SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT - OF 1934 (FEE REQUIRED) For the fiscal year ended June 30, 1997.
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 (FEE REQUIRED)
COMMISSION FILE NUMBER : 33-79356
dick clark productions, inc.
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(Exact name of registrant as specified in its charter)
DELAWARE 23-2038115
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3003 W. Olive Avenue, Burbank, California 91510-7811
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (818) 841-3003
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Common Stock, par value $.01
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(Title of Class)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months, and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] or No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. Yes [X] or No [_]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant computed by reference to the closing sales
price as quoted on NASDAQ on September 23, 1997, was approximately $15,239,000.
As of September 23, 1997, 7,631,500 shares of Registrant's $.01 par
value common stock and 750,000 shares of the Registrant's $.01 par value Class A
common stock were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Proxy Statement relating to the Annual Meeting of Shareholders
to be held November 4, 1997, are incorporated by reference into Part I and Part
III of this Report.
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PART I
ITEM 1. BUSINESS
BACKGROUND
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dick clark productions, inc. was incorporated in California in 1977
and was reincorporated in November 1986 as a Delaware corporation. As used in
this Report, unless the context otherwise expressly requires, the term "Company"
refers to dick clark productions, inc. and its predecessors and their respective
subsidiaries.
The Company develops and produces a wide range of television
programming for television networks, first-run domestic syndicators (which
provide programming for independent and network affiliated stations), cable
networks and advertisers. Since 1957, the Company has been a significant
supplier of television programming and has produced thousands of hours of
television entertainment, including series, annual, recurring and one-time
specials and movies for television. The Company also licenses the rebroadcast
rights to some of its programs, licenses certain segments of its programming to
third parties and from time to time produces home videos. In addition, the
Company, on a limited basis, develops and produces theatrical motion pictures,
which are generally produced in conjunction with third parties who provide the
financing for such motion pictures.
Since fiscal 1990, the Company has operated entertainment-themed
restaurants known as Dick Clark's American Bandstand Grill(R). In fiscal 1992,
the first restaurant developed by the Company was opened in Overland Park,
Kansas, a suburb of Kansas City. Since that time, the Company has opened seven
additional locations, most recently in St. Louis, Missouri; Austin, Texas; and,
King of Prussia, Pennsylvania. The Company is also a majority owner in a joint
venture that in 1993 opened a dance-club-only version of the restaurant, "Dick
Clark's American Bandstand Club," located in Reno, Nevada. Although the dance
club concept has been successful, the Company has chosen to focus its expansion
efforts primarily on the restaurant concept, which the Company believes has a
broader market appeal and greater potential for future revenue growth. It is the
Company's long-term objective to continue to develop its entertainment-themed
restaurant concept by opening additional Company-operated restaurants in
strategically desirable markets. The Company anticipates opening additional
restaurants during fiscal 1998 and is actively negotiating for additional sites
for new restaurants for this growing national chain.
In January 1991, the Company established a subsidiary, dick clark
corporate productions, inc. ("dccp"), in order to enter the corporate
productions and communications business. This subsidiary specializes in
development and execution of non-traditional marketing communications programs,
corporate meetings and special events, new product introductions, trade shows
and exhibits, event marketing, film, video and leisure attractions. The
Company's strategy is to add value to its clients by accessing the wide range of
talent and production resources the Company utilizes for television production
and by providing a level of creativity, production quality and efficiency that
is uncommon in this market.
Since its inception, the Company's principal stockholder has been
Richard ("Dick") W. Clark, who the Company believes to be one of the best-known
personalities in the entertainment industry. Many of the Company's television
and corporate programs involve the executive producing services and creative
input of Mr. Clark. However, Mr. Clark's performance services are not exclusive
to the Company. The Company also employs other experienced producers who are
actively involved in the Company's television production business and dccp's
business.
The Company's principal lines of business according to industry
segments are television production and related activities (including, without
limitation, the aforementioned operations of dccp) and restaurant operations
(dick clark restaurants, inc. and its wholly owned subsidiaries). For financial
information about the Company's industry segments with respect to each of the
fiscal years in the three-year period ended June 30, 1997, see Note 9 "Business
Segment Information" to the Company's Consolidated Financial Statements on page
28 of the Company's 1997 Annual Report.
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DESCRIPTION OF BUSINESS
TELEVISION PRODUCTION AND RELATED BUSINESS
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Introduction
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Historically, the Company has produced entertainment television
programming for daytime, primetime and late night telecast and has become one of
the most versatile independent production companies in the entertainment
business today. The Company's programming mix includes awards shows,
entertainment and comedy specials and series, children's programming, talk and
game show series, movies-for-television, and dramatic series. Many of the
established television specials are produced annually and have become an
expected television event. This breadth of production, together with the
Company's reputation for developing high-quality, popular shows on budget,
distinguishes the Company as a unique and highly regarded programming provider.
This is particularly significant with the growing demand for cost-efficient,
original programming from new cable networks, advertisers and syndicators.
The Company has generally been able to fund its production costs from
license fees paid by the recipients of the programming. However, increasing
consolidation in the entertainment industry has resulted in many of the
Company's traditional customers (such as the television networks) merging with
its competitors who provide entertainment production services. As a result, the
Company's ability to market its programming expertise has been reduced. In
addition, the proliferation of cable networks over the last decade has also
resulted in smaller license fees being paid by networks and other broadcasters.
In particular, the development and production of situation comedies and dramatic
series generally now require substantial deficit financing because the license
fees payable for such programs do not cover production costs. Consequently, the
Company is selective in its development efforts in the dramatic and situation
comedy series area.
Programming in which the Company owns the distribution rights and
which are not subject to restrictions associated with the initial license
agreement may be marketed by the Company in ancillary markets which include,
among others, cable television, foreign and domestic rerun syndication and home
video. Successful television series and television movies can have significant
rerun syndication and other ancillary value. However, a television series must
normally be broadcast for at least three or four television seasons before rerun
syndication is feasible. Consequently, a relatively low percentage of television
series are successful enough to be syndicated.
Television Market, Production and Licensing
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Market. The market for television programming is composed primarily
of the broadcast television networks (ABC, CBS, NBC, Fox Broadcasting Company,
United Paramount Network and Warner Bros., a division of Time Warner
Entertainment Company L.P.), syndicators of first-run programming (such as
Columbia, Inc. and Buena Vista Television) which license programs on a
station-by-station basis, and basic and pay cable networks (such as The Family
Channel, The Nashville Network and VH-1). The Company also deals directly with
companies such as Busch Entertainment Corp., Universal Studios Hollywood and SFM
Entertainment, which finance the production of specials and other programming on
which they intend to advertise their products. The Company also works closely
with dccp to provide television expertise to those corporations seeking
television outlets for their events and promotions.
Production. The production of television programming involves the
development of a format based on a creative concept or literary property into a
television script or teleplay, the selection of talent and, in most cases, the
filming or taping and technical and post-production work necessary to create a
finished product. The Company is continuously engaged in developing and
acquiring concepts and literary properties. The most promising of these serve as
the basis of a plot or concept which may include a description of the principal
characters or performers, and in the case of a dramatic presentation, may
contain sample dialogue.
The development of a project often begins with a meeting of the
Company's development personnel, producers, directors and/or writers for the
purpose of reviewing a concept. Many of the Company's projects originate with
its own staff, although due to the Company's reputation in the television
industry, concepts for development are frequently presented to the Company by
unaffiliated parties. If a concept is attractive, the Company will present it to
a prospective licensee: either one of the television networks, a first-run
syndicator, a cable network or an advertiser. Alternatively, a prospective
licensee, in particular, an advertiser, will often request that the Company
develop a concept for a particular time period or type of audience.
If a concept is accepted for further development, the prospective
licensee will usually commission and pay for a script
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prior to committing itself to the production of a program. However, in the case
of the Company's entertainment programming as well as its awards specials, the
licensee will generally order production of the program based on the initial
presentation. Only a small percentage of the concepts and scripts presented each
year are selected to be produced. Generally, the network or other licensee
retains the right to approve the principal creative elements of a television
production.
Once a script and/or a concept is approved by the licensee, a license
fee is negotiated and pre-production and production activities are undertaken.
In the case of a game show, a finished pilot episode usually is submitted for
acceptance as a series before additional episodes are ordered. A production
order for a series is usually for a specified number of episodes, with the
network or other licensee retaining an option to renew the license. The
production of additional episodes for a series or additional versions of a
special is usually dependent on the ratings obtained by the initial run of
episodes of the program or by the original special, respectively.
Licensing. A majority of the Company's revenue is derived from the
production and licensing of television programming. The Company's television
programming is licensed to the major television networks, cable networks,
domestic and foreign syndicators and advertisers. The Company also receives
production fees from programming buyers who retain ownership of the programming.
The Company has sold or licensed its programs to all of the major networks and
to a number of first-run syndicators, cable broadcasters and advertisers. During
fiscal 1997, revenue from a recurring annual special represented approximately
14% of total revenue. During fiscal 1996, revenue from three customers
individually accounted for more than 12% but not greater than 15% of the
Company's revenue. During fiscal 1995, revenue from two customers individually
accounted for more than 14% but not greater than 24% of the Company's revenue.
See Note 2 "Summary of Significant Accounting Policies" to the Company's
Consolidated Financial Statements on page 22 of the Company's 1997 Annual
Report. The Company is not committed exclusively to any one network, syndicator,
cable network or other licensee for the licensing of the initial broadcast
rights to all or any substantial part of any other Company's programming.
The Company's strategy is to develop programming that does not
require deficit financing, such as reality and variety series and award and
other event specials, which have the potential to be profitable in the first
year of release as well as to be renewed annually. The typical license agreement
for this type of programming provides for a fixed license fee to be paid in
installments by the licensee to the Company for the right to broadcast a program
or series in the United States for a specified number of times during a limited
period of time. In some instances, the Company shares its percentage of net
profits from distribution with third parties who contributed to the production
of the program. In the case of license agreements involving specials or music,
variety or game show series, the fixed license fee is ordinarily in excess of
production and distribution costs. For selected projects, however, the Company
may elect to produce programming for which the initial license fees will not
cover its production and distribution costs in the first year of a project's
release. None of the Company's television production in fiscal 1997 required any
material deficit financing by the Company. The Company does anticipate incurring
deficit financing in connection with the production of a children's series to be
delivered in fiscal 1998. The Company does not anticipate incurring any material
deficit financing obligation with respect to any other programs which are
currently in development.
During the term of a first-run broadcast license, the Company
generally retains all other distribution rights associated with the program,
including all foreign distribution rights. In the case of television movies, the
Company will often pre-sell domestic, foreign and other rights in order to cover
all of the production and distribution costs for the television movie. From time
to time, the Company has entered into non-exclusive agreements with distribution
companies (such as Alfred Haber, Inc. and World International Network, LLC) for
the foreign distribution of certain of its series, specials and television
movies. The Company also occasionally licenses its programming directly to
foreign broadcasters.
After the expiration of a first-run broadcast license, the Company
makes the program available for other types of domestic distribution in cases
where the Company has retained ownership and/or distribution rights to the
program. In fiscal 1997, the Company licensed 118 half-hour episodes of its
Super Bloopers and Practical Jokes series (which had previously been broadcast
on NBC as one hour shows) to the Family Channel. In fiscal 1996, the Company
licensed 22 episodes of Super Bloopers and Practical Jokes (previously broadcast
on NBC) to the Family Channel along with 23 hours of specials for a three-year
term. The Company also licensed to VH-1, the cable music network, the exclusive
rights to re-broadcast 50 episodes from the original American Bandstand series
in fiscal 1996 and an additional 50 episodes in fiscal 1997. The Company has
retained the rights to the clips in these shows for use in its own productions
as well as the ability to continue to market the clips to its media archive
customers. The Company also licenses the syndication rights to television movies
from its library, which the Company is often able to syndicate a number of times
over a period of many years. For example, in each of fiscal 1995, 1996 and 1997,
the Company licensed the previously broadcast television movie The Man in the
Santa Claus Suit.
The Company has also used its library of entertainment and music
specials to create new programming.
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Television Programming
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The Company has in development and production numerous television
projects for broadcast on network television, first-run syndication and cable
television. The Company has an established reputation among the major networks,
cable broadcasters and other licensees as a premier producer of television
awards programming. The Company is also strongly committed to the ongoing
development of entertainment specials and series which include music, variety,
dramatic and comedy programming formats as well as reality-based programming.
The Company employs experienced producers responsible for the development and
production in each of these varied programming formats. The Company's staff is
supplemented on a project basis by industry professionals utilized to expand the
Company's own production resources.
Annual, Recurring and Other Specials. The Company is a leading
television producer of award specials, which are a significant part of the
Company's television production business and contribute and provide an ongoing
foundation of consistent revenue each fiscal year. Many of the Company's award
specials have enjoyed sustained growth, and certain of its specials have been
produced by the Company for as many as 24 years.
The Company's award specials during fiscal 1997 included The 24th
Annual American Music Awards (ABC), the Company's most enduring award special
and again was rated number one in its time period; The 54th Annual Golden Globe
Awards (NBC), the Company's fifteenth annual production for the Hollywood
Foreign Press Association, acknowledging excellence in television and motion
pictures; The 12th Annual Soap Opera Awards (NBC), produced for the tenth
consecutive year; The 32nd Annual Academy of Country Music Awards (NBC), another
popular, long running awards production; "The Family Film Awards" (2 hours-CBS),
hosted by Beau Bridges, Anna Chlumsky and Joey Lawrence, was a new award shows
honoring film and television productions for their family-oriented content; "The
Primetime Emmy Awards" (3 hours-ABC) was hosted by Paul Reiser and received its
highest ratings since 1986; and The 24th Annual Daytime Emmy Awards (NBC), the
fifth year of production of this special presented by the National Academy of
Television Arts & Sciences. The Company has agreements for several recurring and
annual specials subject to long-term license agreements which expire between
1997 and 2000.
In addition to producing award specials for television, the Company
develops new concepts for television specials. Two important aspects of the
Company's production of specials are that the specials may serve as pilots for
the development of series programming and that specials may be produced on an
annual or recurring basis. For instance, the Bloopers programs evolved from an
entertainment special to a series and is still in production as television
specials for NBC.
The Company produced the following entertainment specials in fiscal
1997: "Dick Clark's New Year's Rockin' Eve(R) '97" (ABC), which was the
Company's 25th year of production; three "Bloopers specials" entitled "All New,
All-Star TV Censored Show Me the Bloopers," (NBC), "All New, All-Star TV Tickle
Me Censored Bloopers," (NBC) and "All New, New All-Star TV Censored Bloopers
Palooza," (NBC); and, It's Hot in Here! (UPN), a Fall Preview Special for the
new Paramont Broadcast Network.
In addition to the production of new programming, the Company markets
material from previously produced programs for new development projects.
Programs such as The American Music Awards 20th Anniversary Special, and The
Golden Globes 50th Anniversary Celebration produced and delivered in fiscal 1994
for NBC, utilized footage from previous programs.
Series. The Company is actively developing programs and ideas for
potential series production and represents the most important area of
development in terms of potential revenue and profit growth for the Company.
Series programming presents many opportunities for long-term commitments and, in
some cases, rerun potential. Fiscal 1997 saw these series underway.
The initial six episodes of a new primetime, one-hour dramatic
anthology series called "Beyond Belief: Fact or Fiction" were produced for the
Fox Broadcasting Company. James Brolin hosted the series which began
broadcasting in May 1997. The episodes were rebroadcast beginning in August
1997. This series, if successful, could be a significant contributor to the
revenue and profit of the Company.
Production continued for TNN's "Prime Time County," a live 60-minute,
weeknight, country music entertainment and variety series, which premiered in
January 1996. The show originates from The Nashville Network Studio in Opryland
USA. The Company has received a renewal commitment to produce the show through
September 1998.
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Forty episodes of "No Relation" have been produced and delivered, the
first original game show series for the fX cable network.
A total of 50 additional episodes of the series "VH1's Best of
American Bandstand" with new introductions were delivered for the 1997 season,
bringing the total number of episodes airing on VH1 to 100 episodes.
A three-year license agreement with the Family Channel was entered
into to rerun 118 half-hour episodes of "TV Bloopers and Practical Jokes" series
originally broadcast on NBC. This agreement is in addition to the 22 episodes of
"Bloopers" programming licensed to the Family Channel in fiscal 1996.
CBS committed to 13 episodes - a full season's order - for a new
Saturday morning half-hour comedy show for children called "The Weird Al Show."
Featuring "Weird Al" Yankovic, the series began airing in September 1997 for the
1997-98 children's television season. The Company is deficit financing a portion
of the production cost in anticipation of the potential success of the series.
The Company also has been retained to executive produce a talk show
pilot featuring Donny and Marie Osmond. The series is being marketed for
distribution by Columbia Tristar Television Distribution for the Fall 1998
season.
After the end of the fiscal year, we received a commitment for Buena
Vista Television to develop a talk show pilot featuring Jackie Guerra. The show
will be marketed for possible distribution in calendar 1998.
Movies. Television movies are continually under development and can
be an important source of profitability and cash flow over the life of their
distribution.
In fiscal 1997, we produced a Movie-of-the-Week for CBS, "Deep Family
Secrets," starring Richard Crenna and Angie Dickinson. "Country Angel," an
independently financed move-for-television, is in development and tentatively
scheduled to start filming in fiscal 1998. "Alien Abduction," a two-hour taped
drama for the Paramount Broadcast Network (UPN), is scheduled to start
production in fiscal 1998.
By working with major studios that can provide financing, the Company
also develops theatrical film projects on a limited basis. The Company is
currently developing a motion picture utilizing the American Bandstand concept
with Jersey Films for theatrical release by Universal Pictures. "Tenth Justice,"
is in development as a feature film for Fox 2000, based on the New York Times
best seller.
Live Shows
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"American Bandstand" has been licensed for use as a theme name and
logo for live stage shows. In fiscal 1997, we entered into a three-year license
agreement for a new live show produced by Opryland Productions, Inc. at its
Opryland USA Theme Park, a family-oriented entertainment facility in Nashville.
We continue to license the "American Bandstand" trademark for use in a live show
at Harvey's hotel and casino at Lake Tahoe, Nevada.
Media Archives and Home Video
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The Company believes that it owns one of the largest collections of
musical performance footage, including 16mm films that have been enhanced and
transferred to video tape. The Company keeps an updated, computerized index of
available material in order to be able to easily access the performance footage.
The Company also occasionally acquires from others the rights to license classic
performances by popular recording artists. These rights are acquired from the
copyright holders and then licensed for television, film, cable and home video.
Although the Company's archives are used as source material for the Company's
productions, the Company actively licenses footage from its archives to third
parties as well. In fiscal 1997, the Company licensed footage from its library
to: MTV's "Legends" series, Oprah Winfrey Show, Rosie O'Donnell Show, ABC News
20/20, NBC "Dateline," A&E's "Biography," Lifetime's "Intimate Portrait," Access
Hollywood and E!
The Company also uses its media archives to produce programs intended
directly for the home video market. The Company's previously produced home
videos include The Rock & Roll Collection: Dick Clark's Golden Greats, a
compilation of episodes from the series of the same name; Best of Bandstand
Volumes I & II, a collection of clips from the American Bandstand series; Elvis,
The Movie; and several other television movies from the Company's library. These
home video releases are distributed by various independent distribution
companies.
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In fiscal 1997, a special direct-to-home video was produced called
"Kid Talk 2000," which will be distributed by MVP Entertainment in fiscal 1998.
Other Businesses
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dick clark corporate productions, inc. The Company's wholly-owned
subsidiary, dick clark corporate productions, inc., specializes in development
and execution of non-traditional marketing communications programs, corporate
meetings and special events, new product introductions, trade shows and
exhibits, event marketing, film, video and leisure attractions.
During fiscal 1996, dick clark corporate productions evolved from
primarily an events producer to include innovative marketing and business
communications services for major corporations. In fiscal 1997, dccp's strategy
is to provide its clients the benefit of a range of talents and production
resources available to the television production business - offering a distinct,
new level of creativity, production quality and expertise to this market. This
access, together with the Company's budgetary controls, provides higher
entertainment quality at an efficient cost. Using the entertainment resources of
the Company, dccp is able to provide solutions to businesses seeking
alternatives to the traditional forms of communication to reach their intended
audiences.
During fiscal 1997, dccp produced and delivered the following: The
50th Anniversary Celebration of Tektronix, Inc. - An open-air, live event which
entertained 7,000 employees and featured company exhibits and a dynamic
performance by the legendary Smokey Robinson; The Nissan Z-car Tribute - This
event marked the end of an era which paid tribute to the final Z-car with an
exhibit and commemoration ceremony at the Petersen Automotive Museum in Los
Angeles. The American Honda Motor Co. Motorcycle Division Dealer Meeting - A
production for the National Dealer Meeting in Nashville, Tennessee, which
capitalized on the Company's expertise and strong ties in the country music
market; The Boeing Next Generation 737 Launch - The newly designed Boeing 737
series was introduced to the world by converting a working airplane hangar into
the world's largest museum. More than 41,000 guests attended the event during a
single day in Renton, Washington; The Boeing Paris Air Show Exhibit - A complete
redesign project based on the impressive results that were achieved by the
Company on both the 737 and 777 launches; ITT Sheraton 1st Global Marketing and
Sales Summit - An International summit for ITT Sheraton, which included the
design of a custom set, coaching for senior executives, and break-out sessions;
Kodak Professional Division Launch Meeting - After a period of downsizing and
consolidation, Kodak hired the Company to a project which launched a new
Professional Division, this included the complete project from theme
development, all speech writing and video production to environmental design;
The Mazda Auto Show Film - To attract visitors to Mazda's Auto Show booth and
convey its overall brand premise, the Company developed a panoramic film
experience, projected on a 12' x 40' screen with surround sound. The Company
tapped into its Hollywood connections to bring award-winning talent to the film,
which traveled to auto shows nationwide; Caruso Affiliated Holdings Promenade at
Westlake Opening - To celebrate the opening of this unique open-air mall, the
Company created a private event with a special appearance by Steve Allen, a live
30-piece orchestra, a laser show, fireworks display and dinner for 1,000 guests;
Sony Business and Professional Group National Sales and Management Meeting - An
event in Florida with Sony to help focus the attendees on goals and objectives
for the year, get them prepared for a new wave of digital products, motivate
them and recognize their achievements.
Record business. In fiscal 1994, the Company established the CLICK
Records(R) Inc. ("CLICK") label. During fiscal 1996, the Company entered into an
agreement with Castle Communications (U.S.), Inc. for worldwide distribution of
CLICK's recordings. Under the terms of the Company's agreement, the Company is
not responsible for financing the production or distribution costs of CLICK's
recordings. The strategy for the label involves enlisting the talent of popular
recording artists of the '60s, '70s and '80s to perform classic as well as
contemporary songs by varied composers and groups, resulting in recordings with
wide appeal. During fiscal 1997, we completed a CD of The Spinners, called "The
Spinners at Their Best". In 1997, however, Castle Communications filed for
bankruptcy and as such we are reassessing our options with respect to production
and distribution. A second CD which was in production featuring The Association,
and a planned third CD with Little Anthony and the Imperials have been put on
hold pending the Company's decision with respect to CLICK Records.
The Company collaborated with HarperCollins, which published an
oversized illustrated book tracing "American Bandstand" and its impact on the
American scene musically and culturally over four decades.
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DESCRIPTION OF BUSINESS
RESTAURANT OPERATIONS
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Introduction
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The Company's restaurant operations are conducted by dick clark
restaurants, inc. ("dcri"), a wholly-owned subsidiary of the Company, and dcri's
wholly-owned subsidiaries. The restaurant operations include food and beverage
service as well as music, dancing and merchandising activities. Capitalizing on
the popularity of the American Bandstand television show and over 40 years of
contemporary music, "Dick Clark's American Bandstand Grill" ("Grill")
entertainment theme restaurants are an extension of the Company's entertainment
business. Elements of the theme include: the "Great American Food
Experience(R)", a unique menu concept featuring a variety of delicious regional
specialties from around the country; a design featuring a one-of-a-kind
entertainment atmosphere based on the American Bandstand television show and the
music industry over the last four decades; a dance club area within the
restaurant with a state-of-the-art audio-visual entertainment system; and
signature "American Bandstand Grill" merchandise for customers to purchase. Each
"Dick Clark's American Bandstand Grill" also features memorabilia and other
items generally associated with rock n' roll and the Company's activities
throughout the years, including vintage photos, gold and platinum albums,
original stage costumes, concert programs, rock stars' musical instruments and
rare posters.
Currently, the Company has operations in eight locations: Overland
Park, Kansas, a suburb of Kansas City, which opened in August 1992;
Indianapolis, Indiana and Columbus, Ohio, which opened in April/May 1994;
Cincinnati, Ohio, which opened in March 1996; St Louis, Missouri, which opened
in November 1996; Austin, Texas, which opened in May 1997; King of Prussia,
Pennsylvania, which opened in June 1997; and a dance-club-only variation of the
concept in Reno, Nevada which opened in August 1993.
The Company is developing additional locations which could open in
the second half of fiscal 1998.
dcri and Harmon Entertainment Corporation, a New Jersey corporation
("Harmon"), were originally partners in Entertainment Restaurants, a New York
partnership (the "Partnership"), which was created to own, operate and manage
"Dick Clark's American Bandstand Grill" restaurants and which developed the
first restaurant in Miami, Florida. The Partnership purchased Harmon's interest
in the Partnership in the spring of 1990, whereupon dcri became the sole owner
of all of the assets of the Partnership. The Overland Park, Kansas restaurant
was the Company's first owned and operated "Dick Clark's American Bandstand
Grill" restaurant. The Company agreed to reimburse Harmon for capital
expenditures made in connection with the Miami restaurant and to pay Harmon a
royalty over time of 1.5% of gross revenues from restaurant operations, up to an
aggregate of $10,000,000, for its interest in the Partnership. The Company has
satisfied in full this obligation by an advance payment of $1,000,000 in the
spring of 1990 and a final payment of $3,128,000 in December 1994. The entire
$4,128,000 is being amortized by the Company at the rate of 1.5% of revenues.
dcri has numerous memorabilia displayed in its restaurants and such
memorabilia are an integral part of the restaurant's theme. Some of the
memorabilia is owned by Olive and loaned to dcri without charge. In fiscal 1995,
dcri began acquiring certain memorabilia for its own use and has invested
$356,000 to date for current and future grills.
Operations
- ----------
Significant resources are devoted to ensure that "Dick Clark's
American Bandstand Grill" restaurants offer the highest quality food and
service. Through its managerial personnel, the Company standardizes
specifications for the preparation and service of its food, the maintenance and
repair of its premises and the appearance and conduct of its employees.
Operating specifications and procedures are documented in a series of manuals.
Emphasis is placed on ensuring that quality ingredients are delivered to the
restaurants, continuously developing and improving restaurant food production
systems, and ensuring that all employees are dedicated to delivering
consistently high-quality food and service.
The primary commodities purchased by the "Dick Clark's American
Bandstand Grill" restaurants are beef, poultry, seafood and produce. The Company
monitors the current and future prices and availability of the primary
commodities purchased by the Company to minimize the impact of fluctuations in
price and availability and to make advance purchases of commodities when
considered to be advantageous. However, purchasing remains subject to price
fluctuations in certain commodities, particularly produce. All essential food
and beverage products are available, or upon short notice can be made available,
from alternative qualified suppliers.
8
<PAGE>
The Company maintains centralized financial and accounting controls
for "Dick Clark's American Bandstand Grill" restaurants, which it believes are
important in analyzing profit margins. The restaurants utilize a computerized
POS system which provides point-of-sale transaction data and accumulation of
pertinent marketing information. Sales data are collected and analyzed on a
daily basis by management.
Locations. The success of any restaurant depends, to a large extent,
on its location. The site selection process for the Company's restaurants
consists of three main phases: strategic planning, site identification and
detailed site review. The strategic planning phase ensures that restaurants are
located in population areas with demographics that support the entertainment
concept. In the site identification phase, the major trade areas within a market
area are analyzed and a potential site is identified. The final and most
time-consuming phase is the detailed site review. In this phase, the site's
demographics, traffic and pedestrian counts, visibility, building constraints,
and competition are studied in detail. A detailed budget and
return-on-investment analysis are also completed. Senior management inspects and
approves each restaurant site prior to its lease, acquisition or construction.
Six of the Company's first eight locations average 10,000 square feet
in size. The Company is developing alternate configurations and sizes which
increase the flexibility in choosing locations and expands the potential of the
restaurant group. As an example, the new Grill opened in Austin, Texas, is an
8,500 square-foot unit that is designed with a dance club area which will
accommodate full dining during lunch and early dinner hours when not in use as a
dance club. In addition, the Grill opened in St. Louis is a 7,600 square foot
unit. This is the Company's first restaurant-only unit without a dance floor - a
potential prototype for another version of the Grill.
The smaller and varied restaurant formats that we have developed
should make a greater number of locations available for future consideration,
expanding the overall potential of the restaurant group. In particular, smaller
units should provide increased opportunities for growth as the investment in
individual restaurants will be less and the site alternatives will be more
numerous.
The Company is also planning to test future Grills of approximately
6,500 - 7,000 square feet without a dance club area. These smaller units may
provide increased profitability relative to their investment costs and should
make the search for prime locations easier. Accordingly, many more locations
with the right market and demographic mix will be available for consideration,
including locations in malls where appropriate.
Intended as a market test, the Company, through a joint venture,
opened a dance-club only variation of the "Dick Clark's American Bandstand
Grill" in the legendary Harold's Club in Reno, Nevada. Although the concept has
been profitable, the Company has chosen to focus its expansion efforts on
restaurants, which the Company believes have a broader market appeal and greater
potential for future revenue growth.
GENERAL INFORMATION
-------------------
Joint Ventures
- --------------
The Company from time to time enters into joint ventures with parties
not otherwise affiliated with the Company whose purpose is the production of
entertainment programming and other entertainment related activities associated
with the Company's business.
The C&C Joint Venture was organized by the Company and Freedom
Productions in 1983 to develop and produce the Bloopers series. In December
1988, the Company acquired a controlling interest in the C&C Joint Venture, and
the Company's share of net profits and losses in that venture is now 51%.
Dick Clark's American Bandstand Club, a joint venture between Reno
Entertainment, Inc., a wholly-owned subsidiary of dcri, and RLWH, Inc., was
organized to own and operate a dance club version of "Dick Clark's American
Bandstand Grill" in Reno, Nevada. Through its ownership in dcri, the Company
owns a 51% controlling interest in this venture.
Trademarks
- ----------
The Company licenses from Olive the United States registered service
mark American Bandstand(R) and various
9
<PAGE>
variations thereof. This license has been extended through the end of fiscal
1997. As part of this license, the Company utilizes the service marks and
trademarks American Bandstand Grill(R), Dick Clark's American Bandstand Grill(R)
and AB (Stylized). The Company also owns many other trademarks and service
marks, including federal registration for trademarks and service marks related
to its television programming and other businesses.
Certain of the Company's trademarks and service marks may be
considered to be material to the Company, such as the trademarks and service
marks used in connection with the Company's restaurant operations.
Backlog and Deferred Revenue
- ----------------------------
The Company's backlog consists of orders by networks, first-run
syndicators and cable networks for television programming to be delivered for
the 1997/1998 television season as well as contractual arrangements for the
services of dccp. At June 30, 1997, the Company had received orders for 2
series, 10 specials, and 6 corporate production events which are expected to
total $34,047,000. At June 30, 1996, the Company had received orders for 3
series, 11 specials and 3 corporate production events which were expected to
total $29,425,000. At June 30, 1995, the Company had received orders for 1
series, 9 specials, and 3 corporate production events which were expected to
total $39,653,000.
The Company receives payment installments in advance of and during
production of its television programs. These payments are included in deferred
revenue in the Company's consolidated balance sheets and are recognized as
revenue when the program is delivered to the licensee. At June 30, 1997, 1996
and 1995, such deferred revenue totaled $2,768,000, $726,000, and $4,097,000,
respectively.
Competition
- -----------
Competition in the television industry is intense. The most important
competitive factors include quality, variety of product and marketing. Many
companies compete to obtain the literary properties, production personnel, and
financing, which are essential to market acceptance of the Company's products.
Competition for viewers of the Company's programs has been heightened by the
proliferation of cable networks, which has resulted in the fragmentation of the
viewing audience. The Company also competes for distribution and pre-sale
arrangements, as well as the public's interest in, and acceptance of its
programs. The Company's success is highly dependent upon such unpredictable
factors as the viewing public's taste. Public taste changes, and a shift in
demand could cause the Company's present programming to lose its appeal.
Therefore, acceptance of future programming cannot be assured. Television and
feature films compete with many other forms of entertainment and leisure time
activities, some of which involve new areas of technology, including the
proliferation of internet services and new media games.
The Company's principal competitors in television production are the
television production divisions of the major television networks, motion picture
companies, which are also engaged in the television and feature film
distribution business, and many independent producers. Many of the Company's
principal competitors have greater financial resources and more personnel
engaged in the acquisition, development, production and distribution of
television programming. At present there is substantial competition in the
first-run syndication marketplace, resulting in fragmentation of ratings and
advertising revenues.
Certain of the Company's customers and the television networks are
considered competitors of the Company in that they produce programming for
themselves. While the Federal Communications Commission (the "FCC") promulgated
the Financial Interest and Syndication Rule (the "FinSyn Rule") in 1970 in order
to restrict network ownership of programming and syndication activities, the
FinSyn Rule, as later amended in 1992, expired on September 21, 1995, thereby
eliminating such restrictions. As a consequence, the 40% cap on network in-house
productions previously imposed in 1992 was eliminated, thereby permitting the
major networks to produce and syndicate, in house, all of their primetime
entertainment schedule. With the elimination of such restrictions, the major
networks have increased the amount of programming they produce through their own
production companies. Numerous consolidations have also occurred, further
restricting the Company's ability to sell its entertainment programming.
As a result of the elimination of the FinSyn Rule, the Company has
encountered increased competition in the domestic and foreign syndication of
future television programming, and the Company's rerun syndication revenues
could be adversely impacted by such modification. In addition, there is
increased competition from emerging networks, which were previously exempt from
any restrictions under the FinSyn Rule. The Company believes, however, that it
can continue to compete successfully in the highly-competitive market for
television programming. This belief is based on management's extensive
10
<PAGE>
experience in the industry, the Company's reputation for prompt, cost-efficient
completion of production commitments and the Company's ability to attract
creative talents.
The restaurant industry is a highly-competitive industry that is
affected by many factors including changes in the economy, changes in
socio-demographic characteristics of areas in which restaurants are located,
changes in customer tastes and preferences, and increases in the number of
restaurants in which the Company's restaurants are located. The degree to which
such factors may affect the restaurant industry, however, are not generally
predictable.
Competition in the restaurant industry can be divided into three main
categories: fast food, casual dining, and fine dining. The casual dining segment
(which includes the Company's restaurant operations) includes a much smaller
number of national chains than the fast-food segment but does include many local
and regional chains as well as thousands of independent operators. The fine
dining segment consists primarily of small independent operations in addition to
several regional chains.
The market for corporate production services is large with many
companies vying for market share. In fact, competition in the corporate
production services segment is fierce. Most customers require bids on a
competitive basis and some of the Company's competition have larger staffs and a
greater global reach for information. dccp's principle competitors are other
producers of corporate events and films (including Jack Morton Productions and
Carabiner, Inc.), which have been in business longer and are more established.
The Company believes that dccp can compete successfully in this market by
utilizing the Company's experience in producing live events for television and
its existing talent and business relationships.
Employees - Television Production & Related Activities
- ------------------------------------------------------
At June 30, 1997, the Company had approximately 100 full-time
employees in connection with the Company's television production and related
activities. The Company meets a substantial part of its personnel needs in this
business segment by retaining directors, actors, technicians and other
specialized personnel on a per production, weekly or per diem basis. Such
persons frequently are members of unions or guilds and generally are retained
pursuant to the rules of such organizations.
The Company is a signatory to numerous collective bargaining
agreements relating to various types of employees such as directors, actors,
writers and musicians. The Company's union wage scales and fringe benefits
follow prevailing industry standards. The Company is a party to one contract
with the American Federation of Television and Radio Artists, which expires in
November 1997, two contracts with the American Federation of Musicians which
expired in February and May of 1992 (the Company is currently operating under
the provisions of the contracts which expired and is in negotiations with this
union, and expects to renew these contracts in the near future), two contracts
with the Directors Guild of America, which expires in June 1999, one contract
with the Writers Guild of America which expires in May 1998 and two contracts
with the Screen Actors Guild, both of which expire in June 1998. The renewal of
these union contracts does not depend on the Company's activities or decisions
alone. If the relevant union and the industry are unable to come to new
agreements on a timely basis, any resulting work stoppage could adversely affect
the Company.
Employees - Restaurants
- -----------------------
At June 30, 1997, the Company had approximately 700 employees in its
restaurant operations. Employees are paid on an hourly basis, except restaurant
managers and certain senior executives involved in the restaurant operations. A
majority of the employees are employed on a part-time, hourly basis to provide
services necessary during peak periods of restaurant operations. The Company's
restaurant operations have not experienced any significant work stoppages and
believes its labor relations are good.
ITEM 2. PROPERTIES.
The Company leases from Olive under a triple net lease approximately
30,000 square feet of office space and equipment in two buildings located in
Burbank, California, for its principal executive offices. The current annual
base rent is $613,000 (payable monthly commencing January 1, 1992) and the lease
expires on December 31, 2000. The lease agreement provides for rental
adjustments every two years, commencing January 1, 1992, based on increases in
the Consumer Price Index during the two-year period. The Company subleases
approximately 10,000 square feet of space to third parties and affiliated
companies on a month-to-month basis. The Company believes that the subleases to
affiliated companies are no less favorable to the Company than could be obtained
from unaffiliated third parties on an arms-length basis.
11
<PAGE>
The Company is also party to an Agreement with Olive, wherein Olive
provides records management services, including storage, retrieval and inventory
of customer records, files and other personal property. The term of the
Agreement extends through September 30, 1999.
The Company has entered into lease agreements with respect to
numerous restaurant sites that terminate at varying dates through November 30,
2010.
dcpi's subsidiary, dccp, is a lessee under a lease agreement with
Chelsea Atrium Associates, a New York Partnership, for approximately 5,000
square feet for the site of the dccp office in New York, New York. In addition,
dccp subleases a portion of the space to Kobin Enterprises, Ltd. That sublease
has been renewed through September 30, 1998. The lease expires November 1, 1999.
The current annual base rent is $85,000. This amount increases 3.5% annually.
The Company believes the properties and facilities it leases are
suitable and adequate for the Company's present business and operations.
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in certain litigation in the ordinary course
of its business, none of which, in the opinion of management, is material to the
Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
12
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS.
Price Range
Fiscal 1997 Fiscal 1996 Fiscal 1995
----------- ----------- -----------
High Low High Low High Low
--------- --------- --------- --------- --------- --------
1st Quarter $ 14.25 $ 11.00 $ 10.00 $ 8.25 $ 10.75 $ 8.00
2nd Quarter 12.00 10.50 10.25 9.00 10.25 7.75
3rd Quarter 12.25 10.00 13.00 8.75 10.00 7.50
4th Quarter 14.00 11.38 15.00 12.00 9.75 8.50
ITEM 6. SELECTED FINANCIAL DATA
Income Statement 1997 1996 1995 1994 1993
================================================================================
Total revenues $66,129 $73,819 $46,645 $58,296 $43,428
Gross profit 14,217 11,969 9,094 10,681 5,078
G&A expenses 4,975 4,339 4,145 4,113 3,529
Minority interest 672 351 107 507 305
Interest and other income (1,937) 1,788 1,711 1,455 1,444
Income before taxes 10,507 9,067 6,553 7,516 2,688
Provision (credit) for income taxes 3,993 3,469 2,461 2,640 (510)
Net income 6,514 5,598 4,092 5,138 3,198
================================================================================
<TABLE>
<CAPTION>
Balance Sheet 1997 1996 1995 1994 1993
========================================================================================================
<S> <C> <C> <C> <C> <C>
Working capital $30,017 $29,573 $27,260 $27,136 $29,101
Program costs, net 4,615 1,741 4,306 1,474 5,745
Total assets 63,298 52,711 48,308 44,317 42,461
Stockholders' equity 50,319 43,494 37,792 33,693 28,501
Weighted average number of shares outstanding
Number of shares outstanding at 8,328 8,279 8,278 8,266 8,265
year end
Per share data 8,382 8,302 8,279 8,277 8,265
Net income
Net book value .78 .68 .49 .62 .39
6.00 5.25 4.57 4.07 3.45
========================================================================================================
</TABLE>
- --------
1 Represents the sum of cash, marketable securities and accounts receivable
less accounts payable.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The purpose of the following discussion and analysis is to explain
the major factors and variances between periods of the Company's results of
operations. This analysis should be read in conjunction with the financial
statements and the accompanying notes which begin on page 18.
Introduction
- ------------
A majority of the Company's revenue is derived from the production
and licensing of television programming. The Company's television programming is
licensed to the major television networks, cable networks, program distributors,
domestic and foreign syndicators and advertisers. The Company also receives
production fees from program buyers who retain ownership of the programming. In
addition, the Company derives revenue from the rerun broadcast of its programs
on network and cable television and in foreign markets as well as the licensing
of its media and film archives to third parties for use in theatrical films and
television movies, specials and commercials. The Company, on a limited basis,
also develops theatrical films in association with established studios that
generally provide the financing necessary for production.
The Company also derives substantial revenue from its restaurant
business (dick clark restaurants, inc. and its subsidiaries). This business
segment contributed approximately 24%, 18 % and 29% to the Company's
consolidated revenue for the fiscal years ended June 30, 1997, 1996, and 1995,
respectively.
General
- -------
License fees for the production of television programming are
generally paid to the Company pursuant to license agreements during production
and upon availability and delivery of the completed program or shortly
thereafter. Revenue from network and cable television license agreements is
recognized for financial statement purposes upon availability and delivery of
each program or episode in the case of a series. Revenue from rerun broadcast
(both domestic and foreign) is recognized for each program when it becomes
contractually available for broadcast.
Production costs of television programs are capitalized and charged
to operations on an individual program basis in the ratio that the current
year's gross revenue bears to management's estimate of the total revenue for
each program from all sources. Substantially all television production costs are
amortized in the initial year of delivery, except for those successful
television series and television movies where there is likely to be future
revenue earned in domestic and foreign syndication and other markets. Successful
television series and television movies can achieve substantial revenue from
rerun broadcasts in both foreign and domestic markets after their initial
broadcast, thereby allowing a portion of the production costs to be amortized
against future revenue. Distribution costs of television programs are expensed
in the period incurred.
Depending upon the type of contract, revenue for dick clark corporate
productions, inc. is recognized when the services are completed for a live
event, when a tape or film is delivered to a customer, when services are
completed pursuant to a particular phase of a contract which provides for
periodic payments, or as may be otherwise provided in a particular contract.
Costs of individual corporate event productions are capitalized and expensed as
revenue is recognized.
Liquidity and Capital Resources
- -------------------------------
The Company's capital resources are more than adequate to meet its
current working capital requirements. The Company had cash and marketable
securities of approximately $31,754,000 as of June 30, 1997 compared to
$29,872,000 as of June 30, 1996. The Company has no outstanding bank borrowings
or other indebtedness for borrowed money.
Marketable securities consist primarily of investments in United
States Treasury Bills and Treasury Notes. The Company classifies investments in
marketable securities as "held-to-maturity", and carries its investments at cost
in accordance with Statement of Financial Accounting Standards No. 115. This
Statement requires investments in debt and equity securities, other than debt
securities classified as "held-to-maturity", to be reported at fair value.
Historically, the Company has funded its investment in television
program costs primarily through installment payments of license fees and minimum
guaranteed license payments from program buyers. To the extent the Company
14
<PAGE>
produces television movies and television series, the Company may be required to
finance the portion of its program costs for these programs not covered by
guaranteed license payments from program buyers (known in the television
industry as "deficit financing"). None of the Company's television production in
fiscal 1997 or 1996 required any material deficit financing by the Company. The
Company does anticipate incurring deficit financing in connection with the
production of a children's series to be delivered in fiscal 1998. No other
programs which are currently in development are anticipated to required any
material deficit financing.
Net cash provided by operating activities was approximately $8.6
million, $5.8 million and $1.5 million in fiscal 1997, 1996 and 1995,
respectively. Net cash used in investing activities was approximately $6.6
million, $8.2 million and $2.6 million in fiscal 1997, 1996 and 1995,
respectively. The fluctuations in cash provided by operations and cash used for
investing activities for those years primarily reflect changes in production
activity and the construction of three "Dick Clark's American Bandstand Grill"
restaurants in fiscal 1997 and one restaurant in fiscal 1996.
The Company expects that the opening of additional American Bandstand
Grill restaurants will be financed from available capital and/or alternative
financing methods such as joint ventures and limited recourse borrowings. The
Company anticipates opening additional locations in fiscal 1998 which will be
funded directly by the Company without using such alternative methods. Capital
requirements for the Company's corporate events and production business, dick
clark corporate productions, inc., are anticipated to be immaterial to the
Company's overall capital position in fiscal 1998.
The Company expects that its available capital base and cash
generated from operations will be more than sufficient to meet its cash
requirements for the foreseeable future.
Results of Operations
- ---------------------
Revenue - Revenue for the year ended June 30, 1997 was $66,129,000
compared to $73,819,000 for the year ended June 30, 1996 and $46,645,000 for the
year ended June 30, 1995.
The decrease in revenue in fiscal 1997 as compared to fiscal 1996 is
primarily attributable to decreased revenue associated with the television
series "Tempestt" which completed production during fiscal 1996 as well as
decreased revenue associated with the Company's corporate production business.
This decrease was offset in part by increased revenue associated with the
opening of three additional restaurants during fiscal 1997 as well as the
inclusion of revenue from an additional restaurant which was operating for only
four months during fiscal 1996.
The increase in revenue in fiscal 1996 as compared to fiscal 1995 was
primarily attributable to the delivery of the "Tempestt" talk show series in
fiscal 1996. The increase is further explained by increased revenue associated
with the Company's corporate production business, an improved contract for one
annual special as well as the delivery in fiscal 1996 of a movie for television
which did not occur in fiscal 1995.
During fiscal 1997, revenue from a recurring annual special
represented approximately 14% of total revenue. During fiscal 1996, revenue from
a five-day per week talk show series represented approximately 15% of total
revenue and revenue recognized from a recurring annual special represented
approximately 12% of total revenue. During fiscal 1995, revenue from a recurring
annual special represented approximately 20% of total revenue. No other
production or project accounted for more than 10% of total revenue for fiscal
1997, 1996 or 1995.
Gross Profit -- Gross profit as a percentage of revenue was 21 %, 16%
and 19% for fiscal 1997, 1996 and 1995, respectively. The increase in gross
profit as a percentage of revenue in fiscal 1997 as compared to fiscal 1996 is
primarily attributable to increased profitability of the Company's television
series production activities. During fiscal 1996 the Company produced a five-day
per week television talk show series which earned a small gross profit as a
percentage of sales. This syndicated five-day per week talk show series was
cancelled by the end of fiscal 1996 and, as a consequence, gross profit as a
percentage of sales increased in fiscal 1997. The increase in gross profit as a
percentage of sales is further explained by the production and delivery of a new
dramatic series for Fox Broadcasting Company during fiscal 1997.
The decrease in gross profit as a percentage of revenue in fiscal
1996 as compared to fiscal 1995 is primarily attributable to lower gross profit
as a percentage of sales associated with the five-day per week television talk
show series. Talk show series in their first year of release typically earn a
small gross profit as a percentage of sales. This syndicated five-day per week
talk show series was in its first year of release. The decrease in gross profit
as a percentage of sales in
15
<PAGE>
fiscal 1996 is further explained by a one time project for a customer of dick
clark corporate productions, which contributed lower gross profit as a
percentage of the contracted revenue due to the size and nature of the project.
General & Administrative -- General and administrative expense
increased in fiscal 1997 and fiscal 1996 compared to the corresponding periods
in the previous fiscal years primarily as a result of increased personnel costs
associated with the expansion of the restaurant business.
Other -- Minority interest expense increased in fiscal 1997 compared
to fiscal 1996 primarily as a result of the licensing of the rebroadcast rights
to 118 episodes of the previously-produced "Super Bloopers and New Practical
Jokes". Minority interest expense increased in fiscal 1996 compared to fiscal
1995 primarily as a result of the licensing of 22 episodes of the
previously-produced "Super Bloopers and New Practical Jokes" shows. The C & C
Joint Venture, of which the Company has a 51% interest, produced the "Super
Bloopers and New Practical Jokes" television specials. The Bloopers Specials
currently being produced by the Company do not include the practical joke
segments and are owned 100% by the Company and there is, therefore, no minority
interest expense associated with their production.
General
- -------
Certain statements in the foregoing Management's Discussion and
Analysis (the "MD&A") are not historical facts or information and certain other
statements in the MD&A are forward looking statements that involve risks and
uncertainties, including, without limitation, the Company's ability to develop
and sell television programming, timely completion of negotiations for new
restaurant sites and the ability to construct, finance and open new restaurants
and to attract new corporate productions clients, and such competitive and other
business risks as from time to time may be detailed in the Company's Securities
and Exchange Commission reports.
16
<PAGE>
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
ASSETS 1997 1996
---- ----
<S> <C> <C>
Cash and cash equivalents $ 3,322,000 $ 953,000
Marketable securities 28,432,000 28,919,000
Accounts receivable 4,221,000 4,713,000
Program costs, net 4,615,000 1,741,000
Prepaid royalty 3,128,000 3,128,000
Property, plant and equipment, net 16,711,000 11,275,000
Goodwill and other assets, net 2,869,000 1,982,000
----------- -----------
Total assets $63,298,000 $52,711,000
----------- -----------
LIABILITIES & STOCKHOLDERS' EQUITY
Liabilities:
Accounts payable $ 5,958,000 $ 5,012,000
Accrued residuals and participations 2,410,000 2,260,000
Production advances and deferred revenue 2,768,000 726,000
Current and deferred income taxes 936,000 602,000
----------- -----------
Total liabilities 12,072,000 8,600,000
----------- -----------
Commitments and contingencies
Minority interest 907,000 617,000
Stockholders' Equity:
Class A common stock, $.0l par value,
2,000,000 shares authorized
750,000 shares outstanding 7,000 7,000
Common stock, $.01 par value,
20,000,000 shares authorized
7,631,500 shares outstanding at June 30, 1997 & 76,000 76,000
7,551,500 shares outstanding at June 30, 1996
Additional paid-in capital 8,205,000 7,894,000
Retained earnings 42,031,000 35,517,000
----------- -----------
Total stockholders' equity 50,319,000 43,494,000
----------- -----------
Total liabilities & stockholders' equity $63,298,000 $52,711,000
----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
17
<PAGE>
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Gross revenue $ 66,129,000 $ 73,819,000 $ 46,645,000
Costs related to revenue 51,912,000 61,850,000 37,551,000
------------ ------------ ------------
Gross profit 14,217,000 11,969,000 9,094,000
General and administrative expense 4,975,000 4,339,000 4,145,000
Minority interest expense 672,000 351,000 107,000
Interest and other income (1,937,000) (1,788,000) (1,711,000)
------------ ------------ ------------
Income before provision for
income taxes 10,507,000 9,067,000 6,553,000
Provision for income taxes 3,993,000 3,469,000 2,461,000
------------ ------------ ------------
Net income $ 6,514,000 $ 5,598,000 $ 4,092,000
------------ ------------ ------------
Net income per share $ 0.78 $ 0.68 $ 0.49
------------ ------------ ------------
Weighted average number of
shares outstanding 8,328,000 8,279,000 8,278,000
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
18
<PAGE>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Class A Common Additional Total
Common Stock Stock Paid-in Retained Stockholders'
Shares Amount Shares Amount Capital Earnings Equity
- ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance,
June 30, 1994 750,000 $ 7,000 7,527,000 $ 76,000 $ 7,783,000 $25,827,000 $33,693,000
Net income -- -- -- -- -- 4,092,000 4,092,000
Exercise of -- -- 1,500 -- 7,000 -- 7,000
stock options
- ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
June 30, 1995 750,000 7,000 7,528,500 76,000 7,790,000 29,919,000 37,792,000
Net income -- -- -- -- -- 5,598,000 5,598,000
Exercise of -- -- 23,000 -- 104,000 -- 104,000
stock options
- ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
June 30, 1996 750,000 7,000 7,551,500 76,000 7,894,000 35,517,000 43,494,000
Net income -- -- -- -- -- 6,514,000 6,514,000
Exercise of -- -- 80,000 -- 311,000 -- 311,000
stock options
- ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance,
June 30, 1997 750,000 $ 7,000 7,631,500 $ 76,000 $ 8,205,000 $42,031,000 $50,319,000
- ------------------------ ----------- ----------- ----------- ----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
19
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
--------------------------------------------
1997 1996 1995
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 6,514,000 $ 5,598,000 $ 4,092,000
Adjustments to reconcile net income to net cash
provided by operations
Amortization expense 22,239,000 47,778,000 20,858,000
Depreciation expense 1,468,000 1,123,000 981,000
Investment in program costs (24,586,000) (44,952,000) (23,046,000)
Minority interest, net 290,000 93,000 (441,000)
Disposals of leasehold improvements & equipment 150,000 73,000 177,000
Changes in assets and liabilities
Accounts receivable 492,000 (2,410,000) 1,641,000
Prepaid royalty -- -- (3,128,000)
Goodwill and other assets (1,414,000) (114,000) (21,000)
Accounts payable, accrued residuals and participations 1,096,000 1,725,000 (1,826,000)
Production advances and deferred revenue 2,042,000 (3,371,000) 1,811,000
Current and deferred income taxes payable 334,000 254,000 431,000
------------ ------------ ------------
Net cash provided by operations 8,625,000 5,797,000 1,529,000
------------ ------------ ------------
Cash flows from investing activities
Purchases of marketable securities (29,068,000) (17,348,000) (14,224,000)
Sales of marketable securities 29,555,000 14,198,000 12,803,000
Expenditures on property, plant and equipment (7,054,000) (5,095,000) (1,154,000)
------------ ------------ ------------
Net cash used for investing activities (6,567,000) (8,245,000) (2,575,000)
------------ ------------ ------------
Cash flows from financing activities
Exercise of stock options 311,000 104,000 7,000
------------ ------------ ------------
Net cash provided by financing activities 311,000 104,000 7,000
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents 2,369,000 (2,344,000) (1,039,000)
Cash and cash equivalents at beginning of the year 953,000 3,297,000 4,336,000
------------ ------------ ------------
Cash and cash equivalents at end of the year $ 3,322,000 $ 953,000 $ 3,297,000
------------ ------------ ------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for income taxes $ 3,664,000 $ 3,186,000 $ 2,030,000
------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
20
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- ------------------------------------------
1 -- Basis of Financial Statement Presentation
The consolidated financial statements include the accounts of dick
clark productions, inc., its wholly-owned subsidiaries and majority owned joint
ventures, collectively referred to as the "Company". For financial statement
reporting purposes, the accounts are consolidated using historical data. All
significant inter-company balances and transactions have been eliminated in
consolidation.
The common stock of the Company is entitled to one vote per share on
all the matters submitted to a vote of stockholders, and the Class A common
stock is entitled to 10 votes per share. Holders of Class A common stock are
entitled to a dividend equal to 85% of any declared cash dividends on the shares
of common stock. On liquidation of the Company, holders of the common stock are
entitled to receive $2.00 per share before any payment is made to the holders of
Class A common stock, and thereafter the holders of Class A common stock are
entitled to share ratably with the holders of common stock in the net assets
available for distribution.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reported
period. Actual results could differ from those estimates.
2 - Summary of Significant Accounting Policies
Revenue -- Revenue from television program licensing agreements is
recognized when each program becomes contractually available for broadcast and
delivery. Revenue earned currently which is to be received in future periods is
discounted to present value using the effective interest method. Depending on
the type of contract, revenue for dick clark corporate productions, inc. is
recognized when services are completed for a live event or when a tape or film
is delivered to a customer or when services are completed pursuant to a phase of
a contract which provides for periodic payment. Revenue from restaurant
operations is recognized upon provision of goods and services to customers.
Revenue by significant customer as a percentage of total revenue is
as follows:
YEAR ENDED JUNE 30,
Significant Customers 1997 1996 1995
- --------------------- ---- ---- ----
NBC entertainment 15% 13% 15%
ABC entertainment 17% 13% 24%
Columbia Tristar Television 0% 15% 0%
The Company produces television programming in relation to several
awards shows subject to long-term license agreements which expire between 1997
and 2000. While the existence of each long-term agreement enhances the future
financial performance of the Company, the non-renewal of certain such agreements
at their respective expiration dates could have a material adverse impact on the
Company's financial performance.
Program Costs -- Program costs, which include acquired rights,
indirect production costs (production overhead), residuals and third-party
participations, are charged to operations on an individual program basis in the
ratio that the current year's revenue for each program bears to management's
estimate of total ultimate revenue for the current and future years for that
program from all sources. This method of accounting is commonly referred to as
the individual film forecast method. For the fiscal years ended June 30, 1997,
1996 and 1995 there was $5,237,000, $4,825,000 and $3,576,000, respectively, of
production overhead included within program costs.
Upon distribution of acquired film rights, the Company uses the
individual film forecast method set forth in SFAS No. 53 to amortize these
program costs, together with the participants' share and residuals costs, based
upon the ratio of revenue
21
<PAGE>
earned in the current period to the Company's estimate of total revenue to be
realized. Management periodically reviews its estimates on a program-by-program
basis and, when unamortized costs exceed net realizable value for a program,
that program's unamortized costs are written down to net realizable value. When
estimates of total revenue indicate that a program will result in an ultimate
loss, the entire loss is recognized. There were no significant write downs of
program costs in the fiscal years ended June 30, 1997, 1996 and 1995.
The Company periodically reviews the status of projects in
develpment. If, in the opinion of the Company's management, any such projects
are not planned for production, the costs and any reimbrusements and earned
advances related thereto are charged to the appropriate profit and loss
accounts. Substantially all production and distribution costs are amortized in
the initial year of availability, except with respect to successful television
series and television movies which have the capacity for significant future
revenue.
Accounts Receivable --Accounts receivable represent unsecured
balances due from the Company's various customers and the Company is at risk to
the extent such amounts become uncollectible. The Company performs credit
evaluations of each of its customers and maintains allowances for potential
credit losses. Such losses have generally been within management's expectations.
Marketable Securities -- Marketable securities consist primarily of
investments in United States Treasury Bills and Treasury Notes. The Company
classifies its investments in marketable securities as "held-to-maturity ", and
carries the investments at cost in accordance with Statement of Financial
Accounting Standards No. 115. This statement requires investments in debt and
equity securities, other than debt securities classified as "held- to-maturity",
to be reported at fair value. The cost of these investments as of June 30, 1997
and 1996 was $28,432,000 and $28,919,000, respectively, and the market value as
of June 30, 1997 and 1996 was $28,133,000 and $28,505,000, respectively. As of
June 30, 1997, the recorded costs of marketable securities maturing in fiscal
1998, 1999, 2000, and 2001 were $17,340,000, $6,024,000, $3,561,000, and
$1,507,000, respectively.
Cash and Cash Equivalents - Cash equivalents consist of investments
in interest bearing instruments issued by banks and other financial institutions
with original maturities of 90 days or less. Such investments are stated at
cost, which approximates market value.
Property, Plant and Equipment - Property, plant and equipment consist
of the following:
As of June 30,
1997 1996
------------ ------------
Land $ 1,993,000 $ 660,000
Buildings 4,464,000 3,112,000
Leasehold improvements 5,889,000 3,005,000
Furniture and fixtures 6,210,000 3,915,000
Production and other equipment 2,920,000 2,037,000
Construction in process 73,000 2,000,000
------------ ------------
Total property, plant and equipment $ 21,549,000 $ 14,729,000
Accumulated depreciation (4,838,000) (3,454,000)
------------ ------------
Property, plant and equipment, net $ 16,711,000 $ 11,275,000
============ ============
Depreciation is calculated using the straight-line method based on
estimated useful lives of the applicable property or asset. Useful lives range
from 3 to 30 years for buildings and leasehold improvements and 5 to 7 years for
furniture and fixtures and other equipment. Smallwares, included in furniture
and fixtures, of $451,000 and $326,000 at June 30,1997 and 1996, respectively,
are not being depreciated.
The cost of normal maintenance and repairs to properties and assets
is charged to expense when incurred. Major improvements to properties and assets
are capitalized and depreciated over the estimated useful life of the
improvements.
Goodwill and Other Assets -- Goodwill resulting from the Company's
acquisition of Entertainment Restaurants (see Note 4) in fiscal 1990 is being
amortized on a straight-line basis over 20 years. Other assets include
capitalized organizational costs, pre-opening costs and liquor license costs.
Organizational costs and pre-opening costs are being amortized over 5 years and
12 months, respectively. Organizational costs include legal and other expenses
relating primarily to the Company's various restaurant locations. Pre-opening
costs are limited to direct, incremental costs relating to start-up activities
associated with the Company's restaurant business. Liquor license costs at June
30, 1997 and 1996 of $143,000 and $75,000, respectively, are not being
amortized. Accumulated amortization of goodwill and other assets at June 30,
1997 and 1996 was $1,966,000 and $1,438,000, respectively.
22
<PAGE>
Unclassified Balance Sheet --In accordance with the provisions of
Statement of Financial Accounting Standards No. 53, the Company has elected to
present an unclassified balance sheet.
Joint Ventures --The Company has a controlling interest in several
joint venture arrangements in which the Company's share of profits and losses
exceed 50%. As a result, the assets, liabilities, revenues and expenses of such
joint ventures are included in the consolidated balance sheets and statements of
operations of the Company with the amounts due to others shown as minority
interest.
Reclassifications -- The consolidated financial statements of prior
years reflect certain reclassifications to conform with classifications adopted
in the current year.
Net Income Per Share -- Net income per share is computed on the basis
of the weighted average number of common shares outstanding each year, plus
common stock equivalents related to dilutive stock options.
New Accounting Pronouncements -- In February, 1997 the Financial
Accounting Standards Board (FASB) issued SFAS No. 128, "Earnings Per Share"
which will be implemented by the Company in the quarter ending December 31,
1997. The new standard simplifies the computation of earnings per share (EPS)
and increases comparability to international standards. Under SFAS No. 128,
primary EPS is replaced by "Basic" EPS, which excludes dilution and is computed
by dividing income available to common shareholders by the weighted-average
number of common shares outstanding for the period. "Diluted" EPS, which is
computed similarly to fully diluted EPS, reflects the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock.
In February, 1997, the FASB issued SFAS No. 129, "Disclosure of
Information about Capital Structure", which is effective for the Company's
fiscal year ending June 30, 1998. This statement establishes standards for
disclosing information about an entity's capital structure.
In June, 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive
Income" which is effective for the Company's fiscal year ending June 30, 1999.
This statement established standards for the reporting and display of
comprehensive income and its components in financial statements and thereby
reports a measure of all changes in equity of an enterprise that result from
transactions and other economic events other than transactions with owners.
In June, 1997, the FASB issued SFAS No. 131, "Disclosure about
Segments of An Enterprise and Related Information", which is effective for the
Company's fiscal year ending June 30, 1999. This statement changes the
requirements under which public businesses report disaggregated information.
The Company will adopt these statements on their respective effective
dates. Management does not anticipate the implementation of SFAS 128 to have a
material impact on the computation of earnings per share. The effect of the
other new accounting pronouncements has not yet been determined by Management.
3 - Program Costs
The Company is engaged, as one of its principle activities, in the
development and production of a wide range of television and corporate
programming.
Management's estimate of forecasted revenue related to released
programs exceeds the unamortized costs on an individual program basis. Such
forecasted revenue is subject to revision in future periods if warranted by
changing conditions such as market appeal and availability of new markets. The
Company currently anticipates that all of such revenue and related amortization
will be recognized under the individual-film-forecast method where programs are
available for broadcast in certain secondary markets in years ranging from 1997
through 2002. While management can forecast ultimate revenue based on experience
and current market conditions, specific annual amortization charges to
operations are not predictable because revenue recognition is dependent upon
various external factors including expiration of network license agreements and
availability for broadcasting in certain secondary markets.
23
<PAGE>
Program costs associated with corporate productions are amortized as
projects, or identifiable elements pursuant to a contract, are delivered.
Based on management's estimates of gross revenues as of June 30,
1997, approximately 77% of the $1,592,000 of unamortized program costs
applicable to released programs will be amortized during the three fiscal years
ending June 30, 2000.
Capitalized program costs consist of the following:
As of June 30, 1997 1996
- --------------------------------------------------------------------------------
Released, since inception
Movies for television $ 23,795,000 $ 19,926,000
Television programs 178,563,000 153,388,000
Corporate programs 45,556,000 37,644,000
247,914,000 210,958,000
Less: accumulated amortization (246,322,000) (210,406,000)
1,592,000 552,000
============= =============
In process
Movies for theatrical release 86,000 66,000
Television programs 1,872,000 558,000
Corporate programs 437,000 248,000
2,395,000 872,000
============= =============
Project development costs
Movies for television 511,000 241,000
Television programs 80,000 44,000
Corporate programs 37,000 32,000
628,000 317,000
============= =============
Program costs, net $ 4,615,000 $ 1,741,000
============= =============
4 - Prepaid Royalty
Pursuant to a redemption and settlement agreement dated June 14, 1990
(the "Redemption Agreement"), between Harmon Entertainment Corporation
("Harmon"), a previous co-venturer with the Company in its restaurant business,
the Company, dick clark restaurants, inc. ("dcri") and certain other parties,
the Company had an obligation to pay Harmon a royalty of up to $10,000,000 at a
rate of 1.5% of all restaurant revenue of which $1,000,000 was advanced to
Harmon at the time the Redemption Agreement was entered into by the parties
thereto. Pursuant to a modification dated December 31, 1994 to the Redemption
Agreement, the Company paid Harmon $3,128,000 as pre-payment of the remaining
portion of this obligation. As part of this transaction, Harmon paid the Company
$358,000 in settlement of amounts owed to the Company by Harmon pursuant to the
findings of an audit conducted by the Company in connection with the Redemption
Agreement. As a result of the pre-payment, the Company satisfied in full its
royalty obligation to Harmon under the Redemption Agreement. Harmon also dropped
a previously asserted claim that it was owed certain other amounts under the
Redemption Agreement. The Company is amortizing the prepaid royalty at the rate
of 1.5% of revenue after the $1,000,000 advanced to Harmon is recouped (based on
revenue).
24
<PAGE>
5 - Income Taxes
The provision for income taxes consists of the following:
Year ended June 30, 1997 1996 1995
----------- ----------- -----------
Current
Federal $ 3,539,000 $ 3,174,000 $ 1,147,000
State 376,000 367,000 199,000
Foreign 170,000 192,000 140,000
----------- ----------- -----------
$ 4,085,000 $ 3,733,000 $ 1,486,000
Deferred
Federal (87,000) (230,000) 883,000
State (5,000) (34,000) 92,000
(92,000) (264,000) 975,000
----------- ----------- -----------
$ 3,993,000 $ 3,469,000 $ 2,461,000
=========== =========== ===========
A reconciliation of the difference between the statutory federal tax
rate and the Company's effective tax rate on a historical basis is as follows:
Year ended June 30, 1997 1996 1995
- ------------------- ---- ---- ----
Statutory federal rate 34% 34% 34%
State taxes, net of federal income tax benefit 4 4 3
Other -- -- 1
---- ---- ----
Effective tax rate 38% 38% 38%
==== ==== ====
Statement of Financial Accounting Standards No. 109 requires
recognition of deferred tax liabilities and assets for the expected future tax
consequences of events that have been included in financial statements or tax
returns. Under this method, deferred tax liabilities and assets are determined
based on the difference between the financial statement and tax bases of assets
and liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
The components of current and deferred income taxes were as follows:
<TABLE>
<CAPTION>
As of June 30,
1997 1996
----------- -----------
<S> <C> <C>
Deferred tax assets
Accrued residuals and participations $ 311,000 $ 247,000
Rent abatement 29,000 38,000
Pre-opening costs 214,000 146,000
Depreciation 68,000 37,000
Bonus accrual 362,000 280,000
Miscellaneous 35,000 90,000
----------- -----------
Total deferred tax assets $ 1,019,000 $ 838,000
=========== ===========
Deferred tax liabilities
Difference between book and tax accounting for program costs $ (481,000) $ (150,000)
Prepaid royalty (1,189,000) (1,220,000)
Tax deductible goodwill (257,000) (284,000)
----------- -----------
Total deferred tax liabilities $(1,927,000) $(1,654,000)
Net deferred tax liability (908,000) $ (816,000)
=========== ===========
Taxes (payable)/receivable (28,000) 214,000
Total current and deferred taxes payable $ (936,000) $ (602,000)
=========== ===========
</TABLE>
25
<PAGE>
6 -- Related Party Transactions
The Company is a tenant under a triple net lease (the "Burbank
Lease") with Olive Enterprises, Inc. ("Olive"), a company owned by the Company's
principle stockholders, covering the premises occupied by the Company in
Burbank, California (see Note 7 for a summary of the terms of the Burbank
Lease). The Company subleases a portion of the space covered by the Burbank
Lease to Olive and to unrelated third parties on a month-to-month basis. In
fiscal years 1997, 1996 and 1995 the sublease income paid by Olive was $12,000
per year. The Company believes that the terms of the Burbank Lease and sublease
to Olive are no less favorable to the Company than could have been obtained from
unaffiliated third parties on an arms-length basis. No significant leasehold
improvements were made in fiscal years 1997 or 1996. The Company also paid Olive
$156,000, $142,000 and $97,000 for storage services during the fiscal years
1997, 1996 and 1995, respectively.
The Company provided management and other services to Olive and other
companies owned by the Company's principle stockholders for which the Company
received $150,000, $158,000, and $159,000 for the fiscal years 1997, 1996, and
1995, respectively.
The Company retained the services of Dick Clark as host for certain
of its television programs and other talent services during fiscal 1997, 1996
and 1995 for which the Company paid him host fees of $435,000, $735,000, and
$267,000, respectively. Management believes that the fees paid by the Company
are no more than it would have paid to an unaffiliated third party on an
arms-length basis.
The Company currently licenses the United States registered service
mark "American Bandstand" and all variations thereof from Olive. The Company
does not pay any license fees to Olive under these license agreements.
7 - Commitments and Contingencies
The Company has entered into employment agreements with certain key
employees requiring payment of annual compensation of $2,921,000, $1,829,000,
$1,828,000, $1,585,000 and $1,585,000 for the years ending June 30, 1998, 1999,
2000, 2001 and 2002, respectively. Several agreements also provide for the
payment by the Company of certain profit participation based upon the profits
from specific programs, and/or individual subsidiaries or the Company as a
consolidated entity, as provided in the applicable employment agreements.
Several agreements have renewal options of up to two additional years.
The Company renegotiated its Burbank Lease with Olive for the term
commencing June 1, 1989 and terminat ing December 31, 2000. The Burbank Lease
expense for the years ended June 30, 1997, 1996, and 1995 was $616,000, $612,000
and $601,000, respectively. The Burbank Lease provides for rent increases every
two years commencing January 1, 1992 based on increases in the Consumer Price
Index during the two-year period. The Company has entered into lease agreements
with respect to restaurants that terminate at varying dates through December 31,
2012.
26
<PAGE>
Total lease expense for the Company for the years ended June 30,
1997, 1996 and 1995 was $1,282,000, $1,104,000, and $1,058,000, respectively.
The various operating leases to which the Company is presently subject require
minimum lease payments as follows:
Year ended June 30,
1998 $1,473,000
1999 1,478,000
2000 1,099,000
2001 784,000
2002 795,000
Thereafter 4,597,000
8 - Stock Options
In August 1996, the Company's Board of Directors approved changes to
the Company's 1987 employee stock option plan. The 1996 plan was ratified by the
stockholders in November 1996. The plan provides for issuance of up to 1,000,000
shares of the Company's common stock. Options granted under the plan may be
either incentive stock options or non-qualified stock options, with a maximum
limit of 250,000 shares to any employee during any calendar year. The exercise
price of the incentive and non-qualified stock options must be equal to at least
100 percent of the fair market value of the underlying shares as of the date of
grant. During fiscal years 1997, 1996 and 1995, respectively, 18,300, 1,000, and
7,500 incentive stock options were granted to certain employees of the Company
to purchase shares at prices ranging from $7.50 to $14.00.
As of June 30, 1997, 174,950 of all stock options granted, vested and
outstanding are exercisable at prices ranging from $3.88 to $14.00. 17,300
additional options will become exercisable between fiscal years 1998 and 2000.
During fiscal 1997 and 1996, 80,000 and 23,000 options, respectively, were
exercised. The dilutive effect of these stock options is not significant to the
fiscal 1997, 1996 and 1995 number of shares outstanding and was, therefore, not
included in the calculation of net income per share.
The Company applies APB Opinion 25 and related interpretations in
accounting for its stock-based compen sation plans. Accordingly, compensation
expense recognized was different than what would have otherwise been recognized
under the fair value based method defined in Statement of Financial Accounting
Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation." Had
compensation cost for the Company's stock-based compensation plans been
determined based on the fair value at the grant dates for awards under those
plans consistent with the method of SFAS 123, the Company's net income and net
income per share would have been reduced to the pro forma amounts indicated as
follows:
(thousands, except per share amounts) 1997 1996
----- -----
Net income
As reported $ 6,514 $ 5,598
Pro forma 6,484 5,575
Net income per share
As reported .78 .68
Pro forma .78 .67
The fair value of each option grant is estimated on the date of grant
using the Black-Scholes option-pricing model with the following weighted-average
assumptions used for grants in 1997 and 1996: dividend yield of zero percent for
both years; expected volatility of 35 to 46 percent; risk-free interest rates of
6.32 to 6.57 percent and expected lives of 3.60 to 9.10 years.
27
<PAGE>
A summary of the status of the Company's stock option plans as of
June 30, 1997, 1996 and 1995, and changes during the years ending on those dates
is presented below:
<TABLE>
<CAPTION>
Options Price Range Weighted Options Available
(Per Share) Average Price Outstanding For Grant
----------- ------------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at June 30, 1994 $ 3.88-6.50 $4.14 308,450 674,550
Granted 7.50-7.50 7.50 7,500 (7,500)
Exercised 4.50-4.50 4.50 (1,500) --
Cancelled 4.50-4.50 4.50 (18,500) 18,500
Balance at June 30, 1995 3.88-7.50 4.20 295,950 685,550
Granted 9.50-9.50 9.50 1,000 (1,000)
Exercised 4.50-4.50 4.50 (23,000) --
Cancelled 6.50-6.50 6.50 (20,000) 20,000
Balance at June 30, 1996 3.88-9.50 4.01 253,950 704,550
Granted 11.00-14.00 12.16 18,300 (18,300)
Exercised 3.88-4.00 3.91 (80,000) --
Cancelled -- -- -- --
Balance at June 30, 1997 $3.88-14.00 $4.83 192,250 686,250
</TABLE>
The following table summarizes information about stock options
outstanding at June 30, 1997:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
------------------- -------------------
Number Weighted Average Number
Range of Outstanding Remaining Weighted Average Exercisable Weighted Average
Exercise Price At 06-30-97 Contractual Life Exercise Price At 06-30-97 Exercise Price
- -------------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
$ 3.88-3.88 165,450 5.17 $ 3.88 165,450 $ 3.88
7.50-9.50 8,500 7.09 7.74 8,500 7.74
11.00-14.00 18,300 4.45 12.16 1,000 14.00
$ 3.88-14.00 192,250 5.19 $ 4.83 174,950 $ 4.12
</TABLE>
9 -- Business Segment Information
The Company's business activities consist of two business segments:
entertainment operations and restaurant operations. The revenue and gross profit
of each of these business segments are reported in the following table.
Inter-segment revenue is insignificant.
Business Segments
(in thousands) Entertainment Restaurants Total
1997
$50,547 $15,582 $66,129
Revenue 13,352 865 14,217
Operating profit+ 40,529 22,769 63,298
Identifiable assets 150 1,318 1,468
Depreciation 229 6,825 7,054
Capital expenditures
1996
Revenue $60,287 $13,532 $73,819
Operating profit+ 11,295 674 11,969
Identifiable assets 35,595 17,116 52,711
Depreciation 142 981 1,123
245 4,850 5,095
Capital expenditures
1995
Revenue $33,103 $13,542 $46,645
Operating profit+ 7,962 1,132 9,094
Identifiable assets 35,616 12,692 48,308
Depreciation 157 824 981
Capital expenditures 169 985 1,154
- --------------------
+ Does not include corporate overhead $3,476,000, $3,471,000, and $3,834,000
for entertainment and $1,499,000, $868,000, and $311,000 for the restaurant
segment during the years 1997, 1996, and 1995, respectively. Gross profit
also excludes minority interest expense and interest and other income.
28
<PAGE>
Results of Operations by Quarter
(In thousands, except per share amounts) (unaudited)
1st Quarter Net Income
(ending September 30) Total Revenue Gross Profit Net Income per Share
- --------------------- ------------- ------------ ---------- ---------
1996 $10,909 $1,251 $303 .04
1995 $8,384 $701 $60 .01
------------- ------------ ---------- --------
2nd Quarter
(ending December 31)
- ----------------------
1996 $9,907 $2,031 $698 .08
1995 $18,561 $1,549 $512 .06
------------- ------------ ---------- --------
3rd Quarter
(ending March 31)
- ----------------------
1997 $22,243 $8,532 $4,464 .54
1996 $28,113 $7,097 $4,380 .53
------------- ------------ ---------- --------
4th Quarter
(ending June 30)
- ----------------------
1997 $23,069 $2,404 $1,049 .13
1996 $18,761 $2,622 $646 .08
------------- ------------ ---------- --------
Market and Dividend Information
Price Range Fiscal 1997 Fiscal 1996
----------------------- -----------
High Low High Low
---- --- ---- ---
1st Quarter $14.25 $11.00 $10.00 $8.25
------ ------ ------ -----
2nd Quarter 12.00 10.50 10.25 9.00
3rd Quarter 12.25 10.00 13.00 8.75
4th Quarter 14.00 11.38 15.00 12.00
------ ------ ------ -----
The Company's common stock is traded over-the-counter and is quoted on the
Nasdaq National Market System (symbol DCPI). The preceding table sets forth the
range of prices (which represent actual transactions) by quarters as provided by
the National Association of Securities Dealers, Inc.
The Company has not paid a dividend during the past two years and
does not anticipate paying any dividends in fiscal 1998.
29
<PAGE>
Report of Independent Public Accountants
To the Stockholders of dick clark productions, inc.:
We have audited the accompanying consolidated balance sheets of dick
clark productions, inc. (a Delaware corporation) and subsidiaries as of June 30,
1997 and 1996, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the three years in the period
ended June 30, 1997. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of dick
clark productions, inc. and subsidiaries as of June 30, 1997 and 1996, and the
results of their operations and their cash flows for each of the three years in
the period ended June 30, 1997, in conformity with generally accepted accounting
principles.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Los Angeles, California
August 22, 1997
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
dick clark productions, inc.
By:
/s/ Richard W. Clark
Richard W. Clark
Chairman and Chief Executive Officer
September , 1997
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report has been executed below by the following persons on behalf of the
Registrant and in the Capacities and on the date indicated.
Signature Title Date
/s/ Richard W. Clark Chairman September , 1997
Richard W. Clark Chief Executive Officer
and Director (Principal
Executive Officer)
/s/ Francis C. La Maina President, Chief Operating September , 1997
Francis C. La Maina Officer and Director
/s/ Karen W. Clark Director September , 1997
Karen W. Clark
/s/ Lewis Klein Director September , 1997
Lewis Klein
/s/ Enrique F. Senior Director September , 1997
Enrique F. Senior
/s/ Jeffrey B. Logsdon Director September , 1997
Jeffrey B. Logsdon
/s/ Robert A. Chuck Director September , 1997
Robert A. Chuck
/s/ Kenneth H. Ferguson Chief Financial Officer September , 1997
Kenneth H. Ferguson
31
<PAGE>
LIST OF EXHIBITS
----------------
Number Description of Document
3.1 Certificate of Incorporation of the Registrant dated October 31, 1986
and Certificate of Correction dated November 3, 1986, (incorporated
by reference to Exhibit 3.1 of the Registrant's Registration
Statement No. 33-9955 on Form S-1 (the "Registration Statement").
3.2 By-Laws of the Registrant (incorporated by reference to Exhibit 3.2
of the Registration Statement).
4.1 Form of Warrant issued to Allen & Company Incorporated and L.F.
Rothschild, Towbin, Inc. (incorporated by reference to Exhibit 4.1 of
the Registration Statement).
4.2 Form of certificate for shares of the Registrant's Common Stock
(incorporated by reference to Exhibit 4.2 of the Registration
Statement).
9.1 Agreement dated October 31, 1986, between Richard W. Clark and Karen
W. Clark with form of voting trust agreement attached (incorporated
by reference to Exhibit 9.1 of the Registration Statement).
10.1 Asset Exchange Agreement dated December 15, 1986, between the
Registrant and Olive Enterprises, Inc. ("Olive") (incorporated by
reference to Exhibit 10.1 of the Registration Statement).
10.2 Asset Exchange Agreement dated December 15, 1986, among the
Registrant and Richard W. Clark, Karen W. Clark and Francis C. La
Maina (incorporated by reference to Exhibit 10.2 of the Registration
Statement).
10.3 Bill of Sale and Assignment and Assumption Agreement dated October
30, 1986, between the dick clark company, inc. and dick clark radio
network, inc. (incorporated by reference to Exhibit 10.3 of the
Registration Statement).
10.4 License Agreement dated December 15, 1986, between the Registrant and
Olive (incorporated by reference to Exhibit 10.5 of the Registration
Statement).
10.5 Lease dated November 1, 1986, between the Registrant and Olive
(incorporated by reference to Exhibit 10.5 of the Registration
Statement).
10.6 Shareholders' Agreement dated as of December 23, 1986, among Richard
W. Clark, Karen W. Clark and Francis C. La Maina (incorporated by
reference to Exhibit 10.14 of the Registration Statement).
10.7 Agreement and Plan of Merger dated March 1, 1985, between the dick
clark company, inc. and La Maina Enterprises, Inc. (incorporated by
Registration Statement).
10.8 Lease Amendment No. 1 dated June 30, 1989, between Olive Enterprises,
Inc. and the Registrant amending Lease referred to as Exhibit 10.5
(incorporated by reference to Registrant's Annual Report on Form 10-K
for 1989).
*10.9 Employment Agreement dated as of July 1, 1997, between the Registrant
and Richard W. Clark (incorporated by reference to Registrant's
Annual Report on Form 10-K for 1991).
*10.10 Employment Agreement dated as of July 1, 1997, between the Registrant
and Karen W. Clark (incorporated by reference to Registrants Annual
Report on Form 10-K for 1994).
10.11 Joint Venture Agreement dated as of June 22, 1993, between Reno
Entertainment, Inc. and RLWH, Inc (incorporated by to Registrants
Annual Report on Form 10-K for 1994).
32
<PAGE>
*10.12 Employment Agreement dated as of July 1, 1997, between the Registrant
and Kenneth H. Ferguson (incorporated by reference to Registrants
Annual Report on Form 10-K for 1994).
*10.13 Employment Agreement dated as of July 1, 1997, between the Registrant
and Francis C. La Maina.
*10.14 Employment Agreement dated as of January 29, 1997, between the
Registrant and William S. Simon.
10.19 1996 Employee Stock Option.
*21.1 List of subsidiaries.
23.1 Accountants' consent
*27.1 Financial Data Schedule
- ---------------------------
* Filed herewith
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of July 1, 1997 (this "Agreement"), between
dick clark productions, inc., a Delaware corporation (the "Company"), and
RICHARD W. CLARK (the "Executive").
The Executive is currently employed as the Chairman and Chief
Executive Officer of the Company pursuant to an Employment Agreement dated as of
July 1, 1992 (the "Existing Agreement"). The Company considers the Executive's
continued employment with the Company to be crucial to the continued operations
and performance of the Company. Accordingly, the Company desires to secure the
continued services of, and to continue the employment of the Executive with the
Company and the Executive desires to continue in the employ of the Company.
Therefore, the Company shall continue to Employ the Executive on the terms,
provisions and conditions set forth in this Agreement and the Executive is
willing to continue such employment, upon such terms, provisions and conditions.
Accordingly, the Company and the Executive hereby agree as follows:
1. Employment
(a) The Company shall employ the Executive, and the
Executive shall serve the Company during the term hereof, as Chairman and Chief
Executive Officer of the Company, with such duties and responsibilities normally
associated with those positions; and the Executive hereby accepts such
employment and agrees to serve the Company as the Chairman and Chief Executive
Officer of the Company. The Company may request the Executive to serve as the
Chief Executive Officer of certain of its subsidiaries, and if so requested, the
Executive agrees
<PAGE>
to serve as the Chief Executive Officer of those subsidiaries. The Executive
shall also provide the Company with his creative and executive producer services
in connection with the Company's television, video and motion picture production
activities. The Executive shall devote his best efforts and the major portion of
his business time to the performance of his duties under this Agreement and
shall perform them faithfully, diligently and competently. The Executive shall
report directly and exclusively to the Company's Board of Directors. The
Executive's services shall be performed in Burbank, California (or such other
location as the Executive and the Company may agree upon), subject to travel
reasonably and customarily required by the Company in connection with the
performance of the Executive's services hereunder.
(b) Notwithstanding anything to the contrary contained in
this Agreement, the Executive may devote a significant portion of his business
time to other business activities, including, without limitation (i) performing
(as actor, host or otherwise) on television, radio and other media, consulting
(other than in connection with television, video and motion picture production
in the United States); (ii) owning and managing cable television systems
(including the related telephony and data transmission on such systems); (iii)
authoring and writing books, magazine articles or other publications (provided
that the Executive will not during the Term of this Agreement license to any
third party the right to exploit any television, video or motion picture rights
of such books, articles or other publications without first affording the
Company the right to acquire such rights as follows: the Executive will first
negotiate with the Company in good faith for a period of thirty (30) days prior
to negotiating with any third parties; if an agreement with the Company does not
result from such negotiations, the Executive shall be free to license such
rights to third parties on terms which are no less favorable to the Executive
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<PAGE>
than the terms last offered by the Company during the negotiations with the
Company and if the terms with the third party are less favorable to the
Executive, then the Executive shall once again offer such terms to the Company
on an exclusive basis for a period of twenty (20) days) in which case the
Company can match such terms; (iv) making personal appearances on his own behalf
and on behalf of third parties in his capacity as a celebrity; (v) making
product and third party endorsements; (vi) licensing his name, voice, sobriquet,
biographical material and likeness in connection with any business activities
permitted by this Section 1(b); (vii) serving as an officer or director of
companies a majority of whose equity is owned or controlled, directly or
indirectly, by the Executive on the date of this Agreement and companies a
majority of whose equity is owned by the Executive after the date of this
Agreement (provided such companies do not compete with any business conducted by
the Company or are companies in which the Company declined to make an
investment); (viii) serving as an officer or director of other companies or
entities which do not compete with the business conducted by Company; and (ix)
serving as an officer or director of other companies or entities or otherwise
being involved in a business whose activities or operations may be similar to a
business engaged in by the Company, if the Executive becomes involved in such
business only after the Executive has offered the business opportunity which is
presented to him to the Company and the Company has declined such opportunity
and only if the Board of Directors have determined that the Executive's
involvement with any such company or business activity would not be detrimental
or adverse to the interests of the Company; provided, further, that in each case
the activities to be engaged in by the Executive do not materially interfere
with the Executive's performance of any of his duties and obligations under this
-3-
<PAGE>
Agreement. As used in this Section 1(b), the term "Company" shall include the
Company and its subsidiaries.
2. Term of Employment. The term of Executive's employment by the
Company under this Agreement shall commence on and as of the July 1, 1997, and,
subject to earlier termination pursuant to Section 5 or 7 hereof, shall
terminate on June 30, 2002 (the "Term"). Notwithstanding the foregoing, unless
the Company gives written notice to the Executive prior to April 1 in any year
during the Term of this Agreement that it does not intend to have the Term of
this Agreement extended, the Term of this Agreement shall automatically extend
for an additional year from its then current expiratory date. For purposes of
this Agreement, the term "Term" shall include any extension of the then
applicable Term as provided in this Section 2. An example of the operation of
this Section 2 is as follows: if by April 1, 1998 the Company does not furnish a
notice to the Executive that the Company does not desire the Term to be
extended, then the Term shall automatically be extended until June 30, 2003.
3. Compensation
(a) As full compensation for all services rendered by the
Executive to the Company under this Agreement, the Company shall pay to the
Executive (i) a base salary at an annual rate of $975,000, payable in equal
installments (once every two weeks) in accordance with the Company's customary
payroll practice for its executives, and (ii) a bonus determined in accordance
with Section 3(b).
(b) With respect to each fiscal year of the Company during
the term of the Executive's employment under this Agreement, commencing with the
fiscal year ending
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<PAGE>
June 30, 1998, the Company shall pay to the Executive a bonus equal to the
following amounts with respect to the Pre-tax Profits of the Company, if any,
during that fiscal year:
If Pre-tax Profits are:
Over But Not over Payment
---- ------------ -------
0 - $ 7,000,000 0
$ 7,000,000 - $10,000,000 $380,000 + 4% of Pre-tax
Profits over $7,000,000
$10,000,000 - $15,000,000 $500,000 + 3% of Pre-tax
Profits over $10,000,000
$15,000,000 - $650,000 + 2% of Pre-tax
Profits over $15,000,000
The bonus, if any, payable to the Executive pursuant to this Section 3(b) with
respect to any fiscal year shall be paid not later than thirty (30) days after
the receipt by the Company from its independent public accountants of the
audited financial statements of the Company with respect to that fiscal year.
Nothing herein shall alter, modify, or amend the obligation of the Company
pursuant to Section 3(b) of the Existing Employment Agreement to make a payment
to the Executive pursuant to said Section 3(b) for the fiscal year ended June
30, 1997, which obligation shall remain in full force and effect,
notwithstanding the execution and delivery of this Agreement.
(c) As used in this Agreement the term "Pre-tax Profits"
of the Company for any fiscal year shall mean the net income before taxes of the
Company as shown on the audited consolidated statement of profit and loss of the
Company and its subsidiaries for that fiscal year, but without giving effect to
accruals for the bonus, if any, payable for such fiscal year to the Executive
pursuant to Section 3(b) hereof and any similar bonus payable, to Mr. Francis C.
-5-
<PAGE>
La Maina for that fiscal year pursuant to Mr. La Maina's then current employment
agreement with the Company.
(d) If the Executive's employment is terminated prior to
the end of a fiscal year by his death or by the Company as a result of his
disability, the bonus payable pursuant to Section 3(b) in respect of that fiscal
year, if any, shall be calculated (i) if such termination shall occur during the
first quarter of the Company's fiscal year, by multiplying the amount determined
pursuant to Section 3(b) for that entire fiscal year by a fraction of which the
numerator is the number of days in that fiscal year prior to the date of
termination and the denominator is the number of days in that fiscal year; and
(ii) if such termination shall occur subsequent to the first quarter of the
Company's fiscal year, as if the Executive had been employed for that entire
fiscal year. If the Executive's employment is terminated prior to the end of any
fiscal year for "Cause" (as hereinafter defined), no bonus shall be payable to
the Executive pursuant to Section 3(b) in respect of that fiscal year.
(e) For purposes of Sections 3(b) and 3(c) hereof, if the
Company's fiscal year shall change (the fiscal year presently being July 1
through June 30), resulting in a fiscal year which shall be less than twelve
(12) months, the bonus payable pursuant to Section 3(b) in respect of that short
fiscal year shall be calculated (i) by multiplying the amount of the Pre-tax
Profits determined pursuant to Section 3(c) for that entire short fiscal year by
a fraction of which the numerator is twelve (12) and the denominator is the
number of months in that short fiscal year; (ii) by determining the bonus in
accordance with Section 3(b) based on the amount resulting from the calculations
in clause (i) above; and (iii) by multiplying such bonus amount resulting
-6-
<PAGE>
from the calculation in clause (ii) above by a fraction of which the numerator
is the number of months in that shortened fiscal year and the denominator is
twelve (12).
(f) Anything in this Agreement to the contrary
notwithstanding, the Executive shall not receive any additional compensation for
his services as a producer or executive producer of television or other
programming for or on behalf of the Company, except that the Executive shall be
entitled to such additional compensation for his services as a performer on
television or other programming or with respect to productions (whether live or
otherwise) for or on behalf of the Company and its subsidiaries and for the
licensing to the Company and its subsidiaries of his name and likeness with
respect to products outside of the television, video and motion picture business
and the restaurant business (including, without limitation, with respect to
product merchandising, commercial tie-ins and product endorsements which may be
ancillary to the business of the Company or any of its subsidiaries) as shall be
agreed upon by the Executive, the Company or such subsidiary, as applicable,
commensurate with fees and other compensation generally received by performers
of the Executive's stature. If the Executive would otherwise be entitled to
receive a payment from an affiliate of the Company or a third party of
compensation for his services as a producer or an executive producer of
television, video or motion picture programming, the Executive shall cause such
affiliate or third party to pay such compensation directly to the Company.
Nothing in this Agreement shall affect any other rights the Executive may have
with respect to his services as a producer or executive producer, including,
without limitation, his rights to credits.
-7-
<PAGE>
4. Fringe Benefits; Expenses
(a) The Executive shall be entitled to receive all health
(other than disability) and pension benefits provided by the Company to its
senior executives and to all other fringe benefits provided by the Company to
its executives as a group and shall also be entitled to participate in all
benefit plans provided by the Company to its executives as a group.
(b) The Company shall reimburse the Executive for all
reasonable out-of-pocket expenses (including, without limitation, entertainment
expenses) incurred by the Executive in connection with the performance of the
Executive's services for the Company hereunder (it being agreed that first-class
travel and accommodations are reasonable expenses), upon submission of vouchers
and/or receipts by the Executive in accordance with the Company's policies and
procedures.
(c) The Company shall provide the Executive with the use
of a Company vehicle, such vehicle to be used in connection with the performance
by the Executive of his duties on behalf of the Company.
(d) The Executive shall be entitled to eight (8) weeks of
vacation time annually (based upon the period from July 1 through June 30),
which shall be taken at times selected by the Executive which are consistent
with the proper performance of the Executive's duties under this Agreement. The
Executive may accrue up to two (2) weeks of unused vacation time annually.
-8-
<PAGE>
5. Disability or Death
(a) If, as the result of any physical or mental
disability, the Executive shall have failed or been unable to perform the
Executive's duties hereunder for a period of one hundred eighty (180)
consecutive days, the Company may, by notice to the Executive subsequent
thereto, terminate the Executive's employment under this Agreement prior to the
end of the Term, effective as of the date of the notice. If the Executive's
employment is terminated pursuant to this Section 5(a), the Company shall pay to
the Executive (in equal installments every two (2) weeks) (i) for the period
from the date of termination through the June 30 next succeeding such date of
termination, an amount equal his base salary for such period at the date of
termination; (ii) for the next succeeding twelve (12) month period, an amount
equal to 65% of his base salary at the date of termination; (iii) for the next
succeeding twelve (12) month period, an amount equal to 60% of his base salary
at the date of termination; and (iv) for the twenty-four (24) month period
commencing on the date of the last payment required to be made pursuant to
clauses (i), (ii) and (iii) above, an amount equal to 50% of his base salary at
the date of termination.
(b) The period of the Executive's employment under this
Agreement shall automatically terminate upon the Executive's death. In the event
of the Executive's death, the Company shall pay to the beneficiary designated in
writing by the Executive to the Company (or if the Executive fails to so
designate a beneficiary, to the Executive's estate), an amount at an annual rate
equal to his base salary in affect on the date of the Executive's death for a
period of two (2) years from the date of the Executive's death, payable in equal
installments on the first day of the month next succeeding the data of death and
the first day of every third month thereafter.
-9-
<PAGE>
6. Non-Competition; Confidential Information.
(a) (i) During the term of the Executive's employment
under this Agreement or (ii) through the current Term of this Agreement, if the
Executive voluntarily terminates his employment or the Executive's employment is
terminated for "Cause" (as such term is hereinafter defined), the Executive
shall not, directly or indirectly, engage or be interested (as a stockholder,
director, officer, agent, broker, partner, individual proprietor, lender,
consultant or otherwise) in any other business or enterprise which is
competitive with any of the businesses engaged in by the Company or any of its
subsidiaries at the time of the termination of the Executive's employment with
the Company, except that the Executive may (i) engage in the activities
otherwise permitted pursuant to Section l(b) hereof, whether or not competitive
with the Company or any of its subsidiaries; and (ii) hold not more than 5% of
the outstanding securities of any class of any publicly held company; provided
that this Section 6 shall not prohibit the Executive from holding more than 5%
of the outstanding securities of any class of capital stock of the Company.
(b) The Executive shall not, directly or indirectly,
either during the period of the Executive's employment under this Agreement or
thereafter, disclose to any person or entity (except in the regular course of
the Company's business or as may be required by applicable law or subpoena), or
use in competition with the Company, any information, acquired by the Executive
during the Executive's employment by the Company, concerning or in any way
relating to any confidential or secret aspect of the Company's business,
affairs, operations, plans, prospects, strategies or condition (financial or
otherwise), unless such information has become
-10-
<PAGE>
known by the general public other than by reason of actions of the Executive,
whether direct or indirect.
(c) The Executive shall not, directly or indirectly,
either during the period of the Executive's employment under this Agreement or
for a period of one (1) year thereafter, solicit the services of any person who
was a full-time employee of the Company (other than Ms. Karen Clark, and the
Executive's executive secretary, and employees who have been employed by the
Company for limited periods of time in connection with the production of
particular television or motion picture programming) during the last year of the
period of the Executive's employment under this Agreement.
(d) The Executive acknowledges and agrees that the remedy
at law (including, without limitation, a remedy calculated as money damages),
for breach of his covenants under this Section 6 will be inadequate and,
accordingly, in the event of any breach or threatened breach by the Executive of
any of the provisions of this Section 6, the Company shall be entitled, in
addition to all other rights and remedies available to the Company, whether at
law, in equity or otherwise, an injunction restraining any such breach or
threatened breach (without posting any bond or other security or being required
to prove actual damages).
7. Termination
(a) The Company shall have the right to terminate and the
Executive's employment with the Company hereunder (i) for "Cause" or (ii)
Without Cause. For purposes of this Agreement, the term "Cause" shall mean any
material breach of the Executive's obligations under Section 6 of this Agreement
which is not cured within thirty (30) days after written notice thereof to the
Executive; the conviction of the Executive of a felony, gross misconduct by the
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<PAGE>
Executive related to the Executive's position with, or duties or obligations to,
the Company, which is likely to materially and adversely affect the Company's
business or financial condition, the chronic addiction of the Executive to drugs
or alcohol which materially and adversely affects the Executive's performance of
his duties under this Agreement; or the Executive's willful failure to perform
his material duties to the Company hereunder within a reasonable period under
the circumstances after written notice (specifically identifying the manner in
which the Board of Directors believes that the Executive has so failed to
perform his duties) from the Board of Directors of the Company to the Executive
(provided such duties are consistent, in the reasonable opinion of the Executive
after obtaining an opinion of counsel reasonably acceptable to the Company, with
this Agreement and applicable law).
(b) If the employment of the Executive hereunder is
terminated for "Cause", the Company shall not be obligated to make any further
payments to the Executive hereunder (other than accrued and unpaid salary and
expenses to the date of termination), or continue to provide any benefit (other
than benefits which have accrued pursuant to any plan or applicable law to the
date or termination) to the Executive under this Agreement. If the employment of
the Executive is terminated Without Cause, the Company shall pay to the
Executive all of his compensation (base salary and bonuses) pursuant to Section
3 as if this Agreement had not been terminated for the greater of (x) the
remainder of the then current Term and (y) three (3) years after termination,
all regardless of the amount of compensation the Executive may earn or be able
to earn with respect to any other employment that the Executive may obtain or be
able to obtain (i.e. the Executive shall have no duty to mitigate and the
Company shall have no right to offset). For purposes hereof, the term "Without
Cause" shall mean a
-12-
<PAGE>
termination of the Executive's employment hereunder by the Company for a reason
other than pursuant to Section 7(a) hereof.
(c) The Executive shall have the right to terminate his
employment under this Agreement upon thirty (30) days' prior notice to the
Company given within sixty (60) days following the occurrence of any of the
following events: (i) the Executive's title is changed so that the Executive is
no longer both Chairman and Chief Executive of the Company or (ii) any action by
the Company, pursuant to which the Company materially reduces the Executive's
duties and responsibilities hereunder and the Executive objects thereto within
thirty (30) days of any such reduction and the Company does not restore such
duties and responsibilities within thirty (30) days thereafter. The Executive
shall not have any rights pursuant to this Section 7(c) if the occurrence of the
triggering events was the result, directly or indirectly, of a transaction in
which all or substantially all of the stock or assets of the Company is sold or
the Company is a party to a merger, consolidation or similar transaction, in
which the Company is not the surviving entity.
(d) The parties believe that payments made to the
Executive based upon a termination Without Cause do not constitute "Excess
Parachute Payments" under Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"). Notwithstanding such belief, if any benefit is determined
to be an "Excess Parachute Payment" the Company shall pay the Executive an
additional amount such that (x) the excess of all Excess Parachute Payments
(including any payments under this Section 7(d)) over the sun of excise tax
thereon under section 4999 of the Code and income tax thereon under subtitle A
of the Code and under applicable state law is equal to (y) the excess of all
Excess Parachute Payments (excluding payments under this sentence) over income
tax thereon under Subtitle A of the Code and under applicable state law.
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<PAGE>
The above determination shall be made without regard to interest and penalties
for failure to pay or underpayment of taxes.
8. Name and Likeness
(a) Except with respect to the outside activities of the
Executive permitted pursuant to Section 1(b) hereof, the Company shall have the
exclusive right during the Term of this Agreement to the commercial use in
connection with its television and motion picture business of the Executive's
name, reasonably approved likeness, voice, reasonably approved biography,
reasonably approved photograph and reasonably approved picture; provided that
any such use by the Company is not in the nature of a direct or indirect
endorsement of any product, commodity or service without the Executive's prior
written consent.
(b) With respect to any motion picture, video, television
or other programming (each a "Program") in connection with which the Executive
renders services to the Company as executive producer, the Company shall accord
the Executive (unless the Executive, in his sole discretion, elects not to
receive such credit) screen credit on the Programs and credit in all paid
advertising and publicity issued by or under the control of the Company with
respect to any such Program, as executive producer of the Program, on a separate
card on the screen, placement as is customary in the television and motion
picture industry, and in a size no less than the size of type used to display
the credit given to any other individual (other than performers) in connection
with any such Program. Subject to the foregoing, the Company shall determine, in
its sole discretion, the manner, form, size, style, nature and placement of any
credit given to the Executive. No inadvertent failure of the Company to comply
with the provisions hereof with respect to credit shall constitute a breach of
this Agreement, unless the Company fails to use its
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<PAGE>
best efforts to cure the same, on a prospective basis only, promptly upon notice
thereof. In the event of any breach of these credit provisions, the Executive's
remedies, if any, shall be limited to the right to recover damages in an action
at law, and in no event shall the Executive be entitled to terminate or rescind
this Agreement, revoke any of the rights herein granted or to enjoin or restrain
the distribution or exhibition of the Programs.
9. Miscellaneous
(a) This Agreement shall be governed by and construed in
accordance with the law of California applicable to agreements made and to be
performed in California, and without regard to principles of conflicts of law.
(b) This Agreement sets forth the entire understanding and
agreement between the Company and the Executive with respect to its subject
matter, supersedes all previous agreements between them relating to such subject
matter (whether written or oral), all of which are merged herein (including,
without limitation, the Existing Agreement). There are no representations,
warranties or promises between the parties with respect to the subject matter
hereof, other than those set forth herein.
(c) Any notice or other communication under this Agreement
shall be in writing and shall be considered given when received by the party
hereto who is the intended recipient and shall be delivered personally, or
mailed by certified mail, return receipt requested (postage prepaid), or sent by
telecopy if sent before 4:00 p.m. (California time) on a business day, to the
parties at their respective addresses or facsimile numbers, as the case may be,
set forth below (or at such other address, or facsimile number, as a party may
specify by notice to the other party):
-15-
<PAGE>
If to the Company, to it at:
3003 West Olive Avenue
Burbank, California 91510-4590
Attn: President
Telecopy No.: (818) 566-6690
with a copy to;
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036-8735
Telecopy No.: (212) 704-6288
If to the Executive, to him at:
3003 West Olive Avenue
Burbank, California 91510-4590
Telecopy No.: (818) 566-6690
with a copy to:
Joel Behr, Esq.
Behr and Robinson
2049 Century Park East 26th Floor
Los Angeles, California 90067
Telecopy No.: (310) 556-9229
(d) The failure of a party to insist upon strict adherence
to any term or provision of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or provision on any other occasion or any other
term or provision of this Agreement. Any waiver shall be limited to the specific
instance for which it is given executed by the party affected thereby. This
Agreement may not be waived, amended, modified or altered, except by an
instrument in writing duly executed by each of the Company and the Executive.
-16-
<PAGE>
(e) The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the validity or enforceability of
the remaining terms or provisions of this Agreement which shall remain in full
force and effect and any such invalid or unenforceable term or provision shall
be given full effect as far as is possible under applicable law. If any term or
provision of this Agreement is invalid or unenforceable in one jurisdiction, it
shall not affect the validity or enforceability of that term or provision in any
other jurisdiction.
(f) This Agreement is not assignable by either party,
except that it shall inure to the benefit of and be binding upon any successor
to the Company by merger or consolidation or the acquisition of all or
substantially all of the Company's assets or stock; provided such successor
assumes all of the duties and obligations of the Company hereunder; and this
Agreement shall inure to the benefit of the heirs, estate and legal
representatives of the Executive. The duties and obligations of the Executive
hereunder may not be delegated.
(g) Section headings are inserted herein for convenience
of reference only, and shall have no substantive aspect and shall not be taken
into account in connection with the interpretation or construction of this
Agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed and
delivered this Agreement as of the day and year first above written.
dick clark productions, inc.
By: /s/
-----------------------------------
Name:
Title:
/s/ Richard W. Clark
-----------------------------------
Richard W. Clark
-17-
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of July 1, 1997 (this "Agreement")
between dick clark productions, inc., a Delaware corporation (the "Company"),
and KAREN CLARK (the "Executive").
The Company wishes to employ the Executive, and the Executive wishes
to accept employment with the Company, on the terms and conditions set forth in
this Agreement.
It is therefore agreed as follows:
1. Employment.
(a) The Company shall employ the Executive, and the
Executive shall serve the Company, as Vice President-Administration of the
Company, with such duties and responsibilities as the Company's Chief Executive
Officer shall assign to the Executive from time to time. The Executive shall
devote her best efforts and all of her business time to the performance of her
duties under this Agreement and shall perform them faithfully, diligently,
competently and to the best of her ability. The Executive shall report to the
Chief Executive Officer of the Company. The Executive may engage in incidental
activities outside the scope of her employment with the Company so long as such
activities do not detract from the fulfillment of the Executive's
responsibilities under this Agreement. The Executive's services shall be
performed primarily in Burbank, California (or such other location as the
Executive and the Company may agree upon).
<PAGE>
2. Term of Employment
The Executive's employment by the Company under this
Agreement shall commence as of the date of this Agreement and, subject to
earlier termination pursuant to Section 5 or 7, shall terminate on June 30, 2002
(the "Term"). Notwithstanding the foregoing, unless the Company gives written
notice to the Executive prior to April 1 in any year during the Term of this
Agreement that it does not intend to have the Term of this Agreement extended,
the Term of this Agreement shall automatically extend for an additional year
from its then current expiratory date. For purposes of this Agreement, the term
"Term" shall include any extension of the then applicable Term as provided in
this Section 2. An example of the operation of this Section 2 is as follows: if
by April 1, 1998 the Company does not furnish a notice to the Executive that the
Company does not desire the Term to be extended, then the Term shall
automatically be extended until June 30, 2003.
3. Compensation.
As full compensation for all services rendered by the
Executive to the Company under this Agreement, the Company shall pay to the
Executive a base salary at the annual rate of $85,000, payable in equal
installments (once every two weeks) in accordance with the Company's customary
payroll practice for its executives. 4. Fringe Benefits; Expenses.
(a) The Executive shall be entitled to receive all fringe
benefits provided by the Company to its executives as a group and shall also be
entitled to participate in all benefit plans provided by the Company to its
executives as a group.
-2-
<PAGE>
(b) The Company shall reimburse the Executive for all
reasonable expenses (including, without limitation, entertainment expenses)
incurred by her in connection with the performance of her services and duties
for the Company in accordance with this Agreement (it being agreed that
first-class travel and accommodations are reasonable expenses), upon submission
of vouchers and receipts in accordance with the Company's customary policies and
procedures.
(c) The Executive shall be entitled to eight (8) weeks
vacation time annually, to be taken at times selected by her, with the
reasonable concurrence of the Chief Executive Officer of the Company, which are
consistent with the proper performance of her duties under this Agreement. The
Executive may accrue up to two (2) weeks unused vacation time annually which may
be carried forward and used during the succeeding annual period.
5. Disability or Death.
If, as the result of any physical or mental disability,
the Executive shall have failed or been unable to perform her duties under this
Agreement for a period of 180 consecutive days, the Company may, by notice to
the Executive subsequent thereto, terminate her employment under this Agreement
prior to the end of the Term, effective as of the date of the notice. The
Executive's employment under this Agreement shall automatically terminate upon
her death. If the employment of the Executive is terminated by reason of death
or disability, the Company shall not be required to make any further payment to
the Executive (other than the payment of accrued and unpaid salary and
unreimbursed expenses to the date of termination).
-3-
<PAGE>
6. Non-Competition; Confidential Information.
(a) (i) During the term of the Executive's employment
under this Agreement or (ii) through the current Term of the Agreement, if the
Executive voluntarily terminates her employment or her employment is terminated
by the Company for cause, the Executive shall not, directly or indirectly,
engage or be interested (as a stockholder, director, officer, consultant, agent,
broker, partner, individual proprietor, lender or otherwise) in any other
business which is competitive with the business of the Company, except that she
may hold not more than 5% of the outstanding securities of any class of any
publicly held company provided that this Section 6 shall not prohibit the
Executive from holding more than 5% of the outstanding shares of any class of
the Company.
(b) The Executive shall not, directly or indirectly,
either during the Term of the Executive's employment under this Agreement or
thereafter, disclose to anyone (except in the regular course of the Company's
business or as may be required by applicable law or subpoena), or use in
competition with the Company, any information acquired by the Executive during
her employment by the Company with respect to any confidential or secret aspect
of the Company's operations or affairs unless such information has become public
knowledge other than by reason of actions (direct or indirect) of the Executive.
(c) The Executive shall not, directly or indirectly,
either during the Term of the Executive's employment under this Agreement or for
a period of one (1) year thereafter, solicit the services of any person who was
a full-time employee of the Company (other than employees employed for limited
period of time in connection with the production
-4-
<PAGE>
of particular television or motion picture programming) during the last year of
the period of the Executive's employment under this Agreement.
(d) The Executive acknowledges that the remedy at law
(including, without limitation, a remedy calculated as money damages), for
breach of her covenants under this Section 6 will be inadequate and,
accordingly, in the event of any breach or threatened breach by the Executive of
the provisions of this Section 6, the Company shall be entitled, in addition to
all other remedies, to an injunction restraining any such breach (without
posting any bond or other security or being required to prove actual damages).
7. Termination.
The Company shall have the right to terminate the
Executive's employment with the Company (i) for "Cause" or (ii) Without Cause.
For purposes of this Agreement, the term "Cause" shall mean any material breach
of the Executive's obligations under Section 6 of this Agreement which is not
cured within thirty (30) days after written notice, the conviction of the
Executive of a felony, gross misconduct related to the Executive's position or
duties with the Company which is likely to materially and adversely affect the
Company's financial position, the chronic addiction of the Executive to drugs or
alcohol which materially and adversely affects the Executive's performance of
her duties under this Agreement, or the Executive's willful failure to perform
her material duties within a reasonable period under the circumstances after
written notice (specifically identifying the manner in which the Board believes
that the Executive has failed) from the Board of Directors of the Company
(provided such duties are consistent, in the reasonable opinion of the Executive
after obtaining an opinion of counsel, with this contract and applicable law).
-5-
<PAGE>
If the employment of the Executive is terminated for
Cause, the Company shall not be obligated to make any further payment to the
Executive hereunder (other than accrued and unpaid salary and unreimbursed
expenses to the date of termination), or continue to provide any benefit (other
than benefits which have accrued pursuant to any plan or by law) to the
Executive under this Agreement. If the employment of the Executive is terminated
Without Cause, the Company shall pay to the Executive all of her compensation
pursuant to Section 3 as if this Agreement had not been terminated, regardless
of the amount of compensation the Executive may earn with respect to any other
employment she may obtain.
8. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the law of California applicable to agreements made and to be
performed in California, without regard to principles of conflicts of law.
(b) This Agreement contains a complete statement of all
the arrangements between the Company and the Executive with respect to its
subject matter, supersedes all previous agreements among them relating to its
subject matter (whether written or oral) and cannot be modified, amended or
terminated, except by an instrument in writing executed by the Company and the
Executive.
(c) Any notice or other communication under this Agreement
shall be in writing and shall be considered given when received and shall be
delivered personally or mailed by certified mail, return receipt requested, to
the parties at their respective addresses set forth below (or at such other
address as a party may specify by notice to the other):
-6-
<PAGE>
If to the Company, to it at:
3003 West Olive Avenue
Burbank, California 91505-4590
Attn: Chairman of the Board
and Chief Executive Officer
with a copy to:
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
If to the Executive, to her at:
3003 West Olive Avenue
Burbank, California 91505-4590
(d) The failure of a party to insist upon strict adherence
to any term or provision of this Agreement on any occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or any other term or provision of this Agreement.
Any waiver must be in writing and duly executed by the party granting any such
waiver.
(e) The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the validity or enforceability of
the remaining terms or provisions of this Agreement which shall remain in full
force and effect and any such invalid or unenforceable term or provision shall
be given full effect as far as possible. If any term or provision of this
Agreement is invalid or unenforceable in one jurisdiction, it shall not affect
the validity or enforceability of that term or provision in any other
jurisdiction.
(f) This Agreement is not assignable by either party
except that it shall inure to the benefit of and be binding upon any successor
to the Company by merger or
-7-
<PAGE>
consolidation or the acquisition of all or substantially all of the Company's
assets, and shall inure to the benefit of the estate, heirs and legal
representatives of the Executive.
dick clark productions, inc.
By:
---------------------------------
Name:
Title:
/s/ Karen Clark
---------------------------------
Karen Clark
-8-
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of July 1, 1997, (as from time to time
amended, this "Agreement") between dick clark productions, inc., a Delaware
corporation (the "Company"), and Mr. Kenneth H. Ferguson (the "Executive").
The Executive is currently the Vice President-Finance and Chief
Financial Officer of the Company and has served in that capacity pursuant to an
Employment Agreement dated as of July 1, 1994 (the "Prior Agreement"). The
Company intends to continue the Executive's employment with the Company subject
to the terms, provisions and conditions set forth in this Agreement.
Therefore, upon the mutual premises set forth herein, and other
consideration, the Company and the Executive hereby agree as follows:
1. Employment.
(a) The Company hereby employs the Executive for the Term
(as hereinafter defined) of this Agreement, subject to earlier termination as
hereinafter provided, and the Executive hereby accepts such employment as herein
provided and agrees to serve the Company, as its Vice President - Chief
Financial Officer, with such duties and responsibilities as are normally
associated with those positions and such other duties as may from time to time
be assigned to the Executive by the President and Chief Operating Officer of the
Company or the Board of Directors of the Company. The Executive shall devote his
best efforts and substantially all of his business time to the performance of
his duties and obligations under this Agreement and shall perform them
faithfully, diligently, competently and to the best of his ability. The
Executive shall report directly to the President and Chief Operating Officer of
the Company.
(b) The Executive shall not, directly or indirectly,
engage in any outside activities, whether or not during regular business hours,
if such activities would detract from the
<PAGE>
performance of his duties and obligations hereunder. Notwithstanding anything to
the contrary contained in the immediately preceding sentence, the Executive may
devote a portion of his business time to serving as an officer of companies a
majority of whose equity is owned by Mr. Richard W. Clark on the date of this
Agreement and companies a majority of whose equity is owned by Mr. Richard W.
Clark after the date of this Agreement (collectively, the "Clark Affiliates")
and to Mr. Clark directly; provided however, that providing services to the
Clark Affiliates or Mr. Clark's directly does not compete with any business or
activity conducted by the Company (unless such activities were presented to the
Company and the Board of Directors of the Company determined not to engage in
such activities); and provided further, that such activities do not materially
interfere with the Executive's performance of his duties and obligations under
this Agreement.
2. Term of Employment.
The Executive's employment by the Company pursuant to this
Agreement shall commence as of the date of this Agreement and, subject to
earlier termination pursuant to Section 5 or 7 hereof, shall terminate on June
30, 1998 (the "Term").
3. Compensation.
(a) As full compensation for all services rendered by the
Executive to the Company under this Agreement, the Company shall pay to the
Executive (i) a base salary at an annual rate of $152,761, payable in equal
installments (once every two weeks or as otherwise is consistent with the
Company's regular payroll practices) in accordance with the Company's customary
payroll practices for its senior executives, and (ii) subject to the
discretionary nature thereof, a bonus determined in accordance with Section 3(b)
hereof. The Company shall be entitled to make and deduct from any amounts
payable to the Executive hereunder all withholdings for federal, state and local
taxes and any other withholdings that are required pursuant to applicable law or
regulation or are otherwise consistent with the Company's practices for its
senior executives.
-2-
<PAGE>
(b) The Company may, in its sole and absolute discretion,
pay an annual bonus to the Executive for the completed fiscal year of the
Company ending June 30, 1998. The bonus shall be based upon such criteria as the
President of the Company and Chief Operating Officer, in his discretion,
considers appropriate. The Executive acknowledges that no representation or
warranty has been made by the Company or any of the members of the Board of
Directors of the Company that any bonus will be paid to the Executive pursuant
to this Agreement to the Executive.
4. Fringe Benefits; Expenses, etc.
(a) The Executive shall be entitled to receive all health
and pension benefits provided by the Company to its senior executives as a group
and shall also be entitled to participate in all other benefit plans provided by
the Company to its senior executives as a group.
(b) The Company shall reimburse the Executive for all
reasonable, necessary and ordinary out-of-pocket expenses incurred by him in
connection with the performance of his services for the Company pursuant to this
Agreement; provided, however, that each such reimbursement shall be upon
submission of vouchers and receipts in accordance with the Company's customary
policies and procedures from time to time in effect.
(c) The Executive shall be entitled to four (4) weeks
vacation time annually, to be taken at times selected by him, subject to the
concurrence of the President and Chief Operating Officer of the Company, which
are consistent with the proper performance of the Executive's duties under this
Agreement. One week of vacation shall accrue for each quarter of employment
during the Term.
5. Disability or Death.
(a) If, as the result of any physical or mental
disability, the Executive shall have failed or been unable to perform his duties
for a period of one hundred twenty (120)
-3-
<PAGE>
consecutive days or greater than one hundred eighty (180) days during the twelve
(12) month period of the Term, the Company may, by notice to the Executive
subsequent thereto, terminate the Executive's employment under this Agreement,
effective as of the date of the notice, and the Company shall not be required to
make any further payment or to furnish any benefit to the Executive under this
Agreement (other than accrued and unpaid base salary pursuant to Section 3(a)
hereof and expenses pursuant to Section 4(b) hereof and the benefits which have
accrued pursuant to any plan pursuant to Section 4(a) hereof or by applicable
law).
(b) The Executive's employment under this Agreement shall
automatically terminate upon his death and the Company shall not be required to
make any further payment or the furnish any benefit to the Executive under this
Agreement (other than accrued and unpaid salary pursuant to Section 3(a) hereof
and expenses pursuant to Section 4(b) hereof and benefits which have accrued
pursuant to any plan pursuant to Section 4(a) hereof or by applicable law).
6. Non-Competition; Confidential Agreement.
(a) During the period of the Executive's employment under
this Agreement, the Executive shall not, directly or indirectly, engage or be
interested (as a stockholder, director, officer, agent, broker, partner,
individual proprietor, joint venturer, lender or otherwise), individually or in
any representative capacity, in any other business which is competitive with any
business conducted by or contemplated to be conducted by the Company or any
Clark Affiliate, except that the Executive may own not more than 5% of the
outstanding securities of any class of any publicly held company.
(b) The Executive shall not, directly or indirectly,
either during the term of the Executive's employment under this Agreement or
thereafter, disclose to any person or entity (except in the regular course of
the Company's business during the period of the Executive's employment hereunder
or as required by applicable law), or use in competition with the Company or any
Clark Affiliate, any information of any nature whatsoever acquired by the
Executive during
-4-
<PAGE>
his employment by the Company or during the period that the Executive provides
services to such Clark Affiliate, with respect to any confidential, secret,
non-public or proprietary aspect of the Company's or such Clark Affiliate's
operations, business affairs, financial condition, customers, clients, trade
secrets, business strategies or plans or other confidential information, unless
such information has become known to the general public, other than by reason of
any action (direct or indirect) on the part of the Executive.
(c) The Executive shall not, directly or indirectly,
either during the term of the Executive's employment under this Agreement or for
a period of one (1) year thereafter, solicit the services of any person who was
a full-time employee of the Company or any Clark Affiliate (other than employees
employed for limited periods of time in connection with the production of
particular television or motion picture programming and the Executive's
executive assistant) during the last twelve (12) months of the period of the
Executive's employment with the Company.
(d) The Executive acknowledges that the remedy at law for
breach of any of his covenants or obligations under this Section 6 will be
inadequate and, accordingly, in the event of any breach or threatened breach by
the Executive of the provision of this Section 6, the Company shall be entitled,
in addition to all other rights and remedies to obtain an injunctive or other
equitable relief restraining any such breach or threatened breach (without
posting any bond or other security and without the necessity of demonstrating
actual damages). The equitable remedies described in this Section 6(d) shall not
be the exclusive remedy available to the Company and shall be cumulative with
all other rights and remedies available to the Company at law, in equity or
otherwise.
7. Termination.
(a) The Company shall have the right to terminate the
Executive's employment with the Company (i) "for cause" or (ii) "without cause".
For purposes of this Agreement, termination "for cause" shall mean termination
of the Executive's employment based
-5-
<PAGE>
upon (i) any material breach of the Executive's covenants or obligations under
Section 6 of this Agreement which is not cured within thirty (30) days after
written notice to the Executive by the Company; (ii) conviction of an act of
fraud or theft or gross malfeasance on the part of the Executive, including,
without limitation, conduct of a felonious or criminal nature, embezzlement or
misappropriation of assets; (iii) the chronic addiction of the Executive to
drugs or alcohol; (iv) violation by the Executive of his duties or obligations
to the Company or any Clark Affiliate, including, without limitation, conduct
which is inconsistent with the Executive's position and which results or is
reasonably likely to result (in the opinion of the President and Chief Operating
Officer of the Company) in an adverse effect (financial or otherwise) on the
business of the Company or any Clark Affiliate, as the case may be, and such
violation is not cured within fifteen (15) days after written notice to the
Executive by the Company; (v) the Executive's failure, refusal or neglect to
perform his duties hereunder within a reasonable period, under the
circumstances, after written notice from the Board of Directors or the President
and Chief Operating Officer of the Company (specifically identifying the manner
in which the Board of Directors or the President and Chief Operating Officer of
the Company believes that the Executive has failed, refused or neglected his
duties. A termination of the Executive's employment with the Company for any
reason other than those enumerated in the immediately preceding sentence or as
provided in Section 5 hereof shall be, for purposes of this Agreement, deemed to
be a termination of the Executive's employment with the Company "without cause".
If the employment of the Executive is terminated "for cause", the Company shall
not be obligated to make any further payment to the Executive (other than
accrued and unpaid base salary pursuant to Section 3(a) hereof and expenses
pursuant to Section 4(b) hereof incurred prior to the date of termination), or
continue to provide any benefit (other the benefits which have accrued under any
plan pursuant to Section 4(a) hereof or by applicable law) to the Executive
under this Agreement prior to the date of termination.
(b) If the employment of the Executive is terminated
"without cause", the Company shall pay to the Executive all of his base salary
pursuant to Section 3(a) hereof for the remainder of the term of this Agreement,
as if the employment of the Executive hereunder had not been terminated
regardless of the amount of compensation the Executive may earn or be able
-6-
<PAGE>
to earn with respect to any other employment (subject to Section 6(a) hereof) he
may obtain or be able to obtain (i.e. the Executive shall have no duty to
mitigate and the Company shall have no right to offset), but the Company shall
not be obligated to continue to provide any other benefit (other than the
benefits under any plan pursuant to Section 4(a) hereof through June 30, 1998,
unless such benefits are available to the Executive in connection with other
employment obtained by the Executive) to the Executive under this Agreement
which case the Company shall have no further obligation to provide such
benefits.
(c) If the Executive's employment is terminated prior to
the end of the Term, to the extent permitted by applicable law, the Company
shall be entitled to deduct any amounts owing to the Company by the Executive
from the amounts payable to the Executive.
8. Miscellaneous.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA APPLICABLE TO AGREEMENTS MADE
AND TO BE PERFORMED IN CALIFORNIA. THIS AGREEMENT SHALL BE INTERPRETED AND
CONSTRUED WITHOUT ANY PRESUMPTION AGAINST THE PARTY CAUSING THIS AGREEMENT TO BE
DRAFTED.
(b) This Agreement contains a complete statement of all
the agreements and understandings between the Company and the Executive with
respect to its subject matter, supersedes all previous and contemporaneous
agreements and understandings among them relating such subject matter (whether
written or oral) including, without limitation, the Prior Agreement, all of
which are mereged herein. This Agreement cannot be modified, amended or
terminated orally and may only be modified or amended by an instrument in
writing signed by each of the parties hereto. There are no representations,
warranties or promises between the parties with respect to the subject matter
hereof, except as expressly set forth herein.
-7-
<PAGE>
(c) Any notice or other communication under or relating to
this Agreement shall be in writing and shall be considered given when received
by the intended recipient and shall be delivered personally or mailed by
certified mail, return receipt requested or by an overnight courier service, to
the parties at their respective addresses set forth below (or at such other
address as a party may specify by notice to the other):
If to the Company, to it at:
3003 West Olive Avenue
Burbank, California 91505
Attn: President and Chief Operating Officer
with a copy to:
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036
Attn: Martin Eric Weisberg, Esq.
If to the Executive to him at:
3003 West Olive Avenue
Burbank, California 91505
(d) The failure of a party to insist upon strict adherence
to any term or provision of this Agreement on any one occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or provision or any other term or provision of
this Agreement on any other occasion. Any waiver must be in writing and signed
by each of the parties. All rights and remedies of the parties hereunder are
cumulative and may be exercised separately or concurrently. Any waiver of any
term or provision hereof shall be effective for the specific instance in which
given and it shall not be construed as a waiver of any other term or provision.
(e) The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the validity or enforceability of
the remaining terms or provisions of
-8-
<PAGE>
this Agreement which shall remain in full force and effect and any such invalid
or unenforceable term or provision shall be given full effect as far as possible
pursuant to applicable law. If any term or provision of this Agreement is
invalid or unenforceable in any one jurisdiction, it shall not affect the
validity or enforceability of that term or provision in any other jurisdiction.
It is the intention of the parties that this Agreement be enforced by any court
of competent jurisdiction to the fullest extent permitted by applicable law and
that the Agreement may be reformed and amended by a court of competent
jurisdiction in connection with its enforcement.
(f) This Agreement is not assignable by either party,
except that it shall inure to the benefit of and be binding upon any successor
to the Company by merger or consolidation or any assignee of the Company upon
the acquisition of all or substantially all of the Company's assets by such
assignee; provided such successor assumes all of the obligations of the Company
hereunder; and this Agreement shall inure to the benefit of the heirs, estate
and legal representatives of the Executive.
(g) The section headings are inserted herein for
convenience of reference only and shall not be taken into account in the
interpretation or construction of this Agreement.
dick clark productions, inc.
By: /s/
----------------------------------
Name:
Title:
/s/ Kenneth H. Ferguson
-------------------------------------
Kenneth H. Ferguson
-9-
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT dated as of July 1, 1997 (as it may be amended
in accordance with its terms, this "Agreement") between dick clark productions,
inc., a Delaware corporation (the "Company"), and Mr. Francis C. La Maina (the
"Executive").
The Executive is currently the President and Chief Operating Officer
of the Company and is employed pursuant to an Employment Agreement dated as of
March 1, 1995 (the "Existing Employment Agreement"). The term of the Existing
Employment Agreement expires on June 30, 2000. In light of the Executive's
experience with the Company and his exemplary services on behalf of the Company,
the Company desires to secure the services of, and continue the employment the
Executive for the period ending June 30, 2002, and to do so at this time; and
the Executive desires to continue in the employ of the Company through that
date. Therefore, the Company shall continue to employ the Executive and the
Executive shall continue his employment with the Company, upon the terms,
provisions and conditions set forth herein.
Accordingly, the Company and the Executive hereby agree as follows:
1. Employment.
(a) The Company shall employ the Executive, and the
Executive shall serve the Company during the term hereof, as President and Chief
Operating Officer of the Company, with such duties and responsibilities normally
associated with those positions. The Executive shall devote his best efforts and
a major portion of his business time to the performance of his duties under this
Agreement and shall perform them faithfully, diligently and competently. The
Executive shall report only to the Chairman and Chief Executive Officer of the
Company and the Board of Directors of the Company; and all other executives of
the Company (other than the Chairman and Chief Executive Officer and the Vice
President-Administration, so long as the position of Vice
President-Administration is held by Ms. Karen Clark) shall report to the
Executive. The Executive's services shall be performed in Burbank, California
(or such other location as the Executive and the Company may agree upon) subject
to travel reasonably and customarily required by the Company in connection with
the Executive's services hereunder.
<PAGE>
(b) Notwithstanding anything to the contrary contained in
this Agreement, the Executive may devote a significant portion of his business
time to other business activities, including, without limitation, serving as an
officer of companies a majority of whose equity is owned by Mr. Richard W. Clark
("Mr. Clark") and/or Mr. Clark and the Executive on or after the date of this
Agreement; provided such companies do not compete with the business conducted by
the Company and its subsidiaries ("Affiliated Companies"), providing financial
and consulting services to Mr. Clark in connection with any activities that Mr.
Clark is permitted to engage in accordance with his then current employment
agreement with the Company and serving as a director of any Affiliated Company;
provided, that engaging in such activities do not materially interfere with the
Executive's performance of his duties under this Agreement.
2. Term of Employment.
The term of Executive's employment by the Company under
this Agreement shall commence on and as of July 1, 1997 and, subject to earlier
termination pursuant to Section 5 or 7 hereof, shall terminate on June 30, 2002
(the "Term"). Notwithstanding the foregoing, unless the Company gives written
notice to the Executive prior to April 1 in any year during the Term of this
Agreement that it does not intend to have the Term of this Agreement extended,
the Term of this Agreement shall automatically extend for an additional year
from its then current expiratory date. For purposes of this Agreement, the term
"Term" shall include any extension of the then applicable Term as provided in
this Section 2. An example of the operation of this Section 2 is as follows: if
by April 1, 1998 the Company does not furnish a notice to the Executive that the
Company does not desire the Term to be extended, then the Term shall
automatically be extended until June 30, 2003.
3. Compensation.
(a) As full compensation for all services rendered by the
Executive to the Company under this Agreement, the Company shall pay to the
Executive (i) a base salary at the initial annual rate of $539,379, payable in
equal installments (once every two weeks) in accordance with the Company's
customary payroll practice for its executives, and (ii) a bonus determined in
accordance with Section 3(b) hereof. On each July 1, during the term of the
Executive's employment hereunder, commencing with July 1, 1998, the base salary
payable to the
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Executive pursuant to Section 3(a)(i) shall be increased by an amount, if any,
equal to the percentage increase in the consumer price index (the "CPI") for Los
Angeles, California for the twelve (12) month period ended on the June 30, as
next preceding such July 1, as published by the Federal Bureau of Labor
Statistics (the "Bureau") or any successor entity to the Bureau multiplied by
the then current base salary pursuant to Section 3(a)(i); provided that if the
Bureau no longer publishes the CPI, then a comparable index reasonably
acceptable to the Company and the Executive shall be substituted therefore.
(b) With respect to each fiscal year of the Company during
the term of the Executive's employment under this Agreement, commencing with the
fiscal year ending on June 30, 1998, the Company shall pay to the Executive a
bonus equal to the following amounts with respect to the Pre-tax Profits of the
Company, if any, during that fiscal year:
If Pretax Profits are:
Over But Not Over Payment
- ---- ------------ -------
0 - $ 7,000,000 0
$ 7,000,000 - $10,000,000 $260,000 + 3% of Pre-tax
Profits over $7,000,000
$10,000,000 - $15,000,000 $350,000 + 2% of Pre-tax
Profits over $10,000,000
$15,000,000 - $450,000 + 1% of Pre-Tax
Profits over $15,000,000
The bonus, if any, payable to the Executive pursuant to this Section 3(b) hereof
with respect to any fiscal year shall be paid not later than fifteen (15) days
after the receipt by the Company from its independent public accountants of the
audited financial statements of the Company with respect to the applicable
fiscal year. Nothing herein shall alter, modify, or amend the obligation of the
Company pursuant to Section 3(b) of the Existing Employment Agreement to make a
payment to the Executive pursuant to said Section 3(b) for the fiscal year ended
June 30, 1997, which obligation shall remain in full force and effect,
notwithstanding the execution and delivery of this Agreement.
(c) As used in this Agreement the term "Pre-tax Profits"
of the-Company during a fiscal year shall mean the income before taxes of the
Company as shown on the audited
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<PAGE>
consolidated statement of profit and loss of the Company and its subsidiaries,
but without giving effect to accruals for the bonus payable to the Executive for
that fiscal year pursuant to Section 3(b) hereof and any similar bonus payable
to Mr. Clark for that fiscal year pursuant to Mr. Clark's then current
employment agreement with the Company.
(d) If the Executive's employment is terminated prior to
the end of a fiscal year due to his death or by the Company as a result of his
disability, the bonus payable pursuant to Section 3(b) hereof in respect of that
fiscal year shall be calculated (i) if such termination shall occur during the
first quarter of the Company's fiscal year, by multiplying the amount determined
pursuant to Section 3(b) for that entire fiscal year by a fraction, the
numerator of which is the number of days in that fiscal year prior to the date
of termination and the denominator of which is the number of days in that fiscal
year; and (ii) if such termination shall occur subsequent to the first quarter
of the Company's fiscal year, as if the Executive had been employed for that
entire fiscal year. If the Executive's employment is terminated prior to the end
of a fiscal year for "Cause" (as hereinafter defined), no bonus shall be payable
to the Executive pursuant to Section 3(b) in respect of that fiscal year.
(e) For purposes of Sections 3(b) and 3(c) hereof, if the
Company's fiscal year shall change (the fiscal year presently being July 1
through June 30), resulting in a fiscal year which shall be less than twelve
(12) months, the bonus payable pursuant to Section 3(b) in respect of that short
fiscal year shall be calculated (i) by multiplying the amount of the Pre-tax
Profits determined pursuant to Section 3(c) for that entire short fiscal year by
a fraction of which the numerator is twelve (12) and the denominator is the
number of months in that short fiscal year; (ii) by determining the bonus in
accordance with Section 3(b) based on the amount resulting from the calculations
in clause (i) above; and (iii) by multiplying such bonus amount resulting from
the calculation in clause (ii) above by a fraction of which the numerator is the
number of months in that shortened fiscal year and the denominator is twelve
(12).
4. Fringe Benefits; Expenses.
(a) The Executive shall be entitled to receive all health
(other than disability) and pension benefits provided by the Company to any of
its executives and to all other fringe benefits provided by the Company to its
executives as a group and shall also be entitled to
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<PAGE>
participate in all benefit plans provided by the Company to its executives as a
group. The Executive shall also be entitled to a term life insurance policy,
naming such beneficiaries as the Executive shall specify from time to time, in
an amount equal to $3,000,000.
(b) The Company shall reimburse the Executive for all
reasonable expenses (including, without limitation, entertainment expenses)
incurred by the Executive in connection with the performance of his services for
the Company (it being agreed that first-class travel and accommodations are
reasonable expenses), upon submission of receipts and/or vouchers in accordance
with the Company's customary policy.
(c) The Executive shall be entitled to six (6) weeks
vacation time annually, to be taken at times selected by him, with the
reasonable concurrence of the Chief Executive Officer of the Company, which are
consistent with the proper performance of the Executive's duties under this
Agreement. The Executive may accrue up to two (2) weeks unused vacation time
annually.
5. Disability or Death.
(a) If, as the result of any physical or mental
disability, the Executive shall have failed or been unable to perform his duties
to the Company hereunder for a period of one hundred eighty (180) consecutive
days, the Company may, by notice to the Executive subsequent thereto, terminate
the Executive's employment under this Agreement prior to the end of the Term,
effective as of the date of the notice. If the Executive's employment is
terminated pursuant to this Section 5(a), the Company shall pay to the Executive
(in equal installments every two (2) weeks) (i) for the period from the date of
termination through the June 30 next succeeding such date of termination, an
amount equal to his base salary for such period at the date of termination; (ii)
for the next succeeding twelve (12) month period, an amount equal to 80% of his
base salary at the date of termination; (iii) for the next succeeding twelve
(12) month period, an amount equal to 60% of his base salary at the date of
termination; and (iv) for the twenty-four (24) month period commencing on the
date of the last payment required to be made pursuant to clauses (i), (ii) and
(iii) above, an amount equal to 50% of his base salary at the date of
termination.
(b) The period of the Executive's employment under this
Agreement shall automatically terminate prior to the end of the Term upon his
death. In the event of such termination upon death, the Company shall pay to the
beneficiary or beneficiaries of the Executive
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<PAGE>
as designated in writing by the Executive to the Company (or if the Executive
fails to so designate a beneficiary, to his estate), an amount at an annual rate
equal to his base salary in effect on the date of his death for a period of two
(2) years from the date of his death, payable in equal installments on the first
day of the month next succeeding the date of death and the first day of every
third month thereafter.
6. Non-Competition; Confidential Information.
(a) (i) During the period of the Executive's employment
under this Agreement or (ii) through the end of the then current Term of this
Agreement, if the Executive voluntarily terminates his employment (other than
because of a Change of Control (as such term is defined in Section 8 hereof) or
a termination by the Executive in accordance with Section 7(c) hereof) or if the
Executive's employment is terminated by the Company for Cause (as such term is
hereinafter defined) as provided for hereunder, the Executive shall not,
directly or indirectly, engage or be interested (as a stockholder, director,
officer, agent, broker, partner, individual proprietor, lender or otherwise) in
any other business which is competitive with the business of the Company and its
subsidiaries, except that the Executive may (i) engage in the activities
otherwise permitted pursuant to Section l(b) hereof, whether or not competitive
with the Company or any of its subsidiaries and (ii) hold not more than 5% of
the outstanding securities of any class of any publicly held company; provided
that this Section 6 shall not prohibit the Executive from holding more than 5%
of the outstanding securities of any class of capital stock of the Company.
(b) The Executive shall not, directly or indirectly,
either during the period of the Executive's employment under this Agreement or
thereafter, disclose to anyone (except in the regular course of the Company's
business or as required by applicable law or subpoena), or use in competition
with the Company, any information acquired by the Executive during his
employment by the Company with respect to any confidential or secret aspect of
the Company's operations, business, affairs, plans, prospects, strategies or
condition (financial or otherwise) unless such information has become public
knowledge other than by reason of actions (direct or indirect) of the Executive.
(c) The Executive shall not, directly or indirectly,
either during the period of the Executive's employment under this Agreement or
for a period of one (1) year thereafter,
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<PAGE>
solicit the services of any person who was a full-time employee of the Company
(other than employees employed for limited periods of time in connection with
the production of particular television or motion picture programming) during
the last year of the term of the Executive's employment under this Agreement.
(d) The Executive acknowledges that the remedy at law
(including, without limitation, a remedy calculated as monetary damages) for
breach of his covenants under this Section 6 will be inadequate and,
accordingly, in the event of any breach or threatened breach by the Executive of
the provisions of this Section 6, the Company shall be entitled, in addition to
all other remedies, whether at law, in equity or otherwise, to an injunction
and/or other appropriate equitable relief restraining any such breach (without
posting any bond or other security or being required to prove actual damages).
7. Termination.
(a) The Company shall have the right to terminate and the
Executive's employment with the Company under this Agreement (i) for Cause or
(ii) Without Cause. For purposes of this Agreement, the term "Cause, shall mean
any material breach of the Executive's obligations under Section 6 of this
Agreement which is not cured within thirty (30) days after written notice of any
such breach is furnished to the Executive, the conviction of the Executive of a
felony, gross misconduct related to the Executive's position or duties with the
Company which is likely to materially adversely affect the Company's financial
condition, the chronic addiction of the Executive to drugs or alcohol which
materially adversely affects the Executive's performance of his duties under
this Agreement, or the Executive's willful failure to perform his material
duties within a reasonable period under the circumstances after written notice
(specifically identifying the manner in which the Board of Directors believes
that the Executive has failed) from the Board of Directors of the Company;
(provided that such duties are consistent, in the reasonable opinion of the
Executive after obtaining an opinion of counsel, with this Agreement and
applicable law.
(b) If the employment of the Executive is terminated for
Cause, the Company shall not be obligated to make any further payment to the
Executive (other than accrued and unpaid salary and expenses to the date of
termination), or continue to provide any benefit (other than benefits which have
accrued pursuant to any plan or by applicable law) to the Executive
- 7 -
<PAGE>
under this Agreement. If the employment of the Executive is terminated Without
Cause, then (except as otherwise provided in the Section 11 hereof) the Company
shall pay to the Executive, in equal monthly installments, all of his
compensation (base salary and bonuses) pursuant to Section 3 hereof as if this
Agreement had not been terminated for the greater of (x) the remainder of the
then current Term and (y) three (3) years after termination, all regardless of
the amount of compensation the Executive may earn or be able to earn with
respect to any other employment that the Executive may obtain or be able to
obtain (i.e. the Executive shall have no duty to mitigate and the Company shall
have no right to offset). For purposes hereof, the term "Without Cause" shall
mean a termination of the Executive's employment hereunder for a reason other
than pursuant to Section 7(a) hereof.
(c) The Executive shall have the right to terminate his
employment with the Company under this Agreement prior to the end of the Term,
upon thirty (30) days' prior notice to the Company given within sixty (60) days
following the occurrence of any of the following events:
(i) the Executive is not retained as President
and Chief Operating Officer of the Company even if the
Executive is allowed to continue in the employ of the
Company, or
(ii) the Company materially reduces the
Executive's duties and responsibilities hereunder and the
Executive objects within thirty (30) days of any such
reduction and the Company does not restore such duties and
responsibilities within forty-five (45) days thereafter.
Without limiting the provisions of Section 8 hereof, the
Executive's duties and responsibilities shall not be
deemed materially reduced for purposes hereof solely by
virtue of the fact that the Company is (or substantially
all of its assets are) sold to, or is combined with,
another entity; provided that the Executive shall continue
to have the same duties and responsibilities with respect
to the Company's business following such sale or
combination.
If this Agreement is terminated by the Executive as set forth in this Section
7(c), such termination shall be deemed to be a termination by the Company
Without Cause, with the same effect as
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<PAGE>
otherwise provided in this Agreement.
8. Change of Control. Notwithstanding anything in this
Agreement to the contrary (but without limiting Section 11 hereof), if the
Executive shall voluntarily terminate his employment with the Company within one
hundred twenty (120) days after a Change of Control (as such term is hereinafter
defined), the Company shall pay to the Executive an amount at an annual rate
(payable in equal monthly installments) equal to his base salary in effect on
the date of termination of employment for a period from the date of such
termination and ending three (3) years thereafter, regardless of the amount of
compensation the Executive may earn or be able to earn with respect to any other
employment that the Executive may obtain (i.e., the Executive shall have not
duty to mitigate and the Company shall have no duty to mitigate. For purposes of
this Agreement the term "Change of Control" shall mean Mr. Clark and/or the
Executive not controlling, either through direct or beneficial ownership or by
contract or otherwise, in the aggregate, shares of capital stock of the Company
sufficient to elect a majority of the Board of Directors of the Company, unless
the reason that neither Mr. Clark and/or the Executive is unable to control such
number of shares is due to the sale of stock by the Company to the public during
such periods of time when Mr. Clark and/or the Executive are serving in their
present positions with the Company.
9. "Piggyback" Registration. Unless the Executive's
employment with the Company is terminated for Cause prior to June 30, 2000, if
at any time the Company proposes to file a registration statement under the
Securities Act of 1933, as amended (the "Act") on Form S-1, Form S-2 or Form S-3
(or any successors to those Forms) covering an offering of the Company's Common
Stock by the Company in which any of its shareholders participates, it shall
include in the registration statement such number of the Executive's shares of
the Company's Common Stock as the Executive may designate in his request. If any
registration of which the Executive is given notice pursuant to the preceding
sentence shall be, in whole or in part, in connection with an underwritten
offering of the Company's Common Stock, any request by the Executive pursuant to
this Section 9 to register the distribution of the Executive's shares of the
Company's Common Stock may, but need not, specify that those shares are to be
included in the underwriting on the same terms and conditions as the shares of
the Company's Common Stock, if any, otherwise being
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<PAGE>
sold through underwriters. However, if the managing underwriter or underwriters
determine and advise the Company in writing that the inclusion in the
registration of all or a portion of the Executive's shares of the Company's
Common Stock would interfere with the successful marketing of the other shares
of the Company's Common Stock being sold, the Company shall not be obligated to
include the Executive's shares which would interfere with the successful
marketing of the other shares being sold; provided, that the Executive's shares
are excluded pro rata with the shares of the other shareholders whose shares are
to be included in the registration. If there is an underwritten offering of the
shares of the Company's Common Stock and the Executive has the opportunity but
does not sell his shares of Common Stock to the underwriter or underwriters, the
Executive shall not sell those shares (i) during the period of distribution of
the shares of the Company's Common Stock by the underwriter or underwriters and
(ii) during any further period that participants in the offering agree not to
sell their shares of the Company's Common Stock at the request of the
underwriter or underwriters. Notwithstanding the foregoing, the Company shall
not be obligated to include the Executive's shares of Common Stock in a
registration statement if, the sale of the Executive's shares of Common Stock
would be exempt from the registration requirements of the Act and, if requested,
the Company has delivered to the Executive an opinion of counsel to the Company
that such Common Stock is so exempting connection with any registration of all
or a portion of the Executive's shares of the Company's Common Stock as
contemplated by this Section 9, the Executive shall pay such of the expenses of
such registration as the other shareholders included in such registration, in
the proportion that the Executive's shares subject to the registration bear to
the total number of shares of all shareholders whose shares are subject to the
registration.
The Company shall indemnify the Executive and his heirs, estate and
personal representatives and hold each of them harmless against any damage,
loss, cost or expense (including, without limitation, reasonable attorneys' fees
and expenses) arising out of any untrue statement or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact
required to be stated in any registration statement or prospectus relating to
the distribution of the Executive's shares of the Company's Common Stock, except
to the extent the damage, loss, cost or expense arises out of a statement or
omission that was based upon
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<PAGE>
information furnished in writing to the Company by the Executive for use in the
registration statement or prospectus. The Executive shall indemnify the Company,
its directors, officers, employees, agents and affiliates and their respective
successors and assigns and hold each of them harmless against any damage, loss,
cost or expense (including, without limitation, reasonable attorneys' fees and
expenses) arising out of any untrue statement or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact required
to be stated in any registration statement or prospectus relating to the
distribution of his shares of the Company's Common Stock to the extent the
damage, loss, cost or expense arises out of a statement or omission that was
based upon information furnished in writing to the Company by the Executive for
use in the registration statement or prospectus. Promptly after receipt by an
indemnified party of notice of the commencement of any action, suit or other
proceeding for which such indemnified party is entitled to indemnification
hereunder, the indemnified party shall notify the indemnifying party of the
commencement of any such action, suit or other proceeding. Failure to give such
a notice shall not affect any liability the indemnifying party may have to the
indemnified party otherwise than under this paragraph, except to the extent that
the failure to notify shall have a material adverse affect on the indemnifying
party's ability to defend the action, suit or other proceeding. The indemnifying
party may participate in the action or may assume the defense of the action,
with counsel reasonably satisfactory to the indemnified party. After giving
notice of such an assumption of the defense, the indemnifying party shall not be
responsible for any legal or other expenses subsequently incurred by the
indemnified party in connection with the defense other than the reasonable costs
of investigation. Unless the indemnifying party shall fail to assume the defense
of an action for which the indemnifying party is obligated to provide
indemnification hereunder, the indemnified party shall not settle any claim or
action without the consent of the indemnifying party.
10. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the law of California applicable to agreements made and to be
performed in California, and without regard to its principles of conflicts of
law.
(b) This Agreement sets forth the entire understanding and
agreement between
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<PAGE>
the Company and the Executive with respect to its subject matter, supersedes all
previous agreements between them relating to such subject matter (whether
written or oral), all of which are merged herein (including, without limitation,
the Existing Agreement). Notwithstanding the immediately preceding sentence, it
is the intention of the Executive and the Company that nothing in this Agreement
affect the options granted to the Executive by the Existing Employment Agreement
under the Company's Stock Option Plan. There are no representations, warranties
or promises between the parties with respect to the subject matter hereof, other
than those set forth herein.
(c) Any notice or other communication under or relating to
this Agreement shall be in writing and shall be considered given when actually
received by the intended recipient and shall be delivered personally or mailed
by certified mail, return receipt requested (postage paid), or by telecopy if
sent before 4:00 p.m. (California time) on a business day, to the parties at
their respective addresses or facsimile numbers, as the case may be, set forth
below (or at such other address, or facsimile number, as a party may specify by
notice to the other):
If to the Company, to it at:
3003 West Olive Avenue
Burbank, California 91505-4590
Attn: Chairman
Fax No.: (818) 566-6690
With a copy to:
Martin Eric Weisberg, Esq.
Parker Chapin Flattau & Klimpl, LLP
1211 Avenue of the Americas
New York, New York 10036-8735
Fax No.: (212) 704-6288
If to the Executive, to him at:
3003 West Olive Avenue
Burbank, California 91505-4590
Fax No.: (818) 566-6690
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<PAGE>
with a copy to:
Eric B. Woldenberg, Esq.
Pryor Cashman Sherman & Flynn
410 Park Avenue
New York, New York 10022
Fax No.: (212) 326-0806
(d) The failure of a party to insist upon strict adherence
to any term or provision of this Agreement on any one occasion shall not be
considered a waiver or deprive that party of the right thereafter to insist upon
strict adherence to that term or provision on any other occasion or any other
term or provision of this Agreement. Any waiver shall be limited to the specific
instance for which it is given. This Agreement may not be waived, amended,
modified or altered, except by an instrument in writing duly executed by each of
the Company and the Executive.
(e) The invalidity or unenforceability of any term or
provision of this Agreement shall not affect the validity or enforceability of
the remaining terms or provisions of this Agreement which shall remain in full
force and effect and any such invalid or unenforceable term or provision shall
be given full effect as is far as possible under applicable law. If any term or
provision of this agreement is invalid or unenforceable in any one jurisdiction,
it shall not affect the validity or enforceability of that term or provision in
any other jurisdiction.
(f) This Agreement is not assignable by either party,
except that it shall inure to the benefit of and be binding upon any person or
entity which is a successor to the Company by merger or consolidation or which
acquires all or substantially all of the Company's assets; provided such
successor assumes all of the obligations of the Company; and the Agreement shall
inure to the benefit of the heirs, estate and legal representatives of the
Executive.
11. No Parachute Payments. Notwithstanding anything in this
Agreement to the contrary, if, at any time after the date hereof, the Company
obtains a written opinion of tax counsel to the Company ("Tax Counsel") to the
effect that there exists a substantial likelihood that any payment to which the
Executive would (but for the application of this Section 11) be entitled under
this Agreement would (but for such application) then be treated as an excess
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<PAGE>
parachute payment (as such term is defined in Section 280G of the internal
Revenue Code of 1986, as amended, and the Treasury Regulations promulgated
thereunder), then this Agreement shall be amended by adjusting the amounts,
timing and manner of determination of the payments to which the Executive is
entitled hereunder to the extent and in the manner necessary so that, in the
opinion of Tax Counsel, there does not exist a substantial likelihood that any
payment that the Executive is entitled to under this Agreement (as so amended)
will be treated as an excess parachute payment, and otherwise in an equitable
fashion.
12. Headings. Section headings are inserted herein for
convenience of reference only, shall have no substantive aspect and shall not be
taken into account in connection with the interpretation or construction of this
Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the day and year first above written.
dick clark productions, inc.
By: /s/ Richard W. Clark
---------------------------
Name: Richard W. Clark
Title:Chairman and Chief
Executive Officer
/s/ Francis C. La Maina
---------------------------
Francis C. La Maina
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Effective as of January 29, 1997
William Stuart Simon
1254 South Saltair Avenue, Apt. 202
Los Angeles, CA 90025
Dear Bill:
This letter agreement sets forth the new terms, provisions and conditions of
your employment with dick clark productions, inc., a Delaware corporation (the
"Company"). Those terms, provisions and conditions are as follows:
1. Term of Agreement. The term of this agreement shall commence on January 29,
1997 and shall expire on January 29, 2000 unless earlier terminated pursuant to
the provisions hereof.
2. Title. From January 29, 1997, your title and position shall be Treasurer of
the Company. From and after January 29, 1998, you shall also be Vice President
of Finance of the Company. In any case, your services shall be full time and
shall be exclusive to the Company.
3. Reporting Responsibility. You shall report directly to the Company's Chief
Financial Officer. You shall also have reporting responsibility to the Company's
President and such other individuals as may be designated from time to time by
the Company's President.
4. Salary. As full consideration for your services hereunder, you shall be
entitled to receive a salary at an annual rate as set forth below:
1/29/97 - 1/28/98: $80,000.00
1/29/98 - 1/28/99: $90,000.00
1/29/99 - 1/29/00: $100,000.00
which shall be paid to you, subject to applicable withholdings and deductions,
bi-weekly in accordance with the Company's policies.
5. Discretionary Bonus. The Company may consider paying you a bonus with respect
to an any complete fiscal year (July 1 - June 30) during which you provided
services to the Company of under this agreement. The awarding of any such bonus
shall be determined by the Company in its sole and absolute discretion, there
being no obligation on the part of the Company to pay any bonus or any
representation, warranty, agreement or guaranty that any such bonus will be
awarded. In evaluating whether or not to award any bonus and the amount of any
bonus awarded, the Company shall consider your performance as an employee, the
results and financial performance of the Company for such fiscal year, and such
other criteria and factors as the Company, in its sole and absolute discretion,
considers appropriate. You further acknowledge and agree that in entering into
this agreement, you are not relying on the fact that you will receive a bonus
from the Company.
<PAGE>
6. Benefits. During the term of this agreement, you shall remain entitled to
participate in such health, medical, 401 K and other benefit plans as are
available to all the employees of the Company as a group. Your participation in
such plans shall be subject to the terms and provisions of such plans including,
without limitation, any waiting periods, eligibility standards and contribution
requirements as may be in effect from time to time.
7. Vacation. You shall remain entitled to three (3) weeks of vacation annually,
which shall accrue in accordance with applicable law. You shall coordinate the
timing of your vacation periods with those officers of the Company to whom you
report. The Company expects you to fully utilize your vacation time and the
Company shall not compensate you for any accrued vacation time in excess of the
Company's limits.
8. Travel. All airline travel for business purposes by you on behalf of the
Company shall be business class on all transcontinental flights within the
United States and all international flights. All other airline travel shall be
coach class. All other reasonable out-of-pocket expenses associated with any
required and necessary business travel, such as lodging, meals and ground
transportation, shall be reimbursed in accordance with the Company's policies
and practices with respect thereto, as from time to time in effect.
9. Options. For each year of this agreement, the Company shall grant to you an
option (collectively, the "Options") to purchase up to 2,000 shares of the
Company's common stock, $0.01 par value per share (the "Common Stock"), such
grant to be effective upon your acceptance, execution and delivery of this
agreement. The Options shall have a per share exercise price equal to the market
value of a share of Common Stock on January 30, 1997 (which is $11.00 per share)
and shall vest and be exercisable as to up to 2,000 shares of Common Stock on
the first, second and third anniversaries, respectively, of the effective date
of this agreement. Any portion of any of the Options which is unexercised as of
the earlier of (a) the fifth anniversary of the effective date of this agreement
or (b) 30 days following any termination of your employment with the Company,
shall automatically terminate, whether or not vested. In addition to the
foregoing, the Options shall be subject to the terms and provisions of the
Company's 1987 Employee Stock Option Plan and the certificates which evidence
the Options.
10. Signing Bonus. Within five (5) days after your execution and delivery of
this agreement, the Company shall pay you a one-time signing bonus of $5,000.00.
11. Termination. Your employment and this agreement may be terminated by the
Company immediately (a) should there be a material breach by you of any of your
obligations or duties to the Company; (b) should you engage in an act of moral
turpitude or commit a criminal or other act of a felonious nature; or (c) should
you fail to perform your duties in a reasonable and competent manner as
determined by the Chief Financial Officer or the President of the Company.
12. Confidentiality and Non-solicitation. You shall keep all aspects of the
business of the Company of which you become aware strictly confidential,
including, without limitation, financial information, concepts, revenues,
pricing, business strategies, methods of conducting business and contractual
arrangements with third parties and agree not to use or disclose any
-2-
<PAGE>
such information to any third party without the Company's prior written consent,
which consent may be withheld by the Company in its sole and absolute
discretion. Notwithstanding the foregoing, you may disclose any information
pursuant to applicable subpoena or law; provided that prior to making such
disclosure, you shall give the Company prior written notice of the intended
disclosure to the extent possible, so that the Company, if it determines to do
so, may seek a protective order with respect to such disclosure. You shall not
for the twelve (12) month period following termination of your employment with
the Company for any reason whatsoever, hire or solicit for employment any
employee of the Company who was an employee of the Company during the last six
(6) months of your employment with the Company. The Company shall be entitled to
seek injunctive and other equitable relief with respect to any breach or
threatened breach of your obligations pursuant to this paragraph. The provisions
of this paragraph shall survive the expiration or earlier termination of this
agreement.
13. Work for Hire.
(a) All of your services to the Company in connection with this agreement are
being specially ordered or commissioned by Company and Company shall be the
owner and proprietor of all material created by you hereunder and all of the
results and proceeds of your services in connection with herewith. Any material
created by you, and the results and proceeds of your services, shall constitute
a "work made for hire" within the meaning of the Copyright Act and shall be
referred to hereafter as "Materials". Company shall own in perpetuity all rights
of whatever kind and character, throughout the world and in any and all
languages, in and to the Materials, including without limitation all material,
themes, ideas, operations, products, titles, compositions, designs, patterns,
props, costumes, concepts, characters, creations, sets, works, writings,
business, dialogue, and all other matter written, suggested, composed, created,
prepared, submitted, or interpolated by you for or in connection with your
services hereunder. In the event it is determined by law that any or all of the
Materials were not created as a work-for-hire, you shall be deemed to have
assigned to Company all rights, title and interest in and to the subject
Materials for no further consideration except as expressly set forth herein.
(b) Company shall have the right, but not the obligation, to use, adapt, change,
revise, delete from, add to or rearrange the Materials, or any part of the
Materials, and to combine the Materials with other works or materials of you or
of others, and to vend, copy, publish, reproduce, record, transmit, broadcast by
radio and/or television, perform, photograph with or without sound, including
spoken words, dialogue and music synchronously recorded, and to communicate the
same by any means now known or hereafter devised, either publicly and for
profit, or otherwise. You waive throughout the world the benefit of any law,
doctrine or principle known as the "moral rights of authors" or any similar law,
doctrine or principle however named.
(c) You shall, at Company's request, sign, acknowledge and deliver to Company
all documents and instruments (collectively, "Document") which Company may from
time to time reasonably deem necessary or desirable to evidence, establish,
maintain, protect, enforce or defend its rights under this Agreement. If you
fail to do so within seven (7) business days after written request by the
Company, then Company is hereby irrevocably appointed as your
-3-
<PAGE>
attorney-in-fact with the full right, power and authority to sign, acknowledge
and deliver such Document in your name and on your behalf.
14. Governing Law. This letter agreement shall be governed by and construed in
accordance with the law of the State of California, without reference to its
conflicts of law principles. To the extent permitted by applicable law, this
letter agreement shall not be construed or interpreted with any presumption
against the party causing this letter agreement to be drafted.
15. Miscellaneous. This agreement may not be amended, modified or waived except
by an instrument in writing signed by the Company and you. This agreement sets
forth the entire understanding and agreement between you and the Company
regarding the subject matter hereof and there are no representations,
warranties, understandings, agreements or promises regarding such subject
matter, except as is expressly set forth herein.
Please evidence your concurrence with, and agreement to, the terms and
provisions of this letter agreement by signing and returning the enclosed copy
of this letter agreement.
Very truly yours,
/s/ Francis C. LaMaina
- ------------------------------------
Francis C. LaMaina
President
Agreed and accepted as of January 29, 1997
/s/ William S. Simon
- ------------------------------------
William S. Simon
-4-
Exhibit 21.1
dick clark productions, inc.
Subsidiaries & Affiliates
dick clark film group, inc.
dick clark presentations, inc.
dick clark media archives, inc.
dick clark restaurants, inc.
C & C Joint Venture
dick clark corporate
productions, inc.
Metcalf Restaurants, Inc.
Reno Entertainment, Inc.
Dick Clark's American Bandstand Club
Buckeye Entertainment, Inc.
Hoosier Entertainment, Inc.
Kenwood Entertainment
King of Prussia
Entertainment dick clark
entertainment, inc.
dick clark company - Nashville, inc.
St. Ann Entertainment
Austin ABG, Ltd.
Austin ABG Partners, Inc.
ABG Operating (Austin), Inc.
Austin Concessions, Inc.
Maybe Productions, Inc.
Family Secret Productions, Inc.
Bandstand Holdings, Inc.
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000805370
<NAME> dick clark productions, inc.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 3,322
<SECURITIES> 28,432
<RECEIVABLES> 4,221
<ALLOWANCES> 0
<INVENTORY> 4,615
<CURRENT-ASSETS> 35,975
<PP&E> 21,549
<DEPRECIATION> 4,838
<TOTAL-ASSETS> 63,298
<CURRENT-LIABILITIES> 8,368
<BONDS> 0
0
0
<COMMON> 8,288
<OTHER-SE> 42,031
<TOTAL-LIABILITY-AND-EQUITY> 63,298
<SALES> 66,129
<TOTAL-REVENUES> 66,129
<CGS> 51,912
<TOTAL-COSTS> 51,912
<OTHER-EXPENSES> 5,647
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,937)
<INCOME-PRETAX> 10,507
<INCOME-TAX> 3,993
<INCOME-CONTINUING> 6,514
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,514
<EPS-PRIMARY> 0.78
<EPS-DILUTED> 0.78
</TABLE>
