<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 14, 1997.
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
-----------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ALL AMERICAN COMMUNICATIONS, INC.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 808 WILSHIRE BOULEVARD 95-3803222
(State or other jurisdiction of SANTA MONICA, CALIFORNIA 90401-1810 (I.R.S. Employer
incorporation or organization) (310) 656-1100 Identification No.)
</TABLE>
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
-----------------------
THOMAS BRADSHAW
SENIOR EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER
ALL AMERICAN COMMUNICATIONS, INC.
808 WILSHIRE BOULEVARD
SANTA MONICA, CALIFORNIA 90401-1810
(310) 656-1100
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
-----------------------
WITH A COPY TO:
BARRY L. DASTIN, ESQ.
KAYE, SCHOLER, FIERMAN, HAYS & HANDLER, LLP
1999 AVENUE OF THE STARS, SUITE 1600
LOS ANGELES, CA 90067
(310) 788-1000
-----------------------
Approximate date of commencement of proposed sale to the public: from time to
time after this registration statement becomes effective as determined by
market conditions.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<PAGE> 2
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM
AMOUNT AGGREGATE AGGREGATE AMOUNT OF
TITLE OF SHARES TO BE PRICE PER OFFERING REGISTRATION
TO BE REGISTERED REGISTERED SHARE PRICE FEE
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, par value
$0.0001 per share 4,419,865 shares $12.406(1) $54,833,951 $16,616.35
Class B Common Stock, 2,520,000 shares $9.0635(2) $22,837,500 $ 6,920.45
par value $0.0001 per share
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933 (the
"Securities Act") based upon the average of the high and low prices of
the Company's common stock, par value $0.0001 per share, reported on
the Nasdaq National Market on January 9, 1997.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act based upon the
average of the high and low prices of the Class B Common Stock, par
value $0.0001 per share, reported on the Nasdaq National Market on
January 9, 1997.
<PAGE> 3
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JANUARY 14, 1997
ALL AMERICAN COMMUNICATIONS, INC.
4,419,865 SHARES COMMON STOCK
2,520,000 SHARES CLASS B COMMON STOCK
This Prospectus relates to an aggregate of 4,419,865 shares of common
stock, $0.0001 par value per share (the "Common Stock"), and 2,520,000 shares
of Class B Common Stock, $0.0001 par value per share (the "Class B Common
Stock") of All American Communications, Inc., a Delaware corporation (the
"Company"), which are currently issued and outstanding and may be offered for
sale by the selling stockholders named herein (collectively, the "Selling
Stockholders"). See "Selling Stockholders" and "Description of Securities."
The shares of Common Stock and Class B Common Stock offered hereby are referred
to herein collectively as the "Shares." The Shares may be offered by the
Selling Stockholders for their own account at any time and from time to time on
the National Association of Securities Dealers Automated Quotation System
("Nasdaq") in block trades or otherwise at prices to be negotiated at the time
of sale.
The Company will not receive any proceeds from the sale of Shares
offered by the Selling Stockholders. The Company has agreed to bear certain
expenses (other than selling commissions and fees and expenses of counsel and
other advisors to the Selling Stockholders) in connection with the registration
and sale of the Shares being offered by the Selling Stockholders.
The Common Stock and Class B Common Stock are listed on the Nasdaq
National Market under the trading symbols "AACI" and "AACIB," respectively. On
January 9, 1997, the last sales price of the Common Stock and Class B Common
Stock as reported by Nasdaq was $12.50 and $8.75, respectively per share.
FOR A DISCUSSION OF CERTAIN MATERIAL FACTORS THAT SHOULD BE CONSIDERED IN
CONNECTION WITH AN INVESTMENT IN THE SHARES, SEE "RISK FACTORS" COMMENCING ON
PAGE 5 HEREOF.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS
THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
The Selling Stockholders, acting as principal for their own account,
directly or through agents, dealers, brokers or underwriters to be designated
from time to time, may sell the Shares from time to time on terms to be
determined at the time of sale. To the extent required, the number of Shares to
be sold, the respective purchase price and public offering price, the name of
any agent, dealer, broker or underwriter and any applicable commissions or
discounts with respect to a particular offer will be set forth in an
accompanying Prospectus Supplement. See "Plan of Distribution." Each Selling
Stockholder reserves the sole right to accept or reject, in whole or in part,
any proposed purchase of the Shares.
The date of this Prospectus is _________, 1997
<PAGE> 4
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other information
with the Securities and Exchange Commission (the "Commission"). Such reports,
proxy statements and other information can be inspected and copied at the
public reference facilities maintained by the Commission at Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549 and at the Commission's regional
offices located at 7 World Trade Center, Suite 1300, New York, New York 10048
and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661. Copies of such material can also be obtained from the Public Reference
Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. The Common Stock and Class B
Common Stock are listed on Nasdaq National Market. Such material can also be
inspected at the offices of the National Association of Securities Dealers,
Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed a Registration Statement on Form S-3 (of which
this Prospectus is a part) (together with all amendments and exhibits thereto,
the "Registration Statement") with the Commission under the Securities Act of
1933, as amended (the "Securities Act"). This Prospectus and any accompanying
Prospectus Supplement do not contain all the information set forth in the
Registration Statement, certain portions of which have been omitted pursuant to
the rules and regulations of the Commission. For further information
pertaining to the Company and the Shares, reference is hereby made to the
Registration Statement. Statements contained in this Prospectus as to the
contents of any contract or other document are not necessarily complete, and in
each instance such statements are qualified in their entirety by reference to
the copy of such contract or other document filed as an exhibit to the
Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company incorporates by reference herein the following documents
heretofore filed with the Commission pursuant to the Exchange Act:
1. Annual Report of the Company on Form 10-K for the fiscal year ended
December 31, 1995, as amended on April 29, 1996, and further amended
on June 18, 1996;
2. Quarterly Report of the Company on Form 10-Q for the fiscal quarter
ended March 31, 1996;
3. Quarterly Report of the Company on Form 10-Q for the fiscal quarter
ended June 30, 1996;
4. Quarterly Report of the Company on Form 10-Q, for the fiscal quarter
ended September 30, 1996;
5. Current Reports of the Company on Form 8-K or 8-K/A, filed on May 3,
1996, June 14, 1996, June 21, 1996, June 28, 1996, August 6, 1996,
September 25, 1996, October 22, 1996 and November 6, 1996; and
6. The description of Common Stock contained in the Company's
Registration Statement on Form 8-A, filed on March 20, 1986, as
amended on April 11, 1986.
7. The description of Class B Common Stock contained in the Company's
Registration Statement on Form 8-A, filed on December 4, 1995.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act subsequent to the date of this Prospectus and
prior to the termination of the offering of the Shares shall be deemed to be
incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained herein or in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Prospectus to the
extent that a statement contained herein, in any accompanying Prospectus
Supplement or in any other subsequently filed document which also is or is
deemed to
<PAGE> 5
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Copies of all documents incorporated by reference herein (other than
exhibits to such documents unless such exhibits are specifically incorporated
by reference herein) will be provided without charge to each person, including
any beneficial owner, who receives a copy of this Prospectus on the request of
such person made to All American Communications, Inc., 808 Wilshire Boulevard,
Santa Monica, California 90401, tel: (310) 656-1100, Attention: Paul A. Pavlis,
Executive Vice President and General Counsel.
2
<PAGE> 6
The following is a summary of certain information contained elsewhere
in this Prospectus. The following summary should be read in conjunction with,
and is qualified in its entirety by, the more detailed information and
financial statements (including the notes thereto) incorporated by reference
herein. Unless the context otherwise requires, references herein to the
"Company" or "All American" are to All American Communications, Inc., its
direct or indirect subsidiaries and its predecessors. All American
Communications, Inc. owns the following subsidiaries: All American Television
Production, Inc. ("AATP"), All American Television, Inc. ("AATV"), All American
Entertainment, Inc. ("AAEI"), All American FDF Holdings Inc., ("AAFH"), All
American Fremantle International, Inc. ("AAFI"), All American Orbis, Inc.
("AAO"), All American Consumer Marketing Group, Inc. ("AACM") and All American
Goodson, Inc. ("AAG").
THE COMPANY
All American is a diversified worldwide entertainment company with
operations in television and recorded music production and distribution. The
Company is a leading independent producer and distributor of television
programming and believes that it is the largest supplier of game show
programming in multiple formats and languages worldwide. The Company's
programming includes the Baywatch franchise and 60 game show formats and other
television programming, created by the Company's subsidiary Mark Goodson
Productions, LLC, including The Price Is Right, the longest running game show
in the United States. The Company produces, distributes or owns television
programming consisting of 32 series, approximately 30,000 game show episodes,
165 motion pictures and a library of children's programming, documentaries and
specials.
Leading Game Show Supplier. The Company has substantially expanded
and diversified its television operations in the past two years through the
acquisitions of Mark Goodson Productions, LLC, the producer and worldwide
copyright owner and licensor of many of the most successful game show formats
ever developed, including The Price Is Right, Family Feud, Match Game, What's
My Line and Password; and Fremantle International, Inc., which pioneered the
international production and distribution of U.S. television game show formats
in all-new versions in local languages, both for Mark Goodson shows and shows
developed by other producers such as Let's Make a Deal and The Dating Game.
The Company's current game show line-up consists of The Price Is
Right, in its 25th consecutive season on CBS, and the development of updated
versions of three other Goodson game show formats for possible network
exhibition or first-run syndication in the 1997/1998 broadcast season, as well
as local versions, in certain cases renewed for multi-year periods, of The
Price Is Right and Family Feud in Germany and France. In addition, over 17,000
broadcast hours of rerun game show programming produced by Mark Goodson
Productions are licensed to The Sony Game Show Channel through October 1997
when the licensing rights revert to the Company. The Company has also recently
expanded into the production and distribution of local versions of U.S. style
talk-shows in Europe through its acquisition of Orbis Entertainment, Inc.
Baywatch Franchise. The Company's operations include the production
and domestic distribution of Baywatch, one of the highest rated one-hour series
in first-run syndication domestically and among the most widely exhibited U.S.
television programs worldwide, currently in its seventh season; the production
and worldwide distribution of Baywatch Nights, a spin-off series currently in
its second season; and the distribution through the end of the current
broadcast season of a strip syndication package of 111 Baywatch reruns. The
Company has entered into a license agreement with USA Networks providing for
exclusive U.S. exhibition of Baywatch reruns and certain other previously aired
series on USA Networks cable network through September 2000 (subject to certain
renewal options) in consideration for a minimum license fee of $30.4 million
payable to the Company in 36 equal monthly installments, commencing September
1997.
Other New Television Programming. In September 1996, the Company
launched The Adventures of Sinbad, a new one-hour series in first-run
syndication for the 1996/1997 broadcast season. The series has been cleared on
stations covering more than 90% of the U.S. television market and has been
presold in substantially all the major foreign territories. In addition, the
Company has expanded its television production operations to include
programming for the
3
<PAGE> 7
major broadcast and cable networks through the addition in July 1995 of a
production team led by David Gerber, former head of MGM Television. The
Company currently has network commitments for two movies-for-television, On the
Line for ABC and We The Jury for USA Networks as well as various additional
long-form programming in development. The Company also acts as third party
distributor for programming produced by third parties.
Library of Television Programming. The Company owns or has the rights
to license and distribute an extensive library of programming including series,
classic and contemporary motion picture, documentaries, children's programming
and various network and cable and live-event specials.
Music Recording and Distribution. The Company's recorded music
operations consist of a roster of artists, including James Brown, Skee-Lo and
"Weird Al" Yankovic. In addition, the Company distributes and licenses a
catalog of recorded music, including approximately 75 catalog albums in active
release by artists currently on the roster, additional artists such as Count
Basie, Sarah Vaughn and Dizzie Gillespie, and soundtracks from motion pictures
and television shows. The Company distributes its music domestically through a
division of Time Warner, Inc. and internationally through various licensees.
All American seeks to be a leading global provider of quality
television programming. Management believes that ownership of its programming
combined with its global production and worldwide distribution capabilities
provide important long-term competitive advantages. Opportunistic acquisitions
and internal development efforts are expected to remain important elements in
the Company's growth strategy.
Management believes that the Company is well positioned to take
advantage of current trends in the television industry and that recent
regulatory changes, local content requirements, and the proliferation of
distribution channels via satellite and cable television will increase the
demand for programming content.
The Company is the legal successor of All American Television, Inc.
("AATV"), a corporation primarily engaged in the production and distribution of
television programming. AATV has distributed certain television programming
produced by Scotti Brothers Entertainment Industries ("SBEI"), among its other
business activities. On February 25, 1991, a wholly-owned subsidiary of AATV
was merged (the "Merger") into SBEI, and SBEI became a wholly-owned subsidiary
of the Company. On such date, the Company changed its name to "All American
Communications, Inc." and the pre-merger operations of AATV were contributed to
another wholly-owned subsidiary of the Company.
The Company's principal executive offices are located at 808 Wilshire
Boulevard, Santa Monica, California 90401-1810, and its telephone number is
(310) 656-1100.
4
<PAGE> 8
RISK FACTORS
Prospective investors should consider carefully the following factors,
as well as all of the other information set forth in this Prospectus, in
evaluating an investment in the Shares. This Prospectus contains certain
forward-looking statements within the meaning of Section 27A of the Securities
Act and Section 21E of the Exchange Act that involve risks and uncertainties,
many of which cannot be predicted with accuracy and some of which might not
even be anticipated. The Company's actual results may differ significantly from
the results discussed in such forward-looking statements as a result of certain
factors and uncertainties set forth below and elsewhere in this Prospectus.
DEPENDENCE ON A LIMITED NUMBER OF PROJECTS; NATURE OF THE ENTERTAINMENT
INDUSTRY
The Company's revenues have been derived principally from a relatively
small number of television productions and recorded music releases. The loss
of a major project in any period, unless replaced by new projects, could have
an adverse effect on the Company's results of operations. The agreements
between the Company and the various domestic television stations which
broadcast Baywatch, Baywatch Nights, The Price Is Right and The Adventures of
Sinbad do not have automatic renewal provisions and typically expire at the end
of each broadcast year. The decision of each broadcaster to renew a particular
project is made during the prior broadcast year and is based on a number of
factors, including ratings, availability of key talent and estimated clearances
from local television stations. Baywatch accounted for approximately 19% and
29% of the Company's revenues during the nine-month period ended September 30,
1996, and the fiscal year ended December 31, 1995, respectively. As a result
of the loss of weekly second runs in certain key markets Baywatch has
experienced lower ratings. In addition, two of the Company's game shows, The
Price Is Right (primarily the United States) and Let's Make a Deal (primarily
Germany) accounted in the aggregate for 21% and 20% of the Company's revenues
during such respective periods. There is no assurance that Baywatch or any
other program will continue its prior level of success in the 1996/1997
television season or that any program will be renewed for any future seasons,
except in the case of certain foreign programming subject to multi-year
contracts. In addition, there is no assurance that the Company's new first-
run series, The Adventures of Sinbad, will be successful. While the Company
continually endeavors to develop new programming, there is no assurance that
revenue from existing or future programming will replace a possible loss of
revenue associated with the reduction in ratings, the future availability of
key talent or the nonrenewal of broadcast agreements with respect to any
particular program.
The television and recorded music industries are highly speculative
and historically have involved a substantial degree of risk. The success of an
individual television program or musical recording depends upon unpredictable
and changing factors, such as personal tastes of the public and critics.
Therefore, there is a substantial risk that any of the Company's projects will
not be successful, resulting in costs not being recouped and anticipated
profits not being realized. Although the Company attempts to limit the risks
involved with television production through various activities including
obtaining insurance and completion bonds and entering into co-production and
presale arrangements in selected projects and in its distribution activities
the Company expects to continue to take significant financial risks in return
for more favorable participation in potential revenues over the life of the
programs. Public taste is unpredictable and a shift in demand could cause the
Company's television programming to lose its appeal. The Company's television
syndication barter business also is impacted by advertising rates, which to the
extent they may decline, could have a material adverse effect on the Company's
financial condition or results of operations. In addition, because the
success of recording artists and releases is highly dependent upon consumer
taste and critical response, as well as public awareness of recording artists,
the level of marketing and promotional activities and expenses necessary in any
particular instance cannot be predicted with certainty.
LEVERAGE
The Company has substantially increased its leverage as a result of a
recently completed private placement of its 10 7/8% Senior Subordinated Notes
dues 2001 (the "Notes Offering"), and has the potential to further increase
such leverage as a result of an amendment and restatement of its senior credit
facility (the "Restructured Credit Facility"). The Company had notes payable
totaling approximately $148.1 million and $135.0 million at September 30, 1996
and December 31, 1995, respectively, and such indebtedness represented
approximately 66% and 66% of total consolidated
5
<PAGE> 9
capitalization at such dates. On a pro forma basis, giving effect to the Notes
Offering and the use of proceeds therefrom, the Company's notes payable would
have been approximately $144.3 million at September 30, 1996, or approximately
62% of its capitalization. In addition, as of September 30, 1996, on a pro
forma basis, the Company would have had the right to borrow an additional
$108.7 million under the Restructured Credit Facility (plus up to an additional
$18.8 million of senior debt which could have been incurred thereunder subject
to borrowing base availability).
The Company's degree of leverage may place it at a competitive
disadvantage with respect to its less leveraged competitors. This leverage may
impair the Company's ability to obtain additional financing in the future for
working capital, capital expenditures, acquisitions or other purposes.
Additionally, if the Company were to sustain a decline in its operating results
or available cash, it could experience difficulty in complying with the
covenants contained in the Restructured Credit Facility or any other agreements
governing future indebtedness of the Company. The failure to comply with such
covenants could result in an event of default under these agreements thereby
permitting acceleration of such indebtedness as well as indebtedness under
other instruments that contain cross-acceleration and cross-default provisions.
FLUCTUATIONS IN RESULTS OF OPERATIONS
A large percentage of a television program's revenues is recognized
when the program is delivered pursuant to a non-cancelable agreement, provided
the applicable broadcast season has commenced. Broadcasters typically make
most of their annual programming commitments in the first and second quarters
of any calendar year so that new programs will be ready for delivery in the
third and fourth quarters of that year, typically the commencement of the
broadcast season. Minimum guaranteed revenues from domestic cash license
agreements typically are recognized when the license period begins and the
program is delivered. Advertising revenues (i.e., sales of advertising time
received by the Company in lieu of cash license fees for the sale of program
broadcast rights to a broadcast station ("barter syndication")) are recognized
upon the commencement of the license period of the respective program pursuant
to non-cancelable agreements, provided that the program has been delivered.
Minimum guaranteed revenues from foreign license agreements typically are
recognized on the date of the license agreement. Revenues from subsequent
licensing of delivered product, including rerun strip syndication (i.e., sales
of previously aired episodes licensed for broadcast in a five-day-a-week
format) are recognized on the commencement of the license period. As a result,
significant fluctuations in the Company's total revenues and net income can
occur from period to period depending on, among other things, the delivery or
availability dates of programs. The Company's television revenues have
historically been higher in the third and fourth quarters. The Company's
recorded music operations also are subject to fluctuations due to the timing of
certain album releases (which may generate significant revenues in the period
in which the release occurs) and to the timing of the recognition of artist
cost expense (which may occur during a period prior to determination of actual
sales of an album).
Television program costs (e.g., direct production costs, production
overhead, interest and certain exploitation costs) are capitalized during the
period of production of a respective program. Such capitalized costs, together
with estimated total costs of participations and residuals, are amortized based
upon the ratio of revenue received during the current period to management's
estimate of the remaining gross revenue to be recognized in connection with the
respective program. To the extent that such estimates differ from the actual
results, there could be a material adverse effect on the Company's financial
condition or results from operations. Such estimates are evaluated quarterly
and estimated losses, if any, are provided for in full.
From the quarter ended March 31, 1994 through the quarter ended
September 30, 1996, the Company's quarterly revenues have ranged from
approximately $7.6 million to $85.2 million, and quarterly net income has
ranged from a net loss of approximately $2.7 million to a net profit of
approximately $12.6 million. Year to year comparisons of quarterly results may
not be meaningful and quarterly operating results during the course of a fiscal
year may not be indicative of results that may be expected for the entire
fiscal year.
6
<PAGE> 10
LIQUIDITY AND FINANCING RESOURCES; NEGATIVE CASH FLOWS
The Company's television and recorded music operations require
significant cash outlays. The Company experienced positive cash flows from
operations of approximately $29.8 million in the nine-month period ended
September 30, 1996; however, the Company experienced negative cash flows from
operations of $17.0 million and $14.7 million in the years ended December 31,
1995 and 1994, respectively. The Company attempts to defray the production
costs of its television programming by obtaining, prior to commencement of
production, one or more of the following: (i) television license fees for
exploitation of the project in the United States and foreign markets; (ii)
financial contributions by co-producers, if any; and (iii) pre-sales of
television, home video and other ancillary rights. However, the Company is
generally required to fund a significant portion of television production and
recorded music costs, pending receipt of anticipated license fees and recorded
music sales, out of its line of credit or working capital. Risks such as
production delays, higher talent costs, increased subcontractor costs,
political instability overseas, and other unanticipated events may
substantially increase production costs and delay completion of the production
of any one or more of the Company's programs.
Substantially all of the Company's revenue from domestic syndication
is derived from advertising revenue which is based upon the ratings and viewer
demographics of each respective program. See "--Dependence on a Limited Number
of Projects; Nature of the Entertainment Industry." Typically, payment for the
license and distribution of a particular program follows the broadcast of such
program and the determination of the program's respective ratings.
Accordingly, the Company receives payment in connection with licensing and
distribution revenues after the broadcast of each respective episode throughout
the broadcast season. Consequently, cash flows may fluctuate from quarter to
quarter depending upon the ratings for each particular program's broadcast and
generally do not correlate with the recognition of revenue which is made at the
time the respective programs are delivered and made available for broadcast.
In addition, revenues from rerun strip syndication are recognized on the date
of the respective syndication agreement, while collection of the related
accounts receivable will typically occur over the period during which the
programs are broadcast, even if such agreement covers more than the current
broadcast season.
The Company believes that its existing working capital, together with
the proceeds of the Notes Offering, the amount of available borrowings under
the Restructured Credit Facility and anticipated cash flows from operations,
will be sufficient to satisfy the Company's operating requirements for at least
the next twelve months. However, as a result of (i) the timing differences
between the recognition of revenue and the collection of the related accounts
receivable in connection with revenues from licensing activities and barter
syndication, (ii) capitalized program costs and (iii) the operating risks
identified above, the Company may continue to experience negative cash flows
from operations, from time to time, in the future, even though the Company may
report net income for financial reporting purposes during the respective
period. Any inability of the Company to obtain adequate financing for
operating activities, including the financing of programming production, could
delay or cancel the production and delivery of television programming in time
for the applicable television broadcast season which could have a material
adverse effect on the financial condition or results of operations of the
Company.
From the quarter ended March 31, 1994 through the quarter ended
September 30, 1996, the Company's net cash provided by operating activities has
ranged, on a quarterly basis, from a use of funds of $14.0 million to a
provision of funds of $20.7 million. Year to year comparisons of quarterly
results may not be meaningful and quarterly operating results during the course
of a fiscal year may not be indicative of results that may be expected for the
entire fiscal year.
EXPANSION RISKS
The Company has experienced significant revenue growth since 1991, in
substantial part due to acquisitions, and the Company continues to regularly
evaluate potential acquisitions of program rights and the expansion of its
business through the acquisition of businesses complementary to the current
operations of the Company. Consummation of any such acquisitions or other
expansion of the business conducted by the Company, if beyond its capital
resources, would be subject to the Company securing additional financing. The
Company's ability to achieve its expansion plans will depend on a variety of
factors, including its ability to identify and negotiate satisfactory terms
with acquisition
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targets, obtain additional capital on satisfactory terms, operate its business
profitably and attract and retain qualified and experienced personnel. There
is no assurance that the Company will consummate any acquisition, that any
acquisition will be financed on terms favorable to the Company or that any
recent or future acquisitions will be profitable.
FOREIGN ECONOMIES; FOREIGN CURRENCY FLUCTUATION
Approximately 36% of the Company's revenue for the year ended December
31, 1995 was derived from the Company's foreign operations, substantially all
of which were based in Europe; and an additional 13% of revenues were derived
from licensing rights of domestic productions to licensees outside the United
States. The Company anticipates that it will continue to be substantially
dependent on revenue derived from outside the United States in the future. The
Company's ability to maintain or expand its international business (as well as
its ability to contract upon favorable terms with international broadcasters
and other licensees), and conduct foreign production activities depends, in
part, on the local economic conditions, currency fluctuations, local changes in
regulatory requirements, compliance with a variety of foreign laws and
regulations, inflation, interest rates, and cultural barriers. In addition,
political instability in a foreign nation may adversely affect the ability of
the Company to distribute its product in that country. As a result of the
foregoing, as well as the many other factors affecting domestic businesses,
there is no assurance that the Company's international operations will continue
to be successful.
COMPETITION
Competition is intense within the television and recorded music
industries and between each of these industries and other entertainment media.
The Company's television programming competes with other first-run programming,
network programming and reruns and programs produced by local television
stations. The Company also competes with many other companies that have been
acquiring, producing, and distributing programs longer than the Company, most
of which have greater financial resources than the Company. In addition,
vertical integration of the television broadcast market and the creation and
expansion of new "networks" which create a substantial portion of their own
programming, such as UPN (United Paramount Network.) and WB (Warner Brothers
Inc.), have decreased the number of available time slots for, and thereby
increased the competition among, programs marketed for first-run syndication by
independent syndicators like the Company. There is no assurance that the
Company will continue to acquire rights to additional successful properties or
enter into agreements for the financing, production or licensing of television
programs or musical recordings on terms favorable to the Company.
CONTROL BY MANAGEMENT
Prior to any sale by the Selling Stockholders pursuant to this
Prospectus (based on holdings as of December 4, 1996 and assuming no additional
exercise of outstanding warrants or options), approximately 61% of the
outstanding shares of the Common Stock will be beneficially held by Anthony J.
Scotti and Benjamin J. Scotti, the Company's Chief Executive Officer and Senior
Executive Vice President, respectively. Anthony J. Scotti and Benjamin J.
Scotti will continue to be in a position to elect at least a majority of the
Board of Directors of the Company and control the vote on all matters
considered by the Board of Directors or submitted to a vote of the Company's
stockholders. The Board of Directors and the stockholders of the Company have
approved an amendment to the Company's charter, subject to Nasdaq approval,
which would enable holders of the Common Stock to convert such shares into the
Company's non-voting Class B Common Stock. To the extent non-management
holders of the Common Stock choose to convert such shares, the management
holders will have an increased concentration of voting control of the Company.
In December 1996, Nasdaq determined not to approve this proposal.
In the event of a "change in control" of the Company, as variously
defined in particular contractual provisions (generally the sale of the Company
or the acquisition by persons other than Anthony J. Scotti and related persons
of more than 50% of the outstanding Common Stock or the beneficial ownership by
Anthony J. Scotti and related persons of less than a specified percentage of
the Common Stock), various potentially adverse consequences could occur. Such
consequences include the potential acceleration of the Company's senior debt,
loss of the right to use the name "Scotti" and the automatic conversion of the
Class B Common Stock into Common Stock, which could further impact control of
the Company. The cumulative impact of such provisions, combined with the
concentration of ownership among the
8
<PAGE> 12
Company's senior management, may have the effect of delaying, deferring or
preventing a change in control of the Company, discouraging tender offers for
the Company and inhibiting certain equity issuances.
DEPENDENCE ON KEY PERSONNEL
The Company is dependent on the efforts and abilities of certain of
its senior management, particularly those of Anthony J. Scotti. In addition,
the Restructured Credit Facility permits the lenders to terminate the
commitments and/or declare all outstanding principal and interest amounts
forthwith due and payable if Anthony J. Scotti or all three of the following:
Thomas Bradshaw, Myron Roth and Lawrence Lamattina cease to be active in the
businesses of the Company. The Company has entered into employment agreements
with each of Messrs. Scotti, Bradshaw and Lamattina. The loss of the services
of any key executive could have a material adverse effect on the financial
condition or results of operations of the Company.
GOVERNMENT REGULATION
The Company is subject to various federal and local (including
foreign) regulations, particularly by the Federal Communications Commission
which regulates program content, competition among broadcasters and the
availability of broadcast programming. The Company cannot predict how existing
laws and regulations will be interpreted, whether additional laws and
regulations will be adopted, or the effect such changes may have on the
Company's financial condition or results of operations.
LIMITED PUBLIC MARKET; EFFECT OF CLASS B COMMON STOCK
There is presently a limited trading market for the Common Stock and
the Class B Common Stock and there is no assurance that a more active market
will develop for such securities or that, if a more active market is developed,
it will be sustained at any specific level. On the basis of the recent market
prices of the Common Stock and the Class B Common Stock and of securities of
other companies in the entertainment industry, the market price of the Common
Stock will depend on many factors, including among other things, prevailing
interest rates, the Company's operating results and the market for similar
securities. In addition, stock markets have experienced extreme price and
volume fluctuations recently which often have been unrelated to the operating
performance of specific companies. Although the Class B Common Stock is
generally the same as the Common Stock, it is non-voting and historically has
traded at a discount to the Common Stock.
ABSENCE OF DIVIDENDS
No dividends have been paid on the Common Stock or the Class B Common
Stock to date, and the Company does not anticipate paying dividends on the
Common Stock in the foreseeable future.
SHARES AVAILABLE FOR FUTURE SALE
Substantially all of the 6,857,195 shares of Common Stock, which
amount includes 1,015,043 shares issued upon conversion of a portion of the
Company's 6 1/2% Convertible Subordinated Notes due 2003 (the "Convertible
Notes") subsequent to the Company's issuance of its notice to redeem the
Convertible Notes (which redemption was consummated on November 27, 1996) and
5,191,800 shares of Class B Common Stock outstanding as of the date of this
Prospectus and, subject to issuance, the 4,411,345 shares of Common Stock and
1,977,000 shares of Class B Common Stock issuable upon exercise of outstanding
options or warrants, will be freely tradeable in the public markets, in certain
cases pursuant to a registration statement or an available exemption from
registration. No prediction can be made as to the effect, if any, that sales
of shares of Common Stock or Class B Common Stock, or even the availability of
such shares for sale, will have on the market prices prevailing from time to
time. The possibility that substantial amounts of Common Stock or Class B
Common Stock may be sold in the public market may adversely affect the
prevailing market price for the Common Stock and Class B Common Stock and could
impair the Company's ability to raise capital through the sale of its equity
securities. See "Description of Securities -- Shares Available for Future
Sale."
9
<PAGE> 13
SELLING STOCKHOLDERS
The Selling Stockholders are certain persons, as set forth in the
table below, who from time to time hold Shares. It is unknown if, when, or in
what amounts a Selling Stockholder may offer Shares for sale. There is no
assurance that the Selling Stockholders will sell any or all of the Shares
offered hereby. To the extent required, the public offering price of the
Shares to be sold, the names of any agent, dealer or underwriter employed by
such Selling Stockholder in connection with such sale, and any applicable
commission or discount with respect to a particular offer will be set forth in
an accompanying Prospectus Supplement. The material relationship, if any, of
each Selling Stockholder to the Company during the past three years is also set
forth in the table.
The Interpublic Group of Companies, Inc. ("Interpublic") has
registration rights with respect to 630,000 shares of Common Stock and
2,520,000 shares of Class B Common Stock, all of which are "restricted
securities" subject to Rule 144 promulgated under the Securities Act.
Interpublic has determined to exercise such registration rights with respect to
630,000 shares of Common Stock and 2,520,000 shares of Class B Common Stock
offered pursuant to this Prospectus. Interpublic has entered into a voting
agreement with certain management stockholders of the Company (including
Anthony J. Scotti) to vote for the election of one member of the Company's
Board of Directors nominated by Interpublic. Mr. Eugene P. Beard, Vice
Chairman-Finance and Operations of Interpublic, has been a director of the
Company since October 12, 1994.
Certain of the Shares of particular Selling Stockholders are subject
to a Shareholders Agreement (the "Shareholders Agreement"), dated August 25,
1996, by and among the Company and Anthony J. Scotti, Benjamin J. Scotti,
Thomas Bradshaw and Sydney D. Vinnedge. Pursuant to the Shareholders
Agreement, Anthony J. Scotti and Benjamin J. Scotti, and in the event not
exercised by them, the Company, have a right of first refusal (the "Refusal
Rights") to purchase any of Mr. Bradshaw's shares and any shares acquired by
Mr. Vinnedge on or after February 25, 1991, before such shares may be sold,
transferred, pledged, encumbered or otherwise disposed of by such Selling
Stockholder. Any exercise of the Refusal Rights must be communicated to the
relevant Selling Stockholder within five days of the proposed transfer of the
shares covered by the Shareholders Agreement (the "Notice"). In the event that
Messrs. Bradshaw and Vinnedge seek to transfer any shares covered by the
Shareholder Agreement in the course of an ordinary public market transaction,
the purchase price per share to be paid by the entity exercising the Refusal
Rights shall be equal to the average of the last reported sales price for the
Common Stock on the Nasdaq National Market for the ten trading days immediately
preceding the date of the Notice, subject to adjustment in certain
circumstances.
The Shares covered by this Prospectus may be sold from time to time so
long as this Prospectus remains in effect; provided, however, that the Selling
Stockholder is first required to contact the Company's Corporate Secretary to
confirm that this Prospectus is in effect. Although the Company will use its
best efforts to maintain this Prospectus in effect for up to three years, there
is no assurance that such will be the case. Since a Selling Stockholder may be
liable if he or it sells Shares when this Prospectus is not in effect, the
Company requires each Selling Stockholder to contact it to confirm that this
Prospectus is then in effect prior to any sale of Shares. The Selling
Stockholders expect to sell the Shares at prices then attainable, less ordinary
brokers commissions and dealers' discounts as applicable. Sale of the Shares
of certain of the Selling Stockholders may not exceed, during any three month
period, the amount specified in Rule 144(e) of the Securities Act to the
extent such Selling Stockholders are determined to be "affiliates" of the
Company (as defined in Rule 144). For a discussion of Rule 144 of the
Securities Act, see "Description of Securities--Shares Available for Future
Sale."
10
<PAGE> 14
SELLING STOCKHOLDER TABLE
<TABLE>
<CAPTION>
OWNERSHIP BEFORE OFFERING(1) AMOUNT OFFERED OWNERSHIP AFTER OFFERING(2)
NAME AND ----------------------------- -------------- -----------------------------
RELATIONSHIP COMMON CLASS B COMMON CLASS B COMMON CLASS B
TO COMPANY STOCK COMMON STOCK STOCK COMMON STOCK STOCK COMMON STOCK
- ---------- ------ ------------ ----- ------------ ----- ------------
<S> <C> <C> <C> <C> <C>
Anthony J. Scotti (3) 3,282,328 0 1,435,995 0 1,076,408 0
Chief Executive Officer
and Chairman of the
Board
Benjamin J. Scotti (4) 1,441,995 0 1,435,995 0 6,000 0
Senior Executive
Vice President;
Executive Vice
President--All American
Music Group; and Director
Myron I. Roth (5) 440,850 0 315,850 0 125,000 0
President, Chief
Operating Officer
and Director
Thomas Bradshaw (6) 385,850 100,000 315,850 0 70,000 100,000
Chief Financial Officer,
Senior Executive Vice
President and Director
Sydney D. Vinnedge (7) 153,975 0 141,975 0 12,000 0
Senior Executive Vice
President and Director
George Back (8) 109,700 0 90,200 0 19,500 0
President--Domestic
Distribution
Lawrence Lamattina (9) 130,000 0 30,000 0 100,000 0
Chief Executive Officer
and President--All
American/Fremantle
Television Group
James Tierney 15,000 0 15,000 0 0 0
Attorney to the
Company
Fredrick Scotti (10) 33,550 0 9,000 0 24,550 0
Senior Vice President,
Administration
The Interpublic 630,000 2,520,000 630,000 2,520,000 0 0
Companies, Inc. (11)
Significant Stockholder
</TABLE>
__________________
(1) Amounts include options and other securities exercisable or
convertible into shares of Common Stock or Class B Common Stock, as
the case may be, held by such beneficial owner, unless such securities
are not convertible or exercisable within 60 days.
11
<PAGE> 15
(2) Assumes all shares offered have been sold without regard to
limitations imposed by Rule 144 of the Securities Act.
(3) Common Stock ownership before Offering includes 1,277,638 shares
beneficially owned by Messrs. Roth, Bradshaw, Vinnedge, Lamattina,
Back, F. Scotti and certain other employees which Anthony J. Scotti has
a proxy to vote. Includes vested options to purchase 500,000 shares of
Common Stock. Further includes 8,695 shares of Common Stock from
conversion of the Convertible Notes registered under a registration
statement. Does not include 1,200,000 shares of Class B Common Stock
issuable to Mr. Scotti upon exercise of options which have not vested
and are not subject to vesting within the next 60 days. Common Stock
ownership after Offering excludes 769,925 shares offered herein which
are owned by Messrs. Roth, Bradshaw, Vinnedge and Lamattina which
Anthony J. Scotti has a proxy to vote.
(4) Includes 6,000 time vesting Common Stock options which have vested.
Does not include 14,000 time vesting Common Stock options which have
not vested and are not subject to vesting within the next 60 days.
Further, does not include 100,000 shares of Class B Common Stock
issuable to Mr. B. Scotti upon exercise of options which have not
vested and are not subject to vesting within the next 60 days.
(5) 415,850 of such Common Stock shares are subject to a voting proxy
granted to Anthony J. Scotti. Includes vested performance options to
purchase 100,000 shares of Common Stock. Does not include 50,000
shares of Class B Common Stock issuable to Mr. Roth upon exercise of
options which have not vested and are not subject to vesting within
the next 60 days.
(6) 385,850 of such Common Stock shares are subject to a voting proxy
granted to Anthony J. Scotti. Includes vested performance options to
purchase 70,000 shares of Common Stock. Includes 100,000 shares of
Class B Common Stock issuable to Mr. Bradshaw upon exercise of vested
options. Does not include 150,000 shares of Class B Common Stock
issuable to Mr. Bradshaw upon exercise of options which have not
vested and are not subject to vesting within the next 60 days.
(7) 120,225 of such Common Stock shares are subject to a voting proxy
granted to Anthony J. Scotti. Includes vested performance options to
purchase 12,000 shares of Common Stock. Does not include 6,000 shares
of Class B Common Stock issuable to Mr. Vinnedge upon exercise of
options which have not vested and are not subject to vesting within
the next 60 days.
(8) 19,500 of such Common Stock shares are subject to a voting proxy
granted to Anthony J. Scotti. Includes vested performance and non-
performance options to purchase 19,500 shares of Common Stock. Does
not include 6,000 shares of Class B Common Stock issuable to Mr. Back
upon exercise of options which have not vested and are not subject to
vesting within the next 60 days.
(9) Mr. Lamattina owns 30,000 shares of restricted Common Stock which vest
in July 1998, is vested in time vesting options to purchase 50,000
shares of Common Stock and is vested in performance options to
purchase 50,000 shares of Common Stock. All such shares are subject
to a voting proxy granted to Anthony J. Scotti. Excludes 75,000 time
vesting Common Stock options which have not vested and are not subject
to vesting within the next 60 days. Further, does not include 25,000
shares of Class B Common Stock issuable upon exercise of options which
have not vested and are not subject to vesting within the next 60
days.
(10) 24,550 of such Common Stock shares are subject to a voting proxy
granted to Anthony J. Scotti. Includes 24,550 time vesting Common
Stock options which have vested. Does not include 20,200 shares of
Common Stock issuable to Mr. F. Scotti upon exercise of options which
have not vested and are not subject to vesting within the next 60
days. Further, does not include 50,000 shares of Class B Common Stock
issuable upon exercise of options which have not vested and are not
subject to vesting within the next 60 days.
(11) As disclosed on Schedule 13D, dated August 12, 1994.
12
<PAGE> 16
PLAN OF DISTRIBUTION
The Company will receive no proceeds from the sale of the Shares by
the Selling Stockholders. The Selling Stockholders may sell the Shares offered
hereby from time to time in transactions which may involve crosses or block
transactions in the Nasdaq market, in transactions otherwise than in the Nasdaq
market, through the writing of options on the Shares (whether such options are
listed on an options exchange or otherwise), or in a combination of such
methods of sale or otherwise, at fixed prices which may be changed, at market
prices prevailing at the time of sale, at prices related to prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to one or more purchasers or through
underwriters, broker-dealers or agents and such underwriters, broker-dealers or
agents may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders and/or the purchasers of the Shares
for whom they may act as agents or to whom they sell as principals, or both
(which compensation as to a particular broker-dealer might be in excess of the
customary commissions). The Selling Stockholders and any underwriters,
broker-dealers or agents that participate with the Selling Stockholders in the
distribution of the Shares may be deemed to be "underwriters" within the
meaning of the Securities Act and any commissions received by them and any
profit on the resale of the Shares commissioned by them may be deemed to be
underwriting commissions or discounts under the Securities Act. The
registration of the Shares under the Securities Act shall not be deemed an
admission by the Selling Stockholders or the Company that the Selling
Stockholders are "underwriters" for purposes of the Securities Act of any
Shares offered under this Prospectus. The Selling Stockholders will pay any
transaction costs associated with effecting any sales that occur. Brokers'
commissions and dealers' discounts, taxes and other selling expenses to be
borne by the Selling Stockholders are not expected to exceed normal selling
expenses for sales on the Nasdaq market or otherwise, as the case may be.
At the time a particular offer of the Shares is made, a Prospectus
Supplement, to the extent required, will be distributed which will set forth
the aggregate amount and type of the Shares being offered, the names of the
Selling Stockholders, the purchase price, the amount of expenses of the
offering and the terms of the offering, including the name or names of any
underwriters, broker-dealers or agents, any discounts, commissions and other
items constituting compensation from the Selling Stockholders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
The Selling Stockholders are not restricted as to the price or prices
at which they may sell their Shares. Sales of such Shares may have an adverse
effect on the market price of the Common Stock. Moreover, subject to Rule 144,
the Selling Stockholders are not restricted as to the number of Shares that may
be sold at any one time, and it is possible that a significant number of Shares
could be sold at the same time which may also have an adverse effect on the
market price of the Company's Common Stock.
DESCRIPTION OF CAPITAL STOCK
The following description of the Company's capital stock is not
complete and is qualified in all respects by the provisions of the Company's
Restated Certificate of Incorporation, as amended, and its Restated Bylaws,
copies of which have been attached as exhibits to the documents incorporated
herein by reference and to which reference is made for a detailed description
of the provisions thereof summarized below.
GENERAL
The authorized capital stock of the Company consists of 40,000,000
shares of Common Stock, consisting of (i) 20,000,000 shares of Common Stock
having a par value of $0.0001 per share and (ii) 20,000,000 shares of Class B
Common Stock having a par value of $0.0001 per share, and 5,000,000 shares of
preferred stock, par value $0.01 per share. As of January 9, 1997, 6,887,195
shares of Common Stock (including 30,000 treasury shares) and 5,720,000 shares
of Class B Common Stock (including 528,200 treasury shares) were issued and
outstanding and at the date hereof, there are no shares of preferred stock
which have been issued and which are currently outstanding. The Board of
Directors, without further action by the stockholders, is authorized to issue
preferred stock in one or more series and
13
<PAGE> 17
to designate as to any such series the dividend rate, redemption prices,
preferences on liquidation or dissolution, sinking fund terms, conversion
rights, voting rights and any other preferences or special rights and
qualifications.
COMMON STOCK
The Common Stock has no preemptive rights and no redemption, sinking
fund or conversion provisions. All shares of Common Stock have one vote on any
matter submitted to the vote of stockholders. The Common Stock does not have
cumulative voting rights. Upon any liquidation of the Company, the holders of
Common Stock are entitled to receive, share for share with the holders of
shares of Class B Common Stock on a pro rata basis, all assets then legally
available for distribution after payment of debts and liabilities and
preferences on preferred stock, if any. Holders of Common Stock are entitled
to receive dividends share for share with the holders of shares of Class B
Common Stock when and as declared by the Board of Directors out of funds
legally available therefor (subject to the prior rights of preferred stock, if
any). If the Company obtains necessary Nasdaq approval, shares of Common Stock
will be convertible into an equal number of shares of Class B Common Stock.
See "--Class B Common Stock." All shares of Common Stock are fully paid and
nonassessable. As of September 12, 1996 there were approximately 70 registered
holders of Common Stock.
CLASS B COMMON STOCK
The Class B Common Stock has no preemptive rights and no redemption,
sinking fund or conversion provisions. Except as otherwise required by law,
the shares of Class B Common Stock have no voting rights. Under Delaware law,
holders of Class B Common Stock are permitted to vote on amendments to the
Company's certificate of incorporation, whether or not they are entitled to
vote thereon by the certificate of incorporation, if such amendment would,
among other things, alter or change powers, preferences, or special rights of
such class. The Class B Common Stock shall be automatically converted into
shares of Common Stock on a share for share basis upon certain changes in
control (as defined) of the Company. As defined a "change in control" shall
mean (i) the beneficial ownership (as determined pursuant to Rule 13d-3 under
the Exchange Act) of Anthony J. Scotti (and of members of his immediate family,
including Benjamin J. Scotti and his immediate family) and Related Parties
(which includes shares of Common Stock as to which Anthony Scotti from time
to time, holds a proxy and any shares of Common Stock beneficially owned by
Interpublic is less than 30% of the outstanding Common Stock (prior to any
conversion of the Convertible Notes), (ii) the beneficial ownership of Anthony
J. Scotti and Related Parties is less than 20% of the outstanding Common Stock
following conversion of any of the Convertible Notes (which percentage applies
as a result of the conversion of a portion of the Convertible Notes prior to
the date hereof), or (iii) if any person other than Anthony J. Scotti or any
Related Person acquires more than 50% of the Common Stock. Upon any
liquidation of the Company, the holders of Class B Common Stock are entitled to
receive, share for share with the holders of shares of Common Stock on a pro
rata basis, all assets then legally available for distribution after payment of
debts and liabilities and preferences on preferred stock, if any. Holders of
Class B Common Stock are entitled to receive dividends share for share with the
holders of shares of Common Stock when and as declared by the Board of
Directors out of funds legally available therefor (subject to the prior rights
of preferred stock, if any). All shares of Class B Common Stock are fully paid
and nonassessable. As of September 12, 1996 there were six registered holders
of Class B Common Stock.
In addition, the Company agreed with Interpublic, in connection with
the Company's acquisition of Fremantle International, Inc. (the "Fremantle
Acquisition") that Interpublic has the right to exchange a proportionate number
of shares (calculated on a fully diluted basis) of Class B Common Stock
acquired by Interpublic pursuant to the Fremantle Acquisition for shares of
Common Stock in the event the Company consummates an acquisition of a business
pursuant to which the Company issues shares of Common Stock in exchange for the
assets or the capital stock of such business (a "Transaction"), provided,
however, such shares shall not be exchangeable until the Company issues, in one
or more Transactions, an aggregate of 1,000,000 shares (subject to
proportionate increase or decrease for stock splits, stock dividends or
combinations) of Common Stock. This contractual exchange right applies to
Interpublic only and does not apply to any of the other holders of Class B
Common Stock.
14
<PAGE> 18
In 1996, the Board of Directors and the stockholders of the Company
approved an amendment to the Company's Restated Certificate of Incorporation,
subject to Nasdaq approval, which would permit holders of Common Stock to
convert each share of Common Stock held by such holder into one share of Class B
Common Stock. No assurance can be made that Nasdaq approval will be obtained.
WARRANTS
In accordance with the terms of the LBS Acquisition, the Company
issued warrants to acquire up to an aggregate of 281,250 shares of its Common
Stock to certain creditors of LBS and other third parties as follows: warrants
to purchase 31,250 shares of Common Stock were issued to each of International
Family Entertainment, Inc. and the unsecured creditors of LBS at an exercise
price of $11.00 per share and warrants to acquire an aggregate of up to 218,750
shares of Common Stock were issued to the former senior secured creditor of
LBS, The Bank of New York. The Bank of New York received the following put
options: (i) with respect to warrants to acquire up to an aggregate of 156,250
shares of Common Stock, at $8.00 per warrant if the Company's reported
cumulative pre-tax earnings reach $30.0 million at any time during the period
beginning January 1, 1993 and ending December 31, 1995, for a total obligation
of $1.3 million, and (ii) with respect to warrants to acquire up to an
aggregate of 62,500 shares of Common Stock, at $4.00 per warrant beginning
after December 31, 1993, for a total obligation of $0.3 million (which put was
exercised resulting in the cancellation of such warrant). The remaining Bank
of New York warrant was sold, without the remaining put option, to accounts
managed by Arnhold and S. Bleichroeder, Inc.
SHARES AVAILABLE FOR FUTURE SALE
The prevailing market prices of the Common Stock and Class B Common
Stock could be adversely affected by the availability of shares for sale or
actual sales of substantial amounts of Common Stock or Class B Common Stock by
existing stockholders (including sales as a result of this offering).
There are currently 6,857,195 shares of Common Stock outstanding after
reflecting the conversion of $14.9 million principal amount of Convertible Notes
into 1,353,124 shares of Common Stock, including 1,015,043 shares of Common
Stock issued upon conversion of Convertible Notes since October 28, 1996, the
date notice of the Company's intent to redeem the Convertible Notes was
published. The Convertible Notes were redeemed on November 27, 1996. There are
currently 5,191,800 shares of Class B Common Stock outstanding. The number of
shares of Common Stock and Class B Common Stock outstanding is subject to
increase upon exercise of outstanding warrants and options, including the
options granted under the Company's 1991 Incentive Stock Option Plan and 1994
Stock Incentive Plan (collectively, the "Plans"). In addition, the number of
shares of outstanding Class B Common Stock may increase, with a corresponding
decrease in the number of outstanding shares of Common Stock, if the Company
receives Nasdaq approval of the amendment to the Company's Restated Certificate
of Incorporation permitting the conversion of shares of Common Stock into an
equal number of shares of Class B Common Stock to the extent that holders of
Common Stock determine to exercise such conversion rights. See "--Class B Common
Stock."
Of the currently outstanding shares of Common Stock, 2,301,035 shares
are freely tradeable by non-affiliates without restriction under the Securities
Act, or by the Selling Stockholders pursuant to this offering. All but 8,695
shares of the 1,353,124 shares of Common Stock issued upon conversion of the
Convertible Notes are freely tradeable upon issuance without restriction under
the Securities Act pursuant to an effective registration statement or exemption
from registration. Of the currently outstanding shares of Class B Common
Stock, 2,671,800 shares are freely tradeable by non-affiliates without
restriction under the Securities Act. An additional 1,524,563 shares of Common
Stock and 1,977,000 shares of Class B Common Stock are issuable pursuant to
options and warrants, of which 1,243,863 shares of Common Stock and 114,000
shares of Class B Common Stock are vested and all such shares, upon vesting,
may be freely tradeable upon issuance subject to Rule 144 of the Securities
Act. The Company intends to file a Registration Statement on Form S-8 under
the Securities Act to register the 2,250,000 Class B Common Stock shares
authorized to be granted pursuant to the Company's 1994 Stock Incentive Plan.
1,550,000 shares of Common Stock have been previously registered on a Form S-8
for shares authorized to be granted pursuant to the Plans.
15
<PAGE> 19
Holders of an additional 4,556,160 outstanding shares of Common Stock
and 2,520,000 shares of Class B Common Stock may sell their shares at any time
subject to the volume, timing and manner of sale limitations under Rule 144 of
the Securities Act. Pursuant to Rule 144, a person holding restricted shares
of Common Stock or Class B Common Stock for a period of two years may sell
every three months in "borrowers transactions" and/or "market maker"
transactions (each as defined in Rule 144) an amount of a particular class of
stock, equal to the greater of (i) one percent (1%) of the Company's issued and
outstanding stock of such class or (ii) the average weekly reported trading
volume of such class of stock during the four calendar weeks prior to such
sale. Rule 144 also permits under certain circumstances, the sale of shares of
Common Stock or Class B Common Stock without any quantity limitation by a
person who is not an affiliate of the Company at the time of such sale and
during the three months preceding such sale and who has satisfied a three-year
holding period.
INDEMNIFICATION
In accordance with Delaware General Corporation Law, the Company's
Restated Certificate of Incorporation eliminates in certain circumstances the
liability of directors of the Company for monetary damages for breach of their
fiduciary duty as directors. This provision does not eliminate the liability
of a director (i) for a breach of the director's duty of loyalty to the Company
or its stockholders, (ii) for acts or omissions by the director not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) for a willful or negligent declaration of an unlawful dividend, stock
purchase or redemption or (iv) for transactions from which the director derived
an improper personal benefit. The Company also maintains directors and
officers liability insurance.
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Stock is Continental
Stock Transfer & Trust Company.
LEGAL MATTERS
The validity of the Shares offered hereby will be passed upon for the
Company by Kaye, Scholer, Fierman, Hays & Handler, LLP, 1999 Avenue of the
Stars, Los Angeles, California 90067.
INDEPENDENT ACCOUNTANTS
On July 16, 1996 the Company's Audit Committee and stockholders
approved the engagement of Price Waterhouse LLP as its independent accountants
for the year ending December 31, 1996, as a replacement of the Company's prior
independent accountants, Ernst & Young LLP.
The audit reports of Ernst & Young LLP on the consolidated financial
statements of the Company for the two fiscal years ended December 31, 1995 did
not contain any adverse opinion or disclaimer of opinion, nor were they
qualified or modified as to uncertainty, audit scope, or accounting principles.
Ernst & Young LLP audited the Company's 1995 and 1994 financial
statements in addition to auditing financial statements for certain prior
fiscal years. In connection with the Company's two most recent fiscal years
ended December 31, 1995 and any subsequent interim period, the Company believes
that there were no disagreements with Ernst & Young LLP on any manner of
accounting principles or practices, financial statement disclosure, or auditing
scope or procedure, which , if not resolved to their satisfaction, would have
caused them to make reference to the subject matter of the disagreement.
However, following discussions with Ernst & Young LLP subsequent to their
termination, the Company notes two accounting matters which Ernst & Young LLP
believes constitute disagreements within the meaning of Item 304 of Regulation
S-K but which were both resolved to Ernst & Young LLP's satisfaction prior to
the issuance of their reports on the aforementioned financial statements.
16
<PAGE> 20
The first matter involved certain communications between the Company
and Ernst & Young LLP involving the Company's accounting during certain periods
prior to the 1994 reporting period for the capitalization and deferral of
advance royalties paid to recording artists. As recently as March 1996, the
Company contended, subject to the receipt of additional information, that Ernst
& Young LLP had recently interpreted such standards differently (and less
restrictively) in dealings with another publicly traded music client. Ernst &
Young LLP has advised the Company that such standards have been interpreted on
a consistent basis in relation to all of its clients in accordance with
generally accepted accounting principles.
The second matter, in connection with the audit of the financial
statements for the year ended December 31, 1995, involved a proposed reduction
of $700,000 by the Company in the reserve accounts in the Recorded Music
segment and an equal increase in the reserve accounts in the Television
segment. After Ernst & Young LLP informed the Company's management that the
full amount of the adjustment could not be supported, the Company did not make
such adjustment.
EXPERTS
The consolidated financial statements of All American Communications,
Inc. at December 31, 1995 and 1994, and for each of the three years in the
period ended December 31, 1995, and the combined financial statements of the
combined business of Mark Goodson Productions, L.P. and The Child's Play Company
at December 31, 1995 and for the period from October 6, 1995 (inception) to
December 31, 1995, both of which are included in All American Communications,
Inc.'s Annual Report (Form 10-K) for the year ended December 31, 1995 have been
audited by Ernst & Young LLP, independent auditors, as set forth in their
reports thereon included therein and incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
17
<PAGE> 21
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION IN CONNECTION WITH THIS OFFERING THAT IS NOT CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY OR ANY SELLING STOCKHOLDER. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR SOLICITATION OF ANY OFFER TO BUY BY ANYONE IN ANY
JURISDICTION IN WHICH SUCH OFFER TO SELL OR SOLICITATION IS NOT AUTHORIZED OR
IN WHICH THE PERSON MAKING SUCH OFFER TO SELL OR SOLICITATION IS NOT QUALIFIED
TO DO SO OR TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCE CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED OR INCORPORATED BY REFERENCE HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
_____________________
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
AVAILABLE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
RISK FACTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
SELLING STOCKHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
PLAN OF DISTRIBUTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
DESCRIPTION OF CAPITAL STOCK . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
LEGAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
EXPERTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
</TABLE>
All American
Communications, Inc.
4,419,865 Shares of Common Stock
2,520,000 Shares of Class B Common Stock
__________, 1997
18
<PAGE> 22
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSE OF ISSUANCE AND DISTRIBUTION
The Shares to be offered hereto have been issued by the Company. The
following table sets forth costs and expenses payable in connection with the
sale and distribution of the outstanding securities being registered. All
amounts are estimates except the Securities and Exchange Commission
registration fee.
<TABLE>
<S> <C>
SEC registration fee $23,536.80
Legal fees and expenses $ *
Accounting fees and expenses $ *
Blue Sky fees and expenses $ *
Transfer agent and registrar fees $ *
Miscellaneous $ *
Total $ *
---------
</TABLE>
- ---------------
* To be filed by amendment
None of the expenses of sale and distribution of the Shares is to be
borne by the Selling Stockholders.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Subsection (a) of Section 145 of the General Corporation Law of
Delaware empowers a corporation to indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
Subsection (b) of Section 145 empowers a corporation to indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he believed to be in or not opposed to the best
interests of the corporation, except that no indemnification may be made in
respect of any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that, despite the adjudication of liability, such person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper.
Section 145 further provides that to the extent a director, officer,
employee or agent of a corporation has been successful in the defense of any
action, suit or proceeding referred to in subsections (a) and (b) or in the
defense of any claim, issue or matter therein, he shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred by him in
connection therewith that indemnification provided for by Section 145 shall not
be deemed exclusive of any other rights to which the indemnified party may be
entitled; and that the corporation is empowered to purchase and maintain
insurance on behalf of a director, officer, employee or agent of the
corporation against any liability asserted against him or incurred by him in
any such capacity or arising out of his status as such, whether or not the
corporation would have the power to indemnify him against such liability under
Section 145.
II-1
<PAGE> 23
Article IV of the Registrant's Bylaws provides, in substance, for the
indemnification of directors and officers of the Registrant to the fullest
extent permitted by Delaware law.
See Item 17 of this Registration Statement regarding the opinion of
the Securities and Exchange Commission as to indemnification for liabilities
arising under the Securities Act.
II-2
<PAGE> 24
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- -----------
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant
filed on February 25, 1991 with the Secretary of State of
the State of Delaware (incorporated by reference to the
same numbered Exhibit to the March 1991 Form 10-Q).
3.2 Restated Bylaws of the Registrant dated February 25, 1991
(incorporated by reference to the same numbered Exhibit to
the March 1991 Form 10-Q).
3.4 Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant filed on March 20, 1992
with the Secretary of State of the State of Delaware
(incorporated by reference to the same numbered Exhibit to
the Registrant's Amendment No. 1 to Form S-1 Registration
Statement filed with the Securities and Exchange Commission
on April 3, 1992.)
9.2 Modified Shareholders Agreement dated as of August 25, 1996
between the Company, Anthony J. Scotti, Benjamin J. Scotti,
Thomas Bradshaw, and Sydney D. Vinnedge.
9.3 Irrevocable Proxy, dated August 25, 1996, by Myron Roth in
favor of Anthony J. Scotti.
10.9 Registration Rights Agreement dated as of August 3, 1994 by
and between All American Communications, Inc. and the
Interpublic Group of Companies, Inc. (incorporated by
reference to Exhibit 10.11 to the December 31, 1994 Form
10-K).
23.1 Consent of Ernst & Young LLP.
24 Power of Attorney (contained on page II-5).
</TABLE>
II-3
<PAGE> 25
ITEM 17. UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes to:
(1) File, during any period in which it offer or sells
securities, a post-effective amendment to this
registration statement to:
(i) Include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) Reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement; and
(iii) Include any additional or changed material
information in the plan of distribution.
(2) For determining liability under the Securities Act,
treat each post-effective amendment as a new
registration statement of the securities offered, and
the offering of the securities at that time to be the
initial bona fide offering.
(3) File a post-effective amendment to remove from
registration any of the securities that remain unsold
at the end of the offering.
(4) For purposes of determining any liability under the
Securities Act, each filing of the Company's annual
report pursuant to Section 13(a) or 15(d) of the
Exchange Act that is incorporated by reference in
this Registration Statement shall be deemed to be a
new registration statement relating to the securities
offered herein and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(b) The undersigned Registrant hereby undertakes that:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer
or controlling person of the Registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
II-4
<PAGE> 26
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of Santa
Monica, State of California on January 14, 1997.
ALL AMERICAN COMMUNICATIONS, INC.
By /s/ THOMAS BRADSHAW
---------------------------------
Thomas Bradshaw,
Chief Financial Officer
POWER OF ATTORNEY
The Registrant and each person whose signature appears below
constitutes and appoints Thomas Bradshaw, his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution
for him or her and in his or her name, place and stead, in any and all
capacities, to sign and file (i) any and all amendments (including
post-effective amendments) to this Registration Statement, with all exhibits
thereto, and all other documents in connection therewith, and (ii) any
registration statement, and any and all amendments thereto, relating to the
offering covered hereby filed pursuant to Rule 462(b) under the Securities Act
of 1933, with the Securities and Exchange Commission, granting unto said
attorney-in-fact and agent full power and authority to do and perform each and
every act and thing requisite or necessary to be done, as fully to all intents
and purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent, or his substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
In witness whereof, each of the undersigned has executed this Power of
Attorney as of the date indicated.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ ANTHONY J. SCOTTI Chairman of the Board, Chief Executive January 14, 1997
- ------------------------------ Officer (principal executive officer)
Anthony J. Scotti
/s/ THOMAS BRADSHAW Director, Chief Financial Officer and January 14, 1997
- -------------------------------- Treasurer (principal financial officer and
Thomas Bradshaw principal accounting officer)
/s/ EUGENE P. BEARD Director January 14, 1997
- ------------------------------
Eugene P. Beard
/s/ LAWRENCE E. LAMATTINA Director January 14, 1997
- ---------------------------------------
Lawrence E. Lamattina
/s/ GORDON LUCE Director January 14, 1997
- -----------------------------
Gordon Luce
Director January __, 1997
- ------------------------------------
Timothy O'Donnell
</TABLE>
II-5
<PAGE> 27
<TABLE>
<S> <C> <C>
/s/ DAVID A. MOUNT Director January 14, 1997
- ---------------------------------
David A. Mount
/s/ MYRON I. ROTH Director January 14, 1997
- ---------------------------------
Myron I. Roth
/s/ BENJAMIN J. SCOTTI Director January 14, 1997
- ---------------------------------
Benjamin J. Scotti
/s/ SYDNEY D. VINNEDGE Director January 14, 1997
- ------------------------------------
Sydney D. Vinnedge
</TABLE>
II-6
<PAGE> 28
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
<S> <C>
3.1 Restated Certificate of Incorporation of the Registrant
filed on February 25, 1991 with the Secretary of State of
the State of Delaware (incorporated by reference to the
same numbered Exhibit to the March 1991 Form 10-Q).
3.2 Restated Bylaws of the Registrant dated February 25, 1991
(incorporated by reference to the same numbered Exhibit to
the March 1991 Form 10-Q).
3.4 Certificate of Amendment to Restated Certificate of
Incorporation of the Registrant filed on March 20, 1992
with the Secretary of State of the State of Delaware
(incorporated by reference to the same numbered Exhibit to
the Registrant's Amendment No. 1 to Form S-1 Registration
Statement filed with the Securities and Exchange Commission
on April 3, 1992).
9.2 Shareholders Agreement dated as of August 25, 1996 between
the Company, Anthony J. Scotti, Benjamin J. Scotti, Thomas
Bradshaw and Sydney D. Vinnedge.
9.3 Irrevocable Proxy, dated August 25, 1996, by Myron Roth in
favor of Anthony J. Scotti.
10.9 Registration Rights Agreement dated as of August 3, 1994 by
and between All American Communications, Inc. and the
Interpublic Group of Companies, Inc. (incorporated by
reference to Exhibit 10.11 to the December 31, 1994 Form
10-K).
23.1 Consent of Ernst & Young LLP.
24 Power of Attorney contained on page II-5.
</TABLE>
<PAGE> 1
SHAREHOLDERS AGREEMENT
Extended Shareholders Agreement, effective as of August 25, 1996, by and
among All American Communications, Inc., a Delaware corporation (the "Company"),
Anthony J. Scotti ("A. Scotti"), Benjamin J. Scotti ("B. Scotti") (A. Scotti and
B. Scotti being hereinafter collectively referred to as the "Scotti Group"),
Thomas Bradshaw ("Bradshaw"), Myron Roth ("Roth"), and Sydney D. Vinnedge
("Vinnedge") (Bradshaw, Roth and Vinnedge being hereinafter collectively
referred to as the "Management Group").
WHEREAS, the Company, the Management Group and the Scotti Group have
entered into a Shareholders Agreement dated as of February 25, 1991 (the
"Original Shareholders Agreement") regarding the disposition of the Management
Stock (as defined in the Original Shareholders Agreement) and certain other
rights of the Company and the Scotti Group;
WHEREAS, the parties hereto desire to enter into an agreement
regarding their respective rights and obligations with respect to the
Management Stock and certain other matters for an extended term and to provide
for continuity in the operations of the Company as controlled by A. Scotti and
B. Scotti;
NOW, THEREFORE, in consideration of the agreements and mutual covenants
contained herein, the parties hereby agree as follows:
1. Definitions.
1.1 Capitalized Terms. Capitalized terms used herein
without definition shall have the respective meanings set forth in the Original
Shareholders Agreement.
2. Right of First Refusal.
(a) All Management Stock shall be subject to the following
"right of First Refusal" in favor of first A. Scotti and B. Scotti, and second
the Company to the extent that A. Scotti and B. Scotti elect not to exercise
their Right of First Refusal with respect to any shares of Management Stock
subject to such Right of First Refusal.
(b) For a period of five years following the effective date
hereof, no shares of Management Stock may be sold, transferred, pledged,
encumbered or otherwise disposed of (collectively "Transfer") by Bradshaw, Roth
or Vinnedge (as the case may be) without first offering (i) A. Scotti and B.
Scotti and (ii) the Company (to the extent that A. Scotti and B. Scotti elect
not to exercise their right of First Refusal with respect to all such offered
shares) the right to purchase such portion of the Management Stock.
<PAGE> 2
sought to be transferred by Bradshaw, Roth or Vinnedge (as the case may be), at
such purchase price and upon such terms as shall have been offered in writing
by a third party. If the proposed consideration is other than cash, the person
who has the Right of First Refusal may elect to pay either (i) cash in lieu of
such other non-cash consideration or (ii) non-cash consideration of equal
value. In that case, the value of the non-cash consideration will be determined
within thirty (30) days by an independent appraiser reasonably mutually
acceptable to the Investor and the person having the Right of First Refusal, or
if the parties are unable to select a mutually acceptable appraiser, such
appraiser shall be selected by the Presiding Judge of the Superior Court of Los
Angeles County and shall determine the value of the non-cash consideration
within thirty (30) days of selection. Any exercise of these Right of First
Refusal must be communicated in writing to Bradshaw, Roth or Vinnedge (as the
case may be) within five (5) business days of notification to A. Scotti and B.
Scotti (or the Company) of the proposed transfer of any Management Stock.
(c) In the event that Bradshaw, Roth or Vinnedge (as the case may be)
should seek to Transfer any Management Stock owed by him in the course of an
ordinary public market transaction, then the purchase price per share of
Management Stock to be paid by the person electing to exercise the Right of
First Refusal shall be equal to the average of the Closing Prices (as
hereinafter defined) for the 10 consecutive Trading Days (as hereinafter
defined) immediately preceding the date of written notification of the exercise
of the Right of First Refusal ("Exercise Date"). For purposes of the
Shareholders Agreement, the term "Closing Price" shall mean the last reported
sales price regular way for the Common Stock on the National Association of
Securities Dealers Inc. Automated Quotation System (the "NASDAQ System") if the
Common Stock is then listed thereon or, if not so listed, on the principal
national stock exchange on which the Common Stock is then listed for the 10
consecutive Trading Days immediately preceding the Exercise Date. A "Trading
Day" is a business day in which shares of the Common Stock have actually
traded; provided, that (i) if at the time of any computation pursuant to this
paragraph the Common Stock is not then traded on any trading market or (ii) if
there have not been 10 Trading Days in the last 30 calendar days, the purchase
price for the shares of Management Stock sought to be transferred shall be the
fair value as reasonably determined in good faith by the Board of Directors of
the Company.
(d) Notwithstanding the foregoing, the provisions of this Section 2
shall not apply to any shares of Common Stock owned by Vinnedge prior to
February 25, 1991.
3. Restrictions on Transfer of Management Stock. No Transfer of any
shares of Management Stock may be made except in compliance with the provisions
of the Shareholders Agreement and all applicable federal, state and foreign
securities laws. No Transfer of Management Stock, other than a permitted
Transfer (as hereinafter defined), shall be made unless (i) the transferor
shall deliver to the Company a written opinion of counsel (which opinion shall
be satisfactory in form and substance to the Company) to the effect that an
exemption from registration under the Securities Act is available and
<PAGE> 3
that the proposed Transfer will not violate applicable federal, state or
foreign securities laws and (ii) the transferee delivers to the Company a
written agreement (in form and substance reasonably satisfactory to the
Company) providing that such transferee will be bound by the provisions
restricting Transfers set forth in this Section 3. For purposes of this Section
3, a ""Permitted Transfer" is any Transfer made (i) pursuant to an effective
registration statement filed under the Securities Act or (ii) in the public
market in ordinary market transactions regular way.
4. Legend. In addition to any other legend that may appear on the
certificates representing the shares of Common Stock owned by the parties
hereto, the Company agrees to cause all certificates for shares of Management
Stock to bear the following legend:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, HAVE BEEN TAKEN FOR
INVESTMENT AND ARE SUBJECT TO THE PROVISIONS OF A SHAREHOLDERS
AGREEMENT DATED AS OF AUGUST 25, 1996. NEITHER THIS CERTIFICATE NOR
THE SHARES REPRESENTED BY IT ARE ASSIGNABLE OR OTHERWISE
TRANSFERABLE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
AGREEMENT, A COPY OF WHICH IS ON FILE WITH THE SECRETARY OF THE
COMPANY.
5. Irrevocable Proxy. Each of Bradshaw, Vinnedge and Roth hereby grant
to A. Scotti and irrevocable proxy, coupled with an interest, to vote all
shares of Management Stock owned by him with respect to any and all matters
with respect to which a holder of shares of Common Stock is entitled to vote.
In the event that the proxy shall be unenforceable for any reason, each of
Bradshaw, Vinnedge and Roth hereby agree to vote all such shares as directed by
A. Scotti. Notwithstanding the foregoing, the provisions of this Section 5
shall not apply to any shares of Common Stock owned by Vinnedge prior to
February 25, 1991.
6. Termination. Unless otherwise indicated herein, this Shareholders
Agreement shall terminate five years and six months from the date hereof.
7. Notices. All notices, consents and other communications under this
Shareholders Agreement shall be in writing and shall be deemed to have been
duly given when (a) delivered by hand, (b) sent by telex or telecopier (with
receipt confirmed), provided that a copy is mailed by registered mail, return
receipt requested, or (c) when received by the addressee, if sent by Express
Mail, Federal Express or other express delivery service (receipt requested), in
each case at the principal executive offices of the Company or to the
appropriate addresses, telex numbers and telecopier numbers as a party may
designate as to itself by notice to the other parties).
<PAGE> 4
8. Successors and Assigns. This Shareholders Agreement shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided, however, that this
Shareholders Agreement may not be assigned by A. Scotti, B. Scotti, Bradshaw,
Vinnedge or Roth without the express written consent of the company other than
to the respective heirs, legal representative, conservator or guardian of any
party hereto; and, provided, further, that a transferee pursuant to a Permitted
Transfer shall not be deemed to the a successor or assignee of any party
hereto.
9. Entire Agreement; Amendment and Waiver; Counterparts. This
Shareholders Agreement contains the sole and entire understanding of the
parties with respect to its subject matter and all prior negotiations,
discussions, commitments and understandings heretofore had between them with
respect thereto are merged herein. No waivers of, or consents to departures
from, any provision hereof shall be effective as to any party entitled to the
benefits thereof unless given in writing by such party. This Shareholders
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which shall constitute one and the same
agreement. This Shareholders Agreement may not be amended as to any party
unless such amendment is consented to in writing by such party.
10. Business Day. Any action which is to be taken on any day which
is not a business day shall be deemed to have been taken on such day if taken
on the next succeeding business day. For purposes of this Shareholders
Agreement, a "business day" shall mean any day excluding any Saturday, Sunday
and any day which is a legal holiday under the laws of the State of New York,
or is a day on which banking institutions located in such state are required or
authorized by law or other governmental action to close.
11. Governing Law. This Shareholders Agreement and all amendments
hereof and waivers and consents hereunder shall be governed by the internal law
of the State of New York without regard to the conflicts of law principles
thereof.
<PAGE> 5
IN WITNESS WHEREOF, the parties have caused this Shareholders Agreement
to be duly executed as of the 25th day of August, 1996.
ALL AMERICAN COMMUNICATIONS, INC.
By: /s/ Anthony J. Scotti
-----------------------------
Anthony J. Scotti,
Chief Executive Officer
"SCOTTI GROUP":
/s/ Anthony J. Scotti
-----------------------------
Anthony J. Scotti
/s/ Benjamin J. Scotti
-----------------------------
Benjamin J. Scotti
"MANAGEMENT GROUP":
/s/ Thomas Bradshaw
-----------------------------
Thomas Bradshaw
-----------------------------
Myron Roth
/s/ Sydney D. Vinnedge
-----------------------------
Syndey D. Vinnedge
<PAGE> 1
EXHIBIT 9.3
[ALL AMERICAN COMMUNICATIONS LETTERHEAD]
August 25, 1996
All American Communications
808 Wilshire Boulevard
Santa Monica, California 90401
Re: Irrevocable Proxy
Gentlemen:
For good and valuable consideration I hereby grant to Anthony J. Scotti, for
the lesser of 5 years or the period of my employment with All American
Communications, Inc., an irrevocable proxy to vote all shares of Management
Stock (as defined in the Shareholders Agreement dated February 25, 1991) owned
by me with respect to any and all matters with respect to which a holder of
shares of Common Stock is entitled to vote. Nothing in the foregoing shall
prohibit me from selling some or all of such shares during my employment (upon
which sale the proxy for the shares so sold shall terminate), subject to
compliance with applicable law.
Sincerely,
/s/ Myron Roth
- -----------------
Myron Roth
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of All American
Communications, Inc. for the registration of 4,419,865 shares of its common
stock and 2,520,000 shares of its Class B common stock, and to the incorporation
by reference therein of our report dated March 4, 1996, with respect to the
consolidated financial statements and schedule of All American Communications,
Inc., and to our report dated March 28, 1996, with respect to the combined
financial statements of the combined business of Mark Goodson Productions, L.P.
and The Child's Play Company, both of which are included in All American
Communications, Inc.'s Annual Report (Form 10-K) for the year ended December 31,
1995, filed with the Securities and Exchange Commission.
Los Angeles, California
January 10, 1997
