<PAGE>   1




                                                                    EXHIBIT 10.2

                            STOCK PURCHASE AGREEMENT

                  STOCK PURCHASE AGREEMENT dated as of August 31, 2000 between
the person listed as the Seller on the signature page of this Agreement (the
"Seller"), as the holder of all the shares of capital stock of Animal Town,
Inc., a California corporation (the "Company"), and Kings Road Entertainment,
Inc., a Delaware corporation (the "Buyer").

                  WHEREAS, the Seller owns all of the shares of capital stock of
the Company, which is engaged in the mail order catalogue and sales business;
and

                  WHEREAS, the Seller desires to sell all of the shares of
capital stock of the Company to the Buyer, and the Buyer desires to purchase
such shares from the Seller on the terms set forth in this Agreement;

                  NOW,  THEREFORE,  in  consideration of the mutual promises
herein set forth, the parties agree as follows:

                  Definitions.  As used in this  Agreement,  the following
terms shall have the meanings set forth below:

                  "Action":  any claim, action, suit or proceeding  (including,
          without limitation, any appellate proceeding or proceeding ancillary
          thereto).

                  "Affiliate": with respect to any Person, (i) any other Person
          which directly or indirectly controls, is controlled by or is under
          common control with such Person and (ii) the stockholders,
          subsidiaries, officers, directors and partners of such Person or of
          any other Person described in (i).

                  this  "Agreement":  this Stock Purchase  Agreement and all
          Schedules and Exhibits hereto, as the same may be amended,
          supplemented or otherwise modified from time to time.

                  "Business":  the  business  now carried on by the  Company
          under the name "Animal Town" at its location in Sonoma County,
          California.

                  "Closing": the closing of the transactions contemplated by
          this Agreement.

                  "Closing Date": the date of the Closing.

                  "Code": the Internal Revenue Code of 1986, as amended.

                  "Consent":  any  consent,  waiver,  approval  or
          authorization of, notice to, or designation, registration, declaration
          or filing with, any Person.

                  "Contract":  any contract,  lease,  agreement,  license, deed,
          note, mortgage, other instrument, arrangement, commitment or
          understanding, oral or written.

                  "Employment  Agreement":  the  Employment  Agreement  dated as
          of May 15, 2000 between the Seller and the Company, substantially in
          the form of Exhibit I, as the same may be amended, supplemented or
          otherwise modified from time to time.

                  "ERISA":  the  Employee  Retirement  Income  Security  Act of
          1974 (and any sections of the Code amended by it) and all regulations
          promulgated thereunder, as amended.




<PAGE>   2


                  "Financial  Statements":  the unaudited financial  statements
          of the Company for the fiscal years ended June 30, 1999 and 2000.

                  "Fulfillment Agreement": the Fulfillment Agreement dated as of
          the Closing Date between the Buyer and the Company's existing
          fulfillment center, substantially in the form of Exhibit II, as the
          same may be amended, supplemented or otherwise modified from time to
          time.

                  "GAAP": United States generally accepted accounting principles
          consistently applied.

                  "Interim  Balance  Sheet":  balance  sheet of the  Company as
          of June 30, 2000 included in the Financial Statements.

                  "Laws": (i) all Federal,  state,  local or foreign laws, rules
          and regulations; (ii) all Orders; (iii) all Permits; and (iv) all
          agreements with Federal, state, local or foreign regulatory
          authorities.

                  "Lien": any mortgage, pledge, option, escrow, hypothecation,
          lien, security interest, financing statement, lease, charge,
          encumbrance, easement, conditional sale or other title retention or
          security agreement or any other similar restriction, claim or right of
          others whether arising by Contract, operation of Law or otherwise.

                  "Litigation Expense": any reasonable expense incurred in
          connection with investigating, defending or asserting any Action
          incident to any matter indemnified against hereunder, including,
          without limitation, court filing fees, court costs, arbitration fees
          or costs, witness fees, and reasonable fees and disbursements of legal
          counsel, investigators, expert witnesses, accountants and other
          professionals.

                  "Loss": any loss,  obligation,  claim,  liability,  settlement
          payment, award, judgment, fine, penalty, interest charge, expense,
          damage or deficiency or other charge, other than Litigation Expense.

                  "Order":  any judgment,  award, order, writ,  injunction or
          decree issued by any Federal, state, local or foreign authority,
          court, tribunal, agency, or other governmental authority, or by any
          arbitrator.

                  "Permits":  all  Federal,  state,  local or foreign  permits,
          licenses, approvals, franchises, notices, authorizations and similar
          filings.

                  "Permitted Liens": (a) carriers', warehousemen's, workers',
          materialmen's, brokers' or customs' or other like Liens arising in the
          ordinary course of business with respect to obligations which are not
          due or which are being contested in good faith; and (b) liens and
          other title exceptions set forth on Schedule 3.10.

                  "Person":  any  individual,   partnership,  joint  venture,
          corporation, trust, unincorporated organization, government (and any
          department or agency thereof) or other entity.

                  "Purchase Price": as defined in Section 2.3.

                  "Secured Promissory Note": the Secured Promissory Note dated
          as of the Closing Date between the Company and the Buyer,
          substantially in the form of Exhibit III, as the same may be amended,
          supplemented or otherwise modified from time to time.

                  "Seller  Promissory  Note":  the Promissory Note dated as of
          the Closing Date between the Company and the Seller, substantially in
          the form of Exhibit IV, as the same may be amended, supplemented or
          otherwise modified from time to time.

                  "Shares":  the  shares of the  Company's  common  stock,  par
          value $1 per share (the "Common Stock"), issued and outstanding as of
          the date hereof.




<PAGE>   3


                  "Taxes": all taxes, charges, duties, fees, levies, penalties
          or other assessments imposed by any taxing authority, including, but
          not limited to, income, excise, property, sales, transfer, taxes,
          including any interest, penalties or additions attributable thereto.

                  "to the  Seller's  knowledge":  to the  actual  knowledge,
          without having made any inquiry or investigation, of Kenneth Kolsbun.

                  "Trademark Collateral Security and Pledge Agreement": the
          Trademark Collateral Security and Pledge Agreement dated as of June 5,
          2000 between the Company and the Buyer, substantially in the form of
          Exhibit V, as the same may be amended, supplemented or otherwise
          modified from time to time.

                  "Transaction  Documents":  this Agreement,  the Employment
          Agreement, the Fulfillment Agreement, the Secured Promissory Note, the
          Seller Promissory Note and the Trademark Collateral Security and
          Pledge Agreement.

                  Sale and Purchase of Stock.

                                        Sale and Purchase. At the Closing, which
                      shall occur at the offices of The Dorado Law Group, 1180
                      Avenue of the Americas, New York, New York on August 31,
                      2000, or such other place or date as the parties shall
                      mutually agree in writing, Seller shall sell, transfer,
                      assign, convey and deliver the Shares owned by him to the
                      Buyer or its designee(s), and the Buyer or its designee(s)
                      will purchase, accept and acquire the Shares from the
                      Seller.

                                        Deliveries at Closing. At the Closing,
                      Seller shall cause the Shares held by him to be
                      transferred to the Buyer or its designee(s) by delivering
                      to the Buyer or its designee(s) certificates representing
                      such Shares, duly endorsed for transfer or accompanied by
                      duly executed forms of assignment, and the Buyer shall pay
                      to the Seller the Purchase Price for the Shares in
                      accordance with Section 2.3 hereof.

              Purchase Price and Payment.

                  (a)  Purchase  Price.  The  purchase  price  payable by the
         Buyer for the Shares (the  "Purchase Price") shall be a total of $1.

                  (b)  Payment.  At the Closing,  in payment of the Purchase
         Price the Buyer shall pay $1 by check to the Seller.

                  (c) Indebtedness of the Company to be Discharged. On or before
         the Closing Date, the Buyer shall pay and discharge the indebtedness of
         the Company to the Seller in the principal amount of $39,000 by
         issuance to the Seller of the Seller Promissory Note.

                  Representations and Warranties of the Seller. The Seller
represents and warrants to the Buyer as follows:

                                        Organization; Good Standing; Corporate
                      Name. The Company is a corporation duly organized, validly
                      existing and in good standing under the laws of the State
                      of California and has all requisite corporate power and
                      authority to own, operate and lease its properties, and to
                      carry on its business as now being conducted. The Company
                      is duly qualified to do business and is in good standing
                      as a foreign corporation in each jurisdiction where the
                      failure to be so qualified would have a material adverse
                      effect upon its business, property or assets.

                                        Authorization; Validity; Title. The
                      Seller has all requisite power and authority to enter into
                      the Transaction Documents and the transactions
                      contemplated hereby. The Seller has duly and properly
                      executed and delivered the Transaction




<PAGE>   4


                      Documents, and each of the Transaction Documents
                      constitutes the legal, valid and binding obligation of the
                      Seller enforceable against the Seller in accordance with
                      its terms, except as enforceability thereof may be limited
                      by bankruptcy, insolvency, moratorium or other similar
                      laws of general application affecting the enforceability
                      of creditors' rights generally or by general principles of
                      equity. The Seller is the record and beneficial owner of
                      the Shares, free and clear of all Liens (other than
                      pursuant to this Agreement). Except for agreements
                      effectively terminated at or before Closing, the Seller
                      is not a party to, or bound by, any other agreement,
                      instrument or understanding restricting the transfer of
                      such Shares.

                                        No Conflict. Subject to the obtaining of
                      the Consents and Permits listed on Schedule 3.20, to the
                      Seller's knowledge, neither the execution nor the delivery
                      of the Transaction Documents by the Seller nor the
                      consummation of the transactions contemplated hereby will
                      conflict with or result in any violation of or constitute
                      a breach of or default under any terms, conditions or
                      provisions of the organizational documents or by-laws or
                      any applicable Law or any material Contract by which the
                      Company is bound or to which the Company's assets are
                      subject or result in the creation of any Lien on any of
                      the assets of the Company.

                                        Capitalization. (i) The Company is
                      authorized to issue up to 100,000 shares of Common Stock,
                      (ii) as of the date hereof, 10,000 shares of the Common
                      Stock are issued and outstanding and (iii) the Seller is
                      the record and beneficial holder thereof. All of the
                      Shares are duly authorized, validly issued, fully paid and
                      non-assessable. Except for agreements terminated at or
                      before the Closing, there are no outstanding rights of
                      subscription, warrants, calls, options, conversion or
                      exchange rights or other Contracts with respect to any
                      securities of the Company or pursuant to which any Person
                      has an interest in its capital or profits, and there are
                      no Contracts as to the voting of the Company's securities.

                                        No Subsidiaries. The Company does not
                      own, beneficially or of record, any capital stock or other
                      equity securities of any corporation or other entity or
                      have any direct or indirect equity or ownership interest
                      in any business of any other Person.

                                        Financial Statements. All of the
                      Financial Statements were prepared from the books and
                      records of the Company. Except as disclosed on Schedule
                      3.6, the Financial Statements have been prepared in
                      accordance with GAAP consistently applied and fairly
                      present the financial position and results of operations
                      of the Company as of the dates thereof and for the periods
                      then ended, subject to normal year-end adjustments.

                                        Absence of Undisclosed Liabilities. To
                      the Seller's knowledge, the Company has no liabilities or
                      obligations, of a kind that would be required to be
                      included on the balance sheet of the Company or disclosed
                      in the footnotes thereto, whether accrued, absolute or
                      contingent, and whether due or to become due, except (a)
                      liabilities reflected or reserved against on the Interim
                      Balance Sheet included in the Financial Statements, (b)
                      liabilities arising in the ordinary course of business
                      since the date of such balance sheet, and (c) liabilities
                      and obligations disclosed on Schedule 3.7.

                                        No Material Adverse Change. Since March
                      31, 2000 there has not been (a) any material adverse
                      change in the financial condition, operations, business,
                      properties, assets or liabilities of the Company, or (b)
                      any material damage, destruction or loss to any of the
                      properties or assets of the Company, whether or not
                      covered by insurance, which has materially and adversely
                      affected or impaired the ability of the Company to conduct
                      the Business, or (c) any event or condition of any
                      character (except those affecting the economy or
                      businesses generally) which can reasonably be expected to
                      materially and adversely affect or impair the Business, or
                      (d) any redemption, repurchase, declaration, setting aside
                      or payment of any dividend or any distribution in




<PAGE>   5


                      respect of the Company's capital stock, or (e) any
                      redemption, purchase or other acquisition by the Company
                      of any of its capital stock.

                                        Taxes. The Company has timely filed or
                      caused to be filed all Federal, state, local and foreign
                      income and other tax returns and reports (including any
                      relating to import duties) required to be filed by it. All
                      such returns and reports are true, complete and correct in
                      all material respects, and all taxes shown thereon and all
                      deficiencies or other assessments of tax, interest or
                      penalties and all estimated taxes due by the Company or
                      with respect to its Business have been paid. The charges,
                      accruals and reserves, if any, in respect of taxes
                      (including import duties) set forth in the Financial
                      Statements are adequate. No audit of any tax return of the
                      Company is in progress, no extensions of time with respect
                      to any date on which any tax return was or is to be filed
                      by the Company are in force and no waiver or agreement by
                      the Company is in force for the extension of time for the
                      assessment or payment of any tax.

                                        Good Title; No Liens. Except as set
                      forth on Schedule 3.10, the Company has good and
                      marketable title to all the properties and assets, real
                      and personal, tangible and intangible, purported to be
                      owned by the Company (including all property and assets
                      reflected in the Financial Statements, except as disposed
                      of after the date thereof in the ordinary course of
                      business), subject to no Liens other than Permitted Liens.

                                        Leases. Attached hereto as Schedule 3.11
                      is a list of all leases of real property and all leases of
                      (or other arrangements for the use of) any item of
                      personal property, to which the Company is a party, either
                      as lessor or lessee. Except as indicated on Schedule 3.11,
                      the Company is not in breach, violation or default of any
                      lease with respect to or as a result of which the other
                      party thereto has the right to terminate the same, and to
                      the Seller's knowledge, the Company has not received any
                      notice of any claim that it is in breach, violation or
                      default with respect to any lease.

                                        Condition of Property. Except as set
                      forth on Schedule 3.12, to the Seller's knowledge, all
                      plants, structures and equipment owned or leased by the
                      Company, and all utilities, heating, ventilating, air
                      conditioning, electrical and plumbing systems used in the
                      operation of the Company's business, are in all material
                      respects in reasonable operating condition and repair
                      (except for routine maintenance or repair required in the
                      ordinary course of business) and are adequate for the uses
                      to which they are being put. No material item of the
                      property used in the Company's operations or business is
                      owned by an Affiliate of the Company.

                                        Insurance. Attached hereto as Schedule
                      3.13 is a list of all insurance policies of the Company
                      indicating carrier, amount of coverage, risks covered, and
                      expiration dates. To the Seller's knowledge, the Company
                      is not in default of any obligation under any such policy
                      which would permit cancellation thereof.

                                        Patents, Trademarks, Licenses, etc.
                      Attached hereto as Schedule 3.14 is a list of all patents,
                      trademarks, service marks, trade names, brands and
                      copyrights owned, licensed or used by the Company during
                      the past five years and any applications or registrations
                      therefor. Except as set forth on Schedule 3.14A, the
                      Company owns the entire unencumbered right, title and
                      interest in and to all such properties free of all Liens
                      other than Permitted Liens, no rights or licenses to or
                      from others have been granted with respect to such
                      properties, and the Company owns the right to use all the
                      patents, patent applications, trademarks, service marks,
                      trade names, brands, copyrights and licenses, both
                      domestic and foreign, and rights with respect to the
                      foregoing, necessary for the conduct of its business as
                      now conducted, without any known conflict with the rights
                      of others. No Affiliate of the Company owns or possesses
                      any rights in any patents, patent applications, registered
                      or unregistered trademarks, service marks, trade




<PAGE>   6


                      names, brands, copyrights, or domestic or foreign licenses
                      which are used by the Company in its business except as
                      set forth on Schedule 3.14B.

                                        Litigation, etc. Except as set forth on
                      Schedule 3.15, there is no pending or, to the Seller's
                      knowledge, threatened Action or governmental investigation
                      or inquiry against or involving the Company or its assets
                      or operations. To the Seller's knowledge, except as
                      otherwise disclosed on Schedule 3.15 none of the matters
                      on Schedule 3.15 would, if adversely determined, severally
                      or in the aggregate, materially and adversely affect the
                      financial condition, business, operations, property or
                      assets of the Company or the transactions contemplated
                      hereby.

                                        Permits.  To the Seller's  knowledge,
                      the Company has all material Permits necessary  for the
                      conduct of its  business as presently  conducted  and all
                      such Permits are listed on Schedule 3.16.

                                        Compliance with Laws. Except as set
                      forth on Schedule 3.17, the Company is in compliance in
                      all material respects with, and has not received any
                      notice that it or the plant or property where the Business
                      is conducted is in any material respect in violation of or
                      has any material liability under, any Laws, Orders or
                      Permits.

                                        Contracts, etc. Set forth on Schedule
                      3.18 are complete and accurate lists of the following:

                  all bonus, incentive compensation, profit-sharing, retirement,
         group insurance, death benefit or other fringe benefit plans, deferred
         compensation and post-termination obligations or trust agreements of
         the Company in effect or under which any amounts remain unpaid on the
         date hereof or which are to become effective after the date hereof;

                  each Contract defining the terms on which indebtedness for
         borrowed money, or other indebtedness evidenced by bonds, notes or
         similar instruments, of the Company or guarantees thereof by the
         Company have been or may be issued;

                  all  Contracts,  oral or written,  to which the Company is a
         party and in which any  Affiliate of the Company has any interest,
         direct or indirect;

                  all bank accounts, safe deposit boxes, money market funds,
         certificates of deposit, stocks, bonds, notes and other securities in
         the name of or owned or controlled by the Company and the names of the
         persons having access thereto;

                  all powers of attorney granted by the Company to others;

                  all other Contracts to which the Company is a party, except
         ones that are terminable on less than 30 days' notice, or do not
         involve aggregate remaining payments or unpaid obligations of $5,000 or
         more, and except purchase orders for inventory and sales orders for
         products and services of the Company entered into in the ordinary
         course of business.

Except as set forth on Schedule 3.18, none of the Company's rights under any
Contract listed on Schedule 3.18 will be materially adversely affected by the
transactions contemplated hereby. Except as set forth on Schedule 3.18, the
Company has not given or received notice of, or has any knowledge of, any
default or claimed or purported or alleged default on the part of the Company or
any other party in the performance or payment of any obligation to be performed
or paid under any Contract listed on Schedule 3.18.

                  3.19 Employee Retirement Benefit Plans. Set forth on Schedule
3.19 is a list and brief description of each employee pension benefit plan
maintained by the Company, or to which the Company is obligated to contribute.
The Company is in compliance in all material respects with all applicable Laws
relating to employee benefit plans.




<PAGE>   7


                  3.20 Governmental and other Consents, etc. No Consent or
Permit of any Person is required to be obtained by the Company or the Seller in
connection with the execution and delivery of this Agreement or the consummation
of the transactions contemplated hereby, other than under Contracts being
terminated at or before Closing, and other than those specified in Schedule
3.20, all of which have been or by the Closing Date will be obtained, except as
otherwise indicated in writing to the Buyer.

                  3.21  Environmental Matters.  Except as disclosed in Schedule
3.21:

                  (a) Hazardous Materials have not at any time been generated,
         used, treated or stored by the Company in violation in any material
         respect of any applicable Environmental Law, or in any way which will
         hereafter require material remedial action under any applicable
         Environmental Law, and the Company has not received any notice of any
         such violation with respect to Hazardous Materials;

                  (b) to the Seller's knowledge, there has been no spill,
         discharge, leak, emission, injection, escape, dumping or release of any
         kind onto any property owned or leased by the Company, or into the
         environment surrounding any such property, of Hazardous Materials,
         other than releases permissible under applicable Law or allowable under
         applicable Permits;

                   (c) the Company, its operations and any property owned by it
         are in compliance in all material respects with (i) all applicable
         Environmental Laws, and (ii) the requirements of any Permits issued
         under such Laws; and

                   (d) there are no pending or threatened claims against the
         Company or any property owned or leased by it relating to Hazardous
         Materials or environmental matters.

None of the circumstances, conditions or occurrences disclosed in Schedule 3.21
involves or will result in any material liability on the part of the Company. As
used herein "Hazardous Materials" means (a) any petroleum or petroleum products,
radioactive materials, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, transformers or other equipment that contain
dielectric fluid containing levels of polychlorinated biphenyls, and radon gas;
(b) any chemicals, materials or substances defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants," "contaminants" or "pollutants," or words of similar import,
under any applicable Environmental Law; and (c) any other chemical, material or
substance exposure to which is prohibited, limited or regulated by any
governmental authority; and "Environmental Law" means any federal, state or
local statute, law, rule, regulation, ordinance, code, policy or rule of common
law now or hereafter in effect and in each case as amended, and any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent decree or judgment, relating to the environment, health, safety
or Hazardous Materials, including without limitation the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA") 42 U.S.C.ss. 9601 et seq.; the Hazardous Materials Transportation
Act, as amended, 49 U.S.C.ss. 1801 et seq.; the Resource Conservation and
Recovery Act, as amended, 42 U.S.C.ss.6901 et seq.; the Federal Water Pollution
Control Act, as amended, 33 U.S.C. ss. 1251 et seq.; the Toxic Substances
Control Act, 15 U.S.C.ss. 2601 et seq.; the Clean Air Act, 42 U.S.C.ss. 7401 et
seq.; the Safe Drinking Water Act, 42 U.S.C.ss. 3808 et seq.; and their
counterparts under any state or local laws.

                  Representations and Warranties of the Buyer. The Buyer
represents and warrants to the Seller as follows:

                  4.1 Organization. It is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
all requisite corporate power to own, operate and lease its properties and
assets, to carry on its business as now being conducted and to enter into this
Agreement and perform its obligations hereunder.

                  4.2 Authorization. The execution, delivery and performance of
this Agreement by the Buyer have been duly authorized by all requisite corporate
action and no other corporate proceedings on the part of the Buyer are necessary
to approve the consummation of the transactions contemplated hereby. This




<PAGE>   8


Agreement has been duly executed and delivered by the Buyer, and this Agreement
constitutes the valid and binding obligation of the Buyer enforceable in
accordance with the terms hereof, except as enforceability thereof may be
limited by bankruptcy, insolvency, moratorium or other similar laws of general
application affecting the enforceability of creditors' rights generally or by
general principles of equity.

                  4.3 No Conflict. Subject to obtaining the consents set forth
in Schedule 4.3, neither the execution nor the delivery of this Agreement by the
Buyer nor the consummation of the transactions contemplated hereby will conflict
with or result in any violation of or constitute a breach of or default under
any terms, conditions or provisions of its organizational documents or by-laws
or any Law or Contract by which it is bound or to which it or its assets are
subject.

                  4.4 Buyer's Investigation. The Buyer has conducted inspections
of the properties and financial and other records of the Company and other due
diligence with respect to the Company and the Business. The Buyer has had an
opportunity to ask questions of the Seller and the officers of the Company
relating to their business, management and financial affairs, which questions
were answered to Buyer's satisfaction, and to examine all books and records of
the Company. Based on such inspections and inquiries, the Buyer is not aware of
any inaccuracies or breaches in the Seller's representations and warranties set
forth in this Agreement.

                  4.5 Investment Intent. Buyer is aware that the Shares it is
purchasing hereunder are not registered under the Securities Act of 1933, as
amended, or any state securities law. Buyer is acquiring the Shares for
investment purposes only, for its own account not with a view to, or in
connection with, the further sale or transfer of all or any portion thereof.

                  4.6 Governmental and other Consents, etc. No Consent or Permit
of any Person is required to be obtained by the Buyer in connection with the
execution and delivery of this Agreement or the consummation of the transactions
contemplated hereby, other than those specified in Schedule 4.6, all of which
have been or by the Closing Date will be obtained.

                  4.7 Litigation, etc. There is no pending or, to the Buyer's
knowledge, threatened Action or governmental investigation or inquiry against or
involving the Buyer or its assets or operations that would, if adversely
determined, materially and adversely affect the financial condition, business,
operations, property or assets of the Buyer or the transactions contemplated
hereby.

                  Indemnification.

                  5.1 Obligation of the Seller. The Seller shall indemnify and
save harmless the Buyer and its successors and assigns from, against, for and in
respect of:

                  (a) any Loss incurred or required to be paid which arises out
         of or relates to (i) a statement of facts as a result of which any
         representation or warranty made by the Seller in this Agreement is
         untrue, inaccurate or misleading in any respect, or (ii) the breach of
         any covenant or agreement made by the Seller in this Agreement or any
         Transaction Document; and

                  (b) any Litigation Expense incurred or required to be paid in
         connection with any Action incident to any matter indemnified against
         in paragraph (a).

                  5.2  Obligation  of the Buyer.  The Buyer shall  indemnify
and save  harmless  the Seller  from, against, for and in respect of:

                  (a) any Loss incurred or required to be paid which arises out
         of or relates to (i) a statement of facts as a result of which any
         representation or warranty made by the Buyer in this Agreement is
         untrue, inaccurate or misleading in any respect, or (ii) the breach of
         any covenant or agreement made by the Buyer in this Agreement or in any
         Transaction Document; and

                  (b) any Litigation Expense incurred or required to be paid in
         connection with any Action incident to any matter indemnified against
         in paragraph (a) above.




<PAGE>   9


                  5.3 Notice and Defense of Claims. The obligations and
liabilities of each indemnifying party hereunder with respect to claims
resulting from the assertion of liability by another party or third parties
shall be subject to the following terms and conditions:

                  (a) Notice. The indemnified party shall give prompt written
         notice to the indemnifying party of any claim or event known to it
         which does or may give rise to a claim by the indemnified party against
         the indemnifying party based on this Agreement, stating the nature and
         basis of said claims or events and the amounts thereof, to the extent
         known, and in the case of any Action brought by any third party, a copy
         of any documentation with respect thereto promptly after any such
         documentation is received by the indemnified party.

                  (b) Third Party Claims or Actions. (i) In the event any Action
         is brought by any third party against an indemnified party, with
         respect to which an indemnifying party may have liability under this
         Agreement, the indemnifying party shall be entitled to participate in,
         and, to the extent that it shall wish, to assume the defense thereof,
         with independent counsel reasonably satisfactory to such indemnified
         party.

                  (ii) If the indemnifying parties elect to assume the defense
         of any such third-party Action, the indemnifying parties shall have the
         sole right to contest, pay, settle or compromise any such Action on
         such terms and conditions as the indemnifying parties may determine.
         After notice from the indemnifying parties to such indemnified party of
         the indemnifying parties' election so to assume the defense thereof,
         the indemnifying parties shall not be liable to such indemnified party
         for any legal or other expenses incurred after the date of receipt of
         such notice by the indemnified party. The indemnified party shall have
         the right to employ its own counsel and such counsel may participate in
         such Action, but the fees and expenses of such counsel shall be at the
         expense of such indemnified party, when and as incurred.

                  (iii) If the indemnifying parties do not elect to assume the
         defense of any such Action, the indemnified party may engage
         independent counsel selected by the indemnified party to assume the
         defense and may contest and pay, and, with the consent of the
         indemnifying parties, may settle or compromise any such claim. The fees
         and disbursements of such counsel shall constitute Litigation Expense
         hereunder.

                  (iv) The indemnified party and the indemnifying parties, as
         the case may be, shall be kept fully informed of such Action at all
         stages thereof whether or not such party is represented by its own
         counsel.

                  5.4 Cooperation. The parties hereto agree to render to each
other such assistance as they may reasonably require of each other and to
cooperate in good faith with each other in order to ensure the proper and
adequate defense of any Action brought by any third party.

                  5.5 Confidentiality. The parties agree to make reasonable
efforts to preserve in full the confidentiality of all proprietary or
confidential business records and the attorney-client and work product
privileges. In connection therewith, each party agrees that: (a) it will make
reasonable efforts, in any Action in which it has assumed or participated in the
defense, to avoid production of confidential business records; and (b) all
communications between any party hereto and counsel responsible for or
participating in the defense of any Action shall, to the extent possible, be
made so as to preserve any applicable attorney-client or work-product privilege.

                  5.6 Survival of Representations and Warranties. All covenants,
representations and warranties and agreements made in this Agreement or in any
Exhibit, Schedule, certificate or document delivered herewith or at the Closing
shall survive the execution and delivery thereof and the Closing hereunder.

                  Other Agreements of the Parties.




<PAGE>   10


                  6.1 Brokers. Each party represents and warrants that all
actions by it relative to this Agreement and the transactions contemplated
hereby were carried out in such manner as not to give rise to any valid claim
for finders fees, brokerage commissions or similar payments.

                  6.2 Elections. Neither the Buyer nor any Affiliate of the
Buyer shall make any election pursuant to the Code that is inconsistent with any
election made by the Company or any Affiliate for any prior year which would
materially adversely affect the Seller or the Company or file any amended tax
return of the Company so as to materially adversely affect the Company or the
Seller as to any taxable year ending on or before the Closing Date, without the
prior written consent of the Seller.

                  6.3 No Modifications. After the Closing the Buyer shall not
amend the Certificate of Incorporation or by-laws of the Company in any way that
would, relative to the provisions thereof in effect prior to the Closing, tend
to increase the liabilities of directors and officers prior to the closing, or
impair, lessen or reduce the provisions thereof relating to indemnification of
directors and officers.

                  6.4 Post-Closing Cooperation. After the Closing Date, the
Seller and the Buyer shall provide each other timely access to information and
reasonable assistance and cooperation, during normal business hours, necessary
for the preparation of any tax returns or other filings or conducting or
responding to tax audit or other proceedings. All pertinent books of account,
papers, and records shall be retained by the parties until either the statute of
limitations to which they relate has expired, by lapse of time or by the terms
of any agreement for extension of the period of limitations. If at any time any
records of the Company relating to the period prior to the Closing Date are to
be destroyed, the Buyer shall use its best efforts to so notify the Seller at
least 30 days prior to such destruction and, at the request of the Seller, shall
deliver such records to the Seller.

                  Further Assurances. Following the Closing, at the request of
any party, the other parties shall execute and deliver such further documents,
and take such other action, as may be necessary or appropriate to give full
effect to the transactions contemplated by this Agreement, including without
limitation, to confirm the sale, transfer, assignment and conveyance of the
Shares hereunder and to vest in the Buyer all the Seller's right, title and
interest in and to the Shares or as may otherwise be required to carry out the
provisions of this Agreement.

                  Covenants.

                  8.1 Covenants of the Buyer. The Buyer hereby covenants and
agrees with the Seller that prior to the Closing, it shall (a) take every action
reasonably required of it in order to satisfy the conditions to closing and
otherwise to ensure prompt and expedient consummation of the transactions
contemplated by this Agreement, and, without limiting the generality of the
foregoing, to obtain all Consents and Permits which may be necessary or
reasonably required in order for the Buyer to effect the transactions
contemplated hereby, and (b) give the Seller prompt written notice of any event
or circumstance which can reasonably be expected to affect adversely its ability
to complete the acquisition of the Shares or other transactions contemplated by
this Agreement.

                  8.2  Covenants of the Seller.  The Seller hereby covenants and
agrees with the Buyer that:

                  Cooperation. The Seller will use its reasonable best efforts
         to cause the Company to preserve its business organization intact, to
         keep available the services of its employees and sales representatives
         and to preserve the good will of employees, customers, suppliers and
         others having business relations with the Company.

                  Transactions Out of Ordinary Course of Business. Except with
         the prior written consent of the Buyer, the Seller will not cause the
         Company to enter into any transaction out of the ordinary course of
         business.

                  Maintenance of Properties, etc. The Seller will cause the
         Company to maintain the Company's properties in customary repair, order
         and condition (taking into consideration the age and condition
         thereof), reasonable wear and tear excepted, and maintain insurance
         covering such




<PAGE>   11


         properties in such amounts and of such kinds comparable to that in
         effect on the date of this Agreement.

                  Compliance with Laws. The Seller will cause the Company to
         comply in all material respects with all Laws applicable to it and to
         the conduct of the Business.

                  Access to Properties, etc. The Seller will cause the Company
         to provide the Buyer and its counsel, accountants, investment advisors
         and other representatives full access during normal business hours
         (upon reasonable prior notice) to all of their properties, books, tax
         returns, Contracts, and records, and will furnish to the Buyer all such
         documents and information with respect to the affairs of the Company as
         the Buyer may from time to time reasonably request, provided that such
         access shall not unreasonably interfere with the conduct of the
         Business.

                  Certain Prohibited Transactions. Except with the prior written
         consent of the Buyer, the Seller will not cause the Company to (i)
         sell, transfer or otherwise dispose of any material assets other than
         in the ordinary course of business, or (ii) create or permit to exist
         any new Lien other than Permitted Liens; or (iii) amend its Certificate
         of Incorporation or by-laws.

                  Conditions Precedent.

                  9.1 Conditions to Obligations of the Seller. All obligations
of the Seller under this Agreement are subject to the fulfillment, unless waived
in writing at the sole option of the Seller, at or prior to the Closing Date, of
each of the following conditions precedent:

                  Buyer's Representations and Warranties. The representations
         and warranties of the Buyer herein contained shall be true on and as of
         the Closing Date with the same force and effect as though made on and
         as of said date, except as affected by the transactions contemplated or
         permitted by this Agreement.

                  Financing.  The Buyer  shall have  obtained  financing  from
         a third party  commercial  lender or investor of not less than
         $100,000.

                  Fulfillment  Agreement.   The  parties  thereto  shall  have
         duly  executed  and  delivered  the Fulfillment Agreement.

                  Secured  Promissory  Note.  The  parties  thereto  shall have
         duly  executed  and  delivered  the Secured Promissory Note.

                  Trademark Collateral Security and Pledge Agreement. The
         parties thereto shall have duly executed and delivered the Trademark
         Collateral Security and Pledge Agreement.

                  Seller   Promissory   Note.  The  Buyer  shall  have  duly
         executed  and  delivered  the  Seller Promissory Note.

                  Buyer's Covenants. The Buyer shall have performed all its
         obligations and agreements and complied with all its covenants
         contained in this Agreement to be performed and complied with by the
         Buyer prior to the Closing Date.

                  Buyer's Closing Certificate. The Seller shall have received a
         certificate of the Buyer, executed on behalf of the Buyer by any duly
         authorized representative of the Buyer, dated the Closing Date, in form
         and substance satisfactory to the Seller, certifying as to the
         fulfillment of the matters mentioned in paragraphs (a) and (g) of this
         Section 9.1.

                  Consents and Approvals. This Agreement and the transactions
         contemplated hereby shall have received all approvals, consents,
         authorizations and waivers from governmental and other regulatory
         agencies and other third parties required to consummate the transaction
         contemplated (including the expiration of any applicable waiting period
         under any regulation or statute).




<PAGE>   12


                  (j) Other Documents. The Seller shall have received all
         certificates, corporate documents, evidence of authorization, and other
         agreements, instruments and documents in respect of any aspect or
         consequence of the transactions contemplated by this Agreement as the
         Seller may reasonably request, all of which shall be in form and
         substance satisfactory to the Seller.

                  (k) No Litigation. No Action before any court or any
         governmental or regulatory authority shall have been commenced and
         still be pending, no investigation by any governmental or regulatory
         authority shall have been commenced and still be pending, and no Action
         by any governmental or regulatory authority shall have been threatened
         against the Seller or the Buyer (i) seeking to restrain, prevent or
         change the transactions contemplated hereby or questioning the validity
         or legality of any of such transactions, or (ii) which if resolved
         adversely to such party, would materially and adversely affect the
         financial condition, business, property, assets or prospects of any
         such Person.

                  9.2 Conditions to the Obligations of the Buyer. All
obligations of the Buyer under this Agreement are subject to the fulfillment,
unless waived in writing at the sole option of the Buyer, at or prior to the
Closing Date, of each of the following conditions precedent:

       (1)    Seller's Representations and Warranties. The representations and
              warranties of the Seller herein contained shall be true on and as
              of the Closing Date with the same force and effect as though made
              on and as of said date, except as affected by transactions
              contemplated or permitted by this Agreement.

       (2)    Employment Agreement. The parties thereto shall have duly executed
              and delivered the Employment Agreement. The Company's employment
              compensation rate for each employee is reflected in the Company's
              projected budget for July, 2000 through June, 2001, a copy of
              which is attached hereto as Exhibit VI.

       (3)    Seller's Covenants. The Seller shall have performed all of the
              obligations and agreements and complied with all of its covenants
              contained in this Agreement to be performed and complied with by
              the Seller prior to the Closing Date.

       (4)    Seller's Closing Certificate. The Buyer shall have received one or
              more certificates of the Seller, dated the Closing Date, in form
              and substance satisfactory to the Buyer, certifying as to the
              fulfillment of the matters mentioned in paragraphs (a) and (c) of
              this Section 9.2.

       (5)    Consents. The Buyer shall have received evidence, satisfactory to
              the Buyer and its counsel, that all of the Consents disclosed in
              Schedule 3.20 have been duly obtained (including the expiration of
              any applicable waiting period under any regulation or statute).

       (6)    Other Documents. The Buyer shall have received all certificates,
              corporate documents, evidence of authorization, and other
              agreements, instruments and documents in respect of any aspect or
              consequence of the transactions contemplated by this Agreement as
              the Buyer may reasonably request, all of which shall be in form
              and substance satisfactory to the Buyer.

       (7)    No Litigation. No Action before any court or any governmental or
              regulatory authority shall have been commenced and still be
              pending, no investigation by any governmental or regulatory
              authority shall have been commenced and still be pending, and no
              Action by any governmental or regulatory authority shall have been
              threatened against the Seller or the Buyer (i) seeking to
              restrain, prevent or change the transactions contemplated hereby
              or questioning the validity or legality of any of such
              transactions, or (ii) which if resolved adversely to such party,
              would materially and adversely affect the financial condition,
              business, property, assets or prospects of any such Person.

                  10. Conditions Subsequent to Obligations of the Buyer. The
obligations of the Buyer under the Seller Promissory Note are subject to the
Buyer's payment and discharge, within forty-five (45) days of the Closing Date,
of (a) at least eighty percent (80%) of the indebtedness of the Company set
forth on Schedule 10 (the "Existing Debt"), such percentage being exclusive of
the amount owed by the Company to




<PAGE>   13


the Seller, by the exchange in a valid private placement ("Private Placement")
of the Existing Debt for restricted shares of the common stock of the Buyer (the
"144 Stock") at the rate of $1 per share of 144 Stock for each $4 of the
Existing Debt and (b) the indebtedness of the Company to each of Dawn Pacheco
and Reflex Catalogue Management in the principal amount of $3,000 and $9,000,
respectively, with the amount of cash and shares of 144 Stock set forth opposite
each such party on Schedule 10; provided, however, that, notwithstanding the
foregoing, the Buyer shall pay and discharge each holder of $1,500 or less of
indebtedness of the Company to exchange for cash such holder's indebtedness at
the same conversion rate applied in the Private Placement. In the event that the
foregoing conditions subsequent are not fulfilled to the satisfaction of the
Buyer within the forty-five (45) day period, the Buyer shall have the right to
return Shares to the Seller in full satisfaction of the Seller Promissory Note.

                  11.      Termination.

                  11.1 Termination. This Agreement may be terminated prior to
the Closing and the transactions contemplated hereby may be abandoned by either
party upon written notice to the other party if the Closing has not taken place
within thirty (30) days after the execution and delivery of this Agreement.

                  11.2 Status of Agreement after Termination. Upon any
termination of this Agreement pursuant to Section 11.1, this Agreement shall
become void and shall have no effect, except that such termination shall not
affect any liability either party may have for breach of this Agreement.

                  12.      General Provisions.

                  12.1 Notices. All waivers, notices, consents, demands,
requests, approvals and other communications which are required or may be given
hereunder shall be in writing and shall be deemed to have been duly given when
hand-delivered, sent by telecopier, delivered by national overnight courier
service, or 72 hours after mailed by certified first class mail, return receipt
requested, postage prepaid, as follows:

                  If to the Seller, to him at:

                           Kenneth Kolsbun
                           15295 Coleman Valley Road
                           Occidental, CA 95465

                           with a copy to:

                  (b)      If to the Buyer, to it at:

                           Kings Road Entertainment, Inc.
                           12 East 33rd Street, 12th Floor
                           New York, New York 10016
                           Attention: David W. Dube, President

                           with a copy to:

                           The Dorado Law Group
                           1180 Avenue of the Americas, Suite 1459
                           New York, New York 10036-8401
                           Attention: Marianne Gaertner Dorado, Esq.

or to such other address or addresses as may be designated by a party by written
notice to the other parties hereto.

                  12.2 Costs; Expenses. Each party hereto will bear its own
costs and expenses incurred in negotiating this Agreement and consummating the
transactions contemplated hereby, whether or not the transactions are
consummated.




<PAGE>   14


                  12.3 Binding Effect, Benefits. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and their respective
successors and assigns; provided, however, that nothing in this Agreement shall
be construed to confer any rights, remedies, obligations or liabilities on any
person other than the parties hereto or their respective successors and assigns.

                  12.4 Public Announcements. The parties hereto shall advise and
consult with each other prior to the making of any public announcement with
respect to the transactions contemplated hereby and, in any event, the Seller
shall not issue any press releases, make any public announcement or statement
without the consent of the Buyer, except for filings or registrations which may
be required or except as otherwise required by Law.

                  12.5 No Solicitation. From and after the date hereof and until
the Closing or the termination of this Agreement, the Seller agrees not to
accept or approve any offer from anyone other than the Buyer relating to the
acquisition of the assets or Business of the Company, or any business
combination relating to them.

                  12.6 Entire Agreement; Amendment. This Agreement, together
with the other instruments delivered in connection herewith, embodies the entire
agreement and understanding of the parties hereto and supersedes any prior
agreement or understanding between the parties with respect to the subject
matter of this Agreement. This Agreement cannot be amended or terminated orally,
but only by a writing duly executed by the parties.

                  12.7 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document.

                  12.8 Headings. Headings of the Sections and paragraphs in this
Agreement are for reference purposes only and shall not be deemed to have any
substantive effect.

                  12.9  Assignment.  This  Agreement  may not be assigned by
either party without the prior written consent of the other.

                  12.10  Applicable  Law.  This  Agreement  shall be governed
and construed and interpreted in accordance with the laws of the State of New
York and the federal laws of the United States of America.

                  12.11 Waivers. Except as otherwise provided herein, no delay
on the part of the Seller or the Buyer in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of the Seller or the Buyer of any right, power or privilege hereunder
operate as a waiver of any other right, power or privilege hereunder, nor shall
any single or partial exercise of any right, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power or privilege hereunder.

                  12.12 Miscellaneous. The rights and remedies of the Buyer and
the Seller hereunder are cumulative and not exclusive of any rights or remedies
they would otherwise have.




<PAGE>   15


         IN WITNESS WHEREOF, the parties have executed or caused to be executed
this Stock Purchase Agreement as of the date first set forth above.

         SELLER:

         /s/ Kenneth Kolsbun
         ----------------------
         Kenneth Kolsbun

         BUYER:

         KINGS ROAD ENTERTAINMENT, INC.

         By:  /s/David W. Dube
         -----------------------
         Name: David W. Dube
         Title: President




<PAGE>   16


                                    EXHIBIT I

                          FORM OF EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made as of May 15, 2000 (the "Effective Date"), by
  and between ANIMAL TOWN, INC., a California corporation (the "Company"), and
  you, KENNETH KOLSBUN.

         In consideration of the mutual covenants, terms and conditions set
  forth herein, you and the Company agree as follows:

         1. The Company hereby employs you pursuant and subject to the terms,
  conditions and provisions hereof. You hereby accept such employment and agree
  to render your services exclusively to the Company as provided herein, where
  and when required by the Company (presently in Sonoma County, California), all
  of which services shall be performed conscientiously and to the full extent of
  your ability. You further agree to abide by all rules, regulations and
  policies of the Company.

            1       Your title and position with the Company shall be President.

         3. You shall report to the Company's board of directors (the "Board of
  Directors") or to any committee thereof or director as the Board of Directors
  may direct during the Term (as hereinafter defined). Any conflict between
  divisions of responsibility between you and any other employee shall be
  resolved by the Board of Directors.

         4. The services to be rendered by you hereunder shall include, without
  limitation, all services customarily rendered by persons engaged in the same
  capacity or in a similar capacity in the mail order catalogue and sales
  industry, and such other services as may be requested by the Company from time
  to time hereunder. Your services shall be exclusive to the Company during the
  Term.

         5. The Term shall commence as of the Effective Date and (unless earlier
  terminated pursuant to this Agreement) shall continue thereafter through May
  15, 2001 (the Term"). The Company shall have the option to extend the Term for
  an additional one (1)-year period upon written notice to you at least thirty
  (30) days prior to expiration of the initial Term.

         6. (a) As full consideration for all services to be rendered by you
pursuant hereto, and for all rights and interests herein granted by you to the
Company, and provided that you are not in breach hereof, you shall be entitled
to receive a base salary in an amount equal to sixty-five thousand dollars
($65,000) commencing on the Effective Date and continuing through May 15, 2001.
You shall thereafter be entitled to receive a base salary in an amount equal to
seventy thousand dollars ($70,000) plus an amount equal to sixty-five thousand
dollars ($65,000) multiplied by the percentage by which the Consumer Price Index
has increased from the Effective Date to the date of the expiration of the
initial Term.

        (b) Such compensation shall be paid in accordance with the Company's
normal payroll practices. The Company may make such deductions, withholdings or
payments from any sum payable to you pursuant to this Agreement as are required
by any applicable law, rule or regulation for taxes or similar charges.
Compensation payments made to you by the Company or any affiliate of the Company
shall be deemed made pursuant to this Agreement and any compensation paid to you
from and after the Effective Date shall be deemed to have been paid hereunder.

        7. In addition to the base salary set forth in Paragraph 6, you shall be
eligible to receive such bonus compensation as the Company may elect to award to
you, if any, in the Company's sole and absolute discretion. Nothing in this
Paragraph 7 shall require or otherwise obligate the Company to pay you a bonus.

        8. You represent and warrant that you are free to enter into this
Agreement and to grant the rights and interests to the Company that you purport
to grant thereunder and that there are no agreements or arrangements in effect,
whether written or oral, which could prevent you from rendering exclusive
services to the Company during the Term, and that you have not made and will not
make any commitment or do any act in conflict with this Agreement.




<PAGE>   17


        9. Provided that you are not in breach hereof, the Company shall
reimburse you for all of your reasonable expenses incurred while employed and
performing your duties under and in accordance with the terms and conditions
hereof, subject to your full accounting therefor and your providing the Company
with appropriate documentation, including without limitation receipts, for all
such expenses in the manner required pursuant to Company's policies and
procedures and the Internal Revenue Code, and subject to the Company's prior
approval.

        10. You and the Company agree that the services to be rendered by you
pursuant hereto, and the rights and interests granted by you to the Company
pursuant hereto, are of a special, unique, extraordinary and intellectual
character, which gives them a peculiar value, the loss of which cannot be
reasonably or adequately compensated in damages in any action at law, and that a
breach by you of any of the terms hereof will cause the Company great and
irreparable injury and damage. You hereby expressly agree that the Company shall
be entitled to the remedies of injunction, specific performance and other
equitable relief to prevent a breach hereof by you. This provision shall not,
however, be constructed as a waiver of any of the rights which the Company may
have hereunder, at law, for damages, or otherwise.

        11. (a) In the event that (i) you become incapacitated or prevented from
fully rendering your services hereunder by reason of your illness, mental,
physical or other disability, and such incapacity or inability shall continue
for sixty (60) consecutive days during any period of the Term; or (ii) the
Company's normal operations are prevented or interrupted because of force
majeure events or any other cause beyond the Company's sole control (e.g., any
labor dispute, strike, fire, war, civil disturbance, act of God, governmental
action or proceeding or any event sufficient to excuse performance as a matter
of law), and such prevention or interruption shall continue for sixty (60)
consecutive days during any period of the Term, then the Company shall have the
right to terminate your employment hereunder immediately upon the expiration of
said sixty (60)-day period without any further liability or obligation to you
hereunder except for the greater of (i) your base annual compensation under
Paragraph 6 for a six (6)-month period or (ii) your base annual compensation for
the balance of the Term as of the date of such termination (either such
termination, "For Disability or Force Majeure") without regard to any
unexercised renewal period.

        (b) In the event you, at any time, breach any provision hereof, fail,
refuse or neglect (other than by reason of any above-referenced disability or
incapacity) to perform fully your obligations hereunder, or engage or
participate in any serious or willful misconduct in connection with any of your
obligations hereunder, the Company shall have the right to terminate your
employment hereunder at any time thereafter (such termination,"For Cause"). In
the event of any termination For Cause, you shall be entitled to receive only
accrued compensation payable to you as of the date of such termination, without
regard to any other compensation, benefits or perquisites.

        (c) In addition to the right to terminate For Cause or For Disability or
Force Majeure, the Company shall have the right to terminate your employment
hereunder at any time for any reason, upon thirty (30) days' notice to you (such
termination, "Without Cause"); provided, however, that if termination of your
employment is a termination Without Cause, you shall continue to be entitled
only to the greater of (i) your base annual compensation under Paragraph 6 for a
six (6)-month period or (ii) your base annual compensation for the balance of
the Term as of the date of such termination without regard to any unexercised
renewal period, subject to your obligation to use your best efforts to find
other suitable employment promptly, at which time all your rights hereunder
shall terminate, including without limitation the right to receive compensation.
During the time that you are seeking other employment as a result of termination
Without Cause, you agree to report fully to the Company every three (3) weeks
regarding your efforts to obtain other suitable employment, and the Company
hereby reserves the right to discontinue all payments to you hereunder, but no
earlier than sixty (60) days following such termination, if it reasonably
determines that you are not using your best efforts promptly to find such other
suitable employment.

        (d) Any termination under this Paragraph 11 shall not be deemed to be a
waiver by the Company of any of the Company's rights or remedies otherwise
available to the Company hereunder, at law, in equity or otherwise.




<PAGE>   18


        12. You shall not enter into any contracts or make any commitments on
behalf of the Company outside of the ordinary course of your duties and services
in the ordinary course of the Company's business nor for an amount in excess of
such limits as may be specified by the Board of Directors without the prior
written approval and consent of the Board of Directors in accordance with the
standard practices and operating procedures thereof.

        13.     During the Term you shall be entitled to:

        (a) Reimbursement by the Company for any family plan-based health
insurance expenses incurred by you pursuant to the Company's existing health
insurance plan (such plan being Blue Shield of California as of the Effective
Date), subject to compliance with provisions relating to eligibility or
qualification; and

        (b) During the first year of the Term, two (2) weeks vacation, and
during the second year of the Term, if any, three (3) weeks vacation, each with
pay and normal customary holidays in accordance with the Company's policy for
vacations and holidays for senior executives of the Company.

        (c)     Participate  in any Company  retirement  or similar  benefit
plan available to Company's senior executives.

For the purpose of determining your length of service with the Company with
respect to the applicable provisions of any benefit to which you may be entitled
hereunder, such determination shall be determined with a commencement date of
May 15, 2000.

        14. The Company may secure in its own name or otherwise, and at its own
expense, life, health, accident and other insurance covering you or you and
others, and you shall not have any right, title or interest in or to such
insurance other than as expressly provided herein. You agree to assist the
Company in procuring such insurance by submitting to the usual and customary
medical and other examinations to be conducted by such physician(s) as the
Company or such insurance company may designate and by signing such applications
and other written instruments as may be required by the insurance companies to
which application is made for such insurance.

        15. During the Term, you shall not directly or indirectly compete or
interfere with the actual or contemplated businesses or activities of the
Company. In this regard, during the Term, you shall not, without the prior
written consent of the Company, (a) while actually employed by the Company,
become an officer, employee, consultant, agent, partner (other than a limited
partner) or director of any other business enterprise; and (b) while not
actually employed by the Company, become an officer, employee, consultant,
agent, partner (other than a limited partner) or director of any other business
enterprise engaged in any of the actual or contemplated businesses or activities
of the Company.

        16. You agree that you will not, during the Term or thereafter, disclose
to any other person or entity the terms or conditions hereof (including the
financial terms thereof) and shall not directly or indirectly issue or permit
the issuance of any publicity whatsoever regarding, or grant any interview or
make any statements concerning, the Company's engagement of you hereunder
without the prior written consent of the Company.

        17. The primary place of your employment hereunder shall be Sonoma
County, California. You shall make such trips away from the primary place of
employment as requested by the Company or as may be required for the conduct of
your duties hereunder.

        18.     The Company hereby  represents  and warrants that it has
obtained all approvals necessary to enter into this Agreement.

        19. This Agreement shall be governed by, and construed in accordance
with, the laws of the State of California applicable to contracts entered into
and fully performed therein.

        20. The Company shall have the right to assign or otherwise delegate
this Agreement or any of its rights or obligations thereunder, in whole or in
part, to any person or entity. Without limiting the generality of the foregoing,
the Company shall have the right to license, delegate, lend or otherwise
transfer any of its rights




<PAGE>   19


to any or all of your services hereunder to any person, company or other entity
controlling, controlled by, or under common control with the Company, and you
agree to render such services required hereunder for such person, company or
other entity as part of the services to be rendered hereunder for no additional
compensation other than as provided for herein. You shall not have any right to
assign, delegate or otherwise transfer any duty or obligation to be performed by
you hereunder to any person or entity, nor to assign or transfer any rights
hereunder.

        21. All notices which either party is required or may desire to give to
the other party under or in connection with this Agreement shall be sufficient
if given by addressing the same to the respective party at the address set forth
below or at such other place as may be designated by the respective party:

                  To Company: Animal Town, Inc.
                              15295 Coleman Valley Road
                              Occidental, CA 95465
                              Attention: President

                  With a copy to Kings Road Entertainment, Inc. ("KREN") at the
following address as long as KREN is a shareholder of the Company or holds any
indebtedness of the Company:

                              Kings Road Entertainment, Inc.
                              12 East 33rd Street, 12th Floor
                              New York, New York 10016
                              Attention: President

                   To You:    Kenneth Kolsbun
                              15295 Coleman Valley Road
                              Occidental, CA 95465

When notices addressed as required by this Paragraph 21 shall be hand delivered,
telexed, or deposited, postage prepaid, registered or certified mail, in the
United States mail, or delivered to a telegraph office, toll prepaid, the
Company or you, as appropriate, shall be deemed to have delivered such notice.

        22. If the compensation provided by this Agreement shall exceed the
amount permitted by any present or future law or governmental order or
regulation, such stated compensation shall be reduced, while such limitation is
in effect, to the amount which is so permitted. The payment of such reduced
compensation shall be deemed to constitute full performance by the Company of
its obligations hereunder with respect to compensation for such period;
provided, however, that the Company shall pay you the aggregate amount of such
reduction if and when such payment becomes permissible at law.

        23. You agree to execute and deliver to the Company such further
documents and instruments as the Company may desire to further evidence,
effectuate or protect the Company's rights hereunder. This Agreement may be
modified only by a written instrument duly executed by each of the parties
thereto. No person has any authority on behalf of the Company to make any
representation or promise not set forth herein, and you hereby represent and
warrant that this Agreement has not been executed in reliance upon any
representation or promise except those contained therein. No waiver by the
Company of any default or other breach hereof shall be deemed to be a waiver of
any preceding or succeeding breach of default.

        24. Concurrently with your execution and delivery to Company hereof, you
shall execute and deliver to the Company and Employee Confidentiality Agreement
in the form of Exhibit A attached hereto.

        25. This Agreement supersedes all, prior or contemporaneous agreements,
whether oral or written, between the parties hereto concerning the subject
matter hereof, and constitutes the valid, binding and entire agreement between
the parties with respect thereto, enforceable in accordance with its terms.




<PAGE>   20


        IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.

                                           ANIMAL TOWN, INC.




                                           By
                                              ----------------------------------
                                           Title:


ACCEPTED AND AGREED TO:




----------------------------
Kenneth Kolsbun
Social Security Number:


<PAGE>   21



                                  APPENDIX A TO
                              EMPLOYMENT AGREEMENT


                                     FORM OF
                       EMPLOYEE CONFIDENTIALITY AGREEMENT

        In consideration of my employment, or my continued employment, as the
case may be, by Animal Town, Inc., or by any direct or indirect subsidiary or
affiliate of Animal Town, Inc. (such employer, the "Company"), I agree with the
Company as follows:

        As long as I shall remain in the employ of the Company I shall devote my
whole time and ability to the service of the Company in my employment capacity,
as the Company shall from time to time direct, and I shall perform my duties
faithfully and diligently. Further, I shall abide by all rules, regulations and
policies of the Company, and acknowledge that I am familiar with same.

        I shall not, during my employment by the Company or thereafter, use or
disclose to others without the prior written consent of the Company, any trade
or business secrets, secret "know-how", confidential, secret, technical,
financial or proprietary information or other nonpublic information relative to
the business or activities of the Company, obtained by me while in the employ of
the Company or otherwise. Upon leaving the employ of the Company, I shall not
take with me any confidential, secret, technical, financial or proprietary data,
drawings, documents or information obtained by me as the result of my
employment, or any reproductions thereof. All such items and all copies thereof,
including without limitation all memoranda, notes, records and other documents
related to the actual or contemplated business or activities of the Company
(which is defined to be the mail order catalogue and sales business) that were
made or compiled by me, or made available to me during the term of my employment
by the Company, shall be and remain the Company's property, and I shall
surrender the same to the Company on the termination of my employment by the
Company, or at any other time on request.

        I acknowledge and agree that I am the Company's employee for hire. In
this regard, all right, title and interest of every kind and nature whatsoever,
whether now known or unknown, in and to any property (intellectual or
otherwise), including without limitation any inventions, patents, trademarks,
copyrights, films, scripts, ideas, writings and discoveries, invented, created,
written, developed, furnished, produced, disclosed or acquired by me, alone or
in collaboration with others, during the term of my employment by the Company or
within the three (3)- or six (6)-month period thereafter, as applicable
(qualified by the last sentence of this paragraph), which property relates to or
may be useful in connection with the actual or contemplated business or
activities of the Company, shall be and remain, as between myself and the
Company, the sole and exclusive property of the Company for any and all purposes
and uses whatsoever (including any of my right, title and interest in and to any
domestic or foreign applications for patent or trademark, as well as any
divisions, continuations reissues, revivals, renewals or extensions thereof),
and to the extent protectible under copyright law, shall be deemed for such
purposes as works made for hire for the Company. I acknowledge and agree that I
shall disclose all of the foregoing to the Company immediately upon the
discovery, invention, creation, etc. thereof and that I shall have no right,
title or interest of any kind or nature in or to any of the foregoing or in or
to any results or proceeds therefrom. I further agree that I will, at the
Company's request, whether during or subsequent to my employment by the Company,
do any and all acts, and execute and deliver to the Company (in form
satisfactory to the Company) such instruments or documents, as may be deemed by
the Company as necessary or desirable to evidence, effectuate, secure, maintain
or establish the terms hereof or the Company's ownership of any of the forgoing,
all without charge; but notwithstanding that no such instruments or documents
are executed, the Company, as my employer, shall be deemed the owner thereof
immediately upon the discovery, invention, creation, etc. thereof. Except as
otherwise specifically provided above regarding certain musical or literary
works created solely by me, any invention, patent, trademark or other property
relating to the Company's actual or contemplated business or activities, that is
discovered, invented, created, etc. by me, alone or in collaboration with
others, within (i) three (3) months after the termination of my employment by
the Company for any reason in the event that such termination occurs within one
(1) year after the Effective Date or (ii) six (6) months after the termination
of my employment by the Company for any reason in the event that such
termination occurs after one (1) or more years after the




<PAGE>   22


Effective Date, shall be deemed to be within the provisions of this paragraph,
unless I can prove that the same was conceived and made following said
termination.

        Attached is a list of my existing trademark, copyright and/or patent
applications, unpatented inventions and/or other intellectual property made
prior to my employment by the Company, which I agree is a complete list and
which I desire to remove from the operation hereof.

        I agree that the Company shall be entitled to injunctive or other
appropriate equitable relief to prevent or remedy by proposed, anticipatory or
actual breach of the terms hereof including, without limitation, the disclosure
of any information, data, documents or other materials covered by the terms
hereof.

        This agreement shall inure to the benefit of the Company, its
subsidiaries, affiliates, allied companies, successors and assigns or the
nominees of the Company; and I specifically agree to execute any and all
documents considered necessary or desirable to assign, transfer, sustain or
maintain inventions, discoveries, applications, copyrights, trademarks or
patents, both in the United States and in foreign countries.

        IN WITNESS WHEREOF, I have hereunto signed my name as of the date of the
Employment Agreement to which this document is attached and effective as of the
Effective Date (as defined in the Employment Agreement).

Witness:
         ---------------------               -----------------------------------
                                             Kenneth Kolsbun


ACCEPTED:

Animal Town, Inc.


------------------------------
By:
Title:


<PAGE>   23



                         EXCLUDED INTELLECTUAL PROPERTY

Games entitled:

Save the Whales
Nectar Collector
Back to the Farm
Peter Principle Game
Dam Builders
Madison Avenue
Chicken in Every Plot

Games under development entitled:

Rainbowland
Elephants, Rhinos & Hippos
Deliver the Mail

Other:

Kolsbun Family Film and Photo Archives
Cyberside Kick Dolls
Guardian Angel Dolls
Story of the Peace Symbol manuscript
Peace Symbol.com




<PAGE>   24


                                   EXHIBIT II

                          FORM OF FULFILLMENT AGREEMENT


<PAGE>   25



                                   EXHIBIT III

                         FORM OF SECURED PROMISSORY NOTE

U.S. $32,500.00                                                     JUNE 5, 2000

        FOR VALUE RECEIVED, the undersigned promises to pay to the order of
King's Road Entertainment, Inc. ("KREN" ), with an office at 12 East 33rd
Street, 12th Floor, New York, New York 10016, in lawful money of the United
States of America and in immediately available funds the principal amount of
Thirty Two Thousand Five Hundred United States Dollars (U.S.$32,500) or, if
less, the unpaid principal amount of all loans made by KREN to the undersigned
from time to time, at the principal office of KREN on the dates endorsed on the
schedule (the "Grid") attached hereto.

        The undersigned also promises to pay interest on the unpaid principal
amounts made available by KREN hereunder prior to maturity at the rates per
annum set forth on the Grid. The undersigned hereby promises to pay KREN
interest, payable (after the date that is six months from the date hereof) upon
demand, on any amount of principal and, to the extent permitted by law,
interest, remaining unpaid hereunder after maturity (whether by acceleration or
otherwise) until paid in full at a rate equal to 12%. Interest shall be based on
the basis of a year of 360 days and the exact number of days elapsed. Interest
shall commence to accrue on the date of each loan and be payable in lawful money
of the United States of America at the office of KREN listed above on each such
loan's maturity date stated on the Grid (unless such loan has a maturity greater
than three months in which event interest shall also be payable quarterly in
arrears).

        At the time of the making of any loan hereunder and upon each repayment
of principal KREN shall, and is hereby authorized to, make a notation on the
Grid of the date and the amount and maturity of each such loan, the interest
rate applicable thereto, and each principal repayment. However, the failure to
make any such notation shall not limit or otherwise affect the undersigned's
Liabilities (as defined below) hereunder with respect to any such loan or
repayment of principal. Although this Note is dated the date of issue, interest
in respect hereof shall be payable only for the period during which the loans
evidenced hereby are outstanding and, although the stated amount hereof may be
higher, this Note shall be enforceable, with respect to the undersigned's
obligation to pay the principal amount hereof, and interest hereon, only to the
extent of the unpaid principal amount of loans and accrued and unpaid interest
evidenced hereby.

        As security for the due and punctual payment of any and all of the
present and future liabilities, direct or contingent, joint, several or
independent, of the undersigned now or hereafter existing, due or to become due
to, or held or to be held by, KREN ( the "Liabilities"), the undersigned hereby
grants to KREN a continuing security interest in (a) all of the Collateral (as
described in Schedule A attached hereto), whether now or hereafter existing or
acquired, and (b) all present and future products and proceeds of the
Collateral.

        Except for the security interest granted hereby and by the Trademark
Collateral Security and Pledge Agreement dated the date hereof between the
undesigned and the Creditor, the undersigned shall keep the Collateral and
proceeds and products thereof free and clear of any security interest, liens or
encumbrances of any kind. The undersigned shall promptly pay, when due, all
taxes and transportation, storage and warehousing charges and fees affecting or
arising out of the Collateral and shall defend the Collateral against all claims
and demands of all persons at any time claiming the same or any interest therein
adverse to KREN. The undersigned warrants that no financing statement (other
than any which may have been filed on behalf of KREN) relating to any of the
Collateral is on file in any public office.

        This instrument shall constitute a security agreement between the
undersigned, as debtor, and KREN, as secured party, in accordance with the
Uniform Commercial Code and shall also serve and may be filed in the applicable
public office(s), as a Financing Statement under the Uniform Commercial Code in
the various States of the United States; and, for the purpose of Section 9-402
(1) of the Uniform Commercial Code, the following information is set forth: (a)
the address of the undersigned (as debtor under the Uniform Commercial Code)
specified below under the caption "Chief Place of Business Address" shall be the
undersigned's mailing address, and (b) the address of KREN (as secured party
under the Uniform Commercial Code) specified above shall be KREN's address from
which information concerning KREN's security hereunder may be obtained.




<PAGE>   26


        The undersigned agrees to sign and deliver to KREN such financing
statements, in form acceptable to KREN, as KREN may, from time to time,
reasonably request, or as are necessary in the opinion of KREN, to establish and
maintain, in favor of KREN, a valid perfected, first priority security interest
in the Collateral securing the payment of any and all of the Liabilities. The
undersigned will pay any filing fees or costs with respect thereto and for any
security interest searches. The undersigned authorizes KREN to file any such
financing statement without the signature of the undersigned.

        The undersigned assumes all liability and responsibility in connection
with all Collateral acquired by the undersigned; and the obligation of the
undersigned to pay all Liabilities shall in no way be affected or diminished by
reason of the fact that any such Collateral may be lost, destroyed, stolen,
damaged or for any reason whatsoever unavailable to the undersigned. The
undersigned will at all times keep all insurable Collateral insured at the
expense of the undersigned (a) to KREN's satisfaction against loss by fire,
theft and any other risk to which the Collateral may be subject and (b) if KREN
so requests, in favor of KREN. KREN may apply any proceeds of such insurance
which may be received by it toward payment of the Liabilities, whether or not
due, in such order of application as KREN may determine.

        The undersigned further agrees: (a) that, if KREN so demands in writing
at any time, (i) all proceeds of the Collateral shall be delivered to KREN
promptly upon their receipt in a form satisfactory to KREN and/or (ii) all
chattel paper, instruments, and documents relating to the Collateral shall be
delivered to KREN at the time and place and in the manner in which specified in
KREN's demand; (b) to execute and deliver, upon request, any notice, statement,
instrument, document, agreement or other paper and/or to perform any act
requested by KREN which may be necessary to create, perfect, preserve, validate
or otherwise protect any security interest granted pursuant hereto or to enable
KREN to exercise and enforce KREN's rights hereunder or with respect to such
security interest; (c) that, during the period that any Liability is
outstanding, the undersigned will not, without obtaining KREN's prior written
consent, create, incur, assume, or suffer to exist any security agreement under
the Uniform Commercial Code of any jurisdiction or any portion thereof (the
"Uniform Commercial Code") or any similar law of any jurisdiction, except as
herein provided, and the undersigned will not sign or file or authorize the
signing or filing of a Financing Statement under the Uniform Commercial Code
except as herein provided; (d) to provide KREN with such information as KREN may
from time to time request with respect to the location of any of its places of
business; (e) that KREN will be notified promptly in writing of any change in
any office as set forth below and (f) that the undersigned will promptly notify
KREN upon the occurrence of any default, as provided in this Note, of which the
undersigned has knowledge.

        Upon the occurrence of any of the following events (each an "Event of
Default"): (i) nonpayment when due of any of the Liabilities; (ii) the failure
of the undersigned or any of its subsidiaries to generally pay its debts as they
come due or the admission in writing by the undersigned or any of its
subsidiaries of its inability to pay its debts generally, or the making by the
undersigned or any of its subsidiaries of an assignment for the benefit of
creditors, or the institution of any proceeding by or against the undersigned or
any of its subsidiaries seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of the undersigned, or the
appointment of a receiver, trustee, custodian or other similar official for the
undersigned or any of its subsidiaries or for any substantial part of the
property of the undersigned or any of its subsidiaries and, in the case of
institution of any such proceeding against the undersigned or any of its
subsidiaries, either such proceeding remaining undismissed or unstayed for a
period of 30 days or any of the actions sought in the proceeding occurring, or
the undersigned or any of its subsidiaries taking any corporate or other
authorizing action in respect of the foregoing; or (iii) upon the suspension of
business of the undersigned, THEN AND IN ANY SUCH EVENT, KREN in its discretion
may, by written notice to the undersigned: (a) declare the principal of and
accrued interest on all Liabilities to be, whereupon the same shall become,
forthwith due and payable, without presentment, demand, protest or other notice
of any kind, all of which are hereby expressly waived by the undersigned;
provided, that upon the occurrence of any event specified in clause (ii) with
respect to the undersigned such amounts shall automatically become and be due
and payable, without presentment, demand, protest or any notice of any kind, all
of which are hereby expressly waived by the undersigned; (b) take possession of
the Collateral and, for that purpose, may enter, with the aid and assistance of
any person or persons, any premises where the Collateral, or any part thereof,
is, or may be, placed and remove the same; or (c) require the undersigned to




<PAGE>   27


assemble the Collateral and to make it available to KREN at a place designated
by KREN which is reasonably convenient to KREN and the undersigned. In addition,
KREN shall have the right from time to time to sell, resell, assign, transfer
and deliver all or any part of the Collateral, at any brokers' board or
exchange, or at public or private sale or otherwise, at the option of KREN, for
cash or on credit or for future delivery in such parcel or parcels and at such
time or times and at such place or places, and upon such terms and conditions as
KREN, may deem proper, all without (except as shall be required by applicable
statute and cannot be waived) advertisement or demand upon or notice to the
undersigned or right of redemption of the undersigned, which are hereby
expressly waived. KREN's obligation, if any, to give additional (or to continue)
financial accommodations of any kind to the undersigned shall immediately
terminate and upon each such sale KREN may, unless prohibited by applicable
statute which cannot be waived, purchase all or any part of the Collateral being
sold, free from and discharged of all trusts, claims, right of redemption and
equities of the undersigned, which are hereby waived and released. In addition
to the rights and remedies given to KREN hereunder or otherwise, KREN shall have
all of the rights and remedies of a secured party under the Uniform Commercial
Code.

        In the case of any non-payment when due of any Liabilities, the
undersigned shall pay all costs and expenses of every kind for collection,
including all attorneys' fees.

        All payments by the undersigned hereunder shall be made free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto other than taxes imposed on KREN's income and franchise taxes imposed on
it (such non-excluded taxes, levies, imposts, deductions, charges, withholdings
and liabilities referred to as "Taxes"). If the undersigned shall be required by
law to deduct any Taxes from or in respect of any sum payable hereunder to KREN,
(i) such sum shall be increased as may be necessary so that after making all
required deductions (including any deductions applicable to additional sums
payable under this paragraph) KREN shall receive an amount equal to the sum it
would have received had no such deduction been made, (ii) the undersigned shall
make such deduction and (iii) the undersigned shall pay the full amount deducted
to the relevant taxing authority or other authority as required by law.

        KREN's duty with respect to the Collateral shall be solely to use
reasonable care in the custody and preservation of Collateral in its possession.
KREN shall not be obligated to take any steps necessary to preserve any rights
in any of the Collateral against prior parties, and the undersigned hereby
agrees to take such steps. The undersigned shall pay to KREN all costs and
expenses, including filing and reasonable attorneys' fees, incurred by KREN in
connection with the custody, care, preservation or collection of the Collateral.
KREN may, but is not obligated to, exercise any and all rights of conversion or
exchange or similar rights, privileges and options relating to the Collateral.
KREN shall have no obligation to sell or otherwise realize upon any of the
Collateral as herein authorized and shall not be responsible for any failure to
do so for any delay in so doing.

        All options, powers and rights granted to KREN hereunder or under any
promissory note, instrument, document or other writing delivered to KREN shall
be cumulative and shall be in addition to any other options, powers or rights
which KREN may now or hereafter have as a secured party under the Uniform
Commercial Code or under any other applicable law or otherwise.

        It is the intention of the parties that this Note shall constitute a
continuing loan applying to any and all future, as well as existing,
transactions between the undersigned and KREN; and the security interest
provided for herein shall attach to after-acquired as well as existing
Collateral, and the Liabilities covered by this Note shall include future
advances and other value, as well as existing advances and other value, whether
or not the advances or value are or shall be given pursuant to commitment, all
to the maximum extent permitted by the Uniform Commercial Code.

        In the event that the acquisition transaction contemplated by that
certain Letter of Intent dated May 11, 2000 between the undersigned and KREN is
terminated by KREN in a written notice specifically referring to this provision
prior to a closing (other than as a result of the failure of the conditions
precedent in the definitive stock purchase agreement or as a result of a
material misrepresentation made by the undersigned, before or during the due
diligence process), then 75% of the then outstanding advances under this Note
shall be forgiven automatically.




<PAGE>   28


        No delay on the part of KREN in exercising any of its options, powers or
rights, or partial or single exercise thereof, shall constitute a waiver
thereof.

        This Agreement shall be binding upon the undersigned, its successors and
assigns, and inure to the benefit of, and be enforceable by, KREN and its
successors, transferees and assigns.

        THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK. EACH OF THE UNDERSIGNED AND KREN HEREBY IRREVOCABLY
WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM
ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY MATTER ARISING HEREUNDER.

           Name: ANIMAL TOWN, INC.
                 --------------------------------------------
                 Chief Place of Business Address:
                                                     15295 Coleman Valley Road
                                                     -------------------------
                                                     Occidental, CA 95465
                                                     -------------------------

                                                     -------------------------

                                        Signature:

                                                     -------------------------
                                             Title:  President
                                                     -------------------------



<PAGE>   29



                                   EXHIBIT IV

                         FORM OF SELLER PROMISSORY NOTE

U.S. $39,000.00                                                  AUGUST 31, 2000

FOR VALUE RECEIVED, the undersigned promises to pay to the order of Kenneth
Kolsbun ("Kolsbun" ), with an address at 15295 Coleman Valley Road, Occidental,
CA 95465, in lawful money of the United States of America and in immediately
available funds the principal amount of Thirty Nine Thousand United States
Dollars (U.S.$39,000), or if less, the unpaid principal amount outstanding, on
or before November 30, 2000 (the "Maturity Date"). In the event that the debt
conversion described in paragraph 10 of that certain Stock Purchase Agreement
dated August 31, 2000 by and between the undersigned and Kolsbun (the
"Agreement") does not occur within the period described therein, the undersigned
shall have the right to return Shares (as defined in the Agreement) to Kolsbun
in full satisfaction of the Liabilities (as defined below) outstanding
hereunder.

         The undersigned also promises to pay interest on the unpaid principal
amount hereunder prior to maturity at a rate equal to 7% per annum. The
undersigned hereby promises to pay Kolsbun interest, payable (after the date
that is six months from the date hereof) upon demand, on any amount of principal
and, to the extent permitted by law, interest remaining unpaid hereunder after
maturity (whether by acceleration or otherwise) until paid in full. Interest
shall be based on the basis of a year of 360 days and the exact number of days
elapsed. Interest shall commence to accrue on the date hereof and be payable on
the Maturity Date in lawful money of the United States of America at the address
of Kolsbun listed above.

         Upon each repayment of principal by the undersigned, Kolsbun shall, and
is hereby authorized to, make a notation on the schedule (the "Grid") attached
hereto of the date and the amount of each such repayment. However, the failure
to make any such notation shall not limit or otherwise affect the undersigned's
Liabilities hereunder with respect to any such repayment. Although this Note is
dated the date of issue, interest in respect hereof shall be payable only for
the period during which the loans evidenced hereby are outstanding and, although
the stated amount hereof may be higher, this Note shall be enforceable, with
respect to the undersigned's obligation to pay the principal amount hereof, and
interest hereon, only to the extent of the unpaid principal amount of loans and
accrued and unpaid interest evidenced hereby.

         The undersigned agrees that the undersigned will promptly notify
Kolsbun upon the occurrence of any default, as provided in this Note, of which
the undersigned has knowledge.

         Upon the occurrence of any of the following events (each an "Event of
Default"): (i) nonpayment when due of any of the present and future liabilities,
direct or contingent, joint, several or independent, of the undersigned now or
hereafter existing, due or to become due to, or held or to be held by, Kolsbun (
the ALiabilities@); (ii) the failure of the undersigned or any of its
subsidiaries to generally pay its debts as they come due or the admission in
writing by the undersigned or any of its subsidiaries of its inability to pay
its debts generally, or the making by the undersigned or any of its subsidiaries
of an assignment for the benefit of creditors, or the institution of any
proceeding by or against the undersigned or any of its subsidiaries seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief or composition of it
or its debts under any law relating to bankruptcy, insolvency or reorganization
or relief of the undersigned, or the appointment of a receiver, trustee,
custodian or other similar official for the undersigned or any of its
subsidiaries or for any substantial part of the property of the undersigned or
any of its subsidiaries and, in the case of institution of any such proceeding
against the undersigned or any of its subsidiaries, either such proceeding
remaining undismissed or unstayed for a period of 30 days or any of the actions
sought in the proceeding occurring, or the undersigned or any of its
subsidiaries taking any corporate or other authorizing action in respect of the
foregoing; or (iii) upon the suspension of business of the undersigned, THEN AND
IN ANY SUCH EVENT, Kolsbun in his discretion may, by written notice to the
undersigned declare the principal of and accrued interest on all Liabilities to
be, whereupon the same shall become, forthwith due and payable, without
presentment, demand, protest or other notice of any kind, all of which are
hereby expressly waived by the undersigned; provided, that upon the occurrence
of any event specified in clause (ii) with respect to the undersigned such
amounts shall




<PAGE>   30


automatically become and be due and payable, without presentment, demand,
protest or any notice of any kind, all of which are hereby expressly waived by
the undersigned.

         In the case of any non-payment when due of any Liabilities, the
undersigned shall pay all costs and expenses of every kind for collection,
including all attorneys' fees.

         All payments by the undersigned hereunder shall be made free and clear
of and without deduction for any and all present or future taxes, levies,
imposts, deductions, charges or withholdings, and all liabilities with respect
thereto other than taxes imposed on Kolsbun's income (such non-excluded taxes,
levies, imposts, deductions, charges, withholdings and liabilities referred to
as ATaxes@). If the undersigned shall be required by law to deduct any Taxes
from or in respect of any sum payable hereunder to Kolsbun, (i) such sum shall
be increased as may be necessary so that after making all required deductions
(including any deductions applicable to additional sums payable under this
paragraph) Kolsbun shall receive an amount equal to the sum he would have
received had no such deduction been made, (ii) the undersigned shall make such
deduction and (iii) the undersigned shall pay the full amount deducted to the
relevant taxing authority or other authority as required by law.

         All options, powers and rights granted to Kolsbun hereunder or under
any promissory note, instrument, document or other writing delivered to Kolsbun
shall be cumulative and shall be in addition to any other options, powers or
rights which Kolsbun may now or hereafter have under any applicable law or
otherwise.

         No delay on the part of Kolsbun in exercising any of his options,
powers or rights, or partial or single exercise thereof, shall constitute a
waiver thereof.

         This Agreement shall be binding upon the undersigned, its successors
and assigns, and inure to the benefit of, and be enforceable by, Kolsbun and his
successors, transferees and assigns.

         THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. EACH OF THE UNDERSIGNED AND KOLSBUN HEREBY
IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR
COUNTERCLAIM ARISING OUT OF OR IN CONNECTION WITH THIS NOTE OR ANY MATTER
ARISING HEREUNDER.


         Name:  KINGS ROAD ENTERTAINMENT, INC.
                --------------------------------
                Chief Place of Business Address:
                                                 12 East 33rd Street, 12th Floor
                                                -------------------------------
                                                 New York, NY  10016
                                                -------------------------------

                                                -------------------------------
                                      Signature:

                                                -------------------------------
                                          Title: President
                                                -------------------------------




<PAGE>   31


                                    EXHIBIT V

                      FORM OF TRADEMARK COLLATERAL SECURITY
                              AND PLEDGE AGREEMENT

TRADEMARK COLLATERAL SECURITY AND PLEDGE AGREEMENT dated as of June 5, 2000,
between ANIMAL TOWN, INC., a California corporation having its principal place
of business at 15295 Coleman Valley Road, Occidental, California 95465 (the
"Assignor") and KINGS ROAD ENTERTAINMENT, INC. (the "Creditor").

         WHEREAS, the Assignor and the Creditor are parties to a Secured
Promissory Note dated of even date herewith (as amended and in effect from time
to time, the "Promissory Note"), between the Assignor and the Creditor.

         WHEREAS, it is a condition precedent to the Creditor's making any loans
to the Assignor under the Promissory Note that the Assignor execute and deliver
to the Creditor a trademark security agreement in substantially the form hereof;

         WHEREAS, the Assignor has executed and delivered to the Creditor the
Promissory Note, pursuant to which the Assignor has granted to the Creditor a
security interest in the Assignor's personal property, including without
limitation, the trademarks, service marks, trademark and service mark
registrations, and trademark and service mark registration applications listed
on Schedule A attached hereto, all to secure the payment and performance of the
Liabilities (as defined in the Promissory Note); and

         WHEREAS, this Trademark Agreement is supplemental to the provisions
contained in the Promissory Note;


         NOW, THEREFORE, in consideration of the premises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:

         Section 1. Definitions. Capitalized terms used herein and not otherwise
defined herein shall have the respective meanings provided therefor in the
Promissory Note. In addition, the following terms shall have the meanings set
forth in this Section 1 or elsewhere in this Trademark Agreement referred to
below:

         Associated  Goodwill.  All goodwill of the Assignor and its  business,
products and services  appurtenant to, associated with or symbolized by the
Trademarks and the use thereof.

         Assignment of Marks.  See Section 2(a).

         Domestic Trademarks. All Trademarks, Trademark License Rights,
Trademark Rights, Trademark Registrations and Related Assets existing and/or
registered in the United States.

         Foreign Trademarks.  All Trademarks,  Trademark License Rights,
Trademark Rights, Trademark Registrations and Related Assets existing and/or
registered in jurisdictions other than the United States.

         Pledged Trademarks. All of the Assignor's right, title and interest in
and to all of the Trademarks, the Trademark Registrations, the Trademark License
Rights, the Trademark Rights, the Associated Goodwill, the Related Assets, and
all accessions to, substitutions for, replacements of, and all products and
proceeds of any and all of the foregoing.

         PTO.  The United States Patent and Trademark Office.

         Related Assets. All assets, rights and interests of the Assignor that
uniquely reflect or embody the Associated Goodwill (other than those listed on
Schedule A), including the following:




<PAGE>   32


                           all patents, inventions, copyrights, trade secrets,
confidentialinformation, formulae, methods or processes, compounds, recipes,
know-how, methods and operating systems, drawings, descriptions, formulations,
manufacturing and production and delivery procedures, quality control
procedures, product and service specifications, catalogs, price lists, and
advertising materials, relating to the manufacture, production, delivery,
provision and sale of goods or services under or in association with any of the
Trademarks; and

                           the following documents and things in the possession
or under the control of the Assignor, or subject to its demand for possession or
control, related to the production, delivery, provision and sale by the
Assignor, or any affiliate, franchisee, licensee or contractor, of products or
services sold by or under the authority of the Assignor in connection with the
Trademarks or Trademark Rights, whether prior to, on or subsequent to the date
hereof:

                           2     all lists, contracts, ancillary documents and
other information that identify, describe or provide information with respect to
any customers, dealers or distributors of the Assignor, its affiliates or
franchisees or licensees or contractors, for products or services sold under or
in connection with the Trademarks or Trademark Rights, including all lists and
documents containing information regarding each customer's, dealer's or
distributor's name and address, Loan, payment, discount, delivery and other sale
terms, and history, pattern and total of purchases by brand, product, style,
size and quantity;

                           3     all agreements (including franchise
agreements), product and service specification documents and operating,
production and quality control manuals relating to or used in the design,
manufacture, production, delivery, provision and sale of products or services
under or in connection with the Trademarks or Trademark Rights;

                           4     all documents and agreements relating to the
identity and locations of all sources of supply, all terms of purchase and
delivery, for all materials, components, raw materials and other supplies and
services used in the manufacture, production, provision, delivery and sale of
products or services under or in connection with the Trademarks or Trademark
Rights; and

                           5     all agreements and documents constituting or
concerning the present or future, current or proposed advertising and promotion
by the Assignor (or any of its affiliates, franchisees, licensees or
contractors) of products or services sold under or in connection with the
Trademarks or Trademark Rights.

         Trademarks. All of the trademarks, service marks, designs, logos,
indicia, trade names, corporate names, company names, business names, fictitious
business names, trade styles, elements of package or trade dress, and other
source and product or service identifiers, used or associated with or
appurtenant to the products, services and businesses of the Assignor, that (a)
are set forth on Schedule B, or (b) have been adopted, acquired, owned, held or
used by the Assignor or are now owned, held or used by the Assignor, in the
Assignor's business, or with the Assignor's products and services, or in which
the Assignor has any right, title or interest, or (c) are in the future adopted,
acquired, owned, held and used by the Assignor in the Assignor's business or
with the Assignor's products and services, or in which the Assignor in the
future acquires any right, title or interest, including, without limitation, all
Domestic Trademarks and all Foreign Trademarks.

         Trademark Agreement. This Trademark Collateral Security and Pledge
Agreement, as amended and in effect from time to time.

         Trademark Intellectual Property.  All Trademarks,  including all
Domestic and Foreign Trademarks, Pledged Trademarks, Trademark License Rights,
Trademark Rights and Related Assets.

         Trademark License Rights. Any and all past, present or future rights
and interests of the Assignor pursuant to any and all past, present and future
franchising or licensing agreements in favor of the Assignor, or to which the
Assignor is a party, pertaining to any Trademarks, Trademark Registrations, or
Trademark Rights owned or used by third parties in the past, present or future,
including the right (but not the obligation)




<PAGE>   33


in the name of the Assignor or the Creditor to enforce, and sue and recover for,
any breach or violation of any such agreement to which the Assignor is a party.

         Trademark Registrations. All past, present or future federal, state,
local and foreign registrations of the Trademarks, all past, present and future
applications for any such registrations (and any such registrations thereof upon
approval of such applications), together with the right (but not the obligation)
to apply for such registrations (and prosecute such applications) in the name of
the Assignor or the Creditor, and to take any and all actions necessary or
appropriate to maintain such registrations in effect and renew and extend such
registrations.

         Trademark Rights. Any and all past, present or future rights in, to and
associated with the Trademarks throughout the world, whether arising under
federal law, state law, common law, foreign law or otherwise, including the
following: all such rights arising out of or associated with the Trademark
Registrations; the right (but not the obligation) to register claims under any
state, federal or foreign trademark law or regulation; the right (but not the
obligation) to sue or bring opposition or cancellation proceedings in the name
of the Assignor or the Creditor for any and all past, present and future
infringements or dilution of or any other damages or injury to the Trademarks,
the Trademark Rights, or the Associated Goodwill, and the rights to damages or
profits due or accrued arising out of or in connection with any such past,
present or future infringement, dilution, damage or injury; and the Trademark
License Rights.

         Use. With respect to any Trademark, all uses of such Trademark by, for
or in connection with the Assignor or its business or for the direct or indirect
benefit of the Assignor or its business, including all such uses by the Assignor
itself, by any of the affiliates of the Assignor, or by any franchisee, licensee
or contractor of the Assignor.

         Section 2.        Grant of Security Interest.

                           As  collateral  security  for  the  payment  and
performance in full of all of the Liabilities, the Assignor hereby
unconditionally grants to the Creditor a continuing security interest in and
first priority lien on the Pledged Trademarks, and pledges and mortgages (but
does not transfer title to) the Pledged Trademarks to the Creditor. In addition,
the Assignor has executed in blank and delivered to the Creditor an assignment
of federally registered trademarks in substantially the form of Exhibit I hereto
(the "Assignment of Marks"). The Assignor hereby authorizes the Creditor to
complete as assignee and record with the PTO the Assignment of Marks upon the
occurrence and during the continuance of an Event of Default and the proper
exercise of the Creditor's remedies under this Trademark Agreement and the
Promissory Note.

                           In addition to, and not by way of limitation  of, the
grant, pledge and mortgage of the Pledged Trademarks provided in Section 2(a),
the Assignor grants, assigns, transfers, conveys and sets over to the Creditor
the Assignor's entire right, title and interest in and to the Pledged
Trademarks; provided that such grant, assignment, transfer and conveyance shall
be and become of force and effect only (a) upon or after the occurrence and
during the continuance of an Event of Default and (b) either (i) upon the
written demand of the Creditor at any time during such continuance or (ii)
immediately and automatically (without notice or action of any kind by the
Creditor) upon an Event of Default for which acceleration of the Loans is
automatic under the Promissory Note or upon the sale or other disposition of or
foreclosure upon the Collateral pursuant to the Promissory Note and applicable
law (including the transfer or other disposition of the Collateral by the
Assignor to the Creditor or its nominee in lieu of foreclosure).

                           Pursuant to the  Promissory  Note the  Assignor has
granted to the Creditor a continuing security interest in and lien on the
Collateral (including the Pledged Trademarks). The Promissory Note, and all
rights and interests of the Creditor in and to the Collateral (including the
Pledged Trademarks) thereunder, are hereby ratified and confirmed in all
respects. In no event shall this Trademark Agreement, the grant, assignment,
transfer and conveyance of the Pledged Trademarks hereunder, or the recordation
of this Trademark Agreement (or any document hereunder) with the PTO, adversely
affect or impair, in any way or to any extent, the Promissory Note, the security
interest of the Creditor in the Collateral (including the Pledged Trademarks)
pursuant to the Promissory Note and this Trademark Agreement, the attachment and
perfection of such security interest under the Code (including the security
interest in the Pledged Marks), or any present or future rights and interests of
the Creditor in and to the Collateral under or in connection with the Promissory




<PAGE>   34


Note, this Trademark Agreement or the Code. Any and all rights and interests of
the Creditor in and to the Pledged Trademarks (and any and all obligations of
the Assignor with respect to the Pledged Trademarks) provided herein, or arising
hereunder or in connection herewith, shall only supplement and be cumulative and
in addition to the rights and interests of the Creditor (and the obligations of
the Assignor) in, to or with respect to the Collateral (including the Pledged
Trademarks) provided in or arising under or in connection with the Promissory
Note and shall not be in derogation thereof.

         Section 3. Representations, Warranties and Covenants. The Assignor
represents, warrants and covenants that Schedule A sets forth a true and
complete list of all Trademarks and Trademark Registrations now owned, licensed,
controlled or used by the Assignor. With respect to the Domestic Trademarks, the
Assignor represents, warrants and covenants that (a) the Trademarks and
Trademark Registrations are subsisting and have not been adjudged invalid or
unenforceable, in whole or in part, and there is no litigation or proceeding
pending concerning the validity or enforceability of the Trademarks or Trademark
Registrations; (b) each of the Trademarks and Trademark Registrations is valid
and enforceable; (c) there is no infringement by others of the Trademarks,
Trademark Registrations or Trademark Rights; (d) no claim has been made that the
use of any of the Trademarks does or may violate the rights of any third person,
and to the best of the Assignor's knowledge, there is no infringement by the
Assignor of the trademark rights of others; (e) the Assignor is the sole and
exclusive owner of the entire and unencumbered right, title and interest in and
to each of the Trademarks (other than ownership and other rights reserved by
third party owners with respect to Trademarks that the Assignor is licensed to
use), free and clear of any liens, charges, encumbrances and adverse claims,
including pledges, assignments, licenses, registered user agreements and
covenants by the Assignor not to sue third persons, other than the security
interest and assignment created by the Promissory Note and this Trademark
Agreement; (f) the Assignor has the unqualified right to enter into this
Trademark Agreement and to perform its terms and has entered and will enter into
written agreements with each of its present and future employees, agents,
consultants, licensors and licensees that will enable them to comply with the
covenants herein contained; (h) the Assignor has used, and will continue to use,
proper statutory and other appropriate proprietary notices in connection with
its use of the Trademarks; (h) the Assignor has used, and will continue to use
for the duration of this Trademark Agreement, consistent standards of quality in
its manufacture and provision of products and services sold or provided under
the Trademarks; (i) this Trademark Agreement, together with the Promissory Note,
will create in favor of the Creditor a valid and perfected first priority
security interest in the Pledged Trademarks upon making the filings referred to
in clause (j) of this Section 3; and (j) except for the filing of financing
statements under the Code and the recording of this Trademark Agreement with the
PTO, no authorization, approval or other action by, and no notice to or filing
with, any governmental or regulatory authority, agency or office is required
either (i) for the grant by the Assignor or the effectiveness of the security
interest and assignment granted hereby or for the execution, delivery and
performance of this Trademark Agreement by the Assignor, or (ii) for the
perfection of or the exercise by the Creditor of any of its rights and remedies
hereunder.

         Section 4. Inspection Rights. The Assignor hereby grants to the
Creditor and its employees and agents the right to visit the Assignor's plants
and facilities that manufacture, inspect or store products sold under any of the
Trademarks, and to inspect the products and quality control records relating
thereto at reasonable times during regular business hours.

         Section 5. No Transfer or Inconsistent Agreements. Without the
Creditor's prior written consent and except for licenses of the Pledged
Trademarks in the ordinary course of the Assignor's business consistent with its
past practices, the Assignor will not (a) mortgage, pledge, assign, encumber,
grant a security interest in, transfer, license or alienate any of the Pledged
Trademarks, or (b) enter into any agreement (for example, a license agreement)
that is inconsistent with the Assignor's obligations under this Trademark
Agreement or the Promissory Note.

         Section 6. After-acquired Trademarks, Etc.

         (a) If, before the Liabilities shall have been finally paid and
satisfied in full, the Assignor shall obtain any right, title or interest in or
to any other or new Trademarks, Trademark Registrations or Trademark Rights, the
provisions of this Trademark Agreement shall automatically apply thereto and the
Assignor shall promptly provide to the Creditor notice thereof in writing and
execute and deliver to the Creditor such




<PAGE>   35


documents or instruments consistent with this Agreement as the Creditor may
reasonably request further to implement, preserve or evidence the Creditor's
interest therein.

                           The  Assignor  authorizes  the  Creditor  to modify
this Trademark Agreement and the Assignment of Marks, without the necessity of
the Assignor's further approval or signature, by amending Exhibit A hereto and
the Annex to the Assignment of Marks to include any future or other Trademarks,
Trademark Registrations or Trademark Rights under Section 2 or Section 6 herein.

         Section 7.        Trademark Prosecution.

                          1.     The Assignor shall assume full and complete
responsibility for the prosecution, defense, enforcement or any other necessary
or desirable actions in connection with the Pledged Trademarks, and shall hold
the Creditor harmless from any and all costs, damages, liabilities and expenses
that may be incurred by the Creditor in connection with the Creditor's interest
in the Pledged Trademarks or any other action or failure to act in connection
with this Trademark Agreement or the transactions contemplated hereby. In
respect of such responsibility, the Assignor shall retain trademark counsel
acceptable to the Creditor.

                          2.     The Assignor shall have the right and the duty,
through trademark counsel acceptable to the Creditor, to prosecute diligently
any trademark registration applications of the Trademarks pending as of the date
of this Trademark Agreement or thereafter, to preserve and maintain all rights
in the Trademarks and Trademark Registrations, including the filing of
appropriate renewal applications and other instruments to maintain in effect the
Trademark Registrations and the payment when due of all registration renewal
fees and other fees, taxes and other expenses that shall be incurred or that
shall accrue with respect to any of the Trademarks or Trademark Registrations.
Any expenses incurred in connection with such applications and actions shall be
borne by the Assignor. The Assignor shall not abandon any filed trademark
registration application, or any Trademark Registration or Trademark, without
the consent of the Creditor, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, to the extent any Foreign Trademark is not
material to the conduct of the Assignor's business in such jurisdiction, the
Assignor may, in the prudent exercise of its best judgment, choose not to
prosecute, preserve, maintain or enforce its rights with respect to a Foreign
Trademark without the prior written consent of the Creditor.

                          3.     The Assignor shall have the right and the duty
to bring suit or other action in the Assignor's own name to maintain and enforce
the Trademarks, the Trademark Registrations and the Trademark Rights. The
Assignor may require the Creditor to join in such suit or action as necessary to
assure the Assignor's ability to bring and maintain any such suit or action in
any proper forum if (but only if) the Creditor is completely satisfied that such
joinder will not subject the Creditor to any risk of liability. The Assignor
shall promptly, upon demand, reimburse and indemnify the Creditor for all
damages, costs and expenses, including legal fees, incurred by the Creditor
pursuant to this Section 7(c). Notwithstanding the foregoing, to the extent any
Foreign Trademark is not material to the conduct of the Assignor's business in
such jurisdiction, the Assignor may, in the prudent exercise of its best
judgment, choose not to prosecute, preserve, maintain or enforce its rights with
respect to a Foreign Trademark without the prior written consent of the
Creditor.

                          4.     Subject to (b) and (c) above, with respect to
Foreign Trademarks, the Assignor shall take any and all such actions (including
institution and maintenance of suits, proceedings or actions) as may be
necessary or appropriate to properly maintain, protect, preserve, care for and
enforce the Pledged Trademarks and Assignor shall not take or fail to take any
action, nor permit any action to be taken or not taken by others under its
control, that would adversely affect the validity, grant or enforcement of the
Pledged Trademarks.

         (e) Promptly upon obtaining knowledge thereof, the Assignor will notify
the Creditor in writing of the institution of, or any final adverse
determination in, any proceeding in the PTO or any similar office or agency of
the United States or any foreign country, or any court, regarding the validity
of any of the Trademarks or Trademark Registrations or the Assignor's rights,
title or interests in and to the Pledged Trademarks, and of any event that does
or reasonably could materially adversely affect the value of any of the Pledged
Trademarks, the ability of the Assignor or the Creditor to dispose of any of the
Pledged




<PAGE>   36


Trademarks or the rights and remedies of the Creditor in relation thereto
(including but not limited to the levy of any legal process against any of the
Pledged Trademarks).

         Section 8. Remedies. Upon the occurrence and during the continuance of
an Event of Default, the Creditor shall have, in addition to all other rights
and remedies given it by this Trademark Agreement (including, without
limitation, those set forth in Section 2.(b)), the Promissory Note, those
allowed by law and the rights and remedies of a secured party under the Code as
enacted in the State of California, and, without limiting the generality of the
foregoing, the Creditor may immediately, without demand of performance and
without other notice (except as set forth next below) or demand whatsoever to
the Assignor, all of which are hereby expressly waived, sell or license at
public or private sale or otherwise realize upon the whole or from time to time
any part of the Pledged Trademarks, or any interest that the Assignor may have
therein, and after deducting from the proceeds of sale or other disposition of
the Pledged Trademarks all expenses incurred by the Creditor in attempting to
enforce this Trademark Agreement (including all reasonable expenses for broker's
fees and legal services), shall apply the residue of such proceeds toward the
payment of the Liabilities as set forth in or by reference in the Promissory
Note. Assignor agrees that, to the extent notice of any sale, license or other
disposition of the Pledged Trademarks shall be required by law, at least ten
(10) days' notice to the Assignor of the time and place of any such sale,
license or disposition is to be made shall constitute reasonable notification.
At any such sale or other disposition, the Creditor may, to the extent permitted
under applicable law, purchase or license the whole or any part of the Pledged
Trademarks or interests therein sold, licensed or otherwise disposed of. The
Creditor shall have no obligation to make any sale of the Pledged Trademarks
regardless of the notice of sale having been given.

         Section 9. Collateral Protection. If the Assignor shall fail to do any
act that it has covenanted to do hereunder, or if any representation or warranty
of the Assignor shall be breached, the Creditor, in its own name or that of the
Assignor (in the sole discretion of the Creditor), may (but shall not be
obligated to) do such act or remedy such breach (or cause such act to be done or
such breach to be remedied), and the Assignor agrees promptly to reimburse the
Creditor for any cost or expense incurred by the Creditor in so doing.

         Section 10. Power of Attorney. If any Event of Default shall have
occurred and be continuing, the Assignor does hereby make, constitute and
appoint the Creditor (and any officer or agent of the Creditor as the Creditor
may select in its exclusive discretion) as the Assignor's true and lawful
attorney-in-fact, with full power of substitution and with the power to endorse
the Assignor's name on all applications, documents, papers and instruments
necessary for the Creditor to use the Pledged Trademarks, or to grant or issue
any exclusive or nonexclusive license of any of the Pledged Trademarks to any
third person, or to take any and all actions necessary for the Creditor to
assign, pledge, convey or otherwise transfer title in or dispose of any of the
Pledged Trademarks or any interest of the Assignor therein to any third person,
and, in general, to execute and deliver any instruments or documents and do all
other acts that the Assignor is obligated to execute and do hereunder. The
Assignor hereby ratifies all that such attorney shall lawfully do or cause to be
done by virtue hereof and releases the Creditor from any claims, liabilities,
causes of action or demands arising out of or in connection with any action
taken or omitted to be taken by the Creditor under this power of attorney
(except for the Creditor's gross negligence or willful misconduct). This power
of attorney is coupled with an interest and shall be irrevocable for the
duration of this Trademark Agreement.

         Section 11. Further Assurances. The Assignor shall, at any time and
from time to time, and at its expense, make, execute, acknowledge and deliver,
and file and record as necessary or appropriate with governmental or regulatory
authorities, agencies or offices, such agreements, assignments, documents and
instruments, and do such other and further acts and things (including, without
limitation, obtaining consents of third parties), as the Creditor may request or
as may be necessary or appropriate in order to implement and effect fully the
intentions, purposes and provisions of this Trademark Agreement, or to assure
and confirm to the Creditor the grant, perfection and priority of the Creditor's
security interest in the Pledged Trademarks.

         Section 12. Termination. At such time as all of the Liabilities have
been finally paid and satisfied in full, this Trademark Agreement shall
terminate and the Creditor shall, upon the written request and at the expense of
the Assignor, execute and deliver to the Assignor all deeds, assignments and
other instruments as may be necessary or proper to reassign and reconvey to and
re-vest in the Assignor the entire right, title and interest to the Pledged
Trademarks previously granted, assigned, transferred and conveyed to the
Creditor by the Assignor pursuant to this Trademark Agreement, as fully as if
this Trademark Agreement had




<PAGE>   37


not been made, subject to any disposition of all or any part thereof that may
have been made by the Creditor pursuant hereto or the Promissory Note.

         Section 13. Course of Dealing. No course of dealing between the
Assignor and the Creditor, nor any failure to exercise, nor any delay in
exercising, on the part of the Creditor, any right, power or privilege hereunder
or under the Promissory Note or any other agreement shall operate as a waiver
thereof; nor shall any single or partial exercise of any right, power or
privilege hereunder or thereunder preclude any other or further exercise thereof
or the exercise of any other right, power or privilege.

         Section 14. Expenses. Any and all fees, costs and expenses, of whatever
kind or nature, including the reasonable attorneys' fees and expenses incurred
by the Creditor in connection with the preparation of this Trademark Agreement
and all other documents relating hereto, the consummation of the transactions
contemplated hereby or the enforcement hereof, the filing or recording of any
documents (including all taxes in connection therewith) in public offices, the
payment or discharge of any taxes, counsel fees, maintenance or renewal fees,
encumbrances, or otherwise protecting, maintaining or preserving the Pledged
Trademarks, or in defending or prosecuting any actions or proceedings arising
out of or related to the Pledged Trademarks, shall be borne and paid by the
Assignor. Notwithstanding the foregoing, the Assignor shall not be required to
bear the cost of prosecution, preservation or enforcement of its rights with
respect to a Foreign Trademark unless the Assignor shall have determined, in the
prudent exercise of its best judgement, to undertake such prosecution,
preservation, maintenance or enforcement.

         Section 15. Overdue Amounts. Until paid, all amounts due and payable by
the Assignor hereunder shall be a debt secured by the Pledged Trademarks and
other Collateral and shall bear, whether before or after judgment, interest at
the rate of interest for overdue principal set forth in the Promissory Note.

         SECTION 16. NO ASSUMPTION OF LIABILITY; INDEMNIFICATION.
NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, THE CREDITOR ASSUMES
NO LIABILITIES OF THE ASSIGNOR WITH RESPECT TO ANY CLAIM OR CLAIMS REGARDING THE
ASSIGNOR'S OWNERSHIP OR PURPORTED OWNERSHIP OF, OR RIGHTS OR PURPORTED RIGHTS
ARISING FROM, ANY OF THE PLEDGED TRADEMARKS OR ANY USE, LICENSE OR SUBLICENSE
THEREOF, WHETHER ARISING OUT OF ANY PAST, CURRENT OR FUTURE EVENT, CIRCUMSTANCE,
ACT OR OMISSION OR OTHERWISE. ALL OF SUCH LIABILITIES SHALL BE EXCLUSIVELY THE
RESPONSIBILITY OF THE ASSIGNOR, AND THE ASSIGNOR SHALL INDEMNIFY THE CREDITOR
FOR ANY AND ALL COSTS, EXPENSES, DAMAGES AND CLAIMS, INCLUDING LEGAL FEES,
INCURRED BY THE CREDITOR WITH RESPECT TO SUCH LIABILITIES.

         Section 17. Notices. All notices and other communications made or
required to be given pursuant to this Trademark Agreement shall be in writing
and either by letter (delivered by hand or sent by certified mail, return
receipt requested), by facsimile or telegram, addressed as follows:

                           (a)      if to the  Assignor,  at 15295  Coleman
Valley Road, Occidental, California 95465, Attention: President, Facsimile
Number:707-874-2238 or at such other address for notice as the Assignor shall
last have furnished in writing to the person giving the notice; and

                           (b)      if to the  Creditor,  at 12 East 33rd
Street, 12th Floor, New York, New York 10016 Attention: President, Facsimile
Number: 212-725-4678 or at such other address for notice as the Creditor shall
last have furnished in writing to the person giving the notice.

         Any such notice or demand shall be deemed to have been duly given or
made and to have become effective when deposited in the mail, postage prepaid,
or, in the case of facsimile, when received and such receipt is confirmed by a
subsequent telephone conversation, or, in the case of telegraphic notice, when
delivered to the telegraph company, addressed as aforesaid.

         Section 18. Amendment and Waiver. This Trademark Agreement is subject
to modification only by a writing signed by the Creditor and the Assignor,
except as provided in Section 6.2. The Creditor shall not




<PAGE>   38


be deemed to have waived any right hereunder unless such waiver shall be in
writing and signed by the Creditor. A waiver on any one occasion shall not be
construed as a bar to or waiver of any right on any future occasion.

         SECTION 19. GOVERNING LAW; CONSENT TO JURISDICTION. THIS TRADEMARK
AGREEMENT IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK. The Assignor agrees that any suit for the enforcement of this Trademark
Agreement may be brought in the courts of the State of New York or any federal
court sitting therein and consents to the non-exclusive jurisdiction of such
court and to service of process in any such suit being made upon the Assignor by
mail at the address specified in Section 17. The Assignor hereby waives any
objection that it may now or hereafter have to the venue of any such suit or any
such court or that such suit is brought in an inconvenient court.

         Section 20. Waiver of Jury Trial. THE ASSIGNOR WAIVES ITS RIGHT TO A
JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN
CONNECTION WITH THIS TRADEMARK AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR
THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law,
the Assignor waives any right which it may have to claim or recover in any
litigation referred to in the preceding sentence any special, exemplary,
punitive or consequential damages or any damages other than, or in, addition to,
actual damages. The Assignor (a) certifies that neither the Creditor nor any
representative, agent or attorney of the Creditor has represented, expressly or
otherwise, that the Creditor would not, in the event of litigation, seek to
enforce the foregoing waivers, and (b) acknowledges that, in entering into the
Promissory Note to which the Creditor is a party, the Creditor is relying upon,
among other things, the waivers and certifications contained in this Section 20.

         Section 21. Miscellaneous. The headings of each section of this
Trademark Agreement are for convenience only and shall not define or limit the
provisions thereof. This Trademark Agreement and all rights and obligations
hereunder shall be binding upon the Assignor and its respective successors and
assigns, and shall inure to the benefit of the Creditor and its successors and
assigns. In the event of any irreconcilable conflict between the provisions of
this Trademark Agreement and the Promissory Note, the provisions of the
Promissory Note shall control. If any term of this Trademark Agreement shall be
held to be invalid, illegal or unenforceable, the validity of all other terms
hereof shall in no way be affected thereby, and this Trademark Agreement shall
be construed and be enforceable as if such invalid, illegal or unenforceable
term had not been included herein. The Assignor acknowledges receipt of a copy
of this Trademark Agreement.

         IN WITNESS WHEREOF, this Trademark Agreement has been executed as of
the day and year first above written.

                               ANIMAL TOWN, INC.


                               By:
                                  ----------------------------
                                  Name:
                                  Title:


                               KINGS ROAD ENTERTAINMENT, INC.


                               By:
                                  ---------------------------
                                  Name:
                                  Title:





<PAGE>   39


                                   SCHEDULE A

                             EXCLUDED RELATED ASSETS

Games entitled:


Save the Whales
Nectar Collector
Back to the Farm
Peter Principle Game
Dam Builders
Madison Avenue
Chicken in Every Plot

Games under development entitled:

Rainbowland
Elephants, Rhinos & Hippos
Deliver the Mail

Other:

Kolsbun Family Film and Photo Archives
Cyberside Kick Dolls
Guardian Angel Dolls
Story of the Peace Symbol manuscript
Peace Symbol.com




<PAGE>   40


                                   SCHEDULE B

                 TRADEMARKS AND TRADEMARK REGISTRATION: DOMESTIC

  Trademark                           Registrations
     or                  United States Patent and Trademark Office
Service Mark         Registration No.                   Registration Date
-------------        ----------------                   -----------------
ANIMAL TOWN            1192189                                 03/16/1982
  GAME CO.

MISCELLANEOUS          1677189                                 02/25/1992
DESIGN

ANIMAL TOWN            1689421                                 05/26/1992

BACK TO THE FARM       2035584                                 02/04/1997



Trademark                       Pending Applications
or                    United States Patent and Trademark Office
Service Mark                          Serial No.                     Filing Date
------------                          ----------                     -----------

None


--------------------------------------------------------------------------------


                 TRADEMARKS AND TRADEMARK REGISTRATION: FOREIGN

                             Trademark Registrations

                Trademark
                    or
Country        Service Mark       Registration No.        Registration Date
--------       ------------       ----------------        -----------------

None

                              Pending Applications

                      Trademark
                             or

Country        Service Mark             Serial No.        Filing Date
--------       ------------             ----------        -----------

None


<PAGE>   41



                                    EXHIBIT I

                ASSIGNMENT OF TRADEMARKS AND SERVICE MARKS (U.S.)

        WHEREAS, Animal Town, Inc. , a California corporation having its
principal place of business at 15295 Coleman Valley Road, Occidental, California
95465 (the "Assignor"), has adopted and used and is using the trademarks and
service marks (the "Marks") identified on the Annex hereto, and is the owner of
the registrations of and pending registration applications for such Marks in the
United States Patent and Trademark Office identified on such Annex; and

        WHEREAS,  King's Road  Entertainment,  Inc.  (the  "Assignee"),  is
desirous of acquiring the Marks and the registrations thereof and registration
applications therefor;

        NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the Assignor does hereby assign, sell and transfer unto the
Assignee all right, title and interest in and to the Marks, together with (a)
the registrations of and registration applications for the Marks, (b) the
goodwill of the business symbolized by and associated with the Marks and the
registrations thereof, and (c) the right to sue and recover for, and the right
to profits or damages due or accrued arising out of or in connection with, any
and all past, present or future infringements or dilution of or damage or injury
to the Marks or the registrations thereof or such associated goodwill.

        This Assignment of Trademarks and Service Marks (U.S.) is intended to
and shall take effect as a sealed instrument at such time as the Assignee shall
complete this instrument by inserting its name in the second paragraph above and
signing its acceptance of this Assignment of Trademarks and Service Marks (U.S.)
below.

        IN WITNESS WHEREOF, the Assignor, by its duly authorized officer, has
executed this assignment, as an instrument under seal, on this __ day of June
2000.

                              ANIMAL TOWN, INC.


                              By:
                                 -----------------------------------------------
                                 Name:
                                 Title:



The foregoing assignment of the Marks and the registrations thereof and
registration applications therefor by the Assignor to the Assignee is hereby
accepted as of this __ day of June 2000.

                              KING'S ROAD ENTERTAINMENT, INC.


                              By:
                                 -----------------------------------------------
                                 Name:
                                 Title:




<PAGE>   42


                                   EXHIBIT VI

                           COMPANY'S PROJECTED BUDGET
                          JULY, 2000 THROUGH JUNE, 2001