SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Amendment No. 14
Under the Securities Exchange Act of 1934
CAROLCO PICTURES INC.
(Name of Issuer)
Common Stock, $.01 par value per share
(Title of Class of Securities)
143763100
(CUSIP Number of Class of Securities)
New Carolco Investments B.V.
Parklaan 46, 3016 BC Rotterdam
The Netherlands
Attn: Hans J. Schutte
011-31-10-436-6344
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
Copy to:
Brian J. McCarthy, Esq.
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue, Suite 3400
Los Angeles, California 90071-3144
(213) 687-5000
August 11, 1994
(Date of Event which Requires
Filing of this Statement)
If the filing person has previously filed a statement on
Schedule 13G to report the acquisition which is the
subject of this Statement because of Rule 13d-1(b)(3) or
(4), check the following:
( )
Check the following box if a fee is being paid with this
Statement:
( )
CUSIP No. 143763100 13D
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
NEW CAROLCO INVESTMENTS B.V.
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
(b) (X)
(3) SEC USE ONLY
(4) SOURCE OF FUNDS*
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
( )
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
The Netherlands
: (7) SOLE VOTING POWER
: 7,929,328
: (8) SHARED VOTING
NUMBER OF SHARES BENEFICIALLY : 0
OWNED BY EACH REPORTING :
PERSON WITH : (9) SOLE DISPOSITIVE
: 7,929,328
:(10) SHARED DISPOSITIVE
: 0
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
7,929,328
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES*
( )
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
5.8%
(14) TYPE OF REPORTING PERSON*
CO
___________________________________________________________
(1) NAMES OF REPORTING PERSONS
S.S. OR I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS
MARIO F. KASSAR
(2) CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP:
(a) ( )
(b) (X)
(3) SEC USE ONLY
(4) SOURCE OF FUNDS*
(5) CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS
REQUIRED PURSUANT TO ITEMS 2(d) or 2(e)
( )
(6) CITIZENSHIP OR PLACE OF ORGANIZATION
Dominican Republic
: (7) SOLE VOTING POWER
: 12,356,232
: (8) SHARED VOTING
NUMBER OF SHARES BENEFICIALLY : 0
OWNED BY EACH REPORTING :
PERSON WITH : (9) SOLE DISPOSITIVE
: 12,356,232
:(10) SHARED DISPOSITIVE
: 0
(11) AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH
REPORTING PERSON
12,356,232
(12) CHECK BOX IF THE AGGREGATE AMOUNT IN ROW 11
EXCLUDES CERTAIN SHARES*
( )
(13) PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW 11
8.7%
(14) TYPE OF REPORTING PERSON*
IN
___________________________________________________________
This Amendment No. 14 to the Schedule 13D filed
with the Commission on January 9, 1990 by the Reporting
Persons, as amended by (a) Amendment No. 1 filed on
January 22, 1990, (b) Amendment No. 2 filed on February
1, 1990, (c) Amendment No. 3 filed on March 19, 1990, (d)
Amendment No. 4 filed on November 3, 1990, (e) Amendment
No. 5 filed on January 12, 1991, (f) Amendment No. 6
filed on October 1, 1991, (g) Amendment No. 7 filed on
November 13, 1991, (h) Amendment No. 8 filed on March 25,
1992, (i) Amendment No. 9 filed on April 8, 1992, (j)
Amendment No. 10 filed on May 7, 1993, (k) Amendment No.
11 filed on May 26, 1993, (l) Amendment No. 12 filed on
October 21, 1993 and (m) Amendment No. 13 filed on
February 13, 1994 (as amended, the "Schedule 13D") is
being filed to amend and supplement Items 3, 4, 5 and 6.
Unless otherwise indicated, each capitalized
term used but not otherwise defined herein shall have the
meaning assigned to such term in the Schedule 13D. The
information set forth in the exhibits attached hereto is
hereby expressly incorporated herein by reference and the
responses to each item of this Amendment are qualified in
their entirety by the provisions of such exhibits.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER
CONSIDERATION.
Item 3 is hereby amended and supplemented as
follows:
The information set forth in Item 4 hereof is
hereby incorporated herein by reference.
ITEM 4. PURPOSE OF THE TRANSACTION.
Item 4 is hereby amended and supplemented as
follows:
Pursuant to an Agreement and Plan of Merger,
dated as of August 10, 1994, among LIVE Entertainment
Inc. ("LIVE"), CPI and Carolco Acquisition Corp., a
wholly owned subsidiary of LIVE ("CAC"), a copy of which
is attached hereto as Exhibit 3 (the "Merger Agreement"),
among other things, (i) CAC will be merged with and into
CPI and CPI will become a wholly owned subsidiary of LIVE
(the "Merger"), (ii) LIVE will be renamed "Carolco
Entertainment Inc." ("CEI"), (iii) every 5.5 shares of
Common Stock (subject to adjustments in certain events)
will be converted into one share of common stock, par
value $.01 per share, of CEI ("CEI Common Stock"), (iv)
the Common Stock will be delisted from the New York Stock
Exchange and become eligible for termination of
registration pursuant to Section 12(g)(4) of the
Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (v) the board of directors of CEI will
consist of 21 members as designated in the Merger
Agreement, (vi) the management of CEI will be as
designated in the Merger Agreement and (vii) the
Certificate of Incorporation and Bylaws of each of CPI
and LIVE will be amended as provided in the Merger
Agreement.
As a condition to LIVE, CAC and CPI entering
into the Merger Agreement, CPI requested and, on August
11, 1994, New CIBV agreed to enter into an Investor
Representation Agreement, dated as of August 10, 1994
(the "Investor Representation Agreement"), a copy of
which is attached hereto as Exhibit 4. In the Investor
Representation Agreement, New CIBV (i) represented to
LIVE and CPI that, as of August 10, 1994, it had no plan
or intention to, and (ii) agreed that, prior to the
effective date of the Merger (the "Effective Date"), it
will not form a plan or intention to enter into an
arrangement to sell, transfer or otherwise dispose of any
shares of CEI Common Stock to be received in the Merger
by New CIBV. The Investor Representation Agreement also
provides, among other things, that New CIBV (i) on or
prior to the Effective Date, will not sell, transfer or
otherwise dispose of any of its shares of Common Stock;
(ii) until the Effective Date, will not (A) grant a proxy
with respect to, or otherwise encumber, any of its shares
of Common Stock, (B) acquire any additional shares of
Common Stock unless New CIBV executes an amendment
whereby such additional shares become subject to the
Investor Representation Agreement, (C) deposit any of its
shares of Common Stock into a voting trust or similar
arrangement; and (iii) will vote all of its shares of
Common Stock in favor of the Merger and the transactions
contemplated thereby. The Investor Representation
Agreement terminates upon the earlier to occur of (i) the
Effective Date and (ii) the termination of the Merger
Agreement pursuant to its terms, but in no event later
than December 31, 1994 unless an extension of such date
is agreed to by New CIBV.
To permit CPI to proceed with certainty with
the transactions contemplated by the Merger Agreement, on
August 11, 1994, Mr. Kassar and CPI entered into a new
employment agreement, dated as of August 10, 1994, a copy
of which is attached hereto as Exhibit 5 (the "1994
Employment Agreement"), which amends and restates the May
1993 Agreement. Pursuant to the Merger Agreement and an
Assumption Agreement, dated as of August 10, 1994, among
CPI, LIVE and Mr. Kassar, a copy of which is attached
hereto as Exhibit 6, as of the Effective Date, LIVE will
assume each of the obligations of CPI under the 1994
Employment Agreement.
Concurrently with the execution of the 1994
Employment Agreement, the Foreign Investors (or their
affiliates), MGM Holdings, and New CIBV entered into a
new stockholders agreement, the form of which is attached
hereto as Exhibit 7 (the "1994 Stockholders Agreement"),
which amends and restates the Stockholders Agreement.
The 1994 Stockholders Agreement will be effective as of
the Effective Date and, along with the provisions of the
1994 Employment Agreement and the Merger Agreement, sets
forth, among other things, all agreements among Mr.
Kassar, the Foreign Investors and MGM Holdings with
respect to the corporate governance of CEI after the
Effective Date. Pursuant to the 1994 Employment
Agreement, Mr. Kassar acknowledged the corporate
governance arrangements set forth therein and in the
Merger Agreement and the 1994 Stockholders Agreement.
The 1994 Stockholders Agreement also grants New CIBV the
right to participate proportionately in certain sales or
dispositions of securities of CEI by MGM Holdings and the
Foreign Investors, subject to certain conditions.
Pursuant to the 1994 Employment Agreement, CPI
agreed to use its best efforts to register under the
Securities Act of 1933, as amended (the "Securities
Act"), upon Mr. Kassar's demand (i) any unregistered
shares of Common Stock that have been or will be issued
to Mr. Kassar or his affiliates or (ii) any shares of CEI
Common Stock that are subject to Rule 145 under the
Securities Act that are issued to Mr. Kassar or his
affiliates as a result of the Merger.
The 1994 Employment Agreement provides that all
stock options to purchase Common Stock granted to Mr.
Kassar in connection with the May 1993 Agreement are
terminated. Simultaneously with the execution of the
1994 Employment Agreement, CPI and Mr. Kassar entered
into a stock option agreement, a copy of which is
attached hereto as Exhibit 8 (the "1994 Option
Agreement"), which reflected a discretionary grant by a
committee of the Board of Directors of CPI, all of whose
members are "disinterested persons" as that term is
defined in Rule 16b-3(c)(2)(i) under the Exchange Act, to
Mr. Kassar of stock options to purchase 15,000,000 shares
of Common Stock at $0.40615 per share, of which 2,941,170
are immediately exercisable and the remainder of which
vest pro rata on a monthly basis during the term of the
1994 Employment Agreement. Pursuant to the 1994
Employment Agreement, in the event of certain changes in
the Common Stock, the number and kind of shares subject
to the stock options and the exercise price of stock
options currently held by Mr. Kassar or his affiliates
and to be received by Mr. Kassar pursuant to the 1994
Option Agreement will be appropriately adjusted. In
addition, if any person other than Mr. Kassar is reissued
or granted stock options in connection with the
transactions contemplated by the Merger Agreement at an
exercise price less than $0.40625 per share (prior to
adjustment thereunder), then the stock options granted to
Mr. Kassar under the 1994 Option Agreement shall be
reissued, regranted or reset, at Mr. Kassar's election,
at such lower price.
On August 11, 1994, Mr. Kassar, New CIBV,
Clorenda and each of the Foreign Investors entered into a
Second Amendment to Inducement Agreement, dated as of
August 10, 1994, the form of which is attached hereto as
Exhibit 9, pursuant to which New CIBV issued a second
amended and restated non-recourse secured promissory note
in the principal amount of $3,655,406 to each of the
Foreign Investors, a copy of which is attached hereto as
Exhibit 10, 11 and 12, respectively.
Mr. Kassar may be deemed to own beneficially
the shares of Common Stock owned by New CIBV. All of the
capital stock of New CIBV is owned by Clorenda, which in
turn is 50.1% owned by The Kassar Family Trust, which
benefits certain members of Mr. Kassar's family, and
49.9% owned by Canora A.V.V., a corporation organized
under the laws of Aruba, which is owned 100% by
Mr. Kassar.
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
Item 5 is hereby amended and supplemented as
follows:
The information set forth in Item 4 hereof is
hereby incorporated herein by reference.
New CIBV may be deemed to beneficially own
7,929,328 shares of Common Stock, or 5.8% of the shares
of Common Stock outstanding. This percentage is based on
137,687,728 shares of Common Stock outstanding as of June
30, 1994. New CIBV may be deemed to have sole power to
vote or to direct the vote, and sole power to dispose or
to direct the disposition of, 7,929,328 shares of Common
Stock.
Mr. Kassar may be deemed to beneficially own
12,356,232 shares of Common Stock, including (i)
4,426,904 shares of Common Stock that are issuable upon
the exercise of vested options or options that vest
within 60 days of August 11, 1994 in favor of Mr. Kassar
and (ii) 7,929,328 shares of Common Stock that are owned
of record by New CIBV, or 8.7% of the shares of Common
Stock outstanding. This percentage is based on
142,114,632 shares of Common Stock, the aggregate of the
shares of Common Stock outstanding as of June 30, 1994
and the shares of Common Stock that are issuable upon the
exercise of vested options or options that vest within 60
days of August 11, 1994 in favor of Mr. Kassar. Mr.
Kassar may be deemed to have sole power to vote or to
direct the vote, and sole power to dispose or to direct
the disposition of, 12,356,232 shares of Common Stock.
On each of February 28, 1994, March 31, 1994,
April 30, 1994, May 31, 1994, June 30, 1994 and July 31,
1994, 294,117 options in favor of Mr. Kassar become
immediately exercisable. In addition, 822,500 options in
favor of Mr. Kassar became immediately exercisable on
April 20, 1994.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE
ISSUER.
Item 3 is hereby amended and supplemented as
follows:
The information set forth in Items 4 and 5
hereof is hereby incorporated herein by reference.
Other than as set forth in the Stockholders
Agreement and the 1994 Stockholders Agreement, the
Reporting Persons have no agreements with other parties
to either vote or to act in concert with respect to CPI
or CEI.
ITEM 7. INFORMATION TO BE FILED AS EXHIBITS.
Exhibit Description
2 Joint Filing Agreement between the
Reporting Persons pursuant to Rule 13d-
1(f)(1)(iii)
3 Agreement and Plan of Merger, dated as of
August 10, 1994, by and among LIVE
Entertainment Inc., Carolco Pictures Inc.
and Carolco Acquisition Corp.
4 Investor Representation Agreement, dated
as of August 10, 1994, between New Carolco
Investments B.V. and Carolco Pictures Inc.
5 Employment Agreement, dated as of August
10, 1994, between Mario F. Kassar and
Carolco Pictures Inc.
6 Assumption Agreement, dated as of August
10, 1994, among Mario F. Kassar, Carolco
Pictures Inc. and LIVE Entertainment Inc.
7 Form of Stockholders Agreement, dated as
of August 10, 1994, by and among Pioneer
LDCA, Inc., Cinepole Productions B.V., RCS
Video International Services B.V., MGM
Holdings Corporation and New Carolco
Investments B.V.
8 Option Agreement, dated as of August 10,
1994, between Mario F. Kassar and Carolco
Pictures Inc.
9 Form of Second Amendment to Inducement
Agreement, dated as of August 10, 1994,
among New Carolco Investments B.V.,
Clorenda Corporation A.V.V., Mario F.
Kassar, Le Studio Canal+, Pioneer LDCA,
Inc. and RCS Video International Services
B.V.
10 Second Amended and Restated Non-recourse
Secured Promissory Note, dated July 31,
1994, made by New Carolco Investments B.V.
in favor of Le Studio Canal+
11 Second Amended and Restated Non-recourse
Secured Promissory Note, dated July 31,
1994, made by New Carolco Investments B.V.
in favor of Pioneer LDCA, Inc.
12 Second Amended and Restated Non-recourse
Secured Promissory Note, dated July 31,
1994, made by New Carolco Investments B.V.
in favor of RCS Video Services
International B.V.
SIGNATURE
After reasonable inquiry and to the best of my
knowledge and belief, I certify that the information set
forth in this statement is true, complete and correct.
Dated: August 15, 1994
NEW CAROLCO INVESTMENTS B.V.
By:/s/ Arie Mout
Arie Mout
Managing Director
/s/ Mario F. Kassar
Mario F. Kassar
EXHIBIT INDEX
Exhibit Description
2 Joint Filing Agreement
between the Reporting
Persons pursuant to Rule
13d-1(f)(1)(iii)
3 Agreement and Plan of
Merger, dated as of August
10, 1994, by and among LIVE
Entertainment Inc., Carolco
Pictures Inc. and Carolco
Acquisition Corp.
4 Investor Representation
Agreement, dated as of
August 10, 1994, between
New Carolco Investments
B.V. and Carolco Pictures
Inc.
5 Employment Agreement, dated
as of August 10, 1994,
between Mario F. Kassar and
Carolco Pictures Inc.
6 Assumption Agreement, dated
as of August 10, 1994,
among Mario F. Kassar,
Carolco Pictures Inc. and
LIVE Entertainment Inc.
7 Form of Stockholders
Agreement, dated as of
August 10, 1994, by and
among Pioneer LDCA, Inc.,
Cinepole Productions B.V.,
RCS Video International
Services B.V., MGM Holdings
Corporation and New Carolco
Investments B.V.
8 Option Agreement, dated as
of August 10, 1994, between
Mario F. Kassar and Carolco
Pictures Inc.
9 Form of Second Amendment to
Inducement Agreement, dated
as of August 10, 1994,
among New Carolco
Investments B.V., Clorenda
Corporation A.V.V., Mario
F. Kassar, Le Studio
Canal+, Pioneer LDCA, Inc.
and RCS Video International
Services B.V.
10 Second Amended and Restated
Non-recourse Secured
Promissory Note, dated July
31, 1994, made by New
Carolco Investments B.V. in
favor of Le Studio Canal+
11 Second Amended and Restated
Non-recourse Secured
Promissory Note, dated July
31, 1994, made by New
Carolco Investments B.V. in
favor of Pioneer LDCA, Inc.
12 Second Amended and Restated
Non-recourse Secured
Promissory Note, dated July
31, 1994, made by New
Carolco Investments B.V. in
favor of RCS Video Services
International B.V.
__________________________________________________________
EXHIBIT 2
Joint Filing Agreement
In accordance with Rule 13d-1(f) of the
Securities Exchange Act of 1934, as amended, each of the
persons named below agrees to the joint filing on behalf
of each of them of a Statement on Schedule 13D (including
amendments thereto) with respect to the common stock, par
value $.01 per share, of Carolco Pictures Inc., a
Delaware corporation, and further agrees that this Joint
Filing Agreement be included as an exhibit to such filing
provided that, as contemplated by Section 13d-
1(f)(1)(ii), no person shall be responsible for the
completeness or accuracy of the information concerning
the other persons making the filing, unless such person
knows or has reason to believe that such information is
inaccurate. This Agreement may be executed in any number
of counterparts, all of which taken together shall
constitute one and the same instrument.
Dated: August 15, 1994
NEW CAROLCO INVESTMENTS B.V.
By: /s/ Arie Mout
Arie Mout
Managing Director
/s/ Mario F. Kassar
Mario F. Kassar
__________________________________________________________
EXHIBIT 3
AGREEMENT AND PLAN OF MERGER
DATED AS OF AUGUST 10, 1994
BY AND AMONG
LIVE ENTERTAINMENT INC.
CAROLCO ACQUISITION CORP.
AND
CAROLCO PICTURES INC.
TABLE OF CONTENTS
PAGE
ARTICLE 1
THE MERGER . . . . . . . . . 2
Section 1.1 The Merger. . . . . . . . . . . . 2
Section 1.2 Effective Date of the Merger;
Closing. . . . . . . . . . . . . . . . . . 2
ARTICLE 2
THE SURVIVING CORPORATION . . . . . . 2
Section 2.1 Certificate of Incorporation. . . 2
Section 2.2 Bylaws. . . . . . . . . . . . . . 2
Section 2.3 Board of Directors and
Officers. . . . . . . . . . . . . . . . . . 3
ARTICLE 3
CHANGES AT LIVE AT OR BEFORE EFFECTIVE DATE . 3
Section 3.1 Certificate of Incorporation. . . 3
Section 3.2 Bylaws. . . . . . . . . . . . . . 3
Section 3.3 Board of Directors and
Officers. . . . . . . . . . . . . . . . . . 4
Section 3.4 LIVE Home Video Inc. . . . . . . 4
ARTICLE 4
CONVERSION AND EXCHANGE OF SHARES AND CERTIFICATES
4
Section 4.1 Conversion. . . . . . . . . . . . 4
Section 4.2 LIVE to Make Certificates
Available. . . . . . . . . . . . . . . . . 6
Section 4.3 Dividends; Transfer Taxes. . . . 8
Section 4.4 No Further Ownership Rights in
Carolco Common Stock. . . . . . . . . . . . 9
Section 4.5 Closing of Carolco Transfer
Books. . . . . . . . . . . . . . . . . . . 9
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF LIVE . . 10
Section 5.1 Organization, Standing and
Power. . . . . . . . . . . . . . . . . . . 10
Section 5.2 Subsidiaries. . . . . . . . . . . 10
Section 5.3 Capital Structure and
Commitments. . . . . . . . . . . . . . . . 11
Section 5.4 Authority; Non-Contravention. . . 12
Section 5.5 LIVE SEC Documents. . . . . . . . 14
Section 5.6 No Material Adverse Change. . . . 15
Section 5.7 Absence of Undisclosed
Liabilities. . . . . . . . . . . . . . . . 15
Section 5.8 Absence of Certain Events. . . . 15
Section 5.9 No Solicitation . . . . . . . . . 15
Section 5.10 Registration Statement and Proxy
Statement. . . . . . . . . . . . . . . . . 16
Section 5.11 Reorganization. . . . . . . . . . 16
Section 5.12 Litigation. . . . . . . . . . . . 16
Section 5.13 Loan Agreements, Customers and
Suppliers. . . . . . . . . . . . . . . . . 16
Section 5.14 Permits. . . . . . . . . . . . . 17
Section 5.15 Absence of Changes in LIVE
Benefit Plans. . . . . . . . . . . . . . . 17
Section 5.16 Intellectual Property. . . . . . 18
Section 5.17 Environmental Matters. . . . . . 18
Section 5.18 Taxes. . . . . . . . . . . . . . 18
Section 5.19 Foreign Corrupt Practices Act. . 19
Section 5.20 Brokers. . . . . . . . . . . . . 19
Section 5.21 Officers, Directors and Key
Employees. . . . . . . . . . . . . . . . . 19
Section 5.22 State Takeover Statutes. . . . . 19
Section 5.23 Insurance. . . . . . . . . . . . 20
Section 5.24 Title to Properties and Related
Matters. . . . . . . . . . . . . . . . . . 20
Section 5.25 Accuracy of LIVE Disclosure. . . 20
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CAROLCO . . 21
Section 6.1 Organization, Standing and
Power. . . . . . . . . . . . . . . . . . . 21
Section 6.2 Subsidiaries. . . . . . . . . . . 21
Section 6.3 Capital Structure and
Commitments. . . . . . . . . . . . . . . . 21
Section 6.4 Authority; Non-Contravention. . . 23
Section 6.5 Carolco SEC Documents. . . . . . 24
Section 6.6 No Material Adverse Change. . . . 25
Section 6.7 Absence of Undisclosed
Liabilities. . . . . . . . . . . . . . . . 25
Section 6.8 Absence of Certain Events. . . . 25
Section 6.9 No Solicitation . . . . . . . . . 25
Section 6.10 Registration Statement and Proxy
Statement. . . . . . . . . . . . . . . . . 26
Section 6.11 Reorganization. . . . . . . . . . 26
Section 6.12 Litigation. . . . . . . . . . . . 26
Section 6.13 Loan Agreements, Customers and
Suppliers. . . . . . . . . . . . . . . . . 26
Section 6.14 Permits. . . . . . . . . . . . . 27
Section 6.15 Absence of Changes in Carolco
Benefit Plans. . . . . . . . . . . . . . . 27
Section 6.16 Intellectual Property. . . . . . 27
Section 6.17 Environmental Matters. . . . . . 28
Section 6.18 Taxes. . . . . . . . . . . . . . 28
Section 6.19 Foreign Corrupt Practices Act. . 28
Section 6.20 Brokers. . . . . . . . . . . . . 28
Section 6.21 Officers, Directors and Key
Employees. . . . . . . . . . . . . . . . . 29
Section 6.22 State Takeover Statutes. . . . . 29
Section 6.23 Insurance. . . . . . . . . . . . 29
Section 6.24 Title to Properties and Related
Matters. . . . . . . . . . . . . . . . . . 29
Section 6.25 Accuracy of Carolco Disclosure. . 30
ARTICLE 7
REPRESENTATIONS AND WARRANTIES REGARDING CAC . 30
Section 7.1 Organization and Standing. . . . 30
Section 7.2 Capital Structure. . . . . . . . 30
Section 7.3 Authority. . . . . . . . . . . . 31
ARTICLE 8
COVENANTS RELATING TO CONDUCT OF BUSINESS . . 31
Section 8.1 Conduct of Business by LIVE
Pending the Merger. . . . . . . . . . . . . 31
Section 8.2 Conduct of Business by Carolco
Pending the Merger. . . . . . . . . . . . . 35
Section 8.3 Competing Offers . . . . . . . . 39
Section 8.4 Reorganization. . . . . . . . . . 39
Section 8.5 Conduct of Business of CAC
Pending the Merger. . . . . . . . . . . . . 40
Section 8.6 Update of LIVE LETTER and
CAROLCO LETTER. . . . . . . . . . . . . . . 40
Section 8.7 Bringdown of Fairness Opinion. . 40
ARTICLE 9
ADDITIONAL AGREEMENTS . . . . . . . 40
Section 9.1 Carolco and LIVE Stockholder
Approvals. . . . . . . . . . . . . . . . . 40
Section 9.2 Registration Statement and Proxy
Statement . . . . . . . . . . . . . . . . . 41
Section 9.3 Amendment to Indentures . . . . . 42
Section 9.4 Listing Application. . . . . . . 43
Section 9.5 Access to Information. . . . . . 43
Section 9.6 Affiliates . . . . . . . . . . . 43
Section 9.7 Fees and Expenses. . . . . . . . 43
Section 9.8 Carolco Stock Options. . . . . . 44
Section 9.9 Other Obligations of Carolco and
LIVE . . . . . . . . . . . . . . . . . . . 45
Section 9.10 Registration Rights. . . . . . . 46
Section 9.11 Best Efforts. . . . . . . . . . . 46
Section 9.12 Public Announcements. . . . . . . 47
Section 9.13 State Takeover Laws. . . . . . . 47
Section 9.14 Indemnification. . . . . . . . . 47
Section 9.15 [Intentionally Deleted.] . . . . 48
Section 9.16 [Intentionally Deleted.] . . . . 48
Section 9.17 LIVE Rights. . . . . . . . . . . 48
Section 9.18 Continuation of Business or
Business Assets. . . . . . . . . . . . . . 48
ARTICLE 10
CONDITIONS PRECEDENT . . . . . . . 48
Section 10.1 Conditions to Each Party's
Obligation to Effect the Merger. . . . . . 48
Section 10.2 Conditions to Obligation of
Carolco to Effect the Merger. . . . . . . . 50
Section 10.3 Conditions to Obligations of
LIVE and CAC to Effect the Merger. . . . . 52
ARTICLE 11
TERMINATION, AMENDMENT AND WAIVER . . . . 53
Section 11.1 Termination. . . . . . . . . . . 53
Section 11.2 Effect of Termination. . . . . . 55
Section 11.3 Amendment. . . . . . . . . . . . 55
Section 11.4 Waiver. . . . . . . . . . . . . . 55
Section 11.5 Approval by LIVE Special
Committee . . . . . . . . . . . . . . . . . 56
ARTICLE 12
GENERAL PROVISIONS . . . . . . . 56
Section 12.1 Non-Survival of Representations
and Warranties. . . . . . . . . . . . . . . 56
Section 12.2 Notices. . . . . . . . . . . . . 56
Section 12.3 Interpretation. . . . . . . . . . 60
Section 12.4 Counterparts. . . . . . . . . . . 60
Section 12.5 Entire Agreement; No Third-Party
Beneficiaries. . . . . . . . . . . . . . . 60
Section 12.6 Governing Law. . . . . . . . . . 60
Section 12.7 Assignment. . . . . . . . . . . . 60
Glossary
Amended and Restated Carolco 5% Indenture . . . . . . 45
Amended and Restated Standby Purchase and Investment
Agreement . . . . . . . . . . . . . . . . . . . . . . 45
1986 Plan . . . . . . . . . . . . . . . . . . . . . . 44
1989 Plan . . . . . . . . . . . . . . . . . . . . . . 44
Advisory Committee . . . . . . . . . . . . . . . . . 13
Affiliates . . . . . . . . . . . . . . . . . . . . . 43
Agreement . . . . . . . . . . . . . . . . . . . . . . . 1
Amended and Restated Bylaws of Carolco . . . . . . . . 3
Amended and Restated Bylaws of LIVE . . . . . . . . . . 3
Amended and Restated Certificate of Incorporation of
LIVE . . . . . . . . . . . . . . . . . . . . . . . . . 3
Average Trading Price . . . . . . . . . . . . . . . . . 5
blue sky . . . . . . . . . . . . . . . . . . . . . . 14
CAC . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CAC Common Stock . . . . . . . . . . . . . . . . . . . 6
Carolco . . . . . . . . . . . . . . . . . . . . . . . . 1
Carolco 5% Notes . . . . . . . . . . . . . . . . . . 22
Carolco 7% Notes . . . . . . . . . . . . . . . . . . 22
Carolco 11.5%/10% Notes . . . . . . . . . . . . . . . 45
Carolco 13% Notes . . . . . . . . . . . . . . . . . . 45
Carolco 13%/12% Notes . . . . . . . . . . . . . . . . 45
Carolco Balance Sheet . . . . . . . . . . . . . . . . 25
Carolco Benefit Plans . . . . . . . . . . . . . . . . 27
Carolco Common Certificates . . . . . . . . . . . . . . 6
Carolco Common Stock . . . . . . . . . . . . . . . . . 1
Carolco Entertainment Inc. . . . . . . . . . . . . . . 3
Carolco Investors . . . . . . . . . . . . . . . . . . 23
CAROLCO LETTER . . . . . . . . . . . . . . . . . . . 21
Carolco Preferred Stock . . . . . . . . . . . . . . . . 1
Carolco Proprietary Rights . . . . . . . . . . . . . 27
Carolco Registration Rights Agreements . . . . . . . 23
Carolco SEC Documents . . . . . . . . . . . . . . . . 24
Carolco Series A Preferred Stock . . . . . . . . . . . 6
Carolco Stock Plans . . . . . . . . . . . . . . . . . 44
Carolco Stockholder Meeting . . . . . . . . . . . . . 40
Certificate . . . . . . . . . . . . . . . . . . . . . . 8
Certificate of Merger . . . . . . . . . . . . . . . . . 2
Chemical . . . . . . . . . . . . . . . . . . . . . . 13
Chemical Fairness Opinion . . . . . . . . . . . . . . 13
Cinepole . . . . . . . . . . . . . . . . . . . . . . 13
Closing . . . . . . . . . . . . . . . . . . . . . . . . 2
Code . . . . . . . . . . . . . . . . . . . . . . . . . 1
competing proposal . . . . . . . . . . . . . . . . . 44
Constituent Corporations . . . . . . . . . . . . . . . 1
Contingent Payment Rights . . . . . . . . . . . . . . 12
control share acquisition . . . . . . . . . . . . . . 19
D&O Insurance . . . . . . . . . . . . . . . . . . . . 47
date hereof . . . . . . . . . . . . . . . . . . . . . 60
date of this Agreement, . . . . . . . . . . . . . . . 60
DGCL . . . . . . . . . . . . . . . . . . . . . . . . . 2
Effective Date . . . . . . . . . . . . . . . . . . . . 2
Environmental Laws . . . . . . . . . . . . . . . . . 18
ERISA . . . . . . . . . . . . . . . . . . . . . . . . 18
Exchange Act . . . . . . . . . . . . . . . . . . . . 14
Exchange Agent . . . . . . . . . . . . . . . . . . . . 6
Exchange Ratio . . . . . . . . . . . . . . . . . . . . 5
fair price . . . . . . . . . . . . . . . . . . . . . 19
Governmental Entity . . . . . . . . . . . . . . . . . 14
HSR Act . . . . . . . . . . . . . . . . . . . . . . . 14
include . . . . . . . . . . . . . . . . . . . . . . . 60
indebtedness . . . . . . . . . . . . . . . . . . . . 17
Investor Representation Agreement . . . . . . . . . . 13
Letter . . . . . . . . . . . . . . . . . . . . . . . 40
LHV . . . . . . . . . . . . . . . . . . . . . . . . . . 4
LHV Bylaws . . . . . . . . . . . . . . . . . . . . . . 4
LIVE . . . . . . . . . . . . . . . . . . . . . . . . . 1
LIVE 12% Indenture . . . . . . . . . . . . . . . . . 42
LIVE 12% Notes . . . . . . . . . . . . . . . . . . . 32
LIVE Balance Sheet . . . . . . . . . . . . . . . . . 15
LIVE Benefit Plans . . . . . . . . . . . . . . . . . 18
LIVE Common Stock . . . . . . . . . . . . . . . . . . . 4
LIVE Credit Facility . . . . . . . . . . . . . . . . 52
LIVE Increasing Rate Notes . . . . . . . . . . . . . 42
LIVE Increasing Rate Notes Indenture . . . . . . . . 42
LIVE Investors . . . . . . . . . . . . . . . . . . . 13
LIVE LETTER . . . . . . . . . . . . . . . . . . . . . 10
LIVE Preferred Stock . . . . . . . . . . . . . . . . . 9
LIVE Proprietary Rights . . . . . . . . . . . . . . . 18
LIVE Registration Rights Agreements . . . . . . . . . 12
LIVE Right . . . . . . . . . . . . . . . . . . . . . 11
LIVE Rights Agreement . . . . . . . . . . . . . . . . 11
LIVE SEC Documents . . . . . . . . . . . . . . . . . 14
LIVE Series A Common Stock . . . . . . . . . . . . . 11
LIVE Series D Preferred Stock . . . . . . . . . . . . . 6
LIVE Series B Preferred Stock . . . . . . . . . . . . 11
LIVE Series C Preferred Stock . . . . . . . . . . . . . 6
LIVE Series R Preferred Stock . . . . . . . . . . . . 11
LIVE Special Committee . . . . . . . . . . . . . . . 13
LIVE Stockholder Meeting . . . . . . . . . . . . . . 41
Mailing . . . . . . . . . . . . . . . . . . . . . . . . 8
Material Adverse Change . . . . . . . . . . . . . . . 10
Material Adverse Effect . . . . . . . . . . . . . . . 10
Merger . . . . . . . . . . . . . . . . . . . . . . . . 1
MGM . . . . . . . . . . . . . . . . . . . . . . . . . 45
MGM Distribution Agreements . . . . . . . . . . . . . 45
moratorium . . . . . . . . . . . . . . . . . . . . . 19
New Carolco Entertainment Inc. Registration Rights
Agreement . . . . . . . . . . . . . . . . . . . . . . 46
New LIVE Certificates . . . . . . . . . . . . . . . . . 7
New Plan . . . . . . . . . . . . . . . . . . . . . . 44
New Stock Option . . . . . . . . . . . . . . . . . . 44
offer . . . . . . . . . . . . . . . . . . . . . . . . 39
Old LIVE Certificates . . . . . . . . . . . . . . . . . 7
Option Registration Statement . . . . . . . . . . . . 42
Pay-Per-View Shares . . . . . . . . . . . . . . . . . 22
Pioneer . . . . . . . . . . . . . . . . . . . . . . . 13
Plan Option . . . . . . . . . . . . . . . . . . . . . 44
Proxy Statement . . . . . . . . . . . . . . . . . . . 16
RCS . . . . . . . . . . . . . . . . . . . . . . . . . 13
Registration Statement . . . . . . . . . . . . . . . 16
Restated Certificate of Incorporation of Carolco . . . 2
Restated Certificate of Incorporation of LIVE . . . . . 3
Securities Act . . . . . . . . . . . . . . . . . . . 14
Seidler . . . . . . . . . . . . . . . . . . . . . . . 23
Seidler Fairness Opinion . . . . . . . . . . . . . . 23
Series A Certificates . . . . . . . . . . . . . . . . . 7
Series C Certificate of Designations . . . . . . . . . 6
Significant Carolco Employees . . . . . . . . . . . . 29
Significant LIVE Employees . . . . . . . . . . . . . 19
Stockholder Meetings . . . . . . . . . . . . . . . . 41
Strawberries . . . . . . . . . . . . . . . . . . . . 10
Subsidiary . . . . . . . . . . . . . . . . . . . . . 10
Surviving Corporation . . . . . . . . . . . . . . . . . 2
takeover proposal . . . . . . . . . . . . . . . . . . 39
TCI Purchase Agreement . . . . . . . . . . . . . . . 22
Trading Day . . . . . . . . . . . . . . . . . . . . . . 6
Trading Price . . . . . . . . . . . . . . . . . . . . . 5
VCL . . . . . . . . . . . . . . . . . . . . . . . . . 10
without limitation. . . . . . . . . . . . . . . . . . 60
Exhibits
Exhibit 1.2 Certificate of Merger
Exhibit 2.1 Restated Certificate of
Incorporation of Carolco
Exhibit 2.2 Amended and Restated Bylaws of
Carolco
Exhibit 2.3 Board of Directors of Carolco at
Effective Date
Exhibit 3.1 Amended and Restated Certificate
of Incorporation of Carolco
Entertainment Inc.
Exhibit 3.2 Amended and Restated Bylaws of
Carolco Entertainment Inc.
Exhibit 3.3A Board of Directors and
Committees of Carolco
Entertainment Inc. at Effective
Date
Exhibit 3.3B Officers of Carolco
Entertainment Inc. at Effective
Date
Exhibit 3.4 Amended Bylaws of LHV
Exhibit 5.3A Warrant Agreements and Options
for LIVE Common Stock
Exhibit 5.3B LIVE Registration Rights
Agreements
Exhibit 5.4(c) Investor Representation
Agreement
Exhibit 6.3A Options for Carolco Common Stock
Exhibit 6.3B Carolco Registration Rights
Agreements
Exhibit 9.3(a) Amendment to LIVE 12% Indenture
Exhibit 9.3(b) Amendment to LIVE Increasing
Rate Notes Indenture
Exhibit 9.8(d) 1994 Stock Option and Stock
Appreciation Rights Plan
Exhibit 9.9(a) Assumption Agreement with
respect to Carolco-Mario Kassar
Employment Agreement
Exhibit 9.9(b) Amended and Restated Carolco 5%
Indenture
Exhibit 9.9(c) Amended and Restated Standby
Purchase and Investment
Agreement with respect to the
Carolco 7% Notes
Exhibit 9.9(d) First Supplemental Indenture
with respect to the Carolco
11.5%/10% Notes
Exhibit 9.9(e) First Supplemental Indenture
with respect to the Carolco
13%/12% Notes
Exhibit 9.9(f) First Supplemental Indenture
with respect to the Carolco 13%
Notes
Exhibit 9.9(g) Assumption Agreement with
respect to the MGM Distribution
Agreements
Exhibit 9.9(h) Assumption Agreement with
respect to RCS Agreements
Exhibit 9.9(i) Assumption Agreement with
respect to Canal+ Agreements
Exhibit 9.9(j) Assumption Agreement with
respect to Pioneer Agreements
Exhibit 9.10 New Carolco Entertainment Inc.
Registration Rights Agreement
Exhibit 10.1(f) Terms of Aggregate Working
Capital Commitments
Exhibit 10.2(d) Form of Opinion of Counsel to
LIVE and CAC
Exhibit 10.3(d) Form of Opinion of Counsel
to Carolco
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 10,
1994 (this "Agreement"), by and among LIVE Entertainment
Inc., a Delaware corporation ("LIVE"), Carolco
Acquisition Corp., a Delaware corporation and a
wholly-owned subsidiary of LIVE ("CAC"), and Carolco
Pictures Inc., a Delaware corporation ("Carolco") (CAC
and Carolco being hereinafter collectively referred to as
the "Constituent Corporations").
W I T N E S S E T H:
WHEREAS, LIVE is a corporation duly organized and
existing under the laws of the State of Delaware with an
authorized capitalization as set forth in Section 5.3
hereof;
WHEREAS, Carolco is a corporation duly organized and
existing under the laws of the State of Delaware with an
authorized capitalization as set forth in Section 6.3
hereof;
WHEREAS, CAC is a corporation duly organized and
existing under the laws of the State of Delaware with an
authorized capitalization as set forth in Section 7.2
hereof and is a wholly-owned subsidiary of LIVE;
WHEREAS, the respective Boards of Directors of LIVE,
CAC and Carolco have approved and declared fair to and in
the best interests of their respective corporations and
stockholders, and LIVE acting as the sole stockholder of
CAC has approved, the merger of CAC with and into Carolco
(the "Merger"), upon the terms and subject to the
conditions set forth herein, whereby each issued and
outstanding share of the common stock, par value $.01 per
share, of Carolco ("Carolco Common Stock") and each
issued and outstanding share of the preferred stock, par
value $1.00 per share, of Carolco ("Carolco Preferred
Stock"), will be cancelled and converted into the right
to receive such consideration as is hereinafter
described;
WHEREAS, for federal income tax purposes, the
parties hereto intend that the Merger shall qualify as a
tax free reorganization within the meaning of the
Internal Revenue Code of 1986, as amended (the "Code");
WHEREAS, LIVE, CAC and Carolco desire to make
certain representations, warranties and agreements in
connection with the Merger and also to prescribe various
conditions to the Merger;
NOW, THEREFORE, in consideration of the premises and
the representations, warranties, covenants and agreements
herein contained, the parties hereto agree as follows:
ARTICLE 1
THE MERGER
SECTION 1.1 THE MERGER. At the Effective Date
(as defined in Section 1.2), CAC shall be merged with and
into Carolco in accordance with the applicable provisions
of the General Corporation Law of the State of Delaware
(the "DGCL") with Carolco as the surviving corporation in
the Merger (the "Surviving Corporation"), the separate
existence of CAC shall thereupon cease, and Carolco, as
the Surviving Corporation, shall continue its corporate
existence under the laws of the State of Delaware. From
and after the Effective Date, the Merger shall have all
the effects provided in Section 259(a) of the DGCL.
SECTION 1.2 EFFECTIVE DATE OF THE MERGER;
CLOSING.
(a) The Merger shall become effective when a
properly executed Certificate of Merger in the form
attached hereto as Exhibit 1.2 is duly filed with the
Secretary of State of the State of Delaware in accordance
with the relevant provisions of the DGCL (the
"Certificate of Merger"), which filing shall be made as
soon as practicable after the Closing hereinafter
contemplated; provided, however, that, upon mutual
consent of the Constituent Corporations, the Certificate
of Merger may provide for a later date and time of
effectiveness of the Merger in accordance with the DGCL,
in which case the Merger shall become effective at the
date and time specified in the Certificate of Merger.
When used in this Agreement, the term "Effective Date"
shall mean the date and time at which such actions are
completed and such Merger becomes effective.
(b) The closing of the transactions
contemplated by this Agreement (the "Closing") shall take
place (i) at the offices of Sidley & Austin, 2049 Century
Park East, Los Angeles, California, at 10:00 A.M. local
time on the later of (A) the next business day after the
date of the later of the stockholders' meetings referred
to in Section 9.1 and (B) the day on which the last of
the conditions set forth in Article 9 is fulfilled or
waived or (ii) at such other time and place as LIVE and
Carolco shall agree.
ARTICLE 2
THE SURVIVING CORPORATION
SECTION 2.1 CERTIFICATE OF INCORPORATION. The
Certificate of Incorporation of Carolco as in effect
immediately prior to the Effective Date ("Restated
Certificate of Incorporation of Carolco"), attached
hereto as Exhibit 2.1, as amended by the Certificate of
Merger, at and after the Effective Date shall become the
Certificate of Incorporation of the Surviving Corporation
unless and until thereafter amended in accordance with
its terms and applicable law.
SECTION 2.2 BYLAWS. At or immediately prior to
the Effective Date, the Board of Directors of Carolco
shall repeal the Bylaws of Carolco as in effect
immediately prior to the Effective Date and adopt new
Bylaws ("Amended and Restated Bylaws of Carolco")
substantially in the form attached hereto as Exhibit 2.2
and at and after the Effective Date, such Amended and
Restated Bylaws of Carolco shall become the Bylaws of the
Surviving Corporation, and shall continue in full force
as the Bylaws of the Surviving Corporation until amended
or repealed in accordance with the terms of the Bylaws
and the Certificate of Incorporation of the Surviving
Corporation and in accordance with applicable law.
SECTION 2.3 BOARD OF DIRECTORS AND OFFICERS. At
the Effective Date, the members of the Board of Directors
of Carolco shall resign from their positions as and cease
being directors of Carolco, and the persons named on
Exhibit 2.3 shall become the directors of the Surviving
Corporation, each of whom shall serve until the earlier
of his resignation or removal or until his respective
successor is duly elected and qualified in accordance
with the terms of the Bylaws and the Certificate of
Incorporation of the Surviving Corporation as then in
effect and in accordance with applicable law. At the
Effective Date, the officers of Carolco immediately prior
to the Effective Date shall become the officers of the
Surviving Corporation until the earlier of their
resignation or removal or until their respective
successors are duly elected and qualified in accordance
with the terms of the Bylaws and the Certificate of
Incorporation of the Surviving Corporation as then in
effect and in accordance with applicable law.
ARTICLE 3
CHANGES AT LIVE AT OR BEFORE EFFECTIVE DATE
SECTION 3.1 CERTIFICATE OF INCORPORATION. The
Certificate of Incorporation of LIVE as in effect
immediately prior to the Effective Date ("Restated
Certificate of Incorporation of LIVE") shall be amended
and, immediately before the Effective Date, the Restated
Certificate of Incorporation of LIVE, as amended
("Amended and Restated Certificate of Incorporation of
LIVE") substantially in the form attached hereto as
Exhibit 3.1 shall be filed with the Secretary of State of
the State of Delaware. At and after the Effective Date,
the Amended and Restated Certificate of Incorporation of
LIVE shall continue in full force as the Certificate of
Incorporation of LIVE unless and until thereafter amended
in accordance with its terms and applicable law. At the
Effective Date, pursuant to the Amended and Restated
Certificate of Incorporation of LIVE, the name of LIVE
shall be changed to "Carolco Entertainment Inc."
SECTION 3.2 BYLAWS. At or immediately prior to
the Effective Date, the Board of Directors of LIVE shall
repeal the Bylaws of LIVE as in effect immediately prior
to the Effective Date and adopt new Bylaws ("Amended and
Restated Bylaws of LIVE") substantially in the form
attached hereto as Exhibit 3.2 and at and after the
Effective Date, such Amended and Restated Bylaws of LIVE,
shall continue in full force as the Bylaws of LIVE until
amended or repealed in accordance with the terms of the
Bylaws and the Certificate of Incorporation of LIVE and
in accordance with applicable law.
SECTION 3.3 BOARD OF DIRECTORS AND OFFICERS. At
the Effective Date, the members of the board of directors
of LIVE shall resign, seriatim, from their positions as
and cease being directors of LIVE and as each such person
resigns, the persons named on Exhibit 3.3A shall become,
seriatim, the directors of LIVE and members of the
committees of the board of directors of LIVE as indicated
on Exhibit 3.3A, each of whom shall serve until the
earlier of his resignation or removal or until his
respective successor is duly elected and qualified in
accordance with the terms of the Bylaws and the
Certificate of Incorporation of LIVE as then in effect
and in accordance with applicable law. At the Effective
Date, the officers of LIVE immediately prior to the
Effective Date shall resign from their positions as and
cease being officers of LIVE, and the persons named on
Exhibit 3.3B shall become the officers of LIVE until the
earlier of their resignation or removal or until their
respective successors are duly elected and qualified in
accordance with the terms of the Bylaws and the
Certificate of Incorporation of LIVE as then in effect
and in accordance with applicable law.
SECTION 3.4 LIVE HOME VIDEO INC. The Certificate
of Incorporation of LIVE Home Video Inc., a Delaware
corporation and a wholly-owned subsidiary of LIVE
("LHV"), as in effect immediately prior to the Effective
Date shall continue in full force as the Certificate of
Incorporation of LHV unless and until thereafter amended
in accordance with its terms and applicable law. At or
immediately prior to the Effective Date, the Board of
Directors of LHV shall repeal the Bylaws of LHV as in
effect immediately prior to the Effective Date and adopt
new Bylaws substantially in the form attached hereto as
Exhibit 3.4 (as amended, the "LHV Bylaws"), and at and
after the Effective Date, such LHV Bylaws shall become
the Bylaws of LHV, and shall continue in full force as
the Bylaws of LHV until amended or repealed in accordance
with their terms and the terms of the Certificate of
Incorporation of LHV as then in effect and in accordance
with applicable law. The Board of Directors of LHV shall
not change in connection with the Merger and each member
of the Board of Directors of LHV shall continue to serve
until the earlier of his resignation or removal or until
his respective successor is duly elected and qualified in
accordance with the terms of the Bylaws and the
Certificate of Incorporation of LHV as then in effect and
in accordance with applicable law.
ARTICLE 4
CONVERSION AND EXCHANGE OF SHARES AND CERTIFICATES
SECTION 4.1 CONVERSION. At the Effective Date,
by virtue of the Merger and without any action on the
part of any holder of any capital stock of Carolco, LIVE
or CAC:
(a) CONVERSION OF CAROLCO COMMON STOCK.
(i) Subject to the provisions of clause
(ii) of this Section 4.1(a), every 5.5 shares of
Carolco Common Stock issued and outstanding
immediately prior to the Effective Date (other than
any such shares held in Carolco's treasury) shall be
converted into one share of common stock of LIVE,
par value $.01 per share ("LIVE Common Stock")
(hereinafter the number of shares of Carolco Common
Stock which shall be converted into one share of
LIVE Common Stock shall be referred to as the
"Exchange Ratio"). All such shares of Carolco
Common Stock, when so converted, shall no longer be
outstanding and shall automatically be cancelled and
retired and each holder of a Carolco Common
Certificate (as defined in Section 4.2(a))
representing any such shares shall cease to have any
rights with respect thereto, except as provided in
Section 4.2. All shares of LIVE Common Stock to be
received by holders of Carolco Common Stock upon
conversion of such Carolco Common Stock pursuant to
the Merger shall be duly authorized, validly issued
and outstanding, fully paid and nonassessable, free
of preemptive rights, and will not be liable to any
further call, nor shall the holder thereof be liable
for any further payments with respect thereto. Each
share of Carolco Common Stock held in Carolco's
treasury shall be cancelled and cease to exist at
and after the Effective Date and no consideration
shall be delivered with respect thereto.
(ii) If the Average Trading Price (as
defined below) (A) is less than 54.5 cents per
share, the Exchange Ratio shall not be 5.5 shares
and instead shall be equal to the number obtained by
dividing $3.00 by the Average Trading Price;
provided, however, that in no event shall the
Exchange Ratio exceed 6.5 shares; or (B) is greater
than 72.7 cents per share, the Exchange Ratio shall
not be 5.5 shares and instead shall be equal to the
number obtained by dividing $4.00 by the Average
Trading Price; provided, however, that in no event
shall the Exchange Ratio decrease below 4.5 shares.
For purposes of this Agreement:
(A) "Average Trading Price" means the
average Trading Price (as defined below) for
the 20 consecutive Trading Days (as defined
below) ending on a date that is three Trading
Days prior to the date of the Carolco
Stockholder Meeting and the LIVE Stockholder
Meeting (or in the event the Carolco
Stockholder Meeting and LIVE Stockholder
Meeting are not on the same date, the date of
the later Stockholder Meeting), or ending on
such earlier date as may be required by the
Securities and Exchange Commission,
(B) "Trading Price" means, on any day,
the last reported sale price of one share of
Carolco Common Stock regular way on the New
York Stock Exchange or, if such security is not
listed on the New York Stock Exchange, the last
sale price of such security regular way, as
reported in a composite published report of
transactions which includes transactions on the
exchange or other principal markets on which
such security is traded or, if there is no such
composite report as to any day, the last
reported sale price, regular way (or if there
is no such reported sale on such day, the
average of the closing reported bid and asked
prices) on the principal United States
securities trading market (whether a stock
exchange, National Association of Securities
Dealers Automated Quotation System or
otherwise) on which such security is traded,
and
(C) "Trading Day" means a day on which
the New York Stock Exchange is open for at
least one-half of its normal business hours.
(iii) Stockholders of Carolco entitled
to receive a fractional share of LIVE Common Stock
upon the conversion of the Carolco Common Stock
shall receive in lieu thereof cash in an amount
equal to the Average Trading Price times the number
of shares of Carolco Common Stock not converted
(which number shall be less than the Exchange
Ratio). All checks issued in payment for fractional
interests shall be denominated in U.S. dollars and
drawn on a United States bank.
(b) CONVERSION OF CAROLCO PREFERRED STOCK.
Each share of Series A Convertible Preferred Stock of
Carolco, par value $1.00 ("Carolco Series A Preferred
Stock"), issued and outstanding immediately prior to the
Effective Date shall be converted into one share of
Series D Convertible Preferred Stock of LIVE, par value
$1.00 ("LIVE Series D Preferred Stock"), the statement of
designations, rights, preferences and powers of which is
included in Exhibit 3.1. All such shares of Carolco
Series A Preferred Stock, when so converted, shall no
longer be outstanding and shall automatically be
cancelled and retired and each holder of a certificate
representing any such shares shall cease to have any
rights with respect thereto, except as provided in
Section 4.2. All shares of the LIVE Series D Preferred
Stock to be received by holders of Carolco Series A
Preferred Stock upon conversion of such Carolco Series A
Preferred Stock pursuant to the Merger shall be duly
authorized, validly issued and outstanding, fully paid
and nonassessable, free of preemptive rights, and will
not be liable to any further call, nor shall the holder
thereof be liable for any further payment with respect
thereto.
(c) LIVE STOCK AND CAC STOCK. Each Share of
LIVE Common Stock issued and outstanding immediately
prior to the Effective Date shall remain unchanged by
virtue of the Merger. Each Share of Series C Convertible
Preferred Stock of LIVE, par value $1.00 ("LIVE Series C
Preferred Stock") shall remain unchanged except as the
Amended Certificate of Designations, Preferences and
Rights of LIVE Series C Preferred Stock ("Series C
Certificate of Designations") shall be amended by the
Amended and Restated Certificate of Incorporation of LIVE
to be filed as provided herein. Each Share of common
stock of CAC, par value $0.01 per share ("CAC Common
Stock") issued and outstanding immediately prior to the
Effective Date shall be converted into one share of
common stock, par value $0.01 per share, of the Surviving
Corporation.
SECTION 4.2 LIVE TO MAKE CERTIFICATES AVAILABLE.
(a) EXCHANGE OF COMMON STOCK CERTIFICATES.
Prior to the Effective Date, LIVE shall authorize
American Stock Transfer & Trust Company (or such other
person or persons as shall be acceptable to LIVE and
Carolco) to act as Exchange Agent hereunder (the
"Exchange Agent"). At or prior to the Effective Date,
LIVE shall deposit with the Exchange Agent in trust for
the holders of certificates which immediately prior to
the Effective Date represented shares of Carolco Common
Stock (the "Carolco Common Certificates"), and, subject
to Section 4.3, each such holder will be entitled to
receive, upon surrender to the Exchange Agent in the
manner set forth in subsection (d) below of one or more
Carolco Common Certificates for cancellation,
certificates representing the number of shares of LIVE
Common Stock into which the shares represented by such
Carolco Common Certificates were converted in the Merger.
LIVE Common Stock into which Carolco Common Stock shall
be converted in the Merger shall be deemed to have been
issued at the Effective Date, and Carolco Common
Certificates shall, at and after the Effective Date, be
deemed to represent only the right to receive, upon
surrender of such Carolco Common Certificates, the
certificates contemplated by the preceding sentence.
(b) EXCHANGE OF SERIES A CERTIFICATES. At or
prior to the Effective Date, LIVE shall deposit with the
Exchange Agent in trust for the holders of certificates
which immediately prior to the Effective Date represented
shares of Carolco Series A Preferred Stock ("Series A
Certificates"), and, subject to Section 4.3, each such
holder will be entitled to receive, upon surrender to the
Exchange Agent in the manner set forth in subsection (d)
below of one or more Series A Certificates for
cancellation, certificates representing the number of
shares of LIVE Series D Preferred Stock into which the
shares represented by such Series A Certificates were
converted in the Merger. LIVE Series D Preferred Stock
into which Carolco Series A Preferred Stock shall be
converted in the Merger shall be deemed to exist as of
the Effective Date, and Series A Certificates shall, at
and after the Effective Date, be deemed to represent only
the right to receive, upon surrender of such Series A
Certificates, the certificates contemplated by the
preceding sentence.
(c) EXCHANGE OF OLD LIVE CERTIFICATES. At or
prior to the Effective Date, LIVE shall deposit with the
Exchange Agent in trust for the holders of certificates
which immediately prior to the Effective Date represented
shares of LIVE Common Stock or LIVE Series C Preferred
Stock or of certificates which immediately prior to the
Effective Date represented Contingent Payment Rights (as
defined in Section 5.3) (collectively, "Old LIVE
Certificates"), and, subject to Section 4.3, each such
holder will be entitled to receive, upon surrender to the
Exchange Agent in the manner set forth in subsection (d)
below of one or more Old LIVE Certificates for
cancellation, certificates representing the number of
shares of LIVE Common Stock or LIVE Series C Preferred
Stock or Contingent Payment Rights (reflecting the change
of LIVE's name at the Effective Date), equal to the
number of shares or rights represented by the Old LIVE
Certificates so exchanged ("New LIVE Certificates").
Notwithstanding the foregoing, at and after the Effective
Date, until the holder of an Old LIVE Certificate
surrenders such Old LIVE Certificate to the Exchange
Agent for cancellation in the manner set forth in
subsection (d) below, each Old LIVE Certificate shall
continue to represent the same number of shares of LIVE
Common Stock, LIVE Series C Preferred Stock or Contingent
Payment Rights as such Old LIVE Certificate represented
immediately prior to the Effective Date.
(d) EXCHANGE PROCEDURES. As soon as
practicable after the Effective Date, but in any event no
later than five business days thereafter, the Exchange
Agent shall mail to each holder of record (at such
address as appears on the books of LIVE or Carolco or as
such holder shall otherwise designate) of a Carolco
Common Certificate, a Series A Certificate and/or an Old
LIVE Certificate, as the case may be (any such
certificates are sometimes referred to hereinafter
individually as a "Certificate," and collectively as
"Certificates"), (i) a letter of transmittal (which shall
specify that delivery shall be effected, and risk of loss
and title to such Certificates shall pass, only upon
actual delivery of such Certificates to the Exchange
Agent and shall be in such form and have such other
provisions as LIVE and Carolco shall mutually specify,
including procedures to be followed in the event a holder
has lost his certificates) and (ii) instructions for use
in effecting the surrender of the Certificates in
exchange for certificates representing shares of LIVE
Common Stock and/or LIVE Series D Preferred Stock and/or
for New LIVE Certificates (the "Mailing"). Upon
surrender of such a Certificate for cancellation to the
Exchange Agent, at the offices of the Exchange Agent and
as otherwise specified in the transmittal letter from the
Exchange Agent, together with such letter of transmittal,
duly executed, the holder of such Certificate shall be
entitled to receive in exchange therefor a certificate
representing that number of whole shares of LIVE Common
Stock, or that number of whole shares of LIVE Series D
Preferred Stock, which such holder has the right to
receive pursuant to this Article 4, or New LIVE
Certificates in accordance with the provisions of
Section 4.2(c), and the Certificate so surrendered shall
be cancelled.
SECTION 4.3 DIVIDENDS; TRANSFER TAXES.
(a) DIVIDENDS. No dividends or other
distributions, if any, that are declared on or after the
Effective Date on LIVE Common Stock (other than LIVE
Common Stock represented by an Old LIVE Certificate) or
LIVE Series D Preferred Stock or are payable to the
holders of record thereof will be paid with respect to
shares of such LIVE Common Stock (other than LIVE Common
Stock represented by an Old LIVE Certificate) or LIVE
Series D Preferred Stock, until the holders thereof
surrender their Carolco Common Certificates or Series A
Certificates, as applicable, as provided in Section 4.2.
Nothing in this Agreement shall require holders of Old
LIVE Certificates to surrender such Old LIVE
Certificates, as permitted in Section 4.2, as a condition
to receipt of any dividend or other distribution, if any,
payable to such holder with respect to shares of LIVE
Common Stock, LIVE Series C Preferred Stock or Contingent
Payment Rights represented by such Old LIVE Certificate.
Subject to the effect of any applicable laws, there shall
be paid to such record holder of the certificates
representing such LIVE Common Stock or LIVE Series D
Preferred Stock at the time of such surrender, if
required, or the appropriate payment date, if later, or
as promptly as practicable thereafter, the amount of any
dividends or other distributions theretofore paid with
respect to whole shares of such LIVE Common Stock or LIVE
Series D Preferred Stock and having a record date on or
after the Effective Date. In no event shall the person
entitled to receive any such dividends or other
distributions be entitled to receive interest on such
dividends or other distributions.
(b) TRANSFER TAXES. No transfer taxes shall
be payable by a (i) holder of Carolco Common Stock or
Carolco Series A Preferred Stock in connection with such
holder's receipt of shares of LIVE Common Stock or LIVE
Series D Preferred Stock, as the case may be, upon
surrender of a Carolco Common Certificate or Series A
Certificate or (ii) holder of LIVE Common Stock, LIVE
Series C Preferred Stock or Contingent Payment Rights in
connection with such holder's exchange of an Old LIVE
Certificate for a New LIVE Certificate, except in any
event if any certificate representing shares of LIVE
Common Stock, LIVE Preferred Stock or Contingent Payment
Rights is to be paid to or issued in a name other than
that in which the Certificate surrendered in exchange
therefor is registered, it shall be a condition of such
exchange that the Certificate so surrendered shall be
properly endorsed and otherwise in proper form for
transfer (including any signature guarantees necessary)
and that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required
by reason of the issuance of certificates for such shares
of LIVE Common Stock or LIVE Preferred Stock in a name
other than that of the registered holder of the Carolco
Common Certificate, Series A Certificate, or Old LIVE
Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent or LIVE, as
appropriate, that such tax has been paid or is not
applicable. For purposes of this Agreement, "LIVE
Preferred Stock" means, collectively, the LIVE Series C
Preferred Stock and the LIVE Series D Preferred Stock.
(c) DELAY IN DELIVERY. Any certificates
delivered to the Exchange Agent by LIVE pursuant to
Sections 4.2(a) or 4.2(b) representing shares of LIVE
Common Stock or LIVE Series D Preferred Stock (or any
dividends or distributions thereon) which remain
undistributed to the previous stockholders of Carolco for
six months after the date of the Mailing (as defined
above in Section 4.2(e)) shall be returned to LIVE, upon
demand. Any persons who were previously stockholders of
Carolco who have not theretofore complied with this
Article 4 shall thereafter look only to LIVE (subject to
abandoned property, escheat and other similar laws) for
payment of their claim for LIVE Common Stock or LIVE
Series D Preferred Stock (or any dividends or
distributions thereon). Notwithstanding the foregoing,
neither the Exchange Agent nor any party hereto shall be
liable to a holder of a Carolco Common Certificate or
Series A Certificate for any shares of LIVE Common Stock
or LIVE Series D Preferred Stock (or any dividends or
distributions thereon) delivered to a public official
pursuant to any applicable abandoned property, escheat or
similar law.
SECTION 4.4 NO FURTHER OWNERSHIP RIGHTS IN
CAROLCO COMMON STOCK. All shares of LIVE Common Stock or
LIVE Series D Preferred Stock issued upon the surrender
for exchange of shares of Carolco Common Stock or Carolco
Series A Preferred Stock in accordance with the terms
hereof shall be deemed to have been issued in full
satisfaction of all rights pertaining to such shares of
Carolco Common Stock or Carolco Series A Preferred Stock,
subject, however, to the Surviving Corporation's
obligation to pay any dividends or make any other
distribution with a record date prior to the Effective
Date which may have been declared or made by Carolco on
such shares of Carolco Common Stock or Carolco Series A
Preferred Stock in accordance with the terms of this
Agreement.
SECTION 4.5 CLOSING OF CAROLCO TRANSFER BOOKS.
Upon the Effective Date, the stock transfer books of
Carolco shall be closed and no transfer of Carolco Common
Stock or Carolco Preferred Stock shall thereafter be
made. If, after the Effective Date, Certificates are
presented to the Surviving Corporation, they shall be
cancelled and exchanged as provided in this Article 4.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF LIVE
LIVE represents and warrants to Carolco as follows:
SECTION 5.1 ORGANIZATION, STANDING AND POWER.
(a) LIVE is a corporation duly organized,
validly existing and in good standing under the laws of
the State of Delaware and has the requisite corporate
power and authority to own its property and carry on its
business as now being conducted. LIVE and each of its
Subsidiaries is duly qualified to do business, and is in
good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature
of its activities makes such qualification necessary,
except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse
Effect on LIVE.
(b) For purposes of this Agreement (i)
"Material Adverse Change" or "Material Adverse Effect"
means, when used with respect to LIVE or Carolco, as the
case may be, any change or effect that is or may be
materially adverse to the assets, properties, business,
condition (financial or otherwise) or results of
operations of LIVE and its Subsidiaries taken as a whole
or Carolco and its Subsidiaries taken as a whole, as the
case may be, and (ii) "Subsidiary" means any corporation
or other legal entity of which LIVE or Carolco, as the
case may be (either alone or through or together with any
other Subsidiary), owns, directly or indirectly, 50% or
more of the stock or other equity interests the holders
of which are generally entitled to vote for the election
of the board of directors or other governing body of such
corporation or other legal entity, or otherwise directly
or indirectly controls the operations of such corporation
or other legal entity, except that in the case of LIVE,
Subsidiaries shall not include Strawberries, Inc.
("Strawberries") or VCL/Carolco Communications GmbH
("VCL"), or any subsidiaries of Strawberries or VCL.
(c) LIVE has disclosed to Carolco in writing
all information regarding Strawberries and/or VCL (i)
which should have been disclosed in the LIVE LETTER had
Strawberries and/or VCL been included within the
definition of "Subsidiary" in Section 5.1(b) hereof and
(ii) which, individually or in the aggregate, has, had or
could reasonably be expected to have a Material Adverse
Effect on LIVE or the Surviving Corporation.
SECTION 5.2 SUBSIDIARIES. LIVE has delivered to
Carolco a disclosure letter of even date herewith
(together with the exhibits included as a part thereof,
the "LIVE LETTER") which lists, among other things, each
Subsidiary of LIVE. All the outstanding shares of
capital stock or other ownership interests of each such
Subsidiary have been duly authorized, validly issued and
are fully paid and nonassessable and are, except as set
forth in the LIVE LETTER, owned by LIVE, by another
Subsidiary of LIVE or by LIVE and another such
Subsidiary, free and clear of all liens, charges, claims
and encumbrances except as set forth in the LIVE LETTER.
Except as set forth in the LIVE LETTER, there are no
outstanding options, rights or agreements of any kind
relating to the issuance, sale or transfer of any capital
stock or other equity securities or ownership interests
of any such Subsidiary of LIVE to any person. Each
Subsidiary of LIVE (i) is a corporation duly organized,
validly existing and in good standing under the laws of
the jurisdiction of its organization, (ii) has the
requisite corporate power and authority to own its
properties and carry on its business as now being
conducted, and (iii) is duly qualified to do business,
and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or
the nature of its activities make such qualification
necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a
Material Adverse Effect on LIVE. Except for the capital
stock of its Subsidiaries and except as disclosed in
LIVE's Annual Report on Form 10-K for the year ended
December 31, 1993, and in LIVE's Quarterly Report on Form
10-Q for the quarter ended March 31, 1994, LIVE does not
own, directly or indirectly, any capital stock or other
ownership interest in any corporation, partnership or
other entity which is material to LIVE.
SECTION 5.3 CAPITAL STRUCTURE AND COMMITMENTS.
As of the date hereof, the authorized capital stock of
LIVE consists of 120,000,000 shares of LIVE Common Stock,
15,000,000 shares of LIVE Series A Common Stock, par
value $.01 per share ("LIVE Series A Common Stock") (none
of which LIVE Series A Common Stock is issued and
outstanding) and 15,000,000 shares of LIVE preferred
stock (of the authorized LIVE preferred stock, 9,000,000
shares have been designated as LIVE Series B Cumulative
Convertible Preferred Stock ("LIVE Series B Preferred
Stock") (which LIVE Series B Preferred Stock shall be
redeemed as provided in Section 10.2(e) herein), 15,000
shares have been designated as LIVE Series C Preferred
Stock and 500,000 shares have been designated as LIVE
Series R Junior Participating Cumulative Preferred Stock
("LIVE Series R Preferred Stock") (none of which LIVE
Series R Preferred Stock is issued and outstanding)). As
of the date hereof, each share of LIVE Common Stock
outstanding includes a LIVE Right (which LIVE Right shall
be terminated as provided in Section 9.17 herein). For
purposes of this Agreement, a "LIVE Right" is a right to
purchase LIVE Common Stock pursuant to the Rights
Agreement (the "LIVE Rights Agreement") dated as of
July 19, 1990, as amended, between LIVE and American
Stock Transfer and Trust Company, as Rights Agent. As of
the date of this Agreement:
(a) approximately 12,000,000 shares of LIVE
Common Stock are duly authorized, validly issued and
outstanding, fully paid and nonassessable,
(b) approximately 1,900,000 shares of LIVE
Common Stock are reserved for issuance upon the exercise
of outstanding options to purchase LIVE Common Stock,
which options are listed in Exhibit 5.3A,
(c) approximately 2,400,000 shares of LIVE
Common Stock are reserved for issuance upon the exercise
of warrants issued under the warrant agreements listed in
Exhibit 5.3A,
(d) approximately 6,000,000 shares of LIVE
Series B Preferred Stock are duly authorized, issued and
outstanding, fully paid and nonassessable,
(e) 15,000 shares of LIVE Series C Preferred
Stock are duly authorized, issued and outstanding, fully
paid and nonassessable,
(f) up to 60,000,000 shares of LIVE Common
Stock are reserved for issuance upon conversion of the
LIVE Series B Preferred Stock, and
(g) approximately 5,100,000 shares of LIVE
Common Stock are reserved for issuance upon conversion of
the LIVE Series C Preferred Stock.
As of the date of this Agreement, except for this
Agreement, the stock options referred to in clause (b) of
this Section 5.3 and listed on Exhibit 5.3A, the warrant
agreements referred to in clause (c) of this Section 5.3
and listed on Exhibit 5.3A, the Contingent Payment Rights
issued in connection with the acquisition by LIVE of
certain of the assets of Vestron Inc. in July 1991
("Contingent Payment Rights"), the shares of LIVE Common
Stock underlying the LIVE Series B Preferred Stock and
the LIVE Series C Preferred Stock, the shares of LIVE
Series A Common Stock underlying the LIVE Series C
Preferred Stock, the LIVE Rights, and other agreements
and transactions relating to capital stock described in
the LIVE SEC Documents or in the LIVE LETTER, there are
no options, warrants, rights, contracts, commitments,
agreements, arrangements or undertakings of any kind to
which LIVE or any of its Subsidiaries is a party or by
which any of them is bound relating to the issuance of
any capital stock or other voting securities of LIVE or
of any of its Subsidiaries or any securities convertible
into or exchangeable for any capital stock or other
voting securities of LIVE or of any of its Subsidiaries,
or any options, warrants or other rights to purchase
capital stock or other voting securities of LIVE or any
of its Subsidiaries, nor has LIVE or any of its
Subsidiaries granted any stock appreciation rights to any
person or entity. As of March 31, 1994, there are
approximately 1,281 holders of record of LIVE Common
Stock, approximately 281 holders of record of LIVE
Series B Preferred Stock and one (1) holder of record of
LIVE Series C Preferred Stock.
Exhibit 5.3B lists all agreements of LIVE as of
the date hereof by which LIVE may be required to register
any of its securities ("LIVE Registration Rights
Agreements").
SECTION 5.4 AUTHORITY; NON-CONTRAVENTION.
(a) Each of LIVE and CAC has all requisite
corporate power and authority to enter into and execute
this Agreement and, subject to any approval by the
stockholders of LIVE of the Merger and the related
amendments to the Restated Certificate of Incorporation
of LIVE, to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by
LIVE and CAC, the performance by LIVE and CAC of their
respective obligations hereunder and the consummation by
LIVE and CAC of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on
the part of LIVE and CAC, except for the approval of
LIVE's stockholders, which will be solicited in
accordance with the provisions of Section 9.1 hereof, and
no other act or proceeding on the part of LIVE or CAC is
necessary to authorize the execution, delivery and
consummation of this Agreement or the transactions
contemplated hereby.
(b) The Board of Directors of LIVE has
received the opinion of Chemical Securities Inc.
("Chemical"), the financial advisor to the Board, dated
July 1, 1994, to the effect that in Chemical's opinion
the financial terms of the Merger are fair, from a
financial point of view, to the holders of LIVE Common
Stock, other than the LIVE Investors (as defined below).
A true, correct and complete copy of such opinion (the
"Chemical Fairness Opinion") has been delivered to
Carolco. For purposes of this Agreement, "LIVE
Investors" means, collectively, Pioneer, Cinepole, and
RCS, where "Pioneer" refers to Pioneer LDCA, Inc.,
"Cinepole" refers to Cinepole Productions B.V. and "RCS"
refers, collectively, to RCS International Communications
N.V. and RCS Video International Services B.V.
(c) LIVE has received a letter agreement (the
"Investor Representation Agreement") from each LIVE
Investor and each such Investor Representation Agreement,
substantially in the form of Exhibit 5.4(c) hereto, has
been executed by such LIVE Investor.
(d) This Agreement has been duly and validly
executed and delivered by each of LIVE and CAC and
(assuming the valid authorization, execution and delivery
of this Agreement by Carolco) constitutes a valid and
binding obligation of each of LIVE and CAC enforceable
against LIVE and CAC in accordance with its terms, except
(i) as their respective obligations may be affected by
bankruptcy, insolvency, reorganization, moratorium or
similar laws, or by equitable principles relating to or
limiting creditors' rights generally, and (ii) that the
remedies of specific performance, injunction and other
forms of equitable relief are subject to certain tests of
equity jurisdiction, equitable defenses and the
discretion of the court before which any proceeding
therefor may be brought.
(e) The Board of Directors of LIVE has
approved the terms of this Agreement and of the
transactions contemplated hereby, and the Advisory
Committee of the Board of Directors of LIVE (the
"Advisory Committee") has approved and declared advisable
and in the best interests of LIVE and its stockholders
the Merger, upon the terms and subject to the conditions
herein; the Special Committee (the "LIVE Special
Committee") formed pursuant to and in accordance with
Section 3.6 of the Certificate of Designations,
Preferences and Relative, Participating, Optional or
other Special Rights of the Series B Preferred Stock of
LIVE has approved the terms of this Agreement and of the
transactions contemplated hereby.
(f) Except as set forth in the LIVE LETTER,
the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not,
breach, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or
both) under, or result in or give rise to a right of
termination, cancellation or acceleration of any
liability or obligation or to the loss of a material
benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the
properties or assets of LIVE or any of its Subsidiaries
under, any provision of (i) the Restated Certificate of
Incorporation of LIVE or Bylaws of LIVE (true and
complete copies of which as of the date hereof have been
delivered to Carolco) or any provision of the comparable
charter or organizational documents of any of its
Subsidiaries, (ii) any loan or credit agreement, note,
bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license
applicable to LIVE or any of its Subsidiaries or (iii)
any judgment, order, decree, statute, law, ordinance,
injunction, writ, or authorization, consent, approval,
rule or regulation of any court or governmental authority
applicable to LIVE or any of its Subsidiaries or any of
their respective properties or assets, other than, in the
case of clauses (ii) or (iii), any such conflicts,
violations, defaults, rights, liens, security interests,
charges or encumbrances that, individually or in the
aggregate, would not (A) have a Material Adverse Effect
on LIVE, (B) materially impair the ability of LIVE or CAC
to perform their respective obligations hereunder or (C)
prevent the consummation of any of the transactions
contemplated hereby. The redemption of the LIVE Series B
Preferred Stock as contemplated in Section 10.2(c) herein
and the termination of the LIVE Rights as contemplated in
Section 9.17 herein shall have complied with, and shall
not have resulted in a violation of, either the
Certificate of Designations, Preferences and Rights
governing the LIVE Series B Preferred Stock or the LIVE
Rights Agreement, respectively, or any applicable
securities laws.
(g) No filing or registration with, or
authorization, consent or approval of, any domestic
(federal and state), foreign or international court,
commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is
required by or with respect to LIVE or any of its
Subsidiaries in connection with the execution and
delivery of this Agreement by LIVE or is necessary for
the consummation by LIVE of the Merger or the other
transactions contemplated by this Agreement, except (i)
in connection, or in compliance with, the provisions of
the Securities Act of 1933, as amended (together with the
rules and regulations promulgated thereunder, the
"Securities Act") and the Securities Exchange Act of
1934, as amended (together with the rules and regulations
promulgated thereunder, the "Exchange Act"), (ii) in
connection with, or in compliance with, the provisions of
the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), (iii) the filing of the
Certificate of Merger with the Secretary of State of the
State of Delaware and appropriate documents with the
relevant authorities of other states in which LIVE is
qualified to do business, (iv) the amendments to the
Restated Certificate of Incorporation of LIVE as provided
in Section 3.1, (v) any required filings under state
securities or "blue sky" laws and (vi) filings,
registrations, authorizations, consents or approvals
which if not made or obtained would have a Material
Adverse Effect on LIVE or would prevent or materially
adversely affect the transactions contemplated hereby.
SECTION 5.5 LIVE SEC DOCUMENTS. LIVE has filed
all required reports, statements, forms and documents
with the SEC that LIVE was required to file during the
three-year period immediately preceding the date hereof
(the "LIVE SEC Documents"). As of their respective
dates, and as subsequently revised, amended or superseded
by later-filed LIVE SEC Documents through and including
the date of this Agreement, the LIVE SEC Documents
complied in all material respects with the requirements
of the Securities Act or the Exchange Act, as the case
may be, and as so revised, superseded or amended none of
the LIVE SEC Documents including the financial
information contained therein contained or currently
contain any untrue statement of a material fact or
omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
not misleading. The financial statements of LIVE
included in the LIVE SEC Documents comply as to form in
all material respects with applicable accounting
requirements and the published rules and regulations of
the SEC with respect thereto, have been prepared in
accordance with generally accepted accounting principles
(except, in the case of the unaudited statements, as
permitted by Regulation S-X promulgated by the SEC)
applied on a consistent basis during the periods involved
(except as may be indicated therein or in the notes
thereto) and fairly present the consolidated financial
position of LIVE and its consolidated Subsidiaries as at
the dates thereof and the consolidated results of their
operations and statements of cash flows for the periods
included therein (subject, in the case of unaudited
statements, to normal year-end audit adjustments and to
any other adjustments described therein).
Notwithstanding the foregoing, LIVE makes no
representation or warranty in this Agreement regarding
any information (including financial information and
financial statements) supplied by Carolco for inclusion
in the LIVE SEC Documents.
SECTION 5.6 NO MATERIAL ADVERSE CHANGE. Except
as set forth in the LIVE LETTER, since the date of the
most recent balance sheet and notes to consolidated
financial statements contained in LIVE's Annual Report on
Form 10-K for the year ended December 31, 1993, or LIVE's
Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994, as filed with the SEC (the "LIVE Balance
Sheet"), there has been no Material Adverse Change in
LIVE, and neither LIVE nor any of its Subsidiaries knows
of any such Material Adverse Change that is threatened,
nor has there been any damage, destruction or loss
affecting the assets, properties, business, operations or
condition (financial or otherwise) of LIVE or any of its
Subsidiaries, whether or not covered by insurance, which
would have a Material Adverse Effect on LIVE, and which
has not been subsequently reported in any of the LIVE SEC
Documents filed with the SEC prior to the date hereof.
SECTION 5.7 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth in the LIVE SEC Documents or the LIVE
LETTER, as of the date of the LIVE Balance Sheet neither
LIVE nor any of its Subsidiaries had any liabilities or
obligations of any nature (whether accrued, absolute,
contingent or otherwise) required by generally accepted
accounting principles to be set forth on a financial
statement or in the notes thereto and which, individually
or in the aggregate, would have a Material Adverse Effect
on LIVE, which were not set forth on the LIVE Balance
Sheet.
SECTION 5.8 ABSENCE OF CERTAIN EVENTS. Except as
disclosed in the LIVE SEC Documents or the LIVE LETTER,
since the date of the LIVE Balance Sheet, LIVE and its
Subsidiaries have conducted their business only in the
ordinary course.
SECTION 5.9 NO SOLICITATION. LIVE is not now
engaged in any activities, discussions or negotiations
with any parties (other than Carolco) in respect of a
"takeover proposal" or an "offer" (both as defined in
Section 8.3), except with respect to Strawberries and
VCL.
SECTION 5.10 REGISTRATION STATEMENT AND PROXY
STATEMENT. None of the information to be supplied by
LIVE or CAC for inclusion or incorporation by reference
in the registration statement on Form S-4 under the
Securities Act to be filed with the SEC pursuant to
Section 9.2 (the "Registration Statement"), or the joint
proxy statement/prospectus together with any amendments
or supplements thereto included within the Registration
Statement (the "Proxy Statement") will (a) in the case of
the Registration Statement, at the time it becomes
effective, contain any statement which, at the time and
in the light of the circumstances under which it is made,
is false or misleading with respect to any material fact,
or which omits to state any material fact required to be
stated therein or necessary in order to make the
statements therein not false or misleading, or (b) in the
case of the Proxy Statement, at the time of the mailing
of the Proxy Statement and at the times of the
Stockholder Meetings, contain any statement which, at the
time and in the light of the circumstances under which it
is made, is false or misleading with respect to any
material fact, or which omits to state any material fact
required to be stated therein or necessary in order to
make the statements therein not false or misleading. The
Registration Statement will comply (with respect to LIVE
and CAC) as to form in all material respects with the
provisions of the Securities Act and the Proxy Statement
will comply (with respect to LIVE and CAC) as to form in
all material respects with the provisions of the Exchange
Act. Notwithstanding the foregoing, neither LIVE nor
CAC, individually or collectively, makes any
representation or warranty regarding any information
(including financial information and financial
statements) supplied by Carolco for inclusion in the
Registration Statement or the Proxy Statement.
SECTION 5.11 REORGANIZATION. Neither LIVE nor any
of its Subsidiaries has taken any action or failed to
take any action which action or failure to take action
would jeopardize the qualification of the Merger as a tax
free reorganization under the Code.
SECTION 5.12 LITIGATION. Except as set forth in
the LIVE LETTER or the LIVE SEC Documents, as of the date
hereof, there is no claim, suit, action or proceeding
pending or, to the knowledge of LIVE, threatened against
or affecting LIVE or any of its Subsidiaries (whether or
not covered by insurance) which (i) could reasonably be
expected to have a Material Adverse Effect on LIVE (and
LIVE is not aware of any reasonable basis for any such
suit, action or proceeding), or (ii) challenge the
transactions contemplated hereby at law or in equity or
before or by any federal, state, local, foreign or other
governmental department, commission, board, agency,
instrumentality, or authority; nor is there any judgment,
decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against LIVE or any of
its Subsidiaries having, or which, insofar as reasonably
can be foreseen, in the future would have, any such
effect.
SECTION 5.13 LOAN AGREEMENTS, CUSTOMERS AND
SUPPLIERS.
(a) Neither LIVE nor any of its Subsidiaries
is in violation of or in default under (nor does there
exist any condition which upon the passage of time, the
giving of notice or both would cause such a violation of
or default under) any loan or credit agreement, note,
bond, mortgage, indenture, lease instrument, permit,
concession, franchise, license or any other contract,
agreement, arrangement or understanding, to which it is a
party or by which it or any of its properties or assets
is bound, except for violations or defaults that could
not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect on LIVE
or except as are set forth in the LIVE LETTER. Set forth
in the LIVE LETTER is a list of each loan or credit
agreement, note, bond, mortgage, indenture and other
agreement and instrument pursuant to which any
indebtedness of LIVE or any of its Subsidiaries (other
than indebtedness solely among or between LIVE and/or any
of its Subsidiaries), in an aggregate principal amount in
excess of $3,000,000 is outstanding or may be incurred
and the respective principal amounts currently
outstanding thereunder. For purposes of this Agreement,
"indebtedness" shall mean, with respect to any person,
without duplication, (i) any liability, contingent or
otherwise, (x) for borrowed money (whether or not the
recourse of the lender is to the whole of the assets of
the person or only to a portion thereof), (y) evidenced
by a note, debenture or similar instrument (including a
purchase money obligation), or (z) for the payment of
money relating to a capitalized lease obligation; (ii)
any liability of others of the kind described in the
preceding clause which the person has guaranteed or which
is otherwise its legal liability; (iii) any obligation
secured by a lien to which the property or assets of the
person are subject, whether or not the obligations
secured thereby shall have been assumed by or shall
otherwise be the person's legal liability, and (iv) any
and all deferrals, renewals, extensions and refundings
of, or amendments, modifications or supplements to, any
liability of the kind described in any of the preceding
clauses (i), (ii) or (iii).
(b) Neither LIVE nor any of its Subsidiaries
is in default under (nor does there exist any condition
which upon the passage of time, the giving of notice or
both would cause such a violation of or default under)
any material agreement with any of its customers or
suppliers of products or services which are of material
importance to LIVE or any of its Subsidiaries, and no
such customer or supplier, to the knowledge of LIVE or
any of its Subsidiaries, is in default under (nor does
there exist any condition which upon the passage of time,
the giving of notice or both would cause such customer or
supplier to be in violation of or default under) any of
such material agreements or except as are set forth in
the LIVE LETTER.
SECTION 5.14 PERMITS. LIVE and each of its
Subsidiaries possess all franchises, permits, licenses,
certificates, approvals or other authorizations necessary
to own or lease and operate their properties and to
conduct their businesses, except for incidental
franchises, permits, licenses, certificates, approvals
and other authorizations that would be readily obtainable
by any qualified applicant without undue burden in the
event of any lapse, termination, cancellation or
forfeiture or which if not obtained would not, in the
aggregate, have a Material Adverse Effect on LIVE.
SECTION 5.15 ABSENCE OF CHANGES IN LIVE BENEFIT
PLANS. Except as disclosed in the LIVE SEC Documents or
the LIVE LETTER, since the date of the most recent
audited financial statements included in the LIVE SEC
Documents, there has not been any adoption or amendment
by LIVE or any of its Subsidiaries of any collective
bargaining agreement or any bonus, pension, profit
sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical fringe benefit or other
plan, arrangement or understanding (whether or not
legally binding) providing benefits to any current or
former employee or director of, or any other person
providing services to, LIVE or any of its Subsidiaries
(collectively, "LIVE Benefit Plans") which will have a
Material Adverse Effect on LIVE. LIVE has delivered to
Carolco true, correct and complete copies of all LIVE
Benefit Plans. Each of the LIVE Benefit Plans is in
material compliance with all applicable laws including
the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and the Code.
SECTION 5.16 INTELLECTUAL PROPERTY. LIVE and its
Subsidiaries own, or are licensed or otherwise have the
right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service
marks, service mark rights, copyrights and other
proprietary intellectual property rights and computer
programs (collectively, the "LIVE Proprietary Rights")
which are material to the conduct of the business of LIVE
and its Subsidiaries taken as a whole. No claims are
pending or, to the knowledge of LIVE, threatened that
LIVE or any Subsidiary is infringing or otherwise
adversely affecting the rights of any person with regard
to any LIVE Proprietary Right, except for such claims or
threats which could not reasonably be expected to have a
Material Adverse Effect on LIVE. To the knowledge of
LIVE, no person is infringing the rights of LIVE with
respect to any LIVE Proprietary Right that would have a
Material Adverse Effect on LIVE. No lien, encumbrance or
restriction with respect to any LIVE Proprietary Right
has a Material Adverse Effect on LIVE, or so far as LIVE
can now foresee could reasonably be expected to have a
Material Adverse Effect on LIVE.
SECTION 5.17 ENVIRONMENTAL MATTERS. To the
knowledge of LIVE, LIVE and each of its Subsidiaries are
in compliance with all applicable federal, state,
regional and local laws, statutes, ordinances, judgments,
rulings and regulations relating to any matters of
pollution, protection of the environment or environmental
regulation or control (collectively, "Environmental
Laws"), except for violations of the Environmental Laws
that could not, individually or in the aggregate,
reasonably be expected to result in a Material Adverse
Effect on LIVE.
SECTION 5.18 TAXES. Except as set forth in the
LIVE LETTER or the LIVE SEC Documents: (a) each of LIVE
and its Subsidiaries has timely filed all federal, state,
local or foreign tax returns required to be filed by it
(except for all such returns the failure of which timely
filing would, individually or in the aggregate, not have
a Material Adverse Effect on LIVE), and has paid (or LIVE
has paid on its behalf) all taxes shown as due on the
returns in respect of the periods covered by such
returns; (b) there are no tax liens upon any property or
assets of LIVE or any of its Subsidiaries which would
have a Material Adverse Effect on LIVE, except liens for
current taxes not yet due; (c) neither LIVE nor any of
its Subsidiaries is delinquent in the payment of any
material tax, assessment or governmental charge which
would have a Material Adverse Effect on LIVE; (d) no
deficiencies for any taxes have been proposed, asserted
or assessed against LIVE or any of its Subsidiaries which
would have a Material Adverse Effect on LIVE or its
Subsidiaries, and no requests for waivers of the time to
assess any such taxes are pending; and (e) no audits of
the tax returns of LIVE or any of its Subsidiaries are
currently being conducted by a taxing authority and
neither LIVE nor its Subsidiaries have received any
notices of pending or proposed audits from a taxing
authority.
SECTION 5.19 FOREIGN CORRUPT PRACTICES ACT. To
the best knowledge of the officers of LIVE, neither LIVE,
any Subsidiary of LIVE nor any director, officer, agent,
employee or other person associated with or acting on
behalf of any of them has (i) used any corporate or other
funds for unlawful contributions, payments, gifts or
entertainment or made any unlawful expenditures relating
to political activity, or made any direct or indirect
unlawful payments to governmental officials or others or
established or maintained any unlawful or unrecorded
funds in violation of Section 30A of the Exchange Act or
(ii) accepted or received any unlawful contributions,
payments, gifts or expenditures. LIVE is in compliance
in all material respects with the provisions of Section
13(b) of the Exchange Act and to the best knowledge of
the officers of LIVE, there is no failure of compliance
with such provisions.
SECTION 5.20 BROKERS. No broker, investment
banker or other person, other than Chemical or Jefferson
Capital Corporation, the fees and expenses of which will
be paid by LIVE in accordance with LIVE's written
agreements with Chemical and Jefferson Capital
Corporation (copies of which have been delivered by LIVE
to Carolco prior to the date hereof), is entitled to any
broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of
LIVE, any Subsidiary of LIVE or CAC.
SECTION 5.21 OFFICERS, DIRECTORS AND KEY
EMPLOYEES. The LIVE LETTER sets forth (i) the name and
total compensation of each officer and director of LIVE;
(ii) the name of each officer and director of any of
LIVE's Subsidiaries; (iii) the name and total
compensation of each other officer, director, employee,
consultant, agent or other representative of LIVE or any
of its Subsidiaries whose current annual rate of
compensation (including bonuses and commissions) exceeds
$150,000; (iv) all wage or salary increases or bonuses
received by the persons identified in Section 5.21(i) and
(iii) ("Significant LIVE Employees") since December 31,
1993, and any accrual for or commitment or agreement by
LIVE or any of its Subsidiaries to pay such increases or
bonuses; and (v) a notation with respect to each of such
Significant LIVE Employees, whether they have an
employment agreement with LIVE or any of its Subsidiaries
and, if so, the date and term of such agreement. Except
as set forth in the LIVE LETTER, (x) to the knowledge of
LIVE or any of its Subsidiaries, none of such Significant
LIVE Employees has made a threat to LIVE or any of its
Subsidiaries or to any of their officers or directors to
cancel or otherwise terminate such Significant LIVE
Employee's relationship with LIVE or any of its
Subsidiaries and (y) none of such Significant LIVE
Employees have "change of control" clauses or agreements
with LIVE or any of its Subsidiaries (or similar clauses
or agreements permitting such Significant LIVE Employees
to terminate their employment relationship with LIVE or
any of its Subsidiaries) that would be triggered by the
Merger which have not been waived on the date hereof.
SECTION 5.22 STATE TAKEOVER STATUTES. Neither
Section 203 of the DGCL nor any other "fair price,"
"moratorium," "control share acquisition" or other state
takeover statute or similar statute or regulation applies
to the Merger by virtue of LIVE and CAC engaging in the
transactions contemplated hereby.
SECTION 5.23 INSURANCE. LIVE and each of its
Subsidiaries have been and are insured by financially
sound and reputable insurers with respect to their
properties and the conduct of their business in such
amounts and against such risks as are reasonable in
relation to their respective businesses, and each will
use its best efforts to maintain such insurance. Such
insurance is in full force and effect and no notice of
cancellation or termination has been received with
respect to any of said insurance. Except as disclosed in
the LIVE LETTER, there are no claims pending thereunder
except where such claim would not, individually or in the
aggregate, have a Material Adverse Effect on LIVE.
SECTION 5.24 TITLE TO PROPERTIES AND RELATED
MATTERS. Except with respect to the LIVE Proprietary
Rights, LIVE and each of its Subsidiaries have good and
marketable title (or valid and subsisting leasehold
interests) to all of the personal properties and assets
(tangible and intangible) and the real properties
utilized in their businesses or reflected in the LIVE SEC
Documents or acquired after the date thereof (other than
properties sold or otherwise disposed of in the ordinary
course of business), which are material to them, free and
clear of all title defects, liens, encumbrances and
restrictions, except (i) as reflected in the LIVE SEC
Documents, (ii) to the extent not described in clause
(i), those described in the LIVE LETTER, (iii) to the
extent not described in clause (i), statutory liens not
yet due or delinquent or the validity of which are being
contested or litigated in good faith by appropriate
proceedings and for which LIVE has set aside on its books
reserves that are adequate with respect thereto; and (iv)
liens, encumbrances, covenants, rights of way, building
or use restrictions, easements, exceptions, variances,
reservations and other matters or limitations of any
kind, if any, which, when considered together with the
liens described in clauses (i), (ii) and (iii), do not
have a Material Adverse Effect on LIVE's business or
operations. All properties of LIVE and each of its
Subsidiaries are reflected in the LIVE SEC Documents in
the manner and to the extent required by generally
accepted accounting principles consistently applied.
Neither the whole nor any portion of the leaseholds or
any other assets of LIVE or any of its Subsidiaries is
subject to any governmental decree or order to be sold or
is being condemned, expropriated or otherwise taken by
any public authority with or without payment of
compensation therefor, nor to the knowledge of LIVE or
any of its Subsidiaries has any such condemnation,
expropriation or taking been proposed, which would have a
Material Adverse Effect on LIVE and its Subsidiaries
taken as a whole.
SECTION 5.25 ACCURACY OF LIVE DISCLOSURE. Neither
this Agreement, nor any document or other paper furnished
(or to be furnished pursuant hereto at the Closing) by or
on behalf of LIVE or CAC to Carolco pursuant to this
Agreement or in connection with the transactions
contemplated hereby, contains or will contain any untrue
statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make
the statements made, in the context in which made, not
false or misleading. There is no fact that LIVE has not
disclosed to Carolco in writing that has a Material
Adverse Effect on LIVE, or so far as LIVE can now foresee
will have a Material Adverse Effect on LIVE or on the
ability of LIVE to perform this Agreement.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF CAROLCO
Carolco represents and warrants to LIVE and CAC as
follows:
SECTION 6.1 ORGANIZATION, STANDING AND POWER.
Carolco is a corporation duly organized, validly existing
and in good standing under the laws of the State of
Delaware and has the requisite corporate power and
authority to own its property and carry on its business
as now being conducted. Carolco and each of its
Subsidiaries is duly qualified to do business, and is in
good standing, in each jurisdiction where the character
of its properties owned or held under lease or the nature
of its activities makes such qualification necessary,
except where the failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse
Effect on Carolco.
SECTION 6.2 SUBSIDIARIES. Carolco has delivered
to LIVE a disclosure letter of even date herewith
(together with the exhibits included as a part thereof,
the "CAROLCO LETTER") which lists, among other things,
each Subsidiary of Carolco. All the outstanding shares
of capital stock of each such Subsidiary have been duly
authorized, validly issued and are fully paid and
nonassessable and are, except as set forth in the CAROLCO
LETTER, owned by Carolco, by another Subsidiary of
Carolco or by Carolco and another such Subsidiary, free
and clear of all liens, charges, claims and encumbrances.
Except as set forth in the CAROLCO LETTER, there are no
outstanding options, rights or agreements of any kind
relating to the issuance, sale or transfer of any capital
stock or other equity securities or ownership interests
of any such Subsidiary of Carolco to any person. Each
Subsidiary of Carolco (i) is a corporation duly
organized, validly existing and in good standing under
the laws of the jurisdiction of its organization,
(ii) has the requisite corporate power and authority to
own its properties and carry on its business as now being
conducted, and (iii) is duly qualified to do business,
and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or
the nature of its activities make such qualification
necessary, except where the failure to be so qualified
would not, individually or in the aggregate, have a
Material Adverse Effect on Carolco. Except for the
capital stock of its Subsidiaries and except as disclosed
in Carolco's Annual Report on Form 10-K for the year
ended December 31, 1993 and Carolco's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1994, Carolco
does not own, directly or indirectly, any capital stock
or other ownership interest in any corporation,
partnership or other entity which is material to Carolco.
SECTION 6.3 CAPITAL STRUCTURE AND COMMITMENTS.
As of the date hereof, the authorized capital stock of
Carolco consists of 650,000,000 shares of Carolco Common
Stock and 10,000,000 shares of Carolco preferred stock
(of the Carolco preferred stock, 120,000 shares have been
designated as Carolco Series A Preferred Stock). As of
the date of this Agreement:
(a) approximately 137,687,728 shares of
Carolco Common Stock are duly authorized, validly issued
and outstanding, fully paid and non-assessable (excluding
2,327,381 treasury shares),
(b) approximately 31,222,000 shares of Carolco
Common Stock are reserved for issuance upon the exercise
of outstanding options to purchase Carolco Common Stock,
which options are listed in Exhibit 6.3A.
(c) 82,500 shares of Carolco Series A
Preferred Stock are duly authorized, validly issued and
are outstanding, fully paid and non-assessable,
(d) 37,500 shares of Carolco Series A
Preferred Stock are reserved for issuance upon the
distribution of payment-in-kind dividends;
(e) approximately 137,500,000 shares of
Carolco Common Stock are reserved for issuance upon
conversion of the Carolco Series A Preferred Stock;
(f) approximately 50,000,000 shares of Carolco
Common Stock are reserved for issuance upon conversion of
$30,000,000, in aggregate, of 5% Payment-in-Kind
Convertible Subordinated Notes of Carolco (the "Carolco
5% Notes") due 2002;
(g) approximately 66,666,666 shares of Carolco
Common Stock are reserved for issuance upon conversion of
$50,000,000, in aggregate, of 7% Convertible Subordinated
Notes of Carolco (the "Carolco 7% Notes") due 2006; and
(i) approximately 74,074,074 shares of Carolco
Common Stock are reserved for issuance ("Pay-Per-View
Shares") in connection with the Purchase Agreement dated
as of August 19, 1993, by and between Carolco and TCI
(the "TCI Purchase Agreement").
As of the date of this Agreement, except for this
Agreement, the stock options referred to in clause (b) of
this Section 6.3 and listed on Exhibit 6.3A, the shares
of Carolco Common Stock underlying the Carolco Series A
Preferred Stock, the Carolco 5% Notes and the Carolco 7%
Notes and the Pay-Per-View Shares, and other agreements
and transactions relating to capital stock described in
the Carolco SEC Documents or in the CAROLCO LETTER, there
are no options, warrants, rights, commitments,
agreements, arrangements or undertakings of any kind to
which Carolco or any of its Subsidiaries is a party or by
which any of them is bound relating to the issuance of
any capital stock or other voting securities of Carolco
or of any of its Subsidiaries or any securities
convertible into or exchangeable for any capital stock
or other voting securities of Carolco or any of its
Subsidiaries, or any options, warrants or other rights to
purchase capital stock or other voting securities of
Carolco or any of its Subsidiaries. As of the date of
this Agreement, there were approximately 1,040 holders of
record of Carolco Common Stock, and three (3) holders of
record of Carolco Series A Preferred Stock.
Exhibit 6.3B lists all agreements of Carolco by
which Carolco may be required to register any of its
securities ("Carolco Registration Rights Agreements").
SECTION 6.4 AUTHORITY; NON-CONTRAVENTION.
(a) Carolco has all requisite corporate power
and authority to enter into this Agreement and, subject
to any approval by the stockholders of Carolco to
consummate the Merger, to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement by Carolco, the performance by Carolco of its
obligations hereunder and the consummation by Carolco of
the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part
of Carolco, except for the approval of Carolco's
stockholders, which will be solicited in accordance with
the provisions of Section 9.1 hereof, and no other act or
proceeding on the part of Carolco is necessary to
authorize the execution, delivery and consummation of
this Agreement or the transactions contemplated hereby.
(b) The Board of Directors of Carolco has
received the opinion of The Seidler Companies
Incorporated ("Seidler"), Carolco's financial advisor,
dated June 30, 1994, to the effect that in Seidler's
opinion the financial terms of the Merger are fair, from
a financial point of view, to the holders of Carolco
Common Stock, other than the Carolco Investors (as
defined below). A true, correct and complete copy of
such opinion (the "Seidler Fairness Opinion") has been
delivered to LIVE. For purposes of this Agreement, the
"Carolco Investors" are Pioneer, Cinepole, RCS, MGM
Holdings Corporation and New Carolco Investments B.V.
(c) Carolco has received an Investor
Representation Agreement from each Carolco Investor and
each such Investor Representation Agreement,
substantially in the form of Exhibit 5.4(c) hereto, has
been executed by such Carolco Investor.
(d) This Agreement has been duly and validly
executed and delivered by Carolco and (assuming the valid
authorization, execution and delivery of this Agreement
by LIVE and CAC) constitutes a valid and binding
obligation of Carolco enforceable against Carolco in
accordance with its terms, except (i) as such obligation
may be affected by bankruptcy, insolvency,
reorganization, moratorium or similar laws, or by
equitable principles relating to or limiting creditors'
rights generally, and (ii) that the remedies of specific
performance, injunction and other forms of equitable
relief are subject to certain tests of equity
jurisdiction, equitable defenses and the discretion of
the court before which any proceeding therefor may be
brought.
(e) The Board of Directors of Carolco has
approved the terms of this Agreement and of the
transactions contemplated hereby.
(f) Except as set forth in the CAROLCO LETTER,
the execution and delivery of this Agreement do not, and
the consummation of the transactions contemplated hereby
and compliance with the provisions hereof will not
breach, conflict with, or result in any violation of, or
default (with or without notice or lapse of time, or
both) under, or result in or give rise to a right of
termination, cancellation or acceleration of any
liability or obligation or to the loss of a material
benefit under, or result in the creation of any lien,
security interest, charge or encumbrance upon any of the
properties or assets of Carolco or any of its
Subsidiaries under, any provision of (i) the Restated
Certificate of Incorporation of Carolco or Restated
Bylaws of Carolco (true and complete copies of which as
of the date hereof have been delivered to LIVE) or any
provision of the comparable charter or organizational
documents of any of its Subsidiaries, (ii) any loan or
credit agreement, note, bond, mortgage, indenture, lease
or other agreement, instrument, permit, concession,
franchise or license applicable to Carolco or any of its
Subsidiaries or (iii) any judgment, order, decree,
statute, law, ordinance, injunction, writ, or
authorization, consent, approval, rule or regulation of
any court or governmental authority applicable to Carolco
or any of its Subsidiaries or any of their respective
properties or assets, other than, in the case of clauses
(ii) or (iii), any such conflicts, violations, defaults,
rights, liens, security interests, charges or
encumbrances that, individually or in the aggregate,
would not (A) have a Material Adverse Effect on Carolco,
(B) materially impair the ability of Carolco to perform
its obligations hereunder or (C) prevent the consummation
of any of the transactions contemplated hereby.
(g) No filing or registration with, or
authorization, consent or approval of, any Governmental
Entity is required by or with respect to Carolco or any
of its Subsidiaries in connection with the execution and
delivery of this Agreement by Carolco or is necessary for
the consummation by Carolco of the Merger or the other
transactions contemplated by this Agreement, except (i)
in connection, or in compliance, with the provisions of
the Securities Act and the Exchange Act, (ii) in
connection with, or in compliance with, the provisions of
the HSR Act, (iii) the filing of the Certificate of
Merger with the Secretary of State of the State of
Delaware and appropriate documents with the relevant
authorities of other states in which Carolco is qualified
to do business, (iv) any required filings under state
securities or "blue sky" laws, and (v) filings,
registrations, authorizations, consents or approvals
which if not made or obtained would have a Material
Adverse Effect on Carolco or would prevent or materially
adversely affect the transactions contemplated hereby.
SECTION 6.5 CAROLCO SEC DOCUMENTS. Carolco has
filed all required reports, statements, forms and
documents with the SEC that Carolco was required to file
during the three-year period immediately preceding the
date hereof (the "Carolco SEC Documents"). As
of their respective dates, and as subsequently revised,
amended or superseded by later-filed Carolco SEC
Documents through and including the date of this
Agreement, the Carolco SEC Documents complied in all
material respects with the requirements of the Securities
Act or the Exchange Act, as the case may be, and as so
revised, superseded or amended none of the Carolco SEC
Documents including the financial information contained
therein contained or currently contain any untrue
statement of a material fact or omitted to state a
material fact required to be stated therein or necessary
to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The financial statements of Carolco included in Carolco
SEC Documents comply as to form in all material respects
with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto,
have been prepared in accordance with generally accepted
accounting principles (except, in the case of the
unaudited statements, as permitted by Regulation S-X
promulgated by the SEC) applied on a consistent basis
during the periods involved (except as may be indicated
therein or in the notes thereto) and fairly present the
consolidated financial position of Carolco and its
consolidated Subsidiaries as at the dates thereof and the
consolidated results of their operations and statements
of cash flows for the periods included therein (subject,
in the case of unaudited statements, to normal year-end
audit adjustments and to any other adjustments described
therein). Notwithstanding the foregoing, Carolco makes
no representation or warranty in this Agreement regarding
any information (including financial information and
financial statements) supplied by LIVE for inclusion in
any Carolco SEC Documents.
SECTION 6.6 NO MATERIAL ADVERSE CHANGE. Except
as set forth in the CAROLCO LETTER, since the date of the
most recent balance sheet and notes to consolidated
financial statements contained in Carolco's Annual Report
on Form 10-K for the year ended December 31, 1993, or
Carolco's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1994, as filed with the SEC ("Carolco
Balance Sheet"), there has been no Material Adverse
Change in Carolco and neither Carolco nor any of its
Subsidiaries knows of any such Material Adverse Change
that is threatened, nor has there been any damage,
destruction or loss affecting the assets, properties,
business, operations or condition (financial or
otherwise) of Carolco or any of its Subsidiaries, whether
or not covered by insurance which would have a Material
Adverse Effect on Carolco, and which has not been
subsequently reported in any of the Carolco SEC Documents
filed with the SEC prior to the date hereof.
SECTION 6.7 ABSENCE OF UNDISCLOSED LIABILITIES.
Except as set forth in the Carolco SEC Documents or the
CAROLCO LETTER, as of the date of the Carolco Balance
Sheet neither Carolco nor any of its Subsidiaries had any
liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise) required by
generally accepted accounting principles to be set forth
on a financial statement or in the notes thereto and
which, individually or in the aggregate, would have a
Material Adverse Effect on Carolco, which were not set
forth on the Carolco Balance Sheet.
SECTION 6.8 ABSENCE OF CERTAIN EVENTS. Except as
disclosed in Carolco SEC Documents or the CAROLCO LETTER,
since the date of the Carolco Balance Sheet, Carolco and
its Subsidiaries have conducted their business only in
the ordinary course.
SECTION 6.9 NO SOLICITATION. Carolco is not now
engaged in any activities, discussions or negotiations
with any parties (other than LIVE) in respect of a
"takeover proposal" or an "offer" (both as defined in
Section 8.3).
SECTION 6.10 REGISTRATION STATEMENT AND PROXY
STATEMENT. None of the information to be supplied by
Carolco for inclusion or incorporation by reference in
the Registration Statement or the Proxy Statement will
(a) in the case of the Registration Statement, at the
time it becomes effective, contain any statement which,
at the time and in the light of the circumstances under
which it is made, is false or misleading with respect to
any material fact, or which omits to state any material
fact required to be stated therein or necessary in order
to make the statements therein not false or misleading,
or (b) in the case of the Proxy Statement, at the time of
the mailing of the Proxy Statement and at the times of
the Stockholder Meetings, contain any statement which, at
the time and in the light of the circumstances under
which it is made, is false or misleading with respect to
any material fact, or which omits to state any material
fact required to be stated therein or necessary in order
to make the statements therein not false or misleading.
The Registration Statement will comply (with respect to
Carolco) as to form in all material respects with the
provisions of the Securities Act and the Proxy Statement
will comply (with respect to Carolco) as to form in all
material respects with the provisions of the Exchange
Act. Notwithstanding the foregoing, Carolco makes no
representation or warranty regarding any information
(including financial information and financial
statements) supplied by LIVE or CAC for inclusion in the
Registration Statement or the Proxy Statement.
SECTION 6.11 REORGANIZATION. Neither Carolco nor
any of its Subsidiaries has taken any action nor failed
to take any action which action or failure to take action
would jeopardize the qualification of the Merger as a tax
free reorganization under the Code.
SECTION 6.12 LITIGATION. Except as set forth in
the CAROLCO LETTER or the Carolco SEC Documents, as of
the date hereof, there is no claim, suit, action or
proceeding pending or, to the knowledge of Carolco,
threatened against or affecting Carolco or any of its
Subsidiaries (whether or not covered by insurance) which
(i) could reasonably be expected to have a Material
Adverse Effect on Carolco (and Carolco is not aware of
any reasonable basis for any such suit, action or
proceeding), or (ii) challenge the transactions
contemplated hereby at law or in equity or before or by
any federal, state, local, foreign or other governmental
department, commission, board, agency, instrumentality,
or authority; nor is there any judgment, decree,
injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Carolco or any of its
Subsidiaries having, or which, insofar as reasonably can
be foreseen, in the future would have, any such effect.
SECTION 6.13 LOAN AGREEMENTS, CUSTOMERS AND
SUPPLIERS.
(a) Neither Carolco nor any of its
Subsidiaries is in violation of or in default under (nor
does there exist any condition which upon the passage of
time, the giving of notice or both would cause such a
violation of or default under) any loan or credit
agreement, note, bond, mortgage, indenture, lease
instrument, permit, concession, franchise, license or any
other contract, agreement, arrangement or understanding,
to which it is a party or by which it or any of its
properties or assets is bound, except for violations or
defaults that could not, individually or in the
aggregate, reasonably be expected to result in a Material
Adverse Effect on Carolco or except as are set forth in
the CAROLCO LETTER. Set forth in the CAROLCO LETTER is a
list of each loan or credit agreement, note, bond,
mortgage, indenture and other agreement and instrument
pursuant to which any indebtedness of Carolco or any of
its Subsidiaries (other than indebtedness solely among or
between Carolco and/or any of its Subsidiaries) in an
aggregate principal amount in excess of $3,000,000 is
outstanding or may be incurred and the respective
principal amounts currently outstanding thereunder.
(b) Neither Carolco nor any of its
Subsidiaries is in default under (nor does there exist
any condition which upon the passage of time, the giving
of notice or both would cause such a violation of or
default under) any material agreement with any of its
customers or suppliers of products or services which are
of material importance to Carolco or any of its
Subsidiaries, and no such customer or supplier, to the
knowledge of Carolco or any of its Subsidiaries, is in
default under (nor does there exist any condition which
upon the passage of time, the giving of notice or both
would cause such customer or supplier to be in violation
of or default under) any of such material agreements or
except as are set forth in the CAROLCO LETTER.
SECTION 6.14 PERMITS. Carolco and each of its
Subsidiaries possess all franchises, permits, licenses,
certificates, approvals or other authorizations necessary
to own or lease and operate their properties and to
conduct their businesses, except for incidental
franchises, permits, licenses, certificates, approvals
and other authorizations that would be readily obtainable
by any qualified applicant without undue burden in the
event of any lapse, termination, cancellation or
forfeiture or which if not obtained would not have a
Material Adverse Effect on Carolco.
SECTION 6.15 ABSENCE OF CHANGES IN CAROLCO BENEFIT
PLANS. Except as disclosed in the Carolco SEC Documents
or the CAROLCO LETTER, since the date of the most recent
audited financial statements included in the Carolco SEC
Documents, there has not been any adoption or amendment
by Carolco or any of its Subsidiaries of any collective
bargaining agreement or any bonus, pension, profit
sharing, deferred compensation, incentive compensation,
stock ownership, stock purchase, stock option, phantom
stock, retirement, vacation, severance, disability, death
benefit, hospitalization, medical fringe benefit or other
plan, arrangement or understanding (whether or not
legally binding) providing benefits to any current or
former employee or director of, or any other person
providing services to, Carolco or any of its Subsidiaries
(collectively, "Carolco Benefit Plans") which will have a
Material Adverse Effect on Carolco. Carolco has
delivered to LIVE true, correct and complete copies of
all Carolco Benefit Plans. Each of the Carolco Benefit
Plans is in material compliance with all applicable laws
including ERISA and the Code.
SECTION 6.16 INTELLECTUAL PROPERTY. Carolco and
its Subsidiaries own, or are licensed or otherwise have
the right to use, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service
marks, service mark rights, copyrights and other
proprietary intellectual property rights and computer
programs (collectively, the "Carolco Proprietary Rights")
which are material to the conduct of the business of
Carolco and its Subsidiaries taken as a whole. No claims
are pending or, to the knowledge of Carolco, threatened
that Carolco or any of its Subsidiaries is infringing or
otherwise adversely affecting the rights of any person
with regard to any Carolco Proprietary Right, except for
such claims or threats which could not reasonably be
expected to have a Material Adverse Effect on Carolco.
To the knowledge of Carolco, no person is infringing the
rights of Carolco with respect to any Carolco Proprietary
Right that would have a Material Adverse Effect on
Carolco. No lien, encumbrance or restriction with
respect to any Carolco Proprietary Right has a Material
Adverse Effect on Carolco, or so far as Carolco can now
foresee could reasonably be expected to have a Material
Adverse Effect on Carolco.
SECTION 6.17 ENVIRONMENTAL MATTERS. To the
knowledge of Carolco, Carolco and each of its
Subsidiaries are in compliance with all applicable
Environmental Laws, except for violations of the
Environmental Laws that could not, individually or in the
aggregate, reasonably be expected to result in a Material
Adverse Effect on Carolco.
SECTION 6.18 TAXES. Except as set forth in the
CAROLCO LETTER or the Carolco SEC Documents: (a) each of
Carolco and its Subsidiaries has timely filed all
federal, state, local or foreign tax returns required to
be filed by it (except for all such returns the failure
of which timely filing would, individually or in the
aggregate, not have a Material Adverse Effect on
Carolco), and has paid (or Carolco has paid on its
behalf) all taxes shown as due on the returns in respect
of the periods covered by such returns; (b) there are no
tax liens upon any property or assets of Carolco or any
of its Subsidiaries which would have a Material Adverse
Effect on Carolco, except liens for current taxes not yet
due; (c) neither Carolco nor any of its Subsidiaries is
delinquent in the payment of any material tax, assessment
or governmental charge which would have a Material
Adverse Effect on Carolco; (d) no deficiencies for any
taxes have been proposed, asserted or assessed against
Carolco or any of its Subsidiaries which would have a
Material Adverse Effect on Carolco or its Subsidiaries,
and no requests for waivers of the time to assess any
such taxes are pending; and (e) no audits of the tax
returns of Carolco or any of its Subsidiaries are
currently being conducted by a taxing authority, and
neither Carolco nor its Subsidiaries have received any
notices of pending or proposed audits from a taxing
authority.
SECTION 6.19 FOREIGN CORRUPT PRACTICES ACT. To
the best knowledge of the officers of Carolco, neither
Carolco, any Subsidiary of Carolco nor any director,
officer, agent, employee or other person associated with
or acting on behalf of any of them has (i) used any
corporate or other funds for unlawful contributions,
payments, gifts or entertainment or made any unlawful
expenditures relating to political activity, or made any
direct or indirect unlawful payments to governmental
officials or others or established or maintained any
unlawful or unrecorded funds in violation of Section 30A
of the Exchange Act or (ii) accepted or received any
unlawful contributions, payments, gifts or expenditures.
Carolco is in compliance in all material respects with
the provisions of Section 13(b) of the Exchange Act and
to the best knowledge of the officers of Carolco, there
is no failure of compliance with such provisions.
SECTION 6.20 BROKERS. No broker, investment
banker or other person, other than Seidler or Daniels &
Associates, the fees and expenses of which will be paid
by Carolco in accordance with Carolco's written agreement
with Seidler and Daniels & Associates (copies of which
have been delivered by Carolco to LIVE prior to the date
hereof), is entitled to any broker's, finder's or other
similar fee or commission in connection with the
transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Carolco.
SECTION 6.21 OFFICERS, DIRECTORS AND KEY
EMPLOYEES. The CAROLCO LETTER sets forth (i) the name
and total compensation of each officer and director of
Carolco; (ii) the name of each officer and director of
any of Carolco's Subsidiaries; (iii) the name and total
compensation of each other officer, director, employee,
consultant, agent or other representative of Carolco or
any of its Subsidiaries whose current annual rate of
compensation (including bonuses and commissions) exceeds
$150,000; (iv) all wage or salary increases or bonuses
received by the persons identified in Section 6.21(i) and
(iii) ("Significant Carolco Employees") since
December 31, 1993, and any accrual for or commitment or
agreement by Carolco or any of its Subsidiaries to pay
such increases or bonuses; and (v) a notation with
respect to each of such Significant Carolco Employees,
whether they have an employment agreement with Carolco or
any of its Subsidiaries and, if so, the date and term of
such agreement. Except as set forth in the CAROLCO
LETTER, (x) to the knowledge of Carolco or any of its
Subsidiaries, none of such Significant Carolco Employees
has made a threat to Carolco or any of its Subsidiaries
or to any of their officers or directors to cancel or
otherwise terminate such Significant Carolco Employee's
relationship with Carolco or any of its Subsidiaries and
(y) none of such Significant Carolco Employees have
"change of control" clauses or agreements with Carolco or
any of its Subsidiaries (or similar clauses or agreements
permitting such Significant Carolco Employees to
terminate their employment relationship with Carolco or
any of its Subsidiaries) that would be triggered by the
Merger which have not been waived on the date hereof.
SECTION 6.22 STATE TAKEOVER STATUTES. Neither
Section 203 of the DGCL nor any other "fair price,"
"moratorium," "control share acquisition" or other state
takeover statute or similar statute or regulation applies
to the Merger by virtue of Carolco engaging in the
transactions contemplated hereby.
SECTION 6.23 INSURANCE. Carolco and each of its
Subsidiaries have been and are insured by financially
sound and reputable insurers with respect to their
properties and the conduct of their business in such
amounts and against such risks as are reasonable in
relation to their respective businesses, and each will
use its best efforts to maintain such insurance. Such
insurance is in full force and effect and no notice of
cancellation or termination has been received with
respect to any of said insurance. Except as disclosed in
the CAROLCO LETTER, there are no claims pending
thereunder except where such claim would not,
individually or in the aggregate, have a Material Adverse
Effect on Carolco.
SECTION 6.24 TITLE TO PROPERTIES AND RELATED
MATTERS. Except with respect to the Carolco Proprietary
Rights, Carolco and each of its Subsidiaries have good
and marketable title (or valid and subsisting leasehold
interests) to all of the personal properties and assets
(tangible and intangible) and the real properties
utilized in their businesses or reflected in the Carolco
SEC Documents or acquired after the date thereof (other
than properties sold or otherwise disposed of in the
ordinary course of business) which are material to them,
free and clear of all title defects, liens, encumbrances
and restrictions, except (i) as reflected in the Carolco
SEC Documents, (ii) to the extent not described in clause
(i), those described in the CAROLCO LETTER, (iii) to the
extent not described in clause (i), statutory liens not
yet due or delinquent or the validity of which are being
contested or litigated in good faith by appropriate
proceedings and for which Carolco has set aside on its
books reserves that are adequate with respect thereto;
and (iv) liens, encumbrances, covenants, rights of way,
building or use restrictions, easements, exceptions,
variances, reservations and other matters or limitations
of any kind, if any, which, when considered together with
the liens described in clauses (i), (ii) and (iii), do
not have a Material Adverse Effect on Carolco's business
or operations. All properties of Carolco and each of its
Subsidiaries are reflected in the Carolco SEC Documents
in the manner and to the extent required by generally
accepted accounting principles consistently applied.
Neither the whole nor any portion of the leaseholds or
any other assets of Carolco or any of its Subsidiaries is
subject to any governmental decree or order to be sold or
is being condemned, expropriated or otherwise taken by
any public authority with or without payment of
compensation therefor, nor to the knowledge of Carolco or
any of its Subsidiaries has any such condemnation,
expropriation or taking been proposed, which would have a
Material Adverse Effect on Carolco and its Subsidiaries
taken as a whole.
SECTION 6.25 ACCURACY OF CAROLCO DISCLOSURE.
Neither this Agreement, nor any document or other paper
furnished (or to be furnished pursuant hereto at the
Closing) by or on behalf of Carolco to LIVE pursuant to
this Agreement or in connection with the transactions
contemplated hereby, contains or will contain any untrue
statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make
the statements made, in the context in which made, not
false or misleading. There is no fact that Carolco has
not disclosed to LIVE in writing that has a Material
Adverse Effect on Carolco or so far as Carolco can now
foresee will have a Material Adverse Effect on Carolco or
on the ability of Carolco to perform this Agreement.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES REGARDING CAC
LIVE and CAC jointly and severally represent
and warrant to Carolco as follows:
SECTION 7.1 ORGANIZATION AND STANDING. CAC is a
corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. CAC
was organized solely for the purpose of engaging in the
transactions contemplated by this Agreement and has not
engaged in any business or entered into any agreements
since it was incorporated which is not in connection with
this Agreement, has not incurred any liabilities since it
was incorporated, and (except as set forth in the LIVE
LETTER) does not own any properties.
SECTION 7.2 CAPITAL STRUCTURE. As of the date of
this Agreement, the authorized capital stock of CAC
consists of one share of CAC Common Stock, which is
validly issued and outstanding, fully paid and
nonassessable. As of the date of this Agreement, except
for this Agreement, there are no options, warrants,
rights, commitments, agreements, arrangements or
undertakings of any kind to which CAC is a party or by
which it is bound relating to the issuance of any capital
stock or other voting securities of CAC or any securities
convertible into or exchangeable for any capital stock or
other voting securities of CAC, or any options, warrants
or other rights to purchase capital stock or other voting
securities of CAC.
SECTION 7.3 AUTHORITY.
(a) CAC has all requisite corporate power and
authority to enter into and execute this Agreement and to
consummate the transactions contemplated hereby. The
execution and delivery of this Agreement, the performance
by CAC of its obligations hereunder and the consummation
of the transactions contemplated hereby have been duly
authorized by its Board of Directors and LIVE as its sole
stockholder, and no other corporate proceedings on the
part of CAC are necessary to authorize this Agreement and
the transactions contemplated hereby. This Agreement has
been duly and validly executed and delivered by CAC and
(assuming the due authorization, execution and delivery
hereof by Carolco) constitutes a valid and binding
obligation of CAC enforceable against CAC in accordance
with its terms, except (i) as such obligation may be
affected by bankruptcy, insolvency, reorganization,
moratorium or similar laws, or by equitable principles
relating to or limiting creditors' rights generally, and
(ii) that the remedies of specific performance,
injunction and other forms of equitable relief are
subject to certain tests of equity jurisdiction,
equitable defenses and the discretion of the court before
which any proceeding therefor may be brought.
(b) The execution and delivery of this
Agreement do not, and the consummation of the
transactions contemplated hereby in compliance with the
provisions hereof will not, breach, conflict with, or
result in any violation of, or default (with or without
notice or lapse of time, or both) under or result in or
give rise to a right of termination, cancellation or
acceleration of any liability or obligation or to the
loss of a material benefit under, any provision of the
Certificate of Incorporation or Bylaws of CAC, true and
complete copies of which as of the date hereof have been
delivered to Carolco.
ARTICLE 8
COVENANTS RELATING TO CONDUCT OF BUSINESS
SECTION 8.1 CONDUCT OF BUSINESS BY LIVE PENDING
THE MERGER.
(a) ORDINARY COURSE. During the period from
the date of this Agreement through the Effective Date or
earlier termination of this Agreement, LIVE shall, and
shall cause its Subsidiaries to, in all material respects
carry on their respective businesses in the usual,
regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable best efforts to
preserve intact their current business organizations,
keep available the services of their current officers and
employees necessary to its business and preserve their
relationships with customers, suppliers and others having
business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at
the Effective Date. Without limiting the generality of
the foregoing, and, except as otherwise expressly
contemplated by this Agreement, LIVE shall not, and shall
not permit any of its Subsidiaries to, without the prior
written consent of Carolco or except as disclosed in the
LIVE LETTER:
(i) (A) declare, set aside or pay any
dividends on, or make any other actual,
constructive or deemed distributions in respect
of, any of its capital stock, except for
dividends from Subsidiaries to LIVE, and except
for dividends declared, set aside or paid with
respect to the LIVE Series B Preferred Stock
and LIVE Series C Preferred Stock in accordance
with their current terms;
(B) split, combine or reclassify any
of its capital stock or issue or authorize the
issuance of any other securities in respect of,
in lieu of or in substitution for shares of its
capital stock;
(C) purchase, redeem or otherwise
acquire any shares of capital stock of LIVE or
any other debt or equity securities thereof or
any rights, warrants or options to acquire any
such shares or other securities, except that
LIVE may, before the Effective Date, redeem all
outstanding shares of the LIVE Series B
Preferred Stock as contemplated in
Section 10.2(e) herein, and except that LIVE
may, before the Effective Date, redeem or repay
up to $6,000,000, in aggregate, of its
$37,000,000, in aggregate, 12% Senior
Subordinated Secured Notes due 1994 ("LIVE 12%
Notes");
(D) amend the terms of any LIVE
capital stock or any other securities of LIVE,
except as contemplated herein.
(ii) issue, deliver, sell, pledge, dispose
of or otherwise encumber (or propose to do any of
the foregoing) any shares of its capital stock, any
other voting securities or equity equivalent or any
securities convertible into, or any rights, warrants
or options to acquire, any such shares, voting
securities or convertible securities or equity
equivalent (other than, in the case of LIVE, the
issuance of LIVE Common Stock or LIVE Series A
Common Stock during the period from the date of this
Agreement through the Effective Date upon the
exercise of existing LIVE stock options or warrants
or conversion of LIVE Series B Preferred Stock or
LIVE Series C Preferred Stock outstanding on the
date of this Agreement in accordance with their
current terms, and actions with respect to the LIVE
Rights in accordance with their current terms);
(iii) other than as provided herein or
contemplated hereby, amend the Restated Certificate
of Incorporation of LIVE or Bylaws of LIVE or
comparable charter or organizational documents of
any of its Subsidiaries;
(iv) acquire or agree to acquire by
merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in,
or by any other manner, any business or any
corporation, partnership, association or other
business organization or division thereof or
otherwise acquire or agree to acquire any assets, in
each case that are material, individually or in the
aggregate, to LIVE and its Subsidiaries taken as a
whole or which would make it impossible or a
violation of applicable laws, rules or regulations
for Carolco to effect the Merger;
(v) except with respect to plans
previously disclosed to Carolco with respect to
Strawberries and VCL, sell, lease, assign or
otherwise dispose of or agree to sell, lease, assign
or otherwise dispose of any of its assets that are
material, individually or in the aggregate, to LIVE
and its Subsidiaries taken as a whole or which would
make it impossible or a violation of applicable
laws, rules or regulations for Carolco to effect the
Merger;
(vi) except as permitted in
Section 10.2(f) hereof, incur any indebtedness (as
defined in Section 5.13(a)).
(vii) make or incur any capital
expenditure or expenditures exceeding $100,000 in
the aggregate, other than in the ordinary course of
business consistent with past practice;
(viii) except as disclosed in the LIVE
SEC Documents, pay, discharge or satisfy any
material claims, litigation, liabilities or
obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or
in accordance with their terms, of liabilities (a)
reflected or reserved against in, or contemplated
by, the most recent consolidated financial
statements (or the notes thereto) of LIVE included
in LIVE SEC Documents or (b) incurred in the
ordinary course of business consistent with past
practice;
(ix) take any action with respect to the
grant of any severance or termination pay to any
director, officer or employee of LIVE or any of its
Subsidiaries or with respect to any increase of
benefits payable under its severance or termination
pay practices in effect on the date hereof, except
for actions involving expenditures by LIVE or any of
its Subsidiaries of (a) individually, no more than
$100,000 in excess of the amount of compensation
that would have been paid during the remainder of
the term had the contract not been terminated, or
(b) in the aggregate, no more than $500,000 in
excess of the amount of compensation that would have
been paid during the remainder of the term of all
terminated contracts had they not been terminated;
(x) except as may be required by law or
this Agreement, enter into, adopt or increase in any
material manner the benefits payable under any
bonus, profit sharing, compensation, termination,
stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement,
deferred compensation, employment, severance or
other employee benefit agreements, trusts, plans,
funds or other arrangements for the benefit or
welfare of any director, officer or employee, or
(except for increases in the ordinary course of
business consistent with past practice) increase in
any manner the compensation or fringe benefits of
any director or officer or pay any benefit not
required by any existing plan and arrangement
(including the granting of stock options, stock
appreciation rights, shares of restricted stock or
performance units) or enter into any contract,
agreement, commitment or arrangement to do any of
the foregoing;
(xi) except as may be required as a result
of a change in law or in generally accepted
accounting principles, change any of the accounting
principles or practices used by it;
(xii) write down the value of any
inventory or write off as uncollectible any notes or
accounts receivable, except with respect to plans
previously disclosed to Carolco with respect to
Strawberries and VCL and except for immaterial
write-downs and write-offs in the ordinary course of
business and consistent with past practice;
(xiii) dispose of or permit to lapse
any LIVE Proprietary Rights or disclose to any
person any LIVE Proprietary Rights except where such
disposal, lapse or disclosure would not,
individually or in the aggregate, have a Material
Adverse Effect on LIVE;
(xiv) pay, loan or advance any amount
to, or sell, transfer or lease any properties or
assets to, or enter into any agreement or
arrangement with, any of its officers or directors
or any affiliate thereof, except pursuant to
existing agreements with such persons, except for
directors' fees and compensation to officers at
rates not exceeding the rates of compensation paid
during the six-month period ended December 31, 1993,
or except for transactions in the ordinary course of
business, or except as disclosed in the LIVE SEC
Documents or except as otherwise permitted or
contemplated hereunder; or
(xv) enter into any contract, agreement,
commitment or arrangement with respect to any of the
foregoing.
(b) NO DEFAULT. Other than with Carolco's
prior written consent or as disclosed in the LIVE LETTER,
neither LIVE nor any of its Subsidiaries shall do any act
or omit to do any act, or knowingly permit any act or
omission to act, which will cause a breach of any
material contract or commitment of LIVE or any of its
Subsidiaries, except for such breaches (other than of the
provisions of this Agreement) as would not, individually
or in the aggregate, have a Material Adverse Effect on
LIVE.
(c) COMPLIANCE WITH LAWS. LIVE and each of
its Subsidiaries shall duly comply with all laws
applicable to it and its properties, operations, business
and employees, except where the breach thereof would not,
individually or in the aggregate, have a Material Adverse
Effect on LIVE.
(d) TAX RETURNS. LIVE and each of its
Subsidiaries shall prepare, file and pay amounts shown as
due on all federal, state, local and foreign tax returns
and amendments thereto required to be filed by it, except
that the failure to file those state, local or foreign
returns which individually or in the aggregate would not
have a Material Adverse Effect on LIVE shall not be
deemed a breach of this Section 8.1(d).
(e) OTHER ACTIONS. LIVE shall not, and shall
not permit any of its Subsidiaries to, take any action
that would, or that could reasonably be expected to,
result in (i) any of the representations and warranties
of LIVE or CAC set forth in this Agreement that are
qualified as to materiality becoming untrue, (ii) any of
such representations and warranties that are not so
qualified becoming untrue in any material respect or
(iii) any of the conditions set forth in Article 10 not
being satisfied.
(f) ADVICE OF CHANGES; SEC FILINGS. LIVE
shall promptly advise Carolco in writing of any change or
event having, or which, insofar as can reasonably be
foreseen, would have, a Material Adverse Effect on LIVE
without regard to whether such change or event would be
permitted hereunder. LIVE shall promptly advise Seidler
in writing of any change or event or any other
information which would materially impact the Seidler
Fairness Opinion including material write-downs,
litigation or changes in financial condition or
capitalization without regard to whether such change or
event would be permitted hereunder. LIVE shall promptly
provide Carolco (or its counsel) with copies of all
filings made by LIVE or CAC with the SEC or any other
Governmental Entity in connection with this Agreement and
the transactions contemplated hereby and thereby.
SECTION 8.2 CONDUCT OF BUSINESS BY CAROLCO
PENDING THE MERGER.
(a) ORDINARY COURSE. During the period from
the date of this Agreement through the Effective Date or
earlier termination of this Agreement, Carolco shall, and
shall cause its Subsidiaries to, in all material respects
carry on their respective businesses in the usual,
regular and ordinary course in substantially the same
manner as heretofore conducted and, to the extent
consistent therewith, use all reasonable best efforts to
preserve intact their current business organizations,
keep available the services of their current officers and
employees necessary to its business and preserve their
relationships with customers, suppliers and others having
business dealings with them to the end that their
goodwill and ongoing businesses shall be unimpaired at
the Effective Date. Without limiting the generality of
the foregoing, and, except as otherwise expressly
contemplated by this Agreement, Carolco shall not, and
shall not permit any of its Subsidiaries to, without the
prior written consent of LIVE or except as disclosed in
the CAROLCO LETTER:
(i) (A) declare, set aside or pay any
dividends on, or make any other actual,
constructive or deemed distributions in respect
of, any of its capital stock, except for
dividends from Subsidiaries to Carolco, and
except for payment-in-kind dividends declared,
set aside or paid on the Carolco Series A
Preferred Stock,
(B) split, combine or reclassify any
of its capital stock or issue or authorize the
issuance of any other securities in respect of,
in lieu of, or in substitution for shares of
its capital stock,
(C) purchase, redeem or otherwise
acquire any shares of capital stock of Carolco
or any of its Subsidiaries or any other debt or
equity securities thereof or any rights,
warrants or options to acquire any such shares
or other securities, or
(D) amend the terms of any Carolco
capital stock or any other securities of
Carolco.
(ii) issue, deliver, sell, pledge, dispose
of or otherwise encumber (or propose to do any of
the foregoing) any shares of its capital stock, any
other voting securities or equity equivalent or any
securities convertible into, or any rights, warrants
or options to acquire, any such shares, voting
securities or convertible securities or equity
equivalent (other than, in the case of Carolco, the
issuance of Carolco Common Stock during the period
from the date of this Agreement through the
Effective Date upon the exercise of existing Carolco
stock options or warrants, the conversion of Carolco
Series A Preferred Stock, the Carolco 5% Notes or
the Carolco 7% Notes in accordance with their
current terms or the issuance of Pay-Per-View Shares
during the period from the date of this Agreement
through the Effective Date);
(iii) other than as provided herein,
amend the Restated Certificate of Incorporation of
Carolco or Restated Bylaws of Carolco or comparable
charter or organizational documents of any of its
Subsidiaries;
(iv) enter into any contract, agreement,
commitment or arrangement with respect to United
States and Canadian video rights;
(v) acquire or agree to acquire by
merging or consolidating with, or by purchasing a
substantial portion of the assets of or equity in,
or by any other manner, any business or any
corporation, partnership, association or other
business organization or division thereof or
otherwise acquire or agree to acquire any assets, in
each case that are material, individually or in the
aggregate, to Carolco and its Subsidiaries taken as
a whole or which would make it impossible or a
violation of applicable laws, rules or regulations
for LIVE to effect the Merger;
(vi) sell, lease, assign or otherwise
dispose of or agree to sell, lease, assign or
otherwise dispose of any of its assets that are
material, individually or in the aggregate, to
Carolco and its Subsidiaries taken as a whole or
which would make it impossible or a violation of
applicable laws, rules or regulations for LIVE to
effect the Merger;
(vii) incur any indebtedness (as
defined in Section 5.13(a)), except for indebtedness
incurred in the ordinary course of business
consistent with past practice; or make any material
loans, advances or capital contributions to, or
investments in, any other person, other than to any
wholly-owned Subsidiary of Carolco; and other than
loans, advances, capital contributions, and
investments made in the ordinary course of business,
consistent with past practice;
(viii) make or incur any capital
expenditure or expenditures exceeding $100,000 in
the aggregate other than in the ordinary course of
business consistent with past practice;
(ix) except as disclosed in the Carolco
SEC Documents, pay, discharge or satisfy any
material claims, litigation, liabilities or
obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the
payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or
in accordance with their terms, of liabilities (a)
reflected or reserved against in, or contemplated
by, the most recent consolidated financial
statements (or the notes thereto) of Carolco
included in Carolco SEC Documents or (b) incurred in
the ordinary course of business consistent with past
practice;
(x) take any action with respect to the
grant of any severance or termination pay to any
director, officer or employee of Carolco or any of
its Subsidiaries or with respect to any increase of
benefits payable under its severance or termination
pay practices in effect on the date hereof, except
for actions involving expenditures by Carolco or any
of its Subsidiaries of (a) individually, no more
than $100,000 in excess of the amount of
compensation that would have been paid during the
remainder of the term had the contract not been
terminated, or (b) in the aggregate, no more than
$500,000 in excess of the amount of compensation
that would have been paid during the remainder of
the term of all terminated contracts had they not
been terminated;
(xi) except as may be required by law or
this Agreement, enter into, adopt or increase in any
material manner the benefits payable under any
bonus, profit sharing, compensation, termination,
stock option, stock appreciation right, restricted
stock, performance unit, pension, retirement,
deferred compensation, employment, severance or
other employee benefit agreements, trusts, plans,
funds or other arrangements for the benefit or
welfare of any director, officer or employee, or
(except for increases in the ordinary course of
business consistent with past practice) increase in
any manner the compensation or fringe benefits of
any director or officer or pay any benefit not
required by any existing plan and arrangement
(including the granting of stock options, stock
appreciation rights, shares of restricted stock or
performance units) or enter into any contract,
agreement, commitment or arrangement to do any of
the foregoing;
(xii) except as may be required as a
result of a change in law or in generally accepted
accounting principles, change any of the accounting
principles or practices used by it;
(xiii) write down the value of any
inventory or write off as uncollectible any notes or
accounts receivable, except for immaterial
write-downs, and write-offs in the ordinary course
of business and consistent with past practice;
(xiv) dispose of or permit to lapse
any Carolco Proprietary Rights or disclose to any
person any Carolco Proprietary Rights except where
such disposal, lapse or disclosure would not,
individually or in the aggregate, have a Material
Adverse Effect on Carolco;
(xv) pay, loan or advance any amount to,
or sell, transfer or lease any properties or assets
to, or enter into any agreement or arrangement with,
any of its officers or directors or any affiliate
thereof, except pursuant to existing agreements with
such persons, except for directors' fees and
compensation to officers at rates not exceeding the
rates of compensation paid during the six-month
period ended December 31, 1993, or except for
transactions in the ordinary course of business or
except as otherwise permitted or contemplated
hereunder; or
(xvi) enter into any contract,
agreement, commitment or arrangement with respect to
any of the foregoing.
(b) NO DEFAULT. Other than with LIVE's prior
written consent or as disclosed in the CAROLCO LETTER,
neither Carolco nor any of its Subsidiaries shall do any
act or omit to do any act, or knowingly permit any act or
omission to act, which will cause a breach of any
material contract or commitment of Carolco or any of its
Subsidiaries, except for such breaches (other than of the
provisions of this Agreement) as would not, individually
or in the aggregate, have a Material Adverse Effect on
Carolco.
(c) COMPLIANCE WITH LAWS. Carolco and each of
its Subsidiaries shall duly comply with all laws
applicable to it and its properties, operations, business
and employees, except where the breach thereof would not,
individually or in the aggregate, have a Material Adverse
Effect on Carolco.
(d) TAX RETURNS. Carolco and each of its
Subsidiaries shall prepare, file and pay amounts shown as
due on all federal, state, local and foreign tax returns
and amendments thereto required to be filed by it, except
that the failure to file those state, local or foreign
returns which individually or in the aggregate would not
have a Material Adverse Effect on Carolco shall not be
deemed a breach of this Section 8.2(d).
(e) OTHER ACTIONS. Carolco shall not, and
shall not permit any of its Subsidiaries to, take any
action that would, or that could reasonably be expected
to, result in (i) any of the representations and
warranties of Carolco set forth in this Agreement that
are qualified as to materiality becoming untrue, (ii) any
of such representations and warranties that are not so
qualified becoming untrue in any material respect, or
(iii) any of the conditions set forth in Article 10 not
being satisfied.
(f) ADVICE OF CHANGES; SEC FILINGS. Carolco
shall promptly advise LIVE in writing of any change or
event having, or which, insofar as can reasonably be
foreseen, would have, a Material Adverse Effect on
Carolco without regard to whether such change or event
would be permitted hereunder. Carolco shall promptly
advise Chemical in writing of any change or event or any
other information which would materially impact the
Chemical Fairness Opinion, including material
write-downs, litigation or changes in financial condition
or capitalization without regard to whether such change
or event would be permitted hereunder. Carolco shall
promptly provide LIVE (or its counsel) with copies of all
filings made by Carolco with the SEC or any other
Governmental Entity in connection with this Agreement and
the transactions contemplated hereby.
SECTION 8.3 COMPETING OFFERS. Either LIVE or
Carolco may accept a competing "takeover proposal" or
"offer" if the Board of Directors of LIVE or Carolco, as
the case may be, declare such "takeover proposal" or
"offer" advisable, in the best interest of LIVE or
Carolco, as the case may be, and that the terms, in the
aggregate, of such "takeover proposal" or "offer" are
better than the terms of the Merger as provided herein,
provided, however, that LIVE or Carolco, as the case may
be, shall pay the costs and expenses incurred in
connection with the Merger in accordance with Section 9.7
hereof. In the case of Carolco, "takeover proposal" or
"offer" shall mean any proposal or offer, other than a
proposal or offer by LIVE or any of its affiliates, for a
tender or exchange offer, a merger, consolidation or
other business combination involving Carolco or any
Subsidiary of Carolco or any proposal to acquire in any
manner all or a substantial equity interest in, or all or
a substantial portion of the assets of, Carolco or any of
its Subsidiaries other than the transactions contemplated
by this Agreement. In the case of LIVE, "takeover
proposal" or "offer" shall mean any proposal or offer,
other than a proposal or offer by Carolco or any of its
affiliates, for a tender or exchange offer, a merger,
consolidation or other business combination involving
LIVE or any Subsidiary of LIVE (other than Strawberries
or VCL) or any proposal to acquire in any manner all or a
substantial equity interest in, or all or a substantial
portion of the assets of, LIVE or any of its Subsidiaries
(other than Strawberries or VCL) other than the
transactions contemplated by this Agreement. Nothing
herein shall prevent LIVE from selling all or any part of
its Strawberries or VCL subsidiaries on terms previously
disclosed to Carolco or otherwise acceptable to Carolco.
SECTION 8.4 REORGANIZATION. During the period
from the date of this Agreement through the Effective
Date, unless the other parties hereto shall otherwise
agree in writing, none of LIVE, CAC, any other Subsidiary
of LIVE, Carolco nor any Subsidiary of Carolco shall
knowingly take or fail to take any action which action or
failure to act would jeopardize qualification of the
Merger as a tax free reorganization under the Code.
SECTION 8.5 CONDUCT OF BUSINESS OF CAC PENDING
THE MERGER. During the period from the date of this
Agreement through the Effective Date, CAC shall not
engage in any activities of any nature except as provided
in or contemplated by this Agreement.
SECTION 8.6 UPDATE OF LIVE LETTER and CAROLCO
LETTER. LIVE will update the LIVE LETTER and Carolco
will update the CAROLCO LETTER (the CAROLCO LETTER and
the LIVE LETTER are sometimes referred to herein
collectively as the "Letters" and individually as a
"Letter") from time to time hereafter until the Closing,
including as of the date of the mailing of the Proxy
Statement and as of the date of the Closing, to the
extent any information disclosed on such Letters requires
updating because of a change in facts or circumstances,
and to the extent any new information that would have
been included in either of such Letters on the date
hereof had such information existed or been known on the
date hereof later comes to the knowledge of LIVE or
Carolco, as the case may be. The update of such Letters
shall not modify or add additional exceptions to
representations, warranties or covenants contained
herein; any updating of the LIVE LETTER or CAROLCO LETTER
which subsequently makes materially inaccurate as of the
date of this Agreement any representation or warranty
that is qualified as to materiality, or makes inaccurate
as of the date of this Agreement any representation or
warranty that is not qualified as to materiality, shall
be deemed a material breach of this Agreement by the
party whose representation or warranty was so made
inaccurate; and neither party shall, by any update of its
respective Letter, be relieved from the conditions set
forth in Sections 10.2(a) and 10.2(b) and 10.3(a) and
10.3(b) concerning the truth and correctness of such
parties' respective representations and warranties
contained herein on and as of the Effective Date.
SECTION 8.7 BRINGDOWN OF FAIRNESS OPINION. LIVE
will request that Chemical confirm the Chemical Fairness
Opinion and Carolco will request that Seidler confirm the
Seidler Fairness Opinion each as of the day immediately
preceding the Effective Date without any material change
in any conclusions or opinions contained therein.
ARTICLE 9
ADDITIONAL AGREEMENTS
SECTION 9.1 CAROLCO AND LIVE STOCKHOLDER
APPROVALS.
(a) Carolco shall promptly call a meeting of
its stockholders (the "Carolco Stockholder Meeting") for
the purpose of voting upon this Agreement and the
transactions contemplated hereby and, subject to the
fiduciary duties of Carolco's Board of Directors under
applicable law, shall use its best efforts to obtain
stockholder approval of this Agreement and the
transactions contemplated hereby. The Carolco
Stockholder Meeting shall be held as soon as practicable
following the date upon which the Registration Statement
becomes effective and Carolco will, through its Board of
Directors but subject to the fiduciary duties of its
Board of Directors under applicable law as advised in
writing by outside counsel, recommend to its stockholders
the approval of this Agreement and the transactions
contemplated hereby and not rescind its declaration that
the Merger is advisable. This Agreement and the
transactions contemplated hereby shall be approved on
behalf of Carolco's stockholders if (i) holders of at
least a majority of the combined voting power with
respect to Carolco's voting securities entitled to vote
and present at the Carolco Stockholder Meeting (other
than the Carolco Investors) vote in favor of this
Agreement and the transaction contemplated hereby, (ii)
holders of at least a majority of the combined voting
power with respect to Carolco's voting securities
entitled to vote at the Carolco Stockholder Meeting
(including the Carolco Investors) vote in favor of this
Agreement and the transactions contemplated hereby, and
(iii) holders of 100% of the Carolco Series A Preferred
Stock, voting as a class, vote in favor of this Agreement
and the transactions contemplated hereby.
(b) LIVE shall promptly call a meeting of its
stockholders (the "LIVE Stockholder Meeting" and,
together with Carolco Stockholder Meeting, the
"Stockholder Meetings") for the purpose of voting upon
this Agreement and the transactions contemplated hereby,
including the amendments to the Restated Certificate of
Incorporation of LIVE referred to in Article 3 above, the
issuance of LIVE Common Stock and LIVE Series D Preferred
Stock in connection with the Merger, and taking such
other actions as are reasonably required to consummate
the Merger and, subject to the fiduciary duties of LIVE's
Board of Directors under applicable law, shall use its
best efforts to obtain stockholder approval of such
issuance and action. The LIVE Stockholder Meeting shall
be on the date of the Carolco Stockholder Meeting or, if
such date is not practicable, on the closest date
practicable. LIVE will, through its Board of Directors
but subject to the fiduciary duties of its Board of
Directors under applicable law as advised in writing by
outside counsel, recommend to its stockholders the
approval of this Agreement and the transactions
contemplated hereby and not rescind its declaration that
the Merger is advisable. This Agreement and the
transactions contemplated hereby shall be approved on
behalf of LIVE's stockholders if (i) holders of at least
a majority of the combined voting power with respect to
LIVE's voting securities entitled to vote and present at
the LIVE Stockholder Meeting (other than the LIVE
Investors) vote in favor of this Agreement and the
transactions contemplated hereby, (ii) holders of at
least 66-2/3% of the combined voting power with respect
to LIVE's voting securities entitled to vote at the LIVE
Stockholder Meeting (including the LIVE Investors) vote
in favor of the Agreement and the transactions
contemplated hereby and (iii) holders of 100% of the LIVE
Series C Preferred Stock, voting as a class, vote in
favor of the Agreement and the transactions contemplated
hereby.
SECTION 9.2 REGISTRATION STATEMENT AND PROXY
STATEMENT
(a) LIVE and Carolco shall jointly prepare and
file with the SEC as soon as practicable the Registration
Statement and the Proxy Statement. The Registration
Statement will provide for the registration of all shares
of LIVE capital stock to be issued pursuant to the
Merger, including without limitation, any shares of LIVE
Common Stock underlying any LIVE Series D Preferred Stock
to be issued pursuant to the Merger, any shares of LIVE
Common Stock underlying any convertible debt of Carolco
disclosed in the CAROLCO LETTER or herein, any shares of
LIVE Common Stock underlying any warrants previously
issued by Carolco as described herein or in the CAROLCO
LETTER, and, as LIVE and Carolco mutually agree, any
other security of LIVE. Each of LIVE and Carolco shall
use all reasonable efforts to (i) have the Registration
Statement declared effective by the SEC as soon as
practicable and (ii) respond to and/or comply with any
SEC staff comments on the Proxy Statement. LIVE shall
also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so
qualified) required to be taken under state blue sky or
securities laws in connection with the issuance of the
LIVE Common Stock and LIVE Series D Preferred Stock
pursuant to the Merger and the exercise after the
Effective Date of the New Stock Options issuable in
respect of Carolco Stock Options as contemplated by
Section 9.8. LIVE shall also prepare and timely file
with the SEC one or more registration statements on Form
S-8 for the purpose of registering the shares of LIVE
Common Stock issuable after the Effective Date upon
exercise of any Carolco Stock Options theretofore granted
(collectively, the "Option Registration Statement"), and
LIVE shall use its best efforts to cause the Option
Registration Statement to become effective as soon as
practicable after the Effective Date. LIVE and Carolco
shall each furnish the other company all information
concerning their respective companies and all such other
information required for use in the Registration
Statement, the Option Registration Statement and the
Proxy Statement and both LIVE and Carolco shall each take
such other action as the other company may reasonably
request (and in the case of the Proxy Statement as
required by the Exchange Act) in connection with the
preparation of such Registration Statement, Option
Registration Statement and Proxy Statement and the
actions to be taken by LIVE pursuant to this Section 9.2.
(b) If at any time prior to the Effective Date
any event with respect to LIVE or Carolco, their officers
and directors or any of their Subsidiaries (including
CAC) shall occur which is required at that time to be
described in the Proxy Statement or the Registration
Statement, the party with respect to whom the event
occurs shall promptly notify the other party, and to the
extent required by law, Carolco and LIVE will promptly
file an amendment or supplement with the SEC and
disseminate such amendment to the stockholders of LIVE
and the stockholders of Carolco.
SECTION 9.3 AMENDMENT TO INDENTURES.
(a) LIVE NOTE INDENTURE. LIVE shall take all
action necessary to amend the Indenture ("LIVE Increasing
Rate Notes Indenture") governing its $40,000,000, in
aggregate, Increasing Rate Secured Senior Subordinated
Notes due 1999 ("LIVE Increasing Rate Notes"), in form,
scope and substance and on terms set forth in Exhibit
9.3(a).
(b) LIVE 12% INDENTURE. LIVE shall take all
action necessary to amend the Indenture ("LIVE 12%
Indenture") governing its $37,000,000, in aggregate, 12%
Notes due 1994, in form, scope and substance and on terms
set forth in Exhibit 9.3(b) and in accordance with the
actions contemplated by Section 8.1(a)(i)(C) hereof with
respect to the LIVE 12% Notes.
SECTION 9.4 LISTING APPLICATION. LIVE will use
its best efforts to obtain, prior to the Effective Date,
approval for listing the Shares of LIVE Common Stock
registered pursuant to the Registration Statement on the
New York Stock Exchange, upon official notice of
issuance.
SECTION 9.5 ACCESS TO INFORMATION. Each of the
parties hereto shall, and shall cause each of their
respective Subsidiaries to, afford to the other party and
to such other party's accountants, counsel, financial
advisers and other representatives, reasonable access,
and permit them to make such inspections as they may
reasonably require, during normal business hours during
the period from the date of this Agreement through the
Effective Date to all their respective properties, books,
contracts, commitments and records and, during such
periods, Carolco and LIVE, as the case may be, shall, and
shall cause each of their respective Subsidiaries to,
furnish promptly to LIVE or Carolco, as the case may be,
all other information concerning its business, properties
and personnel as LIVE or Carolco, as the case may be, may
reasonably request. Except as required by law, each of
LIVE and Carolco will hold, and will cause its
affiliates, associates, agents and representatives to
hold, any nonpublic information in confidence unless
disclosure of such material is compelled by judicial or
administrative process, or, in the reasonable opinion of
LIVE's and Carolco's respective outside counsel, by other
requirements of law (in which cases the party compelled
to disclose shall give reasonable notice to the other
party prior to making the compelled disclosure), until
such time as such information becomes publicly available
otherwise than through the actions of such person, and
each of Carolco and LIVE shall use its best efforts to
ensure that such affiliates, associates and
representatives do not disclose such information to
others without the prior written consent of Carolco or
LIVE, as appropriate. In the event of termination of
this Agreement for any reason, LIVE shall promptly return
all documents containing nonpublic information so
obtained from Carolco or any of its Subsidiaries and any
copies made of such documents for LIVE, and Carolco shall
promptly return all documents containing nonpublic
information so obtained from LIVE or any of its
Subsidiaries and any copies made of such documents for
Carolco. No investigation pursuant to this Section 9.5
shall add to or subtract from any representations or
warranties of Carolco or LIVE, as the case may be, or the
conditions to the respective obligations of Carolco or
LIVE or CAC to consummate the Merger. Nothing herein
shall limit or release any of the confidentiality
agreements previously entered in by the parties.
SECTION 9.6 AFFILIATES. Prior to the Effective
Date, Carolco and LIVE, after consultation with Gipson
Hoffman & Pancione and Sidley & Austin, shall each cause
to be prepared and delivered to the other a list
(reasonably satisfactory to each other's counsel)
identifying all persons who, at the time of the
respective Stockholder Meetings, may be deemed to be
"affiliates" of Carolco as that term is used in
paragraphs (c) and (d) of Rule 145 under the Securities
Act (the "Affiliates"). Carolco and LIVE, through its
counsel, shall advise each such possible Affiliate of its
obligations under Rule 145 with respect to shares of LIVE
Common Stock issued to each such possible Affiliate
pursuant to the Merger.
SECTION 9.7 FEES AND EXPENSES. Whether or not
the Merger is consummated, all costs and expenses
incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the
party incurring such costs and expenses, except that the
legal fees and expenses incurred in connection with
printing and mailing the Registration Statement and
related materials, the Option Registration Statement and
the Proxy Statement will be shared equally by LIVE and
Carolco, except that in the event this Agreement shall
terminate by virtue of either of the provisions of
subsections (b)(i) or (ii) or (c)(i) or (ii) of Section
11.1 hereof, then Carolco, in the case of subsection (b),
and LIVE, in the case of subsection (c), shall reimburse
the other party for all such legal fees and expenses. In
the event this Agreement shall terminate by virtue of
Subsection (d) of Section 11.1 hereof, then the party who
accepts the "competing proposal" or "offer" shall
reimburse the other party for all out-of-pocket expenses
incurred by the other party in connection with the Merger
through the date of termination of this Agreement.
SECTION 9.8 CAROLCO STOCK OPTIONS.
(a) As of the Effective Date, LIVE shall
assume (pursuant to an assumption agreement satisfactory
to LIVE and Carolco) Carolco's obligations under the 1986
Non-Employee Stock Option Plan of Carolco and the 1986
Employee Stock Option Plan of Carolco (collectively, the
"1986 Plan") and the 1989 Stock Option and Stock
Appreciation Rights Plan of Carolco (the "1989 Plan")
(the 1986 Plan and the 1989 Plan are sometimes referred
to hereinafter collectively as the "Carolco Stock
Plans"). Each option to purchase shares of Carolco
Common Stock outstanding immediately prior to the
Effective Date pursuant to the Carolco Stock Plans (a
"Plan Option") shall become and represent an option to
purchase that number of shares of LIVE Common Stock (a
"New Stock Option") as the holder of such Plan Option
would have been entitled to receive by virtue of the
Merger had it exercised such Plan Option immediately
prior to the Effective Date, at an exercise price per
share equal to the exercise price per share of such Plan
Option immediately prior to the Effective Date multiplied
by the Exchange Ratio. After the Effective Date, except
as provided in this Section 9.8, each New Stock Option
shall be exercisable upon the same terms and conditions
as were applicable under the related Plan Option prior to
the Effective Date.
(b) All time elapsed since the grant of a Plan
Option shall be credited to the applicable successor
option for purposes of determining when such successor
option vests.
(c) In the event of any reclassification,
stock split or stock dividend with respect to LIVE Common
Stock (or if a record date with respect to any of the
foregoing) should occur after the date of this Agreement
and before the Effective Date, appropriate and
proportionate adjustments shall be made in the exchange
ratios for Plan Options.
(d) After the Effective Date, LIVE shall grant
no New Stock Options or Carolco stock appreciation rights
under the Carolco Stock Plans as assumed by LIVE or any
LIVE stock options or LIVE stock appreciation rights
under LIVE's 1988 Stock Option and Stock Appreciation
Rights Plan. After the Effective Date, LIVE may grant
LIVE stock options or LIVE stock appreciation rights only
pursuant to a 1994 Stock Option and Stock Appreciation
Rights Plan for LIVE substantially in the form attached
hereto as Exhibit 9.8(d) ("New Plan"), subject to
approval of such New Plan by a majority of the voting
power of LIVE entitled to vote and voting at the LIVE
Stockholder Meeting.
SECTION 9.9 OTHER OBLIGATIONS OF CAROLCO AND
LIVE.
(a) As of the Effective Date, LIVE shall
assume (pursuant to an assumption agreement in the form
of Exhibit 9.9(a) hereto) each of Carolco's obligations
under that certain Employment Agreement dated as of
August 10, 1994, by and between Carolco and Mario Kassar.
The agreement of LIVE under this Section 9.9(a) is also
made for the benefit of Mario Kassar, who is intended to
be, and hereby expressly is constituted, a third party
beneficiary of such agreement.
(b) As of the Effective Date, LIVE shall
become co-obligor with Carolco (pursuant to an amendment
to the Indenture dated as of October 20, 1993, by and
between Carolco and First Trust of California, National
Association, as Indenture Trustee, governing the Carolco
5% Notes in the form of Exhibit 9.9(b) hereto ("Amended
and Restated Carolco 5% Indenture")), with respect to
certain of Carolco's obligations with respect to the
Carolco 5% Notes.
(c) As of the Effective Date, LIVE shall
become co-obligor with Carolco (pursuant to an amendment
to the Standby Purchase and Investment Agreement dated as
of July 29, 1993, by and among Carolco, Cinepole, Le
Studio Canal+, RCS, Pioneer and Tele-Communications, Inc.
in the form of Exhibit 9.9(c) hereto ("Amended and
Restated Standby Purchase and Investment Agreement"))
with respect to certain of Carolco's obligations with
respect to the Carolco 7% Notes.
(d) As of the Effective Date, LIVE, Carolco
and American Stock Transfer & Trust Company shall have
entered into that certain First Supplemental Indenture in
the form of Exhibit 9.9(d) hereto with respect to the
Indenture governing the 11.5%/10% Reducing Rate Senior
Notes of Carolco (the "Carolco 11.5%/10% Notes").
(e) As of the Effective Date, LIVE, Carolco
and American Stock Transfer & Trust Company shall have
entered into that certain First Supplemental Indenture in
the form of Exhibit 9.9(e) hereto with respect to the
Indenture governing the 13%/12% Reducing Rate Senior
Subordinated Notes of Carolco (the "Carolco 13%/12%
Notes").
(f) As of the Effective Date, LIVE, Carolco
and IBJ Schroder Bank & Trust Company shall have entered
into that certain First Supplemental Indenture in the
form of Exhibit 9.9(f) hereto with respect to the Amended
and Restated Indenture governing the 13% Senior
Subordinated Notes of Carolco (the "Carolco 13% Notes").
(g) As of the Effective Date, LIVE shall
become a party (pursuant to an assumption agreement in
the form of Exhibit 9.9(g) hereto to that certain
Domestic Output Agreement dated as of May 1, 1993 by and
between Carolco and Metro-Goldwyn-Mayer Inc. ("MGM") and
with respect to that certain Confidential Draft Term
Sheet dated as of April 23, 1993 by and between Carolco
and MGM (together, the "MGM Distribution Agreements").
(h) As of the Effective Date, LIVE (as Carolco
Entertainment Inc.) shall become a party (pursuant to an
assumption agreement in the form of Exhibit 9.9(h)
hereto) to that certain Output Agreement dated as of May
8, 1991, by and between RCS Video Services Antilles N.V.
and Carolco International Inc. (formerly known as Carolco
International N.V.), as amended and to that certain
Inducement Letter dated as of May 8, 1991, by and among
RCS Video Services Antilles N.V., Carolco, Carolco
International Inc. (formerly known as Carolco
International N.V.), RCS Editori SpA and RCS
International Communications N.V.
(i) As of the Effective Date, LIVE (as Carolco
Entertainment Inc.) shall become a party (pursuant to an
assumption agreement in the form of Exhibit 9.9(i)
hereto) to that certain First Refusal Agreement dated
effective as of October 30, 1991, by and between Carolco
and Le Studio Canal+ S.A. and agreed to by Carolco
International Inc. (formerly known as Carolco
International N.V.).
(j) As of the Effective Date, LIVE (as Carolco
Entertainment Inc.) shall become a party (pursuant to an
assumption agreement in the form of Exhibit 9.9(j)
hereto) to that certain Ancillary Agreement Concerning
Japan and Laser Disc Rights of Pioneer, dated as of July
3, 1990 by and between Carolco and Pioneer and agreed to
by Carolco International Inc. (formerly known as Carolco
International N.V.) and LIVE.
SECTION 9.10 REGISTRATION RIGHTS. After the
Effective Date, all registration rights in favor of the
LIVE Investors with respect to any equity securities of
LIVE (other than the LIVE Series C Preferred Stock and
the LIVE Common Stock underlying such LIVE Series C
Preferred Stock, as to which the registration rights
agreement currently in effect with respect thereto shall
continue to remain in full force and effect after the
Effective Date) held by them as of the Effective Date, or
in favor of the Carolco Investors (other than New Carolco
Investments B.V.) with respect to any equity securities
of Carolco held by them as of the Effective Date, shall
be cancelled and replaced by a registration rights
agreement (the "New Carolco Entertainment Inc.
Registration Rights Agreement") substantially in the form
of Exhibit 9.10 hereto.
SECTION 9.11 BEST EFFORTS. Upon the terms and
subject to the conditions set forth in this Agreement,
and further subject to the fiduciary obligations of the
respective Boards of Directors of LIVE, CAC and Carolco
under applicable law as advised in writing by outside
counsel, each of the parties agrees to use its best
efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, and to assist and cooperate
with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Merger, and
the other transactions contemplated by this Agreement,
including (a) the obtaining of all necessary actions or
non-actions, waivers, consents and approvals from
Governmental Entities and the making of all necessary
registrations and filings (including filings with
Governmental Entities) and the taking of all reasonable
steps as may be necessary to obtain an approval or waiver
from, or to avoid an action or proceeding by, any
Governmental Entity, (b) the obtaining of all necessary
consents, approvals or waivers from third parties
including those entities identified in the LIVE LETTER
and the CAROLCO LETTER, (c) the defending of any lawsuits
or other legal proceedings, whether judicial or
administrative, challenging this Agreement, or the
consummation of the transactions contemplated hereby and
thereby, including seeking to have any stay or temporary
restraining order entered by any court or other
Governmental Entity vacated or reversed, and (d) the
execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by
this Agreement. Copies of all third-party consents
obtained hereunder by LIVE (or any of its Subsidiaries)
or Carolco (or any of its Subsidiaries) shall be provided
to LIVE or Carolco, respectively, promptly after any such
consent is obtained. In case at any time after the
Effective Date any further action is necessary or
desirable to carry out the purposes of this Agreement,
the proper officers and/or directors of LIVE, Carolco or
CAC shall take all such necessary action.
SECTION 9.12 PUBLIC ANNOUNCEMENTS. LIVE and CAC,
on the one hand, and Carolco, on the other hand, will
consult with each other before issuing any press release
or otherwise making any public statements with respect to
the transactions contemplated by this Agreement, and
shall not issue any such press release or make any such
public statement prior to such consultation, except as
may be required by applicable law. Nothing herein shall
limit or release any of the confidentiality agreements
previously entered into by the parties.
SECTION 9.13 STATE TAKEOVER LAWS. If any "fair
price" or "control share acquisition" statute or other
similar statute or regulation is or shall become
applicable to the transactions contemplated hereby,
Carolco and the members of the Board of Directors of
Carolco and LIVE and the members of the Board of
Directors of LIVE shall use their best efforts to grant
such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be
consummated as promptly as practicable on the terms
contemplated hereby and otherwise act to minimize the
effects of such statute or regulation on the transactions
contemplated hereby.
SECTION 9.14 INDEMNIFICATION. LIVE and CAC agree
that all rights to indemnification from Carolco for acts
or omissions occurring prior to the Effective Date now
existing shall continue in full force and effect, as
obligations of the Surviving Corporation, in accordance
with their terms. LIVE will provide, or cause the
Surviving Corporation to provide, for a period of not
less than seven years from the Effective Date, Carolco's
current directors and officers an insurance and
indemnification policy that provides coverage for events
occurring prior to the Effective Date (the "D&O
Insurance") that is no less favorable to them than
Carolco's existing policy or, if substantially equivalent
insurance coverage is unavailable or is only available on
terms which LIVE believes are not commercially
reasonable, the best available coverage. At and after
the Effective Date, LIVE shall indemnify, defend and hold
harmless each person who is now or has been at any time
prior to the date hereof or who becomes prior to the
Effective Date an officer, director, employee, agent or
representative of Carolco or any of its Subsidiaries and
all defendants in their capacity as such in the same
manner and to the same extent required by the Restated
Certificate of Incorporation of Carolco and the Restated
Bylaws of Carolco and/or the comparable charter or
organizational documents of any of its Subsidiaries as of
the date hereof and in the same manner and to the same
extent required by any Indemnity Agreements existing as
of the date hereof between Carolco or any of its
Subsidiaries whereby Carolco or any of its Subsidiaries
has agreed to indemnify, defend or hold harmless any
officers, directors, employees or agents thereof (a list
of such indemnity agreements is included in the CAROLCO
LETTER).
SECTION 9.15 [INTENTIONALLY DELETED.]
SECTION 9.16 [INTENTIONALLY DELETED.]
SECTION 9.17 LIVE RIGHTS. In satisfaction of
Section 10.2(i) hereof, before the Effective Date LIVE
will take all actions necessary to terminate the existing
LIVE Rights Agreement and cancel all outstanding LIVE
Rights.
SECTION 9.18 CONTINUATION OF BUSINESS OR BUSINESS
ASSETS. After the Effective Date, LIVE will continue at
least one significant historic business line of Carolco
or use at least a significant portion of Carolco's
historic business assets in a business, in each case
within the meaning of Treasury Regulation SECTION 1.368-1(d).
ARTICLE 10
CONDITIONS PRECEDENT
SECTION 10.1 CONDITIONS TO EACH PARTY'S OBLIGATION
TO EFFECT THE MERGER. The respective obligations of each
party to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Date of the
following conditions:
(a) STOCKHOLDER APPROVALS. (i) This Agreement
and the transactions contemplated hereby shall have been
approved by the requisite vote of the holders of Carolco
capital stock as set forth in Section 9.1 above and (ii)
this Agreement and the transactions contemplated hereby,
including the issuance of LIVE Common Stock and LIVE
Series D Preferred Stock pursuant to the Merger, the
amendments to the Restated Certificate of Incorporation
of LIVE and related matters shall have been approved by
the requisite vote of the holders of LIVE capital stock
as set forth in Section 9.1 above.
(b) BRINGDOWN OF FAIRNESS OPINIONS. The
Chemical Fairness Opinion and the Seidler Fairness
Opinion shall have been confirmed as of the date
immediately preceding the Effective Date without any
material change in any conclusions or opinions contained
therein.
(c) REGISTRATION STATEMENTS. The Registration
Statement shall have become effective in accordance with
the provisions of the Securities Act. No stop order
suspending the effectiveness of the Registration
Statement shall have been issued by the SEC and remain in
effect and no proceedings for such purpose shall be
pending before the SEC.
(d) STOCK EXCHANGE LISTING. The shares of
LIVE Common Stock registered pursuant to the Registration
Statement shall be approved for listing on the New York
Stock Exchange, upon official notice of issuance, or on
such other principal United States trading market
(whether a stock exchange or the National Association of
Securities Dealers Automated Quotation System) as the
LIVE Common Stock is listed immediately prior to the
Effective Date or as the parties may mutually agree.
(e) REORGANIZATION. Each of Carolco and LIVE
shall be reasonably satisfied that none of Carolco, LIVE
and CAC will recognize material taxable gain as a result
of the Merger and that its stockholders will not
recognize any taxable gain as a result of the Merger.
(f) ADEQUATE FINANCING COMMITMENTS. Aggregate
financing commitments shall have been received by Carolco
and LIVE, the terms of which shall be set out more fully
on Exhibit 10.1(f) hereto.
(g) NO MATERIAL ADVERSE CHANGE. There shall
not have occurred any change or development in or
affecting the assets, liabilities, business, operations,
condition (financial or other) or prospects of Carolco or
LIVE which, in the aggregate, could be reasonably
expected to have a Material Adverse Effect on such party,
except for (i) such changes at LIVE with respect to plans
previously disclosed to Carolco with respect to
Strawberries and VCL, or (ii) such changes resulting from
facts disclosed as of the date of the Merger Agreement in
the CAROLCO LETTER or Carolco SEC Documents or the LIVE
LETTER or LIVE SEC Documents, as the case may be.
(h) GOVERNMENTAL APPROVALS. All consents and
approvals of, and notices to and filings with, any
governmental authority or agency as are required in
connection with the consummation of the Merger and the
transactions contemplated hereby shall have been
obtained, given and made, and all waiting periods, if
any, applicable to the consummation of the Merger imposed
by any applicable law, rule or regulation (including, but
not limited to, the HSR Act) shall have expired without
any action, proceeding or investigation being commenced
or threatened which seeks to enjoin or delay consummation
of the Merger or to impose any material restrictions or
onerous requirements on Carolco, LIVE or their respective
stockholders.
(i) THIRD PARTY CONSENTS. All consents and
approvals of, and notices to and filings with, any non-
governmental persons required in connection with the
consummation of the Merger and the transactions
contemplated hereby shall have been obtained, given or
made, except for any thereof which, if not obtained,
given or made would not, in the aggregate, have a
Material Adverse Effect on the ability of any party to
consummate the transactions contemplated hereby or on the
assets, liabilities, business, operations, condition
(financial or other) or prospects of any party or any of
its direct or indirect subsidiaries.
(j) NO ORDER. No Governmental Entity or court
of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other
order (whether temporary, preliminary or permanent) which
is then in effect and has the effect of preventing the
consummation of the Merger or making the transactions
contemplated hereby illegal (each party hereto agreeing
to use its best efforts to have any such order,
injunction or the like lifted or waived).
(k) APPROVAL OF COUNSEL TO CAROLCO AND LIVE.
All actions, proceedings, instruments and documents
required to carry out the transactions contemplated
hereby or incidental hereto and all other related legal
matters shall be reasonably satisfactory to and approved
by counsel for each of Carolco and LIVE and such counsel
shall have been furnished with such certified copies of
such corporate actions and proceedings and such other
instruments and documents as it shall have reasonably
requested.
(l) REGISTRATION RIGHTS. The Carolco
Investors (other than New Carolco Investments B.V.) and
the LIVE Investors shall have entered into the
registration rights agreement contemplated in
Section 9.10 hereof.
(m) AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION OF LIVE. The Amended and Restated
Certificate of Incorporation of LIVE shall have been
filed with the Secretary of State of the State of
Delaware.
SECTION 10.2 CONDITIONS TO OBLIGATION OF CAROLCO
TO EFFECT THE MERGER. The obligation of Carolco to
effect the Merger shall be subject to the fulfillment at
or prior to the Effective Date of the following
additional conditions, any or all of which may be waived
by Carolco at its option, except as may be required by
law:
(a) PERFORMANCE OF OBLIGATIONS;
REPRESENTATIONS AND WARRANTIES; NO MATERIAL ADVERSE
CHANGE. LIVE and CAC shall have performed and satisfied
in all material respects each of their covenants and
agreements required or contemplated by this Agreement to
be performed by them on or prior to the Effective Date;
each of the representations and warranties of LIVE and
CAC contained in this Agreement that is qualified by
materiality shall be true and correct on and as of the
Effective Date as if made on and as of such date and each
of the representations and warranties that is not so
qualified shall be true and correct in all material
respects on and as of the Effective Date as if made on
and as of such date, in each case except as contemplated
or permitted by this Agreement; there shall have been no
Material Adverse Change with respect to LIVE after the
date of this Agreement; and Carolco shall have received a
certificate of LIVE, signed by the Chief Executive
Officer and the Chief Financial Officer of LIVE, to that
effect.
(b) [INTENTIONALLY DELETED.]
(c) TAX OPINION. Carolco shall receive an
opinion of Gipson Hoffman & Pancione, in form and
substance satisfactory to Carolco, dated the Effective
Date, substantially to the effect that on the basis of
facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts
existing as of the Effective Date:
(i) The Merger will constitute a
reorganization for federal income tax purposes
within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code, and Carolco, LIVE and CAC
will each be a party to that reorganization within
the meaning of Section 368(b) of the Code.
(ii) No gain or loss will be recognized by
LIVE, Carolco or CAC as a result of the Merger.
(iii) No gain or loss will be
recognized by the holders of Carolco Common Stock or
Carolco Series A Preferred Stock upon the conversion
of such Carolco Common Stock or Carolco Series A
Preferred Stock into shares of LIVE Common Stock or
LIVE Series D Preferred Stock, respectively, by
reason of the consummation of the Merger, except
with respect to cash, if any, received in lieu of
fractional shares of LIVE Common Stock.
(iv) The aggregate tax basis of the shares
of LIVE Common Stock or LIVE Series D Preferred
Stock into which shares of Carolco Common Stock or
Carolco Series A Preferred Stock are converted
pursuant to the Merger will be the same as the
aggregate tax basis of shares of Carolco Common
Stock or Carolco Series A Preferred Stock converted
into such LIVE Common Stock or LIVE Series D
Preferred Stock in the Merger, decreased by the
amount of any tax basis allocable to the fractional
shares of LIVE Common Stock in lieu of which cash
was received.
(v) The holding period for shares of LIVE
Common Stock or LIVE Series D Preferred Stock into
which shares of Carolco Common Stock or Carolco
Series A Preferred Stock are converted pursuant to
the Merger will include the period that such shares
of Carolco Common Stock or Carolco Series A
Preferred Stock were held, provided such shares of
Carolco Common Stock or Carolco Series A Preferred
Stock were held as capital assets on the Effective
Date.
In rendering such opinion, Gipson Hoffman & Pancione may
receive and rely upon representations of fact contained
in certificates of Carolco, LIVE, CAC and others, and the
obligation of Gipson Hoffman & Pancione to deliver the
opinion contemplated in this Section 10.2(c) shall be
subject to the receipt by Gipson Hoffman & Pancione of
the Investor Representation Agreements contemplated by
Section 6.4(c).
(d) OPINION OF COUNSEL TO LIVE AND CAC.
Carolco shall have received the opinion of Sidley &
Austin, counsel to LIVE, dated the Effective Date,
addressed to Carolco, in the form attached hereto as
Exhibit 10.2(d).
(e) REDEMPTION OF LIVE SERIES B PREFERRED
STOCK. LIVE shall have redeemed all outstanding shares
of the LIVE Series B Preferred Stock in accordance with
the provisions of the Certificate of Designations,
Preferences and Rights governing the LIVE Series B
Preferred Stock.
(f) NO ADDITIONAL INDEBTEDNESS. LIVE shall
not have incurred any indebtedness (as defined in
Section 5.13(a)) from the date hereof through the
Effective Date other than (i) borrowings under its
existing credit facility with Chemical Bank and any
extensions or replacements thereof (the "LIVE Credit
Facility") which borrowings may be used solely for
working capital purposes or for the partial repayment of
amounts owed on the LIVE 12% Notes as permitted by
Section 8.1(a)(i)(C) or for the redemption of the LIVE
Series B Preferred Stock as contemplated in
Section 10.2(e) hereof and (ii) other borrowings of up to
$17,000,000 which may be used solely for the redemption
of the LIVE Series B Preferred Stock as contemplated in
Section 10.2(e) hereof.
(g) AMENDMENTS TO LIVE INCREASING RATE NOTES
INDENTURE. LIVE shall have received amendments to the
LIVE Increasing Rate Notes Indenture in form, scope and
substance and on terms set forth in Exhibit 9.3(a).
(h) AMENDMENTS TO LIVE 12% INDENTURE. The
LIVE 12% Indenture shall have been amended to extend the
maturity date to at least ninety days after the maturity
date of the LIVE Credit Facility and LIVE shall have
received other amendments to such indenture in form,
scope and substance and on terms set forth in Exhibit
9.3(b).
(i) LIVE RIGHTS AGREEMENT. The LIVE Rights
shall no longer be outstanding.
(j) ASSETS OF LIVE. Neither LIVE nor its
Subsidiaries shall have disposed of or written-down the
carrying value of any assets of LIVE or its Subsidiaries
except with respect to plans previously disclosed to
Carolco with respect to Strawberries and VCL and except
for immaterial write-downs and write-offs in the ordinary
course of business and consistent with past practice.
(k) SALE OF STRAWBERRIES AND VCL. If LIVE
shall have sold Strawberries or VCL, the terms of such
sales shall have been on terms and conditions reasonably
satisfactory to Carolco.
SECTION 10.3 CONDITIONS TO OBLIGATIONS OF LIVE AND
CAC TO EFFECT THE MERGER. The obligations of LIVE and
CAC to effect the Merger shall be subject to the
fulfillment at or prior to the Effective Date of the
following additional conditions, any or all of which may
be waived by LIVE and CAC at their option, except as may
be required by law:
(a) PERFORMANCE OF OBLIGATIONS;
REPRESENTATIONS AND WARRANTIES; NO MATERIAL ADVERSE
CHANGE. Carolco shall have performed and satisfied in
all material respects each of its covenants and
agreements required or contemplated by this Agreement to
be performed on or prior to the Effective Date; each of
the representations and warranties of Carolco contained
in this Agreement that is qualified by materiality shall
be true and correct on and as of the Effective Date as if
made on and as of such date and each of the
representations and warranties that is not so qualified
shall be true in all material respects on and as of the
Effective Date as if made on and as of such date, in each
case except as contemplated or permitted by this
Agreement; there shall have been no Material Adverse
Change with respect to Carolco after the date of this
Agreement; and LIVE and CAC shall have received a
certificate of Carolco, signed by the Chief Executive
Officer and Chief Financial Officer of Carolco, to that
effect.
(b) [INTENTIONALLY DELETED.]
(c) TAX OPINION. LIVE shall have received an
opinion of Sidley & Austin, in form and substance
satisfactory to LIVE, dated the Effective Date,
substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion
which are consistent with the state of facts existing as
of the Effective Date:
(i) The Merger will constitute a
reorganization for federal income tax purposes
within the meaning of Sections 368(a)(1)(A) and
368(a)(2)(E) of the Code, and Carolco, LIVE and CAC
will each be a party to that reorganization within
the meaning of Section 368(b) of the Code.
(ii) No gain or loss will be recognized by
Carolco, LIVE or CAC as a result of the Merger.
(iii) No gain or loss will be
recognized by the holders of LIVE Common Stock or
LIVE Series C Preferred Stock as a result of the
Merger.
In rendering such opinion, Sidley & Austin may receive
and rely upon representations of fact contained in
certificates of Carolco, LIVE, CAC and others.
(d) OPINION OF COUNSEL TO CAROLCO. LIVE and
CAC shall have received the opinion of Gipson Hoffman &
Pancione, counsel to Carolco, dated the Effective Date,
addressed to LIVE and CAC, in the form of Exhibit
10.3(d).
(e) ASSETS OF CAROLCO. Neither Carolco nor
its Subsidiaries shall have disposed of or written-down
the carrying value of any assets of Carolco or its
Subsidiaries except for immaterial write-downs and write-
offs in the ordinary course of business and consistent
with past practice.
ARTICLE 11
TERMINATION, AMENDMENT AND WAIVER
SECTION 11.1 TERMINATION. This Agreement may be
terminated and the Merger herein contemplated may be
abandoned at any time prior to the Effective Date,
whether before or after any approval by the stockholders
of LIVE and the stockholders of Carolco:
(a) by mutual consent of LIVE and Carolco, as
authorized by the boards of directors of each of them;
(b) by LIVE if (i) Carolco shall have failed
to comply in any material respect with any of its
material covenants or agreements contained in this
Agreement required to be complied with by Carolco prior
to the date of such termination, which failure to comply
has not been cured within five (5) business days
following receipt by Carolco of notice of such failure to
comply; (ii) there has occurred (A) a material breach by
Carolco of any representation or warranty that is
qualified as to materiality either when made or at the
Effective Date or (B) a breach by Carolco of any
representation or warranty that is not qualified as to
materiality when made or at the Effective Date, in each
case which breach has not been cured within five (5)
business days following receipt by Carolco of notice of
the breach; or (iii) the stockholders of Carolco voting
at the Carolco Stockholder Meeting shall have failed to
approve this Agreement and the transactions contemplated
hereby as contemplated in Section 9.1(a) hereof;
(c) by Carolco if (i) LIVE or CAC or any of
their Subsidiaries shall have failed to comply in any
material respect with any of their material covenants or
agreements contained in this Agreement required to be
complied with by LIVE or CAC or any of their Subsidiaries
prior to the date of such termination, which failure to
comply has not been cured within five (5) business days
following receipt by LIVE or CAC, as the case may be, of
notice of such failure to comply; or (ii) there has
occurred (A) a material breach by LIVE or CAC of any
representation or warranty that is qualified as to
materiality either when made or at the Effective Date or
(B) a breach by LIVE or CAC of any representation or
warranty that is not qualified as to materiality when
made or at the Effective Date, in each case which breach
has not been cured within five (5) business days
following receipt by LIVE or CAC, as the case may be, of
notice of the breach; or (iii) the stockholders of LIVE
voting at the LIVE Stockholder Meeting shall have failed
to approve this Agreement and the transactions
contemplated hereby as contemplated in Section 9.1(b)
hereof;
(d) by either LIVE or Carolco, if the other
party accepts a competing "takeover proposal" or "offer"
as provided in Section 8.3 hereof;
(e) by either LIVE or Carolco, if such party
shall have exercised its best efforts to effect the
Merger and, notwithstanding such best efforts, if the
Merger has not been effected on or prior to the close of
business on December 31, 1994, unless an extension of
such date is agreed to by the parties in writing on or
before such date;
(f) by LIVE, if the Board of Directors of
Carolco shall have modified or withdrawn its
recommendation of the Merger or declaration that the
Merger is advisable or if the Board of Directors of
Carolco shall have recommended to stockholders of Carolco
any takeover proposal of any other person or shall have
resolved to do any of the foregoing, in which case costs
shall be shared as set forth in Section 9.7;
(g) by Carolco, if the Board of Directors of
LIVE and its Advisory Committee considering the Merger
shall have modified or withdrawn its recommendation of
the Merger or declaration that the Merger is advisable or
if the Board of Directors of LIVE shall have recommended
to stockholders of LIVE any takeover proposal of any
other person or shall have resolved to do any of the
foregoing, in which case costs shall be shared as set
forth in Section 9.7; or
(h) by either LIVE or Carolco if any permanent
injunction or other order of a court or other competent
authority preventing the consummation of the Merger shall
have become final and non-appealable.
SECTION 11.2 EFFECT OF TERMINATION. In the event
of termination of this Agreement by either LIVE or
Carolco or both, as provided in Section 11.1, this
Agreement shall forthwith become void and there shall be
no further liability hereunder on the part of Carolco,
LIVE or CAC or their respective officers or directors
except with respect to the provisions concerning fees and
expenses contained in Section 9.7, and except with
respect to provisions concerning confidentiality and the
return of documents contained in Section 9.4, which shall
survive the termination; provided, however, that nothing
contained in this Section 11.2 shall relieve any party
hereto from any liability for any breach of this
Agreement occurring on or prior to the date of
termination hereof.
SECTION 11.3 AMENDMENT. This Agreement may be
amended by the parties hereto, by or pursuant to action
taken by their respective Boards of Directors (and in the
case of LIVE, with the consent of its Advisory
Committee), at any time before or after approval of the
Merger and the transactions contemplated hereby by the
stockholders of Carolco or the approval of the Merger and
the transactions contemplated hereby by the stockholders
of LIVE, but, after any such approval by stockholders of
Carolco or LIVE, no amendment shall be made which (i)
alters or changes the amount or kind of shares of any
class or series of capital stock of LIVE, (ii) alters or
changes any terms of the Certificate of Incorporation of
LIVE or the Surviving Corporation to be effected by the
Merger, (iii) alters or changes any of the terms and
conditions of the Agreement if such alteration or change
would adversely affect the holders of any class or series
of capital stock of LIVE, Carolco or CAC, (iv) changes
the Exchange Ratio provided in Section 4.1 or (v) in any
way materially adversely affects the rights of such
stockholders, without the further approval of such
stockholders. This Agreement may not be amended except
by an instrument in writing signed on behalf of each of
the parties hereto.
SECTION 11.4 WAIVER. At any time prior to the
Effective Date, the parties hereto pursuant to action
taken by their respective Boards of Directors (and in the
case of LIVE, with the consent of its Advisory Committee
of the Board of Directors) may (i) extend the time for
the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies
in the representations and warranties contained herein or
in any document delivered pursuant hereto by the other
parties hereto and (iii) waive compliance by the other
parties hereto with any of the agreements or conditions
contained herein which may legally be waived (except that
neither CAC nor LIVE may waive any material breach
hereunder by the other and except that in the event of a
waiver of any material condition, covenant or breach,
each of the Carolco Investors, in the event of a waiver
by Carolco, and each of the LIVE Investors, in the event
of a waiver by LIVE, shall be entitled to rescind such
Carolco Investor's or LIVE Investor's Investor
Representation Agreement within five (5) business days of
such waiver). Any agreement on the part of a party
hereto to any such extension or waiver shall be valid
only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party hereto to
enforce at any time any provision of this Agreement shall
not be construed to be a waiver of such provision, nor in
any way to affect the validity of this Agreement or any
part hereof or the right of any party thereafter to
enforce each and every such provision. No waiver of any
breach of this Agreement shall be held to constitute a
waiver of any other or subsequent breach.
SECTION 11.5 APPROVAL BY LIVE SPECIAL COMMITTEE.
The approval of the LIVE Special Committee shall be
required for any amendment or waiver which has the effect
of reducing or eliminating the requirement that 100% of
the LIVE Series B Preferred Stock be redeemed as a
condition to the Merger.
ARTICLE 12
GENERAL PROVISIONS
SECTION 12.1 NON-SURVIVAL OF REPRESENTATIONS AND
WARRANTIES. None of the representations and warranties
in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Effective Date.
SECTION 12.2 NOTICES. All notices and other
communications hereunder shall be in writing and shall be
deemed given if delivered personally, sent by overnight
courier or telecopied (with a confirmatory copy sent by
overnight courier) to the parties (with courtesy copies
to the LIVE Investors and Carolco Investors) at the
following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to LIVE or CAC, to
LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Attention: Michael J. White, General
Counsel
Facsimile: (818) 908-9539
with a copy to:
Sidley & Austin
2049 Century Park East
39th Floor
Los Angeles, California 90067
Attention: Gary J. Cohen, Esq.
Facsimile: (310) 556-6502
(b) if to Carolco, to
Carolco Pictures Inc.
8800 Sunset Boulevard
Los Angeles, California 90069
Attention: Robert W. Goldsmith, General Counsel
Facsimile: (310) 652-1343
with a copy to:
Gipson Hoffman & Pancione
1901 Avenue of the Stars
Suite 1100
Los Angeles, California 90067
Attention: Lawrence R. Barnett, Esq.
Facsimile: (310) 556-8945
(c) if to Pioneer, to
Pioneer LDCA, Inc.
2265 East 220th Street
Long Beach, California 90810
Attention: Tetsuro Kudo
Facsimile: (310) 952-2420
with a copy to:
Pioneer LDC, Inc.
1-20-6 Ebisuminami
Shibuya-ku, Tokyo 150
JAPAN
Attention: Mr. Ryuichi Noda
Facsimile: 011 813 5721 2040
and
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Blake Hornick, Esq.
Facsimile: (212) 326-0806
(d) if to Cinepole, to
Cinepole Productions B.V.
P.O. Box 990
1000 AZ Amsterdam
THE NETHERLANDS
Facsimile:
with a copy to:
Coudert Brothers
52, Avenue Des Champs-Elysees
75008 Paris
FRANCE
Attention: Jonathan M. Wohl, Esq.
Facsimile: 011 331 4359 6655
and
Le Studio Canal+ (U.S.)
301 North Canon Drive, Suite 228
Beverly Hills, California 90210
Attention: Richard J. Garzilli, Esq.
Facsimile: (310) 246-9772
and
Coudert Brothers
1055 West 7th Street, 20th Floor
Los Angeles, California 90017-2503
Attention: John A. St. Clair, Esq.
Facsimile: (213) 689-4467
(e) if to RCS, to
RCS Video International Services B.V.
Avv. Enzo Pulitano
Affari Legali e Societari
RCS Editori SpA
Corso Garibaldi 86
20121 Milan ITALY
Facsimile: 011 392 2584 3073
with a copy to:
Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Paul D. Downs, Esq.
Facsimile: (212) 832-3353
(f) if to MGM Holdings Corporation, to
MGM Holdings Corporation
c/o Metro-Goldwyn-Mayer Inc.
2500 Broadway Street
Santa Monica, California 90404
Attention: Michael S. Hope
Facsimile: (310) 449-3090
with a copy to:
White & Case
633 West Fifth Avenue, Suite 1900
Los Angeles, California 90071
Attention: David G. Johnson, Esq.
Facsimile: (213) 620-0758
(g) if to New Carolco Investments B.V., to
New Carolco Investments B.V.
c/o Schutte, Zewald & Jorna
Parklaan 46, 3016 BC Rotterdam
THE NETHERLANDS
Facsimile: 011 3110 4361 880
with a copy to:
Skadden, Arps, Slate, Meagher & Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
Attention: Brian J. McCarthy, Esq.
Facsimile: (213) 687-5600
SECTION 12.3 INTERPRETATION. When a reference is
made in this Agreement to a Section, such reference shall
be to a Section of this Agreement unless otherwise
indicated. The table of contents and headings contained
in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation
of this Agreement. Whenever the words "include,"
"includes" or "including" are used in this Agreement,
they shall be deemed to be followed by the words "without
limitation." The phrases "date of this Agreement," the
"date hereof" and words of similar impact, unless the
context otherwise requires, shall be deemed to refer to
August 10, 1994. Unless expressly indicated herein to
the contrary, and when the context so dictates, the
masculine includes the feminine and the singular includes
the plural.
SECTION 12.4 COUNTERPARTS. This Agreement may be
executed in counterparts, all of which shall be
considered one and the same agreement and shall become
effective when one or more counterparts have been signed
by each of the parties and delivered to the other
parties.
SECTION 12.5 ENTIRE AGREEMENT; NO THIRD-PARTY
BENEFICIARIES. This Agreement, including the documents
and instruments referred to herein, (a) constitutes the
entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties
with respect to the subject matter hereof, and there are
no other covenants, promises, agreements, conditions or
understandings, whether oral or written, among the
parties hereto, and (b) except for the provisions of
Sections 9.9(a) and 9.14, is not intended to confer upon
any person other than the parties any rights or remedies
hereunder.
SECTION 12.6 GOVERNING LAW. This Agreement shall
be governed by, and construed in accordance with, the
laws of the State of Delaware, regardless of the laws
that might otherwise govern under applicable principles
of conflicts of laws thereof.
SECTION 12.7 ASSIGNMENT. Neither this Agreement
nor any of the rights, interests or obligations hereunder
shall be assigned by any of the parties without the prior
written consent of the other parties, except that CAC may
assign, in its sole discretion, any of or all its rights,
interests and obligations under this Agreement to LIVE or
to any direct wholly-owned subsidiary of LIVE, but no
such assignment shall relieve CAC of any of its
obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to
the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
IN WITNESS WHEREOF, LIVE, CAC and Carolco have
caused this Agreement to be signed by their respective
officers thereunto duly authorized all as of the date
first written above.
LIVE ENTERTAINMENT INC.
By: /s/ Roger A. Burlage
Name: Roger A. Burlage
Title: President and Chief
Executive Officer
Attest:
/s/ Robert L. Denton
Name: Robert L. Denton
Title: Vice President and Chief Accounting Officer
CAROLCO ACQUISITION CORP.
By: /s/ Roger A. Burlage
Name: Roger A. Burlage
Title: President and Chief
Executive Officer
Attest:
/s/ Steven E. Mengel
Name: Steven E. Mengel
Title: Senior Vice President
of Legal and Business Affairs
CAROLCO PICTURES INC.
By: /s/ Mario F. Kassar
Name: Mario F. Kassar
Title: Chairman of the Board
and Chief Executive Officer
Attest:
/s/ Robert W. Goldsmith
Name: Robert W. Goldsmith
Title: Senior Vice President and General Counsel
__________________________________________________________
EXHIBIT 4
NEW CIBV INVESTOR REPRESENTATION AGREEMENT
As a condition to LIVE ENTERTAINMENT INC., a Delaware
corporation ("LIVE"), CAROLCO ACQUISITION CORP., a Delaware
corporation and a wholly-owned subsidiary of LIVE ("CAC"), and
CAROLCO PICTURES INC., a Delaware corporation ("Carolco"),
entering into an Agreement and Plan of Merger dated as of August
10, 1994 (the "Merger Agreement"), New Carolco Investments B.V.,
a corporation organized under the laws of The Netherlands
("Significant Shareholder"), hereby enters into this Investor
Representation Agreement (this "Agreement").
WHEREAS, pursuant to the Merger Agreement and in accordance
with the applicable provisions of the General Corporation Law of
the State of Delaware (the "DGCL"), CAC will merge with and into
Carolco with Carolco surviving (the "Merger") and, pursuant to
the Merger, (i) the issued and outstanding shares of common
stock, par value $.01 per share, of Carolco ("Carolco Common
Stock") shall be converted into, and become exchangeable for,
shares of common stock, $.01 par value per share, of LIVE ("LIVE
Common Stock") as set forth in the Merger Agreement; and (ii)
each issued and outstanding share of Series A Convertible
Preferred Stock of Carolco ("Carolco Series A Preferred Stock")
shall be converted into, and become exchangeable for, one share
of Series D Convertible Preferred Stock of LIVE, par value $1.00
("LIVE Series D Preferred Stock"); and
WHEREAS, Carolco, LIVE, and CAC are willing to consummate
the Merger only if such transaction will qualify as a tax free
transaction under the Internal Revenue Code of 1986, as amended.
NOW, THEREFORE, THE SIGNIFICANT SHAREHOLDER AGREES AS
FOLLOWS:
A. The Significant Shareholder represents to LIVE and
Carolco as follows:
1. The Significant Shareholder represents that as of
the date hereof it (a) is the record and beneficial owner of
(x) 7,929,328 shares of Carolco Common Stock and no shares
of Carolco Series A Preferred Stock (collectively, the
"Carolco Shares") and (y) no shares of LIVE Common Stock and
no shares of Series C Convertible Preferred Stock of LIVE,
par value $1.00 per share (collectively, the "LIVE Shares")
and (b) has the power to vote or consent as to matters
concerning the Carolco Shares.
2. The Significant Shareholder (a) represents that,
as of the date hereof, it has no plan or intention to, and
(b) agrees that prior to the Effective Date as defined in
Section 1.2 of the Merger Agreement, it will not form a plan
or intention or enter into an arrangement to sell, transfer
or otherwise dispose of any of the shares of LIVE Common
Stock and/or LIVE Series D Preferred Stock to be received in
the Merger by the Significant Shareholder.
B. The Significant Shareholder agrees as follows:
1. On or prior to the Effective Date, it will not
sell, transfer or otherwise dispose of any of its shares of
Carolco Common Stock or Carolco Series A Preferred Stock.
2. Until the Effective Date, it will not grant a
proxy with respect to, or otherwise encumber, any of its
Carolco Shares, nor will it acquire any additional Carolco
Shares unless the Significant Shareholder executes an
amendment whereby such additional shares become subject to
this Agreement. The Significant Shareholder agrees that
until the Effective Date it will not (i) deposit any Carolco
Shares into any voting trust or similar arrangement, (ii)
enter into any discussions, negotiations, arrangements or
understandings with any third party with respect to any of
the foregoing, or (iii) take any action inconsistent with
any of the foregoing. The Significant Shareholder further
agrees that, subject to its receipt of the Prospectus and
Joint Proxy Statement pursuant to which Carolco and LIVE
propose to solicit proxies from their respective
shareholders in connection with the Merger and the
transactions contemplated thereby (the "Prospectus"), it
will vote all of the Carolco Shares in favor of the Merger
and the transactions contemplated hereby.
3. The Significant Shareholder consents to disclosure
in the Prospectus of its intention to vote for the Merger
and the transactions contemplated in the Merger Agreement.
C. This Agreement will terminate upon the earlier to occur
of (i) the Effective Date (other than with regard to Paragraph
A.2 of this Agreement) and (ii) the termination of the Merger
Agreement pursuant to the terms of Section 11.1 thereof, but in
no event later than December 31, 1994 unless an extension of such
date is agreed to by the Significant Shareholder.
D. In the event of a waiver by Carolco of any material
condition, covenant or breach, or in the event of an amendment of
any material term, of the Merger Agreement without the consent of
the Significant Shareholder, then the Significant Shareholder
shall be entitled to rescind this Agreement within five (5)
business days of receipt of notice of such waiver or amendment.
IN WITNESS WHEREOF, the undersigned has duly executed this
Agreement on August 10, 1994.
NEW CAROLCO INVESTMENTS B.V.
By: /s/ Roberto C. Brazao Gomes
Name: Roberto C. Brazao Gomes
Its: Managing Director
Agreed to and accepted as of
the date first written above:
CAROLCO PICTURES INC.
By: /s/ Robert W. Goldsmith
Name: Robert W. Goldsmith
Its: Senior Vice President
__________________________________________________________
EXHIBIT 5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is
entered into as of August 10, 1994 between Mario F.
Kassar ("Employee") and Carolco Pictures Inc., a Delaware
corporation (the "Company," which for purposes of this
Agreement shall mean the Company and its Affiliates (as
defined below) including, as of the Effective Date (as
defined below), Carolco Entertainment Inc., a Delaware
corporation ("CEI")).
WHEREAS, Employee's Services (as defined below)
are being furnished to the Company pursuant to an
employment agreement entered into as of May 3, 1993
between the Company and Employee (the "May 1993
Agreement"); and
WHEREAS, pursuant to an Agreement and Plan of
Merger, dated as of August 10, 1994 (the "Merger
Agreement"), among the Company, LIVE Entertainment, Inc.,
a Delaware corporation ("LIVE"), and Carolco Acquisition
Corp., a Delaware corporation and wholly owned subsidiary
of LIVE ("CAC"), CAC will be merged with and into the
Company, the Company will become a wholly owned
subsidiary of LIVE and LIVE will be renamed "Carolco
Entertainment Inc." (the "Merger"); and
WHEREAS, pursuant to the Merger Agreement and
an Assumption Agreement, dated as of August 10, 1994,
among the Company, LIVE and Employee, as of the date that
the Merger becomes effective (the "Effective Date"), CEI
shall assume each of the obligations of the Company under
this Agreement; and
WHEREAS, concurrently with the execution of
this Agreement, Pioneer LDCA, Inc., a Delaware
corporation ("Pioneer"), Cinepole Productions B.V., a
corporation organized under the laws of The Netherlands
("Cinepole") and a wholly owned subsidiary of Le Studio
Canal+ S.A., a corporation organized under the laws of
France ("Canal+"), RCS Video International Services B.V.,
a corporation organized under the laws of The Netherlands
("RCS" and, together with Pioneer and Canal+, the
"Strategic Investors"), MGM Holdings Corporation, a
Delaware Corporation ("MGM"), and New Carolco Investments
B.V., a corporation organized under the laws of The
Netherlands and controlled by certain Affiliates of
Employee ("New CIBV"), are entering into a stockholders
agreement (the "1994 Stockholders Agreement"), which (i)
amends and restates the Stockholders Agreement, dated as
of October 20, 1993, among Pioneer, Cinepole, RCS, MGM
and New CIBV (the "1993 Stockholders Agreement"), (ii)
will be effective as of the Effective Date and (iii)
along with the provisions of this Agreement and the
Merger Agreement, sets forth, among other things, all
agreements among Employee, the Strategic Investors and
MGM with respect to the corporate governance of CEI; and
WHEREAS, to permit the Company to proceed with
certainty with the transactions contemplated by the
Merger Agreement, the parties hereto desire to enter into
this Agreement, which amends and restates the May 1993
Agreement.
NOW, THEREFORE, in consideration of the
foregoing, and the mutual covenants and agreements set
forth herein and such other good and valuable
consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be
legally bound, agree as follows:
1. Services.
1.1. Employment. During the Term (as defined
below), the Company hires Employee to perform such
services as the Company may from time to time reasonably
request consistent with Employee's stature and experience
in the motion picture industry, at such locations as the
Company shall reasonably request consistent with its
reasonable business needs (the "Services"). Further, the
Services of Employee shall include but not be limited to
management and supervision of (A) the development,
production and distribution of motion pictures ("Carolco
Pictures") produced by the Company, (B) leasing and
licensing of Carolco Pictures to third parties, and (C)
other principal business activities of the Company. For
purposes of this Agreement, "Affiliates" shall mean, as
to any person, any other person controlled by,
controlling or under common control with, directly or
indirectly, such person, provided, however, that for
purposes of this Agreement the Company shall not be
deemed an Affiliate of any of the Strategic Investors,
MGM or any of their respective Affiliates; and "person"
shall mean any individual, corporation, partnership,
joint venture, association, joint-stock company, trust,
unincorporated organization or government or other agency
or political subdivision thereof, or any other entity.
1.2. Ownership of Properties. The Company shall
own all rights in and to any material and/or ideas
written, suggested or submitted by Employee during the
Term and all other results and proceeds of the Services
(the "Properties"). Without limiting the generality of
the foregoing, these rights shall include all motion
picture, television, radio, dramatic, musical,
publication and other rights in and to the Properties,
including the sole and exclusive right to photograph and
record the same with or without dialogue, music and other
sounds synchronously recorded, and to perform, exhibit,
distribute, reproduce, transmit, broadcast or otherwise
communicate the same and/or motion picture, dramatic or
other versions or adaptations thereof, theatrically, non-
theatrically and/or by means of television, radio, the
legitimate stage and/or any other means now known or
hereafter devised and to manufacture, publish and vend
printed and/or recorded versions or adaptations thereof,
either publicly or privately and for profit or otherwise.
The Company and its licensees and assigns shall have the
right to adapt, change, revise, delete from, add to
and/or rearrange the Properties or any part thereof
written or submitted by Employee, to combine the same
with other works to any extent and to change or
substitute the title thereof, and in this connection
Employee hereby waives any rights commonly referred to as
"moral rights" of authors. Employee agrees to execute
and deliver to the Company such assignments or other
instruments as the Company may require from time to time
to evidence its ownership of the results and proceeds of
Employee's Services; provided, however, that nothing in
this Agreement shall be deemed in any manner to restrict
or qualify Employee's ownership of or right to exploit
Employee's personal memoirs.
1.3. Credit.
1.3.1. For purposes of this Paragraph 1.3, a
"Credit Picture" shall be any Carolco Picture that is
"set for production" (as hereinafter defined) during the
Term. With respect to each Credit Picture, the Company
agrees to accord credit (and to direct its licensees, to
the extent reasonable, to accord credit) to Employee, at
Employee's option as to the form of credit, on screen on
a separate card and in paid advertising in which any
other credit appears (other than credit to up to two cast
members whose credit appears prior to the title on
screen, or Academy Award or other special or
congratulatory advertising) ("Included Advertising"), in
substantially the following forms (as may be applicable):
A. "Mario Kassar Presents"
(the "Presentation Credit")
B. "Executive Producer
Mario Kassar"
or
"Produced by
Mario Kassar"
(the "Producer Credit")
1.3.2. The form of credit shall be selected
by Employee at a sufficient time in advance of initial
theatrical release of the applicable Carolco Picture to
enable the Company to comply with the terms of this
Paragraph. The Presentation Credit shall appear on
screen above the title in a size of type at least 50% of
the size of the largest letter in the title and in
Included Advertising above the title and in a size of
type at least 50% of the size of the largest letter in
the regular title (expressly excluding any title commonly
referred to as "artwork" title which may appear in the
applicable Included Advertising). The Producer Credit
shall appear in size and placement substantially similar
to the size and placement of the Producer Credit on
Carolco Pictures released prior to the date hereof.
1.3.3. The Company shall have the right (but
not the obligation except as set forth above) to use,
publish and broadcast, and to authorize others to do so,
the name, approved likeness and approved biographical
material of Employee to advertise, publicize and promote
the Credit Pictures and the business of the Company and
its Affiliates. An "approved likeness" and "approved
biographical material" shall be, respectively, any
photograph or other depiction of Employee, or any
biographical information or life story concerning the
professional career of Employee, that has been submitted
to and approved by Employee in writing prior to its first
use, publication or broadcast.
1.3.4. Employee agrees that a casual or
inadvertent breach of the terms of this Paragraph 1.3 by
the Company, a Strategic Investor or MGM or a breach by
any other third party shall not constitute a material
breach of the terms of this Agreement and in no event
shall Employee have the right to terminate or rescind
this Agreement or to enjoin, restrain or interfere in any
manner, by governmental process or otherwise, with the
exercise by the Company of any of its rights with respect
to any Credit Picture by reason of any breach or alleged
breach of the terms of this Paragraph 1.3.
Notwithstanding the foregoing, it is understood and
agreed that the Company will take all reasonable steps as
may be necessary to remediate any breach of this
Paragraph 1.3.
1.4. Term. The term of this Agreement (the "Term")
shall commence as of the date hereof and shall end on
December 31, 1997 unless extended or sooner terminated in
accordance with the provisions of this Agreement.
Employee hereby acknowledges the corporate governance
arrangements set forth in this Agreement, the Merger
Agreement (including the exhibits thereto) and the 1994
Stockholders Agreement. Employee further acknowledges
that if the Merger is not consummated in accordance with
the terms of the Merger Agreement, the 1993 Stockholders
Agreement shall remain in full force and effect.
1.5. Exclusivity.
1.5.1. The Services shall be rendered on a
full-time basis during normal working hours. All
Services of Employee shall be exclusive to the Company.
The parties hereto acknowledge that Employee's
performance and Services hereunder are of a special,
unique, unusual, extraordinary and intellectual
character, which gives them peculiar value, the loss of
which cannot be reasonably or adequately compensated in
an action at law for damages, and that a breach by
Employee of the terms hereof (including without
limitation this Paragraph and Paragraph 1.7 hereof) will
cause the Company irreparable injury. Employee agrees
that the Company is entitled to injunctive and other
equitable relief to prevent a breach or threatened breach
of this Agreement, which shall be in addition to any
other rights or remedies to which the Company may be
entitled. Notwithstanding the foregoing, nothing in this
Agreement shall be deemed in any manner to restrict or
qualify Employee's rights under Paragraph 2.3 hereof.
1.5.2. Notwithstanding anything to the
contrary stated in this Agreement, Employee may acquire
and/or retain, solely as an investment, and take
customary actions to maintain and preserve Employee's
ownership of:
(1) securities of any corporation
that are registered under Sections 12(b) or
12(g) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and that are
publicly traded as long as Employee is not
part of any control group of such corporation;
(2) any securities of a partnership,
trust, corporation or other person so long as
Employee remains a passive investor in that
entity and does not become part of any control
group thereof and so long as such entity is
not, directly or indirectly, in competition
with the Company;
(3) corporations now owned or
controlled by Employee directly or indirectly;
and
(4) securities of the Company.
1.6. Power and Authority.
1.6.1. Until the Effective Date, Employee
shall be Chairman of the Board and Chief Executive
Officer of the Company and a member of the supervisory or
comparable committee (including any Executive Committee)
(the "Supervisory Committee") of the Board of Directors
of the Company (the "Board"). As of the Effective Date,
Employee shall be Chairman of the Board and Chief
Executive Officer of CEI and a member of the Supervisory
Committee of the Board of Directors of CEI. Employee
agrees and acknowledges that the Board has determined
that Employee shall have the right to approve the
selection of the Chief Operating Officer and Chief
Financial Officer (which approval shall not be
unreasonably withheld). Subject to the Board's
responsibilities under Delaware law, the Chief Operating
Officer and the Chief Financial Officer shall report to
Employee on a day to day basis. Employee agrees and
acknowledges that approval of all actions of the
Supervisory Committee require the unanimous affirmative
vote of the four members of the Supervisory Committee
designated by the Strategic Investors and MGM or as
otherwise specified in the 1994 Stockholders Agreement or
the 1993 Stockholders Agreement, as the case may be.
1.6.2. The Company may from time to time
appoint Employee to one or more offices of the Company.
Employee agrees to accept such offices if consistent with
his stature and experience and with the type of one or
more of its offices with the Company previously held by
Employee.
1.6.3. In the event that, after the
Effective Date, CEI is a party to any merger or
consolidation transaction involving an Affiliate,
Employee shall be the Chairman of the Board and Chief
Executive Officer of the surviving entity in such
transaction or, in the event of a consolidation or
similar transaction with an Affiliate, the ultimate
parent of CEI.
1.6.4(A). Employee's Creative Decisionmaking.
Employee (and no other person without Employee's consent)
shall have the sole and ultimate authority and
responsibility to make the creative decisions for the
Company on developing and producing Carolco Pictures
(including without limitation the sole and exclusive
right to exercise greenlighting authority in accordance
with subparagraph 1.6.4(C) hereof) consistent with the
terms and conditions of this Agreement. This authority
shall include, without limitation, the creative decisions
for acquiring and developing properties, attaching all
creative elements including writers, producers,
performing talent, directors and cast and crew,
greenlighting films under subparagraph 1.6.4(C) below by
setting the start date for principal photography,
approving the production of Carolco Pictures and
supervising all development, preproduction and production
activities. Employee shall present to the Board the
information about the key creative elements in a film as
it becomes available to Employee.
1.6.4(B). Production Fund. At such time as
Employee reasonably elects, but in any event before the
beginning of each calendar year, Employee shall submit to
the Board for its approval the annual budget and cash
flow schedule (collectively, the "Annual Budget") for the
Company for the following year. The Annual Budget shall
set out allocations for overhead, contingencies/reserves,
debt service and development and production activities of
the Company. The amounts allocated in the Annual Budget
for production expenditures and commitments shall be
referred to as the "Production Fund" for a given year.
In determining the Annual Budget and the Production Fund,
Employee and the Board shall take into account the
financial condition of the Company, its projected cash
flows for the following two years, the production
financing arrangements for films to be produced in the
coming year and the Company's production, pay-or-play and
other commitments from prior years. The amount of the
Production Fund shall be based on the number of films
estimated to start production during such year by the
Company, and their projected costs and revenues, both on
an aggregate and an individual basis. The Production
Fund shall include the amounts for pay-or-play talent
commitments, then known or anticipated, relating to the
films to be produced during the year.
If Employee does not have specific information
about one or more films to be produced during such year,
he will nonetheless have the right to have amounts
allocated under the Production Fund for such films.
Employee, however, shall specify the budget ranges of
such films, their anticipated pay-or-play commitments and
ranges of projected costs and revenues based on
historical averages. Employee shall inform the Board
with respect to the creative and more specific financial
elements as they become available. Employee shall have
the rights set forth under subparagraph 1.6.4(C) on the
greenlighting of such projects provided that the other
terms and conditions of this Paragraph 1.6.4 are met.
Employee shall have the right to substitute other
projects for such projects provided that the other terms
and conditions of this Paragraph 1.6.4 have been met with
respect to the substitute projects.
Any overages or additions to the Production
Fund as well as overages or enhancements for a particular
film above the final budget which was previously approved
by the completion guarantor (including the applicable
budgeted contingency) as presented or as approved, if
applicable, by the Board shall require Board approval.
Employee will deliver to the Board or the
Supervisory Committee as soon as practicable after the
Effective Date the proposed Annual Budget and Production
Fund for the Company for the period through December 31,
1995; provided, however, that if the Merger is not
consummated prior to December 31, 1994, Employee shall
submit to the Board for its approval the Annual Budget in
accordance with this subparagraph 1.6.4(B). Employee and
the Board or the Supervisory Committee shall discuss
throughout the year the production plans for the
following year in planning for the Production Fund for
such following year.
1.6.4(C). Greenlighting. Employee shall not
incur significant preproduction expenditures or authorize
the start of principal photography of a film unless the
Company is in material compliance with the Annual Budget
at that time and the other terms and conditions under
this Paragraph 1.6.4 have been complied with. Employee
shall present to the Board as soon as available (but in
no event later than the time when Employee expects to
commit the Company to significant preproduction
expenditures) information about the production financing
for the film including the film's budget, cash flow
schedule, completion guarantor, bank financing
arrangements consistent with the Annual Budget and the
Company's applicable bank financing commitments, pre-
sales, a range of projections for the film's revenues to
the Company, distribution arrangements, material terms of
major creative agreements and any pay-or-play commitments
that are or may be involved. Unless otherwise approved
by the Board or the Supervisory Committee in the Annual
Budget or otherwise, the bank production financing shall
be approximately 70%, but not less than 65%, of the
budgeted negative cost of each film plus 100% of the
interest and financing costs. Before Employee approves
the start of principal photography for a particular film,
(a) Employee shall have obtained, no later than 60 days
before the start of principal photography, signed written
commitments (including output agreements and deal memos)
for foreign theatrical, video and television equaling at
least 50% of the budgeted negative cost of the film
(including contingency) and a bank financing commitment,
subject to acceptable collateral documentation and other
customary terms and conditions, in an amount equal to the
budgeted production financing for such film (the "Pre-
sale and Bank Commitment Test") and (b) Employee shall
have informed the Board or the Supervisory Committee that
in his good faith opinion the Company will be able to
obtain through foreign and domestic advances and
guarantees sufficient collateral for the bank to fully
finance the projected bank financing. If Employee
approves the start of principal photography after the
above conditions have been met but before all the
conditions subsequent to the bank commitments have been
satisfied, the consent of the Board or Supervisory
Committee is necessary prior to any further expenditures
for the project, if such conditions subsequent have not
then been satisfied, at each of the following events:
(a) the incurrence of preproduction expenditures in
excess of $3,000,000 (excluding the pay-or-play
commitments which will be governed by the terms of
Paragraph 1.6.4(D) hereof and, for the avoidance of
doubt, Development Expenses which shall be governed by
Paragraph 1.6.4(G) hereof), (b) the start of principal
photography of the film and (c) the point at which the
Company estimates it will have expended approximately 50%
and 100% of its budgeted equity contribution to the
project.
If, after Employee approves the start of
principal photography, the Board or the Supervisory
Committee determines not to proceed to production of the
project, then the following shall occur: (i) in the
event of abandonment or postponement of the project,
Employee shall not become entitled to "Producer's Fees"
under Paragraph 2.2 hereof unless such project is
subsequently reinstated by the Company and produced as a
Covered Picture; and (ii) in the event of a sale by the
Company of all or a portion of the Company's right, title
and interest in the project in such a manner so as to
result in the project not being a Covered Picture and in
which agreements with talent are assumed by the third
party or otherwise attached to the project, Employee
shall be attached to the project on the terms and
conditions hereunder (subject to Employee's services
being rendered on a non-exclusive basis and subject to
Employee's primary responsibilities to the Company). The
obligation set forth in clause (ii) of the preceding
sentence shall be subject to the Pre-sale and Bank
Commitment Test remaining satisfied at the time that the
Board or the Supervisory Committee makes its
determination not to proceed to production with the
project and there being no material adverse change at the
time of such determination in the film budget relating to
the project which had previously been presented to the
Board or the Supervisory Committee, other than material
adverse budget changes accepted by the third party
acquiring the project as part of the negotiated sale (but
without limiting such third party's right to renegotiate
deals, produce the film, etc., as it sees fit, including
producing the film at a lower cost than that projected by
the Company).
Each such film shall also have an aggregate
negative cost of no less than $20 million nor more than
$75 million.
The percentage of the budgeted negative costs
represented by bank production financing for the films
shall be adjusted in good faith, taking into account the
financial condition of the Company, if the Company merges
with any party in such a way as to reduce materially the
Company's ability to obtain "bankable" advances in
consideration for the grant of various distribution
rights.
Employee shall have the right to approve the
start of principal photography without obtaining prior
Board or Supervisory Committee approval for subsequent
films, provided that the terms and conditions of this
Paragraph 1.6.4 are complied with, and provided, further,
that the Company shall have received, for each prior film
produced by the Company, fully executed long-form written
commitments for foreign theatrical, video and television
advances and guarantees totaling at least 60% of the
"going-in" budget approved by the Company, the bank and
the completion guarantor. If Employee is unable to
achieve the 60% test on the Company's first few films as
a result of contractual limitations on the Company
obtaining advances and guarantees at then-current market
prices for the rights and/or territories available for
pre-sales, the 60% test shall be adjusted to reflect the
effect of such limitations. The details of such
adjustment shall be negotiated in good faith at that
time.
1.6.4(D). Pay-or-Play Commitments. The
Production Fund shall include amounts allocated for
talent pay-or-play commitments to be made in connection
with film projects identified in and covered by the
Production Fund whether identified as known projects or
dealt with as unspecified budgeted projects, including
any pay-or-play commitments entered into by the Company
in the ordinary course in connection with starting the
production of approved films. No other pay-or-play
commitments, term deals or other similar types of
commitments or arrangements not allocated as part of the
Production Fund may be made without Board approval.
1.6.4(E). Periodic Reviews. The Board or
Supervisory Committee and Employee shall meet as often as
the Supervisory Committee or the Board shall deem
reasonably appropriate. It is currently anticipated that
the meetings with the Supervisory Committee will be held
in no event less than monthly. At these meetings the
parties shall review the status of the commitments and
expenditures made under the Production Fund for that year
and whether adjustments are required in light of the then
estimated financial condition of the Company, the
availability of funds and the Company's production needs.
1.6.4(F). Incapacity. Notwithstanding the
foregoing, in the event of Employee's "incapacity"
because of physical or mental illness, another executive
of the Company, approved by Employee and the Board or
Supervisory Committee, shall be authorized to exercise
the authority granted Employee pursuant to subparagraph
1.6.4(C) hereof and make creative decisions with respect
to projects and Carolco Pictures during the time of
Employee's incapacity; provided, however, that if as a
result of Employee's "incapacity" he is unable to approve
the appointment of such executive, such appointment shall
be made solely by the Board or Supervisory Committee.
1.6.4(G). Development Fund.
(i) The Company shall provide a
development fund (the "Development Fund") in an
amount to be specified in the Annual Budget, but in
any event not less than $10,000,000 during each year
of the Term. Development Fund monies may be used
for "Development Expenses" (as defined below) in
connection with development activities on "Projects
in Development" (as defined below). Employee may
commit and expend monies for Development Expenses as
Employee shall determine in his sole discretion;
provided, however, that no more than $3,000,000 may
be committed or expended for Development Expenses on
any Project in Development in any one year without
the consent of the Board or the Supervisory
Committee. Notwithstanding the foregoing, Employee
may commit or expend no more than $3,500,000 on a
single Project in Development in any one year
without the consent of the Board or the Supervisory
Committee (excluding any pay-or-play commitments
other than as provided in subparagraph 1.6.4(D)
hereof).
(ii) If in any calendar year of the
Term Employee has reached a cap on Development Funds
that may be committed or expended during that year
but Employee desires to commit to a Project in
Development for the next year that will require
expenditures in the following year, Employee may do
so on a reasonable basis and the amount so committed
or expended shall be charged to the amount of
Development Funds available to Employee in the next
year. Any Development Funds not committed or
expended during a year may be carried forward into
future years until committed.
(iii) If a Project in Development is
set for production, then the amount of Development
Expenses paid in connection with such Carolco
Picture during the period of time that the Carolco
Picture was a Project in Development shall be added
back into the pool of Development Funds available to
Employee, subject to the limitations set forth in
subparagraphs 1.6.4(G)(i) and 1.6.4(G)(v) hereof and
only if the Company is to be reimbursed for such
Development Funds out of the negative cost of the
Carolco Picture. Development Expenses that have
been added back pursuant to this subparagraph shall
be treated as if they were never committed or
expended for the purpose of determining whether the
yearly limit as provided in subparagraph 1.6.4(G)(i)
hereof has or is being reached.
(iv) When an idea or literary
material is set up for development by Employee at
the Company and Employee causes the Company to
expend any monies on an idea or literary material,
it shall be referred to herein as a "Project in
Development." As used in this Agreement, "set for
production" shall mean the point of commencement of
"pre-production" (as such term is customarily
understood by companies in the U.S. motion picture
industry); and "Development Expenses" shall mean all
sums spent on a Project in Development prior to the
time it is set for production excluding pay-or-play
commitments, which shall be treated as part of the
Production Fund for purposes of this Agreement.
(v) Notwithstanding subparagraphs
1.6.4(G)(ii) and 1.6.4(G)(iii) hereof, the monies
available to Employee for commitments or
expenditures under the Development Fund shall not
exceed $15,000,000 in any one year of the Term.
1.7. Confidentiality. Employee acknowledges that
in furnishing his Services to the Company, he will,
through the Term, come into close contact with many
confidential affairs of the Company, including
information about costs, profits, markets, sales,
products, key personnel, pricing policies, operational
methods, technical processes, other business affairs and
methods, plans for future development and other
information not readily available to the public.
Employee further acknowledges that the Services to be
performed by him under this Agreement are of a special,
unique, unusual, extraordinary and intellectual
character. Employee further acknowledges that the
business of the Company is international in scope, that
its products are marketed throughout the world, that the
Company competes in nearly all of its business activities
with other organizations that are or could be located in
nearly any part of the world and that the nature of
Employee's Services, position and expertise are such that
they are capable of competing with the Company from
nearly any location in the world. In recognition of the
foregoing, Employee covenants and agrees that he will:
(A) keep secret all material confidential
matters of the Company that are not otherwise in the
public domain and will not intentionally disclose
them to anyone outside of the Company, either during
or after the Term, except with the Company's written
consent; and
(B) deliver promptly to the Company, on
termination of the Term or at any other time the
Company may so request, at the Company's expense,
all memoranda, notes, records, reports and other
documents (and all copies thereof) relating to the
Company's business that Employee obtained while
employed by, or otherwise serving or acting on
behalf of, the Company that Employee may then
possess or have under his control.
1.8. Indemnification. Employee shall be entitled
through the Term to the benefit of the indemnification
provisions contained on the date hereof in the Bylaws of
the Company and any applicable Bylaws of any Affiliate,
notwithstanding any future changes therein, to the extent
permitted by applicable law at the time of the assertion
of any liability against the Company or any Affiliate, as
the case may be.
1.9. Picture Cuts. The version of a Carolco
Picture delivered by Employee shall be the version of
such Carolco Picture that the Company shall distribute
subject only to (i) the rights of any person who has been
accorded final cut by the Company as approved by Employee
and (ii) the following:
(A) The Company shall have the right to
cut the final version delivered by Employee to the
minimum extent necessary to make the Carolco Picture
comply with the following: (i) to meet censorship
requirements for foreign distribution, (ii) to
comply with law, (iii) to comply with standards and
practices requirements for distribution on free
television (including standard broadcast and basic
cable but excluding all forms of pay television as
well as pay-per-view), (iv) to meet airline
specifications for distribution to airlines and (v)
to meet any specifications contained in agreements
entered into by the Company with third parties that
have been approved by Employee.
(B) If the Company proposes to make any
of the cuts provided for in subparagraph 1.9(A), the
Company shall provide Employee the first opportunity
to make any such cuts.
In the event that Employee's employment is
terminated hereunder, Employee, at Employee's option, may
elect to release the Company from its obligation to
accord credit to Employee pursuant to Paragraph 1.3
hereof. In such event, Employee shall not have final cut
rights. In all other instances, Employee shall have
final cut rights, subject only to (i) the rights of any
person who has been accorded final cut by the Company as
approved by Employee and (ii) the provisions of
subparagraphs 1.9(A) and 1.9(B) hereof. The Company
shall have the right to accord Employee credit if in fact
Employee has exercised final cut rights.
1.10. Subsequent Productions. If (i) this
Agreement expires by its terms on December 31, 1997 and
Employee and the Company do not enter into a new
employment agreement and (ii) at any time within the
Subsequent Production Period (as defined below) the
Company or any successor in interest to the Company (a
"Production Entity") intends to produce or causes to be
produced a theatrical or television remake, sequel or
prequel (a "Subsequent Production") of (x) any motion
picture produced by the Company prior to the commencement
of the Term (excluding all motion pictures produced by
LIVE or any of its wholly owned subsidiaries prior to the
Effective Date) or (y) any Credit Picture (collectively,
"Original Pictures"), then the following shall apply:
(A) For purposes of this Paragraph,
"Subsequent Production Period" shall mean the later
of (i) five years following the expiration of this
Agreement by its terms and (ii) seven years
following the initial theatrical release of (x) an
Original Picture or (y) a Subsequent Production
immediately preceding a related Subsequent
Production (a "Preceding Production").
Notwithstanding the foregoing, a Subsequent
Production Period shall recommence with the release
of each succeeding Subsequent Production.
(B) With regard to Subsequent Productions
intended for initial theatrical release (which shall
include theatrical motion pictures released
initially to pay-per-view prior to theatrical
release) ("Theatrical Subsequent Productions"), the
Production Entity shall notify Employee in writing
of its intent to produce or cause the production of
each such Theatrical Subsequent Production and
specifying the estimated time frames and budget for
such Theatrical Subsequent Production and shall
offer Employee the first opportunity to render
services as producer or executive producer (at
Employee's option) thereof on terms to be negotiated
in good faith, taking into account Employee's
stature in the motion picture industry at the time.
Notwithstanding the foregoing, (i) the financial
terms of any such agreement shall be no less
favorable to Employee than the compensation
provisions applicable to the Original Picture or, if
there was a Preceding Production, then the Preceding
Production, but in no event shall be less than the
compensation provisions of Paragraph 2.2 hereof,
(ii) Employee shall be entitled to the credits set
forth in Paragraph 1.3 hereof, (iii) subject to
financial parameters to be determined by the
Production Entity, Employee shall be entitled to
approval of all key creative elements and key crew
with respect to each Theatrical Subsequent
Production, (iv) Employee shall be entitled to the
cutting rights set forth in Paragraph 1.9 hereof,
(v) Employee shall be entitled to be consulted fully
and in good faith with regard to the marketing and
distribution of each Theatrical Subsequent
Production and (vi) Employee's producing or
executive producing services in connection with a
Theatrical Subsequent Production shall be rendered
on a non-exclusive basis.
The Production Entity and Employee shall
attempt in good faith to reach an agreement with
respect to Employee's services in connection with a
Theatrical Subsequent Production as quickly as
possible. If, however, the Production Entity and
Employee are unable to reach such an agreement
within 45 days following Employee's receipt of
notice that the Production Entity intends to produce
or cause the production of a Theatrical Subsequent
Production, then (i) Employee shall have no rights
with respect to such, or any related succeeding,
Theatrical Subsequent Production and (ii) the
Production Entity shall be free to engage another
producer and executive producer with respect to each
such Theatrical Subsequent Production and the
Production Entity and Employee shall have no further
obligations to each other with respect thereto,
except that with respect to each Theatrical
Subsequent Production Employee shall be entitled to
receive "passive" compensation (with no obligation
to render any services whatsoever) of $333,333,
which shall be payable upon the commencement of
principal photography, plus 5% of 100% of the "net
profits" derived from the exploitation of each such
Theatrical Subsequent Production related to the
Original Picture. The definition of "net profits"
will be subject to good faith negotiation within
customary parameters in the motion picture industry
at the time and such negotiations shall include,
without limitation, caps on distribution and talent
fees and "pre-break participations."
The Company shall have the sole and exclusive
right to approve all financial aspects of the
Subsequent Production and to exercise greenlighting
authority with respect thereto.
Notwithstanding the foregoing, if the
Production Entity and Employee are unable to reach
an agreement with respect to Employee's services in
connection with a Theatrical Subsequent Production
pursuant to this subparagraph 1.10(B) and, with
respect to such Theatrical Subsequent Production,
the (i) principal cast or director changes or
(ii) all in proposed production budget is increased
by 25% or more, then the Production Entity shall
notify Employee in writing of such change and shall
offer Employee the opportunity to render services as
producer or executive producer (at Employee's
option) thereof on terms in accordance with this
subparagraph 1.10(B); provided, however, that if the
engagement of Employee with respect to such
Theatrical Subsequent Production would result in a
breach of a contractual obligation between the
Production Entity and any executive producer or
producer other than Employee, then the Production
Entity shall have no obligation to Employee with
respect thereto.
(C) With regard to Subsequent Productions
(including, without limitation, movies, mini-series
and episodic series) intended for initial release on
television (including, without limitation, free,
broadcast, basic cable, pay and pay-per-view
television, but excluding theatrical motion pictures
released initially to pay-per-view prior to
theatrical release), Employee shall be entitled to
"passive" television payments, which will be
negotiated in good faith taking into account
Employee's stature in the motion picture industry at
that time.
(D) The rights of Employee under this
Paragraph are (i) subject to any rights granted to
any third parties in connection with the production
of the Original Picture or Preceding Production that
would restrict or prohibit the granting of the
rights under this Paragraph to Employee and (ii)
available to Employee only if Employee is available
to render the services described in this Paragraph
and is actively engaged in the entertainment
industry in substantially the same capacities as he
is engaged as of the date hereof or is active as a
producer or executive producer in the motion picture
industry. Employee agrees that he shall render
substantially the same producing or executive
producing services in connection with a Theatrical
Subsequent Production as he rendered on a Credit
Picture.
2. Compensation.
As compensation and consideration for all
Services provided by Employee during the Term pursuant to
this Agreement, the Company agrees to pay to Employee the
compensation set forth below.
2.1. Fixed Annual Compensation. In consideration
for Employee's Services hereunder, the Company shall pay
to Employee salary ("Fixed Annual Compensation") at the
rate of $2,250,000 per annum in 1994, $2,500,000 per
annum in 1995, $2,750,000 per annum in 1996 and
$3,000,000 in 1997; provided, however, that all Fixed
Annual Compensation paid to Employee pursuant to
Paragraph 2.1 of the May 1993 Agreement shall be credited
to Fixed Annual Compensation payable to Employee under
this Paragraph 2.1. Fixed Annual Compensation payable to
Employee by the Company hereunder shall be paid at such
times and in such amounts as the Company may designate in
accordance with the Company's usual salary practices, but
in no event less than once monthly.
2.2. (A) Producer's Fees. In addition to the
Fixed Annual Compensation, Employee shall be entitled to
receive such producer's fees (the "Producer's Fees") as
provided below:
(i) Employee shall be entitled to a
fee of $1,000,000 (the "Fixed Fee") for each
"Covered Picture" (as defined below) as a non-
refundable minimum advance against the Producer's
Fees set forth in subparagraph 2.2(A)(ii) hereof,
which shall vest and be payable as follows:
$500,000 upon commencement of principal photography,
$250,000 upon completion of principal photography
and $250,000 upon delivery of the applicable Covered
Picture.
(ii) With respect to each Covered
Picture, Employee shall be entitled to receive the
following contingent fees (the "Contingent Fees"):
(a) 1% (the "One Percent Fee")
of "Gross Rentals" (as defined below) computed
and paid retroactively to the first dollar of
Gross Rentals until the Company's receipts from
Gross Rentals equal "Actual Break-Even" (as
defined below) for the Covered Picture;
provided, however, that any portion of the One
Percent Fee payable on Gross Rentals in excess
of the Fixed Fee shall be payable solely out of
the Company's receipts (other than Ancillary
Gross Revenues) from the exploitation of the
Covered Picture in excess of Actual Break-Even;
plus
(b) 3% of Gross Rentals (the
"Three Percent Fee") commencing at Actual
Break-Even and payable solely out of the
Company's receipts (other than Ancillary Gross
Revenues) from the exploitation of the Covered
Picture in excess of Actual Break-Even; plus
(c) 10% of 100% of "Ancillary
Gross Revenues" (as defined below) (the
"Ancillary Gross Participation").
Notwithstanding the foregoing, 100% of the
Ancillary Gross Revenues shall be retained by
the Company and shall be applied toward the
calculation of Actual Break-Even. At such
time, if ever, that Actual Break-Even has been
achieved with respect to a Covered Picture,
Employee shall be entitled to receive the
Ancillary Gross Participation on all Ancillary
Gross Revenues retroactive to the first dollar
of Ancillary Gross Revenues, and the Ancillary
Gross Participation shall be accounted for and
paid separately on a non-cross-collateralized
basis. The Ancillary Gross Participation shall
be payable solely out of the Company's receipts
from Ancillary Gross Revenues from the Covered
Picture in excess of Actual Break-Even.
(iii) Producer's Fees under this
Paragraph 2.2 shall be payable, at Employee's
election, which may be made at any time or from time
to time prior to the time that payment is received
by Employee, in either cash or shares of the common
stock, par value $.01 per share (the "Common
Stock"), of the Company valued at the Market Price
(as defined below) on the date of such election.
Notwithstanding the foregoing, any Contingent Fees
that Employee elects to be payable in cash shall not
be payable to Employee except out of the Company's
receipts from the exploitation of the Covered
Picture in excess of Actual Break-Even. Employee
agrees that until such time as the repayment of the
second amended and restated non-recourse secured
promissory notes made by New CIBV in favor of each
of the Strategic Investors dated as of July 31, 1994
(the "Amended Notes") has occurred in full, Employee
shall elect to receive the Three Percent Fee in
cash. Employee hereby directs the Company to make
payments of one-half of the Three Percent Fee on a
basis that is after-tax from Employee's point of
view directly to the Strategic Investors on a pro
rata basis to satisfy any amounts due to each of
them in the Amended Notes in accordance with the
terms of such Amended Notes.
The Company shall account to Employee no less
frequently than quarterly with respect to Contingent Fees
payable to Employee, which quarterly accounting shall
commence upon the release of a Covered Picture and shall
continue for a period of four years thereafter.
Following the expiration of said four-year period, the
Company shall account to Employee not less frequently
than semi-annually for a period of two years, and not
less frequently than annually thereafter with respect to
each Covered Picture. Statements, which shall be
accompanied by payments of any amounts shown to be due
Employee, shall be delivered to Employee within 45 days
following the close of the applicable accounting period
(60 days with respect to annual accounting). Employee
shall have the right, exercisable not more frequently
than once annually with respect to each Covered Picture,
to audit the Company's books and records with respect to
each Covered Picture, which audits shall be performed by
a reputable firm of certified public accountants and
which shall not unreasonably interfere with the operation
of the Company's business.
(B) Certain Adjustments. Notwithstanding
the non-refundability of the Fixed Fee, in the event
that the final costs of a Covered Picture are in
excess of the Board approved budget for such Covered
Picture by the greater of (i) 10% of such approved
budget (if the approved budget already has a 10%
contingency factor, another contingency shall not be
added back for the purposes of this subparagraph
2.2(B)) and (ii) the contingency required by the
completion bonding company, if any, for such Covered
Pictures (such greater number hereinafter referred
to as the "Contingency"), Employee shall be required
to return promptly (or, except to the extent
previously deducted, otherwise deduct from future
Contingent Fees) to the Company up to $250,000 on
the basis of $1.00 for each $10.00 of cost overruns
above the Contingency. In the event such cost
overruns exceed $2,500,000, then one-tenth of such
additional cost overruns up to a maximum additional
cost overrun of $2,500,000 shall be added to the
calculation of Actual Break-Even. After the
Company's receipts from the exploitation of a
Covered Picture exceed Actual Break-Even, Employee
shall be entitled to (i) receive all amounts by
which the Contingent Fees for a Covered Picture have
been reduced pursuant to this subparagraph (B), (ii)
reduce Actual Break-Even by the amount by which it
was increased by the provisions of this subparagraph
(B) as set forth in the immediately preceding
sentence, (iii) receive the One Percent Fee (if
applicable) as if Actual Break-Even had not been so
increased and (iv) receive the Three Percent Fee (if
applicable) as if Actual Break-Even had not been so
increased. For purposes of this subparagraph (B),
the following costs shall be excluded when
determining whether the final costs of a Covered
Picture are in excess of the Board approved budget
for such Covered Picture or the Contingency: costs
due to force majeure (including without limitation
unusual inclement weather), enhancements/changes
approved by the Board or Supervisory Committee,
losses covered by insurance to the extent that such
insurance recoveries are received by the Company,
costs due to third-party breach, laboratory delays,
and other items customarily excluded from over-
budget penalties in agreements for producers of
Employee's stature in the motion picture industry.
(C) Definitions and Other Matters. For
purposes of this Agreement:
(i) "Actual Break-Even" for each
Covered Picture shall mean the sum of the Company's
actual production costs, actual interest on actual
production costs (excluding overhead) and other
related financing fees and costs (including
reasonable loan commitment fees), overhead in an
amount equal to 71/2% of the direct cost budget (which
overhead charges shall not be computed on interest
and financing charges or on profit participation
calculated on a gross basis) ("Pre-break
Participation"), actual out-of-pocket distribution
costs (including residuals), Pre-break
Participation, the Fixed Fee and, in the event of
certain cost overruns as described in subparagraph
2.2(B) hereof, up to $250,000 per picture.
(ii) "Ancillary Gross Revenues"
shall mean 100% of all amounts received by the
Company from or in connection with the exploitation
of merchandising, publishing, soundtrack record
and/or music publishing rights and similar rights in
connection with a Covered Picture. To the extent
the Company licenses or grants to a third party the
right to exploit merchandising, publishing,
soundtrack record and/or music publishing rights or
similar rights to a Covered Picture, Ancillary Gross
Revenues shall mean the amounts remitted by such
third party licensee(s) or distributor(s) to the
Company, rather than the amounts received by such
licensee(s) or distributor(s) from the exploitation
of such rights.
(iii) "Covered Pictures" shall mean
all Carolco Pictures (excluding Turnaround Projects
(as hereinafter defined)) as to which principal
photography commences during the Term.
(iv) "Gross Rentals" for each
Covered Picture shall mean 100% of all amounts
received by or credited to the account of the
Company or if the Company does not directly
distribute a Covered Picture in any territory,
market or medium, then all amounts received by or
credited to the account of the Company's licensees
or distributors (or sublicensees or subdistributors,
as applicable) from any and all sources whatsoever
throughout the Universe from or in connection with
the distribution, exhibition, licensing and other
exploitation of such Covered Picture, other than
amounts received by exhibitors or other entities
engaged in retail sales to the general public with
respect to the rights granted or licensed to such
entities. Gross Rentals shall not include Ancillary
Gross Revenues. All amounts credited to the account
of the Company or a licensee, distributor,
sublicensee or subdistributor shall be included in
Gross Rentals in the amounts set forth in a
statement provided by such entities to the Company.
To the extent that the Company, any distributor,
sub-distributor, licensee or sublicensee of the
Company grants or licenses rights in a Covered
Picture for a territory or medium on an "outright
sale" basis (i.e., for a flat sum without any
obligation on the part of the grantee/licensee to
account to the grantor/licensor with respect to such
grantee/licensee's revenues or expenses), then the
amount received by such grantor/licensor in
connection with such outright sale shall be the
amount included in Gross Rentals, rather than the
receipts of the grantee/licensee. It is the intent
of the foregoing that Gross Rentals be measured "at
the source" (i.e., at the lowest level of
distribution above exhibition or retail). For
example, if a licensee or distributor of the Company
uses a sublicensee or subdistributor, then Gross
Rentals would be measured on the basis of revenue
received by such sublicensee or subdistributor.
Gross Rentals shall include advances and security
deposits, provided that advances/security deposits
that are refundable or returnable shall not be
deemed Gross Rentals until no longer refundable or
returnable. Notwithstanding the foregoing,
refundable/returnable advances and deposits shall be
included when received solely for purposes of
computing interest on the cost of production.
(v) "Market Price" shall mean the
last reported sales price regular way or, in case no
such reported sale takes place on such day, the
average of the closing bid and ask prices for such
day, in each case on the principal national
securities exchange or in the NASDAQ National Market
System to which the shares of Common Stock of the
Company (or its successor, if any) are listed or
admitted to trading or, if not listed or admitted to
trading, the average of the closing bid and ask
prices of the Common Stock in the over-the-counter
market as reported by NASDAQ or any other quotation
service, or if the common stock is not listed on
NASDAQ or any other quotation service, the average
of the closing bid and ask prices as furnished by
two members of the National Association of
Securities Dealers Inc. selected from time to time
by the Board for that purpose. In the absence of
one or more such quotations, the Board shall
determine the current market price on the basis of
such quotations as it considers appropriate or in
the case of securities which are not quoted, the
Board shall determine the current market price based
upon such information and advice as it considers
appropriate.
2.3. Turnaround Compensation. If during any year
of the Term the Company, because of its financial
condition, is (i) not expected to commence principal
photography on at least two Carolco Pictures in that year
and (ii) the Board or the Supervisory Committee elects
not to proceed to production of any Project in
Development submitted for production by Employee, then
Employee, upon notification to the Board or the
Supervisory Committee, shall be entitled to set the
project up for production elsewhere (a "Turnaround
Project") and Employee shall be entitled to receive a fee
equal to 50% of the aggregate executive producing and any
other fees paid to the Company for Employee's Services
after the Company has recouped its actual out-of-pocket
development expenses (including any interest) with
respect to a Turnaround Project (the "Turnaround
Compensation"); provided, however, that (i) Turnaround
Compensation shall be limited to two Turnaround Projects
in each calendar year during the Term, (ii) Employee's
services on the Turnaround Project shall be of an
incidental nature and pursuant to a loan-out or similar
arrangement and shall not interfere with Employee's
services to the Company other than in a de minimis
manner, (iii) Employee shall receive a sole or shared
executive producer, producer or co-producer credit and
the Company shall receive an "in association with"
credit, (iv) the Company shall be entitled to receive
such other payments as the Company customarily receives
for projects the Company places into turnaround and
(v) the Turnaround Project may not be offered to a third
party on terms more favorable to such third party than
the terms proposed to the Company at the time that the
Board or Supervisory Committee elected not to proceed.
The Board or Supervisory Committee shall establish
specific procedures and guidelines for implementation of
this arrangement reasonably acceptable in good faith to
Employee. Additional Turnaround Compensation shall be
subject to the approval of the Board or Supervisory
Committee. Turnaround Compensation under this Paragraph
2.3 shall be payable, at Employee's election, which may
be made at any time or from time to time prior to the
time that payment is received by Employee, in either cash
or shares of Common Stock valued at the Market Price on
the date of such election. Employee agrees that until
such time as the repayment of the Amended Notes has
occurred in full, Employee shall elect to receive the
Turnaround Compensation in cash. Employee hereby directs
the Company to make payments of 75% of the Turnaround
Compensation on a basis that is after-tax from Employee's
point of view directly to the Strategic Investors on a
pro rata basis to satisfy any amounts due to each of them
in the Amended Notes in accordance with the terms of such
Amended Notes.
2.4. Additional Incentive Compensation. In
addition to the Fixed Annual Compensation and the
Producer's Fees, Employee shall be entitled to receive
such additional incentive compensation ("Additional
Incentive Compensation") as is approved by the Board.
Additional Incentive Compensation may be in the form of
cash, securities of the Company, employee stock options
or a deferred compensation arrangement customarily
utilized for top management executives in the
entertainment industry. Additional Incentive
Compensation in the form of shares of Common Stock shall
be valued at the average reported sale price regular way
of the Common Stock on the New York Stock Exchange or if
the Common Stock is not listed on the New York Stock
Exchange, the last sale price of the Common Stock regular
way as reported in a composite published report of
transactions that includes transactions on the exchange
or other principal markets on which the Common Stock is
traded or, if there is no such composite report as to any
day, the last reported sale price, regular way (or if
there is no such reported sale on such day, the average
of the closing reported bid and ask prices) on the
principal United States trading market (whether a stock
exchange, National Association of Securities Dealers
Automated Quotation System or otherwise) on which the
Common Stock is traded for the ten consecutive days on
which the New York Stock Exchange is open for at least
one-half of its normal business hours ("Trading Days")
ending three Trading Days prior to the Effective Date.
If a deferred compensation arrangement is adopted,
Employee shall have the right to demand that amounts
accruing or to accrue for the benefit of Employee under
such deferred compensation arrangement be placed in a so-
called Rabbi Trust or similar arrangement. In addition,
the Company shall grant a lock box arrangement to
Employee to segregate the monies payable for payment of
Contingent Fees that Employee is entitled to receive from
the Company's receipts derived from a Covered Picture
pursuant to Paragraph 2.2 hereof. Employee and the
Company shall enter into agreements to effectuate the
foregoing as may be required by the financiers and
distributors of such Covered Picture.
2.5. Employee Business Expense Reimbursement.
Employee shall be entitled to an aggregate of $7,500 per
month for employee business expenses in excess of those
for which Employee makes an accounting to the Company.
To the extent Employee does not utilize all or any
portion of the foregoing expense reimbursement account in
any given month, the unused amount shall be cumulated and
carried forward from month-to-month until used. Employee
shall also be entitled to reimbursement of all reasonable
and customary business travel and entertainment expenses
for which Employee makes an adequate accounting to the
Company. The determination of the adequacy of the
accounting and reasonableness of the expenses shall be
within the reasonable discretion of the Company's
independent certified accountants taking into
consideration the substantiation requirements of the
Internal Revenue Code of 1986, as amended (the "Code").
If verification is provided, the nondeductibility of such
expenses for tax purposes shall not affect Employee's
right to reimbursement.
2.6. Restructuring Expenses. Employee shall be
entitled to reimbursement of legal and accounting fees
and expenses incurred in connection with the execution
and delivery of the May 1993 Agreement, this Agreement
and the transactions contemplated by each of the
financial restructuring of the Company consummated on
October 20, 1993 and the Merger Agreement, but, in any
event, not in excess of $500,000. Employee shall submit
to the Company supporting information reasonably
requested about such fees.
2.7. Registration Rights. Employee or his
Affiliates have been issued unregistered shares of Common
Stock of the Company and, as a result of the Merger, will
be issued shares of common stock of CEI that are subject
to the resale provisions of Rule 145 under the Securities
Act of 1933, as amended (the "Securities Act"). The
Company agrees to use its best efforts to register under
the Securities Act any such shares upon Employee's
demand. The Company may satisfy this obligation by
causing such shares to be registered in connection with
any registration statement for the Common Stock or other
securities of the Company. All of the costs of such
registration (except any underwriting discounts should
Employee determine to seek an underwriter for such shares
in connection with such registration) shall be borne by
the Company and the parties shall negotiate such cross
indemnifications, standstill agreements and other
provisions as are typically negotiated in registration
agreements of similar kind.
2.8. Life Insurance Policy. The Company shall
provide Employee with a split rate life insurance policy
for his benefit in the amount of not less than
$25,000,000 (the "Life Insurance Policy"). The Company
agrees to make all premium payments under the Life
Insurance Policy. Employee shall be entitled to name the
beneficiary or beneficiaries of such policy. Upon the
death of Employee during the Term of this Agreement, and
upon the payment of benefits pursuant to the Life
Insurance Policy, such benefits shall be allocated as
follows: (i) the Company shall be entitled to
reimbursement of all premiums actually paid under such
policy plus 6% per annum interest on such amounts
actually paid, and (ii) the beneficiary or beneficiaries
named under such policy shall be entitled to receive the
remainder of such benefits. Employee agrees that the
Company may secure additional insurance on Employee's
life for the benefit of the Company and that Employee
shall cooperate with the Company in connection with the
application process for such insurance.
2.9. Directors and Officers Liability Insurance.
Employee shall be entitled to the protection of any
insurance policies the Company may elect to maintain
generally for the benefit of its directors and officers
against all costs, charges and expenses whatsoever
incurred or sustained by Employee or his legal
representatives in connection with any action, suit or
proceeding to which Employee (or his legal
representatives or other successors) may be made a party
by reason of Employee being or having been a director or
officer of the Company or Employee serving or having
served any other enterprise as a director, officer or
employee at the request of the Company, provided that the
Company shall use its best efforts to cause to be
maintained in effect for not less than six years from the
date of a Change in Control (as defined in Paragraph 3.5
hereof) policies of directors' and officers' liability
insurance of at least the same coverage as those
maintained by the Company as of January 1, 1992, and
containing terms and conditions that are no less
advantageous than such policies. Notwithstanding the
foregoing, the Company shall not be obligated to pay any
premium on such insurance policies in excess of the
premium the Company pays as of the date of execution of
this Agreement.
2.10. Fringe Benefits. In addition to the
foregoing, Employee shall receive and shall continue to
receive such fringe benefits ("Fringe Benefits") as he
now enjoys and as shall become available in the future to
those with similar executive positions in the motion
picture industry, including without limitation (i)
security guards and security services for Employee and
his principal and second residence, and maintenance of
security systems at Employee's principal and second
residences, (ii) floral, plant and gardening services at
Employee's offices, principal residence and second
residence, (iii) club memberships (including initiation
fees, annual dues and other recurring expenses) for
country clubs, yacht and beach clubs, fraternal and
business organizations and any other clubs in an amount
not to exceed $20,000 in each year of the Term, (iv)
first-class air travel for domestic trips and private air
travel (if first class air travel is not practicable in
Employee's sole judgment) for all trips made by Employee
outside of the United States in connection with
Employee's Services to the Company, (v) all travel
expenses of Employee's companion, children and a member
of Employee's household staff incurred while traveling
with Employee in connection with Employee's Services to
the Company, (vi) chauffeured limousines and similar
transportation, (vii) lease of an automobile of
Employee's choice for the use of Employee and his family
and reimbursement for all expenses incurred in connection
with such automobiles and (viii) reimbursement of
Employee's personal legal and accounting expenses in an
amount not to exceed $250,000 in each year of the Term.
2.11. General. Employee shall be entitled to
participate in any profit-sharing, pension, stock option,
stock ownership, health (including without limitation
participation in the Exec-U-Care Plan), vacation,
insurance or other plans, benefits or policies available
to the employees of the Company on the terms generally
applicable to such employees.
2.12. Grant of Stock Options. The Company and
Employee agree that all stock options to purchase Common
Stock granted to Employee in connection with the May 1993
Agreement are terminated. Simultaneously with the
execution of this Agreement and under and pursuant to the
terms of the 1989 Stock Option and Stock Appreciation
Rights Plan of Carolco Pictures Inc., as amended (the
"1989 Plan"), the Company and Employee have executed a
stock option agreement (the "Option Agreement")
consistent with the 1989 Plan reflecting a discretionary
option grant by a committee of the Board, all of whose
members are "disinterested persons" as that term is
defined in Rule 16b-3(c)(2)(i) of the General Rules and
Regulations under the Exchange Act, pursuant to which
Employee has been granted stock options to purchase
15,000,000 shares
of Common Stock at $0.40625 per share, of which 2,941,170
are immediately exercisable and the remainder shall vest
pro rata on a monthly basis during the Term. Each other
provision of the Option Agreement shall be unchanged from
that contained in the Stock Option Agreement, dated as of
May 3, 1993, between Employee and the Company. In the
event of any change in the Common Stock by reason of
stock dividends, stock splits, reverse stock splits,
spin-offs, mergers, recapitalizations, combinations,
conversions, exchanges of shares or the like or the
issuance of shares of Common Stock or any class of
securities directly or indirectly convertible into or
exchangeable for Common Stock without consideration or
for consideration per share less than 95% of the Market
Price on the date of such issuance, the number and kind
of shares subject to the stock options and the exercise
price of stock options to be received by Employee
pursuant to the Option Agreement shall be appropriately
adjusted. Notwithstanding the foregoing, if any person
other than Employee is reissued or granted stock options
in connection with the transactions contemplated by the
Merger Agreement at an exercise price less than $0.40625
per share (prior to adjustment thereunder), then the
stock options granted to Employee under the Option
Agreement shall be reissued, regranted or reset, at
Employee's election, at such lower price.
3. Termination.
If any of the events described in this
Paragraph 3 shall occur, Employee shall be entitled to
the benefits provided in Paragraph 4 hereof upon the
subsequent termination of Employee's employment during
the Term of Employment. As used in this Agreement, "Date
of Termination" means (i) if employment is terminated for
Disability (as defined in Paragraph 3.1 below), thirty
(30) days after Notice of Termination is given (provided
that Employee shall not have returned to the performance
of his duties on a full-time basis during such thirty
(30) day period), and (ii) if employment is terminated
for any other reason, the date specified in the Notice of
Termination (which, in the case of termination for
"cause" pursuant to Paragraph 3.3 shall not be less than
thirty (30) days, and in the case of a termination for
"good reason" pursuant to Paragraph 3.4 shall not be more
than sixty (60) days, respectively, from the date such
Notice of Termination is given); provided that, if within
thirty (30) days after any Notice of Termination is
given, the party receiving such Notice of Termination
notifies all other parties that a dispute exists
concerning the termination (a "Notice of Dispute"), the
Date of Termination for purposes of determining
Employee's continued right to compensation under
Paragraph 2.2 hereof shall be the date on which the
dispute is finally determined either by mutual written
agreement of the parties, by a binding arbitration award,
or by a final judgment, order or decree of a court of
competent jurisdiction (the time for appeal therefrom
having expired and no appeal having been perfected); and
provided further that the Date of Termination shall be
extended by a Notice of Dispute only if such notice is
given in good faith and the party giving such notice
pursues the resolution of such dispute with reasonable
diligence. Notwithstanding the foregoing, Employee shall
not be entitled to exercise his authority under
subparagraphs 1.6.4(A) and 1.6.4(C) hereof or to receive
Producer's Fees for any Covered Picture as to which
principal photography commences after the Notice of
Dispute unless, with respect to such Producer's Fees, it
is finally determined that a Notice of Termination by the
Company was wrongful. In addition, if the Company
acknowledges that it has terminated Employee other than
for "Cause" (as hereinafter defined), the Date of
Termination shall be the date upon which Employee
receives payments due to him under Paragraph 4.4(A)(i)
hereof. "Notice of Termination" means a written notice
that shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the
provision so indicated.
3.1. Employee Incapacity. If, as a result of
Employee's incapacity because of physical or mental
illness, Employee shall have been absent from his duties
with the Company on a full-time basis for six consecutive
months, and within 30 days after written Notice of
Termination is given he shall not have returned to the
full-time performance of his duties, the Company may
terminate Employee's employment for "Disability."
3.2. Retirement. Termination by the Company or
Employee of Employee's employment based on "Retirement"
shall mean termination in accordance with the Company's
retirement policy or policies, including early
retirement, generally applicable to its salaried
employees or in accordance with any retirement
arrangement established with Employee's consent, and in
the event of termination of Employee's employment based
upon Retirement, Employee shall be compensated in
accordance with such policies and arrangements.
3.3. Termination by the Company "For Cause."
Termination by the Company of Employee's employment for
"Cause" shall mean termination upon (i) the willful and
continued failure by Employee substantially to perform
his duties with the Company in good faith (other than any
such failure resulting from his incapacity because of
physical or mental illness or any such actual or
anticipated failure resulting from his termination for
Good Reason), after a demand for substantial performance
is delivered to him by the Board that specifically
identifies the manner in which the Board believes that
Employee has not substantially performed his duties in
good faith, or (ii) the willful engaging by Employee in
conduct that is demonstrably and materially injurious to
the Company, monetarily or otherwise. For purposes of
this Paragraph 3.3, no act, or failure to act, on
Employee's part shall be considered "willful" unless
done, or omitted to be done, by Employee not in good
faith and without reasonable belief that his action or
omission was in the best interest of the Company.
Notwithstanding the foregoing, Employee shall not be
deemed to have been terminated for Cause unless and until
there shall have been delivered to Employee written
Notice of Termination and a copy of resolutions duly
adopted by a majority of the members of the Board at a
meeting called and held for such purpose (after
reasonable notice to Employee and an opportunity for
Employee, together with his counsel, to be heard before
the Board) finding that in the good faith opinion of the
Board, Employee was guilty of conduct set forth above in
clause (i) or (ii) of the first sentence of this
Paragraph 3.3 and specifying the particulars thereof in
detail.
3.4. Employee's Termination for "Good Reason."
Employee shall be entitled to terminate his employment
for Good Reason. For purposes of this Agreement, "Good
Reason" shall mean the commission or omission of the
following actions:
(A) the assignment to Employee of any
duties inconsistent in any material respect with his
status set forth in Paragraphs 1.1 and 1.6 hereof;
(B) a reduction by the Company in the
Fixed Annual Compensation set forth in Paragraph 2.1
or a reduction in the Producer's Fees set forth in
Paragraph 2.2 hereof;
(C) the failure by the Company to
continue in effect any compensation plan in which
Employee participates, or any substitute plans
hereafter adopted (other than in connection with an
across the board modification to a plan generally
available to the Company's employees), unless an
equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with
respect to such plan or the failure by the Company
to continue Employee's participation therein;
(D) the failure by the Company to
continue to provide Employee with benefits
substantially similar to those enjoyed by him under
any of the Company's pension, retirement, life
insurance, medical, health and accident, or
disability plans in which he is presently
participating (other than in connection within an
across the board modification or termination of a
plan generally available to the Company's
employees), or the taking of any action by the
Company that would directly or indirectly materially
reduce any of such benefits or deprive Employee of
any material fringe benefit presently enjoyed by him
immediately prior to the Effective Date;
(E) any purported termination of
Employee's employment that is not effected pursuant
to a Notice of Termination; and for purposes of this
Agreement, no such purported termination shall be
effective;
(F) a Change in Control of the Company
(as defined below);
(G) the disapproval of this Agreement by
the Independent Committee (as that term is defined
in the Stipulation and Agreement of Compromise and
Settlement, dated October 18, 1991) of the Board;
(H) the failure of the Company, other
than for reasons solely within Employee's control,
to commence principal photography on at least one
Carolco Picture for six consecutive quarters for any
time period commencing after October 20, 1993 if the
financial condition of the Company does not prevent
the Company from undertaking such activity; and
(I) any fundamental change to the
business of the Company so that the Company is no
longer principally involved in motion picture
production; provided, however, that the existence
and operation of a principal operating subsidiary or
division of the Company principally engaged in the
home video distribution business shall not
constitute a fundamental change to the business of
the Company for purposes of this subparagraph
3.4(I).
Notwithstanding the foregoing with respect to
subparagraph 3.4(F) above, if Employee or any of his
Affiliates exercise the "tag-along" rights set forth in
Sections 5(d), (e) and (f) of the 1994 Stockholders
Agreement or the 1993 Stockholders Agreement, as the case
may be, and sell shares of the Common Stock pursuant
thereto, Employee shall be prohibited from terminating
his employment for Good Reason in the event of a Change
in Control of the Company.
3.5. "Change in Control." For purposes of this
Agreement, "Change in Control of the Company" shall be
deemed to have occurred if any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act and
the Regulations promulgated thereunder), excluding each
of the Strategic Investors, MGM and their respective
Affiliates as of May 3, 1993, acquires, directly or
indirectly, 40% or more of the Full Voting Power of the
Company; provided, however, that a Change in Control of
the Company shall be deemed to have occurred if any
Strategic Investor, MGM or any of their respective
Affiliates as of the date hereof acquires, directly or
indirectly, an additional 20% of the Full Voting Power of
the Company in excess of the amount of the Full Voting
Power of such Strategic Investor, MGM or any of their
respective Affiliates as of October 20, 1993, excluding
from what is deemed to be acquired (i) any securities
issued pursuant to the Standby Purchase and Investment
Agreement dated as of July 29, 1993, between the Company,
Cinepole, Canal+, RCS Video Services B.V. and
Telecommunications, Inc., as amended, (ii) any securities
obtained by Canal+ under the put/call arrangement between
MGM and Canal+ regarding the 5% Payment-In-Kind
Convertible Subordinated Notes of Carolco due 2002 and
(iii) the realization of the Common Stock pledged by New
CIBV to each of the Strategic Investors pursuant to each
of the Amended and Restated Security and Pledge
Agreements between New CIBV and each of the Strategic
Investors dated as of April 30, 1993. Notwithstanding
the foregoing, the issuance of securities pursuant to and
in accordance with the terms of the Merger Agreement
shall not constitute a Change in Control of the Company,
and Employee agrees accordingly that the Change of
Control provisions contained herein and in Paragraph 3.5
of the May 1993 Agreement are not applicable with respect
to the transactions contemplated by the Merger Agreement.
"Full Voting Power" shall mean the right to vote in the
election of one or more directors through proxy or by the
beneficial ownership of the Common Stock or other
securities then entitled to vote in the election of one
or more directors. For purposes of calculating the
percentage ownership of Full Voting Power of a person,
all warrants, options or rights held by all persons with
respect to the Company shall be deemed to have been
exercised and all convertible or exchangeable securities
shall be deemed to have been converted or exchanged, as
the case may be (disregarding for such purposes any
restrictions on conversion, voting (such as proxies),
exchange or exercise), in each case for the maximum
number of shares of the Common Stock or other securities
entitled to then vote in the election of one or more
directors.
3.6. Notice of Termination.
(A) Any purported termination of
employment by Employee pursuant to Paragraph 3.4
hereof shall be made, in addition to any other
requirements that may be set forth herein, by giving
Notice of Termination within six months of the
action set forth above giving rise to the right to
terminate for Good Reason. The failure of Employee
to give Notice of Termination within such period
shall not be construed to prevent the giving of
Notice of Termination upon the next occurrence of
such action or upon the occurrence of another action
set forth in Paragraph 3.4 hereof. The Company
shall have 30 days after receipt of the Notice of
Termination to cure the event giving rise to
Employee's right to terminate for Good Reason.
Employee's right to terminate his employment
pursuant to Paragraph 3.4 hereof shall not be
affected by his incapacity due to physical or mental
illness.
(B) Any purported termination by the
Company or by Employee shall be communicated by
written Notice of Termination to the other party
hereto.
4. Compensation Upon Termination.
4.1. Death of Employee. Upon the death of Employee
("Death"), the Company shall pay to Employee's estate (i)
the Fixed Annual Compensation that would otherwise be
payable to Employee hereunder up to the end of the month
in which such Death occurs and (ii) whatever Producer's
Fees, Turnaround Compensation and Additional Incentive
Compensation and other amounts which may become due and
payable to Employee from time to time in the ordinary
course of business pursuant to the terms of this
Agreement. Upon such payments, the Company shall have no
further liability or obligation hereunder to the deceased
Employee's estate, his executors or administrators, his
heirs or assigns or any other person claiming under or
through him.
4.2. Disability of Employee. Upon the termination
of Employee's employment as a result of his Disability,
Employee shall be entitled to receive (i) 100% of
Employee's Fixed Annual Compensation for an additional
six months, and (ii) a sum equal to two times the Fixed
Annual Compensation that he was entitled to receive
pursuant to Paragraph 2.1 hereof for the fiscal year
preceding the effective date of termination for
disability hereunder and (iii) whatever Producer's Fees,
Turnaround Compensation and Additional Incentive
Compensation which may become due and payable to Employee
from time to time in the ordinary course of business
pursuant to the terms of this Agreement. The lump sum
specified in (ii) above shall be paid as soon as
practicable but in any event no later than eight months
after the Date of Termination.
Whenever compensation is payable to Employee
hereunder during a time when Employee is partially or
totally disabled and such disability (except for the
provisions hereof) would entitle Employee to disability
income or to salary continuation payments from the
Company according to the terms of any plan now or
hereafter provided by the Company or according to any
policy of the Company in effect at the time of such
disability, the compensation payable to Employee
hereunder shall be inclusive of any such disability
income or salary continuation and shall not be in
addition thereto. If disability income is payable
directly to Employee by an insurance company under an
insurance policy paid for by the Company, then any such
disability income paid during the 30 months following the
Date of Termination shall be considered to be part of the
payments to be made by the Company pursuant to this
Paragraph 4.2, and not in addition thereto, and shall be
paid to the Company, up to but not to exceed the amount
of payments actually made by the Company pursuant to this
Paragraph 4.2. All disability income paid to Employee by
said insurance company (i) during the 30 months following
the Date of Termination in excess of the payments
actually made by the Company pursuant to this Paragraph
4.2, and (ii) after 30 months following the Date of
Termination shall be the sole property of Employee as
governed by said insurance policy and shall not be
required to be paid to the Company.
4.3. Termination For Cause. If Employee's
employment shall be terminated for Cause, the Company
shall pay Employee his full Fixed Annual Compensation,
whatever Producer's Fees, Turnaround Compensation and
Additional Incentive Compensation that has become due and
payable to Employee on or prior to the Date of
Termination and other benefits to which Employee is
entitled through the Date of Termination at the rate in
effect at the time Notice of Termination is given.
4.4. Termination Other Than For Cause, Retirement,
Death or Disability or For Good Reason.
(A) If Employee's employment by the
Company shall be terminated (i) by the Company other
than for Cause, Retirement, Death or Disability or
(ii) by Employee for Good Reason, then Employee
shall be entitled to the benefits provided below:
(i) The Company shall pay Employee,
not later than the fifth day following the Date of
Termination, a lump sum equal to 299% of the
aggregate of all Fixed Annual Compensation payments
arising under Paragraph 2.1 hereof discounted to the
then present value at a discount rate of 5% per
annum applied to each future payment from the time
it would have become payable to the Date of
Termination.
(ii) Notwithstanding any provision
of any benefit plan, the Company shall pay to
Employee not later than the fifth day following the
Date of Termination, a lump sum amount equal to the
sum of (x) Producer's Fees and Turnaround
Compensation, if any, to which Employee has become
entitled but has not yet been paid, and (y) any
Additional Incentive Compensation award that the
Board has approved for any period that has closed
prior to the Date of Termination but has not yet
been paid, and (z) a pro rata portion for the period
through the Date of Termination of the aggregate
value of all contingent awards, if any.
Notwithstanding the foregoing, Employee shall be
entitled to receive, from time to time, as it
becomes due, all Producer's Fees.
(B) If Employee's employment shall be
terminated (i) by the Company other than for Cause,
Retirement, Death or Disability, or (ii) by Employee
for Good Reason, then for the remaining period of
the Term as set forth in Paragraph 1.4 hereof, the
Company shall arrange to provide Employee with life,
disability, accident and health insurance and all
other benefits substantially similar to those which
Employee is receiving immediately prior to the
Notice of Termination. In addition, all stock
options issued pursuant to the Option Agreement or
otherwise shall become immediately exercisable upon
Notice of Termination whether or not then vested.
(C) In the event that this Agreement
expires by its terms on December 31, 1997 and the
Term is not extended, the Company shall have no
obligation to Employee and Employee shall have no
obligation to the Company under this Agreement
except as otherwise set forth herein.
4.5. Company's Projects. If Employee's employment
with the Company shall be terminated by the Company other
than for Cause, Retirement, Death or Disability or by
Employee for Good Reason pursuant to subparagraphs 3.4(H)
or (I) hereof or if the Company fails to make the
payments required by Paragraph 4.4 hereof unless pursuant
to a good faith dispute between Employee and the Company,
Employee and the Company will review a list of all
Projects in Development during the Term (regardless of
whether or not such projects previously have been set for
production or such projects previously have been
abandoned or deemed abandoned) (the "Listed Properties");
provided, however, that if such dispute is ultimately
resolved with a determination that the payments under
Paragraph 4.4 hereof are required, this Paragraph 4.5
shall become applicable unless such payments are made.
Employee shall be entitled to select eight of the Listed
Properties that Employee desires to continue to develop
(the "Reverted Projects"), in the following order: the
Company shall initially designate two of the Listed
Properties that the Company desires to continue to
develop, then Employee shall promptly designate four of
the remaining Listed Properties that Employee desires to
continue to develop, and the Company and Employee shall
thereafter alternatively designate two of the remaining
Listed Properties that each desires to continue to
develop until Employee shall have designated eight such
properties. As used herein, "Company's Projects" shall
mean the Listed Properties other than the Reverted
Projects.
(A) If the Company (or its successors and
assigns) determines to produce a Company's Project
as a theatrical motion picture (a "Post-Term
Picture"), the Company may offer Employee an
opportunity to serve as executive producer of the
Post-Term Picture on terms and conditions reasonably
acceptable in good faith to Employee; provided,
however, that Employee shall receive not less than
the financial terms set forth in Paragraph 2.2
hereof.
(B) Employee shall have the right to set
up the Reverted Projects with third parties for
development subject to the following:
(i) the Company is repaid all of its
direct, out-of-pocket costs in connection with the
Reverted Project plus interest thereon at the
Company's cost of borrowed funds;
(ii) the Company is granted a profit
participation in any production based in whole or in
part on a Reverted Project of 5%, 21/2% or 0% of 100%
of the net profits if the Company has expended
$500,000 or more, $499,999 to $150,000 or $149,999
or less, respectively, in connection with the
Reverted Project, with net profits to be defined,
computed and paid in accordance with the standard
definition of net profits of the U.S. distributor of
the picture;
(iii) the third party acquiring the
Reverted Project agrees in writing to assume all
executory obligations of the Company and executes in
writing all applicable guild assumption agreements;
and
(iv) the Company shall have no
obligation to make any option payments with respect
to a Reverted Project and Employee may make such
payments if he desires.
4.6. No Mitigation. Employee shall not be required
to mitigate the amount of any payment provided for in
this Section 4 by seeking other employment or otherwise,
nor shall the amount of any payment or benefit provided
for in this Section 4 be reduced by any compensation
earned by Employee as the result of employment by another
employer or by retirement benefits after the Date of
Termination. The Company shall not be entitled to any
rights to offset, mitigate or otherwise reduce the
amounts owing to Employee by virtue of this Section 4
with respect to any rights, claims or damages that the
Company may have against Employee.
4.7. Consultation Fees. If Employee's employment
shall be terminated by the Company other than for Cause,
Retirement, Death or Disability or by Employee for Good
Reason, the Company shall retain Employee as a consultant
for a period of three years commencing on the date of
such expiration or termination (hereinafter referred to
as "Consulting Period"). During the Consulting Period,
Employee shall furnish consulting and advisory services
to the Company with respect to the operation of the
Company's business. Without limiting the generality of
the foregoing, the Employee shall cooperate fully with
the senior executive officers of the Company, provide
such assistance and information as may be reasonably
requested by the Board and officers of the Company and be
available by telephone or in person at such times and
places as may reasonably be requested by the Company and
as may be mutually convenient to Employee and the
Company. During the Consulting Period (a) Employee shall
not be required to devote more than 600 hours per
calendar year to such consulting and advisory services
and (b) Employee's consulting and advisory services shall
be subject to Employee's reasonable business and
professional commitments and vacations. During the
Consulting Period, the Company shall pay Employee
consulting fees, payable in monthly installments or in
such other manner that parties hereto mutually agree
upon, at a rate per annum equal to 50% of the Fixed
Annual Compensation specified in Paragraph 2.1 hereof in
effect at the time of termination of the period of full
employment.
4.8. Potential Excise Taxes. Should any payments
hereunder or contemplated hereby be subject to excise tax
pursuant to section 4999 of the Code or any successor or
similar provision thereto, or comparable state or local
tax laws, the Company shall pay to Employee such
additional compensation as is necessary (after taking
into account all Federal, state and local income taxes
payable by Employee as a result of receipt of such
compensation) to place Employee in the same after-tax
position that he would have been in had no such excise
tax (or any interest or penalties thereon) been paid or
incurred. The Company shall pay such additional
compensation upon the earlier of (i) the time at which
the Company is required to withhold such excise tax for
any payments to Employee or (ii) 30 days after Employee
notifies the Company that Employee has filed a tax return
that takes the position that such excise tax is due and
payable in reliance on a written opinion of Employee's
tax counsel that it is more likely than not that such
excise tax is due and payable. If Employee makes any
payment with respect to any such excise tax as a result
of an adjustment to Employee's tax liability by any
Federal, state or local authority, the Company will pay
such additional compensation within 30 days after
Employee notifies the Company of such payment. Without
limiting the obligation of the Company hereunder,
Employee agrees, in the event Employee makes any payment
pursuant to the preceding sentence, to negotiate with the
Company in good faith with respect to procedures
reasonably requested by the Company that would afford the
Company the ability to contest the imposition of such
excise tax; provided, however, that Employee will not be
required to afford the Company any right to contest the
applicability of any such excise tax to the extent that
Employee reasonably determines that such contest is
inconsistent with the overall tax interests of Employee.
The Company agrees to hold in confidence and not to
disclose, without Employee's prior written consents, any
information with regard to Employee's tax position that
the Company obtains pursuant to this Paragraph 4.8.
5. General.
5.1. Applicable Law Controls. Nothing contained in
this Agreement shall be construed to require the
commission of any act contrary to law and wherever there
is any conflict between any provisions of this Agreement
and any material statute, law, ordinance or regulation
contrary to which the parties have no legal right to
contract, then the latter shall prevail; provided,
however, that in any such event the provisions of this
Agreement so affected shall be curtailed and limited only
to the extent necessary to bring them within applicable
legal requirements, and provided further that if any
obligation to pay the Fixed Annual Compensation,
Producer's Fees or any other amount due Employee
hereunder is so curtailed, then such compensation or
amount shall be paid as soon thereafter, either during or
subsequent to the Term, as permissible.
5.2. Waiver/Estoppel. Any party hereto may waive
the benefit of any term, condition or covenant in this
Agreement or any right or remedy at law or in equity to
which any party may be entitled, but only by an
instrument in writing signed by the parties to be
charged. No estoppel may be raised against any party
except to the extent the other parties rely on an
instrument in writing, signed by the party to be charged,
specifically reciting that the other parties may rely
thereon. The parties' rights and remedies under and
pursuant to this Agreement or at law or in equity shall
be cumulative and the exercise of any rights or remedies
under one provision hereof or rights or remedies at law
or in equity shall not be deemed an election of remedies;
and any waiver or forbearance of any breach of this
Agreement or remedy granted hereunder or at law or in
equity shall not be deemed a waiver of any preceding or
succeeding breach of the same or any other provision
hereof or of the opportunity to exercise such right or
remedy or any other right or remedy, whether or not
similar, at any preceding or subsequent time.
5.3. Attorneys' Fees and Costs. In any action,
suit or proceeding brought by any party hereto with
respect to this Agreement, its subject matter or the
actions, statements or conduct of any or each of the
parties in the negotiation, execution or performance of
this Agreement, the prevailing party shall be entitled to
recover from the other parties all costs and expenses
incurred in connection therewith, including but not
limited to attorneys' fees, attorneys' costs and court
costs.
5.4. Notices. All notices and other communications
hereunder shall be in writing and may be deemed given if
delivered personally or sent by certified mail return
receipt requested, telex, telegraph or facsimile, at the
address set forth below, or such substitute address as
may from time to time be designated by like notice.
Carolco: Carolco Pictures Inc.
8800 Sunset Boulevard
Los Angeles, California 90069
Attention: General Counsel
Employee: Mario F. Kassar
Carolco Pictures Inc.
8800 Sunset Boulevard
Los Angeles, California 90069
with a copy to: Brian J. McCarthy, Esq.
Skadden, Arps, Slate, Meagher
& Flom
300 South Grand Avenue
Suite 3400
Los Angeles, California 90071
5.5. Governing Law. This Agreement shall be
governed by, construed and enforced and the legality and
validity of each term and condition shall be determined
in accordance with the internal, substantive laws of the
State of California without applicable to agreements
fully executed and performed entirely in California.
5.6. Captions. The paragraph headings contained
herein are for reference purposes only and shall not in
any way affect the meaning or interpretation of this
Agreement.
5.7. No Joint Venture. Nothing herein contained
shall constitute a partnership between or joint venture
by the parties hereto or appoint any party the agent of
any other party. No party shall hold itself out contrary
to the terms of this Paragraph 5.7 and, except as
otherwise specifically provided herein, no party shall
become liable for the representation, act or omission of
any other party. This Agreement is not for the benefit
of any third party who is not referred to herein and
shall not be deemed to give any right or remedy to any
such third party.
5.8. Assignability. Employee may assign all or any
portion of his rights to receive compensation hereunder
to any corporation at least 50% of the capital stock of
which is owned or controlled by Employee or trusts for
the benefit of the children or family of Employee.
Notwithstanding any other provision hereof, Employee
shall be permitted to establish loan-out companies to
provide his services to the Company and assign this
Agreement thereto, subject to the delivery by Employee of
a customary personal adherence letter. The Company may
assign this Agreement or all or any portion of its rights
hereunder to any corporation at least 50% of the capital
stock of which is owned or controlled by the Company.
Notwithstanding the foregoing provisions of this
Paragraph 5.8, no such assignment shall relieve the
assignor from any of its obligations hereunder or change
any of the terms and provisions of Employee's employment
hereunder. This Agreement shall be fully effective and
binding upon the successors in interest, predecessors in
interest, assigns and Affiliates of the Company.
Notwithstanding the foregoing, the parties hereto hereby
consent to the assumption by CEI of this Agreement as of
the Effective Date.
5.9. Effect on Prior Employment Agreements. Upon
the date hereof, the May 1993 Agreement shall be deemed
terminated. Notwithstanding the foregoing, the
obligations of the Company under (A) the Employment
Agreement, dated as of March 23, 1992, between Employee
and the Company with respect to any (i) Production-
related Incentive Compensation (as defined therein) as
set forth in subparagraph 2.2(A) thereof and
(ii) Turnaround Incentive Compensation (as defined
therein) as set forth in subparagraph 2.2(B) thereof as
to which Employee has become entitled pursuant to
subparagraph 2.2(A) or 2.2(B) thereof, as the case may
be, and (B) the May 1993 Agreement with respect to any
(i) Producer's Fees (as defined therein) as set forth in
Paragraph 2.2 thereof and (ii) Turnaround Compensation
(as defined therein) as set forth in Paragraph 2.3
thereof as to which Employee has become entitled prior to
the date hereof pursuant to Paragraph 2.2 or 2.3 thereof,
as the case may be, shall remain in full force and
effect.
5.10. Modification/Entire Agreement. This Agreement
may not be altered, modified or amended except by an
instrument in writing signed by all of the parties
hereto. No person, whether or not an officer, agent,
employee or representative of any party, has made or has
any authority to make for or on behalf of that party any
agreement, representation, warranty, statement, promise,
arrangement or understanding not expressly set forth in
this Agreement or in any other document executed by the
parties concurrently herewith ("Parol Agreements"). This
Agreement and all other documents executed by the parties
concurrently herewith constitute the entire agreement
between the parties and supersede all express or implied,
prior or concurrent, Parol Agreements and prior written
agreements with respect to the subject matter hereof.
The parties acknowledge that in entering into this
Agreement, they have not relied and will not in any way
rely upon any Parol Agreements.
5.11. Jurisdiction/Venue/Service. Employee and the
Company and their respective successors in interest and
assigns, each as to and for the benefit of the other:
(a) hereby irrevocably submit to the exclusive
jurisdiction of either the Superior Court of the State of
California for the County of Los Angeles or the United
States District Court for the Central District of
California (the "Applicable Court") for the purpose of
any action, suit or proceeding arising out of or based
upon the subject matter of, or transactions contemplated
by, this Agreement (each an "Applicable Action"); (b)
hereby irrevocably waive and agree not to assert (by way
of motion, as a defense or otherwise) in any Applicable
Action brought in the Applicable Court any claim (i) that
it or he is not subject personally to the jurisdiction of
the Applicable Court; (ii) that the Applicable Action is
brought in an inconvenient forum; (iii) that the venue of
the Applicable Action is improper; or (iv) that this
Agreement or its subject matter may not for any other
reason be enforced in the Applicable Court; (c) hereby
irrevocably consent to service of process of the
Applicable Court in the same manner as any other notice
is served on the Company or Employee (as the case may be)
pursuant to Paragraph 5.4 hereof; and (d) irrevocably
agree that final judgment (including the exhaustion of
all rights to appellate review) in any Applicable Action
("Judgment") shall be conclusive and may be enforced in
any other jurisdiction (i) by action, suit or proceeding
on the Judgment, a certified and true copy of which shall
be absolutely conclusive evidence of the fact and of the
amount of any liability under or pursuant to the
Judgment; or (ii) in any other manner not prevented by
any applicable law.
5.12. Arbitration.
(A) The Company and Employee each hereby
irrevocably agree to submit any and all disputes
between them arising under this Agreement to
binding, non-appealable arbitration, to be conducted
in accordance with this Paragraph 5.12. The parties
further agree irrevocably to submit themselves, in
any suit to confirm the judgment or finding of such
arbitrator, to the jurisdiction of the Superior
Court for the County of Los Angeles, State of
California, and hereby waive any and all objections
to jurisdiction that they may have under the laws of
the State of California or the United States.
(B) The aggrieved party shall, upon
written notice to the other, submit any dispute or
controversy respecting actual or alleged breach of,
or interpretation of, or enforcement of, this
Agreement to binding non-appealable arbitration
before a retired judge of the Superior Court of the
State of California in and for the County of Los
Angeles, to be conducted by means of a reference
pursuant to California Code of Civil Procedure
Section 6381(1). Within ten business days after
receipt of the notice submitting a dispute or
controversy to arbitration, the parties shall
attempt in good faith to agree upon an arbitrator to
whom the dispute will be referred and on a joint
statement of contentions. Failing agreement thereto
within ten business days after receipt of such
notice, each party shall name three retired judges
and thereafter either party may file a petition
seeking the appointment of one of the persons named
by the party as a referee by the presiding Judge of
the Superior Court, which petition shall recite in a
clear and meaningful manner the factual basis of the
controversy between the parties and the issues to be
submitted to the referee for decision. Each party
hereby agrees that service of process in such action
will be deemed accomplished and completed when a
copy of the documents is sent in accordance with the
notice provisions in Paragraph 5.4 hereof.
(C) The hearing before the referee shall
be held within 30 days after the parties reach
agreement as to the identity of the referee (or
within 30 days after the appointment of a referee by
the court). Unless more extensive discovery is
expressly permitted by the referee, each party shall
have only the right to one document production
request, shall serve but one set of interrogatories
and shall only be entitled to depose those witnesses
that the referee expressly permits, it being the
parties' intention to minimize discovery procedures
and to hold the hearing on an expedited basis. The
referee shall establish the discovery schedule
promptly following submission of the joint statement
of contentions (or the filing of the answer to the
petition), which schedule shall be strictly adhered
to. To the extent the contentions of the parties
relate to custom or practice in the film business,
or the entertainment industry generally, or to
accounting matters, the referee shall select an
independent expert or accountant (as applicable)
with substantial experience in the industry segment
involved to provide recommendations to the referee.
All decisions of the referee shall be in writing and
shall not be subject to appeal. The referee shall
make all rulings in accordance with California law
and shall have authority equal to that of a Superior
Court judge, to grant equitable relief in an action
pending in Los Angeles Superior Court in which all
parties have appeared.
(D) Except as otherwise provided in this
Agreement, the fees and costs of the referee and of
any experts retained shall be shared equally by the
parties to such dispute. The referee shall award
legal fees, disbursements and reimbursement of other
expenses to the prevailing party for such amounts,
if any as determined by the referee to be
appropriate. Judgment upon the referee's award may
be entered as if after trial in accordance with
California law.
5.13. Contractual Nomenclature. All references
herein to "Dollars" or "$" shall mean Dollars of the
United States of America, its legal tender for all debts
public and private. Wherever used herein and to the
extent appropriate, the masculine, feminine or neuter
gender shall include the other two genders, the singular
shall include the plural, and the plural shall include
the singular.
IN WITNESS WHEREOF, the parties have executed
the Agreement as of the date first above written.
CAROLCO PICTURES INC.
By: /s/ Robert W. Goldsmith
Name: Robert W. Goldsmith
Title: Senior Vice President,
General Counsel and
Secretary
/s/ Mario F. Kassar
Mario F. Kassar
__________________________________________________________
Exhibit 6
ASSUMPTION AGREEMENT
ASSUMPTION AGREEMENT, dated as of August 10,
1994, among LIVE Entertainment Inc., a Delaware
corporation ("LIVE"), Carolco Pictures Inc., a Delaware
corporation ("Carolco"), and Mario F. Kassar ("Kassar").
WHEREAS, Kassar's services are being furnished
to Carolco pursuant to an employment agreement entered
into as of August 10, 1994 between Kassar and Carolco
(the "Employment Agreement"); and
WHEREAS, pursuant to an Agreement and Plan of
Merger, dated as of August 10, 1994 (the "Merger
Agreement"), among LIVE, Carolco and Carolco Acquisition
Corp., a Delaware corporation and wholly owned subsidiary
of LIVE ("CAC"), at the Effective Date (as defined in the
Merger Agreement), CAC will be merged with and into
Carolco and Carolco will become a wholly owned subsidiary
of LIVE; and
WHEREAS, pursuant to the Merger Agreement, as
of the Effective Date, LIVE will assume each of the
obligations of Carolco under the Employment Agreement
(the "Obligations"); and
WHEREAS, the parties hereto desire to provide
for the assumption of the Obligations as required by the
Merger Agreement.
NOW, THEREFORE, in consideration of the
foregoing, and the mutual covenants and agreements set
forth herein and such other good and valuable
consideration, the receipt and sufficiency of which is
hereby acknowledge, the parties hereto, intending to be
legally bound, agree as follows:
5.13.1. Assumption of Obligations. Effective
as of the Effective Date, LIVE shall assume and will
thereafter perform the Obligations. The assumption by
LIVE of the Obligations will not be construed to defeat,
impair or limit in any way rights or remedies of the
Company or Kassar under the Merger Agreement.
5.13.2. Consent to Assumption. Each of
Carolco and Kassar hereby consent to the assumption of
the Obligations by LIVE as of the Effective Time.
5.13.3. Successors and Assigns. This
Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their respective legal
successors and assigns.
IN WITNESS WHEREOF, each of the parties hereto
has executed this Agreement as of the date first written
above.
LIVE ENTERTAINMENT INC.
By: /s/ Roger A. Burlage
Name: Roger A. Burlage
Title: President and Chief
Executive Officer
CAROLCO PICTURES INC.
By: /s/ Robert W. Goldsmith
Name: Robert W. Goldsmith
Title: Senior Vice President
s/ Mario F. Kassar
Mario F. Kassar
__________________________________________________________
Exhibit 7
FORM OF
STOCKHOLDERS AGREEMENT
This STOCHOLDERS AGREEMENT (this "Agreement")
is made and entered into on this 10th day of August,
1994, by and among Pioneer LDCA, Inc., a Delaware
corporation ("Pioneer"), Cinepole Productions B.V., a
Netherlands company ("Cinepole"), RCS Video International
Services B.V., a Netherlands company (acting for itself
and on behalf of its Affiliates, hereinafter referred to
as "RCS"), MGM Holdings Corporation, a Delaware
corporation ("MGM H") and New Carolco Investments, B.V.,
a Netherlands company ("New CIBV").
W I T N E S S E T H:
WHEREAS, Pioneer, Cinepole, RCS, MGM H and New
CIBV own certain of the capital stock (the "Existing
Carolco Stock") of Carolco Pictures Inc., a Delaware
corporation (the "Carolco");
WHEREAS, Pioneer, Cinepole and RCS own certain
of the capital stock (the "Existing LIVE Stock") of LIVE
Entertainment Inc., a Delaware corporation ("Company");
WHEREAS, Carolco, the Company and Carolco
Acquisition Corp., a Delaware corporation ("Acquisition
Corp.") and a wholly-owned subsidiary of the Company,
have entered into an Agreement and Plan of Merger, dated
as of August 10, 1994 (the "Merger Agreement");
WHEREAS, pursuant to the terms of the Merger
Agreement, Acquisition Corp. will be merged into Carolco
and, in connection therewith, the Existing Carolco Stock
will be exchanged for certain capital stock of the
Company (the "CEI Stock"); and
WHEREAS, the parties wish to enter into this
Agreement to establish certain rights and obligations of
the parties with respect to the voting of the Existing
LIVE Stock and the CEI Stock, the management of the
Company, the disposition of their respective interests in
the Company and other matters;
NOW, THEREFORE, the parties hereby agree as
follows:
Section 1. Definitions. As used in this Agreement,
the following terms have the meanings indicated:
"5% Notes" means the 5% Payment-in-Kind
Convertible Subordinated Notes due 2002 of the
Company and Carolco as co-obligors.
"7% Notes" means the 7% Convertible
Subordinated Notes due 2006 of the Company and
Carolco as co-obligors.
"Affiliate", as to any Person, means any other
Person directly or indirectly controlling,
controlled by or under direct or indirect common
control with, such Person and shall include, without
limitation, any director or executive officer of
such Person, provided, however, that for purposes of
this Agreement the Company shall not be deemed an
Affiliate of any of the Strategic Investors, MGM H,
or any of their respective Affiliates. For purposes
of this definition, "control" when used with respect
to any specified Person means the power to direct or
cause the direction of the management or policies of
such Person, directly or indirectly, whether through
ownership of voting securities, by contract or
otherwise.
"Agreement" means this Agreement as the same
may be amended or modified from time to time in
accordance with the provisions hereof.
"Board" means the Board of Directors of the
Company.
"Business Day" means any day other than a
Saturday, Sunday or any other day on which
commercial banks in Los Angeles, California are
authorized by law to be closed for business.
"Bylaws" means the Amended and Restated Bylaws
of the Company, the form of which is attached as
Exhibit 3.2 to the Merger Agreement, together with
all amendments thereto made pursuant to the terms
hereof and applicable law.
"Common Stock" means the Company's common stock
par value $0.01 per share.
"Common Stock Equivalent" means the number of
shares of Common Stock into which any shares of
Series C Preferred Stock, Series D Preferred Stock,
5% Notes or 7% Notes are convertible, taking into
account at the time such Common Stock Equivalent is
calculated, adjustments for distributions-in-kind
and any other dilutive transactions.
"Common Stock Equivalent Price" means the
highest aggregate number of shares of Common Stock
into which Securities could have been converted
during the course of the transactions triggering
Tag-along Rights multiplied by the fair market value
per share of Common Stock (or Common Stock
Equivalent, in the event the Strategic Investors
have sold shares of Series C Preferred Stock or
Series D Preferred Stock) to be sold.
"Director Designee" means any director
designated for election to the Board by each of the
Stockholders other than New CIBV.
"Director Pool" shall mean a group of directors
of the Company composed of the Director Designees,
the Management Director Designees and the two
Independent Directors listed on Schedule 1.1, whose
designation as members of the Director Pool may be
changed by New CIBV by letter delivered to the other
Stockholders. Such directors designated by New CIBV
as set forth in the preceding sentence shall remain
members of the Director Pool until they cease to be
members of the Board. When either of the directors
designated by New CIBV ceases to be a member of the
Board, the director's successor shall be deemed to
be the designated member of the Director Pool unless
New CIBV shall notify each of the other Stockholders
by letter designating another director, not a
Director Designee or Management Director Designee,
as a member of the Director Pool.
"Distribution Agreement" means the Domestic
Output Agreement, dated as of May 1, 1993, between
Metro-Goldwyn-Mayer Inc. and Carolco and the
Confidential Draft Term Sheet, dated as of April 23,
1993, between Metro-Goldwyn-Mayer Inc. and Carolco,
setting forth, among other matters, the terms and
conditions of MGM H's international distribution of
certain Carolco motion pictures (the "International
Output Agreement"), each as assumed by the Company
by the Agreement substantially in the form of
Exhibit 9.9(g) to the Merger Agreement, as the same
may be further amended, modified or supplemented
from time to time.
"Holder" means any holder of Securities with
voting rights.
"Independent Directors" means directors elected
to the Board by the shareholders at large in
accordance with the Restated Certificate and Bylaws
and who are not Director Designees or Management
Director Designees and who would qualify as a member
of the audit committee of the Board of the Company
pursuant to the rules of the New York Stock
Exchange, or in the case of any Independent Director
vacancy, a director appointed in accordance with the
Bylaws and this Agreement, provided that, no
Independent Director shall be an officer, director,
employee, agent or Affiliate (for purposes of this
definition, as defined under Rule 12b-2 of the
Securities and Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder) of
the Company or any of the Stockholders or their
Affiliates.
"Kassar" means Mario F. Kassar.
"Kassar Employment Agreement" means the
employment agreement, dated as of August 10, 1994,
between Carolco and Kassar which will be assumed by
the Company on the Effective Date of the Merger (as
defined in the Merger Agreement).
"Management Director Designee" means any
director nominated by the Chairman of the Board of
the Company.
"Permitted Indebtedness" means, without
duplication, (i) film production financing incurred
by the Company or by special purpose Subsidiaries
engaged solely in motion picture production, (ii)
"pay or play" obligations related directly to motion
picture production and (iii) bank financing used for
general corporate purposes of the Company and its
Subsidiaries in an aggregate amount not exceeding
the amount of bank financing available to be drawn
pursuant to its terms at the closing of the
Securities Purchase Agreement dated as of May 25,
1993 among the Company, Pioneer, Cinepole and MGM H,
plus $10,000,000.
"Permitted Interested Transaction" means (i)
existing contractual relationships with the
Stockholders or their Affiliates, (ii) the MGM H
Distribution Agreement (other than any material
amendment, modification or supplement thereto, other
than a long-form agreement in respect of the
International Output Agreement), (iii) the Kassar
Employment Agreement and (iv) transactions to be
consummated in the Merger.
"Permitted Investments" means (i) marketable
direct obligations issued or unconditionally
guaranteed by the United States Government or issued
by any agency thereof and backed by the full faith
and credit of the United States, (ii) marketable
direct obligations issued by any state of the United
States of America or any political subdivision of
any such state or any public instrumentality
thereof, (iii) commercial paper or other corporate
obligations provided that, at the time of
acquisition, if the security has less than an
investment grade rating obtainable from either
Standard & Poor's Corp. or Moody's Investors
Services, Inc., then the Company shall not purchase
the security if the result would be that the Company
would (A) have invested more than 20% of its assets
in the obligations of one issuer or (B) own more
than 10% of a single issue of securities, (iv)
demand deposits, certificates of deposit (including
Eurodollar certificates of deposit) or bankers'
acceptances issued by commercial banks, savings and
loans or other financial institutions organized
under the laws of the United States of America or
any state thereof or the District of Columbia, each
having capital and surplus of, in the case of any
such institution organized under the laws of the
United States or any political subdivision thereof,
not less than $100,000,000 or, in the case of any
such institution organized under the laws of any
foreign jurisdiction, not less than $500,000,000 or
whose commercial paper is rated "A-1" by Standard &
Poor's Corp. or "P-1" by Moody's Investors Services,
Inc. ("Qualifying Banks"), (v) repurchase agreements
and reverse repurchase agreements with Qualifying
Banks, (vi) money market funds organized under the
laws of the United States of America or any state
thereof and administered by securities dealers of
recognized national standing, (vii) any investment
in Persons that are Subsidiaries of the Company and
at least 95% of the Capital Stock of which is owned
by the Company, (viii) negotiable instruments
endorsed for deposit or collection or similar
instruments in the ordinary course of business, and
(ix) any investment outstanding on the Effective
Date of the Merger Agreement and any extension,
renewal refinancing or deferral of such investment
provided that such extension, renewal, refinancing
or deferral does not increase the amount of such
investment outstanding on the date of such
extension, renewal, refinancing or deferral.
"Person" means any individual, corporation,
partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or
government or any agency or political subdivision
thereof.
"Put and Call Agreement" means the Amended and
Restated Put and Call Agreement, dated as of August
10, 1994, between MGM H and Cinepole.
"Restated Certificate" means the Amended and
Restated Certificate of Incorporation of the
Company, the form of which is attached as Exhibit
3.1 to the Merger Agreement, together with all
amendments thereto made pursuant to the terms hereof
and applicable law.
"Restructuring" has the meaning specified in
the Securities Purchase Agreement.
"Securities" means the 5% Notes, the 7% Notes,
the Common Stock (including any Common Stock issued
pursuant to a conversion of the Series C Preferred
Stock, the Series D Preferred Stock, the 5% Notes or
the 7% Notes), the Series C Preferred Stock and the
Series D Preferred Stock.
"Series C Preferred Stock" means the Company's
Series C Convertible Preferred Stock, par value
$1.00 per share.
"Series D Preferred Stock" means the Company's
Series D Convertible Preferred Stock, par value
$1.00 per share.
"Stockholders" means Pioneer, Cinepole, RCS,
MGM H and New CIBV.
"Strategic Investors" means Pioneer, Cinepole
and RCS.
"Subsidiary" means, as to any Person, (i) any
corporation more than 50% of whose stock of any
class or classes having by the terms thereof
ordinary voting power to elect a majority of the
directors of such corporation (irrespective of
whether or not at the time stock of any class or
classes of such corporation shall have or might have
voting power by reason of the happening of any
contingency) is at the time owned by such Person
and/or one or more Subsidiaries of such Person and
(ii) any partnership, association, joint venture or
other entity in which such Person and/or one or more
Subsidiaries of such Person have more than a 50%
equity interest at the time.
"Tag-along Rights" has the meaning specified in
Section 6 hereof.
Section 2. Effectiveness. This Agreement shall
become effective on the Effective Date of the Merger (as
defined in the Merger Agreement).
Section 3. Board of Directors.
(a) Composition of the Board. As of the Effective
Date of the Merger, the Board of the Company will consist
of twenty-one (21) directors. For purposes of this
Agreement, the parties hereby agree that until the
stockholdings of any of the Stockholders in the Company
change, in accordance with subsection (c) hereof, Pioneer
shall be entitled to nominate five (5) Director
Designees, Cinepole shall be entitled to nominate three
(3) Director Designees, RCS shall be entitled to nominate
one (1) Director Designee and MGM H shall be entitled to
nominate three (3) Director Designees. Kassar shall be
entitled to nominate two (2) Management Director
Designees.
(b) Election and Removal. (i) Subject to the
provisions of the Restated Certificate and Bylaws, each
Stockholder agrees to vote, or to cause its Director
Designees to vote, consistent with their fiduciary
duties, for the election of the Director Designees of
each of the other Stockholders and for the election of
the two (2) Management Director Designees and two (2)
Independent Directors referred to in the definition of
"Director Pool".
(ii) As soon as practicable after receipt of a
written request from any Stockholder to remove a Director
Designee designated by the Stockholder making such
request, the other Stockholders agree to take, or cause
to be taken, all appropriate action to effect the removal
and replacement of such Management Director Designee or
Director Designee, as the case may be.
(c) Reduction in Number of Director Designees. The
number of Director Designees allocated to each of the
Strategic Investors and MGM H as provided in subsection
(a) of this Section 3 shall be reduced as follows: (i)
in the case of Pioneer, upon each incremental reduction
of at least twenty percent (20%) of the Securities it
holds upon the effectiveness of the Merger, the number of
Pioneer Director Designees shall be reduced by one (1);
(ii) in the case of Cinepole, upon each incremental
reduction of at least thirty-three percent (33%) of the
Securities it holds upon the effectiveness of the Merger,
the number of Cinepole Director Designees shall be
reduced by one (1); (iii) in the case of MGM H, upon each
incremental reduction of at least thirty-three percent
(33%) of the Securities it holds upon the effectiveness
of the Merger, the number of MGM H Director Designees
shall be reduced by one (1); and (iv) in the case of RCS,
upon the reduction of at least fifty percent (50%) of the
Securities it holds upon the effectiveness of the Merger,
the RCS Director Designee position shall be eliminated.
(d) Committees. Each of the Stockholders agrees to
cause its Director Designees to vote, if consistent with
such director's fiduciary duty, to take appropriate
corporate action to establish a Supervisory Committee of
the Board, and to cause the election of such Supervisory
Committee composed of the Directors listed on Schedule
3.1. All Director Designees appointed to the Supervisory
Committee and Kassar shall constitute a quorum at
meetings of the Supervisory Committee. No action shall
be taken by the Supervisory Committee without the
unanimous affirmative vote of each of the Director
Designees on the Supervisory Committee or the unanimous
written consent of the Supervisory Committee.
Notwithstanding the foregoing, if any member of the
Supervisory Committee is not present or represented at
any meeting of the Supervisory Committee, the attendance
of such member shall not be required for purposes of
determining a quorum or unanimous voting on any action to
be taken, provided any such absent member shall have been
given five Business Days prior written notice of such
meeting. Any such absent Supervisory Committee member may
designate a representative to attend such meeting,
provided that if the representative of such absent member
objects to any action proposed to be taken by the
Supervisory Committee, the meeting shall be adjourned for
two Business Days to allow the absent member to attend,
provided further, however, that the continued absence of
such member shall not affect the validity of any actions
taken at the adjourned meeting. In the event any
Strategic Investor or MGM H sells or otherwise disposes
of more than 50% of the Securities it holds upon the
effectiveness of the Merger, such party shall no longer
be entitled to a seat on the Supervisory Committee. All
other committees of the Board shall be formed in
accordance with the Restated Certificate and Bylaws,
subject to Section 5(a)(i) hereof.
Section 4. Undertakings; Condition Precedent. Each
of the Stockholders undertakes and agrees as follows:
(a) Each Stockholder agrees to cause its
Director Designee to vote, if consistent with such
director's fiduciary duty, to adopt the Bylaws as amended
in accordance with the Merger Agreement.
(b) Each Stockholder will vote against any
proposal to amend the Restated Certificate or the Bylaws
and any proposal to change the composition or character
of the Board as set forth in Section 3 hereof, unless all
of the Stockholders agree to vote in favor of such
proposal.
(c) The Stockholders agree to execute and
deliver all documents and instruments, to share all
relevant information and to do all things necessary to
give effect to the provisions of this Agreement.
(d) The obligations of the Stockholders under
this Agreement and the effectiveness of this Agreement
are subject to the satisfaction of the following
conditions:
(i) the Restated Certificate and By-laws shall
have been amended in accordance with the Merger
Agreement and the By-laws shall include provisions
implementing Section 5 hereof and establishing the
Supervisory Committee, each in form and substance
satisfactory to each of the Stockholders;
(ii) the Merger shall have become effective in
accordance with the terms of the Merger Agreement;
and
(iii) the bylaws of Carolco and LIVE Home
Video Inc. ("LHV") shall have been amended to
provide that shareholder consent shall be required
for Carolco or LHV to enter into, terminate, amend
or modify any agreement or incur any liability or
obligation, not made in the ordinary course of
business, that is material to the business or
operations of Carolco or LHV, as the case may be.
Section 5. Restrictions on Certain Actions.
(a) Major Decisions. Each Stockholder agrees that
the following actions, decisions, expenditures and
obligations to be taken, made or incurred by the Company
(each a "Major Decision") shall require the affirmative
vote of (i) at least eighty-five percent (85%) of the
Director Pool and (ii) Director Designees representing at
least three of the Stockholders (other than New CIBV).
Each Stockholder also agrees that it shall not exercise
its voting rights as a Holder to take, make or incur any
of the following actions, decisions, expenditures and
obligations, and shall not call a special meeting of
Holders to vote on any such matter, without the agreement
of (A) Holders entitled to cast at least 80% of the votes
entitled to be cast and (B) at least three Stockholders
(other than New CIBV):
(i) any amendments to the Restated Certificate
or the Bylaws which would alter (A) the voting
rights of the Holders, (B) the number or classes of
directors on the Board, (C) the notice and quorum
requirements for meetings of the Board or
shareholders of the Company, (D) the constitution,
powers or proceedings of the Supervisory Committee
or (E) the constitution of the Director Pool;
(ii) any merger, consolidation, liquidation,
dissolution or winding up of the Company or any
Subsidiary which is material to the business and
operations of the Company and its Subsidiaries taken
as a whole;
(iii) the disposition of any asset or assets,
of the Company or any Subsidiary, other than in the
ordinary course of business, with an aggregate fair
market value in excess of $10,000,000;
(iv) any acquisition by the Company or any
Subsidiary of any business of another person, or any
property, securities, rights or other assets in one
or a series of related transactions for a
consideration in excess of $10,000,000; provided,
that the Company may acquire rights to motion
pictures or other related properties or assets in
the ordinary course of business, or as permitted
under the Kassar Employment Agreement or pursuant to
a resolution of the Board existing on the date of
the Restructuring;
(v) the creation, incurrence, assumption or
guaranty by the Company or any Subsidiary of any
indebtedness, obligation or liability, whether
direct or contingent, in excess of $10,000,000,
except for Permitted Indebtedness.
(vi) the creation, incurrence, or assumption of
any lien, mortgage, pledge, security interest,
charge or encumbrance by the Company or any
Subsidiary with respect to any property, capital
stock or asset of the Company or any Subsidiary,
which secures payment of indebtedness of the Company
in excess of $10,000,000, except for liens or
pledges securing Permitted Indebtedness;
(vii) the declaration or payment by the Company
or any Subsidiary (other than special purpose
subsidiaries engaged solely in motion picture
production) of any dividend on its Common Stock or
any other capital stock junior to the Series C
Preferred Stock and the Series D Preferred Stock
(except that (A) any Subsidiary may declare and pay
dividends to the Company and (B) the Company may
declare and pay dividends on the Series C Preferred
Stock or the Series D Preferred Stock in accordance
with the terms of the Restated Certificate and
applicable law);
(viii) the termination of, or material
amendment, modification or supplement to, the Kassar
Employment Agreement; the Co-Production Financing
Commitment Agreement dated as of August 19, 1993
among Carolco, an affiliate of Cinepole and Tele-
Communications, Inc. ("TCI") and the Standby
Purchase and Investment Agreement dated as of July
29, 1993 among Carolco, Cinepole, an affiliate of
Cinepole, Pioneer, RSC and TCI, as amended as of the
Effective Date of the Merger Agreement;
(ix) any investments, or series of investments,
by the Company or any Subsidiary in excess of
$3,000,000, other than Permitted Investments; and
(x) any agreement, understanding or arrangement
by the Company or any Subsidiary, or the amendment
of any agreement, understanding or arrangement of
the Company or any Subsidiary, with respect to any
of the foregoing matters.
(b) Interested Transactions. Subject to the
provisions of Section 5(a) hereof, any transaction
between the Company or any of its Subsidiaries and any
Stockholder or any Affiliate of a Stockholder, other than
Permitted Interested Transactions, shall be approved by a
majority of the disinterested directors on the Board.
Section 6. Tag-Along Rights. (a) At such time as
any two or more of the Strategic Investors enter into a
joint privately negotiated transaction or series of
related transactions to sell or otherwise dispose for
value to any person (other than the Company or its
Subsidiaries, or any Strategic Investor, MGM H or their
respective Affiliates), at least
(i) 50% of the aggregate amount of Securities
beneficially owned by the Strategic Investors as of
the date of the effectiveness of the Merger (which
amount is subject to adjustment for, among other
things, in-kind interest or dividends and/or any
other anti-dilution adjustments) and
(ii) 10% of Securities beneficially owned by
each of Pioneer and Cinepole, respectively, as of
the date of such sale or disposal, such other
purchasers shall afford MGM H Tag-along Rights (the
"Tag-along Rights"). The Tag-along Rights shall
entitle MGM H to participate proportionately in the
above-referenced transaction or series of
transactions by selling, at an equivalent price and
on the same terms, up to the number of Securities
beneficially owned by MGM H as of the date of the
effectiveness of the Merger (which amount will be
subject to adjustment for, among other things, in-
kind interest or dividends and/or any other anti-
dilution adjustments) multiplied by a fraction, the
numerator of which is the number of Securities sold
by the Strategic Investors in such transaction or
series of transactions and the denominator of which
is the aggregate number of Securities originally
held by all Strategic Investors, as adjusted for,
among other things, in-kind interest or dividends
and/or any other anti-dilution adjustments.
(b) In the event that the Strategic Investors
sell Securities which are of a different class,
designation or type than those of which MGM H desires to
exercise Tag-along Rights, (i) the number of Securities
which may be sold by MGM H shall be equal to the Common
Stock Equivalent of all Securities held by MGM H as of
the date of the effectiveness of the Merger and (ii) all
Securities shall be valued, for the purpose of
determining the price at which MGM H is entitled to
exercise its Tag-along Rights, at the "Common Stock
Equivalent Price".
(c) The Strategic Investors shall be required
to provide MGM H with 25 days' written notice of any
proposed sale of Securities. MGM H shall have 20 days
following such notification in which to notify the
Strategic Investors of its exercise of Tag-along Rights.
(d) In the event that the Strategic Investors
and MGM H enter into a joint privately negotiated
transaction or series of related transactions to sell or
dispose for value to any Person (other than the Company
or its Subsidiaries, or any Strategic Investor or MGM H,
or their respective Affiliates) at least (i) 50% of the
aggregate amount of Securities beneficially owned by them
as of the date of the effectiveness of the Merger (which
amount will be subject to adjustment for, among other
things, in-kind interest or dividends and/or any other
anti-dilution adjustments), (ii) 10% of the Securities
beneficially owned by each of Pioneer, Cinepole and MGM
H, respectively, as of the date of such sale or disposal,
then New CIBV shall be afforded Tag-along Rights in the
same manner as the Tag-along Rights afforded to MGM H
under this Section 6; provided, however, that if any
reduction in the aggregate amount of Securities to be
sold by the Strategic Investors and MGM H in such
transaction becomes necessary as a result of the exercise
by New CIBV of its Tag-along Rights, such reduction shall
apply solely to the Securities to be sold by the
Strategic Investors.
(e) In the event that MGM H and Cinepole enter
into a joint privately negotiated transaction or series
of related transactions to sell or dispose for value to
any Person (other than the Company or its Subsidiaries,
or any Strategic Investor or MGM H, or their respective
Affiliates) at least (i) 50% of the aggregate amount of
Securities beneficially owned by them as of the date of
the effectiveness of the Merger (which amount will be
subject to adjustment for, among other things, in-kind
interest or dividends and/or any other anti-dilution
adjustments), and (ii) 10% of the Securities beneficially
owned by each of them, respectively, as of the date of
such sale or disposal, then Pioneer, RCS and New CIBV
shall be afforded Tag-along Rights in the same manner as
the Tag-along Rights afforded to MGM H under this
Section 6.
(f) In the event that MGM H and Pioneer enter
into a joint privately negotiated transaction or series
of related transactions to sell or dispose for value to
any Person (other than the Company or its subsidiaries,
or any Strategic Investor or MGM H, or their respective
Affiliates) at least (i) 50% of the aggregate amount of
Securities beneficially owned by them as of the date of
the effectiveness of the Merger (which amount will be
subject to adjustment for, among other things, in-kind
interest or dividends and/or any other anti-dilution
adjustments), and (ii) 10% of the Securities beneficially
owned by each of them, respectively, as of the date of
such sale or disposal, then Cinepole, RCS and New CIBV
shall be afforded Tag-along Rights in the same manner as
the Tag-along Rights afforded to MGM H under this Section
6; provided, however, that if any reduction in the
aggregate amount of Securities to be sold by MGM H and
Pioneer in such transaction becomes necessary as a result
of the exercise by Cinepole, RCS or New CIBV of their
respective Tag-along Rights, such reduction shall apply
solely to the Securities to be sold by Pioneer.
Section 7. Representations and Warranties. Each of
the parties hereto represents and warrants to all the
other parties that:
(a) Such party has full power and authority to
enter into this Agreement and all corporate or other
action required to authorize the entering into of this
Agreement and the performance by such party of all its
obligations hereunder has been duly taken;
(b) All acts, conditions and things required to be
done, fulfilled and performed and (except as disclosed in
writing by any of the parties to the others prior to the
signing of this Agreement) all consents, permissions,
authorizations or other approval of, notice to, or
registration with, any regulatory authority or other
person required to be obtained or made, in order (i) to
enable such party lawfully to enter into, exercise its
rights under, and perform the obligations expressed to be
assumed by it in this Agreement, (ii) to ensure that the
obligations expressed to be assumed by such party in this
Agreement are legal, valid and enforceable;
(c) The execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby do not and will not (i) violate any
provision of the charter instruments of such party; (ii)
violate, conflict with or result in the breach of any of
the terms of, result in a modification of the effect of,
otherwise give any other contracting party the right to
terminate, or constitute (with notice or otherwise) a
default under, any contract by which each such party, its
assets, properties or business, or the assets, properties
or business of any of its subsidiaries, may be bound or
subject; (iii) violate any order, judgment, injunction,
award or decree of any regulatory authority against, or
binding upon, such party or its assets, properties or
business, or the assets, properties or business of any of
its subsidiaries; or (iv) except as disclosed in writing
by any of the parties to the others prior to the signing
of this Agreement violate any applicable law or
regulation or any permit, license, franchise,
registration or similar authorization with respect to, or
binding upon, its assets, properties or business or the
assets, properties or business of any of its
subsidiaries.
Section 8. Confidentiality. Each Stockholder
agrees, and will cause each of its respective Director
Designees, officers, directors, subsidiaries, employees,
agents and other affiliates, to keep confidential all
material non-public information obtained by any of them,
and refrain from causing material non-public information
to become public information, provided that, such
information may be disseminated by the Stockholders and
the Director Designees to their respective officers,
directors, subsidiaries, employees, agents and other
affiliates and to other unaffiliated parties (if each
such unaffiliated party enters into a confidentiality
agreement with such Stockholder or with the Director
Designee, as the case may be, with regard to such
information) to the extent necessary for each Stockholder
to evaluate the operations of the Company and for other
corporate purposes.
Section 9. Competition. None of the terms herein
shall be construed to restrict the rights of the
Stockholders (other than New CIBV as long as the Kassar
Employment Agreement remains in effect) or Director
Designees to form, invest in or otherwise participate in
business activities or ventures which may at any time
compete with the Company.
Section 10. Miscellaneous.
(a) Legends on Certificates. Each certificate
representing any of the Securities, and each share of
Common Stock issued upon the conversion of either the
Series C Preferred Stock, the Series D Preferred Stock,
the 7% Notes or the 5% Notes, shall bear appropriate
legends alerting the holder thereof of the existence of
this Agreement.
(b) Superseding Agreement. This Agreement replaces
and supersedes any and all agreements, arrangements or
understandings among any of the parties hereto concerning
the subject matter hereof, including (i) the Stockholders
Agreement dated March 23, 1992 among Pioneer, Le Studio
Canal+ S.A., RCS and New CIBV and (ii) the Stockholders
Agreement dated October 20, 1993 among Pioneer, Cinepole,
RCS, MGM H and New CIBV, except for other agreements
entered into in connection with the Restructuring or the
Merger.
(c) Amendments and Waivers. No amendment to this
Agreement shall be valid or binding unless set forth in
writing, specifically referring to the provision to be
amended, and duly executed by all of the parties hereto.
No waiver of any provision of this Agreement, or of any
breach thereof, shall be effective or binding unless made
in writing and signed by the party purporting to grant
such waiver and, unless provided otherwise, shall be
limited to the specific matter waived.
(d) Assignment; Termination. Except as expressly
provided herein, none of the parties may assign its
rights or obligations hereunder without prior written
consent of all the other parties hereto. This Agreement
shall terminate, with respect to any Stockholder, at such
time as any Stockholder (or its Affiliates) no longer
beneficially owns an amount of Securities which would
entitle such Stockholder to appoint a Director Designee
in accordance with Section 2(c) hereof, provided, that
with respect to New CIBV, this Agreement shall terminate
upon termination of the Kassar Employment Agreement.
(e) Notices. Any demand, notice or other
communication given in connection with this Agreement
shall be in writing and shall be delivered personally or
sent by facsimile to the parties at the following
addresses (or at such other address, facsimile number or
individual for a party as may be designated by notice by
such party to the others):
Pioneer: Pioneer LDCA, Inc.
2265 East 220th Street
Long Beach, California 90810
Attention: Mr. Tetsuro Kudo
With a copy to:
Pioneer LDC, Inc.
Arco Tower, 8-1
Shimomeguro 1-chome
Meguro-ku
Tokyo 153, Japan
Attention: Mr. Ryuichi Noda
and
Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Blake Hornick, Esq.
Cinepole: Cinepole Productions B.V.
P.O. Box 990
1000 AZ Amsterdam
The Netherlands
With a copy to:
Coudert Freres
52, Avenue des Champs-Elysees
75008 Paris
France
Atten: Jonathan M. Wohl, Esq.
and
Le Studio Canal+ (U.S.)
301 North Canon Drive, Suite 228
Beverly Hills, California 90210
Attention: Richard J. Garzilli,
Esq.
and
Coudert Brothers
1055 West Seventh Street, 20th Fl.
Los Angeles, California 90017
Attention: John St. Clair, Esq.
MGM H: c/o Metro-Goldwyn-Mayer
2500 Broadway
Santa Monica, California 90404
Attention: Mr. Michael S. Hope
and
c/o Credit Lyonnais
19 boulevard des Italiens
75002 Paris, France
Atten: Mr. Rene-Claude Jouannet
With a copy to:
White & Case
633 West Fifth Street
Los Angeles, California 90071
Atten: David G. Johnson, Esq.
RCS: Museumplein 11
1071 DJ Amsterdam
Netherlands
Attention: Mr. Koopsman or
Mr. Peters
With a copy to:
Avv. Enzo Pulitano
Affari Legali e Societari
RCS Editori SpA
Corso Garibaldi 86
20121 Milan
Italy
and
Werbel, McMillin & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Paul D. Downs, Esq.
New CIBV: Parklaan 46
3016 BC Rotterdam
The Netherlands
Attention: Mr. Hans Schutte
With a copy to:
Skadden, Arps, Slate,
Meagher & Flom
300 S. Grand Avenue
Suite 3400
Los Angeles, CA 90071-3144
Atten: Brian J. McCarthy, Esq.
(f) Governing Law; Jurisdiction. THE AGREEMENT
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO
THOSE LAWS RELATING TO CONFLICTS OF LAWS. Each party
irrevocably agrees that any suit, action, or other legal
proceeding arising from or relating to this Agreement
shall be brought in the courts of the State of New York
or the United States of America located in New York
County, or the courts of the State of California or the
United States of America located in Los Angeles County.
(g) Counterparts. This Agreement may be entered
into in any number of counterparts and by the parties to
it on separate counterparts, each of which when so
executed and delivered shall be an original, but all of
which together shall constitute one and the same
instrument.
(h) Severability. If any one or more of the
provisions contained herein, or the application thereof
in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the
validity, legality and enforceability of any such
provision in every other respect and of the remaining
provisions hereof shall not be in any way impaired, it
being intended that all of the rights of the parties
hereto shall be enforceable to the fullest extent
permitted by law.
IN WITNESS WHEREOF, the parties have executed
this Agreement this ____ day of August, 1994.
PIONEER LDCA, INC.
By:
Title:
CINEPOLE PRODUCTIONS B.V.
By:
Title:
RCS VIDEO INTERNATIONAL
SERVICES B.V.
By:
Title:
MGM HOLDINGS CORPORATION
By:
Title:
NEW CAROLCO INVESTMENTS, B.V.
By:
Title:
__________________________________________________________
Exhibit 8
Carolco Pictures Inc.
8800 Sunset Boulevard
Los Angeles, CA 90069
as of August 10, 1994
Mr. Mario F. Kassar
10281 Charing Cross Road
Los Angeles, CA 90024
Re: Stock Option Agreement
Dear Mario:
Please make reference to the 1989 Stock Option
and Stock Appreciation Rights Plan (the "Plan") of
Carolco Pictures Inc. (the "Corporation") adopted by the
Board of Directors (the "Board") of the Corporation on
March 29, 1989 and approved by the Corporation's
stockholders at the Special Meeting of Stockholders held
on September 30, 1993. Pursuant to the Plan, a committee
of the Board, all of whose members are "disinterested
persons" as that term is used in Rule 16b-3(c)(2)(i) of
the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Committee"),
acting as the Stock Option Committee, is authorized to
grant options to purchase authorized but unissued shares
of the Corporation's Common Stock ("Common Stock") on the
terms and conditions set forth by the Committee. The
Committee has resolved to grant to you ("Optionee")
options to purchase Common Stock as more fully set forth
in this letter agreement (the "Agreement") herein below.
(i) Grant of Option. The Corporation hereby
grants to Optionee the option (the "Option") to purchase,
upon and subject to the full terms and conditions of the
Plan, which is incorporated in full herein by this
reference, all or any part of Fifteen Million
(15,000,000) shares of the Common Stock (the "Shares") at
an exercise price of $0.40625 per share. The Option
shall expire on October 20, 2003. The Option granted
hereunder is not intended to qualify as an "Incentive
Stock Option" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended.
(ii) Exercisability. The Option shall be
immediately exercisable as to 2,941,170 Shares and shall
become exercisable on a monthly basis as to 294,117
Shares on the last day of each month of the Term (as
defined in the Employment Agreement, dated as of August
10, 1994, between Optionee and the Corporation (the
"Employment Agreement")) and as to 294,150 Shares on
December 31, 1997; provided, however, that upon
Optionee's Death or Disability or in the event that
Optionee's employment is terminated (i) by the
Corporation other than for Cause, Retirement, Death or
Disability or (ii) by Optionee for Good Reason (as such
terms are defined in the Employment Agreement) the Option
shall become immediately exercisable as to all the Shares
subject to the Option. Any portion of the Option that
becomes so exercisable shall remain exercisable until the
expiration of the Option.
(iii) Exercise of Option. The Option shall
be exercised by written notice delivered to the
Corporation stating the number of shares of Common Stock
with respect to which the Option is being exercised,
together with cash or a certified or cashier's check in
the amount of, or shares of the Corporation (of the same
class as the shares covered by the Option) with a fair
market value equivalent to, the purchase price of the
applicable shares. If the Option is being exercised by
any person(s) other than Optionee, notice shall be
accompanied by proof, satisfactory to counsel for the
Corporation, of the right of the applicable person(s) to
exercise the Option. Not less than ten (10) shares of
Common Stock may be purchased at any one time unless the
number purchased is the total number which may be
purchased under the Option and in no event may the Option
be exercised with respect to fractional shares. Upon
exercise, Optionee shall be responsible for any federal
and state taxes when due and the Corporation shall make
appropriate arrangements for the withholding of such
taxes. The Corporation may require that all necessary
withholding taxes be paid prior to the delivery of the
shares covered by the exercised Option.
(iv) Nontransferability: Disability or Death
of Optionee. The Option shall not be transferable except
by will or by the laws of descent and distribution and
shall be exercisable only by Optionee during his
lifetime. After death, the persons to whom Optionee's
rights under the Option shall have passed by order of a
court of competent jurisdiction, by will or by the
applicable laws of descent and distribution or the
executor or administrator of Optionee's estate, shall
have the right to exercise the Option.
(v) Privileges of Stock Ownership. Optionee
shall have no rights as a stockholder with respect to the
Common Stock until the date of issuance of stock
certificates to Optionee. No adjustment will be made for
dividends or other rights for which the record date is
prior to the date the stock certificates are issued.
(vi) Notification of Sale. Optionee agrees
that Optionee, or any person acquiring Common Stock upon
exercise of the Option, will notify the Corporation not
more than five (5) days after any sale or other
disposition of the applicable Common Stock.
(vii) Representations of Optionee. No
Common Stock issuable upon the exercise of the Option
shall be issued and delivered unless and until all
applicable requirements of state and federal law and of
the Securities and Exchange Commission and the state
securities laws pertaining to the issuance and sale of
shares, and all applicable listing requirements of any
national securities exchange on which shares of the
Corporation of the same class are then listed, if any,
shall have been compiled with.
(viii) Notices. Any notice to the
Corporation provided for in this Agreement shall be
addressed to it in care of its Corporate Secretary at its
main office, and any notice to Optionee shall be
addressed to Optionee's address on file with the
Corporation or a subsidiary corporation with a copy to
Brian J. McCarthy, Esq., Skadden, Arps, Slate, Meagher &
Flom, 300 South Grand Avenue, Los Angeles, California
90071, or to such other address as either party hereto
may designate to the other in writing. Any notice shall
be deemed to be duly given if and when enclosed in a
properly sealed envelope and addressed as stated above,
and deposited, postage prepaid, in a post office or
branch post office regularly maintained by the United
States government. In lieu of giving notice by mail as
aforesaid, any written notice under this Agreement may be
give to Optionee in person, and to the Corporation by
personal delivery to its Corporate Secretary or if
Optionee is the Corporate Secretary, to the President.
This Agreement is not a full description of the
terms of the Plan. Optionee is urged to review the Plan
for a complete description of the terms covering the
grant of the Option.
Please confirm your agreement to the foregoing
by signing below where indicated.
Sincerely,
/s/ Robert W. Goldsmith
Robert W. Goldsmith
Senior Vice President
and General Counsel
AGREED AND ACCEPTED:
/s/ Mario F. Kassar
Mario F. Kassar
__________________________________________________________
Exhibit 9
FORM OF
SECOND AMENDMENT TO INDUCEMENT AGREEMENT
This Second Amendment to Inducement Agreement
(the "Second Amendment") dated as of August 10, 1994 is
entered into by and among New Carolco Investments B.V., a
corporation organized under the laws of The Netherlands
("New CIBV"), Clorenda Corporation A.V.V., a corporation
organized under the laws of Aruba ("Clorenda"), Mario F.
Kassar ("Kassar"), Pioneer LDCA, Inc., a Delaware
corporation ("Pioneer"), Le Studio Canal+, a societe
anonyme ("Canal"), and RCS Video Services International
B.V., a corporation organized under the laws of The
Netherlands ("RCS") (Pioneer, Canal and RCS are
collectively referred to herein as the "Foreign
Investors"). All capitalized terms used but not defined
herein shall have the meaning set forth in the Inducement
Agreement (as defined below).
WHEREAS, the parties to this Second Amendment
have entered into the Inducement Agreement (the
"Inducement Agreement"), dated as of March 23, 1992, as
amended by the First Amendment to Inducement Agreement,
dated as of April 30, 1993 (the "First Amendment"); and
WHEREAS, as contemplated by the Inducement
Agreement, on March 23, 1992, New CIBV executed a
promissory note in the principal amount of $2,500,000 in
favor of each of the Foreign Investors (as to each
Foreign Investor, an "Original Note"), and as
contemplated by the First Amendment, on April 30, 1993,
New CIBV executed an amended and restated Original Note
in the principal amount of $3,438,232 in favor of each of
the Foreign Investors (as to each Foreign Investor, an
"Amended Note"); and
WHEREAS, pursuant to the Agreement and Plan of
Merger, dated as of August 10, 1994 (the "Merger
Agreement"), among Carolco Pictures Inc., a Delaware
corporation ("Carolco"), LIVE Entertainment Inc., a
Delaware corporation ("LIVE"), and Carolco Acquisition
Corp., a Delaware corporation and wholly owned subsidiary
of LIVE ("CAC"), CAC will be merged with and into Carolco
and Carolco will become a wholly owned subsidiary of
LIVE; and
WHEREAS, as an inducement to Kassar to enter
into a new employment agreement, which will permit
Carolco to proceed with certainty with the transactions
contemplated by the Merger Agreement, the parties hereto
have agreed to amend the Inducement Agreement and to
undertake certain obligations, all as set forth herein.
NOW, THEREFORE, in consideration of the mutual
promises contained herein, the parties to this Second
Amendment agree as follows:
(ix) New CIBV shall execute and deliver a
second amended and restated Original Note (the "Second
Amended Note") to each Foreign Investor, which shall
contain the following modifications:
(a) The principal amount of each Second
Amended Noted shall be the outstanding principal amount
of the Amended Note together with all accrued and unpaid
interest through July 31, 1994 on the Amended Note.
(b) Interest will be fixed at 6.25% per annum.
(c) Interest on the Second Amended Notes shall
be cumulative and accrue quarterly and shall be due and
payable in one installment at the earlier of the end of
the term of the Second Amended Note or the occurrence of
certain events set forth in Sections 2(b) and 2(c) of the
Amended Note.
(d) The maturity date of the Second Amended
Note shall be December 31, 1997.
(x) New CIBV hereby affirms that the Amended
Pledge Agreement secures New CIBV's obligations under the
Second Amended Note.
(xi) With the exception of Sections 5, 6 and 7
of the First Amendment, which shall remain in effect and
are hereby reaffirmed, none of the agreements in the
First Amendment shall survive the execution of this
Second Amendment.
IN WITNESS WHEREOF, the parties hereto have
caused this Second Amendment to be executed as of the
date first written above.
PIONEER LDCA, INC.
_______________________________
Title:
RCS VIDEO SERVICES INTERNATIONAL B.V.
_______________________________
Title:
LE STUDIO CANAL+ S.A.
_______________________________
Title:
NEW CAROLCO INVESTMENTS B.V.
_______________________________
Title:
CLORENDA CORPORATION A.V.V.
_______________________________
Title:
_______________________________
MARIO F. KASSAR
__________________________________________________________
EXHIBIT 10
Made at Rotterdam, The Netherlands
SECOND
AMENDED AND RESTATED
NON-RECOURSE
SECURED PROMISSORY NOTE
U.S.$3,655,406 July 31, 1994
FOR VALUE RECEIVED, New Carolco Investments
B.V., an entity organized under the laws of The
Netherlands ("Borrower"), hereby promises to pay to Le
Studio Canal+ ("Lender"), or order, at such place as the
holder hereof may from time to time direct, the principal
sum of THREE MILLION SIX HUNDRED FIFTY-FIVE THOUSAND FOUR
HUNDRED AND SIX and 00/100 U.S. DOLLARS (U.S.$3,655,406),
together with interest from the date hereof, on the
outstanding principal amount at the rate set forth below.
1. The outstanding principal amount of this
Note, together with all accrued and unpaid interest
thereon, shall bear interest at a rate of 6.25% per
annum.
2. Such interest shall be cumulative (i.e.,
compound quarterly) and accrue quarterly and, together
with the unpaid principal sum of this Note, shall be due
and payable in one installment at the earlier to occur of
(a) December 31, 1997, (b) such time as Lender declares
the entire amount of this Note due and payable in
accordance with the provisions of Section 4 hereof, or
(c) the date 30 days after the date (i) the employment of
Mario F. Kassar ("Kassar") is terminated by Carolco
Pictures Inc. (the "Company," which for purposes of this
Note shall mean the Company and its Affiliates (as
defined in the Employment Agreement between Kassar and
the Company, dated as of August 10, 1994 (the "Employment
Agreement") including, as of the Effective Date (as
defined in the Employment Agreement), Carolco
Entertainment Inc.) for Cause (as defined in the
Employment Agreement), or (ii) Kassar terminates his
employment with the Company other than for Good Reason,
Death, Retirement or Disability (each as defined in the
Employment Agreement).
3. Principal and interest shall be payable in
lawful money of the United States of America. Payments
shall be applied first to interest on past due interest,
then to past due interest, then to accrued interest and
then to principal. All principal and interest not paid
when due shall bear interest from such date until paid in
full at the stated interest rate. Borrower may prepay
all or part of this Note at any time and from time to
time without penalty, provided, that Borrower shall
prepay this Note pro rata with those certain promissory
notes (the "Other Notes"), of even date herewith, made by
it on behalf of each of Pioneer LDCA, Inc. and RCS Video
International Services B.V.
4. An event of default hereunder shall occur
if (a) any principal payment due hereunder is not paid as
and when due, (b) any interest payment is not paid within
20 calendar days of its due date, (c) Borrower fails to
timely comply in any material respect with any non-
monetary obligation hereunder within 20 calendar days
after receiving notice of such failure, (d) Borrower
becomes insolvent (meaning the inability to meet its
obligations as and when due), (e) Borrower makes an
assignment for the benefit of its creditors or files a
petition in bankruptcy, (f) Borrower is adjudged
insolvent, (g) an involuntary petition in bankruptcy (or
other similar statute) is filed against the Borrower and
is not dismissed within 15 days after the filing thereof,
(h) an event of default (as defined in the Other Notes)
under one or both of the Other Notes shall have occurred
and is continuing and such event has not been waived or
tolled, or (i) Borrower fails to comply in any material
respect with any covenant contained in the Security
Agreement and all applicable cure periods have expired.
If any such event of default occurs, the holder hereof,
at its option, may declare all sums due hereunder
immediately due and payable without notice or demand and,
thereafter, any amounts due hereunder shall bear interest
at the lower of (y) the maximum rate permitted by law or
(z) 7.25% per annum.
5. No delay on the part of the holder of this
Note nor the exercise of any power or right under this
Note shall operate as a waiver of such power or right or
preclude other or further exercise thereof or the
exercise of any other power or right. The undersigned
hereby waives presentment, demand for payment, notice of
dishonor or acceleration, protest and notice of protest,
and any and all other notices or demands in connection
with delivery, acceptance, performance, default or
enforcement of this Note.
6. If this Note is not paid when due or if
any event of default occurs hereunder, Borrower promises
to pay all costs of enforcement and collection,
including, but not limited to, reasonable attorneys'
fees, whether or not such enforcement and collection
includes the filing of a lawsuit.
7. This Note shall inure to the benefit of
Lender's successors and assigns and shall bind the
successors and assigns of the Borrower.
8. This Note is secured by the Amended and
Restated Security and Pledge Agreement, dated as of April
30, 1993, by and between Borrower and Lender (the
"Security Agreement").
9. This Note is not transferable, provided
that this Note may be sold, transferred or assigned by
Lender to its affiliates (as defined in Rule 405
promulgated under the Securities Act of 1933, as
amended).
10. Any and all notices required or permitted
under this Note to be delivered to any party hereto by
any other party shall be deemed duly delivered when
personally delivered to the party (including by express
courier service) at the address set forth below, or any
such other address as shall be given in writing by the
respective party to all other parties:
Borrower: New Carolco Investments B.V.
Parklaan 46
3016 BC Rotterdam
The Netherlands
Attention: Hans Schutte, Esq.
with a copy to: Skadden, Arps, Slate,
Meagher & Flom
300 South Grand Avenue
Los Angeles, California 90071
Attention: Brian J. McCarthy, Esq.
Lender: Le Studio Canal+
17, rue Dumont D'Arville
75116 Paris, France
Attention: Mr. Olivier Granier
with a copy to: Coudert Brothers
1055 West Seventh Street
20th Floor
Los Angeles, California 90071
Attention: John St. Clair, Esq.
11. This Note is subject to all applicable
laws and treaties. This Note, its validity, construction
and effect shall be governed by and construed under the
laws of The Netherlands applicable to contracts executed
therein and wholly to be performed therein. Words used
in the singular shall include the plural and vice versa.
If any part of this Note is declared invalid or
unenforceable by any governmental authority or court of
competent jurisdiction, the validity of the balance of
this Note shall not be affected.
12. Borrower and Lender, each as to and for
the benefit of the other: (a) hereby irrevocably submit
to the exclusive jurisdiction of the courts of The
Netherlands (the "Applicable Court") for the purpose of
any action, suit or proceeding arising out of or based
upon the subject matter of, or transactions contemplated
by, this Note (each, an "Applicable Action"); (b) hereby
irrevocably waive and agree not to assert (by way of
motion, as a defense or otherwise) in any Applicable
Action brought in the Applicable Court any claim (i) that
it is not subject personally to the jurisdiction of the
Applicable Court, (ii) that the Applicable Action is
brought in an inconvenient forum, (iii) that the venue of
the Applicable Action is improper, or (iv) that this Note
or its subject matter may not for any other reason be
enforced in the Applicable Court; (c) hereby irrevocably
consent to service of process of the Applicable Court in
the same manner as any other notice is served on Borrower
or Lender (as the case may be) pursuant to Paragraph 8
above; and (d) irrevocably agree that final judgment
(including exhaustion of all rights to appellate review)
in any Applicable Action ("Judgment") shall be conclusive
and may be enforced in any other jurisdiction (i) by
action, suit or proceeding on the Judgment, a certified
and true copy of which shall be absolutely conclusive
evidence of the fact and of the amount of any liability
under or pursuant to the Judgment, or (ii) in any other
manner not prevented by any applicable law.
13. Notwithstanding anything herein or in the
Security Agreement to the contrary, it is understood and
agreed that this Note is intended to evidence a non-
recourse obligation of Borrower, and Lender's sole
recourse in the event of a default hereunder or
thereunder is against the Collateral.
IN WITNESS WHEREOF, the undersigned has
executed this Note on the day and year first above
written.
NEW CAROLCO INVESTMENTS B.V.,
an entity organized under the laws
of The Netherlands
By: /s/ Roberto C. Brazao Gomes
Roberto C. Brazao Gomes
Managing Director
__________________________________________________________
EXHIBIT 11
Made at Rotterdam, The Netherlands
SECOND
AMENDED AND RESTATED
NON-RECOURSE
SECURED PROMISSORY NOTE
U.S.$3,655,406 July 31, 1994
FOR VALUE RECEIVED, New Carolco Investments
B.V., an entity organized under the laws of The
Netherlands ("Borrower"), hereby promises to pay to
Pioneer LDCA, Inc. ("Lender"), or order, at such place as
the holder hereof may from time to time direct, the
principal sum of THREE MILLION SIX HUNDRED FIFTY-FIVE
THOUSAND FOUR HUNDRED AND SIX and 00/100 U.S. DOLLARS
(U.S.$3,655,406), together with interest from the date
hereof, on the outstanding principal amount at the rate
set forth below.
14. The outstanding principal amount of this
Note, together with all accrued and unpaid interest
thereon, shall bear interest at a rate of 6.25% per
annum.
15. Such interest shall be cumulative (i.e.,
compound quarterly) and accrue quarterly and, together
with the unpaid principal sum of this Note, shall be due
and payable in one installment at the earlier to occur of
(a) December 31, 1997, (b) such time as Lender declares
the entire amount of this Note due and payable in
accordance with the provisions of Section 4 hereof, or
(c) the date 30 days after the date (i) the employment of
Mario F. Kassar ("Kassar") is terminated by Carolco
Pictures Inc. (the "Company," which for purposes of this
Note shall mean the Company and its Affiliates (as
defined in the Employment Agreement between Kassar and
the Company, dated as of August 10, 1994 (the "Employment
Agreement") including, as of the Effective Date (as
defined in the Employment Agreement), Carolco
Entertainment Inc.) for Cause (as defined in the
Employment Agreement), or (ii) Kassar terminates his
employment with the Company other than for Good Reason,
Death, Retirement or Disability (each as defined in the
Employment Agreement).
16. Principal and interest shall be payable in
lawful money of the United States of America. Payments
shall be applied first to interest on past due interest,
then to past due interest, then to accrued interest and
then to principal. All principal and interest not paid
when due shall bear interest from such date until paid in
full at the stated interest rate. Borrower may prepay
all or part of this Note at any time and from time to
time without penalty, provided, that Borrower shall
prepay this Note pro rata with those certain promissory
notes (the "Other Notes"), of even date herewith, made by
it on behalf of each of Le Studio Canal+ and RCS Video
International Services B.V.
17. An event of default hereunder shall occur
if (a) any principal payment due hereunder is not paid as
and when due, (b) any interest payment is not paid within
20 calendar days of its due date, (c) Borrower fails to
timely comply in any material respect with any non-
monetary obligation hereunder within 20 calendar days
after receiving notice of such failure, (d) Borrower
becomes insolvent (meaning the inability to meet its
obligations as and when due), (e) Borrower makes an
assignment for the benefit of its creditors or files a
petition in bankruptcy, (f) Borrower is adjudged
insolvent, (g) an involuntary petition in bankruptcy (or
other similar statute) is filed against the Borrower and
is not dismissed within 15 days after the filing thereof,
(h) an event of default (as defined in the Other Notes)
under one or both of the Other Notes shall have occurred
and is continuing and such event has not been waived or
tolled, or (i) Borrower fails to comply in any material
respect with any covenant contained in the Security
Agreement and all applicable cure periods have expired.
If any such event of default occurs, the holder hereof,
at its option, may declare all sums due hereunder
immediately due and payable without notice or demand and,
thereafter, any amounts due hereunder shall bear interest
at the lower of (y) the maximum rate permitted by law or
(z) 7.25% per annum.
18. No delay on the part of the holder of this
Note nor the exercise of any power or right under this
Note shall operate as a waiver of such power or right or
preclude other or further exercise thereof or the
exercise of any other power or right. The undersigned
hereby waives presentment, demand for payment, notice of
dishonor or acceleration, protest and notice of protest,
and any and all other notices or demands in connection
with delivery, acceptance, performance, default or
enforcement of this Note.
19. If this Note is not paid when due or if
any event of default occurs hereunder, Borrower promises
to pay all costs of enforcement and collection,
including, but not limited to, reasonable attorneys'
fees, whether or not such enforcement and collection
includes the filing of a lawsuit.
20. This Note shall inure to the benefit of
Lender's successors and assigns and shall bind the
successors and assigns of the Borrower.
21. This Note is secured by the Amended and
Restated Security and Pledge Agreement, dated as of April
30, 1993, by and between Borrower and Lender (the
"Security Agreement").
22. This Note is not transferable, provided
that this Note may be sold, transferred or assigned by
Lender to its affiliates (as defined in Rule 405
promulgated under the Securities Act of 1933, as
amended).
23. Any and all notices required or permitted
under this Note to be delivered to any party hereto by
any other party shall be deemed duly delivered when
personally delivered to the party (including by express
courier service) at the address set forth below, or any
such other address as shall be given in writing by the
respective party to all other parties:
Borrower: New Carolco Investments B.V.
Parklaan 46
3016 BC Rotterdam
The Netherlands
Attention: Hans Schutte, Esq.
with a copy to: Skadden, Arps, Slate,
Meagher & Flom
300 South Grand Avenue
Los Angeles, California 90071
Attention: Brian J. McCarthy, Esq.
Lender: Pioneer LDCA, Inc.
2265 East 220th Street
Long Beach, California 90801
Attention: Tetsuro Kudo
with a copy to: Pioneer LDC, Inc.
Arco Tower, 8-1
Shimomeghio 1-Chrome
Meguro-ku
Tokyo 153, Japan
Attention: Ryuichi Noda
and: Pryor, Cashman, Sherman & Flynn
410 Park Avenue
New York, New York 10022
Attention: Blake Hornick, Esq.
24. This Note is subject to all applicable
laws and treaties. This Note, its validity, construction
and effect shall be governed by and construed under the
laws of The Netherlands applicable to contracts executed
therein and wholly to be performed therein. Words used
in the singular shall include the plural and vice versa.
If any part of this Note is declared invalid or
unenforceable by any governmental authority or court of
competent jurisdiction, the validity of the balance of
this Note shall not be affected.
25. Borrower and Lender, each as to and for
the benefit of the other: (a) hereby irrevocably submit
to the exclusive jurisdiction of the courts of The
Netherlands (the "Applicable Court") for the purpose of
any action, suit or proceeding arising out of or based
upon the subject matter of, or transactions contemplated
by, this Note (each, an "Applicable Action"); (b) hereby
irrevocably waive and agree not to assert (by way of
motion, as a defense or otherwise) in any Applicable
Action brought in the Applicable Court any claim (i) that
it is not subject personally to the jurisdiction of the
Applicable Court, (ii) that the Applicable Action is
brought in an inconvenient forum, (iii) that the venue of
the Applicable Action is improper, or (iv) that this Note
or its subject matter may not for any other reason be
enforced in the Applicable Court; (c) hereby irrevocably
consent to service of process of the Applicable Court in
the same manner as any other notice is served on Borrower
or Lender (as the case may be) pursuant to Paragraph 8
above; and (d) irrevocably agree that final judgment
(including exhaustion of all rights to appellate review)
in any Applicable Action ("Judgment") shall be conclusive
and may be enforced in any other jurisdiction (i) by
action, suit or proceeding on the Judgment, a certified
and true copy of which shall be absolutely conclusive
evidence of the fact and of the amount of any liability
under or pursuant to the Judgment, or (ii) in any other
manner not prevented by any applicable law.
26. Notwithstanding anything herein or in the
Security Agreement to the contrary, it is understood and
agreed that this Note is intended to evidence a non-
recourse obligation of Borrower, and Lender's sole
recourse in the event of a default hereunder or
thereunder is against the Collateral.
IN WITNESS WHEREOF, the undersigned has
executed this Note on the day and year first above
written.
NEW CAROLCO INVESTMENTS B.V.,
an entity organized under the laws
of The Netherlands
By: /s/ Roberto C. Brazao Gomes
Roberto C. Brazao Gomes
Managing Director
__________________________________________________________
EXHIBIT 12
Made at Rotterdam, The Netherlands
SECOND
AMENDED AND RESTATED
NON-RECOURSE
SECURED PROMISSORY NOTE
U.S.$3,655,406 July 31, 1994
FOR VALUE RECEIVED, New Carolco Investments
B.V., an entity organized under the laws of The
Netherlands ("Borrower"), hereby promises to pay to RCS
Video International Services B.V. ("Lender"), or order,
at such place as the holder hereof may from time to time
direct, the principal sum of THREE MILLION SIX HUNDRED
FIFTY-FIVE THOUSAND FOUR HUNDRED AND SIX and 00/100 U.S.
DOLLARS (U.S.$3,655,406), together with interest from the
date hereof, on the outstanding principal amount at the
rate set forth below.
27. The outstanding principal amount of this
Note, together with all accrued and unpaid interest
thereon, shall bear interest at a rate of 6.25% per
annum.
28. Such interest shall be cumulative (i.e.,
compound quarterly) and accrue quarterly and, together
with the unpaid principal sum of this Note, shall be due
and payable in one installment at the earlier to occur of
(a) December 31, 1997, (b) such time as Lender declares
the entire amount of this Note due and payable in
accordance with the provisions of Section 4 hereof, or
(c) the date 30 days after the date (i) the employment of
Mario F. Kassar ("Kassar") is terminated by Carolco
Pictures Inc. (the "Company," which for purposes of this
Note shall mean the Company and its Affiliates (as
defined in the Employment Agreement between Kassar and
the Company, dated as of August 10, 1994 (the "Employment
Agreement") including, as of the Effective Date (as
defined in the Employment Agreement), Carolco
Entertainment Inc.) for Cause (as defined in the
Employment Agreement), or (ii) Kassar terminates his
employment with the Company other than for Good Reason,
Death, Retirement or Disability (each as defined in the
Employment Agreement).
29. Principal and interest shall be payable in
lawful money of the United States of America. Payments
shall be applied first to interest on past due interest,
then to past due interest, then to accrued interest and
then to principal. All principal and interest not paid
when due shall bear interest from such date until paid in
full at the stated interest rate. Borrower may prepay
all or part of this Note at any time and from time to
time without penalty, provided, that Borrower shall
prepay this Note pro rata with those certain promissory
notes (the "Other Notes"), of even date herewith, made by
it on behalf of each of Pioneer LDCA, Inc. and Le Studio
Canal+.
30. An event of default hereunder shall occur
if (a) any principal payment due hereunder is not paid as
and when due, (b) any interest payment is not paid within
20 calendar days of its due date, (c) Borrower fails to
timely comply in any material respect with any non-
monetary obligation hereunder within 20 calendar days
after receiving notice of such failure, (d) Borrower
becomes insolvent (meaning the inability to meet its
obligations as and when due), (e) Borrower makes an
assignment for the benefit of its creditors or files a
petition in bankruptcy, (f) Borrower is adjudged
insolvent, (g) an involuntary petition in bankruptcy (or
other similar statute) is filed against the Borrower and
is not dismissed within 15 days after the filing thereof,
(h) an event of default (as defined in the Other Notes)
under one or both of the Other Notes shall have occurred
and is continuing and such event has not been waived or
tolled, or (i) Borrower fails to comply in any material
respect with any covenant contained in the Security
Agreement and all applicable cure periods have expired.
If any such event of default occurs, the holder hereof,
at its option, may declare all sums due hereunder
immediately due and payable without notice or demand and,
thereafter, any amounts due hereunder shall bear interest
at the lower of (y) the maximum rate permitted by law or
(z) 7.25% per annum.
31. No delay on the part of the holder of this
Note nor the exercise of any power or right under this
Note shall operate as a waiver of such power or right or
preclude other or further exercise thereof or the
exercise of any other power or right. The undersigned
hereby waives presentment, demand for payment, notice of
dishonor or acceleration, protest and notice of protest,
and any and all other notices or demands in connection
with delivery, acceptance, performance, default or
enforcement of this Note.
32. If this Note is not paid when due or if
any event of default occurs hereunder, Borrower promises
to pay all costs of enforcement and collection,
including, but not limited to, reasonable attorneys'
fees, whether or not such enforcement and collection
includes the filing of a lawsuit.
33. This Note shall inure to the benefit of
Lender's successors and assigns and shall bind the
successors and assigns of the Borrower.
34. This Note is secured by the Amended and
Restated Security and Pledge Agreement, dated as of April
30, 1993, by and between Borrower and Lender (the
"Security Agreement").
35. This Note is not transferable, provided
that this Note may be sold, transferred or assigned by
Lender to its affiliates (as defined in Rule 405
promulgated under the Securities Act of 1933, as
amended).
36. Any and all notices required or permitted
under this Note to be delivered to any party hereto by
any other party shall be deemed duly delivered when
personally delivered to the party (including by express
courier service) at the address set forth below, or any
such other address as shall be given in writing by the
respective party to all other parties:
Borrower: New Carolco Investments B.V.
Parklaan 46
3016 BC Rotterdam
The Netherlands
Attention: Hans Schutte, Esq.
with a copy to: Skadden, Arps, Slate,
Meagher & Flom
300 South Grand Avenue
Los Angeles, California 90071
Attention: Brian J. McCarthy, Esq.
Lender: RCS Video International Services B.V.
Museumplein 11
1071 DJ Amsterdam
The Netherlands
with a copy to: Affari Legali e Societari
Rizzoli
Corso Garibaldi 86
20121 Milan Italy
and: Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, New York 10022
Attention: Paul D. Downs, Esq.
37. This Note is subject to all applicable
laws and treaties. This Note, its validity, construction
and effect shall be governed by and construed under the
laws of The Netherlands applicable to contracts executed
therein and wholly to be performed therein. Words used
in the singular shall include the plural and vice versa.
If any part of this Note is declared invalid or
unenforceable by any governmental authority or court of
competent jurisdiction, the validity of the balance of
this Note shall not be affected.
38. Borrower and Lender, each as to and for
the benefit of the other: (a) hereby irrevocably submit
to the exclusive jurisdiction of the courts of The
Netherlands (the "Applicable Court") for the purpose of
any action, suit or proceeding arising out of or based
upon the subject matter of, or transactions contemplated
by, this Note (each, an "Applicable Action"); (b) hereby
irrevocably waive and agree not to assert (by way of
motion, as a defense or otherwise) in any Applicable
Action brought in the Applicable Court any claim (i) that
it is not subject personally to the jurisdiction of the
Applicable Court, (ii) that the Applicable Action is
brought in an inconvenient forum, (iii) that the venue of
the Applicable Action is improper, or (iv) that this Note
or its subject matter may not for any other reason be
enforced in the Applicable Court; (c) hereby irrevocably
consent to service of process of the Applicable Court in
the same manner as any other notice is served on Borrower
or Lender (as the case may be) pursuant to Paragraph 8
above; and (d) irrevocably agree that final judgment
(including exhaustion of all rights to appellate review)
in any Applicable Action ("Judgment") shall be conclusive
and may be enforced in any other jurisdiction (i) by
action, suit or proceeding on the Judgment, a certified
and true copy of which shall be absolutely conclusive
evidence of the fact and of the amount of any liability
under or pursuant to the Judgment, or (ii) in any other
manner not prevented by any applicable law.
39. Notwithstanding anything herein or in the
Security Agreement to the contrary, it is understood and
agreed that this Note is intended to evidence a non-
recourse obligation of Borrower, and Lender's sole
recourse in the event of a default hereunder or
thereunder is against the Collateral.
IN WITNESS WHEREOF, the undersigned has
executed this Note on the day and year first above
written.
NEW CAROLCO INVESTMENTS B.V.,
an entity organized under the laws
of The Netherlands
By: /s/ Roberto C. Brazao Gomes
Roberto C. Brazao Gomes
Managing Director
