c90ce78. -19- COMPLAINT 1 as the Founders each split their respective ownership ofDMG evenly. 66. 2 3 On its first day of trading on the Shenzhen Stock Exchange, DMG's shares closed at 16.63 yuan, placing DMG's value at roughly $3 billion USD, with the collective ownership interest 4 of the Founders at $2.2 billion USD. At its peak on or about November 30, 2015, the share price of 5 DMG reached 26.25 Yuan21, which amounted to a market capitalization well north of $5 billion USD. 67. 6 7 8 9 At no time has DMG compensated Plaintiff in any way, shape or form in connection with the IPO (whether in the form of a bonus or otherwise), despite DMG's contractual obligation to do so and Plaintiff's demands therefore. passionately Nevertheless, Plaintiff continued to work diligently and for DMG, in full reliance that his bonus compensation under the Employment Agreement would be paid without unreasonable delay. 10 11 F. 12 13 DMG Reaffirmed Its Promise To Compensate PlaintiffAfter The IPO 68. On numerous occasions during the years following DMG's IPO, each of the Founders reaffirmed and reassured Plaintiff that he would receive his bonuses pursuant to the Employment 14 Agreement. 15 69. On or about May 2, 2015, during a flight on a Gulfstream 550 private jet provided by 16 Wynn Resorts to Las Vegas, Nevada for the "Fight of the Century" between Manny Pacquiao and 17 Floyd Mayweather, Xiao told Plaintiff: "You should get used to flying private. We are all rich now." 18 22 Xiao was known as a "whale" to the Wynn Las Vegas hotel and casino, given the substantial 19 amount of money he was known to gamble. 23 Even with many of Las Vegas' largest gamblers in 20 town that weekend for the fight, Xiao was granted full use of the Wynn's jet, and was comped three, 21 10,000 square foot private villas at the Wynn hotel. 70. 22 On or about July 12-13, 2015, during a trip to Milan for Wu's birthday, whereby Mintz 23 21 See Exhibit 16: Yinji Entertainment and Media Co Ltd, Bloomberg, https://www.bloomberg.com/quote/002143:CH (last updated Feb. 22, 2019). 25 22 Xiao is not proficient in English, however, this is the gist of what Plaintiff understands Xiao had said during the private flight to Las Vegas. 26 23 Xiao's 8-figure gambling debts have been reported press numerous times. Over the years Plaintiff had to defend Xiao's numerous gambling debts to journalists and business associates. Julia 27 Hollingsworth, Why Singapore casinos can 't collect Ji-om China 's high rollers, South China Morning 28 Post (May 31, 2017), https://www.scmp.com/news/china/diplomacy-defence/article/2096328/whysingapore-casinos- cant-collect-chinas-high-rollers. 24 -20- COMPLAINT 1 and Wu arrived on DMG's Challenger 850 private jet (which was later traded in for a larger Global 2 Express jet) Wu told Plaintiff and Plaintiffs wife on several occasions that he was going to be taken 3 care ofby the Founders very well, and that Plaintiff would be rich like them, stating: "The IPO made 4 us rich, and you will be rich from it too."24 71. 5 6 7 8 On or about January 30, 2016, during a Mandarin karaoke party after DMG's annual gala in Beijing, Wu pulled Plaintiff aside to praise him for his karaoke performance (where Plaintiff performed a song in Mandarin) at the gala in front of hundreds ofDMG employees and spouses, and then she stated, "You're part of the family with me, Dan [Mintz], and Peter [Xiao], and we are going to make you and [your wife] rich." 9 72. 10 11 house in Beverly Hills, California, Wu again told Plaintiff that he would be compensated for the IPO, stating: "The IPO made us rich, and you will be rich from it too." 12 13 On or about April 23, 2016, during a birthday party for Mintz at DMG's $50 million 73. On or about January 18, 2017, during a Chinese New Year event in Beijing, Wu stated to Plaintiff:25 "We set up an entity to properly take care of you as we promised years ago. If we are 14 rich, we want members of our family to be rich too." "Chris deserves that," Wu added. Mintz walked 15 in on the conversation and asked: "What are we all talking about?" Wu responded by reiterating that 16 she and Mintz would make Plaintiff and his family26 wealthy like the Founders. 17 agreement, but he showed some concern that Wu had made such a promise to Plaintiff in front of 18 other employees. Mintz nodded in 19 DMG Highlv Leverages Its Stock, Diverts Hundreds Of Millions Of Dollars Out Of 20 G. 21 China. Spends Lavishlv, And Causes DMG's Stock Price To Collapse Before Compensating 22 Plaintiff In Accordance With The Emplovment Agreement 74. 23 24 25 At all relevant times following the IPO, Defendants continued to spend irresponsibly and leverage DMG's assets against high risk loans, with full knowledge that Plaintiff had yet to receive his bonus compensation according to the Employment Agreement. 26 Mintz was present when Wu made the statement to Plaintiff, and affirmed Wu's statements. This statement was made by Wu in front of two U.S.-based DMG colleagues as witnesses. 26 Wu made specific reference to "The Golden Pigs", which was a reference to Plaintiffs twins who were born during a very rare period in the Year of the Pig. 24 27 28 25 -21- COMPLAINT 75. 1 Plaintiff is informed and believes, and thereon alleges, that in the years following 2 DMG's IPO, the Founders began to leverage (i.e. borrow against) DMG's stock and transfer that 3 money offshore, outside the purview and jurisdiction of the Chinese government. 76. 4 5 6 7 Plaintiff is further informed and believes, and thereon alleges, that the Founders pledged more than 50% of the shares ofDMG as collateral for third-party loans, and, in the process, borrowed hundreds of millions of dollars and distributed that money to various entities throughout the world using a variety of complex transactions. 77. 8 With the proceeds of these loans, the Founders spent lavishly for their own personal benefit, including but not limited to: a $20 million mansion in Beverly Hills (now estimated to be 9 worth $50 million); a separate home in West Los Angeles; multiple airplanes, including a $25 million 10 11 12 Bombardier Challenger 850 private jet and a $30 million Bombardier Global Express private jet; numerous luxury cars, including Rolls-Royces, Bentleys and Ferraris; and incurred millions of dollars of debt for experimental, regenerative medical treatments. 13 78. 27 Moreover, DMG frivolously spent over one hundred-million dollars acquiring various 14 intellectual property rights, including but not limited to: Valiant Entertainment 15 million) which created the third largest comic book universe behind Marvel and DC; a spin-off of 16 Marilyn Monroe's intellectual property known as Mini Marilyn, through a deal with Leonard Green- 17 owned Authentic Brands Group ($5 million); Brandon Sanderson's library of books, including books (roughly $100 18 pertaining to his connected universe, The Cosmere ($ I million); a Transformers-themed live show 19 through an agreement with Hasbro Studios ($12 million); and a 30 conversion of Jim Cameron's 20 Terminator 2 ($10 million) for the purpose of marketing and distributing in China yet both the 21 marketing and distribution divisions were in the process of being eliminated and a couple years later 22 the finished film as yet to be released. 79. 23 24 25 26 As further example of DMG's reckless risk taking in return for powerful press announcements, manufactured shareholder excitement, and potential financial engineering, Mintz instructed Plaintiff and DMG's outside counsel in late 2016 to structure perplexing economic deals with top actors, directors, and producers. The deals were structured as follows: DMG, would receive 27 28 27 Mintz and Wu were eventually sued in connection with its investment in experimental, regenerative medical treatments in Los Angeles Superior Court. The matter is presently set for trial in 2019. -22COMPLAINT 1 $30 million from the respective artist over three years, and in return, DMG would pay $45 million to 2 the respective artist over the three-year period. Upon information and belief, DMG was planning to 3 keep the $45 million expense off the books. Mintz knew that DMG's valuation on the Chinese stock 4 market was calculated at roughly 40-times the value of DMG's net profit. Thus, by injecting $30 5 6 million in cash into DMG without reporting the expense, the market-valuation increase by an astounding $1.2 billion! 80. 7 8 for DMG would Both Plaintiff and DMG's outside counsel referred to these illogical deals as "infinity multiples" since DMG would never get its money back. Mintz would argue, "no they are not! They are 1.5 multiples! I don't see what's so confusing to people about this!" Under intense pressure 9 from Mintz, both Plaintiff and DMG's counsel worked on pitching these irrational deals to an A-list 10 11 12 actor and a producer with these offers. After several meetings with representatives for both artists, one attorney eventually said, ''None of this makes sense. This deal simply doesn't pass the smell test." That attorney ultimately turned down the deal, as did the reps for the other artist in September 13 2017. Afterwards, Plaintiff said to DMG's outside counsel, "going around town with this kind of 14 preposterous deal is going to make us stink too!" DMG's outside counsel agreed, so Plaintiff told 15 both Eric Sullivan and Mintz separately that pursuing these types of deals should be abandoned both 16 because they make DMG look bad, and also that no logical and worthwhile artist or their reps would 17 agree to them. Mintz responded, "I'm not sure why Zack28 and his team can close so many innovative 18 deals and you [Plaintiff] can't." 81. 19 Meanwhile, the highly leveraged nature of DMG's stock created extreme volatility in 20 DMG's share price, which caused the Chinese government to suspend trading of DMG's stock on 21 multiple occasions.29 This, in tum, contributed to a collapse in the market value for DMG's stock. 22 As of late December of 2018, DMG's share price had dropped from a high of26.25 Yuan to well23 under 3.00 Yuan. By the time Plaintiff was forced out of DMG in February 2018, the stock had 24 25 Zack Fu was a DMG employee who oversaw mergers and acquisitions for DMG in China. Fu left DMG shortly thereafter. 26 29 Trading of DMG stock was suspended on January 2018 through July 9, 2018, and then again on both July 9, 2018 and July 10, 2018. Moreover, on or about July 27, 2018, the stock of DMG's 27 controlling shareholder, Xiao, was frozen by a Chinese court for three years, or until DMG repays 28 the debt underlying the court order. This will reportedly cause a lower credit rating for DMG and hinder its ability to obtain future financing. -23COMPLAINT 28 1 remained relatively stable around 15.00 Yuan. 82. 2 Plaintiff is further informed and believes that DMG's financial dealings have also 3 drawn the scrutiny of the Chinese government. Amid this scrutiny, and the associated problems with 4 DMG's stock, Plaintiff is informed and believes that the Founders have fled China and left DMG's 5 6 7 8 presence in China in shambles, with hundreds of employees losing their jobs, and, in some cases, subordinates discovering they are legal guarantors of the outstanding debts incurred by Mintz, Wu, and Xiao. In fact, the financial information released by DMG for the first half of 2018 show that DMG's revenue had plummeted 49.4% from that time period during the prior year, and that net profits have fallen from $39 million USD in the first half of 2017, to $3.2 million USD in the first 9 half of 2018, a drop of91.9%. 10 83. 11 12 Meanwhile, Mintz has now made demonstrative attempts to distance DMG's U.S.- based operations from its Chinese operations, after relying upon that very same connection for almost two decades, and effectively bleeding DMG dry after the IPO. In response to the media's inquiry 13 into DMG's financial troubles, Mintz tried to distance DMG from DMG Yinji, stating: "This is 14 irrelevant. DMG Entertainment is not Yinji, and therefore has no bearing on DMG."30 15 16 H. 17 Plaintiff Learned Of Fiscally Reckless Activities B DMG And The Founders 84. Through the 17 years of Plaintiffs employment with DMG, Plaintiff has carried 18 himself as an honest and responsible leader for DMG. However, Plaintiff now realizes that despite 19 his constant desire to be a great team player and team leader, DMG and its Founders have long been 20. placing Plaintiff in situations which have made it increasingly difficult for Plaintiff to perform his 21 duties as President of DMG's Entertainment Motion Picture Group, and the General Manager of 22 DMG North America. 85. 23 24 25 As one of the leaders for DMG in both the United States and China, Plaintiff put his credibility and long-standing reputation on the line on a daily basis defending both DMG and the Founders from scrutiny by industry colleagues, the media, and both U.S. and Chinese 26 27 28 30 Patrick Brzeski, DMG Entertainment's Chinese Affiliate Crashes on Shenzhen Stock Exchange, The Hollywood Reporter (Aug. 20, 2018), https://www.hollywoodreporter.com/news/dmgente1iaimnents-chinese-affiliate-crashes-shenzhen-stock-exchange-113 5 5 8 0. -24COMPLAINT 1 government authorities.Only recently towards the end of his employment did Plaintiff learn about 2 the depth of DMG's activities that the Founders have been actively concealing from Plaintiff, which 3 have made it impracticable for Plaintiff to perform his duties. 86. 4 5 6 7 8 In addition to the events that were discussed herein, traces of the Founders' questionable activities began to appear as early as September 2010. Mintz asked Plaintiff to transport $600,000 in cash from Los Angeles to a casino in Las Vegas. Although Mintz was pressuring Plaintiff into performing an activity that he was not comfortable with, Plaintiff ultimately refused to transport $600,000.00 in cash from Los Angeles to Las Vegas unless Mintz confirmed that such cash was properly documented or declared through appropriate tax authorities. Plaintiff emailed to Mintz 9 instructions from an accountant on how to properly do this. Rather than confirm that the funds should 10 11 12 be declared, Mintz instructed another DMG employee to transport the funds. Plaintiff ultimately did not participate in the transfer of funds, and to date has no knowledge as to whether any of said funds were ever wired to Beijing. 13 14 87. Another early example occurred in February 2016, when Plaintiff questioned DMG's business affairs team about a lease of a Ferrari that was listed as a DMG expense on the general 15 ledger. Upon information and belief, and against the advice of DMG staff and Mintz's advisers, 16 DMG accountants were instrncted to track the Ferrari lease as a business expense rather than Mintz's 17 personal expense. 18 88. By 2017, Plaintiff was deliberately kept in the dark of DMG's activities, including 19 but not limited to Mintz's, Wu's, and Xiao's activities involving leveraging of DMG stock, as well 20 21 22 23 24 25 26 as pertinent details surrounding the near-$100 million purchase of Valiant Entertainment. 89. Plaintiff was made aware of repeat instances where DMG transmitted funds from entities in China into the U.S. as "loans" for various purposes. In many instances, the "loans" were issued first and then paperwork was subsequently drawn up by DMG's counsel to make the loans appear legitimate rather than appear as payments sent to the U.S. In one example, real estate property taxes for a personal home located at 1655 Gilcrest in Los Angeles, California have been paid by DMG via Pacific Metro Group in the form of a "loan" that was transmitted from China to the U.S. Upon information and belief, DMG does not use this home for any legitimate business purpose. 27 90. As further evidence of these "loans," in June 2017, DMG's Director of Finance alerted 28 -25COMPLAINT 1 Plaintiff of large sums of money that were disbursed from the various entities and repaid interest- 2 free. Plaintiff was informed that DMG's various shell corporations were transferring funds between 3 them in the form of undocumented "loans" (loans for which DMG has no paper trail or deal terms 4 on file). Per DMG's Director of Finance, these loans had accrued up to $12.3 million in interest, 5 6 7 8 though there were no records of any interest being paid on such loans by the various DMG entities. When Plaintiff asked if this kind of accounting and record keeping was compliant, Plaintiff would never get an answer or in many cases would find himself removed from the email discussions moving forward. When Plaintiff then raised these concerns with Mintz, Mintz responded: "Don't email stuff like that. Why is she (Director of Finance) emailing that?" 9 91. As previously mentioned, DMG's stock price began to decline at such an alarming 10 rate that China's regulatory body placed a regulatory freeze on the sale of DMG stock. Plaintiff 11 12 13 14 15 would repeatedly inquire about DMG's accounting practices because, as the acting President of DMG's Entertaimnent Motion Picture Group, and the General Manager of DMG North America, Plaintiff had a professional obligation to make sure that DMG would stay afloat Even more than that, Plaintiffs professional reputation was becoming inextricably linked with the negative press and questionable activities by DMG and the other Defendants. 16 92. Plaintiff was repeatedly left in the dark by Defendants about the regulatory activity of 17 DMG stock. Upon information and belief, Defendants purposefully withheld this information from 18 Plaintiff. For example, for reasons unknown to Plaintiff, large quantities of stock shares were being 19 held by several low-level employees of DMG.31 Only later did Plaintiff discover that these shares 20 were then leveraged as collateral for loans with Chinese banks, all done at the instruction and for the 21 benefit of Mintz, Wu, and Xiao. The loans were obtained under the names of the aforementioned 22 low-level employees without Plaintiffs involvement or knowledge. At least one of these employees 23 24 pleaded to Plaintiff for help after Plaintiffs departure from DMG because said employee was now being pursued by Chinese banks and Chinese Securities Regulatory Commission for unpaid debts 25 31 26 27 28 Some of these low-level employees were part of a on-stage ceremony at the annual DMG gala in Beijing where Plaintiff would hand each of the esteemed employees medals. DMG would acknowledge their employees' accomplishments through the reward of stock ownership. During these instances, Plaintiff asked Mintz what exactly is being rewarded specifically to each of the said employees but never received a straight answer. Mintz would get annoyed and dismiss Plaintiffs inquiries by instruct Plaintiff to "just hand out the medals." -26COMPLAINT 1 and taxes that accrued from the pledged shares whose collateral was guaranteed by that employee. 2 Plaintiff is informed and believes, and thereon alleges, that these DMG low-level employees now 3 owe roughly $220,000,000 USD (1.5 Billion Yuan) to Chinese banks and investors due to various 4 unpaid loans that were issued to the Defendants. 93. 5 6 7 8 Concurrently in 2017, Plaintiff and Mintz were negotiating the final tranche purchase of Valiant, which is presently one of the largest comic book publishers behind Marvel and DC. The negotiations took roughly 3 years to make a complicated series of transactions that put DMG and Mintz firmly in control of Valiant with roughly 98% ownership. During those 3 years, Plaintiff held a seat on Valiant's board, a position that was assumed, by Plaintiff, to continue upon the final closing 9 of the purchase, especially since Plaintiff initially brought the purchase opportunity to DMG and also 10 11 12 led the multi-year charge of acquiring full control of the asset. However, unbeknownst to Plaintiff, Mintz was secretly removing Plaintiff of his duties and authority within DMG by replacing Plaintiff from the board of Valiant with Eric Sullivan. Neither Mintz nor Mr. Sullivan informed Plaintiff of 13 his removal from the board of Valiant, rather, Plaintiff discovered this inadvertently while he was 14 reviewing changes to the final Valiant purchase agreement. Had Plaintiff not reviewed the purchase 15 documents, Plaintiff would otherwise never have known that he was being removed from the board 16 ofValiant. 17 18 19 I. Plaintiff Voiced His Concerns To Mintz And Was Subseguentlv Forced To Resign 94. Following each of the aforementioned instances, Plaintiff voiced his concerns to 20 Mintz regarding DMG's stock activity and his removal from the board of Valiant. Plaintiff took 21 extraordinary efforts to advise Mintz in good faith on what DMG needed to do to steer the ship in 22 the right direction. However, it became clear that Mintz only treated Plaintiff's "boy scout" mentality 23 as a hurdle to Defendants' ongoing activities when it became time to discuss Plaintiff's continued employment. Plaintiff realized that DMG's ability to hide behind Plaintiff's clean reputation on a 24 business to business level or business to government level was no longer possible. As a result, 25 Plaintiff was no longer motivated to fight certain battles for DMG or behave in a manner complicit 26 with the Defendants' actions, losing faith in DMG's mission that Plaintiff once fought hard to protect. 27 95. By the end of 2017, Plaintiff was due to negotiate the terms of his ongoing 28 -27COMPLAINT 1 employment with DMG. Plaintiff demanded that Mintz honor the terms of the Employment 2 Agreement and compensate Plaintiff following the successful launch of the IPO in 2014 and all of 3 the excellent work that Plaintiff performed on DMG's behalf. 4 negotiation with Plaintiff, Mintz instructed Plaintiff to speak directly to DMG's counsel at Venable. 5 6 7 8 Rather than engage in a friendly Mintz did add in a frustrated tone, "Don't worry. I'll take care of you!" Plaintiff responded to Mintz by stating that he too would have his counsel participate in the discussions, and told Mintz to expect a call. Mintz in turn replied by telling Plaintiff: "You do a deal directly with me and Venable." In other words, DMG would not speak to any lawyers acting on Plaintiffs behalf, and that if Plaintiff wanted to be compensated then Plaintiff would have to speak directly to DMG's attorneys at Venable 9 to discuss Plaintiffs compensation pursuant to the Employment Agreement. 10 11 12 13 14 15 96. Despite this unreasonable demand from Mintz, Plaintiff acquiesced and spoke to Venable without his own legal representation. As the conversation between Plaintiff and Venable progressed, it became clear that DMG would not pay Plaintiff either of his bonus following the DMG IPO or his performance bonuses. Plaintiff also made it clear to Mintz that the ongoing conversations regarding the Employment Agreement had been very taxing on Plaintiffs relationship with Mintz, and made it seem to Plaintiff as if Mintz did not really want Plaintiff in DMG' s way. As a result of 16 Plaintiff voicing his concerns about unpaid bonus compensation and detrimental working conditions, 17 Plaintiff was compelled to resign, and DMG ended Plaintiffs employment on February 23, 2018. 18 Defendants to date have failed to honor the IPO bonus provision in Plaintiffs Employment 19 Agreement. 20 97. Upon information and belief, part of the reason for Mintz forcing Plaintiff to resign 21 was due to Plaintiffs constant desire to address his ongoing concern over DMG's activities. Mintz 22 viewed Plaintiffs desire to seek answers concerning DMG's activities as an obstacle and a threat to 23 24 25 26 27 Defendants. Thus, as time drew closer to discuss Plaintiffs compensation under the Employment Agreement and terms for continued employment, Mintz was substantially motivated by a desire to move Plaintiff out of DMG's way and avoid any further compensation for Plaintiff (including any past-due compensation), thereby bringing an end to Plaintiffs employment. 98. After Plaintiffs employment with DMG ended, the stock price ofDMG continued to plummet. According to numerous financial analysts, much of the decline on DMG's share price was 28 -28COMPLAINT 1 linked to the public information concerning unpaid loans backed against stock shares, as well as other 2 factors such as Xiao's outstanding gambling debts. 99. 3 4 5 6 7 8 Or about June 2018, Plaintiff was informed that he would be named in a lawsuit32 by The Orange Happy Poet, Inc. and Neutrino Corp. as a co-defendant with Valiant, DMG, Mintz, and other individuals for allegations involving the Valiant purchase. Plaintiff argued to Mintz, in concert with DMG's outside counsel,33 that Mintz should buy-out the minority shareholder rather than face potential liabilities from Valiant's minority shareholders down the road. Mintz refused, which then led to the lawsuit filed by Neutrino Corp. on September 14, 201834 against Plaintiff and his codefendants, even though a) Plaintiff told Mintz how to avoid the lawsuit and do the right thing to 9 avoid such a liability, and b) more importantly, Plaintiff was removed from the board, unbeknownst 10 by Plaintiff, before DMG completed the Valiant purchase. 11 12 13 100. Plaintiff risked his reputation and credibility35 while fulfilling his duties as President ofDMG's Entertainment Motion Picture Group, and the General Manager ofDMG North America. Yet, towards the end of his term, the Founders were actively controlling Defendants' activities 14 without Plaintiffs knowledge in a deliberate attempt to conceal the activities from Plaintiff. Plaintiff 15 nevertheless learned of these activities towards the end of his tenure and addressed it with Mintz and 16 the other Defendants. When it came time to address Plaintiffs compensation, Defendants took 17 adverse action by bringing an end to Plaintiffs employment with the specific intent of avoiding 18 Plaintiffs bonus compensation pursuant to the Employment Agreement, as well as preventing 19 Plaintiff from interfering with Defendants' ongoing activities. Plaintiff now brings the following 20 causes of action as a result. 21 II I 22 32 A copy of the caption page for the draft complaint that was sent by The Orange Happy Poet, Inc. and which names Plaintiff as a co-defendant is attached hereto as Exhibit17. 33 24 34 At the time, Greenberg Traurig was representing DMG in the Valiant purchase. A complaint was ultimately filed by a different but similarly situated company, Neutrino Corp., on 25 September 14, 2018, Los Angeles Superior Court Case No. BC721321, which names Plaintiff individually as a defendant. A true and correct copy of the caption page in that case is attached hereto 26 as Exhibit18. 35 Plaintiff was portrayed in a negative light in a recent investigative article on DMG's wrongdoings 27 in Tencent's QQ publication. DMG India Media's 40 billion market value evaporation: major 28 shareholders crazy cash, QQ.com (Oct. 24, 2018), https://mp.weixin.qq.com/sNGLCKWsi45HMhUTGNbKyg. -29COMPLAINT 23 1 IV. 2 CAUSES OF ACTION 3 FIRST CAUSE OF ACTION 4 BREACH OF CONTRACT (Against All Defendants) 5 101. 6 7 Plaintiff incorporates by this reference Paragraphs 1 through 100 of this Complaint as though fully set forth herein. 102. 8 The Employment Agreement, which was drafted by DMG's general counsel, constitutes a binding written contract between Plaintiff and Defendants. 9 103. Under the terms of the Employment Agreement, Defendants promised that Plaintiff 10 '"shall be taken care of nicely' in the event of an initial public offering of DMG." The Employment 11 12 Agreement additionally provides that Plaintiff "shall be paid bonuses for his contributions to DMG .... " 13 14 104. contractual bonuses based on his performance as well as the successful launch ofDMG's IPO. 15 16 The Founders, on numerous occasions, reaffirmed that Plaintiff was entitled to his 105. Plaintiff has performed all of the terms, conditions and covenants required of him under the Employment Agreement, except as excused, prevented or waived as a result of Defendants' 1 7 conduct and material breach of such agreement. 18 106. Defendants have materially breached the Employment Agreement by failing to 19 compensate Plaintiff after the IPO, and failing to compensate Plaintiff in the form of performance 20 bonuses, despite demand therefor. 21 22 23 24 25 26 107. As a direct and proximate cause of Defendants' actions, Plaintiff has suffered general, consequential, and incidental damages in an amount to be proven at trial, but which Plaintiff believes are in excess of $3 0 million dollars. III III II I II I 27 II I 28 -30COMPLAINT SECOND CAUSE OF ACTION 1 2 BREACH OF COVENANT OF GOOD FAITH AND FAIR DEALING 3 (Against All Defendants) 4 5 6 7 8 9 108. Plaintiff incorporates by reference paragraphs 1 to 100 of this Complaint into this section as though fully set forth herein. 109. Plaintiff and Defendants entered into an Employment Agreement. 110. Within every employment contract is an implied covenant of good faith and fair dealing. See Foley v. Interactive Data Corp., 47 Cal.3d 654 (1988); Guz v. Bechtel Nat. Inc., 24 Cal. 4th 317 (2000). 111. The Employment Agreement, which was drafted by DMG's general counsel, 10 constitutes a binding written contract between Plaintiff and Defendants. 11 12 13 14 15 112. Under the terms of the Employment Agreement, Defendants promised that Plaintiff "'shall be taken care of nicely' in the event of an initial public offering of DMG." The Employment Agreement additionally provides that Plaintiff "shall be paid bonuses for his contributions to DMG .... " 113. The Founders, on numerous occasions, reaffirmed that Plaintiff was entitled to his 16 contractual bonuses based on his performance as well as the successful launch ofDMG's IPO. 17 114. Plaintiff has performed all of the terms, conditions and covenants required of him 18 under the Employment Agreement, except as excused, prevented or waived as a result of Defendants' 19 conduct and material breach of such agreement. 20 115. Defendants unfairly interfered with Plaintiffs right to receive the benefits of the 21 Employment Agreement by refusing to pay Plaintiff his bonus following the successful launch of 22 the DMG IPO, and failing to compensate Plaintiff in the form of performance bonuses. Instead, 23 Defendants spent all of DMG's assets frivolously and/or leveraged its assets against substantial 24 loans, which ultimately led to the crash ofDMG's stock price. 25 26 27 116. As a direct and proximate cause of Defendants' actions, Plaintiffhas suffered general, consequential, and incidental damages in an amount to be proven at trial, but which Plaintiff believes are in excess of $30 million dollars. 28 -31COMPLAINT 1 THIRD CAUSE OF ACTION 2 PROMISSORY ESTOPPEL 3 (Against All Defendants) 117. 4 5 though fully set forth herein. 118. 6 7 8 Plaintiff incorporates by this reference Paragraphs 1 through 100 of this Complaint as Defendants repeatedly represented and promised to Plaintiff that he would be compensated "nicely" after the IPO and the he would be "rich" like the Founders. The Employment Agreement provides that Plaintiff '"shall be taken care of nicely' in the event of an initial public offering of DMG." The Employment Agreement additionally provides that Plaintiff "shall be paid 9 bonuses for his contributions to DMG .... " Such promises were subsequently reflected in oral and 10 written statements to Plaintiff and his wife. 11 12 13 119. In reasonable and foreseeable reliance on Defendants' promises and conduct, Plaintiff entered into the Employment Agreement, began working full-time for DMG and continued to do so throughout the term of the Employment Agreement. 14 120. Defendants' promises to pay performance bonuses and take care of Plaintiff "nicely" 15 in the event of a DMG IPO were a material inducement for Plaintiff to enter into the Employment 16 Agreement and to work full-time for DMG throughout the term of the Employment Agreement. 17 Plaintiffs reliance upon Defendants' promises was foreseeable and reasonable. 18 19 121. As alleged hereinabove, Defendants have reneged on their promises to compensate Plaintiff in connection with the IPO and in accordance with Plaintiffs performance, 20 122. Defendants are therefore estopped from denying their obligations to compensate 21 Plaintiff in connection with the IPO and in the form of performance bonuses. 22 enforce DMG's promises as alleged hereinabove to avoid injustice to Plaintiff. 123. 23 24 25 26 It is necessary to As a direct and proximate cause of Defendants' actions, Plaintiff has suffered general, consequential, and incidental damages in an amount to be proven at trial, but which Plaintiff believes are in excess of $30 million dollars. II I II I 27 I II 28 -32COMPLAINT 1 FOURTH CAUSE OF ACTION 2 PROMISSORY FRAUD 3 (Against All Defendants) 4 5 6 7 8 124. Plaintiff incorporates by this reference Paragraphs 1 through 100 of this Complaint as though fully set forth herein. 125. As alleged hereinabove, the promises Defendants made to Plaintiff, including those made in the Employment Agreement and thereafter, were communicated to Plaintiff by the Founders. The promises were made: orally by Mintz to Fenton beginning in July 2012 and continuing until November 2013; in writing in various drafts of the Employment Agreement in November 2013 and 9 in the final version of the Employment Agreement dated November 18, 2013; in a letter by Mintz on 10 11 12 13 October 22, 2014; orally by Xiao on a flight to Las Vegas on or about May 2, 2015; and orally by Wu on or about July 12-13, 2015, January 30, 2016, April 23, 2016 and January 18, 2017. 126. Plaintiff is informed and believes that at the time Defendants made the above alleged promises to Plaintiff and entered into the Employment Agreement, such promises were falsely made 14 in that Defendants did not intend to fulfill the promises made to Plaintiff. 15 127. Plaintiff is also informed and believes that such false promises by Defendants were 16 made with the intent to induce Plaintiff to enter into the Employment Agreement, begin working full17 time for DMG and to continue to work full-time for DMG throughout the term of the Employment 18 Agreement. 19 128. As alleged hereinabove, in reliance on Defendants' promises, Plaintiff entered into 20 the Employment Agreement, began working full-time for DMG and continued to do so until DMG 21 terminated Plaintiff's employment in February of 2018. 22 129. At the time Plaintiff took such actions, he was ignorant of the falsity of Defendants' 23 promises, and, in the exercise ofreasonable diligence, could not have discovered its secret intentions. Had Plaintiff known such intentions, he would not have taken the actions alleged hereinabove. 24 130. Defendants failed to abide by their promises as alleged hereinabove. 25 131. As a direct and proximate result of the foregoing acts of Defendants, and Plaintiff's 26 reliance thereon, Plaintiff has suffered general, consequential, and incidental damages in an amount 27 to be proven at trial, but which Plaintiff believes are in excess of $30 million dollars. 28 -33COMPLAINT 1 2 132. The aforementioned acts of Defendants were willful, wanton, malicious, oppressive, and were undertaken with the intent to defraud Plaintiff of the compensation promised 3 to him under the Employment Agreement, and thereafter. 4 5 and As a result of Defendants' willful and intentionally fraudulent conduct, Plaintiff is entitled to exemplary and punitive damages in an amount sufficient to make an example of and punish Defendants for their wrongful acts. 6 FIFTH CAUSE OF ACTION 7 CONSTRUCTIVE DISCHARGE 8 (Against DMG ENTERTAINMENT, LLC; DMG ENTERTAINMENT HOLDING, LLC; DMG 9 MANAGEMENT SERVICES, INC.; NEW ASIA SUCCESS PARTNERS LIMITED; and 10 11 12 13 HEALTHY SOAR INVESTMENT LIMITED) 133. Plaintiff incorporates by this reference Paragraphs 1 through 100 of this Complaint as though fully set forth herein. 134. Plaintiff was employed by DMG, pursuant to the terms of the Employment 14 Agreement. 15 135. Plaintiff was subjected to working conditions that violate public policy, in that violate 16 public policy. In particular, Plaintiff was employed to serve as President of DMG's Entertainment 17 Motion Picture Group, and the General Manager of DMG North America. However, Defendants 18 wanted to avoid compensating Plaintiff according to the te1111s of his Employment Agreement, and 19 were actively concealing business activities from Plaintiff in such a manner that it impacted not only 20 his ability to substantially perform his role, but also impacted his reputation as a critical participant 21 in the relationship between U.S. and Chinese film industries. 22 23 24 25 26 27 136. Defendants intentionally created and/or knowingly permitted Plaintiff to endure working conditions whereby Plaintiff constantly had to cover for the Founders' activities, subject himself to Mintz's unreasonable working demands, risk his long-standing reputation and credibility in the industry, and continue working at a high level with no knowledge of whether or not he would be compensated as promised in the form of an IPO bonus or performance bonus. 13 7. These working conditions were so intolerable that a reasonable person acting in Plaintiffs position would have had no reasonable alternative except to resign. 28 -34COMPLAINT 1 2 3 138. Plaintiff was forced by Defendants to terminate his employment for reasons that violate public policy, and did in fact resign on or about February 2018. 139. Defendants' refusal to honor the Employment Agreement, in addition to the ongoing 4 practice of concealing DMG activities that made it impracticable for Plaintiff to perform his duties, 5 6 7 8 were a substantial factor in causing Plaintiffs harm. 140. As a direct and proximate result of the foregoing acts of Defendants, and Plaintiffs reliance thereon, Plaintiff has suffered general, consequential, and incidental damages in an amount to be proven at trial, but which Plaintiff believes are not less than $30 million dollars. 9 SIXTH CAUSE OF ACTION 10 11 12 RETALIATION IN VIOLATION OF CALIFORNIA LABOR CODE§ 1102.5 (Against DMG ENTERTAINMENT, LLC; DMG ENTERTAINMENT HOLDING, LLC; DMG MANAG EMENT SERVICES, INC.; NEW ASIA SUCCESS PARTNERS LIMITED; 0 13 14 15 16 HEALTHY SOAR INVESTMENT LIMITED; and DAN MINTZ) 141. Plaintiff incorporates by this reference Paragraphs 1 through 100 of this Complaint as though fully set forth herein. 142. California Labor Code§ 1102.5 (a) provides that "An employer shall not make, adopt, 17 or enforce any rule, regulation, or policy preventing an employee from disclosing information to a 18 government or law enforcement agency, where the employee has reasonable cause to believe that 19 the information discloses a violation of state or federal statute, or a violation or noncompliance with 20 a state or federal rule or regulation." 21 143. Labor Code § 1102.5 (b) provided that "An employer ... shall not retaliate against an 22 employer for disclosing information, or because the employer believes that the employer disclosed 23 or may disclose information, to a govenunent or law enforcement agency, to a person with authority 24 25 26 over the employee or another employee who has the authority to investigate, discover, or correct the violation of noncompliance ... if the employee has reasonable cause to believe that the information discloses a violation of state or federal statute, or a violation or noncompliance with a local, state, or federal rule or regulation, regardless of whether disclosing the information is part of the 27 employee's job duties." 28 -35COMPLAINT 1 144. Labor Code § 1102.5 (c) provides that "An employer shall not retaliate against an 2 employee for refusing to participate in an activity that would result in a violation of state or federal 3 statute, or a violation or noncompliance with a state or federal statute." Labor Code§ 1102.5 (a)- 4 (c) embodies important public policies against ani-whistleblower policies and retaliatory conduct. 5 6 7 8 145. Labor Code § 1104 provides that "[i]n all prosecutions ... the employer is responsible for the acts of his managers, officers, agents, and employees." 146. Upon information and belief, Defendants believed that Plaintiff had disclosed to a person with authority over Plaintiff that Defendants were performing reckless and questionable business practices that Plaintiff reasonably believed were violations of a state or federal statute. In 9 particular, Plaintiff informed Mintz and other executives that Defendants' actions might run afoul 10 11 12 13 14 of SEC regulations. 14 7. As a result of Plaintiffs actions, Defendants stripped Plaintiff of his involvement on the board of Valiant, and ultimately forced Plaintiff to resign. Defendants' actions violate Labor Code § 1102.5 (a)-(c) as well as the public policy embodied by the statute. 148. As a direct and proximate result of the foregoing acts of Defendants, and Plaintiffs 15 reliance thereon, Plaintiff has suffered general, consequential, and incidental damages in an amount 16 to be proven at trial, but which Plaintiff believes are not less than $30 million dollars. 17 18 SEVENTH CAUSE OF ACTION: 19 UNFAIR BUSINESS PRACTICES (CA BUS. & PROF. CODE §17200, et seq.) 20 (Against All Defendants) 21 22 23 24 25 26 149. Plaintiff incorporates by this reference Paragraphs 1 through 100 and Paragraphs 11 7 through 132 of this Complaint as though fully set forth herein. 150. The acts of Defendants that are laid out and alleged herein constitute unlawful, unfair, and/or fraudulent business practices and are unfair and wrongful conduct that is prohibited by California Business and Professions Code §17200, et seq. 151. Defendants engaged in unlawful, unfair, and/or fraudulent business practices, including but not limited to: promissory fraud and promissory estoppel. 27 152. Defendants did not engage in the above-described misconduct out of any sincere or 28 -36COMPLAINT 1 proper motive; rather, said misconduct was knowing, willful, and oppressive in that Defendants 2 made specific promises to Plaintiff regarding his compensation, upon which Plaintiff justifiably 3 relied to agree to the employ of DMG, and all the while Defendants had no intention to fulfill 4 those promises to Plaintiff. 5 6 7 153. As a direct and proximate result of the foregoing acts of Defendants, and Plaintiffs reliance thereon, Plaintiff has suffered general, consequential, and incidental damages in an amount to be proven at trial, but which Plaintiff believes are not less than $30 million dollars. 8 PRAYER FOR RELIEF 9 WHEREFORE, Plaintiff CHRISTOPHER FENTON prays for judgment as follows: 10 11 12 13 1. For damages according to proof at trial, but not less than $30 million; 2. For punitive damages according to proof at trial; 3. For civil penalties pursuant to Labor Code§ 1102.5(f) in an amount not less than $10,000; 14 4. For interest at the legal rate; 15 5. For costs of suit incurred herein; 16 6. Reasonable attorneys' fees pursuant to California Civil Procedure § 1021.5; and 17 7. For such other and further relief as the Court deems just and proper. 18 19 20 DATED: February 22, 2019 PIERCE LAW GROUP LL_--:..P By: ·c, Esq. 21 22 23 John R. Baldivia, Esq. Dhara J. Patel, Esq. Attorneys for Plaintiff CHRISTOPHER FENTON 24 25 26 27 28 -37COMPLAINT _ DEMAND FOR JURY TRIAL 1 2 Plaintiff CHRISTOPHER FENTON hereby demands a trial by jury. 3 4 DATED: February 22, 2019 PIERCE LAW GROUP LLP ~Jr]: 5 By: 6 7 8 David~ P eresq..-John R. Ba1divia,8 Privileged/Confidential Information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of the message to such person), you may not copy or deliver this message to anyone. In such case, you should destroy this message and kindly notify the sender by reply email. Please advise immediately if you or your employer does not consent to email or messages of this kind. Opinions.conclusions and other information in this message that do not relate to the official business of the DMG Group shall be understood as neither given nor endorsed by it. From: CHAYQLAW@aoLcom [mailto:CHAYOLAW@aol.com] Sent: Friday, November 15, 2013 12:25 PM To: timothy.shih@dmg-entertajnment.com Subject: SPA, etc. Timothy Chris forwarded to me as his father in law your drafts of the SPA and other agreement. He would kill me if he knew that I am reaching out to you without first discussing my concerns with him. I am concerned as to the agreements in several instances. Let me summarize and perhaps we can discuss and resolve all issues: 1. para 2 of the SPA references Fentori shall be compensated as further set forth in this Agreement. Nowhere is there further compensation and I am concerned that for tax purposes this will not be construed as an SPA but rather as an employment agreement with its concomitant tax consequences. I therefore suggest that the SPA be carefully drafted as an SPA only, and the other agreement be drafted as the employment agreement, etc. Happy to move employment stuff to the letter. Compensation is as laid out in the agreement, we are buying his shares (on the schedule he suggest in order to accommodate his taxes), but at the end of the day, that is the value he is getting out of this arrangement. Obviously there is an understanding between Dan and Chris regarding the IPO and potential bonuses, but in terms of his work at DMG, the 800K is what he's getting - it's structure this way for his benefit, not ours. TECHNICALLY THEY ARE BUYING THE SHARES OVER TIME TO HELP MY TAX SITUATION. FOR ME TO WORK FOR THEM. THE 800K IS REALLY l'M OK WITH THIS REASONING. 2. para 3 references an acceleration without further payment to Fenton. This is unfair and he must be paid in full unless he voluntarily and without force or duress quits. This is a requirement from Dan. Once again, the share buyout was structure for tax purposes for Fenton. If he leaves the company, then there is no more value to it from our perspective transferred and all shares should be over. From the beginning, we anticipated buying all of the shares in one transaction further now, with any payments as income to Chris. We are accommodating his ask to structure hence that is why it is structured this as equity, and this way. THEY CAN HAVE ALL THE SHARES AND THE ENTITY CAN COLLECT THE INCOME OWED TO THEM FROM THE DEALS BOOKED AFTER THE DEAL IS CLOSED AND SIGNED (OR AT LEAST THE MONEY CHANGES HANDS). THE REVENUE FROM PRE-EXISTING DEALS WILL GO TO ME AS IT WOULD'VE IF I REMAINED AT THE COMPANY. NOTHING WOULD CHANGE THERE. 3. para 6, needs to add back my indemnification language in addition to your insert! Chris needs to be indemnified for all past and future actions and not just "arising out of Fenton's actions or omisions during his employment" We were not responsible for his actions prior to the acquisition, in that circumstance so indemnity make much sense in our opinion. doesn't In terms of future actions, I think my language covers that- please let me know what I'm missing there. We can backdate indemnity to the first acquisition perhaps? THEY NEED TO INDEMNIFY ME FOR ANYTHING I WAS DOING ON BEHALF OF DMG PRE-ACQUISITION. I ALREADY HAVE A LAWSUIT AGAINST ME FOR LOOPER AND AN SEC SUBPOENA AND ISSUE - BOTH PREACQUISTION, AND ADDITIONALLY, THE SEC ISSUE NAMES H2F ENTERTAINMENT AS AN ENTITY IT IS INQUIRING ABOUT. ADDITIONALLY, THEY DID NAME MY ASSISTANTBRIAN MCCURLEYIN THAT INQUIRY TOO, SO HE SHOULD BE COVERED iF HE'S EVER BROUGHT IN TO IT AGAIN. 4. para 7, the SPA was never contingent upon "delivery of a proper business plan" and that should be eliminated Another requirement from Dan, which I spoke to Chris about. If there are issues with this, then Chris needs to speak to Dan directly. I TOLD HIM THAT THERE WOULD BE A MORE SPECIFIC BREAKDOWN OF THE GENERAL BREAKDOWN I GAVE IN THE PAPERWORKI FURNISHED LAST MONTH. l'D GIVE IT TO HIM IN APRIL. 5. para 9, the reps and warranties must be pared down as "f,h and i" are not true and I do not want a breach Why are they not true? I specifically reference the two actions we know about (SEC and Gradient FX). If there are other undisclosed liabilities, litigations or noncompliance with laws, that is a serious matter and we should discuss what they are right now. Further, I note that these are the same exact reps and warranties in the Stage 1 agreement.... THERE IS NOTHING ELSE l'M AWARE OF EITHER. NOT SURE IF WE NEED TO FIGHT THIS ONE. 6. para 10, the transaction was not "contingent" upon delivery of a business plan, nor, subject to a re-valuation Unfortunately, these terms have changed based on discussions between Dan and Chris, if there is an issue here, they need to discuss, I am merely trying to reflect what I understand to be the new business terms. HE'S CORRECT. 7. para 11 should be revised to provide that the accounting info will be fair and reasonable and not necessarily in the form required by DMG's accountants (Chris is not an accountant!) As you may or may not know, we are preparing for an IPO, and thus Chris must deliver financial statements in a format that allows us to be in compliance with our disclosure requirements. That is a minimum and something we need from a business perspective. Given that we are putting in the entire budget of this company, it seems to me that it is not that big of an ask to get properly formatted financial statements. He can hire someone if necessary. l'M FINE DOING THIS AS LONG AS IT ISN'T OUTSIDE THE REALM OF WHAT MY BUSINESS MANAGER ALREADY DOES FOR ME (IE. COSTS MORE). SHOULD BE FINE. As to the other agreement, we should discuss as Fenton has already indicated that the credits, etc might be an issue and he will not "utilize best efforts" but rather he will do all that he can to insure that the partners receive their credits Why would he not utilize his best efforts? Not sure what you are getting at here. I would hope he utilizes his best efforts in everything he does, not just at getting credits ... I WILL USE BEST EFFORTS WHICH IS BETTER THAN MOST ANYONE ELSE'S BEST EFFORTS. Thank you. Les PS do you want me to take a "stab" at drafting the agreements? Let's iron out these points first before modifying the agreements, otherwise it may delay the process. Also seems like there is a disconnect between what I've spoken to Dan, Chris and you about. There needs to be some clarity on what we want and need in order for this deal to close. To the extent some of these business points need to be discussed between Chris and Dan, we need to figure out an efficient way to hash it out. I THINK WE ARE OK. DOES THAT CLARIFY SOME STUFF ABOVE? Thanks again for your comments, let's keep the discussion going and finalize this as I understand Chris is in a rush. ____ Information from ESET NOD32 Antivirus, version of virus signature database 9050 (20131114) The message was checked by ESET NOD32 Antivirus. http://www eset com ____ Information from ESET NOD32 Antivirus, version of virus signature database 9050 (20131114) The message was checked by ESET NOD32 Antivirus. bttp·/fwww.eset.com ~hris Fenton Partner I H2F Entertainment I p: 310.275.3750 If: 310.275.3770 I e: fenton@h2f-entertajnmentcom I w: www h2f-entertainment com = EXHIBIT 6 EXHIBIT 6 AGREEMENT FOR PURCHASE AND SALE OF STOCK THIS AGREEMENT, reflects an agreement of the parties and shall be effective as of September 20, 2012, by and among Chris Fenton ("SELLER"), New Asia Success Partners Limited {"BUYER") and DMG (Hong Kong) Group Limited ("DMG") is made with reference to the following facts: A. SELLER has represented that he is the owner of 100% of the issued and outstanding stock ("Stock") of H2F Entertainment, Inc., a California corporation ("Corporation"). B. The parties desire by the terms of this Agreement to provide for the sale of four hundred and ninety nine (499) shares of SELLER'S Stock in Corporation to BUYER and certain representations and warranties, all as more particularly hereinafter set forth. The parties are entering into this Agreement after, and with reference to, their preliminary agreement to the Stage II terms, which terms shall be set forth in a separate agreement. NOW, THEREFORE, in consideration of the mutual covenants and conditions herein contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: ARTICLE I PURCHASE AND SALE OF STOCK 1.1 Sale and Transfer of Stock to BUYER. Subject to and upon the terms and conditions set forth in this Agreement, effective September 20, 2012, SELLER will transfer and convey four hundred and ninety nine (499) shares of Stock to BUYER for the purchase price of one million US dollars (USD1 ,000,000.00). 1.2 Consideration from BUYER at Closing. As full payment for the transfer of said 499 shares of Stock by SELLER to BUYER, BUYER shall pay on or shortly after September 20, 2012 cash in the sum of USD500,000.00 to SELLER and on November 1, 2012 cash in the sum of USD500,000.00 to SELLER ARTICLE II REPRESENTATIONS AND WARRANTIES OF SELLER SELLER represents and warrants the following: 2.1 Organization, Standing and Qualification of Corporation. Corporation is a corporation duly organized, validly existing and in good standing under the laws of the State of California. 2.2 Usage of Corporate Name. SELLER will cause Corporation to use the Trademark (as defined in Article 111 below) with respect to all business transactions and all marketing, advertising, publicity, credits or any other public or private information concerning the Corporation going forward from the date of this Agreement. Usage of any other name or moniker in connection with the Corporation's business or publicity activities going forward shall be subject to approval by DMG. 2.3 Authorization, etc. SELLER has full power and. authority to enter into this Agreement, the Stage II Agreement and all agreements contemplated herein (the "Agreements"), to perform its obligations hereunder and thereunder, and to carry out the transactions contemplated. 2.4 No Violation. None of (1} the execution and delivery of the Agreements, (ii) the performance by Corporation of its obligations under the Agreements, (iii) the consummation of the transactions contemplated by the Agreements, will (A) violate any provision of the Certificate of Incorporation or By-Laws of the Corporation, (B) violate, or be in conflict with, or constitute a default or breach of, or permit the termination of, any contract commitment, debt or obligatfons of the Corporation, which either individually or in the aggregate would have a material adverse effect on the operations, business, assets or financial condition of the Corporation. (C) violate any statute, law, judgment, decree, order, regulation or rule of any court or governmental authority to which the Corporation is subject or (D) result in the loss of any material license, privilege or certificate benefitting the Corporation. 2.5 Consents and Approvals. No consent, approval, or authorization of, or declaration filing, or registration with, any governmental or regulatory authority is required to be made or obtained by the Corporation in connection with the execution, delivery and performance of the Agreements by the Corporation. · 2.6 Litigation. To the best knowledge of the SELLER, no state of facts exists or has existed that would constitute grounds for the institution of any action, claim, proceeding or investigation, against the Corporation or against any properties or rights of the Corporation or the transactions contemplated by the Agreements. The Corporation is not subject to any judgment, order or decree entered in any lawsuit or proceeding that has materially adversely affected, or that can reasonably be expected to materially adversely affect, the transactions contemplated by the Agreements or the Corporation. 2.7 Taxes. All of the tax returns and reports of the Corporation or respecting the operations of the Corporation required by law to be filed on or before the date hereof have been duly and timely filed and all taxes shown as due thereon have been paid. There are in effect no waivers of any applicable statute of limitations related to such returns. The Corporation is not subject to any open audit in respect of its taxes, no deficiency assessment or proposed adjustment for taxes is pending, and Corporation has no knowledge of any liability, whether or not proposed, for any tax with respect to any period through the date hereof to be imposed upon any of its properties or assets. 2.8 Compliance with Laws. The Corporation is not in violation of, has not been charged with any violation of, or, to the best of its knowledge, is not under any investigation (other than the disclosed SEC action) with respect to any charge concerning any violation of any applicable laws. The Corporation is not in default with 2 respect to any order, write, injunction, or decree of any court, agency or instrumentality. 2.9 Absence of Undisclosed Liabilities. The Corporation does not have any undisclosed material debt, liability or obligation of any nature, whether known or unknown, or fixed, absolute, accrued, contingent or otherwise. 2.10 Disclosure. No representation or warranty by the Corporation in the Agreements contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make the statements in the Agreements not misleading. There is no fact known to the Corporation that materially adversely affects, or that might in the future materially adversely affect, the operations, business, assets, properties or condition, financial or otherwise, of the Corporation. ARTICLE Ill License to use DMG Trademark Subject to the terms and conditions set forth in this Agreement, OMG grants SELLER a non-exclusive, non-transferable, royalty-free license to use the trademark "DMG Entertainment" (the "Trademark") in connection with the Corporation's business. SELLER acknowledges and agrees that the rights granted to SELLER as a result of or in connection with this Agreement are license rights only, and nothing in this Agreement constitutes or shall be construed to be an assignment of any or all of DMG's rights in the Trademark. SELLER shall not at any time do or cause to be done any act or thing challenging, contesting, impairing, invalidating or tending to impair or invalidate any of OMG's rights in the Trademark or any registrations derived from such rights. SELLER acknowledges and agrees that DMG has. shall retain, and may exercise all rights and remedies available to DMG, whether derived from this Agreement, from statute, or otherwise, as a result of or in connection with SELLER'S breach of this Agreement or misuse of the Trademark. DMG may terminate SELLER's license to use the Trademark at any time, at DMG's sole discretion. BUYER and DMG agree to indemnify, defend and hold harmless SELLER for any and all actions, causes of action, liabilities, losses, costs, expenses, claims, penalties, etc. (to Include SELLER'S actual attorneys fees and costs) that SELLER may suffer or incur as a result of actions of BUYER and/or DMG. ARTICLE Ill CLOSING The transfer of the stock by SELLER to BUYER shall take place on September 20, 2012 ("Closing"). At the Closing, SELLER shall deliver to BUYER the certificate representing the shares and BUYER shall deliver at the Closing cash in the amount of USDS00,000.00 to SELLER and on November 1, 2012 another USD500,000.00 in cash to SELLER. ARTICLE IV GOVERNING LAW 3 This Agreement shall be construed in accordance with and shall be governed by the laws of the State of California. IN WITNESS WHEREOF, the parties to this Agreement have duly executed it on the date and year first above written. The parties acknowledge and agree that the value of the Stock may increase or decrease in the future. BUYER: New Asia SuccessPartners Limited 4 EXHIBIT 7 EXHIBIT 7 STOCK PURCHASE AGREEMENT This Agreement, reflects an agreement of the parties and shall be effective upon execution by November 18, 2013 yet backdated for issues related only to the initial stock purchase, to January 1, 2013, between and among Chris Fenton ("Fenton»), H2F Entertainment, Inc., a California Corporation (HH2Fn) and New Asia Success Partners Limited ("DMG"), and is made with reference to the following facts: A. DMG previously purchased four hundred ninety-nine (499) shares of H2F pursuant to the Agreement for Purchase and Sale of Stock dated September 20, 2012 between Fenton and DMG (the «First Stock PurchaseAgreement"). Said shares represented 49.9% of all existing shares of H2F. B. Fenton and DMG desire to set forth in this Agreement to provide for the sale by Fenton and purchase ~V DMG of the remaining five hundred one (501) shares of H2F over a five year period. C. Concurrently with the execution of this Agreement are additional terms agreed upon on a good faith basis in the Letter dated November 18, 2013 between Fenton and DMG, which terms are Incorporated herein by reference. Now, therefore, in consideration of the mutual covenants and conditions herein contained, and for other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: 1. Usage of Corporate Name. Pursuant to the First Stock Purchase Agreement, H2F agreed to use the Trademark (as defined in the First Stock PurchaseAgreement), and hereby agrees to continue to use the Trademark (as defined In the First Stock PurchaseAgreement) with respect to all businesstransactions and all marketing, advertising. publicity, credits or any other public or private information concerning the Corporation going forward from the date of this Agreement. Usage of any other name or moniker in connection with the Corporation's business or publicity activities going forward shall be subject to approval by DMG. 2. Acceleration of Share Purchase. Fenton acknowledges and agrees that the purchase price paid for the remaining H2F shares Is contingent on Fenton remaining a full-time employee of DMG and H2F. In the event that Fenton leaves or otherwise is no longer employed by DMG or H2F, all remaining shares shall be immediately transferred by Fenton to DMG with the total purchase price paid by such date being deemed to be the total purchase price for such shares. 3. Accounts Receivable. It Is understood and agreed that DMG did not purchase and shall not participate in the existing receivables of H2F for its pre-existing client and production deals. Such accounts receivable shall be paid to whom they are currently due. Notwithstanding the foregoing, It is hereby agreed that DMG shall receive a pro-rata interest in future revenues from H2F for client and production deals made after the execution date of this Agreement. Such pro-rata interest is equivalent to Fenton's share (which is 50% of client deals and 50% of any quote of $400,000 or less with respect to production deals) plus any overages above the $400,000.00 present quote on production deals. Therefore, if a producer fee is $500,000.00, OMG would receive $200,000.00 plus the overage of $100,000.00. The backend participation will follow the same formula and is 80% of the "full quote" of DMG or 50% of H2F's normal quote with DMG receiving an amount equivalent to Fenton's share plus any overage. 4. Indemnification. DMG to indemnify, defend and hold-harmless Fenton and any H2F employees and H2F, from any and all expense, cost, obligations, legal expenses, liabilities, fines, etc., relative to his or their actions (or an employee's actions at Fenton's direction) at any time on behalf of OMG and/or relative to his employment by DMG, as well as, for all licensing and contractual transactions related to OMG. Said Indemnification is to shield Fenton, H2Fand It's employees from any liabilitles, obligations fees, lawsuits, claims, investigations, regulatory infractions, suspicions or convictions of fraud and/or criminal activity either by private parties or governmental entities, both domestic and international, as a result of business practices and/or activities by DMG, its owners, and its employees, as well as, any liablllty (contractual or otherwise) for licensing transactions related to OMG. A request for Indemnification shall be submitted by Fenton to DMG by 10 working days written notice upon discovery of the action giving rise to the Indemnity claim. Such notice shall state the cause of action giving rise to Indemnity, the amount of indemnity and the reasons for claiming indemnity. Upon OMG's receipt of such suitable notice, DMG shall indemnify Fenton as soon as reasonably practicable. S. Stock Purchase. Subject to and upon the terms set forth in this Agreement, partlculartv Section 2 regarding Fenton's continued employment and section 7 regarding delivery of a proper business plan, Fenton shall transfer and sell his remaining shares in H2F and DMG shall purchase and receive such remaining H2F shares according to the following schedule (each, a "Closing"): a. 2013 -101 Shares: i. $320,000 July 18, 2013 (already paid) II. $500,000 November 15, 2013 Ill. Stock PurchaseCertificate issued by December 15, 2013 b. 2014 - 100 Shares: i. $400,000 March 1, 2014 II. $400,000 September 1, 2014 Iii. Stock PurchaseCertificate issued by September 1, 2014 c. 2015 - 100 Shares: i. $400,000 March 1, 2015 ii. $400,000 September 1, 2015 iii. Stock PurchaseCertificate issued by September 1, 2015 d. 2016-100 Shares: I. $400,000 March 1, 2016 Ii. $400,000 September 1, 2016 iii. Stock PurchaseCertificate issued by September 1, 2016 e. 2017-100 Shares: 1. $400,000 March l, 2017 ii. $400,000 September 1, 2017 iii. Final Stock PurchaseCertificate issued by September 1, 2017 Cashrelated to each such stock purchase shall be paid to the following bank account: Bank: Wells Fargo Name on account: Christopher W. Fenton REDACTED Phone Number: 310-550-2101 24 Hour Number: 800·869-3557 6. and Warranties of Fenton and H2f. As of the date of this Asreernent and the date of each stock purchase and payment: a. Organization. Standing and Qualification of Corporation. H2F represents and warrants that It Is a corporation duly organized, validly existing and in good standing under the laws of the State of California. b. Usage of Corporate Name. Fenton will cause H2F and H2F shall use the Trademark (as defined in the First Stock PurchaseAgreement) with respect to all businesstransactions and all marketing, advertising, publicity, credits or any other public or private information concerning H2F. Usage of any other name or moniker in connection with the H2F's business or publicity activities going forward shall be subject to approval bv DMG. c. Authorization. Fenton has full power and authority to enter into this Agreement and all agreements contemplated herein (the NAgreements"),to perforrn his obligations hereunder and thereunder, and to carry out the transactions contemplated. d. No Violation. None of (1) the execution and delivery of the Agreements, (ii) the performance by H2F of its obligations under the Agreements, (iii) the consummation of the transactions contemplated by the Agreements, will (A) Violate any provision of the Certificate of Incorporation or By-Lawsof H2F, (B) violate, or be In conflict with, or constitute a default or breach of, or permit the termination of, any contract commitment, debt or obligations of H2F, which either Individually or in the aggregate would have a material adverse effect on the operations, business, assets or financial condition of H2F, (C) violate any statute, law, Judgment, decree, order, regulation or rule of any court or governmental authority to which H2F is subject or (D} result in the loss of any material license, privilege or certificate benefitting H2F. e. Consents and Approvals. No consent, approval, or authorization of, or declaration filing, or registration with, any governmental or regulatory authority is required to be made or obtained by H2F in connection with the execution, delivery and performance of the Agreements by H2F. f. litigation. To the best knowledge of Fenton, except as previously disclosed, no state of facts exists or has existed that would constitute grounds for the institution of any action, dalm, proceeding or investigation, against H2F or against any properties or rights of H2F or the transactions contemplated by the Agreements. H2F is not subject to any judgment, order or decree entered in any lawsuit or proceeding that has materially adversely affected, or that can reasonably be expected to materially adversely affect, the transactions contemplated by the Agreements or H2F. g. Taxes.All of the tax returns and reports of H2F or respecting the operations of H2F required by law to be filed on or before the date hereof have been duly and timely flied and all taxes shown as due thereon have been paid. There are in effect no waivers of any applicable statute of limitations related to such returns. H2F is not subject to any open audit in respect of its taxes, no deficiency assessment or proposed adjustment for taxes is pending, and H2F has no knowledge of any llability, whether or not proposed, for any tax with respect to any period through the date hereof to be imposed upon any of its properties or assets. h. Compliance with Laws. H2F is not In violation of, has not been charged with any violation of, or, to the best of its knowledge, is not under any Investigation (other than the disclosed SEC, and Looper/GradientFX actions) with respect to any charge concerning any violation of any Representations applicable laws. H2F ts not In default with respect to any order, writ, injunction, or decree ·of any court, agency or instrumentality. i. j. Absence of Undisclosed liabilities. H2F does not have any undisclosed material debt, liability or obligation of any nature, whether known or unknown, or fixed, absolute, accrued, contingent or otherwise. Disclosure. No representation or warranty by H2F in the Agreements contains or will contain any untrue statement of a material fact or omits or will omit to state any material fact necessary to make the statements in the Agreements not misleading. There Is no fact known to H2F or Fenton that materially adversely affects, or that might In the future materially adversely affect, the operations, business, assets, properties or condition, financial or otherwise, of H2F. 7. Business Plan. Fenton agrees as a condition precedent to this Agreement to deliver a business plan with appropriate metrics for determining performance to OMG's satisfaction by March 31, 2014. Failure to provide an adequate business ptan to DMG by such date shall impact the valuation of H2F and in the event a revaluation Is necessary, the amounts payable for H2F shares after such date shall be modified according to such revaluation at that time. 8. Reports. Fenton shall ensure that H2F provides financial statements (ie: as prepared by H2F's business manager) setting forth all relevant financial information including profit, loss and expenses to OMG according to the schedule and In the format required by DMG's accounting department, but in any event at least quarterly and In an industry-standard accounting format. 9. Confidential Information. The parties agree that they and their representatives wlll hold in strict confidence the terms and conditions of, and existence of, this Agreement. 10. Other Agreements. Fenton not set forth herein. & DMG shall utilize their reasonable and best efforts to resolve all Issues 11. Governing Law. This Agreement shall be construed in accord a nee with and shall be governed by the laws of the State of California. ,e~s z. o'"#--- IN WITNESS WHEREOF, the parties to flrstabove written. ~eme~uly executed on the date and year CHRIS FENTON, as individual H2F Entertainm~ By:d'~~ CHRIS FENTON, as President New Asia Success Partners Limited By: EXHIBIT 8 EXHIBIT 8 Chris Fenton H2F Entertainment, Inc. 3431 Wesley Street Suite E Culver City, CA 90232 November 18, 2013 Re-: Other Arrangements Reference is hereby made to that certain Stock Purchase Agreement (the "Stock Purchase dated as of November 18, 2013, by and among Chris Fenton ("Fenton"). an individual and shareholder of H2F Entertainment, Inc. ("HlF'), and New Asia Success Partners Limited ("DMG"), as amended from time to time. Any capitalized term used but not otherwise defined herein shall have the meaning ascribed to such term in the Stock Purchase Agreement. Agreement"). Pursuant to the terms of the Stock Purchase Agreement, DMG shall acquire all of the shares of H2F held by Fenton according to the schedule set forth therein (the "Transaction"). In connection with the Transaction, we have set forth the following additional understandings and promises made between the parties: I. IPO and Bonuses. DMG agrees in good faith that Fenton "shall be taken care of nicely" in the event of an initial public offering of DMG. DMG also recognizes and agrees in good faith that Fenton shall be paid bonuses for his contributions to DMG, the amount of such bonuses to be determined by DMG. 2. Production Fees and Credits. Fenton shall utilize best efforts to increase the production fees paid to H2F. as evidenced by the recent BLOODMONEY deal with Alcon and the $1,000,000 fee Fenton negotiated. Said projects associated with such fees shall also increase the "credits" gained by Dan Mintz ("Mintz"), and, where also possible, Wu Bing and Peter Xiao as well as the visibility of DMG through increased production company credits. All credits shall be detennined at DMG's discretion and on a case-by-case basis. 3. Studio Deal. In the event a studio gives H2F and DMG a production deal, be that for Film and/or TV, the monies from said production deal(s) will go directly to H2F or DMO, in any manner as OMO detennines. Cowles's participation in such a production deal shall be similar to that of his full quote producer fee participation (20%) with 80% going to DMG. 4. Los Angeles Office. Fenton established an office in Los Angeles and signed a lease for which Fenton is personally liable for. The creative office space features approximately 2000 square.feet ofindoor and outdoor work space and has been customized, furnished. and tech configured to the level required to run a top notch media and entertainment business. The H2F budget shall be utilized to pay for the office lease and office expenses. S. Employment of Fenton. Fenton shall become a full-time employee of DMG with the titles of "President, DMG Entertainment Motion Picture Group" and "General Manager, DMG North America" and shall report directly to Dan Mintz ("Mintz") with priorities laid out by Mintz. Wu Bing and Peter Xiao. Fenton shall be compensated as further set forth in this AgreemenL The initial term of the Employment Agreement shall be for five (5) years, backdated to January 1, 2013 and continuing to December 31, 2017. Fenton 's duties shall include, but are not limited to, maintaining a strong boutique management/production company with respect to DMG which includes both maintaining a strong boutique client list and continually increasing the number of projects in development as producers, as well as pushing additional projects into production. The aforesaid focus is four-fold; (1) increasing the value of the DMG brand and awareness in the U.S. and international markets, (2) providing synergy between DMG and content creators, (3) further strengthening the bond between DMG and US Studio partners through a vibrant US domestic Hollywood operation, and (4) generating a steady but growing income stream from the US operations ofDMG to offset costs. 6. Expenses. It is the intention of the parties that the total net cost to DMG of both H2F's operations and Fenton shall be one million dollars ($1,000,000.00) annually (the "H2F Budget"), inclusive of taxes and insurance, which shall be divided as follows: (I) Eight hundred thousand dollars ($800,000) shall be paid according to the schedule set forth in the Stock Purchase Agreement for the share purehase and (2) two hundred thousand dollars ($200,000) shall be paid to H2F's bank account as set forth in Section 8 below. This H2F Budget shall cover all of H2F's business operations and expenses including, but not limited to: (1) compensation to Fenton, (2) compensation to Brian McCurley, (3) compensation to any other person hired by H2F, (4) office expenses including rent, utilities, phone, internet, office supplies and equipment, office furnishings and (5) business expenses including reimbursable transportation. meals, entertainment, etc. If the H2F Budget is unable to cover these expenses, then Fenton shall then be responsible for covering said deficit (up to, but not to exceed) from accounts receivable booked prior to the date of this Agreement. Any expenses outside the scope of H2F's operations (including Mintz• expenses} shall be handled separately by DMG with H2F's and Fenton's cooperation. but in the interest of clarity, are not included in the calcuJation of expenses for purposes of this Section. 7. _ Confidential Information, The parties agree that they and their representatives will hold in strict confidence the terms and conditions of, and existence of, this Agreement. 8. H2F Operational Budget. Annual Cashtlow Schedule payable to the H2F primary CNB account: a. 2013 i. $180,000 July 18, 2013 (already paid) b. 2014 i. $100,000 ii. $100,000 c. 2015 i. $100,000 ii. $100,000 d. January JS, 2014 July 15, 2014 January 15, 2015 July 15, 2015 2016 i. ii. e. 2017 i. ii. $100,000 $100,000 January IS, 2016 July 15, 2016 $100,000 $100,000 January 15,2017 July IS,2017 Cash related to the H2F Operational Budget shall be paid to the following bank account: Bank: City National Bank Name on Account: H2F Entertainment, Inc. REDACTED Address: City National Bank 400 N. Roxbury Drive Beverly Hills, Ca. 90210 213-382-4262 9. Chris Cowles. Chris Fenton shall negotiate a formal working relationship with Chris Cowles and DMO/H2F going forward which shall be patterned after the November 2013 emails to Timothy Shih, Esq. enumerating the compensation to Cowles. To indicate your agreement with the foregoing, please execute and return a copy of this letter agreement to OMO. Very truly yours, New Asia Success Partners Limited By:~~~~~~~~~~~~Name: Title: Agreed and Consented to: Chrbei By: C?'lr: . e1ti. ~ H2F Entertainm~ By: (!/i. ~-1---I Name: Chris Fenton Title: President - EXHIBIT 9 EXHIBIT 9 REDACTED Attachments: Employmenteontract.pdf StockPyrchase.pdf From: Chris Fenton Date: Wednesday, December 4, 2013 at 12:26 PM To: Jennifer Fenton Subject: Fwd: H2F Acquisition - Final Documents ily Begin forwarded message: From: Chris Fenton Subject: Re: H2F Acquisition - Final Documents Date: December 4, 2013 12:23:31 PM PST To: Dan Mintz , Tim Shih Cc: Chris Fenton , "CHAYOLAW@aoLcom Les Chaya" Executed Documents attached. Very exciting! Here's to a fantastic future! ........ CF On Dec 3, 2013, at 8:17 PM, Dan Mintz wrote: OK from my side! OM Dan Mintz CEO DMG Entertainment 25th Floor, Tower A, 25 Chao Yang Men Wai St. Beijing, PRC 100020 Phone +86 10 8565 3333 ext. 6157 Email dan mintz@DMG-Entertainmentcom YfNW DMG-Entertainment.com From: Chris Fenton Date: Wednesday, December 4, 2013 3:41 AM To: Timothy Shih , Dan Cc: Chris Fenton Subject: Re: H2F Acquisition - Final Documents Dan, as per our conversation earlier today, we believe the agreements are ready to sign. Please advise. Very exciting! Best, CF On Dec 3, 2013, at 12:36 AM, Timothy Shih wrote: Still need's Dan's final sign off, but I'm good with them at this point. Timothy Y. Shih (.~.':J\15t;) General Counsel DMG Entertainment 25th Floor, Tower A, CHAOWAIMEN, 26 Chaoyangmenwai Street Chaoyang District, 100020, Beijing China Mobile: +86 18601328700 Email: timothy shih@dmg-entertajnment com Privileged/Confidential Information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of the message to such person), you may not copy or deliver this message to anyone. In such case, you should destroy this message and kindly notify the sender by reply email. Please advise immediately if you or your employer does not consent to email or messages of this kind. Opinions.conclusions and other information in this message that do not relate to the official business of the DMG Group shall be understood as neither given nor endorsed by it. From: Chris Fenton [mailto:chris.fenton@dmgentertaioment. com] Sent: Tuesday, December 03, 2013 10:22 AM To: Timothy Shih Cc: Chris Fenton; CHAYOLAW@ao!.com Les Chaya Subject: Re: H2F Acquisition - Final Documents I looked thru and they seem I should sign work on this. the documents with Les today, ready to sign. Please advise if them now. Thanks for your hard Best, CF Chris Fenton President, DMG Entertainment Motion Picture Group GM, DMG North America Los Angeles Office: 3431 Wesley Street Suite E Culver City, CA 90232 Phone 310-275-3710 Fax Cell 310-275-3770 310-717-0481 chds fenton@dmg-enterta,oment com bttp"{lwww dmg-entertajnment com Beijing Office: Level 25 Tower A Chaowaimen 26 Chaoyangmenwai Street Chaoyang District Beijing Phone (86)10-85653333 Fax (86)10-85653555 ~hris Fenton Partner I H2F Entertainment Ip: 310.275.3750 If: entertajnment com 310.275.3770 I e: fenton@h2f-entertainment com I w: www h2f- EXHIBIT 10 EXHIBIT 10 REDACTED Attachments: EmploymentContract[1 ].pdf; StockPurchase[1 ].pdf; H2Flega1Documents[1 ][2].pdf REDACTED From: Date: Tuesday, December 10, 2013 at 7:30 PM To: Chris Fenton Subject: Re: Fwd: H2F Acquisition - Final Documents Hi Chris, We delivered the bank instruction yesterday, so it's expected that the bank shall make the wire today. Cheers, Michelle Qu Finance Director DMG DMG Level 25, Tower A, 26 Chaoyangmenwai Street, 100020 tllPB r'191-;;l::tti26~A~25Jii, 100020 Beijing ~t.* Phone (8610)85653333*2888 ~~ (8610)85653333*2888 Fax (8610)85653555 fif~ (8610)85653555 Email michelle.qu@dmgmedia.com illB11t-tt!!i.lt michelle.qu@dmgmedia.com iJfflG ®:#-J... ?? , Chris Fenton Wm. ~H ; 2013-12-1108:37 Fwd: H2F Acquisition - Final Documents please give me an update today when you get a moment. thank you very much. best, CF 1 Begin forwarded message: From: Dan Mintz Subject: Re: H2F Acquisition - Final Documents Date: December 9, 2013 8:11 :24 AM PST To: Cc: Chris Fenton , Tim Shih , Michelle, Pleasemake sure the wire goes out to Chris ASAP. Thx, DM Dan Mintz CEO DMG Entertainment 25th Floor, Tower A, 25 Chao Yang Men Wai St. Beijing, PRC 100020 Phone +8610 8565 3333 ext. 6157 Email dan.mintz@DMG-Entertamment.com www.DMG-Entertainment.com Privileged/Confidential Information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of the message to such person), you may not copy or deliver this message to anyone. In such case, you should destroy this message and kindly notify the sender by reply email. Please advise immediately if you or your employer does not consent to email or messages of this kind. Opinions.conclusions and other information in this message that do not relate to the official business of the DMG Group shall be understood as neither given nor endorsed by it. From: Chris Fenton Date: Monday, December 9, 2013 11:14 PM To: Cc: Tim Shih ,,Dan Mintz Subject: Re: H2F Acquisition - Final Documents Thanks Michelle. Just please keep in mind that the holidays are coming up here and I need the wire to post by end of the month. Reallyappreciate you staying on top of this. Thanksso much. Best, CF On Dec 8, 2013, at 11:26 PM, michelle.qu@dmgmedia.com wrote: I haven't received any chop application for the agreement, but I heard that someone is coordinating for Bing to prove the payment. Once Finance Dept get the approved payment application form, we will make the wire. Regards, Michelle Qu db9 Finance Director DMG DMG Level 25, Tower A, 26 Chaoyangmenwai Street, 100020 tilPB r'J?J-;i<;:l!i26~A~25~. Beijing 2 100020 Phone (8610)85653333*2888 "§ljli (8610)85653333*2888 Fax(8610)85653555 j'I, ;11!; (8610)85653555 Email michelle.qu@dmqmediacom ill~itr-:1:!!l:l;ll: michelle gu@dmgmedia.com Chris Fenton 2013-12-0811:00 =·-·· ___:,._,··--,: - --,~ _,_......_..... - .. !&#-A •"michelle.gu@dmgmedia.com" :el>i! ::tM Fwd: H2F Acquisition - Final Documents I ·-- Michelle, What's the status on this? Thanks so very much. Best, CF Sent from my iPhone Begin forwarded message: From: "Timothy Shih" Date: December 5, 2013, 12:09:31 AM PST To: , Cc: "'Chris Fenton"' Subject: FW: H2F Acquisition- Final Documents Michelle, H2F documents have been finalized, attached are scanned versions of Chris's signature and Dan's signature will be delivered to you shortly for chop. I will also send up the payment form. Pleaselet me know if you have any issues. Best, Tim Timothy Y. Shih (~~Ut) General Counsel DMG Entertainment 25th Floor, Tower A, CHAOWAIMEN, 26 Chaoyangmenwai Street Chaoyang District, 100020, Beijing China Mobile: +86 18601328700 Email: timothy.shih@dmg-entertainment.com Privileged/Confidential Information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of the message to such person), you may not copy or deliver this message to anyone. In such case, you should destroy this message and kindly notify the sender by reply email. Please advise immediately if you or your employer does not consent to email or messages of this kind. Opinions.conclusions and other information in this message that do not relate to the official business of the DMG Group shall be understood as neither given nor endorsed by it. From: Chris Fenton [mailto:chris.fenton@dmq-entertainment.com] Sent: Thursday, December05, 2013 4:24 AM To: Dan Mintz; Tim Shih 3 Cc: Chris Fenton; CHAYOL.AW@aol.com Les Chaya Subject: Re: H2F Acquisition - Final Documents Executed Documents attached. Very exciting! Here's to a fantastic future!.+ .. CF ____ Information from ESET NOD32 Antivirus, version of virus signature database 9132 (20131204) The message was checked by ESET NOD32 Antivirus. http :Uwww.eset.com ____ Information from ESET NOD32 Antivirus, version of virus signature database 9132 (20131204) The message was checked by ESET NOD32 Antivirus. http://www.eset.com On Dec 3, 2013, at 8:17 PM, Dan Mintz wrote: OK from my side! DM Dan Mintz CEO DMG Entertainment 25th Floor, Tower A, 25 Chao Yang Men Wai St. Beijing, PRC 100020 Phone +86 10 8565 3333 ext. 6157 Email dan.mintz@DMG-Entertainment.com www DMG-Entertainment com From: Chris Fenton Date: Wednesday, December4, 2013 3:41 AM To: Timothy Shih ,Dan Cc: Chris Fenton Subject: Re: H2FAcquisition - Final Documents Dan, as per our conversation earlier today, we believe the agreements are ready to sign. Please advise. Very exciting! Best, CF On Dec 3, 2013, at 12:36 AM, Timothy Shih wrote: Still need's Dan's final sign off, but I'm good with them at this point. Timothy Y. Shih (~WI.~) 4 General Counsel DMG Entertainment 25th Floor, Tower A, CHAOWAIMEN, 26 Chaoyangmenwai Street Chaoyang District, 100020, Beijing China Mobile: +86 18601328700 Email: timothy.shih@dmq-entertainment.com Privileged/Confidential Information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of the message to such person), you may not copy or deliver this message to anyone. In such case, you should destroy this message and kindly notify the sender by reply email. Please advise immediately if you or your employer does not consent to email or messages of this kind. Opinions.conclusions and other information in this message that do not relate to the official business of the DMG Group shall be understood as neither given nor endorsed by it. From: Chris Fenton [mailto:chris.fenton@dmg-entertainment.com] Sent: Tuesday, December 03, 2013 10:22 AM To: Timothy Shih Cc: Chris Fenton; CHAYOLAW@aol.com Les Chaya Subject: Re: H2F Acquisition - Final Documents I looked thru the documents with Les today, and they seem ready to sign. I should sign them now. Thanks for your hard work on this. Best, Please advise if CF Chris Fenton President, DMG Entertainment Motion Picture Group GM, DMG North America Los Angeles Office: 3431 Wesley Street Suite E Culver City, CA 90232 Phone 310-275-3710 Fax 310-275-3770 Cell 310-717-0481 chris. fenton@dmg-entertainment.com htlp:/twww.dmg-entertainment.com Beijing Office: Level 25 Tower A Chaowaimen 26 Chaoyangmenwai Street Chaoyang District Beijing Phone (86)10-85653333 Fax (86)10-85653555 Privileged/Confidential Information may be contained in this message. If you are not the addressee indicated in this message (or responsible for delivery of the message to such person), you may not copy or deliver this message to anyone. In such case, you should destroy this message and kindly notify the sender by reply email. Please advise immediately if you or your employer does not consent 5 to email or messages of this kind. Opinions,conclusions and other information in this message that do not relate to the official business of the DMG Group shall be understood as neither given nor endorsed by it. Chris Fenton President, DMG Entertainment Motion Picture Group GM, DMG North America Los Angeles Office: 3431 Wesley Street Suite E Culver City, CA 90232 Phone 310-275-3710 Fax 310-275-3770 Cell 310-717-0481 chris.fenton@dmg-enterta1nment.com http·/Jwww.dmg-entertainment.com Beijing Office: Level 25 Tower A Chaowaimen 26 Chaoyangmenwai Street Chaoyang District Beijing Phone (86) 10-85653333 Fax (86) 10-85653555 i:lfflG i:lfflG Chris Fenton President, DMG Entertainment Motion Picture Group GM, DMG North America Los Angeles Office: 3431 Wesley Street Suite E Culver City, CA 90232 Phone 310-27 5-371 o Fax 310-275-3770 Cell 310-717-0481 chris.fenton@dmg-entertainment.com http://www.dmg-entertainment.com Beijing Office: Level 25 Tower A Chaowaimen 26 Chaoyangmenwai Street Chaoyang District Beijing Phone (86) 10-85653333 Fax (86)10-85653555 6 EXHIBIT 11 EXHIBIT 11 SHARE PURCHASE AGREEMENT THIS SHARE PURCHASE AGREEMENT (this "Agreement") is made and entered into as of March 27, 2014 by and between New Asia Success Partners Limited (''Seller") and Healthy Soar Investment Limited ("Buyer"). WHEREAS, Buyer desires to purchase froms Seller, and Seller desires to sell to Buyer, on the terms and subject to the conditions of this Agreement, 600 ordinary shares, par value US$1.00 per share (the "Shares") ofH2F Entertainment, Inc., a California corporation (the "Company"); WHEREAS, Seller is a party to the Agreement for Purchase and Sale of Stick dated September 20, 2012 between Chris Fenton ('~Fenton"),an individual, and Seller (the "First Stock Purchase Agreement") and the Stock Purchase Agreement dated November 18, 2013 between and among Fenton, the Seller and the Company (the "Second Stock Purchase Agreement" and, together with the First Stock Purchase Agreement, the "Financing Documents"); NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, the parties hereto agree as follows: ARTICLE I PURCHASE AND SALE OF SHARES SECTION 1.1. Sale and Purchase of Shares. Subject to the satisfaction or waiver of the conditions set forth in this Agreement, Seller hereby agrees to sell, transfer and convey to Buyer, and Buyer hereby agrees to purchase from Seller, the Shares, free and clear of all adverse claims, liens, encumbrances, security interests, title defects, or other restriction or limitation (collectively, "Liens"), other than those created by Buyer or pursuant to this Agreement. SECTION 1.2. Payment of Purchase Price. The aggregate purchase price for the Shares is US$600.00 (the "Purchase Price"). SECTION 1.3. Closing. (a) The Closing of the purchase and sale of the Shares is to be held at Hong Kong (the "Closing") on such a date as agreed between the parties (the "Closing Date"). (b) At the Closing, Buyer shall deliver to Seller a cashier's check or wire transfer in the amount of the Purchase Price, and Seller shall deliver to the (i) Buyer a copy of a duly executed instrument of transfer of the Shares in favor of Buyer, (ii) a copy of the register of members of the Company, which is updated according to board resolutions of the Company approving the transfer of the Shares and reflects the transfer of the Shares from Seller to Buyer as of the Closing Date and gives effect to Buyer's acquisition of the Shares, and (iii) duly executed joinder agreements to the Financing Documents countersigned by the Company (provided such joinder agreements are duly executed by Buyer and delivered to Seller). (c) As promptly as practicable after the Closing, Seller shall deliver to Buyer a share certificate representing Buyer's ownership of the Shares. REPRESENTATIONS ARTICLE II AND WARRANTIES OF THE SELLER Seller represents and warrants to Buyer as follows: SECTION 2.1. Organization and Authority. Seller is duly organized, validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction of its formation. Seller has all requisite power and authority to execute and deliver this Agreement and perform its obligations under this Agreement and to consummate the transactions contemplated hereby, including, without limitation, to own, hold, sell, transfer and convey pursuant to this Agreement, the Shares. Toe execution, delivery and performance of this Agreement have been duly and validly authorized by Seller, and all necessary action on behalf of Seller has been taken to make this Agreement a valid and binding obligation of Seller, enforceable against Seller in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium, receivership or similar laws affecting creditors' rights generally and by general principles of equity (whether considered at law or in equity). SECTION 2.2. No Conflicts. The execution and delivery by Seller of this Agreement and the performance by Seller of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result in a violation or breach of: (a) any of the terms, conditions or provisions of the organizational documents of Seller; or (b) any term or provision of any law, statute, order, judgment or decree applicable to Seller or any of its assets or properties. SECTION 2.3. Consents. No consent, approval, permit, license, order or authorization of, filing with, or notice or other actions to, with or by any local or foreign governmental authority or any other person, is necessary, on the part of Seller to effect the transactions contemplated by this Agreement or to authorize the execution, delivery and performance by Seller of this Agreement. SECTION 2.4. Ownership of Shares. As of the date hereof, Seller is the sole owner of, and has good and valid title to the Shares free and clear of any Liens. Seller has, as of the date hereof, full and unrestricted power to sell, assign, transfer and deliver the Shares held by it to Buyer in accordance with the terms of this Agreement, and good and valid title to the Shares will be delivered to Buyer upon sale pursuant hereto free and clear of all Liens, other than Liens created by Buyer or pursuant to this Agreement. REPRESENTATIONS ARTICLE III AND WARRANTIES OF THE BUYER Buyer represents and warrants to Seller that: SECTION 3.1. Organization and Authority. 2 Buyer is duly organized, validly existing and, to the extent applicable, in good standing under the laws of the jurisdiction of its formation. Buyer has all requisite corporate or other power and authority to execute and deliver this Agreement and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery and performance of this Agreement have been duly and validly authorized by Buyer, and all necessary corporate or other action on behalf of Buyer has been taken to make this Agreement a valid and binding obligation of Buyer, enforceable against Buyer in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, insolvency, fraudulent conveyance, moratorium, receivership or similar laws affecting creditors' rights generally and by general principles of equity (whether considered at law or in equity). SECTION 3.2. No Conflicts. The execution and delivery by Buyer of this Agreement and the performance by Buyer of its obligations under this Agreement and the consummation of the transactions contemplated hereby will not conflict with or result in a violation or breach of: (a) any of the terms, conditions or provisions of the organizational documents of Buyer; or (b) any term or provision of any law, statute, order, judgment or decree applicable to Buyer or any of its assets or properties. SECTION 3.3. Consents. No consent, approval, permit, license, order or authorization of, filing with, or notice or other actions to, with or by any local or foreign governmental authority or any other person, is necessary, on the part of Buyer to effect the transactions contemplated by this Agreement or to authorize the execution, delivery and performance by Buyer of this Agreement. SECTION 3.4. Available Funds. Buyer has sufficient funds unconditionally available to it to pay the Purchase Price. ARTICLE IV COVENANTS SECTION 4.1. Restrictions. Buyer understands and agrees that by purchasing the Shares it will acquire certain rights and obligations pursuant to the organizational docwnents of the Company (as amended or restated from time to time) and Buyer hereby agrees to comply with all covenants and restrictions contained therein. ARTICLEV MISCELLANEOUS PROVISIONS SECTION 5 .1. Notices. All notices and other communications provided for herein shall be dated and in writing and shall be deemed to have been duly given when delivered, if delivered personally or sent by registered or certified mail, return receipt requested, postage prepaid and when received if delivered otherwise, to the party to whom it is directed: If to Buyer, to: 3 Address: Room D, 10/F Tower A, Billion Center, 1 Wang Kwong Road Kowloon Bay, KL . Attention: Liu Yang Cell: 86-18601328987 If to Seller, to: Address: Start Incorp Services Limited of Start Chambers, Wickham's Cay II, P. 0. Box 2221, Road Town, Tortola, British Virgin Islands. Attention: Wang Shulan Cell: 86-18601328981 SECTION 5.2. Further Assurances. The parties hereto shall from time to time, including, without limitation, after the date hereof, execute and deliver all such further documents and do all acts and things as the other party may reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement. SECTION 5.3. Complete Al!reement; Counterparts. This Agreement constitutes the entire agreement and supersedes all other agreements and understandings, both written and oral, among the parties or any of them, with respect to the subject matter hereof. This Agreement may be executed by any one or more of the parties hereto in any number of counterparts, each of which shall be deemed to be an original, but all such counterparts shall together constitute one and the same instrument. SECTION 5.4. Amendments; No Waiver; Remedies. This Agreement may not be amended, altered or modified except by written instrument duly executed by all the parties hereto. Any agreement on the part of any party to waive (i) any inaccuracies in the representations and warranties contained herein by any other party or in any other document delivered hereto by any party, or (ii) compliance with any of the agreements, covenants or conditions contained herein, shall be valid only if set forth in an instrument in writing signed on behalf of such waiving party. No such waiver shall constitute a waiver of, or estoppel with respect to, any subsequent or other inaccuracy, breach or failure to strictly comply with the provisions of this Agreement. No failure on the part of a party to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof; and no single or partial exercise of any right hereunder shall preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. SECTION 5.5. Binding Effect: Persons Benefiting. This Agreement shall be binding upon and inure to the benefit of Seller and Buyer and their respective successors and permitted assigns; provided, however, that, except as otherwise expressly permitted under this Agreement, no party hereto shall have the right to assign its rights hereunder or any interest herein without the prior written consent of the other parties hereto, except that either party may assign.its rights and obligations hereunder, in whole or in part, to another entity that is wholly-owned, directly or indirectly, by such party or wholly-owns, directly or indirectly, such party; provided, that such party shall not be relieved of its obligations under this Agreement. Nothing in this Agreement is intended or shall be construed to confer upon any person other than the parties hereto and their respective successors and permitted assigns any right, remedy or claim under or by 4 reason of this Agreement or any part hereof. SECTION 5.6. Governing Law~ Consent to Jurisdiction. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the Hong Kong Special Administrative Region of People's Republic of China, without regard to principles of conflicts of law. In any legal action, proceeding, dispute, controversy or claim arising out of or relating to this Agreement, or the interpretation, breach, termination or validity thereof, the parties irrevocably submit to the exclusive jurisdiction of the courts of Hong Kong and irrevocably waive any objection to any proceedings in such courts whether on the grounds that the any proceedings have been brought in an inconvenient forum or otherwise. SECTION 5. 7. Headings. The headings in this Agreement are for convenience ofreference only and shall not limit or otherwise affect the meaning of terms contained herein. Unless the context of this Agreement otherwise requires, (i) words of any gender shall be deemed to include each other gender; (ii) words using the singular or plural number shall also include the plural or singular number, respectively; and (iii) references to "hereof," "herein," "hereby" and similar terms shall refer to this entire Agreement unless the context otherwise requires. SECTION 5.8. Severabilitv. Any term or provision of this Agreement which is invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction, be ineffective to the extent of such invalidity, iUegality or unenforceability without rendering invalid, illegal or unenforceable the remaining terms and provisions of this Agreement or affecting the validity, legality or enforceability of any of the terms or provisions of this Agreement in any other jurisdiction; provided, that the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. If any provision of this Agreement is so broad as to be unenforceable, the provision shall be interpreted to be only so broad as is enforceable, subject to the foregoing proviso. SECTION 5.9. Termination. This Agreement may be terminated at any time prior to the Closing Date by mutual written consent of Seller and Buyer. [Signature Page Follows] 5 • IN WI1NESS WHEREOF, the parties hereto have executed this Agreement as of the date set forth in the first paragraph hereof. · HEALTHY SOAR INVESTMENT LIMITEDI By: ~ Name: Title: NEW ASIA SUCCESS PARTNERS LIMITED By:_~-"--)g_-Jtv_/_ Name: Title: 6 EXHIBIT 12 EXHIBIT 12 ASSIGNMENT AND ASSUMPTION AGREEMENT TIIlS ASSIGNMENT AND ASSUMPTION AGREEMENT (the .. Assignment"), effective as of April D, 2014, the ("Effective Date"), is entered into by and among: Chris Fenton, an individual ("Fenton"); H2F Entertainment, Inc., a California Corporation ("H2F"); New Asia Success Partners Limited, a British Virgin Islands Corporation ("DMG"); and Healthy Soar Investment Limited, a Hong Kong Corporation ("Healthy Soar") WHEREAS, Fenton, H2F and DMG are parties to the agreements identified below (collectively, "Financing Documents"): Agreement for Purchase and Sale of Stock, dated September 20, 2012 Stock Purchase Agreement, dated September 18, 2013 WHEREAS, the parties desire to assign the Financing Documents to Healthy Soar, in connection with the restructuring of its business, which shall include the deregistration of New Asia Success Partners Limited; NOW, TIIEREFORE, the parties agree as follows; 1. Assignment 1.1 DMG hereby assigns, and Healthy Soar hereby accepts, the assignment of all ofDMG's right, title and interest in and to the Financing Documents. 1.2 DMG hereby delegates, and Healthy Soar hereby agrees to assume, the performance obligations and duties of all the terms, conditions and covenants to be performed by DMG under the Financing Documents. 1.3 Subject to the terms and conditions of this Assignment, Fenton and H2F hereby consent, under any relevant assignment provisions in the Financing Documents or otherwise, to the assignment of the Financing Documents to Healthy Soar and agree that all duties and obligations of Fenton and H2F due and owing to DMG under the Financing Documents shall henceforth be due and owing to Healthy Soar. 2. This Assignment shall become effective as of the Effective Date. Healthy Soar shall be liable for any breach of the Financing Documents. 3. Except as expressly set forth in this Assignment, the Financing Documents remain in full force and effect without modification. The terms and conditions of this Assignment shall not be modified or amended except by a writing signed by authorized representatives of Fenton, H2F, DMG and Healthy Soar. IN WI1NESS WHEREOF, the parties hereto have caused this Assignment to he executed as of the Effective Date. H2F Entertainm~. By: e:£7£= flc,Jr.-r- Title: ;j;J,.!,~'.L-, { Title: New Asia Success Partners Limited Healthy Soar Investment Limited By:. Title: _ ~--------- By: Title: _ _ IN WITNESS WHEREOF, the parties hereto have caused this Assignment to be executed as of the Effective Date. I-I2F Entertainm~. By: ~£,zrr-;._-_f-'----- Title: __._a...e....rt"-<' Jt_,~;fr=· New Asia By: __ ss Partners Limited -J.. ~~ Healthy Soar Investment Limited _ Title:----------- By: ~ Title:----------- EXHIBIT l3 EXHIBIT 13 l .:ltll!i&"Wllfl91-;l;tli26~"5191-MEN. All25"-i LOVEl 25. Tower A. CHAOWAIMEN. 2i>ChaO'jangmenwai Streot.100020.Beijing. PRC Tel:186110-BS653333 F.. ,!l!lil10-8S6S3SSS http://www.dmgmedia. Contact Us Help https://www.bloomberg.com/quote/002143:CH 5/6 2122/2019 002143:Shenzhen Stock Quote - Yinji Entertainment and Media Co Ltd - Bloomberg Markets https://www.bloomberg.com/quote/002143:CH 6/6 EXHIBIT 17 EXHIBIT 17 IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE ) THE ORANGE HAPPY POET, INC.; NEUTRINO CORP. Plaintiffs, v. VALIANT ENTERTAINMENT, LLC; DMG ENTERTAINMENT HOLDING, LLC; DANIEL MINTZ; DINESH SHAMDASANI; PETER CUNEO; JASON KOTHARI; STEPHEN GANS; AND CHRIS FENTON. Defendants. ) ) ) ) ) ) ) ) ) ) ) ) ) C.A.No. -- VERIFIED COMPLAINT Plaintiffs The Orange Happy Poet, Inc. and Neutrino Corp. ( collectively "Plaintiffs"), by their attorneys, for their complaint against defendants Valiant Entertainment, LLC, DMG Entertainment Holding, LLC, Daniel Mintz, Dinesh Shamdasani, Peter Cuneo, Jason Kothari, Stephen Gans and Chris Fenton ( collectively "Defendants") allege upon personal knowledge as to themselves, and upon information and belief as to all other allegations herein, as follows: NATURE OF THE ACTION 1. This action alleges a conspiracy by the Defendants in which DMG Entertainment, LLC ("DMG") acquired Valiant Entertainment, LLC ("Valiant") for $2,413 .16 per Valiant Unit - buying out all of the individual Defendants without paying Plaintiffs their pro rata share of the purchase price. Specifically: 1 EXHIBIT 18 EXHIBIT 18 ,· SEP 14 2018 Sherri R. Carter, Execuuve Otticer/cterkof Court By: Brittny Smith, Deputy 10 ll I SUPERIOR COURT OF THE STATE OF CALIFORNIA FOR. THE (::OUNTY OF i..OSANGELES . . " • . . . It-------~-----~ 12 14_ · i Case No.:------ Plaintiff, Y., 1COMPLAINTFORDAMAGESAND : ;illflll:i lij ~ BC'121821 NE~OCORP., 13· OTHER RELIEF BASED ON CLAIMS FOR: 1.- BREACH DUTY ·-·.. . OF ''FIDUCIARY .,. - 1 : 2. BREACH OF CONTRACT Defendants; f9H----~-----------~~----.--1 20 21 . , PJ~tiffNeµtrino Corp. ("Plahitiff' or "Neutrino"), by its undersigned attorneys, for its 2.i complaint agains\ defendantsValiant Eq,tertainment LLC,("Valiant'), DMG Entertau:unent 2'.3 Holding, LLC ("DMG"), Daniel Min~· (~~Mintz''), Dinesh Shamdasani ("Shamdasani''), Peter 24 ~J.meQ t~~,~Jasoti Kothati-(''Kothatl,,. S.tephen OanJ (~tm,~~. ~d .CJni&:E~nto.n:(''Feu.tQn") ·25 (collectively "Defendants") alleges uwn personal knowledge as to itself. and upon information 26 and belief as to all other allegations herein, as follows: 27 2'.8· I I j