<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
/x/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1995 OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________________ TO ________________
COMMISSION FILE NUMBER: 1-6739
SPELLING ENTERTAINMENT GROUP INC.
(Exact name of registrant as specified in its charter)
DELAWARE 59-0862100
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5700 WILSHIRE BOULEVARD
LOS ANGELES, CALIFORNIA 90036
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (213) 965-5700
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
----- ------
On August 10, 1995, the registrant had outstanding 88,401,244 shares of
Common Stock, $.10 par value.
1
<PAGE> 2
SPELLING ENTERTAINMENT GROUP INC.
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
Unaudited Condensed Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 3
Unaudited Condensed Consolidated Statements of
Operations - Three Months and Six Months Ended
June 30, 1995 and 1994 4
Unaudited Condensed Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1995 and 1994 5
Notes to Unaudited Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 12
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 17
</TABLE>
2
<PAGE> 3
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
--------- ------------
<S> <C> <C>
ASSETS:
Cash and cash equivalents $ 14,497 $ 22,400
Accounts receivable, net 197,080 242,127
Entertainment product, net 323,776 325,643
Property, plant and equipment, net 22,283 16,161
Other assets 23,538 19,678
Intangible assets, net 392,683 400,751
--------- ----------
$ 973,857 $1,026,760
========= ==========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable, accrued expenses and other liabilities $ 50,984 $ 101,484
Accrued participation expense 91,300 83,493
Deferred revenue 1,507 11,275
Bank and other debt 241,994 248,853
Income and other taxes 28,911 24,355
Net liabilities related to discontinued operations 22,113 27,061
--------- ----------
Total Liabilities 436,809 496,521
--------- ----------
Minority interest 1,155 1,792
Commitments and contingent liabilities
Shareholders' Equity:
Preferred stock, $.10 par value; authorized
20,000,000 shares; none outstanding - -
Common stock, $.10 par value; authorized
300,000,000 shares; issued and outstanding
88,352,411 and 87,983,329 shares, respectively 8,835 8,798
Capital in excess of par value 548,671 546,843
Accumulated deficit (20,703) (27,287)
Cumulative translation adjustment (910) 93
--------- ----------
Total Shareholders' Equity 535,893 528,447
--------- ----------
$ 973,857 $1,026,760
========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- -----------------------
1995 1994 1995 1994
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Revenue $135,332 $84,232 $320,480 $164,645
Costs and expenses:
Entertainment product costs 106,115 57,646 250,857 117,177
Selling, general and administrative 24,544 9,885 47,911 18,616
-------- ------- -------- --------
Operating income 4,673 16,701 21,712 28,852
Interest income 525 810 1,582 1,334
Interest expense (4,147) (2,245) (8,846) (2,901)
Other income, net 61 10 114 10
-------- ------- -------- --------
Income from continuing operations
before income taxes and minority interest 1,112 15,276 14,562 27,295
Provision for income taxes 842 6,569 7,048 11,734
-------- ------- -------- --------
Income from continuing operations
before minority interest 270 8,707 7,514 15,561
Minority interest in loss (610) - (637) -
-------- ------- -------- --------
Net income $ 880 $ 8,707 $ 8,151 $ 15,561
======== ======= ======== ========
Average number of common and
common equivalent shares 88,327 64,819 88,254 64,698
======== ======= ======== ========
Net income per common and
common equivalent share $ 0.01 $ 0.13 $ 0.09 $ 0.24
======== ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------------
1995 1994
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,151 $ 15,561
Adjustments to reconcile net income to cash flows
from operating activities:
Depreciation and amortization 7,859 2,855
Amortization of entertainment product costs 225,387 82,307
Additions to entertainment product costs (220,607) (96,671)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 45,047 (7,479)
Increase (decrease) in accounts payable,
accrued expenses, other liabilities and income taxes (44,850) 1,391
Increase in accrued participation expenses 7,807 271
Decrease in deferred revenue (9,768) (4,779)
Other, net (8,337) 8,121
--------- ---------
10,689 1,577
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment, net (8,650) (732)
Changes in net liabilities related to
discontinued operations (4,948) (2,220)
Purchase of Republic,
net of cash acquired - (101,214)
--------- ---------
(13,598) (104,166)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under credit facilities 18,000 172,500
Repayments of credit facilities (24,859) (72,079)
Cash dividends paid on Common Stock - (2,591)
Issuances of Common Stock 1,865 2,623
--------- ---------
(4,994) 100,453
--------- ---------
DECREASE IN CASH AND CASH EQUIVALENTS (7,903) (2,136)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 22,400 12,682
--------- ---------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 14,497 $ 10,546
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables)
1. INTERIM FINANCIAL STATEMENTS
The accompanying unaudited condensed consolidated financial statements of
Spelling Entertainment Group Inc. and subsidiaries (the "Company") have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. The Company believes that the disclosures contained herein are
adequate to make the information presented not misleading; however, these
unaudited condensed consolidated financial statements should be read in
conjunction with the more detailed financial statements and notes thereto
included in the Company's most recent Annual Report on Form 10-K.
The financial statements reflect, in the opinion of management, all normal
recurring adjustments necessary to present fairly the Company's financial
position and results of operations. In order to maintain consistency and
comparability between periods presented, certain amounts have been reclassified
from the previously reported financial statements in order to conform with the
financial statement presentation in the current period.
Blockbuster Entertainment Corporation ("BEC") owned 67,673,702 shares of the
Company's outstanding common stock ("Common Stock") at September 29, 1994.
Effective as of that date, BEC merged with and into Viacom Inc. ("Viacom"),
with Viacom being the surviving corporation. As a result of the merger, Viacom
currently owns approximately 77% of the Company's Common Stock.
The first quarter of 1995 reflects $5,026,000 of operating income that resulted
from the Company conforming its accounting policies with respect to Statement
of Financial Accounting Standards ("SFAS") No. 53 to those of Viacom. In
addition, such operating income includes a net adjustment of approximately
$5,500,000 attributable to prior years.
2. MERGER AND ACQUISITION
On April 26, 1994, the Company, acquired all of the outstanding shares of
Republic Entertainment Inc. (formerly Republic Pictures Corporation)
("Republic"), through a cash merger (the "Merger").
On July 30, 1994, the Company acquired from BEC (the "Acquisition") 8,686,984
ordinary shares (the "Ordinary Shares") of Virgin Interactive Entertainment
Limited ("VIEL", together with its subsidiaries, "VIE") and an option to
acquire 550,000 Ordinary Shares of VIEL (collectively, the "VIE Interests") in
exchange for 22,015,062 shares of the Company's Common Stock. BEC had acquired
a majority of the VIE Interests from third parties on July 29, 1994. As a
result of the Acquisition, the Company acquired approximately 90% of VIEL's
Ordinary Shares.
In connection with the Acquisition, the Company also entered into put- and
call-option agreements with respect to the Ordinary Shares of VIEL not then
owned by the Company. Under
6
<PAGE> 7
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables)
(Continued)
these agreements the Company may acquire, or be required by Viacom to purchase,
these shares from Viacom at an agreed-upon price. At the option of the
Company, such purchase price may be paid in cash or shares of the Company's
Common Stock. On June 8, 1995, Blockbuster Entertainment Group ("BEG") acquired
the remaining Ordinary Shares of VIEL not owned by the Company for
approximately $22,973,000 plus other costs associated with the transaction.
BEG has agreed to extend the put- and call-option agreements, which
originally had a term of 30 days from June 8, 1995, for a period of 120 days.
(See Note 10.)
The Company has accounted for the Merger and the Acquisition under the purchase
method of accounting. The results of operations of Republic and VIE are
included in the Company's results of operations subsequent to acquisition. The
assets and liabilities of Republic and VIE are included in the accompanying
condensed consolidated balance sheets as of June 30, 1995 and December 31,
1994, at fair value, with the differences between purchase price and such fair
values being included in intangible assets. The excess of the purchase price
over net assets and liabilities acquired is being amortized on a straight-line
basis over forty years.
3. ENTERTAINMENT PRODUCT, NET
Entertainment product, net, includes production or acquisition costs (including
advance payments to producers), capitalized overhead and interest, home video
and interactive manufacturing costs, and prints, advertising and other related
distribution costs expected to benefit future periods. These costs are
amortized, and third-party participations and residuals are accrued, on an
individual product basis in the ratio that current year gross revenue bears to
estimated future gross revenue.
Entertainment product, net, is stated at the lower of cost less amortization or
estimated net realizable value, generally on an individual film product basis.
Estimates of total gross revenue, costs and participations are reviewed
quarterly and revised as necessary. When estimates of total revenue and costs
indicate that an individual product will realize an ultimate loss, additional
amortization is provided to fully recognize such loss in that period.
Entertainment product, net is comprised of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Entertainment product:
Released $186,113 $162,147
In process and other 8,717 53,615
Entertainment product rights 128,946 109,881
-------- --------
$323,776 $325,643
======== ========
</TABLE>
7
<PAGE> 8
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables)
(Continued)
Entertainment product rights include advances to producers and acquisition
costs for distribution or other rights to entertainment product not produced by
the Company.
4. DEBT
Debt consisted of the following:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
-------- ------------
<S> <C> <C>
Viacom Facility, average interest at
7.06% at June 30, 1995 $170,000 $181,805
Credit Agreement, average interest at
6.87% at June 30, 1995 71,247 54,313
UK Facility, interest at 7.13%
at June 30, 1995 693 8,943
Other credit facilities 54 3,792
-------- --------
$241,994 $248,853
======== ========
</TABLE>
In January 1994, the Company entered into a three-year credit agreement with
BEC. As a result of the merger of BEC with and into Viacom, Viacom succeeded
to BEC's position under the credit agreement (the "Viacom Facility"). This
agreement was amended and restated in January 1995 to reflect certain
amendments to the facility which were effective as of December 7, 1994,
including a $25,000,000 increase in the amount available under the facility.
The Viacom Facility, as amended, provides for (i) a term loan of $100,000,000
and (ii) a revolving credit facility of $100,000,000 to fund the Company's
working capital and other requirements. All outstanding borrowings mature on
March 31, 1997. Under the Viacom Facility, the Company pays an annual fee
(currently 0.3125%) based on the unused portion of the facility, as well as
certain facility and administration fees, all based on the similar fees payable
by Viacom under its separate credit facilities. Interest on all outstanding
borrowings is payable, at the Company's option, at LIBOR plus a spread
(currently 1.0%) or at prime rate; both rates are determined by reference to
the corresponding rates payable by Viacom under its separate credit facilities.
Borrowings under the Viacom Facility are secured by all of the assets of the
Company and its domestic subsidiaries and the entire amount outstanding under
the Viacom Facility may be accelerated if Viacom's borrowings under its
separate credit facilities were to be accelerated. Borrowings under the Viacom
Facility will be accelerated in the event of a "change in control," as defined
in the Viacom Facility, of the Company. (See Note 10.)
On December 23, 1993, a wholly-owned subsidiary of VIEL established a
multi-currency credit agreement with a bank in the U.S. (the "Credit
Agreement"). The Credit Agreement initially provided for maximum borrowings of
$15,000,000, subject to a borrowing base test. Following the Acquisition, the
8
<PAGE> 9
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables)
(Continued)
amount of borrowings allowable under the Credit Agreement was increased to
$75,000,000, and the borrowing base test and other ratio tests were eliminated,
based on the guarantee of all borrowings under the Credit Agreement by BEC (now
Viacom). All outstanding borrowings under the Credit Agreement are due March
31, 1996. Interest is payable monthly at the bank's reference rate or, at the
Company's option, certain alternative rates. Additionally, the Company must
pay a commitment fee of 0.125% on the unused portion of the available credit.
On September 8, 1993, another wholly-owned subsidiary of VIEL established a
5,000,000 pounds sterling credit facility (the "UK Facility") with a bank in the
United Kingdom. On April 12, 1994, the UK Facility was increased to
10,000,000 pounds sterling, based in part on the personal guarantee of two of
the directors of the subsidiary. Following the Acquisition, the Company
guaranteed the UK Facility and the guarantees of the two directors were
terminated. (See Note 2.) Advances under the credit facility bear interest at
the bank's prime rate plus 1.5% and are due on demand. The UK Facility matures
on April 30, 2005.
During the first quarter of 1995, the Company's other credit facilities were
substantially paid off and terminated.
Pursuant to the separate credit facilities under which Viacom is a borrower,
certain subsidiaries of Viacom, including the Company, are restricted from
incurring indebtedness (other than indebtedness owing to Viacom) without the
prior consent of Viacom's lenders. Such consent has been given with respect to
the Credit Agreement and the UK Facility.
5. SHAREHOLDERS' EQUITY
The following is a summary of the changes in the components of shareholders'
equity:
<TABLE>
<CAPTION>
Capital In Cumulative
Common Excess of Accumulated Translation
Stock Par Value Deficit Adjustment Total
------- ---------- ----------- ----------- --------
<S> <C> <C> <C> <C> <C>
Balance at
December 31, 1994 $8,798 $546,843 $(27,287) $ 93 $528,447
Sales of common stock 37 1,828 - - 1,865
Unrealized holding loss, net - - (1,567) - (1,567)
Net income for the period - - 8,151 - 8,151
Cumulative translation adjustment - - - (1,003) (1,003)
------ -------- -------- ------- --------
Balance at June 30, 1995 $8,835 $548,671 $(20,703) $ (910) $535,893
====== ======== ======== ======= ========
</TABLE>
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." This statement requires the
Company to adjust the carrying value of common stock investments, which are
classified as "available for sale" under the applicable provisions of
9
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SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables)
(Continued)
SFAS No. 115, to fair market value with a corresponding adjustment to
Shareholders' Equity. The adjustment recorded in the six months ended June 30,
1995 was a decrease of $1,567,000, net of tax. The carrying value of these
investments is included in other assets.
6. INCOME TAXES
Income taxes have been provided in each period based on the Company's
anticipated annual effective income tax rate.
7. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share amounts are based on the
weighted average number of common shares outstanding during the respective
periods. Primary and fully-diluted net income per common and common equivalent
share are not presented as they result in a dilution of less than 3% from basic
net income per common and common equivalent share.
8. LEGAL MATTERS
The Company is involved in certain legal proceedings which arise in the
ordinary course of conducting its entertainment business operations. The
Company believes such legal proceedings should not have a material adverse
effect on the Company's consolidated results of operations or financial
condition.
The Company also is subject to pending and contingent claims relating to the
Company's discontinued operations, including certain claims involving
environmental matters. Some of the parties involved in such actions seek
significant damages. While the outcome of these claims cannot be predicted
with certainty, the Company believes based upon (i) its knowledge of the facts
and circumstances and applicable law; (ii) allowances for estimated losses on
disposal of the discontinued operations, and (iii) an indemnity agreement, that
the ultimate resolution of such suits and claims will not have a material
adverse effect on the Company's consolidated results of operations or financial
condition.
9. RELATED PARTY TRANSACTIONS
See Note 4 regarding the Company's credit facility with Viacom and Viacom's
guarantee of the Company's credit agreement with a bank. The Company paid
interest and fees to Viacom of $5,279,000 and to BEC of $1,922,000 during the
six months ended June 30, 1995 and 1994, respectively, in connection with this
facility.
10
<PAGE> 11
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
(000's omitted in all tables)
(Continued)
During the six months ended June 30, 1995 and 1994, the Company recorded
revenue, net of returns, of approximately $1,806,000 and $372,000,
respectively, from the sale of home videocassettes and interactive
entertainment product to BEG.
At June 30, 1995, the Company had a net receivable due from BEG of
approximately $683,000 resulting from these sales and associated returns.
Viacom (BEC) provided the Company with management services for which the
Company was charged $300,000 by Viacom and $250,000 by BEC for the six months
ended June 30, 1995 and 1994, respectively. As of June 30, 1995, the Company
had a net payable to Viacom of approximately $887,000 with respect to these and
other expenses.
Prior and subsequent to the merger of BEC into Viacom, the Company licensed
certain entertainment product to Showtime Networks Inc. ("Showtime"), a
subsidiary of Viacom, and certain television stations owned by Viacom. Revenue
from sales to Showtime were not material for the six months ended June 30,
1995. Sales to the television stations consist of both cash and barter
contracts. Revenue from cash contracts was $710,000 for the six months ended
June 30, 1995 and the Company has a receivable due from Viacom of $2,221,000 as
of June 30, 1995. The Company realized $437,000 in revenue from third-party
advertisers with respect to the sale of advertising time received under the
barter contracts.
Additionally, prior and subsequent to the merger of BEC into Viacom, the
Company licensed certain entertainment product to USA Network and Sci-Fi
Channel in which Viacom has equity interests. Revenue from such sales were
$3,423,000 for the six months ended June 30, 1995, and the Company has
receivables at June 30, 1995 due from USA Network and Sci-Fi Channel of
$5,395,000 associated with such sales.
In the ordinary course of business, the Company has and expects to continue to
do business with Viacom and it affiliates, including BEG, Showtime, Nickelodeon
and Paramount Pictures Corporation.
10. SUBSEQUENT EVENTS
On August 10, 1995, Viacom announced its intent to sell the Company, and that
it has retained an investment banking firm to identify qualified purchasers and
to assist in the evaluation of proposals. Viacom also announced its intention
to acquire the Company's interest in VIE. An independent committee of the
Company's board of directors will be formed to negotiate the terms of the VIE
transaction.
11
<PAGE> 12
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(000's omitted in all tables)
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the Company's
unaudited condensed consolidated financial statements and the related notes
thereto. References to Notes refer to the notes to such statements.
RESULTS OF CONTINUING OPERATIONS
The results of operations for any period are significantly affected by the
quantity and performance of the Company's entertainment product which is
licensed or sold to, and available for exhibition by, licensees or customers in
various media and territories. Consequently, results of operations may vary
significantly between periods, and the results of operations in any one period
may not be indicative of results of operations in future periods.
REVENUE
The following table sets forth the components of revenue from the Company's
major media and markets for the three months and six months ended June 30:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------- -------------------------
1995* 1994 1995* 1994
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Television Distribution $ 80,332 $64,013 $204,913 $131,642
Worldwide interactive entertainment 31,994 - 68,258 -
Worldwide home video 14,015 15,847 33,005 19,866
International film distribution 3,658 2,092 5,667 4,196
Worldwide licensing and merchandising 4,125 1,612 7,306 6,576
Other 1,208 668 1,331 2,365
-------- ------- -------- --------
$135,332 $84,232 $320,480 $164,645
======== ======= ======== ========
</TABLE>
* Includes operations of Republic and VIE, which were acquired in the second
and third quarters of 1994, respectively, for the full period.
12
<PAGE> 13
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(000's omitted in all tables)
(Continued)
Television programming revenue is derived from network license fees, first-run
syndication sales and fees arising from domestic and international television
licensing agreements. During the initial years of a one-hour network
television series, network and international license fees normally approximate
the production costs of the series, and accordingly the Company recognizes only
minimal profit or loss during this period. With respect to half-hour network
television programming and first-run syndication television programming, the
production costs can significantly exceed the combination of the network or
other domestic revenue and international license fees. However, if a
sufficient number of episodes of a series are produced, the Company is
reasonably assured that it will also be able to sell the series in the domestic
off-network market, and the Company would then expect to be able to reduce its
loss or realize a profit with respect to the series.
Revenue from television distribution increased $16,319,000 and $73,271,000
during the three and six months ended June 30, 1995, respectively, compared to
the similar periods in 1994. These increases arose primarily from (i) higher
per episode network license fees; (ii) the delivery of five television pilots
to the networks in the second quarter of 1995; (iii) the distribution of
"Beverly Hills, 90210" in domestic syndication; (iv) the distribution of
programming in the first-run syndication market; (v) higher revenue from the
exploitation of the Company's library, including revenue recognized in the
first quarter of 1995 attributable to prior periods; and (vi) the effect
recorded in the first quarter of 1995 of conforming the Company's accounting
policies to those of Viacom (see Note 1).
Revenue from interactive entertainment product resulted from the acquisition of
VIE during the third quarter of 1994. Due to the seasonal nature of the market
for interactive entertainment product, VIE's revenue is generally highest in
the fourth quarter each year. A significant portion of the interactive
entertainment product revenue is denominated in foreign currencies and as such
is subject to exchange fluctuations.
International film distribution revenue increased $1,566,000 and $1,471,000 for
the three and six months ended June 30, 1995, respectively, from the comparable
periods in 1994, due primarily to a larger number of titles in release.
Home video revenue decreased $1,832,000 for the three month period and
increased $13,139,000 for the six month period ended June 30, 1995, from the
comparable periods in 1994. The decrease in the three month period is
primarily due to the larger number of titles released at sell-thru prices in
1995. The increase for the six month period is primarily a result of the
acquisition of the operations of Republic.
Licensing and merchandising revenue increased $2,513,000 and $730,000 for the
three months and six months ended June 30, 1995, respectively, from the
comparable periods in 1994. The increase was primarily due to increased
licensing revenue with respect to third-party product which was partially
offset by the decline in licensing revenue related to "Beverly Hills, 90210."
13
<PAGE> 14
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(000's omitted in all tables)
(Continued)
ENTERTAINMENT PRODUCT COSTS
Entertainment product costs consist primarily of the amortization of
capitalized product costs and the accrual of third-party participations and
residuals. The increases in such costs of $48,469,000 and $133,680,000 during
the three months and six months ended June 30, 1995, respectively, as compared
to the same periods in 1994, resulted primarily from the increases in revenue
described above.
Additionally, the percentage relationship between such costs and the related
revenue increased to 78% in the first six months of 1995 as compared to 71% in
the first six months of 1994. This percentage relationship is a function of
(i) the mix of entertainment product generating revenue in each period and (ii)
changes in the projected profitability of individual entertainment product
based on the Company's estimates of such product's ultimate revenue and costs.
Contributing to the increase in the percentage relationship in the six months
ended June 30, 1995, was the delivery by the Company of five television series
pilots, which traditionally cost more than the related network license fees.
SELLING, GENERAL AND ADMINISTRATIVE
Selling, general and administrative expenses increased $14,659,000 and
$29,295,000 during the three months and six months ended June 30, 1995,
respectively, compared to the same periods of 1994, primarily due to the
selling, general and administrative costs related to the operations of VIE and
Republic, including the amortization of intangible assets. In addition, there
were increased administrative costs commensurate with the Company's growth.
INTEREST EXPENSE
Interest expense increased $1,902,000 and $5,945,000 during the three months
and six months ended June 30, 1995, respectively, in comparison to the prior
year periods, as a result of higher total indebtedness, including that related
to the Republic merger. The Company's interest expense is dependent upon the
interest rates on its outstanding obligations, which are largely tied to the
interest rates under Viacom's separate credit facilities, and the Company
could experience fluctuations in interest expense resulting solely from
increases or decreases in such interest rates.
PROVISION FOR INCOME TAXES
The Company computes its interim provision for income taxes based upon an
estimated annual effective tax rate computed in accordance with SFAS No. 109.
The Company's provision for income taxes for the six months ended June 30,
1995, decreased $4,686,000, as compared to the corresponding period of 1994,
largely as a result of the decrease in income for the period, net of the effect
of an increase in the effective
14
<PAGE> 15
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(000's omitted in all tables)
(Continued)
tax rate. The provision for the three months ended June 30, 1995, includes an
amount required to reflect the increase in the effective tax rate on earnings
of the Company for the three months ended March 31, 1995. The effective tax
rate for the six months ended June 30, 1995, increased as compared to the
corresponding period for 1994 and increased in the second quarter of 1995
compared to the first quarter of 1995, as a result of changes in the
relationship between revenue and expenses composing income from continuing
operations before income taxes and minority interest.
LIQUIDITY AND CAPITAL RESOURCES
The Company's operations require the production of entertainment product and
the acquisition of distribution or other rights to entertainment product
produced by third parties. The Company's expenditures in this regard totaled
$220,607,000 and $96,671,000 in the six months ended June 30, 1995 and 1994,
respectively. The cost of producing network television programming is largely
funded through the receipt of the related network license fees. The deficit
financing of its network programming and the cost of other production and
acquisition activities is funded through the Company's operating cash flow and
borrowings under its credit arrangements.
The Company's principal credit agreement is with Viacom. (See Note 4.) The
Viacom Facility provides for a three-year term loan facility of $100,000,000,
which funded the Company's acquisition of Republic, and a revolving credit
facility of $100,000,000 (increased in December 1994 from $75,000,000) to fund
the Company's working capital and other requirements.
A wholly-owned subsidiary of VIEL has a multi-currency credit agreement for
$75,000,000 with a bank in the U.S. Viacom has guaranteed all of the
borrowings under the Credit Agreement, which are due March 31, 1996. (See Note
4.)
Another wholly-owned subsidiary of VIEL has a 10,000,000 pounds sterling credit
facility with a bank in the United Kingdom, which the Company has guaranteed.
The UK Facility has been extended until April 2005. (See Note 4.)
As a result of the merger of BEC into Viacom in September 1994, Viacom
currently owns approximately 77% of the Company's Common Stock. Pursuant to
the separate credit facilities under which Viacom is a borrower, certain
subsidiaries of Viacom, including the Company, are restricted from incurring
indebtedness (other than indebtedness owing to Viacom) without the prior
consent of Viacom's lenders. Such consent has been given with respect to the
Credit Agreement and the UK Facility.
On August 10, 1995, Viacom announced its intent to sell the Company, and that
it has retained an investment banking firm to identify qualified purchasers and
to assist in the evaluation of proposals. Viacom also announced its intention
to acquire the Company's interest in VIE. An independent committee of the
Company's board of directors will be formed to negotiate the terms of the VIE
transaction.
The Company believes that its financial condition remains strong and that it
has the financial resources necessary to meet its anticipated capital
requirements. The Company has sufficient resources available from the cash
provided by operating activities and that available under its credit facilities
to meet its
15
<PAGE> 16
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(000's omitted in all tables)
(Continued)
ongoing plans for the production, acquisition and distribution of entertainment
product and to take advantage of internal and external development and growth
opportunities. A change in control of the Company, which would result from a
sale of the Company (see Note 10), constitutes an event of default under the
Viacom Facility and would accelerate any outstanding borrowings under the
Viacom Facility. The Company expects the resolution of these matters would be
negotiated in connection with any proposed sale of the Company.
UNCERTAINTIES
The Company is subject to pending and contingent claims relating to the
Company's discontinued operations, including certain claims involving
environmental matters. Some of the parties involved in such actions seek
significant damages. While the outcome of these claims cannot be predicted
with certainty, the Company believes based upon (i) its knowledge of the facts
and circumstances and applicable law; (ii) allowances for estimated losses on
disposal of the discontinued operations, and (iii) an indemnity agreement, that
the ultimate resolution of such claims will not have a material adverse effect
on the Company's consolidated results of operations or financial condition.
16
<PAGE> 17
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
PART II.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
<TABLE>
<CAPTION>
(a) Exhibits:
<S> <C>
3 (i) Certificate of Incorporation of Spelling Merger Corporation
(incorporated by reference to Spelling Entertainment Group Inc.'s
Notice of Annual Meeting and Proxy Statement dated April 14,
1995).
3 (ii) Bylaws of Spelling Merger Corporation (incorporated by reference
to Spelling Entertainment Group Inc.'s Notice of Annual Meeting
and Proxy Statement dated April 14, 1995).
10 (i) Second Amended and Restated Credit Agreement dated as of December
1, 1994 between Virgin Interactive Entertainment, Inc. and Bank of
America National Trust and Savings Association.
10 (ii) First Amendment to Second Amended and Restated Credit Agreement
dated March 31, 1995 between Virgin Interactive Entertainment,
Inc. and Bank of America National Trust and Savings Association.
10 (iii) Second Amendment to Second Amended and Restated Credit Agreement
dated June 1, 1995 between Virgin Interactive Entertainment, Inc.
and Bank of America National Trust and Savings Association.
11 Computation of net income per common and common equivalent share.
27 Financial Data Schedule.
99.1 Viacom Inc. Press Release dated August 10, 1995.
</TABLE>
(b) Reports on Form 8-K:
None
17
<PAGE> 18
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SPELLING ENTERTAINMENT GROUP INC.
August 14, 1995 By: /s/ Thomas P. Carson
----------------------------------------------
Thomas P. Carson
Executive Vice President, Chief Financial
Officer and Treasurer
(Principal Financial Officer)
By: /s/ Kathleen Coughlan
----------------------------------------------
Kathleen Coughlan
Senior Vice President and Corporate Controller
(Principal Accounting Officer)
18
<PAGE> 1
Exhibit 10(i)
---------------------------------------------------------------
SECOND AMENDED AND RESTATED
CREDIT AGREEMENT
DATED AS OF DECEMBER 1, 1994
BETWEEN
VIRGIN INTERACTIVE ENTERTAINMENT, INC.
AND
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
-------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
SECTION PAGE
ARTICLE I
DEFINITIONS; FINANCIAL REQUIREMENTS; EFFECT OF THIS AGREEMENT.
1.01 Definitions........................................... 1
1.02 Financial Requirements................................ 6
ARTICLE II
THE CREDIT FACILITIES
2.01 The Revolving Facility................................ 7
2.02 Advances Under the Revolving Facility................. 7
2.03 Commercial Letters of Credit under the
Revolving Facility.................................. 9
2.04 Standby Letters of Credit Under the Revolving
Facility............................................ 9
2.05 General Provisions as to Letters of Credit............ 10
2.06 Mandatory Payment..................................... 10
2.07 Commitment Fee........................................ 10
2.08 Default Rate.......................................... 11
2.09 Early Termination..................................... 11
2.10 Guaranty.............................................. 11
ARTICLE III
EXTENSIONS OF CREDIT, PAYMENTS AND INTEREST CALCULATIONS
3.01 Requests for Credit................................... 12
3.02 Oral Requests......................................... 12
3.03 Disbursements and Payments............................ 12
3.04 Branch Accounts....................................... 12
3.05 Evidence of Indebtedness.............................. 12
3.06 Debits to Borrower's Accounts......................... 12
3.07 Interest Calculation.................................. 13
3.08 Late Payments; Compounding............................ 13
3.09 Business Day.......................................... 13
3.10 Taxes and Other Charges............................... 13
3.11 Illegality............................................ 14
3.12 Increased Costs....................................... 15
3.13 Funding Losses........................................ 15
3.14 Inability to Determine Rates.......................... 15
3.15 Certificate of the Bank............................... 15
3.16 Survival.............................................. 15
<PAGE> 3
ARTICLE IV
CONDITIONS TO AVAILABILITY OF CREDIT.
4.01 Conditions to Each Extension of Credit . . . . . . . . . . . . . . 16
ARTICLE V
REPRESENTATIONS AND WARRANTIES
5.01 Corporate Existence and Power . . . . . . . . . . . . . . . . . . 17
5.02 Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.03 Enforceability . . . . . . . . . . . . . . . . . . . . . . . . . . 17
5.04 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 17
5.05 Permits Franchises . . . . . . . . . . . . . . . . . . . . . . . . 18
5.06 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.07 No Event of Default . . . . . . . . . . . . . . . . . . . . . . . 18
5.08 Tax Returns . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.09 No Material Adverse Effect . . . . . . . . . . . . . . . . . . . . 18
5.10 Environmental Matters . . . . . . . . . . . . . . . . . . . . . . 18
5.11 Chief Executive Office; Corporate Structure . . . . . . . . . . . 19
ARTICLE VI
AFFIRMATIVE COVENANTS
6.01 Notices of Certain Events . . . . . . . . . . . . . . . . . . . . 20
6.02 Financial and Other Information. . . . . . . . . . . . . . . . . . 20
6.03 Books, Records, Audits and Inspections . . . . . . . . . . . . . . 21
6.04 Use of Facility . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.05 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.06 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . 21
6.07 Change in Name . . . . . . . . . . . . . . . . . . . . . . . . . . 21
6.08 Additional Acts . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII
NEGATIVE COVENANTS
7.01 Other Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . 22
7.02 Existence and Properties . . . . . . . . . . . . . . . . . . . . . 22
7.03 Liquidations and Mergers . . . . . . . . . . . . . . . . . . . . . 22
7.04 Business Activities . . . . . . . . . . . . . . . . . . . . . . . 23
7.05 Regulations G, T, U, and X . . . . . . . . . . . . . . . . . . . . 23
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Events of Default . . . . . . . . . . . . . . . . . . . . . . . . 24
(a) Failure to Pay . . . . . . . . . . . . . . . . . . . . . . . . 24
(b) Breach of Representation or Warranty . . . . . . . . . . . . . 24
<PAGE> 4
(c) Other Defaults . . . . . . . . . . . . . . . . . . . . . . . . 24
(d) Trade Suits . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(e) Judgments . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
(f) Failure to Pay Debts; Voluntary Bankruptcy . . . . . . . . . . 24
(g) Involuntary Bankruptcy . . . . . . . . . . . . . . . . . . . . 24
(h) Suspension of Business . . . . . . . . . . . . . . . . . . . . 25
(i) Default of Other Financial Obligations . . . . . . . . . . . . 25
(j) Default under other Credit Documents . . . . . . . . . . . . . 25
(k) Material Adverse Effect . . . . . . . . . . . . . . . . . . . . 25
(l) Default of Viacom Obligations under Viacom Credit Documents . . 25
8.02 Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE IX
MISCELLANEOUS
9.01 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 27
9.02 Consents and Waivers . . . . . . . . . . . . . . . . . . . . . . . 27
9.03 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
9.04 Costs and Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . 27
9.05 Integration; Amendment . . . . . . . . . . . . . . . . . . . . . . 27
9.06 Destruction of the Borrower's Documents . . . . . . . . . . . . . . 27
9.07 Participations . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.08 General Indemnification . . . . . . . . . . . . . . . . . . . . . . 28
9.09 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
9.10 Headings; Interpretation . . . . . . . . . . . . . . . . . . . . . 29
9.11 Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
9.12 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
<PAGE> 5
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this "Agreement") is
entered into as of December 1, 1994, between VIRGIN INTERACTIVE ENTERTAINMENT,
INC., a Delaware corporation (the "Borrower") and BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION (the "Bank").
RECITALS
This Agreement is entered into upon the basis of the following facts,
intentions and understandings of the parties:
1. The Borrower and the Bank are parties to that certain Amended &
Restated Credit Agreement, dated as of August 8, 1994 (the "Credit Agreement").
2. All obligations of the Borrower under the Credit Agreement and the
other Credit Documents were guaranteed by Blockbuster Entertainment Corporation
("Blockbuster") pursuant to the Blockbuster Guaranty.
3. As of the date hereof, (i) Spelling Entertainment Group Inc., a
Florida corporation ("Spelling"), owns approximately ninety percent (90%) of
the outstanding equity of Virgin Interactive Entertainment PLC, a company
organized under the laws of England ("VIE plc") and VIE plc owns all of the
outstanding equity of the Borrower, and (ii) Viacom Inc. ("Viacom"), a Delaware
corporation owns approximately seventy-eight percent (78%) of the outstanding
equity of Spelling.
4. On September 29, 1994, Blockbuster consummated a merger with and
into Viacom and Viacom delivered a new guaranty to supersede the Blockbuster
Guaranty.
5. The Borrower and the Bank desire to amend the Credit Agreement and
the Credit Documents all as hereinafter set forth.
In consideration of the mutual covenants and agreements contained
herein, the Borrower and the Bank agree as follows:
ARTICLE I
DEFINITIONS; FINANCIAL REQUIREMENTS; EFFECT OF THIS AGREEMENT.
1.01 Definitions. The following terms have the meanings indicated:
"Advance": an advance hereunder.
"Availability Period": the period commencing on the date of
this Agreement and ending on the date that is the earlier
<PAGE> 6
to occur of (i) March 31, 1995, or (ii) the date on which the Bank's commitment
to extend credit hereunder terminates.
"Blockbuster": specified in the Recitals hereof.
"Blockbuster Guaranty": a guaranty dated as of August 8, 1994 by
Blockbuster guarantying all the obligations of the Borrower under the Credit
Agreement.
"Business Day": any day other than a Saturday, a Sunday, or other day
on which commercial banks in San Francisco, California, are authorized or
required by law to close and, if the applicable Business Day relates to any
Offshore Rate Advance, means such a day on which dealings are carried on in the
applicable offshore interbank market.
"CD Rate": for any CD Rate Interest Period, the rate of interest
(rounded upward to the nearest 1/100th of 1%) determined pursuant to the
following formula:
CD Rate = Certificate of Deposit Rate + Assessment
--------------------------- Rate
1.00 - Reserve Percentage
Where:
"Assessment Rate" means, for any day of such CD Rate Interest
Period, the rate determined by the Bank as equal to the annual assessment
rate in effect on day of such CD Rate Interest Period that is payable to
the FDIC by a member of the Bank Insurance Fund that is classified as
adequately capitalized and within supervisory subgroup "A" (or a comparable
successor assessment risk classification within the meaning of 12 C.F.R.
Section 327.3) for insuring time deposits at offices of such member in the
United States, or, in the event that the FDIC shall at any time hereafter
cease to assess time deposits based upon such classifications or successor
classifications, equal to the maximum annual assessment rate in effect on
such day that is payable to the FDIC by commercial banks (whether or not
applicable to the Bank) for insuring time deposits at offices of such banks
in the United States.
"Certificate of Deposit Rate" means for any CD Rate Interest
Period, the rate of interest per annum determined by the Bank to be the
arithmetic mean (rounded upward to the nearest 1/100th of 1%) of the rates
notified to the Bank as the rates of interest bid by two or more
certificate of deposit dealers of recognized standing selected by the Bank
for the purchase at face value of dollar certificates of deposit issued by
major United States banks, for a maturity comparable to the CD Rate
Interest Period and in the approximate amount of the
2
<PAGE> 7
CD Rate Advance to be made, at the time selected by the Bank on the
first day of such CD Rate Interest Period.
"Reserve Percentage" means for any day of such CD Rate Interest
Period the maximum reserve percentage (expressed as a decimal, rounded
upward to the nearest 1/100th of 1%), as determined by the Bank, in
effect on such day (including any ordinary, marginal, emergency,
supplemental, special and other reserve percentages) prescribed by the
Federal Reserve Board for determining the maximum reserves to be
maintained by member banks of the Federal Reserve System with deposits
exceeding $1,000,000,000 for new non-personal time deposits for a period
comparable to the CD Rate Interest Period and in an amount of $100,000
or more.
"CD Rate Advance": an Advance that bears interest based on the CD Rate.
"CD Rate Interest Period": for each CD Rate Advance, the period
commencing on the date the CD Rate Advance begins to bear interest at a rate
related to the CD Rate and ending 30, 60, 90, or 180 days thereafter, as
requested by the Borrower; provided, however, that no such CD Rate Interest
Period shall extend beyond June 30, 1995.
"Code": the Internal Revenue Code of 1986, as amended, and the rules
and regulations promulgated thereunder as from time to time in effect.
"Credit Documents": collectively, this Agreement, the Guaranty, and any
letter of credit or amendments delivered in connection with the credits
established herein and the transactions contemplated hereby.
"Default": any event or circumstance which, with the giving of notice,
the lapse of time, or both, would (if not cured or otherwise remedied during
such time) constitute an Event of Default.
"Dollars", "dollars" and "$": each, lawful money of the United States.
"Dollar Advances": specified in subsection 2.01(b).
"Environmental Laws": any foreign, federal, state, local, or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decrees,
requirements of any governmental authority, any and all requirements of law and
any and all common law requirements, rules, and bases of liability regulating,
relating to, or imposing liability or standards of conduct concerning pollution
or protection of
3
<PAGE> 8
human health or the environment, as now or may at any time hereafter may be in
effect.
"Equivalent Amount": (i) whenever this Agreement (or the Guaranty)
requires or permits a determination on any date of the equivalent in Dollars of
an amount expressed in an Offshore Currency, the equivalent amount in Dollars
of any amount expressed in an Offshore Currency as determined by the Bank on
such date on the basis of the Spot Rate for the purchase of Dollars with such
Offshore Currency on the relevant date; or (ii) whenever this Agreement (or the
Guaranty) requires or permits a determination on any date of the equivalent in
an Offshore Currency of an amount expressed in Dollars, the equivalent amount
in an Offshore Currency of an amount expressed in Dollars as determined by the
Bank on such date on the basis of the Spot Rate for the purchase of such
Offshore Currency with Dollars on the relevant date.
"Event of Default": any event listed in Article VIII of this Agreement.
"Facility Amount": specified in subsection 2.01(c).
"FDIC": the Federal Deposit Insurance Corporation, or any entity
succeeding to any of its principal functions.
"Guaranty": a guaranty in form and substance satisfactory to the Bank,
executed by Viacom, Inc. guarantying all obligations of the Borrower
hereunder.
"Hazardous Substance": any hazardous or toxic substance, material, or
waste, defined, listed, classified, or regulated as such in or under any
Environmental Laws, including, without limitation, asbestos, petroleum, or
petroleum products (including gasoline, crude oil, or any fraction thereof),
polychlorinated bephenyls, and urea-formaldehyde insulation.
"IRS": the Internal Revenue Service or any entity succeeding to any of
its principal functions under the Code.
"L/C Outstanding Amount": at any time, the undrawn amount of any letter
of credit at such time, plus the amount of all drafts or drawings paid or
accepted by the Bank which have not yet been reimbursed to the Bank, plus any
other obligation or liability of the Borrower to the Bank with respect to any
letter of credit issued under this Agreement.
"Material Adverse Effect": a material adverse change in, or a material
adverse effect upon, the results of operations, business, properties and
financial condition of the Borrower or Viacom Inc. and its Subsidiaries taken
as a whole.
4
<PAGE> 9
"Offshore Currency": specified in subsection 2.01(b).
"Offshore Currency Advance": specified in subsection 2.01(b).
"Offshore Rate" means for any Offshore Rate Interest Period the rate of
interest per annum equal to the rate at which dollar deposits for such Offshore
Rate Interest Period and in an amount comparable to the amount of the Offshore
Rate Advance during such Offshore Rate Interest Period would be offered by the
Bank's London Branch to major banks in the London eurodollar market at or about
11:00 a.m. (London time) on the second Business Day before the first day of
such Offshore Rate Interest Period.
"Offshore Rate Advance": an Advance for which interest is based on the
Offshore Rate.
"Offshore Rate Interest Period": for each Offshore Rate Advance, the
period commencing on the date the Offshore Rate Advance begins to bear interest
at a rate related to the Offshore Rate and ending one, two, three, or six
months thereafter, as requested by the Borrower; provided, however, that the
last day of each Offshore Rate Interest Period shall be determined in
accordance with the practices of the applicable offshore interbank markets as
from time to time in effect, and provided further that no such interest period
shall extend beyond June 30, 1995.
"Reference Rate": for any day, the rate of interest in effect for such
day as publicly announced from time to time by the Bank in San Francisco,
California, as its "reference rate." It is a rate set by the Bank based upon
various factors including the Bank's costs and desired return, general economic
conditions and other factors, and is used as a reference point for pricing some
loans, which may be priced at, above, or below such announced rate. Any change
in the reference rate announced by the Bank shall take effect at the opening of
business on the day specified in the public announcement of such change.
"Reference Rate Advance": an Advance that bears interest based on the
Reference Rate.
"Revolving Facility": the line of credit described in Section 2.01.
"Revolving Maturity Date": June 30, 1995.
"Spelling": specified in the Recitals hereof.
5
<PAGE> 10
"Spot Rate": for a currency, the rate quoted by the Bank as the spot rate
for the purchase by the Bank of such currency with another currency through its
Foreign Exchange Trading Center #5193, San Francisco, California, or such other
of the Bank's offices as it may designate from time to time, at approximately
8:00 a.m. (San Francisco time) on the date two Business Days prior to the date
as of which the foreign exchange computation is made.
"Subsidiary": of the Borrower, any corporation, association, partnership,
joint venture, or other business entity of which more than 50% of the voting
stock or other equity interests (in the case of entities other than
corporations), is owned or controlled directly or indirectly by the Borrower or
one or more Subsidiaries of the Borrower or a combination thereof; of Viacom
Inc., any corporation, association, partnership joint venture, or other
business entity of which more than 50% of the voting stock or other equity
interests (in the case of entities other than corporations), is owned or
controlled directly or indirectly by Viacom Inc. or one or more Subsidiaries of
Viacom Inc. or a combination thereof.
"Viacom Credit Documents" means the Credit Agreement, dated as or July 1,
1994, as amended, among Viacom Inc. The Bank of New York, Citibank and Bank of
America, as Managing Agents, The Bank of New York, as Documentation Agent,
Citibank, as Administrative Agent, JP Morgan Inc., a Syndication Agent, the
banks identified on the signature pages as agents and the banks party thereto,
and (2) the Credit Agreement, dated as of September 29, 1994, among Viacom
Inc., The Bank of New York, Citibank and Bank of America, as Managing Agents,
The Bank of New York, as Documentation Agent, Citibank, a Administrative Agent,
JP Morgan Inc., as Syndication Agent, the bank identified on the signature
pages as agents and the banks party thereto.
"VIE plc": specified in the Recitals hereof.
1.02 Financial Requirements. Unless otherwise specified in this Agreement,
all accounting terms used in this Agreement shall be interpreted, all financial
computations required under this Agreement shall be made, and all financial
information required under this Agreement shall be prepared in accordance with
generally accepted accounting principles in effect from time to time in the
United States, consistently applied.
6
<PAGE> 11
ARTICLE II
THE CREDIT FACILITIES
2.01 The Revolving Facility.
(a) From time to time during the Availability Period, subject to the
terms and provisions hereof, the Bank, on a revolving basis, will (i) make
Advances to the Borrower and (ii) create and issue commercial and standby
letters of credit for the Borrower's account.
(b) Advances hereunder may be made in (i) dollars ("Dollar Advances"),
and (ii) in a lawful currency other than dollars which is freely transferable
and convertible into dollars and is traded in the offshore and interbank
currency markets at the time of the Advance (an "Offshore Currency") ("Offshore
Currency Advances").
(c) The aggregate of (i) all Dollar Advances, (ii) the Equivalent
Amount of all Offshore Currency Advances, and (iii) the L/C Outstanding Amount
of all letters of credit, may not exceed, at any time prior to August 29, 1994,
$15,000,000 and, at any time on and after August 29, 1994, $75,000,000 (in any
such case, the "Facility Amount").
2.02 Advances Under the Revolving Facility.
(a) Subject to the other provisions of this Section, Dollar Advances
under the Revolving Facility shall bear interest at a rate per annum equal to
the Reference Rate. The Borrower shall pay interest monthly on the last day of
each month until the Revolving Maturity Date, on which date all accrued and
unpaid interest shall be due and payable. The Borrower shall repay the
principal amount of each Reference Rate Advance on the date such advance is
converted into an Offshore Rate Advance or a CD Rate Advance under subsections
(b) or (c), below, and on the last day of the Availability Period.
(b) In lieu of the interest rate described above, the Borrower may
from time to time prior to the last day of the Availability Period elect to
have all or portions of Advances under the Revolving Facility be in Dollars or
an Offshore Currency and bear interest at the Offshore Rate plus .625% per
annum during an Offshore Rate Interest Period, subject to the following
requirements:
(i) Each Offshore Rate Advance shall be for an amount not less
than $1,000,000;
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(ii) The Borrower shall repay the principal and interest of each
Offshore Rate Advance on the last day of the Offshore Rate Interest Period
for such Advance;
(iii) Any payment of an Offshore Rate Advance prior to the last day of
the Offshore Rate Interest Period for such Advance, whether voluntary, by
reason of acceleration or otherwise, including any mandatory payments
required under this Agreement and applied by the Bank to an Offshore Rate
Advance, shall be accompanied by the amount of accrued interest on the
amount repaid and by the amount (if any) required by Section 3.13.
(c) In lieu of the interest rates described above in this Section, the
Borrower may, from time to time prior to the last day of the Availability
Period, elect to have all or portions of Advances under the Revolving Facility
be in Dollars and bear interest at the CD Rate plus .625% per annum during a CD
Rate Interest Period, subject to the following requirements:
(i) Each CD Rate Advance shall be in an amount not less than
$1,000,000;
(ii) The Borrower shall repay the principal and interest of each CD
Rate Advance on the last day of the CD Rate Interest Period for such
Advance;
(iii) Any payment of a CD Rate Advance prior to the last day of the CD
Rate Interest Period for such Advance, whether voluntary, by reason of
acceleration or otherwise, including mandatory payments required under this
Agreement and applied by the Bank to a CD Rate Advance, shall be
accompanied by the amount of accrued interest on the amount repaid and by
the amount (if any) required by Section 3.13.
(d) The Borrower shall repay to the Bank in full on the Revolving Maturity
Date the aggregate principal amount of the Advances outstanding on that day.
(e) For purposes of determining the Borrower's compliance with subsection
2.01(c), the Equivalent Amount of Offshore Currency Advances shall be
determined, and redetermined by the Bank as of the applicable borrowing date in
respect of such Advance, or on the date such Advance was converted into an
Offshore Currency Advance under subsection 2.02(b) and on the last Business Day
of each month.
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2.03 Commercial Letters of Credit under the Revolving Facility.
(a) From time to time during the Availability Period, the
Bank will, upon the request of the Borrower, issue commercial letters
of credit for the Borrower's account, subject to the terms and
provisions hereof. Each commercial letter of credit shall be
denominated in dollars and issued pursuant to the terms and conditions
hereof and of a Bank standard form Application and Security Agreement
for Commercial Letter of Credit (or such other form as the Bank may
require) executed by the Borrower.
(b) Each commercial letter of credit shall:
(i) expire on or before 180 days after the date such
letter of credit is issued, but in no event later than the
Revolving Maturity Date;
(ii) require drafts payable in dollars at sight; and
(iii) be otherwise in form and substance and in favor of
beneficiaries and for purposes satisfactory to the Bank.
(c) The Borrower shall pay to the Bank (i) an issuance fee for
each commercial letter of credit issued hereunder which is the greater
of (x) .125% of the face amount of the letter of credit, or (y) $200,
and (ii) a negotiation fee for each such letter of credit which is the
greater of (x) .125% of the face amount of the letter of credit, or
(y) $200.
2.04 Standby Letters of Credit Under the Revolving Facility.
(a) From time to time during the Availability Period, the Bank
will, upon the request of the Borrower, issue standby letters of credit
for the Borrower's account, subject to the terms and provisions hereof.
Each standby letter of credit shall be denominated in dollars and
issued pursuant to the terms and conditions hereof and of a Bank
standard form Application and Agreement for Standby Letter of Credit
(or such other form as the Bank may require) executed by the Borrower.
(b) Each standby letter of credit shall: (i) expire on or
before one year after the date such letter of credit is issued, but in
no event later than the Revolving Maturity Date; and (ii) be otherwise
in form and substance and in favor of beneficiaries and for purposes
satisfactory to the Bank.
(c) The Borrower shall pay to the Bank a nonrefundable fee
equal to the greater of (i) 1.25% per annum of the
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outstanding undrawn amount of each standby letter of credit, or (ii)
$250 per annum, payable quarterly in arrears, and calculated on the
basis of the face amount outstanding on the day the fee is calculated.
However, if an Event of Default exists, at the option of the Bank, the
amount of the fee shall be increased to 3.25% per annum, commencing
on the day the Bank provides notice of the increase to the Borrower.
The Borrower shall also pay such other fees and commissions at
the times and in the amounts the Bank advises the Borrower from time
to time as being applicable to any standby letters of credit.
2.05 General Provisions as to Letters of Credit. Each draft paid by
the Bank under a letter of credit issued hereunder shall be reimbursed by the
Borrower to the Bank on the date such draft is paid by the Bank. Any sum owed
to the Bank with respect to a letter of credit issued for the Borrower's
account which is not paid when due shall, at the option of the Bank in each
instance, be deemed to be an Advance outstanding under the Revolving Facility
and shall thereafter bear interest at the Reference Rate; provided, however,
that if by treating such sum as an Advance outstanding under the Revolving
Facility the aggregate of all Advances and the L/C Outstanding Amount of all
letters of credit would exceed the then applicable Facility Amount, then such
sum shall bear interest at the Default Rate.
2.06 Mandatory Payment. If at any time and for any reason the total
amount of credit outstanding under this Agreement exceeds the limitations set
forth herein, the Borrower shall pay to the Bank, upon demand, the amount of
the excess, provided, that if the foregoing applies due to a change in
applicable rates of exchange between Dollars and Offshore Currencies, the
Borrower shall be obligated to pay such amount only if the excess is greater
than $100,000 or the Equivalent Amount thereof. Payments under this Section may
be applied to the obligations of the Borrower to the Bank in the order and
manner as the Bank in its discretion may determine. Payments to be applied to
outstanding letters of credit and drafts accepted under letters of credit may,
at the Bank's option, be used to prepay, or held as cash collateral to secure,
the Borrower's obligations to the Bank with respect thereto.
2.07 Commitment Fee. The Borrower shall pay to the Bank a commitment
fee at the rate of .125% per annum on the average daily unused portion of the
credit provided under this Agreement. For purposes of computing the unused
portion, the L/C Outstanding Amount shall be deemed to be usage. The commitment
fee shall be computed on a calendar quarter basis, except for the last period
which shall end on the last day of the Availability Period. The commitment fee
shall be payable on the last day of each successive calendar quarter and on the
last day of the Availability Period.
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2.08 Default Rate. Upon the occurrence and during the continuation of
any Event of Default, and without constituting a waiver of any such Event of
Default, (a) Advances under the Revolving Facility shall at the option of the
Bank bear interest at a rate per annum which is two percent (2%) per annum
higher than the rate of interest otherwise provided under this Agreement, and
(b) Offshore Currency Advances shall at the option of the Bank be redenominated
and converted into Reference Rate Advances in Dollars.
2.09 Early Termination. The Borrower may at any time terminate the
Bank's commitment to extend credit hereunder by paying in full the entire
amount of credit outstanding hereunder (including the L/C Outstanding Amount,
together with any sums due under Section 3.13). Payments to be applied to
outstanding letters of credit and drafts accepted under letters of credit, may,
at the Bank's option, be used to prepay, or held as cash collateral to secure,
the Borrower's obligations to the Bank with respect thereto.
2.10 Guaranty. All obligations of the Borrower under this Agreement
and the other Credit Documents shall be guaranteed by Viacom Inc. pursuant to
the Guaranty.
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ARTICLE III
EXTENSIONS OF CREDIT, PAYMENTS AND INTEREST CALCULATIONS
3.01 Requests for Credit. Each request for an extension of credit
shall be made in writing on a form acceptable to the Bank or in any other
manner acceptable to the Bank. By delivering such a request to the Bank on or
before 10:00 a.m., San Francisco time, on a Business Day, the Borrower may from
time to time irrevocably request, on not less than three nor more than five
Business Days' notice, that an extension of credit be made hereunder. On the
terms and subject to the conditions of this Agreement, each extension of
credit hereunder shall be made on the Business Day specified in such request.
3.02 Oral Requests. At the Bank's sole discretion in each instance,
the Bank may accept telephone requests to make or to repay extensions of
credit. Extensions of credit requested by telephone shall be deposited into the
Borrower's commercial account number 12574-53915 at the Global Payment
Operations branch of the Bank, or such other account(s) as may be specified in
writing by the Borrower.
3.03 Disbursements and Payments. Each disbursement by the Bank and
each payment by the Borrower under this Agreement shall be made in the funds
and at such branch of the Bank as the Bank may from time to time select.
3.04 Branch Accounts. Each extension of credit under this Agreement
shall be made for the account of such branch, office, or affiliate of the Bank
as the Bank may from time to time select.
3.05 Evidence of Indebtedness. Principal, interest, and all other sums
due to the Bank under this Agreement shall be evidenced by entries in records
maintained by the Bank, and, if required by the Bank, by a promissory note or
notes. Each payment on and any other credits with respect to principal,
interest, and all other sums due under this Agreement shall be evidenced by
entries to records maintained by the Bank. The loan accounts or records
maintained by the Bank shall be conclusive absent manifest error of the amount
of the credit extended hereunder and the interest and payments thereon. Any
failure to so record or any error in doing so shall not, however, limit or
otherwise affect the obligation of the Borrower hereunder to pay any amount
owing with respect to the Advances.
3.06 Debits to Borrower's Accounts. The Borrower hereby authorizes the
Bank to debit the Borrower's account number 12574-53915 at the Global Payment
Operations branch of the Bank in the amount of principal, interest, fees, or
any other amount due under this Agreement or under any instrument or agreement
required under this Agreement. The Bank may, at its option, debit the account
on the date such amounts become due, or, if such due date
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is not a Business Day, on the next Business Day after such due date. If there
are insufficient funds in the account to cover the amount debited to the
account in accordance with this Section, such debit may be reversed in whole or
in part, at the option of the Bank in its sole discretion, and the amount not
debited shall be deemed to remain unpaid.
3.07 Interest Calculation. Except as otherwise stated in this
Agreement, all interest and fees, if any, payable under this Agreement shall
be computed on the basis of a 360 day year and actual days elapsed, which
results in more interest or a larger fee than if a 365-366 day year were used.
3.08 Late Payments; Compounding. Any sum payable by the Borrower
hereunder (including unpaid interest) if not paid when due shall bear interest
(payable on demand) from its due date until payment in full at a rate per annum
equal to the Reference Rate plus two percent (2%) per annum. At the option of
the Bank, in each instance, any sum payable hereunder which is not paid when
due (including unpaid interest) may be added to principal of the Revolving
Facility and shall thereafter bear interest at the rate applicable to
principal.
3.09 Business Day. Any sum payable by the Borrower hereunder which
becomes due on a day which is not a Business Day shall be due on the next
Business Day after such due date, unless, in the case of an Offshore Rate Loan,
the result of such extension would be to carry such Interest Period into
another calendar month, in which event such Interest Period shall end on the
immediately preceding Business Day. Any payments received by the Bank on a day
which is not a Business Day shall be deemed to be received on the next
Business Day after such date of receipt.
3.10 Taxes and Other Charges.
(a)(i) If any taxes (other than taxes on net income (A) imposed by
the country or any subdivision of the country in which the Bank's
principal office or actual lending office is located and (B) measured
by the United States taxable income the Bank would have received if
all payments under or in respect of this Agreement and any instrument
or agreement required hereunder were exempt from taxes levied by the
Borrower's country) are at any time imposed on any payments under or
in respect of this Agreement or any instrument or agreement required
hereunder including, but not limited to, payments made pursuant to
this Paragraph, the Borrower shall pay all such taxes and shall also
pay to the Bank, at the time interest is paid, all additional amounts
which the Bank specifies as necessary to preserve the after-tax yield
the Bank would have received if such taxes had not been imposed.
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(ii) The additional amounts necessary to preserve the
after-tax yield the Bank would have received if such taxes had not been
imposed shall be calculated pursuant to the formula:
(W) (t) (i)
y = -----------
1-w-t
where the terms are defined as follows:
y = additional payment to be made to the Bank
w = withholding tax rate levied by foreign government
t = the Bank's combined Federal and state tax rate
i = amount of interest to be paid on Credit (computed by using the base
rate plus quoted spread)
1 = one
(b) The Borrower will provide the Bank with original tax receipts,
notarized copies of tax receipts, or such other documentation as will prove
payment of tax in a court of law applying the United States Federal Rules of
Evidence, for all taxes paid by the Borrower pursuant to subparagraph (a)
above. The Borrower will deliver receipts to the Bank within 30 days after the
due date for the related tax.
3.11 Illegality.
(a) If the Bank shall determine that (i) the introduction of any law,
rule, regulation, treaty, or determination of an arbitrator or court or other
governmental authority or any change in or in the interpretation or
administration thereof has made it unlawful, or that any central bank or other
governmental authority has asserted that it is unlawful, for the Bank to make
or extend any Advance or other credit under this Agreement, or (ii) any order,
judgment, or decree of any governmental authority or arbitrator purports by its
terms to enjoin or restrain the Bank from making or extending any Advance or
other credit hereunder, then, on notice thereof by the Bank to the Borrower,
the obligation of the Bank to make or extend such Advance or other credit shall
be suspended until the Bank shall have notified the Borrower that the
circumstances giving rise to such determination no longer exist.
(b) If the Bank shall determine that it is unlawful to maintain any
Offshore Rate Advance hereunder, the Borrower shall prepay in full all Offshore
Rate Advances then outstanding, together with interest accrued thereon, either
on the last day of the applicable Offshore Rate Interest Period if the Bank may
lawfully continue to maintain such Advances to such day and such loans have an
interest period, or
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immediately, if the Bank may not lawfully continue to maintain such
Advances, together with any amounts required to be paid in connection
therewith pursuant to Section 3.13.
3.12 Increased Costs. The Borrower agrees to pay to the Bank, on
demand, the Bank's costs or losses arising from any statute or regulation, or
any request or requirement of a regulatory agency which is applicable to all
national banks or a class of all national banks. The costs and losses will be
allocated to this facility in a manner determined by the Bank, using any
reasonable method. The costs include the following:
(a) any reserve or deposit requirements; and
(b) any capital requirements relating to the Bank's assets and
commitments for credit.
3.13 Funding Losses. The Borrower agrees to reimburse the Bank and to
hold the Bank harmless from any loss or expense which the Bank may sustain or
incur as a consequence of the failure of the Borrower to make any payment or
prepayment of principal of any Advance hereunder made at a rate of interest
related to the Offshore Rate or the CD Rate (including, without limitation,
payments made after any acceleration thereof), or to borrow at such a rate, or
the prepayment of an Advance which bears interest at such a rate on a day which
is not the last day of the interest period with respect thereto; including any
such loss or expense arising from the liquidation or reemployment of funds
obtained by it to maintain its Advances made at a rate related to the Offshore
Rate, the CD Rate hereunder or from fees payable to terminate the deposits from
which such funds were obtained.
3.14 Inability to Determine Rates. The Bank will have no obligation to
accept an election for an Offshore Rate Advance or a CD Rate Advance if (i)
deposits in the applicable currency in the principal amount, and for the
periods equal to the interest period, for such Advance are not available in the
applicable market; or (ii) the Offshore Rate or CD Rate does not accurately
reflect the cost of such Advance.
3.15 Certificate of the Bank. If the Bank claims any reimbursement or
compensation pursuant to Section 3.12 or Section 3.13 hereof, then the Bank
shall deliver to the Borrower a certificate setting forth in reasonable detail
the amount payable to the Bank thereunder and such certificate shall be
conclusive and binding on the Borrower in the absence of manifest error.
3.16 Survival. The agreements and obligations of the Borrower under
Sections 3.10 through 3.15 hereof shall survive the payment of all other
obligations of the Borrower hereunder.
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ARTICLE IV
CONDITIONS TO AVAILABILITY OF CREDIT.
The Bank's obligation to extend credit under this Agreement is subject
to the Bank's receipt of the following, each of which must be in form and
substance satisfactory to the Bank.
4.01 Conditions to Each Extension of Credit. Before each
extension of credit, including the first:
(a) The representations and warranties of the Borrower
contained in this Agreement and of Viacom Inc. contained in the Guaranty
shall be true as of the date of each extension of credit; and
(b) Immediately prior to and immediately after giving effect
to such extension of credit, no Default or Event of Default shall exist.
Each request for an extension of credit hereunder shall constitute a
representation and warranty by the Borrower, as of the date of each such
request and as of the date of each extension of credit, that the conditions in
this Section are satisfied.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
5.01 Corporate Existence and Power. The Borrower: (a) is a Delaware
corporation duly organized and existing under the laws of the jurisdiction of
its organization; (b) has the power and authority and all governmental
licenses, authorizations, consents, and approvals to own its assets, carry on
its business, and to execute, deliver, and perform its obligations under, the
Credit Documents; and (c) is duly qualified and properly licensed and in good
standing under the laws of each jurisdiction where its ownership, lease, or
operation of property or the conduct of its business requires such license or
qualification.
5.02 Authorization. The execution, delivery, and performance by the
Borrower and of this Agreement and any other Credit Document to which it is a
party, have been duly authorized by all necessary corporate action, and do not
and will not:
(a) contravene the terms of any of its organizational or
charter documents;
(b) conflict with or result in any breach or contravention of,
or the creation of any lien, security interest, or charge under, any
material agreement, contract, indenture, document, or instrument to
which the Borrower is a party or by which any of its property is bound,
or any order, injunction, writ, or decree of any governmental authority
to which the Borrower or any of its property is subject; or
(c) violate any law, rule, regulation, or determination of an
arbitrator or of a court or other governmental authority, in each case
applicable to or binding upon the Borrower or any of its property.
5.03 Enforceability. This Agreement is a legal, valid, and binding
agreement of the Borrower, enforceable against the Borrower in accordance with
its terms, and the other Credit Documents and any other instrument or agreement
required under this Agreement, when executed and delivered, will be legal,
valid, binding, and enforceable in accordance with its terms against the
Borrower.
5.04 Compliance with Laws. The Borrower is in compliance with all
federal, state and local laws, rules, regulations and determinations of
arbitrators, courts and other governmental authorities materially affecting the
business, operations or property of the Borrower (including, without
limitation, Environmental Laws), except for such non-compliance that will not
have a Material Adverse Effect.
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5.05 Permits Franchises. The Borrower possesses all permits, memberships,
franchises, contracts, and licenses required and all trademark rights, trade
name rights, patent rights, and fictitious name rights necessary to enable it
to conduct the business in which it is now engaged.
5.06 Litigation. There is no litigation, tax claim, proceeding,
governmental or administrative action, or dispute pending, or, to the knowledge
of the Borrower, threatened, against or affecting the Borrower or any of its
properties, the adverse determination of which would have a Material Adverse
Effect on the Borrower's consolidated financial condition or operations or
impair the Borrower's ability to perform its obligations hereunder, under any
other Credit Document, or under any instrument or agreement required hereunder.
5.07 No Event of Default. There exists no Default or Event of Default.
5.08 Tax Returns. As of the Closing Date, the Borrower has no knowledge of
any pending assessments or adjustments with respect to its income tax
liabilities for any year except as disclosed in writing to the Bank prior to
the date hereof.
5.09 No Material Adverse Effect. Since September 30, 1994, there has been
no Material Adverse Effect.
5.10 Environmental Matters.
(a) Except to the extent that, in the aggregate, a Material Adverse
Effect could not result therefrom, (i) the properties of the Borrower do
not contain and have not previously contained (at, under, or about any such
property) any Hazardous Substances or other contamination (A) in amounts or
concentrations that constitute or constituted a violation of, or could give
rise to liability under, any Environmental Laws, (B) which could interfere
with the continued operation of such property, or (C) which could impair
the fair market value thereof; and (ii) there has been no transportation or
disposal of Hazardous Substances from, nor any release or threatened
release of Hazardous Substances at or from, any property of the Borrower or
any of its Subsidiaries in violation of or in any manner which could give
rise to liability under any Environmental Laws.
(b) The Borrower has not received, nor is it aware of, any material
claim or notice of material violation, alleged material violation,
non-compliance, liability or potential liability regarding environmental
matters or compliance with Environmental Laws with regard to the properties
or operations of the Borrower, nor does the Borrower have knowledge or
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reason to believe that any such action is being contemplated, considered,
or threatened.
5.11 Chief Executive Office; Corporate Structure. The chief executive
office of the Borrower is located within the State of California.
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ARTICLE VI
AFFIRMATIVE COVENANTS
So long as credit is available under this Agreement and until full and
final payment of all of the Borrower's obligations under this Agreement and any
other Credit Document or instrument or agreement required under or entered into
pursuant to this Agreement:
6.01 Notices of Certain Events. The Borrower shall promptly give written
notice to the Bank of:
(a) all litigation affecting the Borrower where the amount claimed
is Four Million Dollars ($4,000,000) or more;
(b) any dispute which may exist between the Borrower and any
governmental regulatory body or law enforcement authority that would have a
Material Adverse Effect;
(c) any Event of Default or any Default;
(d) any condition, circumstance, occurrence, or event that could
result in a material liability as to the Borrower under any Environmental
Laws; and
(e) any other matter which has resulted or would reasonably be
expected to result in a Material Adverse Effect.
6.02 Financial and Other Information. Viacom shall promptly deliver to
the Bank:
(a) Within 60 days after the close of the first three quarters of
each fiscal year of Viacom, a copy of the unaudited consolidated balance
sheet of Viacom and its Subsidiaries as at the end of such quarter and the
related consolidated statements of income and retained earnings and
statements of changes in financial position for such period and for the
elapsed portion of the fiscal year ended with the last day of such period,
in each case setting forth comparative figures for the related periods in
the prior fiscal year, subject to normal year-end audit adjustments; and
(b) Within 120 days after the close of each fiscal year of Viacom, a
copy of the audited consolidated balance sheet of Viacom, and its
Subsidiaries as at the end of such year and the related consolidated
statements of income and retained earnings and statements of changes in
financial position for such period, in each case setting forth comparative
figures for the prior fiscal year, and accompanied by the opinion of a
nationally-recognized independent public accounting firm which report shall
state that such consolidated financial statements present fairly in all
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material respects the financial position for the periods indicated in
accordance with generally acceptable accounting principles.
6.03 Books, Records, Audits and Inspections. The Borrower shall maintain
adequate books, accounts and records, and prepare all financial statements
required hereunder in accordance with generally accepted accounting principles
consistently applied, and in compliance with the regulations of any
governmental regulatory body having jurisdiction over the Borrower or the
Borrower's business, and permit employees or agents of the Bank at any
reasonable time to inspect the Borrower's properties, and to examine or audit
the Borrower's books, accounts, and records and make copies and memoranda
thereof.
6.04 Use of Facility. The Borrower shall use the credit facility provided
herein solely for working capital and other general corporate purposes not in
contravention of any requirement of law.
6.05 Insurance. The Borrower shall maintain and keep in force insurance of
the types and in amounts customarily carried in lines of businesses similar to
those of the Borrower, including, without limitation, fire, extended coverage,
public liability (including coverage for contractual liability), property
damage (including use and occupance), business interruption, and workers'
compensation, all carried by insurers and in amounts reasonably satisfactory to
the Bank.
6.06 Compliance with Laws. The Borrower shall at all times comply with all
laws, statutes (including but not limited to any fictitious name statute),
rules, regulations, orders, and directions of any governmental authority having
jurisdiction over the Borrower or the business of the Borrower (including,
without limitation, all Environmental Laws).
6.07 Change in Name, Structure or Location. The Borrower shall notify the
Bank in writing prior to any change in (a) the Borrower's name, (b) the
Borrower's business or legal structure, or (c) the Borrower's place of business
or chief executive office.
6.08 Additional Acts. The Borrower shall perform, on request of the Bank,
such acts as may be necessary or advisable to perfect any lien or security
interest provided for herein or otherwise to carry out the intent of this
Agreement.
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ARTICLE VII
NEGATIVE COVENANTS
So long as credit is available under this Agreement and until full and
final payment of all of the Borrower's and any Subsidiaries' obligations under
this Agreement and any other Credit Document or instrument or agreement
required under or entered into pursuant to this Agreement.
7.01 Other Indebtedness. The Borrower shall not create, incur,
assume, or permit to exist any indebtedness or liabilities for or resulting
from borrowed money, loans, or advances, or for the deferred purchase price of
property under capital leases, whether secured or unsecured, matured or
unmatured, liquidated or unliquidated, joint or several, or become liable as a
surety, guarantor, accommodation endorser, or otherwise for or upon the
obligation of any other person, firm, or corporation; provided, however, that
this Section shall not be deemed to prohibit:
(a) the acquisition of goods, supplies, or merchandise
(including, for purposes hereof, film rights and interactive,
multimedia rights) on normal trade credit; or
(b) the execution of bonds or undertakings in the ordinary
course of its business as presently conducted; or
(c) indebtedness of the Borrower to the Guarantor or to another
Subsidiary of the Guarantor; or
(d) the endorsement of negotiable instruments received in the
ordinary course of its business as presently conducted.
7.02 Existence and Properties. The Borrower shall maintain and
preserve its existence and all rights, privileges, and franchises now enjoyed,
conduct its business in an orderly, efficient, and customary manner, keep all
the its properties in good working order and condition, and from time to time
make all needed repairs, renewals, or replacements thereto and thereof so that
the efficiency of such property shall be fully maintained and preserved.
7.03 Liquidations and Mergers. The Borrower shall not liquidate or
dissolve or enter into any consolidation, merger, partnership, joint venture,
or other combination; provided, however, that the Borrower may merge or
consolidate with (i) a subsidiary of Viacom, or (ii) another corporation,
provided that (a) the Borrower is the surviving corporation in such merger, (b)
no cash consideration is paid by the Borrower in connection with such merger,
and (c) the Borrower is in compliance with all terms and conditions of this
Agreement and the other Credit Documents in effect to such transaction no
Default or Event of Default.
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7.04 Business Activities. The Borrower shall not engage in any business
activities or operations substantially different from or unrelated to present
business activities and operations.
7.05 Regulations G, T, U, and X. The Borrower shall not use any portion of
the proceeds of any borrowings or extensions of credit hereunder, directly or
indirectly, (i) to purchase or carry margin stock (within the meanings of
Regulations G, T, U, and X of the Board of Governors of the Federal Reserve
System), (ii) to repay or otherwise refinance indebtedness of the Borrower or
others incurred to purchase or carry any such margin stock, (iii) to extend
credit for the purpose of purchasing or carrying any such margin stock, or (iv)
to acquire any security in any transaction that is subject to Section 13 or 14
of the Securities Exchange Act of 1934, as amended.
23
<PAGE> 28
ARTICLE VIII
EVENTS OF DEFAULT
8.01 Events of Default. The occurrence of any of the following events
shall constitute an "Event of Default" under this Agreement.
(a) Failure to Pay. The Borrower fails to pay, when due, any
installment of principal, or, within three (3) Business Days after the
date when due any interest, fee or any other sum due under this
Agreement in accordance with the terms hereof.
(b) Breach of Representation or Warranty. Any representation
or warranty herein or in any agreement, instrument or certificate
executed pursuant hereto or in connection with any transaction
contemplated hereby proves to have been false or misleading in any
material respect when made.
(c) Other Defaults. The Borrower fails to perform or observe
any other term or covenant contained in this Agreement or any Credit
Document, and such default shall continue unremedied for a period of
20 days after the initial occurrence thereof.
(d) Trade Suits. One or more suits are filed against the
Borrower by a trade creditor or trade creditors of the Borrower in the
aggregate amount of $2,000,000 or more, which is not fully covered by
third party insurance and which remains unpaid, unbonded, unvacated or
unstayed for a period of 30 days after the filing thereof.
(e) Judgments. One or more final judgments or arbitration
awards are entered against the Borrower or any guarantor of any of the
Borrower's obligations to the Bank, or the Borrower or any such
guarantor enters into any settlement agreements with respect to any
litigation or arbitration, in the aggregate amount of $2,000,000 or
more on a claim or claims not fully covered by insurance and not
vacated or discharged within 60 days.
(f) Failure to Pay Debts; Voluntary Bankruptcy. The Borrower
or any guarantor of any of the Borrower's (i) fails to pay the
Borrower's or such guarantor's debts generally as they come due, or
(ii) files any petition, proceeding, case, or action for relief under
any bankruptcy, reorganization, insolvency, or moratorium law, or any
other law or laws for the relief of, or relating to, debtors.
(g) Involuntary Bankruptcy. An involuntary petition is filed
under any bankruptcy or similar statute against the
24
<PAGE> 29
Borrower or any guarantor of any of the Borrower's obligations to the Bank, or
a receiver, trustee, liquidator, assignee, custodian, sequestrator, or other
similar official is appointed to take possession of the properties of the
Borrower or such guarantor; provided, however, that such Event of Default shall
be deemed cured if such petition or appointment is set aside or withdrawn or
ceases to be in effect within 60 days from the date of said filing or
appointment.
(h) Suspension of Business. The Borrower voluntarily suspends its
business.
(i) Default of Other Financial Obligations. Any default occurs under
any other agreement involving the borrowing of money or the extension of
credit to which the Borrower may be a party as borrower, guarantor, or
installment purchaser, if such default consists of the failure to pay any
obligation when due or if such default gives to the holder of the
obligation concerned the right to accelerate the obligation.
(j) Default under other Credit Documents. The Guaranty or any other
Credit Document (other than this Agreement), or other agreement or
instrument required hereunder or executed in connection herewith is
breached or becomes ineffective or any default occurs under any such
agreement or instrument.
(k) Material Adverse Effect. There shall occur a Material Adverse
Effect.
(l) Default of Viacom Obligations under Viacom Credit Documents. An
Event of Default occurs and is continuing and has not been waived under any
of the Viacom Credit Documents.
8.02 Remedies. If any Event of Default occurs,
(a) any indebtedness of the Borrower under any of the Credit
Documents, any term thereof to the contrary notwithstanding, shall at the
Bank's option (but automatically upon the occurrence of an Event of Default
described in subsection 8.01(f)(ii) or subsection 8.01(g)) and without
notice become immediately due and payable without presentment, demand,
protest, or notice of dishonor, or any other notice, all of which are
hereby expressly waived by the Borrower to the full extent permitted by
law, and the Bank may declare an amount equal to the maximum aggregate
amount that is or at any time thereafter may become available for drawing
under any then outstanding letters of credit (whether or not any
beneficiary shall have presented, or be entitled at such time to present,
the drafts or other documents required to draw under such letters of
credit) to be immediately due and payable;
25
<PAGE> 30
(b) the obligation, if any, of the Bank to make further loans
or extensions of credit hereunder shall immediately cease and
terminate; and
(c) the Bank shall have all rights, powers, and remedies
available under each of the Credit Documents, or accorded by law,
including, without limitation, the right to resort to any or all
security for any credit accommodation described herein, and to exercise
any or all of the rights of a beneficiary or secured party pursuant to
applicable law.
All rights, powers, and remedies of the Bank may be exercised at any
time by the Bank and from time to time after the occurrence of an Event of
Default. All rights, powers, and remedies of the Bank in connection with each
of the Credit Documents are cumulative and not exclusive and shall be in
addition to any other rights, powers, or remedies provided by law or equity.
26
<PAGE> 31
ARTICLE IX
MISCELLANEOUS
9.01 Successors and Assigns. This Agreement shall bind and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that the Borrower shall not assign this Agreement or any of
the rights, duties or obligations of the Borrower hereunder without the prior
written consent of the Bank.
9.02 Consents and Waivers. No failure to exercise and no delay in
exercising, on the part of the Bank, any right, remedy, power, or privilege
hereunder, shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power, or privilege hereunder preclude any other
or further exercise thereof or the exercise of any other right, remedy, power,
or privilege. No consent or waiver under this Agreement shall be effective
unless in writing. No waiver of any breach or default shall be deemed a waiver
of any breach or default thereafter occurring.
9.03 Governing Law. This Agreement shall be governed by and construed
under the laws of the State of New York.
9.04 Costs and Attorney's Fees. The Borrower shall, whether or not the
transactions contemplated hereby shall be consummated, pay or reimburse the Bank
on demand for all reasonable costs and expenses incurred by the Bank in
connection with the development, preparation, delivery, administration, and
execution of, and any amendment, supplement, waiver or modification to, this
Agreement, any other Credit Document and any other documents prepared in
connection herewith or therewith and the consummation of the transactions
contemplated hereby and thereby, including reasonable attorney fees and
disbursements incurred by the Bank with respect thereto; and in connection with
the enforcement, attempted enforcement or preservation of any rights or remedies
hereunder or under any Credit Document, including any "workout" or
restructuring under this Agreement, including attorney fees and disbursements.
9.05 Integration; Amendment. This Agreement, together with the other
Credit Documents, embodies the entire agreement and understanding between the
Borrower and the Bank. This Agreement may be amended or modified only in
writing, signed by the Borrower and the Bank.
9.06 Destruction of the Borrower's Documents. The Bank shall be under no
obligation to return any schedules, invoices, statements, budgets, forecasts,
reports or other papers delivered by the Borrower and shall destroy or otherwise
dispose of same at such time as the Bank, in its discretion, deems appropriate.
27
<PAGE> 32
9.07 Participations. The Bank may at any time sell, assign, grant
participations in, or otherwise transfer to any other person, firm, corporation
or other entity (a "Participant") all or part of the obligations of the
Borrower under this Agreement. The Borrower authorizes the Bank and each
Participant, upon the occurrence of an Event of Default, to proceed directly by
right of setoff, banker's lien, or otherwise, against any assets of the
Borrower which may be in the hands of the Bank or such Participant,
respectively. The Borrower authorizes the Bank to disclose to any prospective
Participant and any Participant any and all information in the Bank's
possession concerning the Borrower, this Agreement; provided, however, that any
such prospective Participant or Participant shall agree to keep any such
information confidential.
9.08 General Indemnification. The Borrower shall pay, indemnify, and
the Bank, its parent company, and each of their officers, directors, employees,
counsel, agents and attorneys-in-fact (each, an "Indemnified Person") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, charges, expenses, or disbursements
(including attorneys' fees and disbursements) of any kind or nature whatsoever
with respect to the execution, delivery, enforcement, performance, and
administration of this Agreement and any other Credit Documents, or the
transactions contemplated hereby and thereby, and with respect to any
investigation, litigation, or proceeding related to this Agreement, any
violation of any Environmental Law by the Borrower, any release of a Hazardous
Substance at or from any property of the Borrower, or the loans and other
extensions of credit hereunder or the use of the proceeds thereof, whether or
not any Indemnified Person is a party thereto (all the foregoing, collectively,
the "Indemnified Liabilities"); Provided, that the Borrower shall have no
obligation hereunder to any Indemnified Person with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of such
Indemnified Person. The agreements in this Section shall survive payment of all
other obligations of the Borrower hereunder or under the other Credit Documents.
9.09 Notices.
(a) All notices, requests and other communications provided for
hereunder shall be in writing and mailed or delivered to a party at its
address specified on the signature pages hereof, or to such other
address as shall be designated by such party in a written notice to the
other parties. Copies of all notices to the Borrower shall be sent to
Spelling Entertainment Group Inc., 5700 Wilshire Blvd., Los Angeles,
CA 90036, Attention: Thomas Carson, Executive Vice President and Chief
Financial Officer, Fax: (213) 965-5829, and to Viacom Inc., 1515
Broadway, New York, New York 10036; Attention: Treasurer.
28
<PAGE> 33
(b) All such notices and communications shall, when transmitted by
overnight delivery, be effective when delivered for overnight delivery, or
if personally delivered, upon such personal delivery, except that notices
pursuant to Article II shall not be effective until actually received by
the Bank.
(c) The Borrower acknowledges and agrees that any agreement of the
Bank at Article II and Section 3.02 herein to receive certain notices by
telephone and facsimile is solely for the convenience and at the request of
the Borrower. Telephone requests may be made by any individual identified
in writing to the Bank on a form acceptable to the Bank as being authorized
to make such requests. The Bank shall be entitled to rely upon any written
or telephone request from persons it reasonably believes to be authorized
by the Borrower to make such requests without making independent inquiry.
The Borrower assumes the full risk of, and the Bank shall not be
responsible for, any delays or errors in transmission, and the obligation
of the Borrower to repay the loans and other extensions of credit hereunder
shall not be affected in any way or to any extent by any failure by the
Bank to receive written confirmation of any telephonic or facsimile notice
or the receipt by the Bank of a confirmation which is at variance with the
terms understood by the Bank to be contained in the telephonic or facsimile
notice.
9.10 Headings; Interpretation. Article, section, and paragraph headings
are for reference only and shall not affect the interpretation or meaning of
any provisions of this Agreement. The meaning of defined terms shall be equally
applicable to the singular and plural forms of the defined terms. The words
"hereof", "herein", "hereunder" and words of similar import when used in this
Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; and subsection, section, schedule and exhibit
references are to this Agreement unless otherwise specified. The term
"including" is not limiting and means "including without limitation." In the
computation of periods of time from a specified date to a later specified date,
the words "from" means "from and including"; the words "to" and "until" each
mean "to but excluding", and the word "through" means "to and including."
9.11 Severability. The illegality or unenforceability of any provision of
this Agreement or any instrument or agreement required hereunder shall not in
any way affect or impair the legality or enforceability of the remaining
provisions of this Agreement or any instrument or agreement required hereunder.
9.12 Counterparts. This Agreement may be executed in as many counterparts
as may be deemed necessary or convenient, and by the different parties hereto
on separate counterparts each of which,
29
<PAGE> 34
when so executed, shall be deemed an original but all such counterparts shall
constitute but one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
VIRGIN INTERACTIVE ENTERTAINMENT, INC.
By: /s/ THOMAS P. CARSON
-------------------------------
Title: Executive Vice President
-------------------------------
Address for Notices
18061 Fifth Avenue
Irvine, CA 92714
Fax: (714) 833-8717
BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION
By: /s/ BRUCE THOMAS
-------------------------------
Title: Vice President
-------------------------------
Address for Notices
Entertainment Media 15777
555 South Flower Street, 10th Fl.
Los Angeles, CA 90071
Attn: Mr. Bruce Thomas
Fax: (213) 228-3145
30
<PAGE> 1
Exhibit 10(ii)
FIRST AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment, dated as of March 31, 1995, (this "Amendment") is
entered into by and between VIRGIN INTERACTIVE ENTERTAINMENT, INC., a Delaware
corporation (the "Company") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank").
RECITALS
The Company and the Bank are parties to a Second Amended and Restated
Credit Agreement dated as of December 1, 1994, (the "Credit Agreement"), to
which the Bank extended a revolving and letter of credit facility. Capitalized
terms used and not otherwise defined or amended in this Amendment shall have
the meanings respectively assigned to them in the Credit Agreement.
The Company has requested that the Bank extend the maturity date of the
facility. The Company has requested that the Bank enter into this Amendment in
order to approve and reflect the foregoing, and the Bank has agreed to do so,
all upon the terms and provisions and subject to the conditions hereinafter
set forth.
AGREEMENT
In consideration of the foregoing and the mutual covenants and
agreement hereinafter set forth, the parties hereto mutually agree as follows:
A. AMENDMENTS
Amendment of Section 1.01
1. Section 1.01 is hereby amended by deleting the date "March 31,
1995" in the definition of "Availability Period" and substituting the date "May
31, 1995" therefor.
Section 1.01 is hereby further amended by deleting the date "August
31,1995" in the definitions of "CD Rate Interest Period, "Eurodollar Rate
Interest Period" and "Revolving Maturity Date" and substituting the date
"August 31, 1995" thereof.
B. REPRESENTATIONS AND WARRANTIES
The Company hereby represents and warrants to the Bank that:
1. No Event of Default specified in the Credit Agreement and no event
which with Notice or lapse of time or both would become such an Event of
Default has occurred and is continuing;
<PAGE> 2
2. The representations and warranties of the Company pursuant to the Credit
Agreement are true on and as of the date hereof as if made on and as of said
date;
3. The making and performance by the Company of this Amendment have been
duly authorized by all corporate action; and
4. No consent, approval, authorization, permit or license from any federal
or state regulatory authority is required in connection with the making or
performance of the Credit Agreement as amended hereby.
C. CONDITIONS PRECEDENT
This Amendment will become effective as of March 31, 1995, provided that
the Bank shall have received in form and substance satisfactory to the Bank,
all of the following:
1. A copy of a resolution passed by the Board of Directors of the Company,
certified by the Secretary or an Assistant Secretary of the Company as being in
full force and effect on the date hereof, authorizing the execution, delivery
and performance of the Credit Agreement as hereby amended.
2. A certificate of incumbency certifying the names of the officers of the
Company authorized to sign this Amendment, together with the true signatures of
such officers.
3. Executed counterparts of this Amendment.
D. MISCELLANEOUS
1. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with same effect as if the signatures thereto and
hereto were upon the same instrument.
2. Except as herein specifically amended, all terms, covenants and
provisions of the Credit Agreement shall remain in full force and effect and
shall be performed by the parties hereto according to its terms and provisions
and all references therein or in the Exhibits shall henceforth refer to the
Credit Agreement as amended by this Amendment.
3. This Amendment shall be governed by and construed in accordance with
the laws of the State of New York.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first written.
VIRGIN INTERACTIVE ENTERTAINMENT, INC.
By: /s/ THOMAS P CARSON
----------------------------------
Title: Executive Vice President
------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ AMY S. TUEY
----------------------------------
Title: Vice President
-------------------------------
3
<PAGE> 1
Exhibit 10(iii)
SECOND AMENDMENT TO
SECOND AMENDED AND RESTATED CREDIT AGREEMENT
This Amendment, dated as of June 1, 1995, (this "Amendment") is entered
into by and between VIRGIN INTERACTIVE ENTERTAINMENT, INC., a Delaware
corporation (the "Company") and BANK OF AMERICA NATIONAL TRUST AND SAVINGS
ASSOCIATION (the "Bank").
RECITALS
--------
The Company and the Bank are parties to a Second Amended and Restated
Credit Agreement dated as of December 1, 1994, (the "Credit Agreement"), to
which the Bank extended a revolving and letter of credit facility. Capitalized
terms used and not otherwise defined or amended in this Amendment shall have
the meanings respectively assigned to them in the Credit Agreement.
The Company has requested that the Bank extend the maturity date of the
facility. The Company has requested that the Bank enter into this Amendment in
order to approve and reflect the foregoing, and the Bank has agreed to do so,
all upon the terms and provisions and subject to the conditions hereinafter set
forth.
AGREEMENT
---------
In consideration of the foregoing and the mutual covenants and agreement
hereinafter set forth, the parties hereto mutually agree as follows:
A. AMENDMENTS
----------
Amendment of Section 1.01
-------------------------
1. Section 1.01 is hereby amended by deleting the date "May 31, 1995" in
the definition of "Availability Period" and substituting the date "December 31,
1995" therefor.
2. Section 1.01 is hereby further amended by deleting the date "August 31,
1995" in the definitions of "CD Rate Interest Period, "Eurodollar Rate
Interest Period" and "Revolving Maturity Date" and substituting the date "March
31, 1996" thereof.
Amendment of Section 2.02(b)
----------------------------
1. Section 2.02(b) is hereby amended by deleting the percentage ".625%"
and substituting ".75%" therefor.
B. REPRESENTATIONS AND WARRANTIES
------------------------------
The Company hereby represents and warrants to the Bank that:
<PAGE> 2
1. No Event of Default specified in the Credit Agreement and no event
which with notice or lapse of time or both would become such an Event of
Default has occurred and is continuing;
2. The representations and warranties of the Company pursuant to the
Credit Agreement are true on and as of the date hereof as if made on and as of
said date;
3. The making and performance by the Company of this Amendment have
been duly authorized by all corporate action; and
4. No consent, approval, authorization, permit or license from any
federal or state regulatory authority is required in connection with the making
or performance of the Credit Agreement as amended hereby.
C. CONDITIONS PRECEDENT
This Amendment will become effective as of June , 1995, provided that
the Bank shall have received executed counterparts of this Amendment.
D. MISCELLANEOUS
1. This Amendment may be signed in any number of counterparts, each of
which shall be an original, with same effect as if the signatures thereto and
hereto were upon the same instrument.
2. Except as herein specifically amended, all terms, covenants and
provisions of the Credit Agreement shall remain in full force and effect and
shall be performed by the parties hereto according to its terms and provisions
and all references therein or in the Exhibits shall henceforth refer to the
Credit Agreement as amended by this Amendment.
3. This Amendment shall be governed by and construed in
2
<PAGE> 3
accordance with the laws of the State of New York.
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Amendment as of the date first written.
VIRGIN INTERACTIVE ENTERTAINMENT, INC.
By: /s/ THOMAS P. CARSON
----------------------------------
Title: Executive Vice President
------------------------------
BANK OF AMERICA NATIONAL TRUST
AND SAVINGS ASSOCIATION
By: /s/ BRUCE THOMAS
----------------------------------
Title: Vice President
-------------------------------
3
<PAGE> 1
SPELLING ENTERTAINMENT GROUP INC. AND SUBSIDIARIES
EXHIBIT 11 - COMPUTATION OF NET INCOME PER COMMON
AND COMMON EQUIVALENT SHARE
(In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------- ---------------------
1995 1994 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income: $ 880 $ 8,707 $ 8,151 $15,561
======= ======= ======= =======
Shares:
Basic shares - weighted average of
common shares outstanding 88,327 64,819 88,254 64,698
Additional shares assuming
conversion of stock options and warrants 1,687 1,857 1,558 1,721
------- ------- ------- -------
Primary shares 90,014 66,676 89,812 66,419
Additional shares, when dilutive, assuming
full dilution of stock options and warrants - - - -
------- ------- ------- -------
Fully-diluted shares 90,014 66,676 89,812 66,419
======= ======= ======= =======
Primary and fully-diluted net income
per common and common equivalent share $ 0.01 $ 0.13 $ 0.09 $ 0.24
======= ======= ======= =======
</TABLE>
Note 1: This calculation is submitted in accordance with the Securities
Exchange Act of 1934 although not required by footnote 2 to paragraph
14 of APB Opinion No. 15 because the calculation of primary and
fully-diluted net income per common and common equivalent share
results in a dilution of less than 3%.
19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF JUNE 30, 1995 AND
THE UNAUDITED CONDENSED STATEMENT OF OPERATIONS FOR THE SIX MONTHS THEN ENDED
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 14,497
<SECURITIES> 0
<RECEIVABLES> 229,960
<ALLOWANCES> (32,880)
<INVENTORY> 323,776
<CURRENT-ASSETS> 388,886
<PP&E> 35,081
<DEPRECIATION> (12,798)
<TOTAL-ASSETS> 973,857
<CURRENT-LIABILITIES> 203,631
<BONDS> 0
<COMMON> 8,835
0
0
<OTHER-SE> 527,058
<TOTAL-LIABILITY-AND-EQUITY> 973,857
<SALES> 320,480
<TOTAL-REVENUES> 320,480
<CGS> 250,857
<TOTAL-COSTS> 250,857
<OTHER-EXPENSES> 47,911
<LOSS-PROVISION> 0<F1>
<INTEREST-EXPENSE> 8,846
<INCOME-PRETAX> 14,562
<INCOME-TAX> 7,048
<INCOME-CONTINUING> 7,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,151
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
<FN>
<F1>Note 1 - Amounts are not presented as permitted under Rule 10-01(a) of Article
10 of Regulation S-X.
</FN>
</TABLE>
<PAGE> 1
EXHIBIT 99.1
VIACOM TO SELL SPELLING ENTERTAINMENT
WILL ACQUIRE SPELLING'S INTEREST IN VIRGIN INTERACTIVE ENTERTAINMENT
New York, N.Y., August 10, 1995 - Viacom Inc. (AMEX: VIA and VIAB) announced
today that it will sell Spelling Entertainment Group Inc. (NYSE: SP).
Spelling, a TV and film producer, is a 78% owned subsidiary of Viacom acquired
as part of Viacom's purchase of Blockbuster Entertainment in September 1994.
Viacom has retained the investment banking firm of Bear Stearns & Co. Inc. to
identify qualified purchasers and to assist in the evaluation of proposals.
The Company also announced it will acquire Spelling's interest in Virgin
Interactive Entertainment Limited, the preeminent multimedia software unit that
Spelling acquired in the fall of 1994. An independent committee of Spelling's
Board of Directors will be formed to negotiate the terms of the Virgin
transaction.
Sumner M. Redstone, Chairman of the Board of Viacom, said "The sale of Spelling
is another major step in sharpening our focus and follows the previously
consummated sales of Madison Square Garden and our interest in Lifetime, and
the recently announced spin-off of our cable systems. The substantial net
proceeds we anticipate from the sale of Spelling will essentially complete the
process of establishing Viacom as one of the world's most strongly capitalized
global media companies. We will continue to take advantage of the many growth
opportunities of our businesses around the world while maintaining a very
strong balance sheet."
"Spelling is a unique and valuable entertainment franchise with rich libraries
of TV shows and motion pictures and we are reluctant to part with it," said
Frank J. Biondi, Jr., President and Chief Executive Officer of Viacom.
"However, after evaluating our content-rich asset portfolio and the potential
overlap with our Paramount Television operations, we feel Spelling could
provide even more benefit to others looking to build or enhance their presence
in programming. We are retaining our interest in Virgin Interactive
Entertainment because of the importance of the new and burgeoning multimedia
market and its position as a core asset in our overall strategic vision for
that market."
Spelling Entertainment Group Inc., based in Los Angeles, has long been a
preeminent producer and distributor of TV programming (Melrose Place, Beverly
Hills 90210) and motion pictures. In recent years, Spelling has expanded,
acquiring Republic Entertainment, with its strong home-video distribution and a
library of 7,000 titles.
Virgin Entertainment is one of the world's leading developers, publishers and
distributors of interactive entertainment software, including "The 7th Guest"
and "The Lion King."
Viacom Inc. is one of the world's largest entertainment and publishing
companies and a leading force in nearly every segment of the international
media marketplace. The operations of Viacom include Blockbuster Music,
Blockbuster Video, MTV Networks, Paramount Parks, Paramount Pictures, Paramount
Television, Showtime Networks, Simon & Schuster and Viacom Interactive Media,
as well as cable systems serving 1.2 million customers, radio and television
stations, and movie screens in 11 countries. Viacom also has a substantial
interest in Discovery Zone and a majority interest in Spelling Entertainment
Group. National Amusements, Inc., a closely held corporation which owns and
operates almost 1,000 screens in the U.S. ad the U.K., is the parent company of
Viacom.
# # #
Contact: Carl Folta
212/258-6352
