<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
INFORMATION STATEMENT
PURSUANT TO SECTION (14f) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------
PRISM ENTERTAINMENT CORPORATION
(Name of Subject Company)
PRISM ENTERTAINMENT CORPORATION
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
74266310
(CUSIP Number of Class of Securities)
---------------
BARRY COLLIER
PRISM ENTERTAINMENT CORPORATION
1888 CENTURY PARK EAST, SUITE 350
LOS ANGELES, CA 90067
(Name, address and telephone number of person
authorized to receive notice and communications on
behalf of the person(s) filing statement)
With copies to:
DAVID L. FICKSMAN, ESQ.
LOEB & LOEB LLP
1000 WILSHIRE BOULEVARD, SUITE 1800
LOS ANGELES, CALIFORNIA 90017
(213) 688-3698
===============================================================================
<PAGE>
PRISM ENTERTAINMENT CORPORATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(f)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14f-1 THEREUNDER
1. General
-------
This information statement is being furnished in connection with the
expected appointment to the Board of Directors of Prism Entertainment
Corporation, a Delaware corporation ("Prism" or the "Company"), of persons
representing a majority of the members of the Board of Directors of the Company,
other than at a meeting of the Company's stockholders, pursuant to the terms of
that certain Agreement and Plan of Reorganization and Merger, dated as of
October 25, 1996 (the "Reorganization Agreement") by and among the Company and
Lee Video City, Inc. ("VCI") and that certain Override Agreement, dated as of
November 19, 1996 by and among VCI, Robert Y. Lee ("Lee"), the Company and
Ingram Entertainment Inc. ("Ingram"). No action is required by the stockholders
of the Company in connection with the appointment of such directors. However,
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the filing with the Securities and Exchange Commission (the
"SEC") and the mailing to stockholders of the information set forth herein prior
to a change in majority of the directors.
On December 1, 1995, the Company and its subsidiaries filed a
voluntary Chapter 11 petition and commenced a case (the "Bankruptcy
Proceedings") under Chapter 11 of the United States Bankruptcy Code. Throughout
the course of the Bankruptcy Proceedings, the Company has been operating as
debtor-in-possession.
On November 1, 1996, the United States Bankruptcy Court for the
Central District of California (the "Bankruptcy Court") entered an Order
approving the Amended Disclosure Statement for Debtors' Amended Plan of
Reorganization, dated October 25, 1996 (the "Disclosure Statement"). The
Disclosure Statement has been distributed to the stockholders of the Company on
November 12, 1996. A Supplemental Disclosure Statement (the "Supplemental
Statement") was disseminated to the stockholders on November 26, 1996.
Reference is made to the Disclosure Statement and Supplemental Disclosure
Statement for a more detailed description of certain of the transactions
contemplated herein. On December 17, 1996, the Bankruptcy Court entered an
Order confirming the Plan of Reorganization of the Company (the "Plan").
2. The Merger
----------
Pursuant to the Reorganization Agreement, as authorized by the Plan,
VCI will merge with and into the Company (the "Merger"). The Merger will be
consummated on or after the effective date of the Plan (the "Effective Date"),
with the Company, after emerging
<PAGE>
from the Bankruptcy Proceedings as a reorganized debtor, being the surviving
corporation ("New Entertainment"). Upon the Effective Date, the name of New
Entertainment will be changed to Video City, Inc.
The initial outstanding shares of New Entertainment will be 10,000,000
shares of Common Stock (including a presently exercisable option in Favor of
Barry Collier to purchase 175,000 shares). Pursuant to the Merger, on the
Effective Date, the existing shareholders of VCI will receive 5,078,750 shares
(or approximately 50.79% of New Entertainment Common Stock on the Effective
Date), 1,500,000 shares of Common Stock will be issued to Ingram pursuant to the
Override Agreement (see below), 2,552,750 shares will be issued to holders of
"Allowed Claims" (as such term is defined in the Plan) and 693,500 shares of the
Common Stock will be retained by the existing stockholders of Prism. As
indicated, options that can be exercised immediately will be granted to Barry
Collier ("Collier"), Prism's current Chief Executive Officer and President, to
purchase 175,000 shares of New Entertainment Common Stock.
As part of the Merger, New Entertainment will assume the obligations
under certain stock options which were issued by VCI and originally exercisable
into VCI stock. After the Effective Date, these options will become options to
purchase shares of New Entertainment Common Stock.
VCI was formed in 1989 by Lee who remains its largest shareholder.
VCI owns and operates 18 retail video/rental superstores in the State of
California and operates on behalf of third parties five additional video stores.
The stores are devoted exclusively to the rental and sale of pre-recorded movies
on videocassettes to the public, the rental of video game cartridges to the
public and the sale of other related products. The stores are primarily located
in areas with a total population of less than 500,000 people.
3. Transaction With Ingram
-----------------------
Ingram is a video distributor which acquires videocassettes from
studios and film producers and sells them to video retail stores such as VCI for
rental and sale. Ingram was VCI's biggest supplier of videocassettes and, as a
result of this relationship, VCI is presently indebted to Ingram in the
approximate amount of $4,500,000. Pursuant to the Override Agreement, Ingram
has agreed to convert $3,000,000 of the existing debt of VCI into 1,500,000
shares of Common Stock of New Entertainment. The remaining debt will become the
obligation of New Entertainment. On the Effective Date, New Entertainment will
issue to Ingram warrants to purchase up to an aggregate of 852,750 shares and
Ingram will have the right to purchase from certain shareholders of VCI an
additional 410,444 shares of New Entertainment Common Stock.
2
<PAGE>
4. Certain Information Concerning the Board of Directors
-----------------------------------------------------
Pursuant to the terms of the proposed Stockholders Agreement among the
Company, Lee, Collier and Ingram which is required to be entered into as of the
Effective Date pursuant to the Override Agreement, Collier, Lee and Ingram have
agreed to use their best efforts to cause the number of directors of the Company
to be eight and to vote in each election of members of the Board of Directors
all of such stockholder's shares in favor of two designees of Ingram, four
designees of Lee and two designees of Collier. In this connection, Lee has
designated the following individuals in addition to himself: Steven
Antongiovanni, James Craig Kelly and Stephen C. Lehman; Ingram has designated
Charles Cook and Michael Anderson; and Collier has designated Gerald D. B. Weber
in addition to himself.
Set forth below is the name, age, business address, present principal
occupation and five year employment history of each of the persons expected to
be appointed to the Board of Directors of the Company on the Effective Date
pursuant to the Stockholders Agreement.
<TABLE>
<CAPTION>
Name and Address Age Principal Occupation and Five
- ------------------------------------ --- -----------------------------
Year Employment History
-----------------------------
<S> <C> <C>
Barry Collier 53 See Text Below
Prism Entertainment Corporation
1888 Century Park East, Suite 350
Los Angeles, California 90067
Robert Y. Lee 33 See Text Below
Lee Video City, Inc.
6851 McDivitt Drive, Suite A
Bakersfield, California 93313
Steven Antongiovanni 38 See Text Below
Lee Video City, Inc.
6851 McDivitt Drive, Suite A
Bakersfield, California 93313
James Craig Kelly 38 See Text Below
Lee Video City, Inc.
6851 McDivitt Drive, Suite A
Bakersfield, California 93313
</TABLE>
3
<PAGE>
<TABLE>
<S> <C> <C>
Gerald W.B. Weber 43 See Text Below
AutoNation U.S.A.
One Financial Plaza
Ft. Lauderdale, Florida 33394
Charles Edward Cook See Text Below
3309 Fairmont Drive
Nashville, Tennessee 37203
Michael Anderson 33 See Text Below
10940 Wilshire Boulevard
Los Angeles, California 90024
Stephen Lehman 44 See Text Below
15260 Ventura Boulevard
Fifth Floor
Sherman Oaks, California 91403-5339
</TABLE>
Mr. Collier has been director, President and Chief Operating Officer
of the Company from its inception and served as its Secretary from its inception
until June 12, 1985, when he became Chief Executive Officer. Mr. Collier served
as Chairman of the Board from 1990 to 1994. Mr. Collier is presently the sole
director of the Company. Upon the Effective Date, Mr. Collier will resign as
Chairman of the Board and Chief Executive Officer and will be elected the
President and a director of New Entertainment.
Upon the Effective Date, Mr. Lee will become the Chief Executive
Officer and Chairman of the Board of New Entertainment. Mr. Lee is one of the
pioneers of the video retail industry. He purchased his first video store in
1983, and during the 1980s owned a total of 23 video stores in Los Angeles and
Orange Counties, California. Mr. Lee was elected Orange County Entrepreneur of
the Year by 1989 by Inc. Magazine and Ernst & Young. In 1990, Mr. Lee moved to
-------------
Bakersfield, California and founded VCI to exploit his secondary market growth
strategy. Since 1990, he has been the President, Chief Executive Officer and
Chairman of the Board of VCI.
Upon the Effective Date, Mr. Kelly will become the Senior Vice
President and Chief Operating Officer, and a director of New Entertainment. Mr.
Kelly joined VCI in 1992, after 15 years with Wherehouse Entertainment, a $500
million in revenue retailer of music and video products. From 1982 to 1984, Mr.
Kelly was Director of Loss Prevention for Wherehouse. From 1984 to 1991, Mr.
Kelly was Vice President and Regional Manager for Wherehouse, where he oversaw
approximately 100 stores with annual revenues of $150 million and approximately
2,000 employees.
4
<PAGE>
Upon the Effective Date, Mr. Antongiovanni will become the Chief
Financial Officer and a director of New Entertainment. Mr. Antongiovanni is
currently the Chief Financial Officer of VCI. From 1980 to 1994, Mr.
Antongiovanni was employed by Sunworld International, Inc., an agribusiness with
annual revenues in excess of $250 million, where he rose from Staff Accountant
to Vice President and Controller. Mr. Antongiovanni joined VCI in 1994.
Mr. Lehman has been President, Chief Executive Officer and Chairman of
the Board of Premier Radio Networks, Inc., a producer of radio programming,
since its formation in January 1987. From 1984 to 1987, Mr. Lehman was
President of Stephen Lehman Productions, a syndicated radio program company,
while also serving as an on-air personality at KIIS-AM and FM/Los Angeles. From
1982 to 1984, he specialized in building radio networks for independent radio
syndication.
Mr. Weber is Senior Vice President of Retail Operations of AutoNation
USA responsible for all AutoNation USA retail operations, including sales,
training, planning, hiring, and loss prevention. Prior to joining AutoNation
USA, he was with Blockbuster Entertainment Corporation where he served most
recently as President of Blockbuster Music. Prior to that, Mr. Weber served in
a number of management roles at Blockbuster Video, including Zone Vice President
of the East and Southeast regions; as well as Vice President of Operations and
Senior Vice President of Domestic Retail.
Since 1994, Mr. Cook has been a principal of Cook & Grace Properties
which owns, manages, sells and leases commercial real property. From 1985 to
1994, Mr. Cook was affiliated with Dobson & Johnson, Inc., a commercial real
estate broker.
Since 1994, Mr. Anderson has been a principal at the law firm of Troop
Meisinger Steuber & Pasich LLP, Los Angeles, California, where he specializes in
commercial litigation. Prior to joining such firm, Mr. Anderson was associated
with the law firm of DeCastro, West, Chodorow & Burns, and was an associate at
the Boston Consulting Group, a management consulting firm.
Except for Mr. Collier, none of the foregoing persons currently is a
director of, or holds any position with, the Company. Except as set forth
herein, to the best knowledge of the Company, none of the above-listed persons
beneficially owns any equity securities or rights to acquire any equity
securities of the Company or has been involved in any transactions with the
Company or any of its directors, executive officers or affiliates which are
required to be disclosed pursuant to the rules and regulations of the Securities
and Exchange Commission.
The following table provides information as of December 15, 1996 with
respect to each of the Company's present directors and executive officers.
5
<PAGE>
<TABLE>
<CAPTION>
Name Age Position Served as Officer or
- ---------------------------- --- -------- -------------------------
Director of Company Since
-------------------------
<S> <C> <C> <C>
Barry Collier President, Chief Executive 1985
Officer and Chief Operating
Officer and Director
Rudy Patino Chief Accounting Officer 1996
</TABLE>
Officers of the Company are elected annually by the Board of
Directors.
The Company did not hold any meetings during the fiscal year
commencing February 1, 1996 since Mr. Collier was the sole director during that
period.
The Board of Directors has an Audit Committee. However, since Mr.
Collier was the sole director during the recent fiscal year, the Audit Committee
did not meet.
5. Certain Information Concerning the Company.
------------------------------------------
The authorized capital stock of the Company consists of 20,000,000
shares of Common Stock $.01 per value, 10,000,000 of which will be issued and
outstanding (including shares purchasable under the Collier Option), after
giving effect to the transactions described herein.
The Board of Directors is comprised of only one class. At each annual
meeting of stockholders, the entire board of directors is elected to serve for a
one year term. The term of office of the directors will expire at the next
Annual Stockholders Meeting. As indicated, the Board of Directors is expected
to be comprised of 8 members immediately after the Effective Date.
6. Compensation of Officers and Directors
--------------------------------------
The following table sets forth information concerning compensation
paid (or earned by the named individuals) by the Company for the fiscal years
ended January 31, 1996, 1995 and 1994 to the individual who was at January 31,
1996 the chief executive officer and the other executive officer employed by the
Company as of January 31, 1996 who earned more than $100,000 for the last fiscal
year:
6
<PAGE>
SUMMARY COMPENSATION TABLE
--------------------------
<TABLE>
<CAPTION>
Stock
options
Name and Principal Salary Bonus Other Annual # of
Position Year ($) ($)(1) Compensation Shares
- --------------------------- ---- ------- ------ ------------ -------
<S> <C> <C> <C> <C> <C>
Barry Collier 1996 436,645 -- -- --
President; Chief 1995 447,319 -- -- --
Executive Officer; 1994 421,985 64,000 -- --
Chief Operating
officer
Earl Rosenstein/(1)/ 1996 138,497 -- -- --
Senior Vice President; 1995 147,930 -- -- --
Chief Financial Officer; 1994 150,000 20,000 -- --
Secretary
</TABLE>
/(1)/ Mr. Rosenstein resigned as an officer of the Company effective June 30,
1996.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
---------------------------------------------------
AND FY-END OPTION/SAR VALUES
----------------------------
<TABLE>
<CAPTION>
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs at
at FY-End(#) FY-End($)
Shares Acquired Exercisable/ Exercisable/
Name on Exercise(#) Value Realized($) Unexercisable Unexercisable
- ------------------ --------------- ---------------- ------------- ---------------
<S> <C> <C> <C> <C>
Barry Collier NA NA NA NA
Earl Rosenstein -0- -0- 30,000/0 O/NA
</TABLE>
Employment Agreements
---------------------
Upon the Effective Date, Robert Y. Lee will enter into an Employment
Agreement with New Entertainment pursuant to which he will serve for a period of
three years in the capacity of Chairman of the Board and Chief Executive
Officer. Mr. Lee will receive a base salary of $178,000 per year and an annual
bonus of 3% of any pre-tax profit in excess of $1,100,000 with respect to the
fiscal year commencing in 1997; 3% of any pre-tax profit in excess of $1,200,000
with respect to the fiscal year commencing in 1998; and 3% of any pre-tax profit
in excess of $1,300,000 with respect to the fiscal year commencing in 1999.
7
<PAGE>
Mr. Lee is also entitled to certain fringe benefits including payment of up to
$500 per month for the use of one Company provided automobile.
Upon the Effective Date, Barry Collier will enter into a new
Employment Agreement with New Entertainment pursuant to which for a period of
two years Mr. Collier will serve in the capacity of President. Mr. Collier will
receive a base salary of $178,000 per year. In addition, Mr. Collier is
entitled to an annual bonus equal to 12% of all annual revenues (net of
commissions and expenses related thereto) recorded in excess of $625,000 from
the licensing of and/or transfer of rights to the Prism film library; an annual
bonus equal to 5% of any promotional advertising development funds from any
external source in excess of $350,000 received by or credited to the Company;
and a bonus equal to 20% of proceeds in excess of $3,700,000 (net of commissions
and expenses of sale) received by the Company generated from the sale of the
film library in its entirety. Mr. Collier is also entitled to certain fringe
benefits including payment of up to $500 per month for the use of one Company
provided automobile.
Upon the Effective Date, James Craig Kelly will enter into an
Employment Agreement with New Entertainment pursuant to which he will serve for
a period of three years in the capacity of Senior Vice President and Chief
Operating Officer. Mr. Kelly will receive a base salary of $120,000 per year
and a bonus of 3% of any pre-tax profit in excess of $1,100,000 with respect to
the fiscal year commencing in 1997; 3% of any pre-tax profit in excess of
$1,200,000 with respect to the fiscal year commencing in 1998; and 3% of any
pre-tax profit in excess of $1,300,000 with respect to the fiscal year
commencing in 1999. Mr. Kelly is also entitled to certain fringe benefits
including payment of up to $500 per month for the use of one Company provided
automobile.
Stock Options
-------------
Pursuant to the Reorganization Agreement, the Company has agreed to
assume the following options previously granted to Messrs. Kelly and
Antongiovanni by VCI:
<TABLE>
<CAPTION>
Total exercise Price per
Name Options Price share
- ----------------------- ------- -------------- ---------
<S> <C> <C> <C>
James Craig Kelly 761,600 $391,821 $ .51
Steven Antongiovanni 181,200 $186,446 $1.03
</TABLE>
All such options will be fully vested as of the Effective Date.
In addition, certain other key employees and consultants of VCI will
receive options to purchase an aggregate of 461,000 shares of New Entertainment
Common Stock over a 5-year term, vesting one third prior to the Effective Date,
one third upon the first anniversary thereof and one third on the second
anniversary thereof. The exercise price will
8
<PAGE>
be $2.00 per share. Mr. Collier will also be granted options to purchase
175,000 shares of New Entertainment Common Stock at an exercise price of $.10
per share for a period of ten years (the "Collier Option"). The Collier Option
will contain a "gross-up" provision pursuant to which upon exercise of all or
part of the Option, he will be granted an additional option to purchase that
number of shares at an exercise price of $2.00 per share equal to (i) 17,500
divided by (ii) that number that is equal to the fair market value of the Common
Stock at the time of exercise less $2.00.
Compensation to Directors
-------------------------
During the fiscal year ended January 31, 1996, directors of the
Company who were also officers did not receive any compensation for their
services as directors. Each director of the Company, other than those who are
officers of the Company or its affiliates, were entitled to receive $5,000 per
year, plus reimbursement of expenses incurred as a director. Since Mr. Collier
was the sole director of the Company during the current fiscal year, no
additional compensation was paid or payable by the Company for service on the
Board with respect to such fiscal year.
7. Security Ownership of Certain Beneficial Owners and
---------------------------------------------------
Management.
- -----------
Security Ownership of Certain Beneficial Owners
-----------------------------------------------
The following table identifies the persons and entities known by the
Company to be the beneficial owners of 5% or more of the Company's outstanding
voting securities as of December 15, 1996 before giving effect to the Merger and
the Plan:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner (1)(2) Beneficial Ownership Class
- ------------------------------- -------------------- ----------
<S> <C> <C>
Barry Collier(3)(4) 650,000 29.4
Investors (5) 756,000 34.3
KuwAm Corporation (5)(6)(7) 679,000 30.6
Mishal Y. Al Sabah (5) 32,000 1.4
</TABLE>
9
<PAGE>
<TABLE>
<S> <C> <C>
Special Situation Investment
Holdings, Ltd. (5)(6) 632,000 28.6
Special Situation Investment
Holdings, L.P. II(5)(6) 25,000 1.1
Wirt D. Walker III(5)(6)(8) 738,000 34.3
</TABLE>
(1) The address of Mr. Collier is 1888 Century Park East, Suite 350, Los
Angeles, California 90067. The address of each of the Investors is 2600
Virginia Avenue N.W., Suite 900, Washington, D.C. 20037.
(2) The information was furnished by the named persons, or is contained in
filings made by certain named persons with the Securities and Exchange
Commission.
(3) Including 305,750 shares owned of record by Mr. Collier which were pledged
to Palan Settlement Trust ("Palan"), the predecessor in interest to Batur
Lake, Inc. and Betula Holdings, Inc., to secure a debt. On June 29, 1985,
Mr. Collier purchased 305,750 shares of the Company's common stock from
Palan, which shares are pledged to Palan to secure the deferred purchase
price owed to Palan. Under the terms of the pledge, Mr. Collier retains
voting rights and the right to receive cash dividends. Shares will be
released from the pledge on a pro rata basis as and when portions of the
deferred purchase price are paid to Palan. The deferred purchase price is
payable from proceeds to Mr. Collier of the sale of any of his common stock
or the shares of common stock held in trust for his children after such
time as aggregate proceeds of such sales exceed $500,000. Mr. Collier has
the obligation to pay the deferred purchase price only and to the extent
that he can lawfully sell any of such common stock. The Company is not a
party to the pledge and has not undertaken any obligation regarding the
sale to Mr. Collier. However, if Mr. Collier defaults in payments, Batur
Lake, Inc. and Betula Holdings, Inc., as successors to Palan's rights with
respect to the pledge, have the right to retain or to sell the pledged
shares to satisfy the unpaid balance of the purchase price.
(4) Including 137,000 shares held of record by trusts for Mr. Collier's
children for which Mr. Collier's brother is trustee. The trustee has sole
voting and investment power with respect to the shares held by such trusts.
Mr. Collier has sole voting and investment power over the remaining 513,000
shares.
(5) The "Investors" are KuwAm Corporation (the general partner of Special
Situation Investment Holdings, Ltd. and special Situation Investment
Holdings, L.P. II); Special Situation Investment Holdings, Ltd.; Special
Situation Investment Holdings, L.P. II; Mishal Y. Al Sabah; and Wirt D.
Walker III. The Investors have filed statements on Schedule 13D with the
Securities and Exchange Commission with respect to their
10
<PAGE>
ownership of shares of common stock. The shares of the Investors are held
of record as follows: KuwAm Corporation -- 22,000 shares, Special Situation
Investment Holdings, Ltd. -- 632,000 shares, Special Situation Investment
Holdings, L.P. II --25,000 shares, Mishal Y. Al Sabah -- 32,000 shares, and
Wirt D. Walker III and Sally Walker --25,000 shares.
(6) Mr. Walker is a director and Managing Director of KuwAm Corporation. By
reason of the foregoing and other relationships with members of the
Investors, Mr. Walker may be deemed to share voting and investment power
with respect to the shares owned by KuwAm Corporation, Special Situation
Investment Holdings, Ltd., Special Situation Investment Holdings, L.P. II
and Mr. Al Sabah.
(7) Includes 632,000 and 25,000 shares held of record by Special Situation
Investment Holdings, Ltd. and Special Situation Investment Holdings, L.P.
II, respectively.
(8) Includes 632,000 shares, 22,000 shares, 32,000 shares and 25,000 held of
record by Special Situation Investment Holdings, Ltd., KuwAm Corporation,
Mr. Al Sabah, and Special Situation Investment Holdings L.P. II,
respectively, and 2,000 shares held by Mr. Walker, as custodian for W.
Alexander Walker.
The following table identifies the persons and entities who are
expected, as of the Effective Date, to be the beneficial owners of 5% or more of
the New Entertainment's outstanding Common Stock after giving effect to the
Merger and the Plan:
11
<PAGE>
<TABLE>
<CAPTION>
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership Percent of Class
- ------------------------------------ -------------------- ----------------
<S> <C> <C>
Barry Collier 993,050/(1)/ 9.8
Prism Entertainment Corporation
1888 Century Park East, Suite 350
Los Angeles, California 90067
Robert Y. Lee 2,719,024 27.2
Lee Video City, Inc.
6851 McDivitt Drive, Suite A
Bakersfield, California 93313
Ingram Entertainment, Inc. 2,763,194/(2)/ 24.5
Two Ingram Boulevard
</TABLE>
La Vergne, Tennessee 37089
(1) Consists of (a) 208,050 shares retained as a result of Mr. Collier's
existing equity interest in the Company, (b) 610,000 shares to be received
upon the Merger as a result of Mr. Collier's purchase of 216,916 shares of
VCI from Mr. Lee as of November 1, 1996; and (c) 175,000 shares purchasable
upon exercise of the Collier Option.
(2) Includes 1,263,194 shares purchasable upon the exercise of warrants which
will be exercisable as of the Effective Date.
Security Ownership of Management
--------------------------------
The following table sets forth the beneficial ownership of the
Company's common stock by (i) each director, individually, and (ii) all
directors and officers of the Company, as a group, as of December 15, 1996
before giving effect to the Merger and the Plan:
12
<PAGE>
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent of
Beneficial Owner Beneficial Ownership Class
- ------------------------- -------------------- ----------
<S> <C> <C>
Barry Collier/(1)/ 650,000 29.4
1888 Century Park East
Suite 350
Los Angeles, CA 90067
All Directors and
officers as a Group
(1 person) 650,000 29.4
</TABLE>
(1) See notes 3 and 4 in the first table under "Security Ownership of Certain
Beneficial Owners," above.
The following table sets forth the beneficial ownership of the New
Entertainment's Common Stock which is expected to be owned as of the Effective
Date by (i) each director to be elected to the Board, individually who is
expected to be the beneficial owner of any shares and (ii) all directors and
officers of the New Entertainment, as a group, and after giving effect to the
Merger and the Plan:
<TABLE>
<CAPTION>
Name and Address Amount and Nature of Percent of
of Beneficial Owner Beneficial Ownership Class
- ------------------------------------ -------------------- ----------
<S> <C> <C>
Barry Collier 993,050/(1)/ 9.8
Prism Entertainment Corporation
1888 Century Park East, Suite 350
Los Angeles, California 90067
Robert Y. Lee 2,719,024 27.2
Lee Video City, Inc.
6851 McDivitt Drive, Suite A
Bakersfield, California 93313
Steven Antongiovanni 181,200/(2)/ 1.8
Lee Video City, Inc.
6851 McDivitt Drive, Suite A
Bakersfield, California 93313
</TABLE>
13
<PAGE>
<TABLE>
<S> <C> <C>
James Craig Kelly 761,600/(2)/ 7.1
Lee Video City, Inc.
6851 McDivitt Drive, Suite A
Bakersfield, California 93313
All directors and
officers as a group
(4 persons) 4,654,874 41.9
</TABLE>
(1) See Note 1 in the second table under "Security Ownership of Certain
Beneficial Owners" above.
(2) Consists of shares of New Entertainment Common Stock purchasable upon
exercise of options.
8. Compliance with Section 16(a) of the Exchange Act.
-------------------------------------------------
Based solely on a review of Forms 3 and 4 and amendments thereto
furnished to the Company during its most recent fiscal year and certain written
presentations, no persons who was a director, officer, or beneficial owner of
more than 10% of the Company's common stock, failed to file on a timely basis
reports required by Section 16(a) of the Exchange Act during the most recent
fiscal year.
14
