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
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-17342
LIVE ENTERTAINMENT INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-4178252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15400 Sherman Way, Van Nuys, California 91406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 988-5060
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
------------------- ----------------
Common Stock, $.01 par value New York Stock Exchange
Series B Cumulative Convertible NASDAQ Small Cap Market
Preferred Stock, $1.00 par value
Securities registered pursuant to Section 12(g) of the Act:
Contingent Payment Rights
(Title of Class)
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days. Yes X No
--- ---
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. [ ]
<PAGE>
The aggregate market value of the voting common stock held by non-
affiliates of the Registrant as of March 31, 1994 was approximately
$13,680,000.
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the
Securities Exchange Act of 1934 subsequent to the distribution of
securities under a plan confirmed by a court. Yes X No
--- ---
As of March 31, 1994, there were 12,093,610 shares of the
Registrant's Common Stock, 6,000,000 shares of the Registrant's Series B
Cumulative Convertible Preferred Stock and 15,000 shares of the
Registrant's Series C Convertible Preferred Stock outstanding.
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction
LIVE Entertainment Inc., a Delaware corporation (the "Company" or
"LIVE") was formed in 1988 and its largest ongoing businesses are LIVE
Home Video Inc. ("LHV") and LEI-IVE Entertainment N.V. ("LIVE NV"), which
acquire rights to theatrical motion pictures, children's films and special
interest programs which they market and distribute primarily on
videocassettes to wholesalers, retailers and consumers in the United
States and Canada (LHV) and internationally (LIVE NV). The Company owns
an 81% interest in VCL/Carolco Communications GmbH ("VCL"), a home video
distribution and marketing company headquartered in Munich, Germany. The
Company also owns the "Specialty Retail Division," consisting of its
wholly owned subsidiary, Strawberries Inc. ("Strawberries"), and
Strawberries' wholly owned subsidiary, Waxie Maxie Quality Music Co.
("Waxie Maxie"). The Specialty Retail Division engages in the retail sale
of audio records and tapes, compact discs and video products and consists
of 142 stores in the Northeastern United States and the
Baltimore/Washington D.C. metropolitan area. As discussed below under
"Recent Developments for the Company - Decision to Dispose of Specialty
Retailing Division and VCL," the Company intends to dispose of its
interests in both VCL and the Specialty Retail Division. The Company's
continuing operations are primarily in a single business segment, the
distribution and retail sale of a broad variety of entertainment software
products.
The Company's executive offices are located at 15400 Sherman Way,
Suite 500, Van Nuys, California 91406 and its telephone number is (818)
988-5060.
Recent Developments for the Company
Agreement in Principle on Business Combination with Carolco Pictures Inc.
("Carolco")
In March 1994, the Company and Carolco reached agreement in principle
on a business combination (the "Combination"). The Combination will be
structured as a tax free exchange whereby each Carolco stockholder will
receive one share of newly issued LIVE Common Stock for each 5.5 shares of
Carolco Common Stock held by them. The exchange ratio will be subject to
adjustment based on the market price of Carolco Common Stock prior to the
consummation of the Combination, subject to two limitations. The first
limitation is that the number of Carolco shares to be exchanged for each
share of LIVE will be adjusted upward, if necessary, so that the market
value of Carolco shares to be exchanged is at least $3.00, but in no event
will more than 6.5 shares of Carolco be exchanged for each share of LIVE.
The second limitation is similar to the first in that the number of
Carolco shares to be exchanged for each share of LIVE will be adjusted
downward, if necessary, so that the market value of Carolco shares to be
exchanged is no more than $4.00, but in no event will fewer than 4.5
shares of Carolco be exchanged for each share of LIVE. The market value
of Carolco shares will be deemed to be the average trading price of
Carolco Common Stock for the twenty (20) trading days ending no earlier
than three days prior to the closing of the Combination.
As a result of the Combination, the current LIVE stockholders will
own between 22% and 29% of the combined company, the name of which will be
changed to Carolco Entertainment Inc.
The Combination is subject to a number of conditions, including (a)
redemption of LIVE's Series B Cumulative Convertible Preferred Stock (the
"Series B Preferred Stock"), (b) amendments to the Indenture (the "12%
Note Indenture") governing the $37,000,000 in principal amount of LIVE's
12% Subordinated Secured Notes Due September 1994 (the "12% Notes"), the
Indenture (the "Public Indenture") governing the $40,000,000 in principal
amount of LIVE's Increasing Rate Senior Subordinated Notes due 1999 (the
"Public Notes"), and the terms of LIVE's Series C Convertible Preferred
Stock (the "Series C Preferred Stock"), (c) delivery of fairness opinions
by the independent financial advisors to each company, and (d) the
availability of financing commitments at each company prior to the closing
of the Combination. The Combination is also subject to the execution of a
definitive business combination agreement by no later than April 22, 1994
and the subsequent approval of the Combination by a majority of the non-
affiliated common stockholders of each of Carolco and LIVE.
Decision to Dispose of Specialty Retailing Division and VCL
In March 1994, both as a result of a desire of the Company to focus
its efforts on its core entertainment business and as a result of the
agreement in principle on the Combination, the Board of Directors of the
Company decided to dispose of the Company's interests in the Specialty
Retail Division and VCL. Accordingly, the Company's interests in the
Specialty Retail Division and VCL have been recorded as "Assets Held For
Sale" and "Liabilities Related To Assets Held For Sale" as of December 31,
1993 and have been written down to their estimated net realizable or
liquidation values. The operating statements presented have been restated
to separately disclose the results of operations of VCL as a disposal of a
portion of a line of business and to account for the Specialty Retail
Division as a discontinued operation.
As of March 31, 1994, no purchase offers had yet been received for
either the Specialty Retail Division or VCL, although management was
engaged in discussions regarding the sale of both entities. In
particular, the President of the Specialty Retail Division is in the
process of seeking financing to make an offer for a management led buy out
of the Division. The Board of Directors of the Company has stated that it
intends to give serious consideration to any such offer.
The Series B Preferred Stock is mandatorily redeemable from the net
proceeds of any sale of the Specialty Retail Division. As a result of the
Company's decision to dispose of its interest in the Specialty Retail
Division, a total of $40,000,000 of the Series B Preferred Stock has been
re-classified from equity to current liabilities as of December 31, 1993
reflecting the Company's expectation to sell the Division for no less than
$40,000,000.
Restructuring of Senior Subordinated Notes and Series A Preferred Stock
On March 17, 1993, the United States Bankruptcy Court for the Central
District of California (the "Bankruptcy Court") confirmed a prepackaged
plan of reorganization (the "Prepackaged Plan") for LIVE, providing for
the issuance of $40,000,000 in principal amount of Public Notes, 6,000,000
shares of Series B Preferred Stock, with a liquidation preference of
$60,0000,000, par value $1.00 per share, initially bearing an annual
dividend of 5% if paid in cash or 8% if paid in kind and $8,000,000 in
cash, replacing an aggregate of $110,000,000 principal amount of the
Company's then-outstanding 14.5% Senior Subordinated Notes due May 15,
1999 (the "Outstanding Notes"), plus accrued and unpaid interest of
$12,672,000 through August 31, 1992, and 1,050,000 shares of outstanding
Series A Cumulative Convertible Preferred Stock, with a liquidation
preference of $21,000,000, bearing a 10% cash dividend of which $872,000
was accrued and unpaid as of August 31, 1992 (the "Series A Preferred
Stock") (the Outstanding Notes and the Series A Preferred Stock are
referred to herein collectively as the "Outstanding Securities"). This
completed the financial restructuring of LIVE begun in 1992 (the
"Restructuring") that contemplated these transactions. Reorganized LIVE
emerged from bankruptcy on March 23, 1993.
Upon tender of their Outstanding Securities to American Stock
Transfer & Trust Company, the holders of the Outstanding Securities
received the following:
(a) $72.727 in cash plus $335.20 principal amount of Public Notes
plus 50.28 shares of Series B Preferred Stock for each $1,000 principal
amount of Outstanding Notes; and
(b) $2.98 principal amount of Public Notes plus 0.447 shares of
Series B Preferred Stock for each share of Series A Preferred Stock.
The Prepackaged Plan was filed with the Bankruptcy Court on February
2, 1993 following LIVE's receipt of acceptances of the Prepackaged Plan by
the holders of the Outstanding Securities pursuant to a Prospectus,
Consent Solicitation, Proxy Statement and Solicitation of Prepackaged Plan
Acceptances dated December 18, 1992, and supplemented on January 13, 1993
and January 18, 1993, filed with the Securities and Exchange Commission.
Credit Issues
On January 28, 1994, the Company's and LHV's pre-existing bank credit
facility (the "Bank Credit Facility") with a group of banks headed by
Chemical Bank and Credit Lyonnais Bank Nederland N.V. (the "Bank Group")
was amended. The maximum credit available under the Bank Credit Facility
was reduced to $20,000,000 effective on the date of the amendment. The
commitments under the Bank Credit Facility will be further reduced on a
monthly basis to $10,000,000 by June 29, 1994. Furthermore, the maximum
credit amount available under the Bank Credit Facility will continue to be
further reduced by an amount equal to cash dividends paid on the Series B
Preferred Stock and Series C Preferred Stock. On April 1, 1994, cash
dividends totaling $750,000 were paid on the Series B Preferred Stock,
thereby reducing the maximum credit currently available under the Bank
Credit Facility to $15,916,000 as of that date.
The term of the Bank Credit Facility ends July 29, 1994 and earlier
in the event of a default. The Bank Credit Facility provides that if the
Bank Group chooses to terminate its lending commitment thereunder without
accelerating the loans thereunder prior to July 29, 1994, the Company must
apply all its cash receipts (except net proceeds of equity sales) to the
repayment of the amounts outstanding under the Bank Credit Facility for up
to six months after termination, at which time any amounts remaining
unpaid are due. Additionally, the 12% Notes are due and payable on
September 15, 1994.
As a result of the Company's operating results in 1993, as well as
its decision to dispose of the Specialty Retail Division and VCL, the
Company was not in compliance with a number of ratios under the Bank
Credit Facility and the 12% Note Indenture as of December 31, 1993. The
Company is in discussions with the Bank Group to obtain waivers of the
non-compliance and management believes that those waivers will be
obtained. If the Bank Group waives the non-compliance, such waiver
automatically acts as a waiver of the corresponding non-compliance under
the 12% Note Indenture. If the Company does not secure the waivers, an
event of default will exist under both the Bank Credit Facility and the
12% Note Indenture, allowing the Bank Group and the holders of the 12%
Notes to accelerate payment of the amounts due to them. If such
acceleration occurs, the Company might not be in a position to pay the
amounts due and might not be able to continue as a going concern.
The Company is in negotiations with members of the Bank Group, as
well as others, to provide a replacement source of financing of up to
$40,000,000, having a term of at least one year, prior to the expiration
of the Bank Credit Facility (the "New Bank Credit Facility"). A condition
to obtaining the New Bank Credit Facility is the agreement of the holders
of at least $31,000,000 in principal amount of the 12% Notes to extend the
maturity date for payment of the 12% Notes held by them to a date which
would be not earlier than several months after the maturity date of the
New Bank Credit Facility (the "12% Note Extension"). Although management
believes there is a realistic possibility of obtaining both the New Bank
Credit Facility and the 12% Note Extension prior to the expiration of the
Bank Credit Facility, there is no assurance that management will be
successful in these efforts. If the Company is unable to obtain
replacement financing, it may not be in a position to pay the amounts due
under the Bank Credit Facility and the 12% Notes upon the maturity thereof
and might not be able to continue as a going concern.
Management is also seeking to replace the Bank Credit Facility, as
well as the New Bank Credit Facility once the New Bank Credit Facility is
in place, with a new credit facility of approximately $75,000,000 having a
term of at least one year (the "Permanent Facility"), prior to the
expiration of the Bank Credit Facility (or the New Bank Credit Facility,
if the New Bank Credit Facility replaces the Bank Credit Facility). Funds
from the Permanent Facility may also be used to pay all then-outstanding
12% Notes in full. Management does not expect the Permanent Facility to
be available unless and until after the closing of the Combination. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources."
Carolco Financial Restructuring and Change in Control
On October 20, 1993, Carolco, formerly the owner of approximately
51.7% of the outstanding Common Stock and 37% of the voting equity of the
Company, completed a financial restructuring (the "Carolco
Restructuring"). As part of the Carolco Restructuring, Pioneer LDCA, Inc.
("Pioneer"), RCS Video International Services B.V. ("RCS") and Le Studio
Canal+ ("Canal+" and collectively with Pioneer and RCS, the "Strategic
Investors") received all 6,245,283 shares of LIVE Common Stock owned by
Carolco. Canal+ subsequently transferred to its affiliate, Cinepole
Productions B.V. ("Cinepole"), all of the Common Stock in the Company
owned by Canal+. As of March 31, 1994, the voting ownership percentage of
LIVE held by Pioneer, RCS and Cinepole and their affiliates was 53.2%,
7.5% and 7.5%, respectively.
Although Carolco no longer owns any voting equity of LIVE, as a
result of the Carolco Restructuring, the Strategic Investors currently own
approximately 63.8% of the common stock voting ownership of Carolco.
Carolco product sold by LHV accounted for 13.0%, 38.4% and 40.3% of
combined LHV and VCL net sales for the years ended December 31, 1993, 1992
and 1991, respectively.
Management Changes
Since the beginning of 1993, Thomas Bradshaw resigned from the Board
of Directors, Roy A. Salter did not stand for re-election as a member of
the Board of Directors and Jay Burnham, Masao Nomura and Ronald B. Cushey
have been elected or appointed as Directors. Neither of the departures
from the Board of Directors was the result of any dispute with the
Company.
In September 1993, David A. Mount resigned as President and Chief
Executive Officer of the Company. Mr. Mount continues to serve as a
member of the Company's Board of Directors. In December 1993, Roger A.
Burlage was appointed President and Chief Executive Officer of the
Company.
Entertainment Marketing and Distribution Operations
General
Historically, the operations of LHV and VCL have focused on the
acquisition and distribution of home video programming in the United
States and Canada (through LHV) and in German-speaking Europe (through
VCL), by marketing and distributing videocassettes to wholesalers,
retailers and consumers directly. In early 1994, the Company announced
plans to expand LHV's business activities into the theatrical release of a
limited number of motion pictures and the direct licensing of
international, television rights and other ancillary rights to third
parties rather than through intermediaries. This expansion is meant to
enhance the core video business of the Company. LHV controls the United
States and Canadian home video rights (hereinafter referred to as
"domestic home video rights") to a catalog of approximately 1,800 titles,
inclusive of approximately 1,000 titles acquired from Vestron, Inc.
("Vestron").
As an independent distribution company, the Company acquires the
rights to programming from a variety of sources, including production
companies and independent producers. The Company often acquires the
rights to completed motion pictures. However, in order to secure rights
to motion pictures which might not otherwise be available to the Company
and to acquire a wider array of distribution rights on more favorable
terms, the Company also secures the rights to motion pictures prior to or
during production.
Distribution rights which the Company may acquire include (a)
DOMESTIC: home video, free television, pay television (including cable and
pay-per-view), theatrical and electronic publishing, and (b)
INTERNATIONAL: all media.
The United States Motion Picture Industry
The United States motion picture industry encompasses the production
and theatrical exhibition of feature-length motion pictures and the
subsequent distribution of such pictures in home video, television and
other ancillary markets. The industry is dominated by the major studios,
including Universal Pictures, Warner Bros., Twentieth Century Fox, MGM,
Sony Pictures Entertainment (including Columbia Pictures and Tri-Star
Pictures), Paramount Pictures and Walt Disney Company, which historically
have produced and distributed the majority of theatrical motion pictures
released annually in the United States. In recent years, however,
"independent" motion picture production companies such as The Samuel
Goldwyn Company, New Line Cinema Corporation, Republic Pictures, Castle
Rock Entertainment and Morgan Creek Productions, Inc. have played an
important role in the production of motion pictures for the worldwide
feature film market. There are also a large number of smaller production
companies that produce theatrical motion pictures.
The "majors" generally own their production studios and have national
or worldwide distribution organizations. Major studios typically release
films with direct production costs ranging from $10,000,000 to $50,000,000
or more and provide a continual source of motion pictures to the nation's
theater exhibitors. The independents do not own production studios and,
with certain exceptions, have more limited distribution capabilities than
the major studios. Independents typically produce fewer motion pictures
at substantially lower average production costs than major studios.
Motion Picture Production and Financing
The production of a motion picture begins with the screenplay
adaptation of a popular novel or other literary work acquired by the
producer or the development of an original screenplay having its genesis
in a story line or scenario conceived of or acquired by the producer. In
the development phase, the producer typically seeks production financing
and tentative commitments from a director, principal cast members and
other creative personnel. A proposed production schedule and budget are
also prepared during this phase.
Upon completing the screenplay and arranging financing commitments,
pre-production of the motion picture begins. In this phase, the producer
engages creative personnel to the extent not previously committed;
finalizes the filming schedule and production budget; obtains insurance
and secures completion guarantees, if necessary or available, as recently
the costs of securing such guarantees has increased and the number of
companies providing such guarantees has decreased; establishes filming
locations and secures any necessary studio facilities and stages; and
prepares for the start of actual filming.
Principal photography, the actual filming of the screenplay, may
extend from four to twelve weeks or more, depending upon such factors as
budget, location, weather and complications inherent in the screenplay.
Following completion of principal photography, the motion picture is
edited, opticals, dialogue, music and any special effects are added, and
voice, effects and music sound tracks and picture are synchronized during
post-production. This results in the production of the negative from
which the release prints of the motion picture are made.
The cost of a motion picture produced by an independent production
company for limited distribution ranges from approximately $1,000,000 to
$10,000,000 as compared with an average of more than $20,000,000 for
commercial films produced by major studios for wide release. Production
costs consist of acquiring or developing the screenplay, film studio
rental, cinematograph, post-production costs and the compensation of
creative and other production personnel. Distribution expenses, which
consist primarily of the costs of advertising and release prints, are not
included in direct production costs.
The major studios generally fund production costs from cash flow from
their motion picture and related activities, or in some cases from
unrelated businesses. Substantial overhead costs, consisting largely of
salaries and related costs of the production staff and physical facilities
maintained by the major studios, also must be funded.
Independent production companies generally avoid incurring
substantial overhead costs by hiring creative and other production
personnel and retaining the other elements required for pre-production,
principal photography and post-production activities on a project-by-
project basis. Unlike the major studios, the independents also typically
finance their production activities from discrete sources. Such sources
include bank loans, "pre-sales," equity offerings and joint ventures.
Independents generally attempt to complete their financing of a motion
picture production prior to commencement of principal photography, at
which point substantial production costs begin to be incurred and require
payment.
"Pre-sales" are often used by independent film companies to finance
all or a portion of the direct production costs of a motion picture. Pre-
sales consist of fees paid to the producer by third parties in return for
the right to exhibit the completed motion picture in theaters or to
distribute it in home video, television, foreign or other ancillary
markets. Producers with distribution capabilities may retain the right to
distribute the completed motion picture either domestically or in one or
more foreign markets. Other producers may separately license theatrical,
home video, television, foreign and all other distribution rights among
several licensees.
Both major studios and independent film companies often acquire
motion pictures for distribution through a customary industry arrangement
known as a "negative pickup," under which the studio or independent film
company agrees to acquire from an independent production company all
rights to a film upon completion of production. The independent
production company normally finances production of the motion picture
pursuant to financing arrangements with banks or other lenders in which
the lender is granted a security interest in the film and the independent
production company's rights under its arrangement with the studio or
independent. When the studio or independent "picks up" the completed
motion picture, it assumes (and in the case of the Company, most often
simply pays) the production financing indebtedness incurred by the
production company in connection with the film. In addition, the
independent production company is paid a production fee and generally is
granted a participation in the net profits from distribution of the motion
picture.
Both major studios and independent film companies generally incur
various third-party participations in connection with the distribution and
production of a motion picture. These participations are contractual
rights of actors, directors, screenwriters, owners of rights and other
creative and financial contributors entitling them to share in revenues or
net profits (as defined in the respective agreements) from a particular
motion picture. Except for the most sought-after talent, participations
are generally payable after all distribution and marketing fees and
expenses, direct production costs and financing costs are paid in full.
Motion Picture Distribution
Motion picture distribution encompasses the distribution of motion
pictures in theaters and in ancillary markets such as home video, pay-per-
view, pay television, broadcast television, foreign and other markets.
The distributor typically acquires rights from the producer to distribute
a motion picture in one or more markets. For its distribution rights, the
distributor typically agrees to advance the producer a certain minimum
royalty or guarantee, which is to be recouped by the distributor out of
revenues generated from the distribution of the motion picture and is
generally non-refundable. The producer also is entitled to receive a
royalty equal to an agreed-upon percentage of all revenues received from
distribution of the motion picture over and above the royalty advance.
Theatrical Distribution
The theatrical distribution of a motion picture involves the
manufacture of release prints, the promotion of the picture through
advertising and publicity campaigns and the licensing of the motion
picture to theatrical exhibitors. The size and success of the promotional
advertising campaign can materially affect the revenues realized from the
theatrical release of a motion picture. The costs incurred in connection
with the distribution of a motion picture can vary significantly,
depending on the number of screens on which the motion picture is to be
exhibited and the ability to exhibit motion pictures during peak
exhibition seasons. Competition among distributors for theaters during
such seasons is great. Similarly, the ability to exhibit motion pictures
in the most popular theaters in each area can affect theatrical revenues.
The distributor and theatrical exhibitor generally enter into an
arrangement providing for the exhibitor's payment to the distributor of a
percentage of the box office receipts for the exhibition period, in some
cases after deduction of the theater's overhead, or a flat negotiated
weekly amount. The distributor's percentage of box office receipts
generally ranges from an effective rate of 35% to over 50%, depending upon
the success of the motion picture at the box office. Distributors
carefully monitor the theaters which have licensed the picture for
exhibition to ensure that the exhibitor promptly pays all amounts due the
distributor. Substantial delays in collection are not unusual.
Motion pictures may continue to play in theaters for up to six months
following their initial release. Concurrently with their release in the
United States, motion pictures generally are released in Canada and may
also be released in one or more other foreign markets. The motion picture
then becomes available for distribution in other markets as follows:
Months After Approximate
Initial Release Release Period
Domestic home video 4-6 months ----
Domestic pay-per-view 6-9 months 3 months
Domestic pay television 10-18 months 12-21 months
Domestic network/basic cable 30-36 months 18-36 months
Domestic syndication 30-36 months 3-15 years
Foreign home video 6-12 months ----
Foreign television 18-24 months 18-30 months
Home Video
The home video distribution business involves the promotion and sale
of videocassettes and videodiscs to distributors as well as local,
regional and national video retailers (e.g., video specialty stores,
convenience stores, record stores and other outlets), which then rent or
sell such videocassettes and videodiscs to consumers primarily for private
viewing.
Major feature films are usually scheduled for release in the home
video market within four to six months after theatrical release to
capitalize on the theatrical advertising and publicity for the film.
Promotion of new releases is generally undertaken during the nine to
twelve weeks before the release date. Videocassettes of feature films are
generally sold to domestic wholesalers at approximately $50 to $60 per
unit and generally are rented by consumers for fees ranging from $1 to $5
per day. Wholesalers who meet certain sales and performance objectives
may earn rebates, return credits and cooperative advertising allowances.
Selected titles, including certain made-for-video programs, are priced
significantly lower (at a wholesale price ranging from $5 to $19 per unit)
to encourage direct purchase by consumers. Direct sale to consumers is
referred to as the "priced-for-sale" or "sell-through" market.
Overall growth in the domestic home video market has slowed as growth
in the number of new outlets and new VCR homes has moderated. The growth
in outlets designed to serve the rental market has remained essentially
flat for the past several years, while the number of new outlets which
offer videocassettes and videodiscs for sale has increased. The sell-
through market continues to be a seasonal business, except for feature
films initially released at prices generally below $30. Furthermore,
technological developments which regional telephone companies and others
are developing could make competing delivery systems economically viable
and could alter the home video marketplace.
Pay-per-view
Pay-per-view television allows cable television subscribers to
purchase individual programs, including recently released motion pictures
and live sporting, music or other events, on a "per use" basis. The
subscriber fees are typically divided among the program distributor, the
pay-per-view operator and the cable system operator.
Pay Television
Pay television allows cable television subscribers to view HBO,
Cinemax, Showtime, The Movie Channel, Encore and other pay television
network programming offered by cable system operators for a monthly
subscription fee. The pay television networks acquire a substantial
portion of their programming from motion picture distributors.
Broadcast and Basic Cable Television
Broadcast television allows viewers to receive, without charge,
programming broadcast over the air by affiliates of the major networks
(ABC, CBS, NBC and Fox), independent television stations and cable and
satellite networks and stations. In certain areas, viewers may receive
the same programming via cable transmission for which subscribers pay a
basic cable television fee. Broadcasters or cable systems operations pay
fees to distributors for the right to air programming a specified number
of times.
Foreign Markets
In addition to their domestic distribution activities, some motion
picture distributors generate revenues from distribution of motion
pictures in foreign theaters, home video, television and other foreign
markets. There has been a dramatic increase in recent years in the
worldwide demand for filmed entertainment. This growth is largely due to
the privatization of television stations, introduction of direct broadcast
satellite services, growth of home video and increased cable penetration.
Other Markets
Revenues also may be derived from the distribution of motion pictures
to airlines, schools, libraries, hospitals and the military, licensing of
rights to perform musical works and sound recordings embodied in a motion
picture, and rights to manufacture and distribute games, dolls, clothing
and similar commercial articles derived from characters or other elements
of a motion picture.
Acquisition of Motion Picture Distribution Rights by the Company
General
Distribution rights to motion pictures can encompass various media
(e.g., theatrical, home video, free or pay television, electronic
publishing) and various markets or territories (e.g., the United States
and Canada, Great Britain, Japan). The Company prefers to acquire
worldwide distribution rights to a motion picture in all media wherever
feasible although historically the Company has focused its activities in
the domestic video market.
Domestic Home Video Distribution Rights
LHV has developed operating strategies which it believes enhance
sales and profit growth potential by focusing on securing long-term access
to commercially viable motion pictures for video release. It categorizes
the feature films it releases in video by reference to relative
acquisition costs and expected unit sales. "A+" titles generally are
those films with some combination of significant box office revenues,
established stars, wide theatrical distribution and/or large budgets. "A"
titles usually are feature films with cast or other elements which give
them a defined audience appeal and which also receive wide theatrical
distribution. Those films categorized as "B" titles generally include a
variety of more modestly budgeted films which, if released theatrically,
are done so on a limited or regional basis. In addition to motion picture
product, LHV also acquires non-theatrical programming such as sports and
fitness programming, children's programming and special interest products.
As a result of its agreement with Carolco, LHV has secured access to
broadly distributed theatrical motion pictures. Carolco has granted to
LHV domestic home video rights to motion pictures produced or controlled
by Carolco prior to August 1995. Canadian home video rights have not been
granted to LHV in the case of several films produced by Carolco. In
consideration for the rights granted by Carolco, LHV has agreed to pay
Carolco certain advances for each picture. These advances are recoupable
from LHV's net receipts from video distribution of the pictures. LHV is
entitled to cross-collateralize both net receipts from groups of pictures
and advances on subsequent groups of pictures in order to ensure that it
earns a certain minimum overall distribution fee on each group of films.
There is a corresponding upper limit on the total gross distribution fee
that LHV can earn on each group of films. "Net receipts" generally are
LHV's wholesale receipts less certain expenses such as marketing and costs
of manufacturing. These agreements have been (or will be in the case of
any future amendments or pictures) approved by the independent committees
of LIVE's Board of Directors (including members elected by holders of the
Series B Preferred Stock) and Carolco's Board of Directors. During 1993,
LHV released two Carolco titles under this arrangement: "Chaplin" and
"Dark Wind." The Company does not anticipate releasing any additional
titles under this arrangement until 1995. The Company expects that this
output agreement will be extended and modified if the Combination is
consummated.
In March 1993, a subsidiary of LHV entered into a distribution
agreement with Miramax Film Corp. ("Miramax") for the video release by LHV
of a number of motion pictures, some of which have been theatrically
released by Miramax domestically, including "The Crying Game," "The
Piano," "House of the Spirits" and "Fortress." "The Piano" won three
Academy Awards, including Best Actress, out of eight nominations. LHV
released "The Crying Game," along with ten other titles, during 1993 and
anticipates releasing the remaining titles, including "The Piano," during
1994.
Under an agreement with Gladden Productions Inc. ("Gladden") dated as
of November 1993, a subsidiary of LHV obtained home video distribution
rights in the United States and Canada to ten motion pictures to be
produced in the future with minimum negative costs of $10,000,000 each.
Under the agreement, all ten movies are to receive a theatrical release.
None of the films are yet in production and there is no assurance that any
films will be produced under this agreement. The Company does not expect
to have any of these films available for video release until late 1995 at
the earliest.
Pursuant to various other agreements with independent motion picture
producers, exclusive of Carolco and Miramax, LHV released 29 other feature
film titles during 1993, including among others, "Light Sleeper,"
"Reservoir Dogs," "Bob Roberts," "Glengarry Glen Ross," "Bad Lieutenant"
and "Tom and Jerry: The Movie." Although there can be no assurance that
motion pictures to be released theatrically in the future will be
delivered to LHV, pursuant to those same and other agreements, LHV
anticipates releasing a total of between 50 to 75 feature films in 1994
and 1995. Management believes that, under current market conditions, "B"
titles generally will be available at favorable prices on a title by title
basis, either in the pre-production stage or as finished product. LHV
also intends to continue to pursue opportunities to acquire video rights
in children's, budget line and special interest programming, assuming
sufficient capital resources are available to the Company.
Domestic home video rights are acquired under exclusive licenses,
typically for a term of 15 years or more, in return for non-refundable
advances against future royalties which are generally based on either a
percentage of LHV's wholesale selling price or a percentage of profit
contribution derived from the sale of videocassettes. In most instances,
the advance is paid on or after the delivery of the applicable picture to
the Company, which typically occurs six to twelve months prior to video
release. Furthermore, the licenses may require the film's producer or
distributor to make certain minimum print and advertising expenditures
toward the theatrical release of the motion picture. In those instances
where LHV pays a substantial portion of the royalty advance prior to
completion, a completion bond in favor of LHV guaranteeing that a movie
will be finished is almost always required or the funds are escrowed or
secured by a letter of credit. Acquisition costs vary substantially from
title to title, depending on LHV's assessment of the projected demand for
the program.
LHV, under its children's programming label, Family Home
Entertainment ("FHE"), has over the years built a substantial library of
children's titles. In 1988, FHE secured worldwide rights to release
videocassettes of the "Teenage Mutant Ninja Turtles" animated television
series. LHV also has an agreement with Broadway Video Entertainment
granting it home video rights to programs including "Rudolph the Red Nosed
Reindeer," "Frosty the Snowman," "Santa Claus is Coming to Town," "The
Little Drummer Boy," "Here Comes Peter Cottontail" and "Frosty Returns."
In addition, license agreements have been secured for programming
featuring the products of major toy manufacturers including such licensed
characters as "Robotech," "Pound Puppies," "G.I. Joe," "Transformers,"
"JEM," "Mapletown," "Velveteen Rabbit," "Strawberry Shortcake," "The Mad
Scientist," "Babar," "Care Bears" and"Bucky O'Hare."
LHV also distributes non-theatrical products such as the "Smithsonian
Series" and the "Audubon Series." LHV distributes music videos, including
those by Michael Jackson, the Rolling Stones and the Doobie Brothers.
Sports and fitness titles include the "PGA Tour," a Jose Canseco
instructional tape and Paula Abdul and Marla Maples fitness tapes.
LHV maintains its own sales organization which prepares sales and
marketing plans for new release and catalog promotions, and, in
conjunction with the sales force of WEA Corp. ("WEA"), works closely with
wholesale distributors, rackjobbers and key retailers in the United
States. Pursuant to an agreement expiring in May 1995, WEA handles all
physical aspects of United States sales, distribution, billing and
collections for LHV. LHV, through its wholly owned subsidiary LIVE
America Inc., has a similar arrangement with MCA Canada Ltd., with respect
to LHV's Canadian sales, marketing and distribution activities under an
agreement expiring in August 1994.
Acquisition agreements typically define "home video rights" as the
rights to manufacture and market videocassettes, videodiscs and other
information storage devices for the purpose of viewing the motion pictures
embodied therein in private living accommodations. These agreements
generally do not include the right to broadcast or cablecast programs or
exhibit programs on pay-per-view television or in movie theaters or
similar locations, although from time to time these agreements include
such rights. Historically, where these other rights were acquired, the
Company exploited them by sublicensing the rights to third parties whose
principal businesses included exploitation of such rights. In early 1994,
the Company announced plans to expand LHV's business activities into the
theatrical release of a limited number of motion pictures and the direct
licensing of international and television rights to third parties rather
than through intermediaries. Therefore, the Company anticipates acquiring
more of these non-video rights in the future.
<PAGE>
Other Domestic Distribution Rights
The Company intends to acquire theatrical distribution rights as part
of the overall acquisition where possible, even if a film ultimately will
not be released theatrically. In addition, television distribution rights
will be acquired where available. Television networks, independent
television networks, television stations and cable system operators
generally license television series, films and film packages (consisting
of theatrically released feature films and made-for-television movies)
pursuant to agreements with distributors or syndicators that allow a fixed
number of telecasts over a prescribed period of time for a specified cash
license fee or for barter of advertising time.
International Distribution Rights
International distribution rights include rights in various media
(e.g., television, theatrical and home video) and to various territories
(e.g., the United Kingdom, Japan, and the Benelux nations). To acquire
these rights, the Company is required to pay a minimum guarantee. The
minimum guarantee, along with specific recoupable marketing and other
expenses, is recovered from the motion picture's gross revenues before the
producer begins to participate in the net revenues. The Company is in the
process of developing a sales force to manage international sales and to
promote its motion pictures at foreign film markets, including the Cannes
Film Festival in France, the American Film Market in Los Angeles and MIFED
in Italy.
Other International Activities
In addition to LHV's newly created international sales division, the
Company conducts its foreign home video operations through a series of
foreign subsidiaries, including LIVE NV and VCL. LIVE NV and VCL are
engaged in the acquisition of rights to, and the marketing and
distribution of, home video programming in certain foreign markets.
The activities of VCL are in the German-speaking market in Europe.
VCL has entered into a series of agreements with Rank Video Services GmbH
("Rank Germany") whereby Rank Germany became the exclusive provider of
videocassette duplication services to VCL. As part of those agreements,
Rank paid VCL DM5,000,000. A portion of the funds advanced to VCL must be
repaid to Rank Germany if certain minimum volume duplication requirements
are not met.
In March 1994, both as a result of a desire of the Company to focus
its efforts on its core domestic entertainment business and as a result of
the agreement in principle on the Combination, the Board of Directors of
the Company decided to dispose of the Company's interest in VCL.
Specialty Retail Operations
Strawberries, started in 1976, has grown to be one of the largest
specialty retailers of pre-recorded music in the New England market.
The Specialty Retail Division currently operates 142 stores in 11
states, providing audio and video software products. Its largest market
is the greater Boston area from which it derives more than one-quarter of
its revenue. Acquired by the Company in June 1989, Strawberries is a
wholly owned subsidiary of LIVE. In March 1990, Strawberries acquired
Waxie Maxie, a retailer of pre-recorded music and video, which currently
operates 32 stores in the greater Baltimore/Washington D.C. metropolitan
area, including Virginia and Maryland.
The stores are generally clustered in metropolitan markets which
allows for potentially greater name recognition, advertising efficiency
and distribution and shipping economies of scale. Most stores are located
in strip retail centers with high visibility locations as opposed to mall
locations. Because mall stores frequently present parking and other
logistical problems for customers, management believes that strip centers
are better suited for the sale of entertainment products. By locating in
such strip centers, the Specialty Retail Division is able to lease
locations at a lower cost per square foot than a major mall since the
rents charged for strip shopping center locations are generally lower than
rents charged for mall stores. The Division operates one central
warehouse distribution center and administrative offices in Milford,
Massachusetts.
Most of the Division's stores range in size from 1,800 to 4,000
square feet. The Division also has three "superstores" of over 10,000
square feet, the most recent being the 11,300 square foot store that
opened on Boston's Boylston Street in April 1994. The "superstore" model
is seen by the Division as a prototype for large format stores in major
metropolitan areas. In 1993 the Division continued its store development
program by opening, remodeling and/or relocating a total of 21 stores and
intends to continue to retrofit and, where physically possible and
justified by other factors, including availability of capital, open new
stores and enlarge a significant number of existing stores over the next
several years.
Sales of pre-recorded music represent approximately 90% of all the
Specialty Retail Division's revenues; the balance is from pre-recorded
videocassettes and accessories. Most of the Division's stores carry
between 8,000 and 15,000 pre-recorded music titles in both the compact
disc and cassette configurations and cover the spectrum of rock, pop,
jazz, dance, soul, classical and country. The stores offer a broad
selection of pre-recorded music, usually at least as broad as that offered
by competitors in their markets.
The Specialty Retail Division extensively advertises its products on
radio and in newspapers and to a lesser extent on television and by
flyers. Its advertising is handled by its own staff, with substantially
all advertising expenditures covered by manufacturers' cooperative
allowances.
Most of the stores sell pre-recorded videocassettes, although video
sales constituted only 3.5% and 2.8% of the Specialty Retail Division's
revenues for the twelve months ended January 31, 1993 and 1994,
respectively.
Substantially all of the home entertainment products sold by the
Specialty Retail Division are purchased directly from manufacturers. Six
major manufacturers produce over 90% of the pre-recorded music sold in the
United States. Pre-recorded music manufacturers' return policies
typically permit the right of return all unsold product, subject to
certain financial penalties if returns exceed a predetermined level.
However, these return policies differ among manufacturers and are subject
to change without notice. In the twelve months ended January 31, 1994,
the Specialty Retail Division received return allowances from
manufacturers for substantially all pre-recorded music product.
In March 1994, both as a result of a desire of the Company to focus
its efforts on its core domestic entertainment business and as a result of
the agreement in principle on the Combination, the Board of Directors of
the Company decided to dispose of the Company's interest in the Specialty
Retail Division.
Competition
Success in the home video market is largely dependent on a company's
ability to acquire home video rights to programming at attractive prices
and upon the subsequent performance of this programming in the
marketplace. The Company currently has an exclusive output arrangement
with Carolco with respect to the acquisition of programming and also has
multi-picture distribution arrangements with Miramax and Gladden. There
is no assurance that the films which the Company expects to receive under
these arrangements will be commercially successful. The output
arrangement with Carolco will not cover films produced after July 31,
1995. Although the Company intends to use its best efforts to extend
LHV's existing output agreement with Carolco beyond its current July 1995
expiration date, there is no assurance that an extension agreement will be
reached. Should the Combination occur, the Company expects this agreement
will be extended and modified.
The Company also acquires additional distribution rights on a film-
by-film basis. The Company faces significant competition both in
obtaining distribution rights and in selling products. The Company's
competitors for product acquisitions are companies such as New Line, HBO
and Trimark, and it competes with these companies as well as major studios
in the marketing of its product. Certain of the Company's competitors,
particularly those affiliated with major studios or pay television
broadcasters, have significantly greater financial resources than the
Company. Competition for distribution rights is based primarily on the
amount of the royalty advances which companies are willing to offer to
producers as well as on the producer's perception of the company's
marketing capabilities and its commitment to marketing the release of a
film.
The distribution of video and audio software merchandise by the
Specialty Retail Division is highly competitive. Identical merchandise is
available to competitors at approximately the same price. Buying and
selling is performed in open competitive markets in which the measure of
success is largely determined by the degree of efficiency and
effectiveness of the retailer. Competition for the Specialty Retail
Division is mostly regionalized with competitors affecting business to
various degrees in each market.
Regulation Affecting the Company
Distribution rights to motion pictures are granted legal protection
under the copyright law of the United States and most foreign countries,
which provide substantial civil and criminal sanctions for unauthorized
duplication and exhibition of motion pictures. The Company endeavors to
maintain copyright protection for all its films under the laws of all
applicable jurisdictions.
United States television stations and networks as well as foreign
governments impose restrictions on the content of motion pictures which
may restrict in whole or in part exhibition on television or in a
particular territory. There can be no assurance, therefore, that current
or future restrictions on the content of Company films, may not limit or
affect the Company's ability to exhibit certain of such motion pictures in
such media or markets.
Major Customers
During the year ended December 31, 1991 and 1993, no one customer
accounted for more than 10% of the combined net sales of LHV and VCL.
During the year ended December 31, 1992, one customer accounted for
approximately 16.6% of the combined net sales of LHV and VCL.
Employees
As of March 31, 1994, LHV had 95 full-time employees and 7 part-time
employees, the Specialty Retail Division had 679 full-time employees and
649 part-time employees and VCL had 79 full-time employees and 14 part-
time employees. None of the Company's employees are covered by a
collective bargaining agreement and the Company believes that its employee
relations are good.
ITEM 2. PROPERTIES
The Company's executive offices, which include the offices of LHV,
are leased in Van Nuys, California. The Specialty Retail Division owns
its administrative offices and a distribution center which are located in
Milford, Massachusetts; its 142 retail store locations, located in 11
states in the Northeastern and mid-Atlantic regions, are in leased
facilities. VCL leases its offices and distribution center, which are all
located in Munich, Germany. LIVE NV leases its offices, which are located
in Curacao, Netherlands Antilles. The Company believes that its office
and warehouse facilities described above are adequate to meet its current
and anticipated future needs.
ITEM 3. LEGAL PROCEEDINGS
On January 9, 1992, a purported class action lawsuit was filed in the
U.S. District Court, Central District of California, by alleged
stockholders of the Company against the Company, Carolco and certain of
the Company's past and present directors and executive officers. The
complaint alleges, among other things, that the defendants violated
Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange Act")
and Rule 10b-5 promulgated thereunder (a) by concealing the true value of
certain of LIVE's assets, and overstating goodwill, stockholders' equity,
operating profits and net income in LIVE's Form 10-K for the year ended
December 31, 1990, in its 1990 Annual Report and in its Forms 10-Q for the
quarters ended March 31, 1991 and June 30, 1991, and (b) by materially
understating the true extent of the write off of goodwill in connection
with the sale of substantially all of the assets of the Company's wholly
owned subsidiary, Lieberman Enterprises Incorporated ("Lieberman"), to
Handleman Company ("Handleman") in July 1991. In addition, the complaint
alleges that certain of the defendants are liable as controlling persons
under Section 20 of the Exchange Act and alleges that certain other
defendants are liable for aiding and abetting the primary violations.
Subsequently, two additional lawsuits were filed in the U.S. District
Court, Central District of California, by alleged stockholders of the
Company against the same persons and entities who were defendants in the
original actions, making substantially the same allegations as were made
in the first lawsuit. On March 30, 1992, these lawsuits were
consolidated. Further, in April 1992, an amended complaint was filed in
the consolidated action, lengthening the alleged class period and adding
as defendants certain additional officers, directors and affiliates of the
Company and Carolco, including Pioneer, as well as a lender to LHV and
Carolco. On June 17, 1992, the U.S. District Court, Central District of
California, entered an order conditionally certifying the class, subject
to possible decertification after discovery is completed. On January 27,
1993, a second amended complaint was filed in the consolidated class
action making additional and modified allegations against certain of the
defendants claiming they are liable as controlling persons under Section
20 of the Exchange Act and claiming that certain other defendants are
liable for aiding and abetting the primary violations. On April 19, 1993,
the court issued a ruling dismissing Pioneer from this lawsuit.
In February 1992, a purported class action lawsuit was filed in the
U.S. District Court, District of Delaware, by an alleged holder of
Carolco's public debt, against the Company, Carolco and certain directors
and executive officers of Carolco. The Delaware complaint alleges, among
other things, that the defendants violated Section 10(b) of the Exchange
Act and Rule 10b-5 promulgated thereunder by concealing the true value of
certain of the Company's assets, and overstating goodwill, stockholders'
equity, operating profits and net income in the Company's Form 10-K for
the year ended December 31, 1990 and in its Forms 10-Q for the quarters
ended March 31, 1991 and June 30, 1991. In April of 1992 this lawsuit was
transferred to the U.S. District Court, Central District of California.
The proceedings are being coordinated with the consolidated action
described in the preceding paragraph. On July 17, 1992, the U.S. District
Court, Central District of California, entered an order conditionally
certifying the class, subject to possible decertification after discovery
is completed.
On March 24, 1994, the same day as the Company and Carolco announced
that they had reached agreement in principle on the Combination, a
purported class action lawsuit was filed in the Delaware Chancery Court by
an alleged stockholder of the Company against the Company, Carolco,
Pioneer, Cinepole and certain past and present directors of the Company
and Carolco. The complaint alleges, among other things, that the
defendants breached their fiduciary duties in agreeing in principle to the
Combination. The complaint seeks an injunction prohibiting the Company
and Carolco from proceeding with the Combination, as well as unspecified
monetary damages.
Management and counsel to the Company are unable to predict the
ultimate outcome of the above-described actions at this time. However,
the Company and the other defendants believe that all these lawsuits are
without merit and intend to defend them vigorously. Accordingly, no
provision for any liability which may result has been made in the
Company's consolidated financial statements. In the opinion of
management, these actions, when finally concluded and determined, will not
have a material adverse effect upon the Company's financial position or
results of operations.
Other than as described above, there are no material legal
proceedings to which LIVE or any of its subsidiaries are a party other
than ordinary routine litigation in the ordinary course of business. In
the opinion of management (which is based in part on the advice of outside
counsel), resolution of these matters will not have a material adverse
impact on the Company's financial position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of the Company's security holders
during the fourth quarter of the Company's fiscal year ended December 31,
1993.<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Prices
The Company's Common Stock is listed with, and has been traded on,
the New York Stock Exchange under the symbol "LVE." As of March 31, 1994,
there were 1,281 holders of record of the Company's Common Stock. As of
the same date, 12,093,610 shares of the Company's Common Stock were
outstanding out of 120,000,000 shares authorized.
The following table sets forth for the periods indicated the high and
low sales prices for the Company's Common Stock on the New York Stock
Exchange.
Year Ended December 31, 1992
Quarter Ended High Low
- - ------------- ---- ---
March 31, 1992. . . . . . . . . . . . . . . $4.750 $2.000
June 30, 1992 . . . . . . . . . . . . . . . 3.500 1.625
September 30, 1992. . . . . . . . . . . . . 1.750 1.125
December 31, 1992 . . . . . . . . . . . . . 2.125 1.250
Year Ended December 31, 1993
Quarter Ended High Low
- - ------------- ---- ---
March 31, 1993 . . . . . . . . . . . . . . $2.875 $1.625
June 30, 1993 . . . . . . . . . . . . . . . 2.375 1.625
September 30, 1993. . . . . . . . . . . . . 2.625 1.750
December 31, 1993 . . . . . . . . . . . . . 2.875 1.750
Year Ending December 31, 1994
Quarter Ended High Low
- - ------------- ---- ---
March 31, 1994. . . . . . . . . . . . . . . $3.125 $2.000
Cash Dividends
The Company has never paid cash dividends on its Common Stock, which
in part has been due to restrictions imposed by debt instruments. See
"Management's Discussion and Analysis of Financial Condition and Results
of Operations - Liquidity and Capital Resources." The Board of Directors
expects that it will continue to retain all earnings for use in the
Company's business except as required to be paid on the Series B Preferred
Stock and the Series C Preferred Stock.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following table sets forth the selected financial data and other
operating information of LIVE and is derived from the audited consolidated
financial statements of LIVE. The table does not include financial data
of Strawberries prior to June 1989 and Waxie Maxie and VCL prior to their
respective acquisition dates in 1990. The data should be read in
conjunction with the consolidated financial statements, related notes and
"Management's Discussion and Analysis of Financial Condition and Results
of Operations" included elsewhere in this Form 10-K. Certain re-
classifications were made to the financial information from 1989 through
1992 to conform to the 1993 presentations.
<TABLE>
<CAPTION>
Year Ended December 31,
----------------------------------------------
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
(Amounts in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Summary of Operations
- - ---------------------
Net sales . . . . . . . . . . . . . . . . . . $110,931 $322,878 $264,418 $192,513 $172,246
Operating profit (loss) . . . . . . . . . . . 20,683 59,851 (586) (4,854) (21,177)
Interest expense, net . . . . . . . . . . . . 12,496 8,852 (15,834) (14,424) (6,264)
Income (loss) from continuing operations 11,304 38,008 (17,737) (17,460) (28,209)
Income (loss) from discontinued operations 8,123 (12,460) (89,315) 1,090 (22,083)
Extraordinary item. . . . . . . . . . . . . . -- -- -- 3,967 --
Net income (loss) . . . . . . . . . . . . . . 19,427 25,548 (107,052) (12,403) (50,292)
Income (loss) per common share:
(a) (a) (a) (a)
Continuing operations . . . . . . . . . . . .96 3.12 (1.55) (1.64) (2.63)
Discontinued operations . . . . . . . . . . .71 (1.02) (7.40) .09 (1.83)
Extraordinary item. . . . . . . . . . . . . -- -- -- 0.33 --
(a) (a) (a) (a)
Net income (loss) . . . . . . . . . . . . . $ 1.67 $ 2.10 $ (8.95) $ (1.22) $ (4.46)
December 31,
----------------------------------------------
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Data
- - -----------------------
Cash and receivables. . . . . . . . . . . . . $134,446 $149,408 $ 97,597 $ 33,183 $ 44,790
Inventories . . . . . . . . . . . . . . . . . 83,229 118,576 49,205 48,961 10,124
Total assets. . . . . . . . . . . . . . . . . 482,212 567,600 413,977 297,048 253,549
Total long-term debt obligations. . . . . . . 186,195 154,955 118,937 79,061 60,204
Total stockholders' equity. . . . . . . . . . 121,875 149,084 61,597 89,059 10,742
Working capital . . . . . . . . . . . . . . . 118,505 94,762 17,109 15,763 5,797
<FN>
(a) Income (loss) per common share in 1989, 1991, 1992 and 1993 is
net of preferred dividends of $367,000, $966,000, $2,397,000
and $3,589,000, respectively.
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Year Ended December 31, 1993 Compared to Year Ended December 31, 1992
Continuing Operations
Combined net sales of LHV and VCL decreased to $172,246,000 during
1993 compared to $192,513,000 during 1992. The decrease of $20,267,000,
or 10.53%, is primarily attributable to a decrease in sales at LHV,
resulting from a weaker release schedule in 1993 compared to 1992.
Results for 1993 included revenues from the initial rental releases of the
theatrical films "Reservoir Dogs," "Bob Roberts," "Glengarry Glen Ross,"
"The Crying Game," "Bad Lieutenant" and "Chaplin," along with the sell-
through release of "Tom and Jerry: The Movie." The net sales from these
1993 releases were less than the revenues generated from 1992's initial
rental releases of "Defenseless," "Rambling Rose," "Basic Instinct" and
"Universal Soldier," along with the sell-through release of "Terminator 2:
Judgment Day." In addition, LHV's 1992 results included sales of
approximately $9,300,000 from titles obtained in the July 1991 acquisition
of Vestron that had not been previously released to the video market. All
previously unreleased Vestron titles were released by LHV on video by May
1992. Revenues generated by LHV from Carolco titles amounted to 13.0% and
38.4% of combined net sales for 1993 and 1992, respectively. VCL's sales
decreased during 1993 compared to 1992, primarily due to a weakening in
the video rental market in Germany. In addition, 1992's results included
the home video rental release of "Terminator 2: Judgment Day" in Germany;
there was no similar release by VCL in 1993.
Combined gross profits of LHV and VCL decreased $924,000, or 3.8%, to
$23,138,000 during 1993 compared to $24,062,000 during 1992. As a
percentage of sales, gross profit increased from 12.5% during 1992 to
13.4% during 1993. The increase as a percentage of sales despite the
decrease in gross profit dollars is primarily due to greater allowances
for returns and related items in 1992 than in 1993. In 1992, the Company
temporarily increased its returns and related allowances as a result of
matters related to the Restructuring.
Combined selling, general and administrative expenses of LHV and VCL
decreased $1,113,000, or 4.7%, to $22,700,000 during 1993 compared to
$23,813,000 during 1992. As a percentage of sales, the amount increased
from 12.4% during 1992 to 13.2% during 1993. The dollar decrease is
primarily a result of the Company's efforts to reduce overhead due to
lower sales. The percentage increase is primarily due to the decrease in
combined sales.
Combined net interest expenses of LHV and VCL decreased $8,650,000,
or 59.0%, to $6,003,000 during 1993 compared to $14,653,000 during 1992.
Effective September 1, 1992, interest stopped accruing on the Outstanding
Notes; the interest expense recorded in 1992 on the Outstanding Notes was
approximately $10,600,000. Interest to maturity on $36,872,000 of the
Company's $40,000,000 of Public Notes has been included in the carrying
value of the Public Notes and will not be recognized as interest expense
in 1993 and future years. Interest expense recognized in 1992 and 1993 on
the remaining $3,128,000 of Public Notes was $104,000 and $312,000,
respectively. This decrease in interest expense in 1993 was partially
offset by approximately $3,300,000 of interest expense associated with the
12% Notes that were issued in March and April 1993.
LHV and VCL had a combined operating loss of $5,436,000 during 1993
compared to a combined operating loss of $4,854,000 during 1992. Both LHV
and VCL had operating losses for 1992 and 1993. The combined loss of LHV
and VCL before income tax expense was $27,441,000 during 1993 compared to
a combined loss of $19,278,000 during 1992. The increase in the combined
pre-tax loss of $8,163,000 was primarily due to the write down of the
carrying value of VCL in anticipation of the disposition thereof, offset
by a reduction in interest expense in 1993.
Preferred dividends of $3,589,000 in 1993 represents the 5% cash
dividend accrued on both the Series B Preferred Stock and the Series C
Preferred Stock. Preferred dividends of $2,397,000 in 1992 represents the
10% cash dividend accrued on the Series A Preferred Stock for the eight
months ended August 31, 1992 and the 5% cash dividend on the Series B
Preferred Stock for the four months ended December 31, 1992.
In 1992, the Company recognized a pre-tax gain of $3,177,000
associated with the Restructuring. The income tax benefit associated with
this transaction was $790,000. There were no similar transactions in
1993.
The effective income tax (benefit) rate from continuing operations
for 1993 was (2.8)%. The effective tax rate from continuing operations
for 1992 was 9.4%.
Revenues, operating profits/(losses) and identifiable assets of the
Company's foreign operations were $34,009,000, ($3,289,000) and
$28,871,000, respectively, in 1993 compared to $32,993,000, ($3,043,000)
and $42,983,000, respectively, in 1992.
Discontinued Operations
As a result of the Board of Directors' decision to dispose of the
Company's interest in the Specialty Retail Division, the Division's
results of operations for the periods presented have been classified as a
discontinued operation.
The Specialty Retail Division revenues in 1993 were $106,124,000
compared to $98,894,000 in 1992. The increase is due to the opening of
new stores and an increase in comparable store sales. The Division had
income before income taxes of $2,322,000 during 1993 compared to $992,000
during 1992. The increase is primarily attributable to increased sales
and increased margins during 1993. The estimated loss on disposal
includes a $2,024,000 provision for operating losses during the phase out
period.
<PAGE>
Year Ended December 31, 1992 Compared to Year Ended December 31, 1991
Continuing Operations
Combined net sales of LHV and VCL decreased to $192,513,000 during
1992 compared to $264,418,000 during 1991. The decrease of $71,905,000,
or 27.2%, was primarily attributable to a decrease in sales at LHV,
resulting from a combination of a weaker release schedule in 1992 compared
to 1991 as well as a soft video market for straight to video feature
films. Results for 1991 included revenues from the initial rental
releases of the theatrical films "Air America," "L.A. Story," "The
Punisher," "Narrow Margin," "The Doors," "Madonna: Truth or Dare,"
"Jacob's Ladder" and "Terminator 2: Judgment Day." The only similar video
releases by LHV in 1992 were the initial rental releases of "Defenseless,
"Rambling Rose," "Basic Instinct" and "Universal Soldier," along with the
sell-through release of "Terminator 2: Judgment Day." Revenues generated
by LHV from Carolco titles amounted to 38.4% and 40.3% of combined net
sales for 1992 and 1991, respectively. VCL's sales increased during 1992
compared to 1991, primarily due to the home video rental release of
"Terminator 2: Judgment Day" in Germany.
Combined gross profits of LHV and VCL decreased $24,557,000, or
50.5%, to $24,062,000 during 1992 compared to $48,619,000 during 1991. As
a percentage of sales, gross profit decreased from 18.4% during 1991 to
12.5% during 1992. The decrease in gross profit dollars and margin
percentages was primarily attributable to lower sales volumes and margins
at LHV. The decrease in margins at LHV was partially attributable to
higher than anticipated returns of, and allowances related to, product
released in 1991 (including price protection and rebate claims), amounting
to approximately $4,100,000. With the exception of "Rambling Rose,"
"Defenseless," "Basic Instinct," "Universal Soldier" and "Terminator 2:
Judgment Day" (at a sell-through price), the titles released by LHV in
1992 were mostly "secondary" titles. Secondary titles are those films
that are released on video that have a modest production budget and are
either released directly to video or, if released theatrically, are done
so on a limited or regional basis. The market for secondary titles
continued to weaken in 1992, partly because of a general weakness in the
United States economy, and partly because of a shift in buying and rental
patterns of video retailers and consumers. Among the causes for the shift
in buying and rental patterns were (a) a reduction in disposable income
during the economic recession in 1991 and 1992 which negatively affected
video retailers' revenues and, in turn, limited their budgets to purchase
videos and (b) in order to meet reduced demand by consumers for video
product and retailers' reduced purchasing budgets, video retailers limited
their purchases of secondary titles and shifted their spending to "A"
titles. Therefore, additional costs (in the form of rebates and price
protection) were necessary to attempt to obtain increased sales volumes
for secondary product. These additional costs decreased gross profit as a
percentage of sales. The Company's response to this shift has been, among
other actions, to change the model LHV uses for acquisition and marketing
of secondary titles. The decreased gross profit percentage at LHV also is
partially attributable to an increase in sales of sell-through product
(which usually generates lower margins as a percentage of total sales) and
higher distribution costs associated with the WEA distribution agreement
(9% of gross domestic video sales) as compared to the Uni distribution
agreement (5% of gross domestic video sales), offset by a decrease in
LHV's film amortization as a percentage of LHV's sales from 46.7% in 1991
to 40.2% in 1992 and a decrease of advertising expenditures as a
percentage of sales from 15.1% in 1991 to 14.1% in 1992.
Management of the Company believes the decrease in gross profit
dollars and percentages from 1991 to 1992 was exacerbated by the Company's
financial condition in 1992 and published reports in 1992 regarding such
financial condition, which management believes resulted in lower video
sales, higher than normal returns of video product from wholesale
customers and difficulty in acquiring video product on favorable terms.
Combined selling, general and administrative expenses of LHV and VCL
decreased $2,620,000, or 10.0%, to $23,813,000 during 1992 compared to
$26,433,000 during 1991. As a percentage of sales, the amount increased
from 10.0% during 1991 compared to 12.3% during 1992. The dollar decrease
is primarily attributable to a reduction in corporate overhead of
approximately $2,700,000, while the percentage increase is primarily due
to the decrease in sales.
Combined amortization of goodwill and covenants of LHV and VCL
increased $1,218,000, or 33.3%, to $4,874,000 during 1992 compared to
$3,656,000 during 1991. The increase is primarily due to a full year of
amortization of goodwill associated with the acquisition of the assets of
Vestron in July 1991.
During 1991 the Company wrote off $15,000,000 of the excess purchase
cost over the fair value of net assets acquired related to its acquisition
of Vestron. There was no similar write-off in 1992.
Combined net interest expenses of LHV and VCL decreased $1,391,000,
or 8.7%, to $14,653,000 during 1992 compared to $16,044,000 during 1991.
Effective September 1, 1992, interest stopped accruing on the Company's
Outstanding Notes, reducing 1992 interest expense by $5,450,000. Interest
to maturity on $36,872,000 of the Public Notes has been included in the
carrying value of the Public Notes and will not be recognized as interest
expense in current and future years. Interest expense recognized in 1992
on the remaining $3,128,000 of Public Notes was $104,000. In 1991,
approximately $2,389,000 of interest relating to the Outstanding Notes was
allocated to Lieberman Enterprises Incorporated ("Lieberman"), the
Company's entertainment software distribution subsidiary that was sold in
July 1991, and was included in discontinued operations; such interest is
included in continuing operations through August 31, 1992.
Both LHV and VCL had operating losses during 1992. The combined loss
from continuing operations of LHV and VCL before income taxes was
$19,278,000 during 1992 compared to a combined loss of $16,420,000 during
1991. The Company's consolidated loss from continuing operations in 1991
was principally due to the $15,000,000 write-off of the excess of the
Vestron purchase price over the fair value of net assets acquired and the
$3,905,000 of expenses relating to the proposed business combination with
Carolco in 1991 and related restructuring of the Company's management
(there were no similar transactions during 1992); 1992's combined loss was
due principally to lower sales and gross profits.
The effective income tax expense (benefit) rate from continuing
operations for 1992 and 1991 was approximately 9.4% and (8.0)%,
respectively.
Preferred dividends of $2,397,000 in 1992 represents the 10% cash
dividend accrued on the Company's Series A Preferred Stock for the eight
months ended August 31, 1992 and the 5% cash dividend on the Series B
Preferred Stock for the four months ended December 31, 1992. The $966,000
of dividends during 1991 represents the dividends on the Series A
Preferred Stock from July 1991, the date of issuance.
In 1992, the Company recognized a pre-tax gain of $3,177,000
associated with the financial restructuring of the Outstanding Notes. The
income tax benefit associated with this transaction was $790,000.
Revenues, operating profits/(losses) and identifiable assets of the
Company's foreign operations were $32,993,000, ($3,043,000) and
$42,983,000, respectively, in 1992 compared to $27,788,000, $985,000 and
$52,913,000, respectively, in 1991.
Discontinued Operations
The Specialty Retail Division's revenues for the year ended December
31, 1992 were $98,894,000 compared to $96,945,000 for the comparable
period in 1991. The increase is due to increased inventories made
possible by the Division's two-year, $10,000,000 credit facility obtained
from Foothill Capital Corporation in June 1992 (the "Strawberries Credit
Facility"), as well as the re-institution of the Division's store
development, expansion and relocation programs in 1992. The Division had
income before income taxes of $992,000 during 1992 compared to a loss
before income taxes of $2,796,000 during 1991. The increase in profits is
primarily due to increased sales and a reduction in interest expense
during 1992 compared to 1991.
There were no sales at Lieberman during 1992 due to the sale of
Lieberman in July 1991. Lieberman's net sales during 1991 (through July
26, 1991, the date operations ceased) were $150,423,000.
Lieberman's loss from discontinued operations after tax benefits was
$11,629,000 during 1991. Losses of $8,336,000 during 1992 were charged
against the provision of $20,711,000 which was established upon the
decision to dispose of Lieberman's assets.
Liquidity and Capital Resources
The Series B Preferred Stock is mandatorily redeemable from the net
proceeds of any sale of the Specialty Retail Division. As a result of the
Company's decision to dispose of its interest in the Specialty Retail
Division, a total of $40,000,000 of the Series B Preferred Stock has been
re-classified from equity to current liabilities as of December 31, 1993
reflecting the Company's expectation to sell the Division for no less than
$40,000,000.
At December 31, 1993, the Company had total current assets of
$176,472,000 and total current liabilities of $170,675,000, resulting in
working capital of $5,797,000, a decrease of $9,966,000 over the working
capital at December 31, 1992.
Historically, the Company has funded its operations through a
combination of cash generated from operations, bank borrowings, advances
from distributors under distribution agreements and the proceeds from the
issuance of the Outstanding Notes. For the year ended December 31, 1993,
the Company generated negative cash flow from continuing operations of
$12,299,000.
On May 11, 1992, LHV entered into a three-year distribution agreement
with WEA that became effective on June 1, 1992. Under the terms of the
agreement, WEA advanced $20,000,000 to LHV, recoupable from distribution
revenues during the three-year term of the agreement at the rate of
$555,555 per month plus interest at LIBOR (3.2% at December 31, 1993) plus
0.2%, not to exceed the prime rate. The advance is secured by a first
priority security interest in certain of LHV's FHE catalog titles. LHV
received an additional advance from WEA of $4,900,000 which was repaid in
full in September 1992. The amount of the advance outstanding as of
December 31, 1993 was $10,000,000.
In 1993, the Company received a total of $37,000,000 upon issuance of
the 12% Notes and as of April 1, 1994 was able to borrow up to $15,916,000
under the Bank Credit Facility for new video rights acquisitions. The
total borrowings and borrowing availability under the Bank Credit Facility
and the 12% Notes ($52,916,000 as of April 14, 1994) will provide
sufficient funds to permit LHV to acquire additional films for
distribution.
Investing activities generated a negative cash flow during 1993 of
$3,676,000, primarily as a result of the acquisition of property and
equipment at all operating subsidiaries. Management expects that cash
flows from investing activities will be negative through 1994 as a result
of the store opening, expansion, renovation and relocation program at the
Specialty Retail Division.
On January 28, 1994, the Company's and LHV's pre-existing Bank Credit
Facility with the Bank Group was amended. The maximum credit available
under the Bank Credit Facility was reduced to $20,000,000 effective on the
date of the amendment. The commitments under the Bank Credit Facility
will be further reduced on a monthly basis to $10,000,000 by June 29,
1994. The term of the Bank Credit Facility ends July 29, 1994 and earlier
in the event of a default. Furthermore, the maximum credit amount under
the Bank Credit Facility will continue to be further reduced by an amount
equal to cash dividends paid on the Series B Preferred Stock and Series C
Preferred Stock. On April 1, 1994, cash dividends totaling $750,000 were
paid on the Series B Preferred Stock, thereby reducing the maximum credit
currently available under the Bank Credit Facility to $15,916,000 as of
that date.
As a result of the Company's operating results in 1993, as well as
its decision to dispose of the Specialty Retail Division and VCL, the
Company was not in compliance with a number of ratios under the Bank
Credit Facility and the 12% Note Indenture as of December 31, 1993. The
Company is in discussions with the Bank Group to obtain waivers of the
non-compliance and management believes that those waivers will be
obtained. If the Bank Group waives the non-compliance, such waiver
automatically acts as a waiver of the corresponding non-compliance under
the 12% Note Indenture. If the Company does not secure the waivers, an
event of default will exist under both the Bank Credit Facility and the
12% Note Indenture, allowing the Bank Group and the holders of the 12%
Notes to accelerate payment of the amounts due to them. If such
acceleration occurred, the Company might not be in a position to pay the
amounts due and might not be able to continue as a going concern.
The Company is in negotiations with members of the Bank Group, as
well as others, to provide the New Bank Credit Facility prior to the
expiration of the Bank Credit Facility. The Company also is in
negotiations with holders of $31,000,000 in principal amount of the 12%
Notes to obtain the 12% Note Extension. A condition to obtaining the New
Bank Credit Facility is obtaining the 12% Note Extension. Although
management believes there is a realistic possibility of obtaining both the
New Bank Credit Facility and the 12% Note Extension prior to the
expiration of the Bank Credit Facility, there is no assurance that
management will be successful in these efforts. If the Company is unable
to obtain replacement financing, it may not be in a position to pay the
amounts due under the Bank Credit Facility and the 12% Notes upon the
maturity thereof and might not be able to continue as a going concern.
Management is also seeking to replace the Bank Credit Facility, as
well as the New Bank Credit Facility, with the Permanent Facility. Funds
from the Permanent Facility may also be used to pay all then-outstanding
12% Notes in full. Management does not expect the Permanent Facility to
be available unless and until after the closing of the Combination.
The 12% Notes were issued on March 26, 1993. Repayment of the 12%
Notes has been guaranteed by the same subsidiaries of LIVE that are
borrowers under the Bank Credit Facility. The 12% Notes bear interest at
the rate of 12% per annum, with interest payable monthly, and are
currently due and payable on September 15, 1994. The 12% Note Indenture
includes warranties, financial ratios, covenants and restrictions which
generally mirror the terms of the Bank Credit Facility. Repayment of the
12% Notes is subordinated to repayment of the Bank Credit Facility, and
until payment in full of the Bank Credit Facility, the rights of holders
of the 12% Notes to accelerate payment thereunder are limited to payment
defaults and/or acceleration of the Bank Credit Facility. Repayment of
the 12% Notes is secured by a lien on all of the assets of LIVE and LHV,
subordinate to the lien under the Bank Credit Facility and other pre-
existing liens.
On June 11, 1992, the Specialty Retail Division entered into the
Strawberries Credit Facility to provide working capital as well as funds
for expansion for the Specialty Retail Division. Borrowings under the
Strawberries Credit Facility are secured by substantially all of the
assets of the Specialty Retail Division. Outstanding borrowings under the
Strawberries Credit Facility bear interest at the rate of 3.5% per annum
above the higher of the Bank of America reference rate or the greater of
the Citibank or Mellon Bank prime rate. In no event will interest under
the loan be less than 9% per annum or $25,000 per month. As of the
Specialty Retail Division's 1993 fiscal year end, $3,354,000 was
outstanding under the Strawberries Credit Facility. The Specialty Retail
Division is currently in the process of negotiating an extension to the
Strawberries Credit Facility or securing a new line of credit. Management
expects that the Strawberries Credit Facility or a new line of credit,
together with funds generated from the operations of the Specialty Retail
Division, will be sufficient to provide the Division with all needed
capital resources through 1994.
The Specialty Retail Division owns the building housing its corporate
headquarters and distribution center in Milford, Massachusetts. In 1988,
the Division entered into a $4,000,000 mortgage loan on this building,
bearing interest at the prime rate plus 0.5%, with interest payable
monthly, annual principal reduction payments of $40,000 and a balloon
payment of all unpaid principal and interest on August 20, 1993. In July
1993, the Division agreed with the holder of the mortgage loan to change
the interest rate to a fixed rate of 9% per annum, to continue annual
principal reduction payments of $40,000 and to extend the balloon payment
date to August 20, 1995. The amount outstanding under the mortgage loan
as of January 31, 1994 was $3,800,000.
Dividends under the Series C Preferred Stock, at the rate of 5% per
annum on the unreturned $15,000,000 liquidation value of the Series C
Preferred Stock, are due on June 30 and December 31 of each year.
Although the dividends scheduled to be paid on June 30, 1993 and December
31, 1993 were accrued by the Company, those dividends were not paid due to
restrictions imposed on the Company by the terms of the Series B Preferred
Stock, which prohibit the payment of dividends on the Series C Preferred
Stock unless the aggregate amount of such dividends, together with all
cash dividends paid on the Series B Preferred Stock, does not exceed the
net income of the Company (adding back specified net worth exclusions)
since the March 23, 1993 date of issuance of the Series B Preferred Stock
and Series C Preferred Stock. The Company had a consolidated net loss for
the period subsequent to March 23, 1993. Thus, pursuant to the terms of
the Series B Preferred Stock, the Company was prohibited from paying the
June 30, 1993 and December 31, 1993 cash dividends on the Series C
Preferred Stock.
The unpaid Series C Preferred Stock dividend itself bears a dividend
of 5%, and is due on the next regularly scheduled dividend payment date
for the Series C Preferred Stock. The Company intends to pay the June 30,
1993 and December 31, 1993 dividends, plus the additional dividends
thereon, as soon as it has sufficient net income to permit such payment to
occur.
The Company experienced positive cash flows from financing activities
of $38,336,000 during 1993, primarily as a result of the receipt of
approximately $37,000,000 from the 12% Notes.
The Company's management is taking the following actions to address
the liquidity and capital resources issues facing it:
(a) The Company is in negotiations with members of the Bank Group
and other potential financing sources to obtain the New Bank Credit
Facility prior to the expiration of the Bank Credit Facility.
(b) The Company has held preliminary discussions with holders of the
12% Notes regarding obtaining the 12% Note Extension.
Although there is no assurance that the Company will be successful in
any of these activities, management believes that there is a realistic
possibility of completing all of them during 1994.
If management is successful in its financing efforts, it believes
that the Company will have sufficient capital resources to continue to
finance its activities, including the continued acquisition of additional
film titles.
Impact of Inflation and Other Matters
The inflation rate in recent years has been negligible. Where
manufacturers have increased prices, the Company generally has been able
to pass on such price increases within 90 to 180 days. As a result,
inflation has not had a material impact on the results of operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The index to Consolidated Financial Statements of the Company is
included in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth information with respect to the
directors and executive officers of the Company as of March 31, 1994.
Started
with the
Name Age Position Company
---- --- -------- --------
Anthony J. Scotti 54 Chairman of the Board 1988
Frans J. Afman 60 Director 1988
Jay Burnham 31 Director 1993
Ronald B. Cushey 37 Director 1993
Mario F. Kassar 42 Director 1988
Jonathan D. Lloyd 41 Director 1993
Satoshi Matsumoto 39 Director 1992
David A. Mount 50 Director 1988
Masao Nomura 44 Director 1993
R. Timothy O'Donnell 38 Director 1988
Roger R. Smith 51 Director 1988
Lynwood Spinks 41 Director 1992
Roger A. Burlage 51 President and Chief Executive 1994
Officer of the Company and LHV
Ivan R. Lipton 38 President of Specialty Retail 1980
Division
Michael J. White 38 Executive Vice President/Chief 1990
Administrative Officer, General
Counsel and Corporate Secretary
of the Company
Rodney W. Trovinger 43 Acting Chief Financial Officer 1986
of the Company and Senior Vice
President/Chief Financial
Officer of LHV
Mr. Scotti has been a Director of the Company since November 1988 and
Chairman of the Board since November 1992. Since February 1991, Mr.
Scotti has been Chairman of the Board and Chief Executive Officer of All
American Communications, Inc. ("All American"), a multi-media
entertainment conglomerate specializing in television production and
distribution, record producing, music publishing and motion picture
production. From 1976 to 1991, Mr. Scotti served as Co-Chairman of the
Board of Directors and Chief Executive Officer of Scotti Brothers
Entertainment Industries, a multi-media entertainment company which became
a wholly owned subsidiary of All American in February 1991.
Mr. Afman has been a Director of the Company since November 1988.
From 1982 until July 1988, Mr. Afman was a Senior Vice President of Credit
Lyonnais. He served as a consultant to the Board of Directors of Credit
Lyonnais from July 1988 until July 1991. In July 1991, Mr. Afman was
appointed Managing Director of a newly formed financial services unit of
International Creative Management, a leading worldwide talent and literary
agency. Currently, Mr. Afman is an independent financial consultant to
the entertainment industry.
Mr. Burnham, a Director of the Company since June 1993, has been an
investment analyst with Paul D. Sonz Partners, a diversified investment
services firm, since June 1990. From August 1987 until June 1990, he was
an investment analyst with Columbia Savings and Loan Association, a
financial savings institution. Mr. Burnham is a director of Bally's
Casino Resort, a hotel and gaming establishment located in Las Vegas,
Nevada.
Mr. Cushey became a Director of the Company on November 9, 1993. He
became Executive Consultant for Pioneer North America, Inc. in April 1992.
Mr. Cushey served as Chief Financial Officer of Nelson Holdings
International Ltd. and Nelson Entertainment Group (collectively, "Nelson")
from January 1989 until June 1991, after serving as Nelson's Acting Chief
Financial Officer since November 1987.
Mr. Kassar has been a Director of the Company since November 1988.
Mr. Kassar has been the Chairman of the Board of Directors of Carolco
since November 1989 and Chief Executive Officer of Carolco since March
1992. From 1986 until November 1989, Mr. Kassar was Co-Chairman of the
Board of Directors of Carolco. He was a co-founder of Carolco's
predecessor companies in 1975, which initially involved the sale,
distribution and servicing of feature films worldwide. He also was a
Director of Lieberman from March 1989 until 1991. Mr. Kassar is executive
producer or co-executive producer of a number of motion pictures produced
by Carolco, including the "Rambo" trilogy, "Total Recall," "Terminator 2:
Judgment Day," "Basic Instinct," "Chaplin" and "Cliffhanger."
Mr. Lloyd, a Director of the Company since June 1993, is currently
the President of Qintex Entertainment, Inc. ("Qintex"), a company engaged
in the development and production of television programming, a position he
has held since January 1990. In October 1989, Qintex filed for
reorganization under Chapter 11 of the United States Bankruptcy Code and a
plan of reorganization for Qintex was confirmed in December 1992. From
April 1988 to January 1990, Mr. Lloyd was the Executive Vice President and
Chief Financial Officer of Qintex. He is also the Chairman of Vanguard
Communications, L.P., a privately held developer and operator of microwave
cable television systems.
Mr. Matsumoto has been a Director of the Company since April 1992.
He was Executive Vice President for Strategic Operations of Carolco from
June 1990 until December 1993. From January 1989 to June 1990, Mr.
Matsumoto served as Senior Vice President of Movie Studio Relations for
Pioneer. From January 1986 until January 1989, he was Marketing Manager
for the Home Audio Division of Pioneer High Fidelity (Great Britain),
Ltd., a company that markets and sells electronic equipment manufactured
by Pioneer Electronic Corporation ("Pioneer Electronic").
Mr. Mount has been the President and Chief Executive Officer of WEA
since November 1993. Mr. Mount became Chief Executive Officer and a
Director of the Company in December 1991, President of the Company in
November 1992 and was President and Chief Executive Officer of LHV from
April 1990 to September 1993. In February 1993, the Company filed a
"prepackaged plan of reorganization" in the United States Bankruptcy Court
in order to consummate the Restructuring. The plan of reorganization was
confirmed on March 17, 1993 and the Company emerged from bankruptcy on
March 23, 1993. Mr. Mount previously served as Chief Operating Officer of
LHV from August 1989 and was Senior Vice President and General Manager
since joining LHV in August 1988. Prior to joining LHV, Mr. Mount served
for eleven years in a variety of positions with various divisions of
Warner Communications, Inc., most recently as Vice President of Sales for
Warner Home Video with responsibility for domestic sales and distribution
of video product, a position he assumed in 1984.
Mr. Nomura became a Director of the Company on November 9, 1993. He
has served as Secretary, Treasurer and Chief Financial Officer of Pioneer
since March 1987.
Mr. O'Donnell has been a Director of the Company since November 1988.
He is currently President of Jefferson Capital Group, Ltd. ("Jefferson
Capital"), a privately held investment banking group which he co-founded
in September 1989. From July 1988 until the founding of such firm, Mr.
O'Donnell served as Vice President, Acquisitions of CCA Industries Inc., a
privately held diversified investment company. Mr. O'Donnell has been a
Director of All American since January 1992 and a Director of Shorewood
Packaging Corporation, a packager of records, audiocassettes and
videocassettes, since 1992.
Mr. Smith has been a Director of the Company since November 1988 and
was Executive Vice President of Carolco from October 1990 to June 1992.
Since June 1992, Mr. Smith has been self employed as an independent motion
picture producer. He served as Executive Vice President of the Company
from November 1989 until September 1990 and Chief Financial Officer of the
Company from November 1988 until September 1990. He also served as Senior
Vice President of the Company from November 1988 until he became Acting
President of the Company in August 1989, a position he held until his
appointment as Executive Vice President of the Company. He was also
President of LIVE Enterprises Inc., a subsidiary of the Company, from
November 1989 until September 1990.
Mr. Spinks has been a Director of the Company since June 1992. He
became Executive Vice President/President of Production of Carolco in July
1993. Prior to that date, he served as Executive Vice President for
Business and Production Affairs of Carolco since March 1990. Mr. Spinks
received the additional title of President of Production in March 1993.
He became a Director of Carolco in March 1990. From September 1988 until
March 1990, Mr. Spinks was Senior Vice President of Carolco. From June
1986 until September 1988, he was Vice President of Carolco.
Mr. Burlage has served as President and Chief Executive Officer of
LIVE and LHV since January 1994. From 1989 until joining LIVE, Mr.
Burlage served as President and Chief Executive Officer of Trimark
Holdings, Inc., an diversified entertainment company ("Trimark"). Prior
to joining Trimark, Mr. Burlage served in several other capacities in the
entertainment industry, including positions with New World Pictures, Ltd.
and with AVCO Corporation and AVCO Embassy Pictures.
Mr. Lipton became President of the Specialty Retail Division in
December 1991, after previously serving as Executive Vice President/Chief
Merchandising Officer of the Specialty Retail Division since July 1990.
In February 1993, the Company filed a "prepackaged plan of reorganization"
in the United States Bankruptcy Court in order to consummate the
Restructuring. The plan of reorganization was confirmed on March 17, 1993
and the Company emerged from bankruptcy on March 23, 1993. From October
1989 to July 1990, he was Executive Vice President of Stores/Chief
Operating Officer of the Specialty Retail Division, and from February 1988
to October 1989 he was Vice President, Operations. Prior to that, Mr.
Lipton served as General Manager of Strawberries, a position he assumed in
1983, after joining Strawberries in 1980.
Mr. White has been Executive Vice President/Chief Administrative
Officer of the Company since November 1993 and General Counsel since
September 1990. In February 1993, the Company filed a "prepackaged plan
of reorganization" in the United States Bankruptcy Court in order to
consummate the Restructuring. The plan of reorganization was confirmed on
March 17, 1993 and the Company emerged from bankruptcy on March 23, 1993.
Prior to joining the Company, Mr. White served as Vice President, Human
Resources and Corporate Counsel of PACE Membership Warehouse, Inc.
("PACE") from June 1988 and February 1988, respectively, until April 1990.
Mr. Trovinger has been Acting Chief Financial Officer of the Company
since May 1992. He has been Senior Vice President and Chief Financial
Officer of LHV since 1988. In February 1993, the Company filed a
"prepackaged plan of reorganization" in the United States Bankruptcy Court
in order to consummate the Restructuring. The plan of reorganization was
confirmed on March 17, 1993 and the Company emerged from bankruptcy on
March 23, 1993.
Directors are elected for staggered terms of three years, except for
one year in regards to Messrs. Burnham and Lloyd, expiring as follows:
Jay Burnham, Ronald B. Cushey, Jonathan D. Lloyd, Satoshi Matsumoto and R.
Timothy O'Donnell at the 1994 annual meeting of stockholders; David A.
Mount, Roger R. Smith and Lynwood Spinks at the 1995 annual meeting of
stockholders; and Frans J. Afman, Mario F. Kassar, Masao Nomura and
Anthony J. Scotti at the 1996 annual meeting of stockholders. Officers
generally are appointed annually by the Board of Directors and serve at
the pleasure of the Board of Directors.
Arrangements Pursuant to Which Certain Directors Have Been Elected
By the terms of the Certificate of Designations, Preferences and
Relative, Participating, Optional or Other Special Rights of the Series B
Preferred Stock, the holders of the Series B Preferred Stock, voting as a
class, are entitled to elect two Directors of the Company, and more in
certain events. Messrs. Burnham and Lloyd have been elected as Directors
by the holders of the Series B Preferred Stock.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the cash compensation paid by the
Company during the fiscal years ended December 31, 1993, December 31, 1992
and December 31, 1991 to Mr. Mount who served as the Chief Executive
Officer of the Company until September 1993 and to each of the other
executive officers of the Company during 1993 whose annual salary and
bonus for such period was in excess of $100,000. As of the end of the
fiscal year ended December 31, 1993, the office of President and Chief
Executive Officer was vacant and there were only three executive officers
of the Company (Michael J. White, Ivan R. Lipton and Rodney W. Trovinger).
Such three executives along with Mr. Mount are referred to herein as the
"Named Executives." Mr. Burlage became President and Chief Executive
Officer of the Company in January 1994.
Following the Summary Compensation Table are certain additional
charts and tables detailing other aspects of the compensation of the Named
Executives including (a) an Option Grants Table that includes information
regarding individual grants of options made to the Named Executives during
fiscal 1993 along with the potential realizable values of such options and
(b) a Fiscal Year End Option Table that indicates whether any of the Named
Executives exercised options in fiscal 1993 and includes the number and
value of unexercised options held by the Named Executives at December 31,
1993.
<PAGE>
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
Long-Term Compensation
Annual Compensation Awards (1)
-------------------------------- ----------------------
Other
Annual All Other
Compen- Compen-
Name and sation Options/ sation
Principal Position Year Salary ($) Bonus ($) ($)(2)(3) SARs (#) ($)(2)
- - ------------------ ---- ---------- --------- --------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
David A. Mount 1993 336,741 125,000 (6) - 30,000 11,306 (9)
Chief Executive 1992 378,456 300,000 (7) - 153,500 17,503 (8)(9)
Officer (4)(5) 1991 324,000 - - - -
Michael J. White 1993 236,385 50,000 (6) - 10,000 3,090 (10)
Executive Vice 1992 220,423 95,000 - 30,000 3,404 (9)
President/Chief 1991 165,000 50,000 - - -
Administrative
Officer and
General Counsel
Rodney W. Trovinger 1993 157,307 50,000 (6) - 10,000 2,716 (10)
Acting Chief 1992 141,950 40,000 - 33,000 -
Financial Officer 1991 - - - - -
(11)(12)
Ivan R. Lipton 1993 161,250 70,499 - 20,000 3,090 (10)
President/Straw- 1992 150,000 124,250 (15) - 30,000 2,250 (9)
berries Inc. (13)(14) 1991 109,582 24,382 - - -
<FN>
(1) The column for long-term incentive plan payouts has been omitted
because no such payouts were made to any of the Named Executives
during any fiscal year covered by this Table.
(2) Does not include information for fiscal years ended prior to
December 15, 1992.
(3) Perquisites and other personal benefits are not included to the
extent they do not exceed the lesser of either $50,000 or 10% of
the total of annual salary and bonus for the named executive.
(4) Mr. Mount became Chief Executive Officer of the Company on December
24, 1991. Compensation amounts include compensation for fiscal
1991 prior to becoming Chief Executive Officer.
(5) In fiscal 1991, Mr. Mount's predecessor as Chief Executive Officer
of the Company received an annual base salary of $600,000.
(6) Represents a bonus paid in recognition of the Named Executive's
efforts in connection with the completion of the Restructuring in
March 1993.
(7) Includes a $50,000 "signing bonus" for assuming the duties of Chief
Executive Officer of LIVE in addition to Mr. Mount's then-existing
duties as President and Chief Executive Officer of LHV.
(8) Includes for Messrs. Mount, White and Lipton matching contributions
in the amount of $2,477, $3,404, and $2,250, respectively, under
the LIVE Incentive Savings Plan, which is a 401(k) savings plan.
(9) Includes $11,306 and $15,026 of life insurance premiums paid in
1993 and 1992, respectively, for Mr. Mount under a $1,000,000
whole-life split dollar insurance policy.
(10) Represents for Messrs. White, Trovinger and Lipton matching
contributions in the amount of $3,090, $2,716 and $3,090 each,
respectively, under the LIVE Incentive Savings Plan.
(11) Mr. Trovinger became an executive officer of the Company on May 1,
1992. Compensation amounts include compensation for fiscal 1992
prior to becoming an executive officer.
(12) Mr. Trovinger's predecessor as Chief Financial Officer of the
Company received an annual base salary of $225,000. In fiscal
1991, such predecessor received total compensation of $295,808.
(13) Mr. Lipton became an executive officer of the Company on December
24, 1991. Compensation amounts include compensation for fiscal
1991 prior to becoming an executive officer.
(14) In fiscal 1991, Mr. Lipton's predecessor as President of
Strawberries received an annual base salary of $275,000 and total
compensation of $420,695.
(15) Includes a $50,000 "signing bonus" to extend Mr. Lipton's
employment agreement through January 1996.
</TABLE>
<PAGE>
The following table sets forth certain information regarding the Chief
Executive Officer and the other Named Executives identified in the Summary
Compensation Table.
<TABLE>
OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
-----------------------------------------
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
- - --------------------------------------------------------------------- ---------------------------
% of
Total
Options/
SARs
Options/ Granted to Exercise
SARs Employees or Base Expir-
Granted in Fiscal Price ation
Name (#) Year(1) ($/Share)(2) Date 5%($)(3) 10%($)(3)
- - ---- ------- --------- ------------ ---- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
David A. Mount 5,000 0.5% 2.250 3/17/03 7,075 17,930
David A. Mount 25,000 2.7% 1.875 4/20/03 29,479 74,707
Michael J. White 10,000 1.1% 1.875 4/20/03 11,792 29,883
Rodney W. Trovinger 10,000 1.1% 1.875 4/20/03 11,792 29,883
Ivan R. Lipton 20,000 2.2% 1.875 4/20/03 23,584 59,765
<FN>
(1) Total of 929,300 granted.
(2) The closing price of the Company's Common Stock on the New York
Stock Exchange on March 31, 1994 was $2.50.
(3) Based upon the number of shares of the Company's Common Stock
outstanding as of December 31, 1993, a 5% and 10% increase in the
annual rates of stock price appreciation over the option term would
result in an aggregate increase of $16,573,134 and $41,248,664,
respectively, in the value of the Common Stock held by all the
Company's Common Stockholders (assuming no exercise of warrants,
other stock options or conversion of Series B Preferred Stock or
Series C Preferred Stock).
</TABLE>
<PAGE>
The following table sets forth certain information regarding option
exercises and option values for the Chief Executive Officer and the other
Named Executives identified in the Summary Compensation Table.
AGGREGATED OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
-------------------------------------------------------
AND FISCAL YEAR-END OPTION/SAR VALUES
-------------------------------------
Value of
Number of Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized Unexercisable Unexercisable
- - ---- --------------- -------- ------------- -------------
David A. Mount -0- -- 65,750/ 625/
117,750 13,125
Michael J. White -0- -- 15,000/ 0/
40,000 5,000
Rodney W. Trovinger -0- -- 16,500/ 0/
43,000 5,000
Ivan R. Lipton -0- -- 19,000/ 0/
50,000 10,000
Board Fees
During 1993, all Directors of the Company were entitled to receive
non-qualified options to acquire 5,000 shares of the Company's Common
Stock for service as a Board member. All Directors of the Company who are
not employed by the Company or its affiliates are also entitled to receive
an annual fee of $10,000 plus $1,000 for attendance at each committee
meeting. Mr. Scotti does not receive these fees.
Members of the Operations Review Committee who are not employed by
the Company are each entitled to receive a $75,000 per annum fee for
service on such Committee (in addition to regular fees for service on the
Board but excluding a separate meeting fee for the committee members).
Mr. Scotti does not receive this fee.
Mr. Scotti receives $25,000 per month for services rendered as
Chairman of the Board of Directors of the Company. Mr. Scotti receives no
other annual meeting or committee fees for his service on the Board. In
March 1993, Mr. Scotti received an additional $125,000 in recognition of
his efforts in connection with the Restructuring.
The Company and Mr. Scotti are parties to an agreement dated December
1993, pursuant to which the Company agreed, for a term ending in December
1996, to pay Mr. Scotti $25,000 per month, plus normal directors expenses
and other out-of-pocket expenses he may incur in connection with his
services to the Company, in return for Mr. Scotti making himself available
to the Company or any video subsidiary thereof to act as Mr. Burlage's
primary reporting person for the period ending December 31, 1996. Such
compensation is payable as long as Mr. Scotti makes himself available for
such purpose, whether or not the Company actually utilizes his services
and whether or not Mr. Burlage remains in the Company's employ.
Mr. Mount was party to a January 1992 employment agreement amended in
November 1992 with LIVE which provided that he would serve as Chief
Executive Officer and President of LIVE and Chief Executive Officer and
President of LHV for a minimum salary of $425,000 per annum, plus such
incentive compensation as may be determined from time to time by the Board
of Directors of the Company. Mr. Mount resigned as Chief Executive
Officer and President of LIVE and LHV in September 1993 but continues to
serve as a Director. Mr. Mount's employment contract provided him with a
$1,000,000 whole-life split dollar insurance policy, health insurance
benefits, automobile benefits, vacation benefits and a country club
membership. As part of Mr. Mount's employment agreement, LHV made an
unsecured, non-interest bearing loan of $150,000 to Mr. Mount. The
largest amount outstanding on the loan at any time during 1993 was
$150,000. Under the provisions of Mr. Mount's employment agreement, such
loan was to be forgiven in its entirety at the normal expiration of the
term of the agreement. In connection with Mr. Mount's departure in
September 1993 as President and Chief Executive Officer of the Company and
LHV, Mr. Mount and the Company entered into a separation agreement whereby
Mr. Mount agreed (a) to pay to the Company by January 1994 the sum of
$63,500, representing the unamortized portion of such loan, (b) to pay to
the Company by January 1994 the sum of $60,000, which was the amount paid
by the Company to obtain Mr. Mount's country club membership, and (c) to
reimburse to the Company by January 1994 the sum of $22,843.22,
representing the cash surrender value of Mr. Mount's life insurance
policy. All such amounts were paid in full by early 1994.
On February 5, 1993, the Company, LHV and certain of their
subsidiaries entered into a $20,000,000 credit facility (the "Junior
Credit Facility") with Pioneer North America, Inc. ("PNA"), the parent of
Pioneer, and a group of other participants. PNA committed to fund
$15,000,000 of the Junior Credit Facility conditioned upon completion of
Restructuring, and a group of participants (the "Junior Credit Facility
Participants") funded $5,000,000 of the Junior Credit Facility prior to
completion of the Restructuring. Jefferson Capital was one of the Junior
Credit Facility Participants, and provided $250,000 of the $5,000,000
funded by the Junior Credit Facility Participants. Mr. O'Donnell, a
principal of Jefferson Capital, is a Director of the Company. Borrowings
under the Junior Credit Facility bore interest at the Chemical Bank prime
rate plus six percentage points, resulting in an interest rate of 12% per
annum.
On March 26, 1993, the Junior Credit Facility was refinanced by the
12% Note Indenture and the 12% Notes. Neither Pioneer nor PNA is a holder
of any 12% Notes. Fidelity Management & Research Company, a subsidiary of
FMR Corp., manages or advises funds that hold $31,250,000 in principal
amount of the 12% Notes. Jefferson Capital held $500,000 in principal
amount of the 12% Notes; Mr. Scotti held $250,000 in principal amount of
the 12% Notes. The notes held by Jefferson Capital and Mr. Scotti were
sold to unrelated parties in July 1993. The 12% Notes bear interest at
the rate of 12% per annum, with interest payable monthly, and are due and
payable on September 15, 1994.
In connection with the Junior Credit Facility and the 12% Notes, the
Company issued warrants to purchase 1,333,332 and 1,000,000 shares of the
Company's Common Stock at a price of $2.00 and $2.72 per share,
respectively. Jefferson Capital received a warrant to purchase 16,667 and
14,706 shares of the Company's Common Stock at a price of $2.00 and $2.72,
respectively, for providing funding of $250,000 for both the Junior Credit
Facility and the 12% Notes; Mr. Scotti received a warrant to purchase
14,706 shares of the Company's Common Stock at a price of $2.72 per share
for his $250,000 investment in the 12% Notes. The warrants are
exercisable until March 1998 and the holders have been granted demand and
piggyback registration rights for the Common Stock underlying the
warrants.
In a May 1992 agreement, amended in July and August 1992, the Company
engaged Jefferson Capital and Daniels and Associates (collectively, the
"Financial Advisors") to review the Company's capital structure, assist in
structuring and placing appropriate working capital facilities at LHV and
to make recommendations with respect to the Company's capital structure.
As part of their engagement, the Financial Advisors assisted the Company
in negotiating and completing the Restructuring and received a total fee
of $1,700,000 for such services. LIVE has also agreed to reimburse the
Financial Advisors for their reasonable out-of-pocket expenses, including
legal fees, in connection with such engagement.
Jefferson Capital has performed various other investment banking
services for the Company. In January 1993, Jefferson Capital received a
$100,000 retainer for investment banking services to be provided in
connection with the Company's consideration of a potential business
combination of the Company and Carolco. The fee for such services could
increase to $1,000,000 contingent upon consummation of the Combination.
LIVE has also agreed to reimburse Jefferson Capital for its reasonable
out-of-pocket expenses, including legal fees, and to indemnify Jefferson
Capital against certain liabilities, including liabilities under the
federal securities laws, relating to or arising out of services performed
by Jefferson Capital as financial advisor to LIVE's management.
In April 1993, the Company engaged the Financial Advisors to assist
in structuring and placing a long-term working capital facility for LHV
and to make recommendations regarding the Company's capital structure. As
part of their engagement, the Financial Advisors received a $150,000 non-
refundable retainer. The additional fee for such services will be based
on a percentage of the financing obtained or the capital raised and will
vary depending upon the type of financing or capital raised. LIVE has
also agreed to reimburse the Financial Advisors for their reasonable out-
of-pocket expenses, including legal fees, in connection with such
engagement.
Houlihan, Lokey, Howard & Zukin, Inc. ("HLHZ") and Mr. Lloyd together
acted as advisors to holders of the Senior Subordinated Notes and Series A
Preferred Stock in connection with the Restructuring. LIVE paid HLHZ and
Mr. Lloyd together a total of $630,000, plus expenses, in connection with
such services. Mr. Lloyd received $92,000 of such amount. Mr. Salter,
who served as a Director of the Company from April 1993 to June 1993, is a
Vice President of HLHZ.
In a July 1993 consulting agreement, the Company engaged Mr. Smith to
provide consulting services as an independent contractor in connection
with the search by the Company for an individual to replace David Mount as
Chief Executive Officer of LIVE and LHV upon Mr. Mount's departure from
the Company. The fee for such service was $10,000 per month (pro rated
for partial months) plus expenses. This agreement terminated upon the
hiring of Roger Burlage as President and Chief Executive Officer of the
Company in January 1994. The Company paid Mr. Smith a total of $62,200 in
consideration of his services under this agreement.
Metronome Productions N.V. ("Metronome"), which employs Mr. Afman,
serves as Managing Director of LIVE NV and was paid $75,000 per year
through February 1994 as compensation for such service. Metronome was
paid $75,000 in 1993.
Employment and Consulting Agreements
Mr. Burlage is party to a December 1993 employment agreement with
LIVE which provides that he will serve as Chief Executive Officer and
President of LIVE from January 1994 until December 1997. Mr. Burlage's
minimum salary is $450,000 per annum during 1994 and will be increased
each calendar year thereafter by 5% of the base salary in effect in the
prior calendar year (or more at the discretion of the Company's Board of
Directors). Mr. Burlage will also receive incentive compensation equal to
two percent of the Company's earnings before interest and taxes in excess
of $10,000,000 per annum, subject to certain exclusions, limited to 100%
of his base salary for the applicable year. As part of the agreement, the
Company paid Mr. Burlage a signing bonus of $100,000 and agreed to pay for
and/or provide a life insurance policy, disability benefits, health
insurance benefits, automobile benefits, vacation benefits and a country
club membership. In addition, the Company granted Mr. Burlage options to
acquire 600,000 shares of the Company's Common Stock at a price of $1.875
per share (the closing price of the Company's Common Stock on the New York
Stock Exchange on the date the Company and Mr. Burlage reached agreement
on his employment), with 150,000 of such options vesting annually
commencing December 31, 1994. If Mr. Burlage's employment is terminated
by LIVE for other than "good cause," he will receive his salary, incentive
compensation, life insurance, health insurance and automobile benefits for
the remainder of the term of his employment agreement. All payments
pursuant to the provisions of the immediately preceding sentence would be
reduced, dollar for dollar, by the amount received by Mr. Burlage from
employment following termination of his agreement.
Mr. White is party to a February 1994 employment agreement with the
Company which provides that he will serve as Executive Vice
President/Chief Administrative Officer and General Counsel of the Company
until such time that either the Company or Mr. White gives notice of
termination. The agreement provides that Mr. White will receive a minimum
annual salary of $250,000, plus such incentive compensation as is
determined from time to time by the Board. As part of the agreement, the
Company agreed to provide Mr. White with health insurance, life insurance
and vacation benefits. If Mr. White's employment is terminated by LIVE
for other than "good cause," he will receive his salary for one year,
along with health insurance. All payments pursuant to the provisions of
the immediately preceding sentence would be reduced, dollar for dollar, by
the amount received by Mr. White from employment following termination of
his agreement.
Mr. Trovinger is party to an October 1992 employment agreement with
LHV which provides that he will serve as Senior Vice President/Chief
Financial Officer of LHV for a period of three years. The agreement
provides that Mr. Trovinger will receive a minimum annual salary of
$150,000, plus such incentive compensation as is determined from time to
time by the Board of Directors of LHV. In addition, as part of the
agreement, LHV agreed to provide Mr. Trovinger with health insurance, life
insurance, automobile benefits and vacation benefits. If Mr. Trovinger's
employment is terminated by LHV for other than "good cause," he will
receive his salary for the lesser of one year or the remaining term of his
agreement, along with life and health insurance and automobile benefits.
In the event of a change of control under Mr. Trovinger's employment
contract of LHV involving persons or entities other than the Company,
Carolco or their affiliates, and a subsequent reduction in Mr. Trovinger's
responsibilities, Mr. Trovinger has the right to terminate his agreement
with the same effect as if LHV had terminated his agreement without "good
cause." All payments pursuant to the provisions of the two immediately
preceding sentences would be reduced, dollar for dollar, by the amount
received by Mr. Trovinger from employment following termination of his
agreement.
Mr. Lipton and Strawberries are parties to a December 1992 employment
agreement which provides that he will serve as President of Strawberries
though January 1996. The agreement provides that Mr. Lipton will receive
a minimum annual salary of $161,250 through the term of the agreement,
plus such incentive compensation as is determined from time to time by the
Board of Directors of Strawberries. As part of the agreement,
Strawberries paid Mr. Lipton a $50,000 signing bonus and agreed to provide
Mr. Lipton with health insurance, life insurance, automobile benefits and
vacation benefits. If more than 50% of the stock or assets of
Strawberries is sold during the term of Mr. Lipton's contract and, in
certain circumstances, within two years after such term, then Mr. Lipton
will be entitled to additional compensation based upon the net proceeds
received in connection with such sale.
Compensation Committee Interlocks and Insider Participation
Mr. Afman, Mr. O'Donnell and Mr. Scotti all are members of the
Company's Compensation Committee. The various agreements between the
Company and Messrs. Afman, O'Donnell and Scotti and their respective
affiliates are described above under "Board Fees."<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Common Stock and Series C Preferred Stock
The following table sets forth as of March 31, 1994, the beneficial
ownership of shares of the Company's Common Stock and Series C Preferred
Stock (a) by each stockholder who is known by the Company to own more than
5% of the outstanding shares of Common Stock, (b) by each Director of the
Company, (c) by the Chief Executive Officer of the Company, (d) by the
other executive officers of the Company, and (e) by all executive officers
and Directors as a group. The number of shares and percentages set forth
below are based upon 12,093,610 shares of Common Stock outstanding as of
March 31, 1994 plus 5,119,389 shares of Common Stock that is issuable upon
the conversion of the Series C Preferred Stock, including the liquidation
value attributable to certain accrued and unpaid dividends. All 15,000
shares of Series C Preferred Stock are owned by Pioneer. The shares of
Common Stock underlying immediately exercisable options or warrants or
options or warrants that become exercisable within 60 days after March 31,
1994, are deemed to be outstanding for purposes of calculating the number
and percentage of Common Stock owned by the holders of such options.
Percentage of
Shares of Outstanding
Common Stock Common Stock and
Name of Beneficial and Voting Shares Voting Shares
Owner or Identity of Series C Preferred of Series C
of Group Stock Owned Preferred Stock
------------------ --------------------- ---------------
Pioneer LDCA, Inc. (1) 9,148,612 53.2%
Cinepole Productions B.V. (2) 1,288,030 7.5%
RCS Editori S.p.A. (3) 1,288,030 7.5%
FMR Corp. (4) 1,955,882 10.2%
Anthony J. Scotti (5)(6) 54,206 *
Roger A. Burlage (7) 0 *
Frans J. Afman (8) 19,500 *
Jay Burnham (9)(10) 10,000 *
Ronald B. Cushey (11)(12) 5,000 *
Mario F. Kassar (13) 22,500 *
Jonathan D. Lloyd (9) 10,000 *
Satoshi Matsumoto (9)(12) 10,000 *
David A. Mount (14) 139,500 *
Masao Nomura (11)(12) 5,000 *
R. Timothy O'Donnell (5)(15)(16) 80,373 *
Roger R. Smith (17) 95,260 *
Lynwood Spinks (18) 11,500 *
Ivan R. Lipton (19)(20) 32,000 *
Michael J. White (19)(21) 34,000 *
Rodney W. Trovinger (19)(22) 37,010 *
All executive officers and Directors
as a group (16 persons) 565,849 3.2%
- - ---------
* Less than 1%.
(1) Pioneer owns directly 4,029,223 shares of Common Stock. Pioneer also
owns 15,000 shares of Series C Preferred Stock. The Series C
Preferred Stock has voting rights equivalent to and is convertible
into 5,119,389 shares of Common Stock. The addresses of Pioneer are
2265 East 220th Street, Long Beach, California 90810 and 1-20-6,
Ebisuminami, Shibuya-jym, Tokyo 150, Japan.
(2) The address of Cinepole is 17, Dumont d'Urville, 75116, Paris,
France.
(3) The address of RCS Editori S.p.A. is Via Rizzoli 2, 20132 Milan,
Italy. RCS Editori S.p.A. directly owns 60% of the outstanding stock
of RCS Video International Services B.V. ("RCS") and indirectly owns
40% of the outstanding stock of RCS.
(4) Represents 1,955,882 shares of Common Stock which are issuable upon
exercise of presently exercisable warrants. FMR Corp. is the parent
of Fidelity Management & Research Company which manages or advises
funds that hold these warrants. The address of FMR Corp. and
Fidelity Management & Research Company is 82 Devonshire Street, F7E,
Boston, Massachusetts 02109.
(5) Does not include 167,378 shares of Common Stock held by Scotti
Brothers.
(6) Represents 54,206 shares of Common Stock which are issuable upon
exercise of presently exercisable options and warrants.
(7) Mr. Burlage is the Chief Executive Officer of the Company.
(8) Represents 19,500 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(9) Represents 10,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(10) Does not include 192,400 shares of Common Stock held by entities
controlled by Paul D. Sonz Partners.
(11) Represents 5,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(12) Does not include 4,029,223 shares of Common Stock and 15,000 shares
of Series C Preferred Stock held by Pioneer.
(13) Represents 22,500 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(14) Represents 139,500 shares of Common Stock which are issuable
upon exercise of presently exercisable options.
(15) Includes 19,500 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(16) Includes 45,873 shares of Common Stock underlying three warrants
issued to Jefferson Capital. See "Board Fees" above.
(17) Includes 94,500 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(18) Represents 11,500 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(19) Messrs. Lipton, White and Trovinger are executive officers of the
Company.
(20) Represents 32,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(21) Represents 34,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(22) Includes 37,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
Series B Preferred Stock
The following table sets forth, as of March 31, 1994, the beneficial
ownership of shares of Series B Preferred Stock (a) by each stockholder
who is known by the Company to own more than 5% of the outstanding shares
of Series B Preferred Stock, (b) by each Director of the Company, (c) by
the Chief Executive Officer of the Company, (d) by the other executive
officers of the Company, and (e) by all officers and Directors as a group.
The number of shares and percentages set forth below are based upon
6,000,000 shares of Series B Preferred Stock outstanding as of March 31,
1994.
Percentage of
Name of Beneficial Shares of Series Outstanding
Owner or Identity B Preferred Series B
of Group Stock Owned Preferred Stock
------------------ ---------------- ---------------
Island Investors Partnership (1) 467,604 7.8%
Metropolitan Life Insurance Company (2) 419,094 7.0%
Anthony J. Scotti 0 *
Roger A. Burlage 0 *
Frans J. Afman 0 *
Jay Burnham (3) 0 *
Ronald B. Cushey 0 *
Mario F. Kassar 0 *
Jonathan D. Lloyd 0 *
Satoshi Matsumoto 0 *
David A. Mount 0 *
Masao Nomura 0 *
R. Timothy O'Donnell 0 *
Roger R. Smith 0 *
Lynwood Spinks 0 *
Ivan R. Lipton 0 *
Michael J. White 0 *
Rodney W. Trovinger 0 *
All executive officers and Directors
as a group (16 persons) 0 *
- - ---------
* Less than 1%.
(1) The address of Island Investors Partnership is 40304 Fisher Island
Drive, Fisher Island, Florida 33109.
(2) The address of Metropolitan Life Insurance Company is One Madison
Avenue, New York, New York 10010.
(3) Does not include 244,586 shares of Series B Preferred Stock held by
entities controlled by Paul D. Sonz Partners.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
LHV has entered into an agreement with Carolco entitling LHV to
acquire home video rights in the United States and Canada for most motion
pictures produced or controlled by Carolco which commence principal
photography prior to August 1995, under a series of agreements which
principally consist of a master agreement entered into in July 1987,
restated in October 1987, and amended in April 1990, March 1991, October
1991 and March 1992 (the "Master Agreement"). Canadian home video rights
have not been granted to LHV in the case of several films produced or
acquired by Carolco. The Strategic Investors have co-financed certain of
the motion pictures subject to the Master Agreement. The Master Agreement
provides for the payment by LHV of certain advances for each picture,
which advances are recoupable from LHV's net receipts from video
distribution of the pictures. LHV is entitled to cross-collateralize both
net receipts from groups of pictures and advances on subsequent groups of
pictures in order to ensure that it earns a certain minimum overall
distribution fee on each group of films. There is a corresponding upper
limit on the total gross distribution fee that LHV can earn on each group
of films. "Net receipts" generally are LHV's wholesale receipts less
certain expenses such as marketing and costs of manufacturing. All
aspects of the Master Agreement, amendments thereto and advances on
individual pictures have been or will be (in the case of future amendments
or pictures) approved by the Independent Committees of each of Carolco's
and LIVE's Board of Directors. In 1993, LHV made no payments to Carolco
and at December 31, 1993 had no recorded contractual obligations under the
Master Agreement. Additional advances also will be due if additional
films are made available from Carolco under the Master Agreement. From
time to time, LHV has made payments to Carolco for video rights to films
in production prior to the date payment was required under the applicable
video distribution agreement. The Company has received discounts for such
early payments. As of December 31, 1993, the Company had no such early
payments outstanding.
LIVE NV has entered into an agreement with Carolco International N.V.
(now Carolco International Inc.) ("CINV") entitling LIVE NV to acquire
home video rights in the German-speaking European market for most motion
pictures produced or controlled by CINV which commence principal
photography prior to August 1995 (other than rights granted by CINV to
other parties prior to April 1991), under a master agreement entered into
in April 1991 (the "German Master Agreement"). The Strategic Investors
have co-financed certain of the motion pictures subject to the German
Master Agreement. The German Master Agreement provides for the payment by
LIVE NV of certain advances for each picture, which advances are
recoupable from LIVE NV's net receipts from video distribution of these
pictures. LIVE NV is entitled to cross-collateralize both net receipts
from groups of pictures and advances on subsequent groups of pictures in
order to ensure that it earns a certain minimum overall distribution fee
on each group of films. There is a corresponding upper limit on the total
gross distribution fee that LIVE NV can earn on each group of films. "Net
receipts" generally are the wholesale receipts of LIVE NV or its
designated subsidiaries, including VCL, less certain expenses such as
marketing and costs of manufacturing. All aspects of the German Master
Agreement and advances on individual pictures have been or will be (in the
case of future amendments or pictures) approved by the Independent
Committee of each of Carolco's and LIVE's Board of Directors. In 1993,
LIVE NV did not pay any advances to CINV. Under the German Master
Agreement, LIVE NV may owe CINV up to $900,000 for three completed films
to be delivered during the remaining term of the German Master Agreement.
Additional advances also will be due if additional films are made
available from Carolco under the German Master Agreement.
LIVE NV and CINV are general partners in a Netherlands Antilles
general partnership which is involved in the international marketing and
distribution of video rights. LIVE NV's contribution to the partnership
consists of international video rights, and CINV's contribution consists
of international distribution services. LIVE NV has a 99% interest in the
partnership and CINV's interest is 1%. During 1993, CINV's portion of the
partnership's income was approximately $4,000. Pursuant to a service
agreement between CINV and the partnership, CINV has agreed to provide
additional international sales, marketing and distribution facilities and
expertise to the partnership for an annual fee not to exceed 10% of the
partnership's sublicense and royalty revenue. During 1993, CINV's fee for
the services rendered pursuant to this service agreement was approximately
$152,000.
In December 1992, the Company, Carolco and certain of their
affiliates reconciled the amounts owing to each by the others (the
"Reconciliation Agreement"). As of January 1, 1993 and December 31, 1993,
Carolco and its affiliates owed a total of $5,364,439 and $8,047,318,
respectively, to LIVE and its affiliates.
Pursuant to an agreement dated October 1991, LIVE America granted
Pioneer a license for United States laser videodisc rights to LIVE
America's library of motion pictures (subject to certain reserved rights)
for a term ending in September 1995. In October 1991, Pioneer paid LIVE
America $5,000,000 under this agreement as a non-returnable advance
recoupable on a cross-collateralized basis from all royalties payable to
LIVE America under the agreement.
On September 14, 1992, Pioneer and a wholly owned subsidiary of LHV
formed a film rights acquisition limited partnership (the "Film Rights
Partnership") to acquire video and other film rights and exploit such
rights through the distribution facilities of LHV and its subdistributors.
Pioneer contributed $15,000,000 in cash to the Film Rights Partnership.
At the March 23, 1993 closing date of the Restructuring, Pioneer exchanged
with the Company all of its right, title and interest in and to the Film
Rights Partnership in return for the Series C Preferred Stock. On March
23, 1993, Pioneer also received $472,500 as the guaranteed return on its
investment in the Film Rights Partnership from September 15, 1992 to March
23, 1993. The Company has granted Pioneer piggyback and demand
registration rights for the Common Stock into which the Series C Preferred
Stock is convertible.
In July 1993, LIVE granted to the Strategic Investors the right to
require LIVE to use its best efforts to register all Common Stock in the
Company owned by them, whether acquired directly from the Company, upon
conversion of the Series C Preferred Stock, or upon acquisition of such
stock from Carolco pursuant to the Carolco Restructuring.
The Company believes that each transaction with an affiliate of the
Company was on terms at least as favorable to the Company as would have
prevailed in arms-length transactions between unrelated parties. In
addition, future transactions between the Company and its affiliates will
be referred to either the Company's Board of Directors or a committee of
disinterested Directors to ensure that the interests of the Company are
protected in any such transaction.
<PAGE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES ACT OF 1934
Section 16(a) of the Securities Act of 1934 requires the Company's
directors and executive officers, and persons who own more than ten
percent of a registered class of the Company's equity securities, to file
with the Securities and Exchange Commission ("SEC") and the New York Stock
Exchange initial reports of ownership and reports of changes in ownership
of Common Stock and other equity securities of the Company. Officers,
directors and greater than ten percent stockholders are required by SEC
regulation to furnish the Company with copies of all Section 16(a) forms
they file.
To the Company's knowledge, based solely on review of the copies of
such reports furnished to the Company and written representations that no
other reports were required, during the year ended December 31, 1993 all
Section 16(a) filing requirements applicable to its officers, directors
and greater than ten-percent beneficial owners were complied with except
that Mr. Burnham, a Director of the Company, failed to file on a timely
basis one report dealing with one transaction, which report was filed two
days late.
<PAGE>
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) The following consolidated financial statements of LIVE and its
subsidiaries are included in Item 8 and filed herewith:
Consolidated Balance Sheets as of December 31, 1992 and 1993
Consolidated Statements of Operations for the Years Ended
December 31, 1991, 1992 and 1993
Consolidated Statements of Stockholders' Equity for the Years
Ended December 31, 1991, 1992 and 1993
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1991, 1992 and 1993
Notes to Consolidated Financial Statements
(a)(2) The following consolidated financial statement schedules are
included in Item 14(d):
Schedule II -- Amounts Receivable from Related Parties and
Underwriters, Promoters, and Employees Other
than Related Parties
Schedule VIII -- Valuation and Qualifying Accounts
Schedule IX -- Short Term Borrowings
Schedule X -- Supplementary Income Statement Information
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and Exchange Commission
are either not required under the related instructions or are
inapplicable, and therefore have been omitted.
(a)(3) The exhibits listed on the Exhibit Index are filed as part
of this report.
(b) On November 3, 1993, the Company filed a report on Form 8-K,
dated October 20, 1993, announcing that Carolco had consummated a
financial restructuring and that the LIVE Common Stock held by Carolco was
conveyed to Carolco's Strategic Investors as partial satisfaction of a
loan outstanding from Carolco to the Strategic Investors.
<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.
LIVE ENTERTAINMENT INC.
By /s/ ROGER A. BURLAGE
-------------------------------
Roger A. Burlage
Chief Executive Officer
Dated: April 15, 1994
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
ANTHONY J. SCOTTI* Chairman of the Board April 12, 1994
- - --------------------------
Anthony J. Scotti
/s/ROGER A. BURLAGE Chief Executive Officer April 15, 1994
- - -------------------------- (principal executive officer)
Roger A. Burlage
RODNEY W. TROVINGER* Chief Financial Officer April 11, 1994
- - -------------------------- (principal financial officer)
Rodney W. Trovinger
/s/ROBERT L. DENTON Vice President and April 15, 1994
- - -------------------------- Chief Accounting Officer
Robert L. Denton (principal accouting officer)
FRANS J. AFMAN* Director April 13, 1994
- - --------------------------
Frans J. Afman
JAY BURNHAM* Director April 11, 1994
- - --------------------------
Jay Burnham
RONALD B. CUSHEY* Director April 11, 1994
- - --------------------------
Ronald B. Cushey
<PAGE>
Signature Title Date
--------- ----- ----
JONATHAN D. LLOYD* Director April 9, 1994
- - --------------------------
Jonathan D. Lloyd
DAVID A. MOUNT* Director April 12, 1994
- - --------------------------
David A. Mount
MASAO NOMURA* Director April 12, 1994
- - --------------------------
Masao Nomura
R. TIMOTHY O'DONNELL* Director April 12, 1994
- - --------------------------
R. Timothy O'Donnell
ROGER R. SMITH* Director April 12, 1994
- - --------------------------
Roger R. Smith
LYNWOOD SPINKS* Director April 9, 1994
- - --------------------------
Lynwood Spinks
* By signing his name hereto, Roger A. Burlage signs this document as
Chief Executive Officer of the Registrant and on behalf of the persons
indicated above pursuant to powers of attorney duly executed by such
persons and filed herewith.
By: /s/ ROGER A. BURLAGE, ATTORNEY-IN-FACT
---------------------------------------
Roger A. Burlage, Attorney-In-Fact
<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.
LIVE ENTERTAINMENT INC.
By /s/ ROGER A. BURLAGE
-------------------------------
Roger A. Burlage
Chief Executive Officer
Dated: April 15, 1994
--------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
ANTHONY J. SCOTTI* Chairman of the Board April 12, 1994
- - --------------------------
Anthony J. Scotti
Chief Executive Officer April 15, 1994
- - -------------------------- (principal executive officer)
Roger A. Burlage
RODNEY W. TROVINGER* Chief Financial Officer April 11, 1994
- - -------------------------- (principal executive officer)
Rodney W. Trovinger
Vice President and April 15, 1994
- - -------------------------- Chief Accounting Officer
Robert L. Denton (principal accounting officer)
FRANS J. AFMAN* Director April 13, 1994
- - --------------------------
Frans J. Afman
JAY BURNHAM* Director April 11, 1994
- - --------------------------
Jay Burnham
RONALD B. CUSHEY* Director April 11, 1994
- - -------------------------
Ronald B. Cushey
<PAGE>
Signature Title Date
--------- ----- ----
JONATHAN D. LLOYD* Director April 9, 1994
- - --------------------------
Jonathan D. Lloyd
DAVID A. MOUNT* Director April 12, 1994
- - --------------------------
David A. Mount
MASAO NOMURA* Director April 12, 1994
- - --------------------------
Masao Nomura
R. TIMOTHY O'DONNELL* Director April 12, 1994
- - --------------------------
R. Timothy O'Donnell
ROGER R. SMITH* Director April 12, 1994
- - --------------------------
Roger R. Smith
LYNWOOD SPINKS* Director April 9, 1994
- - --------------------------
Lynwood Spinks
* By signing his name hereto, Roger A. Burlage signs this document as
Chief Executive Officer of the Registrant and on behalf of the persons
indicated above pursuant to powers of attorney duly executed by such
persons and filed herewith.
By: /s/ ROGER A. BURLAGE, ATTORNEY-IN-FACT
---------------------------------------
Roger A. Burlage, Attorney-In-Fact
REPORT OF INDEPENDENT AUDITORS
Board of Directors
LIVE Entertainment Inc.
We have audited the accompanying consolidated balance sheets of LIVE
Entertainment Inc. and subsidiaries as of December 31, 1992 and 1993, and
the related consolidated statements of operations, stockholders' equity,
and cash flows for each of the three years in the period ended December 31,
1993. Our audits also included the financial statement schedules listed
in the Index at Item 14(a). These financial statements and schedules are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit 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 financial statements referred to above, present
fairly, in all material respects, the consolidated financial position of
LIVE Entertainment Inc. and subsidiaries at December 31, 1992 and 1993, and
the consolidated results of their operations and their cash flows for each
of the three years in the period ended December 31, 1993, in conformity
with generally accepted accounting principles. Also, in our opinion, the
related financial statement schedules, when considered in relation to the
basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
The accompanying consolidated financial statements have been prepared
assuming that LIVE Entertainment Inc. will continue as a going concern.
As more fully described in Note 1, the Company has incurred recurring
operating losses and has not complied with certain restrictive covenants
under its debt agreements. Further, the Company's principal credit
facility contains decreasing borrowing limits and expires July 29, 1994.
In addition, the Company's 12% Subordinated Secured Notes are due and
payable September 15, 1994. The Company has not obtained waivers from
appropriate parties and as such, approximately $37,000,000 of 12%
Subordinated Secured Notes are subject to acceleration. If the Company is
unable to generate sufficient cash flows from operations, obtain
appropriate waivers, or if it is unable to obtain financing beyond July 29,
1994, it may not be able to repay the required balances or have sufficient
borrowing capacity to fund its operations. These conditions raise
substantial doubt about the Company's ability to continue as a going
concern. Management's plans in regard to these matters are also described
in Note 1. The consolidated financial statements do not include any
adjustments to reflect the possible future effects on the recoverability
and classification of assets or the amounts and classification of
liabilities that may result from the possible inability of LIVE
Entertainment Inc. to continue as a going concern.
ERNST & YOUNG
Century City
Los Angeles, California
April 1, 1994
<PAGE>
<TABLE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
<CAPTION>
December 31,
-----------------
1992 1993
ASSETS ------ ------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash
of $7,804 and $17,173. . . . . . . . . . . . . . . . . . . . . . . . . . $ 18,847 $ 42,358
Accounts receivable, less allowances of $24,463 and $25,440. . . . . . . . 14,336 2,432
Officer and employee receivables . . . . . . . . . . . . . . . . . . . . . 524 407
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48,961 10,124
Video rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,716 29,839
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . -- 4,176
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,426 1,136
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,911 86,000
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . . . . . . . . 131,721 176,472
PROPERTY AND EQUIPMENT, net. . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,948 1,686
RECEIVABLE FROM AFFILIATE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,364 8,047
VIDEO RIGHTS, net of accumulated amortization of $382,326 and $415,681 . . . . . . 51,541 32,228
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,725 1,320
GOODWILL, net of accumulated amortization of $36,069 and $32,193 . . . . . . . . . 95,749 33,796
$297,048 $253,549
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,230 $ --
12% Subordinated Secured Notes due 1994. . . . . . . . . . . . . . . . . . -- 36,707
Current maturities of long-term obligations. . . . . . . . . . . . . . . . 12,838 8,043
Current maturities of Increasing Rate Senior Subordinated Notes. . . . . . 3,687 3,791
Video rights obligations . . . . . . . . . . . . . . . . . . . . . . . . . 33,314 15,850
Accounts payable, deferred revenue and accrued expenses. . . . . . . . . . 58,090 18,343
Liabilities related to assets held for sale. . . . . . . . . . . . . . . . 5,412 46,601
Series B Cumulative Convertible Preferred Stock (5,000,000 shares) . . . . -- 40,000
Dividends payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- 1,340
Income taxes payable and deferred income taxes . . . . . . . . . . . . . . 387 --
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . . . . 115,958 170,675
BANK DEBT, less current maturities . . . . . . . . . . . . . . . . . . . . . . . . 5,370 --
LONG-TERM OBLIGATIONS, less current maturities . . . . . . . . . . . . . . . . . . 13,133 3,333
INCREASING RATE SENIOR SUBORDINATED NOTES DUE 1999, including
capitalized interest of $24,245 and $20,662, less current maturities . . . . . . 60,558 56,871
DEFERRED REVENUE AND ACCRUED EXPENSES, less current portion. . . . . . . . . . . . 7,439 1,740
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,531 10,188
STOCKHOLDERS' EQUITY:
Series B Cumulative Convertible Preferred Stock--authorized 9,000,000 shares;
$1.00 par value; $60,000,000 liquidation preference;
6,000,000 (1992) and 1,000,000 (1993) shares outstanding . . . . . . . . 6,000 1,000
Series C Convertible Preferred Stock--15,000 shares authorized
and outstanding; $1.00 par value; $15,000,000 liquidation preference . . -- 15
Common Stock -- authorized 120,000,000 shares; $0.01 par value;
12,086,530 (1992) and 12,090,016 (1993) shares outstanding . . . . . . . 121 121
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . 126,405 106,507
Retained deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (43,020) (96,901)
Cumulative translation adjustment. . . . . . . . . . . . . . . . . . . . . (447) --
89,059 10,742
$297,048 $253,549
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
<CAPTION>
Year Ended December 31,
1991 1992 1993
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 237,705 $ 160,953 $ 143,735
Cost of goods sold . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 200,316 142,000 124,336
GROSS PROFIT. . . . . . . . . . . . . . . . . . . . . . . . . . . 37,389 18,953 19,399
Operating expenses:
Selling, general and administrative expenses . . . . . . . . . . . . 16,834 16,092 17,248
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . 2,365 3,924 3,924
Write-off of excess cost over net assets acquired (goodwill) . . . . 15,000 -- --
Other expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,905 -- --
38,104 20,016 21,172
(715) (1,063) (1,773)
Disposal of VCL/Carolco Communications GmbH (VCL):
Net Sales. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26,713 31,560 28,511
Costs and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 26,584 35,351 32,174
129 (3,791) (3,663)
Loss on disposal of VCL. . . . . . . . . . . . . . . . . . . . . . . -- -- (15,741)
129 (3,791) (19,404)
OPERATING LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . (586) (4,854) (21,177)
Interest expense, net. . . . . . . . . . . . . . . . . . . . . . . . (15,834) (14,424) (6,264)
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (BENEFIT). . . . . . . . . . . . . . . . . . . . . (16,420) (19,278) (27,441)
Income tax expense (benefit) . . . . . . . . . . . . . . . . . . . . 1,317 (1,818) 768
LOSS FROM CONTINUING OPERATIONS . . . . . . . . . . . . . . . . . (17,737) (17,460) (28,209)
Discontinued Operations:
(Loss) income from discontinued operations net of income taxes . . . (11,855) 1,090 1,690
Loss on disposal and operating losses during phase-out period,
net of income tax benefit. . . . . . . . . . . . . . . . . . . . . (77,460) -- (23,773)
(LOSS)INCOME FROM DISCONTINUED OPERATIONS . . . . . . . . . . . . (89,315) 1,090 (22,083)
LOSS BEFORE EXTRAORDINARY ITEM. . . . . . . . . . . . . . . . . . (107,052) (16,370) (50,292)
EXTRAORDINARY ITEM-Gain from debt restructuring, including
income tax benefit of $790 . . . . . . . . . . . . . . . . . . . . . -- 3,967 --
NET LOSS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (107,052) (12,403) (50,292)
Preferred dividends. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 966 2,397 3,589
NET LOSS ATTRIBUTABLE TO COMMON STOCK . . . . . . . . . . . . . . $ (108,018) $ (14,800) $ (53,881)
(Loss) income per common share:
Continuing operations. . . . . . . . . . . . . . . . . . . . . . . . $ (1.55) $ (1.64) $ (2.63)
Discontinued operations. . . . . . . . . . . . . . . . . . . . . . . (7.40) 0.09 (1.83)
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . . -- 0.33 --
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (8.95) $ (1.22) $ (4.46)
Weighted average number of shares outstanding. . . . . . . . . . . . . . . . 12,071,425 12,080,233 12,089,004
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar Amounts in Thousands)
<CAPTION>
Year Ended December 31,
1991 1992 1993
Shares Amounts Shares Amounts Shares Amounts
<S> <C> <C> <C> <C> <C> <C>
Series A Cumulative Convertible
Preferred Stock
Beginning balance . . . . . . . . . 1,050,000 $ 1,050
Series A Cumulative Convertible
Preferred Stock issued. . . . . . 1,050,000 $ 1,050
Exchange of Series A Cumulative
Convertible Preferred Stock . . . (1,050,000) (1,050)
Ending balance. . . . . . . . . . . 1,050,000 1,050 -0- -0-
Series B Cumulative Convertible
Preferred Stock
Beginning balance . . . . . . . . . 6,000,000 $ 6,000
Series B Cumulative Convertible
Preferred Stock issued. . . . . . 6,000,000 6,000
Transferred to current liabilities (5,000,000) (5,000)
Ending balance. . . . . . . . . . . 6,000,000 6,000 1,000,000 1,000
Series C Convertible Preferred
Stock
Series C Convertible Preferred
Stock issued. . . . . . . . . . . 15,000 15
Ending balance. . . . . . . . . . . 15,000 15
Series A Common Stock
Beginning balance . . . . . . . . . 1,084,000 11
Exchange into Common Stock. . . . . (1,084,000) (11)
Ending balance. . . . . . . . . . . -0- -0-
Common Stock
Beginning balance . . . . . . . . . 10,435,065 104 12,077,667 121 12,086,530 121
Conversion of convertible
subordinated debentures . . . . . 6,785
Exchange of Series A Common
Stock . . . . . . . . . . . . . . 1,626,000 16
Common Stock issued . . . . . . . . 9,817 1 8,863 3,486
Ending balance. . . . . . . . . . . 12,077,667 121 12,086,530 121 12,090,016 121
(Continued)
</TABLE>
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Continued)
(Dollar Amounts in Thousands)
Year Ended December 31,
1991 1992 1993
Additional Paid-in Capital
Beginning balance. . . . . . . . . . . . . $ 70,994 $ 89,026 $ 126,405
Conversion of convertible
subordinated debentures. . . . . . . . . 95
Common Stock issued. . . . . . . . . . . . 87 9 7
Series A Cumulative Convertible
Preferred Stock issued . . . . . . . . . 17,850
Cancellation of stock options
granted at below market price. . . . . . 604
Exchange of Series A Cumulative
Convertible Preferred Stock
for Series B Cumulative
Convertible Preferred Stock
and Increasing Rate Senior
Subordinated Notes due 1999. . . . . . . 36,766
Issuance of Warrants . . . . . . . . . . . 600
Series C Convertible Preferred
Stock issued . . . . . . . . . . . . . . 14,495
Series B Cumulative Convertible
Preferred Stock transferred to
current liabilities. . . . . . . . . . . (35,000)
Ending balance . . . . . . . . . . . . . . 89,026 126,405 106,507
Retained Earnings (Deficit)
Beginning balance. . . . . . . . . . . . . 79,798 (28,220) (43,020)
Net loss attributable to Common Stock. . . (108,018) (14,800) (53,881)
Ending balance . . . . . . . . . . . . . . (28,220) (43,020) (96,901)
Other
Beginning balance. . . . . . . . . . . . . (1,823) (380) (447)
Cash received. . . . . . . . . . . . . . . 335
Translation adjustment . . . . . . . . . . 1,108 (67) 447
Ending balance . . . . . . . . . . . . . . (380) (447) -0-
Total Stockholders' Equity. . . . . . . . . . . $ 61,597 $ 89,059 $ 10,742
See notes to consolidated financial statements.
<PAGE>
<TABLE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
Year Ended
December 31,
1991 1992 1993
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Loss from continuing operations. . . . . . . . . . . . . . . . . . . . $ (18,703) $ (15,890) $ (31,798)
Adjustments to reconcile net income (loss) to net cash provided by
(used for) continuing operating activities:
Depreciation and amortization of property and equipment. . . . . . . 1,527 1,496 880
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . 3,640 4,875 3,924
Write-off of excess cost over net assets acquired (goodwill) . . . . 15,000 -- --
Loss on disposal of VCL. . . . . . . . . . . . . . . . . . . . . . . -- -- 15,741
Amortization of and adjustments to video rights. . . . . . . . . . . 117,543 78,961 53,091
Income taxes payable and deferred income taxes . . . . . . . . . . . (8,386) (2,353) (478)
Utilization of pre-acquisition net operating loss carryforwards. . . 1,044 1,000 --
(Increase) decrease in operating assets, net of acquisitions:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . (51,744) 56,088 6,515
Officer and employee receivables . . . . . . . . . . . . . . . . . . 3,475 192 42
Refundable income taxes. . . . . . . . . . . . . . . . . . . . . . . (105) 7,718 --
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,737) 5,250 5,802
Assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . (2,683) 9,095 (12,637)
Receivable from stockholder. . . . . . . . . . . . . . . . . . . . . (566) (329) (2,683)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,299 1,276 385
Increase (decrease) in operating liabilities, net of acquisitions:
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . 7,251 2,263 (13,888)
Liabilities related to assets held for sale. . . . . . . . . . . . . 4,174 (2,028) 6,436
Acquisition of and adjustment to video rights. . . . . . . . . . . . (101,042) (53,331) (31,907)
Video rights obligations incurred. . . . . . . . . . . . . . . . . . 101,042 51,360 31,907
Payments on video rights obligations . . . . . . . . . . . . . . . . (127,014) (70,856) (43,631)
Cash provided by (used for) continuing operating activities. . . . (54,986) 74,787 (12,299)
Cash provided by (used for) discontinued operations. . . . . . . . 37,496 (17,040) 1,150
Cash provided by (used for) operating activities . . . . . . . . . (17,490) 57,747 (11,149)
INVESTING ACTIVITIES:
Increase in goodwill related to additional acquisition costs . . . . . (5,900) -- --
Purchase of subsidiaries, net of cash acquired . . . . . . . . . . . . (34,461) -- --
Acquisition of property and equipment. . . . . . . . . . . . . . . . . (2,826) (3,051) (3,676)
Retirement of fixed assets . . . . . . . . . . . . . . . . . . . . . . 1,538 -- --
Cash used for investing activities . . . . . . . . . . . . . . . . (41,649) (3,051) (3,676)
FINANCING ACTIVITIES:
Issuance of bank debt and long-term obligations. . . . . . . . . . . . 135,376 166,131 211,260
Payments on bank debt and long-term obligations. . . . . . . . . . . . (108,401) (220,410) (189,381)
Payment of debt restructuring expenses . . . . . . . . . . . . . . . . -- (2,533) --
Issuance of Common Stock . . . . . . . . . . . . . . . . . . . . . . . 524 10 --
Dividends accrued but not paid . . . . . . . . . . . . . . . . . . . . -- -- 1,340
Issuance of Series C Preferred Stock . . . . . . . . . . . . . . . . . -- -- 15,117
Cash provided by (used for) financing activities . . . . . . . . . 27,499 (56,802) 38,336
Effect of exchange rate changes. . . . . . . . . . . . . . . . . . 709 190 --
Increase (decrease) in cash and cash equivalents . . . . . . . . . (30,931) (1,916) 23,511
Cash and cash equivalents at beginning of period . . . . . . . . . 51,694 20,763 18,847
Cash and cash equivalents at end of period . . . . . . . . . . . . $ 20,763 $ 18,847 $ 42,358
See notes to consolidated financial statements.
</TABLE>
Note 1 -- Going Concern
On January 28, 1994, the pre-existing bank credit facility (the
"Bank Credit Facility") between LIVE Entertainment Inc. ("LIVE" or the
"Company") and LIVE Home Video Inc. ("LHV") and a group of banks headed
by Chemical Bank and Credit Lyonnais Bank Nederland N.V. (the "Bank
Group") was amended. The maximum credit available under the Bank Credit
Facility was reduced to $20,000,000 effective on the date of the
amendment. The commitments under the Bank Credit Facility will be
further reduced on a monthly basis to $10,000,000 by June 29, 1994.
Furthermore, the maximum credit amount available under the Bank Credit
Facility will continue to be reduced by an amount equal to cash
dividends paid on the Company's 6,000,000 shares of Series B Cumulative
Convertible Preferred Stock (the "Series B Preferred Stock") and 15,000
shares of Series C Convertible Preferred Stock (the "Series C Preferred
Stock"). On April 1, 1994, cash dividends totaling $750,000 were paid
on the Series B Preferred Stock, thereby reducing the maximum credit
currently available under the Bank Credit Facility to $15,916,000 as of
that date.
The term of the Bank Credit Facility ends July 29, 1994 and earlier
in the event of a default. Additionally, the Company's $37,000,000 in
12% Subordinated Secured Notes Due September 1994 ("12% Notes") are due
and payable on September 15, 1994.
The Company is in negotiations with members of the Bank Group, as
well as others, to provide a replacement source of financing of up to
$40,000,000, having a term of at least one year, prior to the expiration
of the Bank Credit Facility (the "New Bank Credit Facility"). A
condition to obtaining the New Bank Credit Facility is the agreement of
the holders of at least $31,000,000 in principal amount of the 12% Notes
to extend the maturity date for payment of the 12% Notes held by them to
a date which would be not earlier than several months after the maturity
date of the New Bank Credit Facility (the "12% Note Extension").
Although management believes there is a realistic possibility of
obtaining both the New Bank Credit Facility and the 12% Note Extension
prior to the expiration of the Bank Credit Facility, there is no
assurance that management will be successful in these efforts. If the
Company is unable to obtain replacement financing, it may not be in a
position to pay the amounts due under the Bank Credit Facility and the
12% Notes upon the maturity thereof.
As a result of the Company's operating results in 1993, as well as
its decision to dispose of both (a) its "Specialty Retail Division,"
consisting of its wholly owned subsidiary, Strawberries Inc.
("Strawberries") and Strawberries' wholly owned subsidiary, Waxie Maxie
Quality Music Co. ("Waxie Maxie"), and (b) its German video distribution
subsidiary, VCL/Carolco Communications GmbH ("VCL"), the Company was not
in compliance with a number of ratios under the Bank Credit Facility and
the Indenture (the 12% Note Indenture") governing the 12% Notes as of
December 31, 1993. The Company is in discussions with the Bank Group to
obtain waivers of non-compliance and management believes that those
waivers will be obtained. If the Bank Group waives the non-compliance,
such waiver automatically acts as a waiver of the corresponding non-
compliance under the 12% Note Indenture. If the Company does not secure
the waivers, an event of default will exist under both the Bank Credit
Facility and the 12% Note Indenture, allowing the Bank Group and the
holders of the 12% Notes to accelerate payment of the amounts due to
them. If such acceleration occurred, the Company might not be in a
position to pay the amounts due.
Without either replacement facilities or an agreement for
extension, the Bank Credit Facility will be due on July 29, 1994 and the
12% Notes will be due on September 15, 1994.
These conditions raise substantial doubt about LIVE's ability to
continue as a going concern.
The Company's management is taking the following actions to address
concerns about its ability to continue as a going concern:
(a) The Company is in negotiations with members of the Bank Group
and other potential financing sources to obtain the New Bank Credit
Facility prior to the expiration of the Bank Credit Facility.
(b) The Company has held preliminary discussions with holders of
12% Notes regarding obtaining the 12% Note Extension.
Although there is no assurance that the Company will be successful
in any of these activities, management believes that there is a
realistic possibility of completing all of them during 1994.
Note 2 -- Summary of Significant Accounting Policies
Background and Operations: LIVE was formed in 1988 and its largest
ongoing businesses are LHV and LEI-IVE Entertainment N.V. ("LIVE NV"),
which acquire rights to theatrical motion pictures, children's films and
special interest programs which they market and distribute primarily on
videocassettes to wholesalers, retailers and consumers in the United
States and Canada (LHV) and internationally (LIVE NV). As part of its
international activities, the Company also owns an 81% interest in VCL,
a home video distribution and marketing company headquartered in Munich,
Germany. VCL's year-end is November 30. The Company also operates the
Specialty Retail Division. The Specialty Retail Division engages in the
retail sale of audio records and tapes, compact discs and video products
and consists of 142 stores in the Northeastern United States and the
Baltimore/Washington D.C. metropolitan area. The Specialty Retail
Division has a January 31 year-end. In March 1994, the Company decided
to dispose of its interests in the Specialty Retail Division and VCL.
The Company expects the sales to be effected in such a manner whereby
the buyers assume all liabilities. Accordingly, the Company's interests
in the Specialty Retail Division and VCL have been recorded as "Assets
Held For Sale" and "Liabilities Related To Assets Held For Sale." The
Company's continuing operations are principally in a single business
segment, the distribution and retail sale of a broad variety of
entertainment software products.
Principles of Consolidation: The financial statements include the
accounts of the Company and its subsidiaries - LHV, the Specialty Retail
Division, LIVE NV and VCL. The financial statements reflect the
Company's interests in the Specialty Retail Division and VCL as "Assets
Held For Sale" and "Liabilities Related To Assets Held For Sale" and
have been restated to account for the Specialty Retail Division as a
discontinued operation. All significant intercompany balances and
transactions have been eliminated.
Cash Equivalents: Cash equivalents are all highly liquid
investments maturing in three months or less when purchased.
Restricted Cash: Restricted cash is cash on deposit with foreign
banks, representing collateral for demand loans or funds subject to
certain foreign restrictions, and collateral for domestic letters of
credit relating to video rights obligations. Such restricted cash is
expected to be available to the Company within 12 months of the balance
sheet date. In 1993, cash on deposit with foreign banks (totaling
$2,621,000) representing collateral for a demand loan has been re-
classified and included in "Assets Held For Sale."
Accounts Receivable Allowances: Accounts receivable are net of
allowances for doubtful accounts, sales returns and advertising credits.
Inventory Valuation: LHV's inventory of duplicated videocassettes
and boxes is stated at the lower of actual cost or market. All other
inventories, which consist of pre-recorded music, videocassettes and
accessories, are stated at the lower of cost or market determined by
using an average cost which approximates the first-in, first-out (FIFO)
method. In 1993, the Specialty Retail Division's and VCL's inventories
have been re-classified and included in "Assets Held For Sale."
Depreciation and Amortization: Property and equipment are stated
at cost and are depreciated over their estimated service lives using
accelerated and straight-line methods. Leasehold improvements are
amortized over the lesser of their estimated useful lives or the terms
of the related leases.
Video Rights: Video rights, which include minimum guaranteed
payments, accrued royalties and advertising and promotional costs
associated with unreleased titles, are stated in the aggregate at the
lower of unrecovered cost or estimated net realizable value. Video
rights are amortized in amounts estimated to match such costs with
revenues earned to date in proportion to management's estimate of total
anticipated revenues. As revenue estimates change, amortization is
adjusted accordingly. Where video rights are acquired from producers
for a guaranteed minimum payment and the producer retains a
participation in the video profits, the video profits are allocated to
the Company until the guaranteed minimum payment is recovered, after
which the producer's share is accrued.
Goodwill: Goodwill represents both the excess of consideration
paid for companies acquired in purchase transactions over the estimated
fair value of the net assets of such companies and the application of
pushdown accounting associated with the purchase of LHV by Carolco
Pictures Inc. ("Carolco") in 1986. Goodwill is being amortized
principally on a straight-line basis over periods ranging from 7 to 30
years. In 1993, the recoverable goodwill balance relating from the
acquisition of the Specialty Retail Division and VCL has been re-
classified and included in "Assets Held For Sale." It is the Company's
policy to evaluate goodwill and recognize impairment if it is probable
that the recorded amounts are not recoverable from future cash flows.
Income Taxes: The Company records its income tax provision in
accordance with the Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" ("SFAS No. 109"). Prior to the adoption
of SFAS No. 109, income tax expense was determined using the liability
method prescribed by Statement of Financial Accounting Standards No. 96
("SFAS No. 96"), which was superseded by SFAS No. 109. Among other
changes, SFAS No. 109 changed the recognition and measurement criteria
for deferred tax assets included in SFAS No. 96. Adoption of SFAS No.
109 has had no material impact on the Company's financial position or
results of operations.
Deferred income taxes are provided on transactions which are
reported in the financial statements in different periods than they are
for income tax purposes. Goodwill is reduced for the tax effect of pre-
acquisition net operating losses utilized to reduce current and deferred
federal and state income taxes. Current and deferred taxes are provided
based on filing a consolidated tax return for federal income tax
purposes and combined state tax returns where permitted by state taxing
authorities. Income taxes for foreign subsidiaries are provided based
upon the applicable statutory rates of the respective jurisdictions.
Sales Revenue and Returns Recognition: Revenue from sales is
generally recognized upon shipment to the customer. However, in
accordance with industry practice, certain sales are made with the right
to return unsold items. An allowance is provided for the gross profit
impact of future sales returns, which reduces sales and cost of goods
sold accordingly.
Net Loss Per Share: Loss per common share is based on the weighted
average number of common and common equivalent shares outstanding during
the periods. Common equivalent shares, consisting of outstanding stock
options and warrants, and convertible preferred stock are not included
as they are antidilutive.
Foreign Currency Translation: The Company's foreign subsidiaries
use the local currency as the functional currency. The assets and
liabilities are translated into U.S. dollars at year-end exchange rates.
Revenues and expenses have been translated into U.S. dollars based
generally on the average rates prevailing during the period. Gains and
losses resulting from foreign currency transactions were not significant
during 1991, 1992 and 1993.
Concentration of Credit Risk: The Company sells pre-recorded music
and videocassettes to wholesalers, retailers and consumers. The
Specialty Retail Division sells to customers in the Northeastern United
States and Baltimore/Washington D.C. metropolitan area. Sales by LHV
are made to customers nationwide. Sales by VCL are made to customers in
German-speaking territories in Europe. Credit is extended to
wholesalers and retailers based on an evaluation of the customer's
financial condition, and generally collateral is not required. Credit
losses are provided for in the financial statements and consistently
have been within management's expectations. Credit risk relating to the
sale and distribution of videocassettes by WEA Corp. ("WEA") to LHV's
customers has been assumed by WEA under the terms of a three-year
distribution agreement (see Note 11).
The Company places its temporary cash investments with high credit
quality financial institutions and limits the amount of credit exposure
to any one financial institution. Generally, the investments made
mature within 30 days and therefore are subject to little risk. The
Company has not incurred any losses related to these investments.
Fair Values of Financial Instruments: At December 31, 1993, the
carrying value of the Company's financial instruments, which consist
primarily of short-term and long-term debt, approximates the fair value
thereof. Fair value of public held debt has been determined based on
quoted market prices.
Re-classification: Certain re-classifications were made to the
1991 and 1992 financial statements to conform to the 1993 presentations.
Note 3 -- Restructuring of Senior Subordinated Notes and Series A Preferred
Stock
On March 17, 1993, the United States Bankruptcy Court for the
Central District of California (the "Bankruptcy Court") confirmed a
prepackaged plan of reorganization (the "Prepackaged Plan") for LIVE,
providing for the issuance of $40,000,000 in principal amount of
Increasing Rate Senior Subordinated Notes due 1999 (the "Public Notes")
(see Note 14), 6,000,000 shares of Series B Preferred Stock, with a
liquidation preference of $60,000,000, par value $1.00 per share,
initially bearing a dividend of 5% if paid in cash or 8% if paid in kind
(see Note 16) and $8,000,000 in cash, replacing an aggregate of
$110,000,000 principal amount of the Company's then-outstanding 14.5%
Senior Subordinated Notes due May 15, 1999 (the "Outstanding Notes"),
plus accrued and unpaid interest of $12,672,000 through August 31, 1992,
and 1,050,000 shares of outstanding Series A Cumulative Convertible
Preferred Stock, with a liquidation preference of $21,000,000, bearing a
10% cash dividend of which $872,000 was accrued and unpaid as of August
31, 1992 (the "Series A Preferred Stock") (see Note 5) (the Outstanding
Notes and the Series A Preferred Stock are referred to herein
collectively as the "Outstanding Securities"). This completed the
financial restructuring of LIVE begun in 1992 (the "Restructuring") that
contemplated these transactions. Reorganized LIVE emerged from
bankruptcy on March 23, 1993.
Upon tender of their Outstanding Securities to American Stock
Transfer & Trust Company, the holders of the Outstanding Securities
received the following:
(a) $72.727 in cash plus $335.20 principal amount of Public Notes
plus 50.28 shares of Series B Preferred Stock for each $1,000 principal
amount of Outstanding Notes; and
(b) $2.98 principal amount of Public Notes plus 0.447 shares of
Series B Preferred Stock for each share of Series A Preferred Stock.
The Prepackaged Plan was filed with the Bankruptcy Court on
February 2, 1993 following LIVE's receipt of acceptances of the
Prepackaged Plan by the holders of the Outstanding Securities pursuant
to a Prospectus, Consent Solicitation, Proxy Statement and Solicitation
of Prepackaged Plan Acceptances dated December 18, 1992, and
supplemented on January 13, 1993 and January 18, 1993, filed with the
Securities and Exchange Commission.
In 1992, the Company recognized an extraordinary gain on the debt
restructuring of $3,967,000, including a tax benefit of $790,000.
Note 4 -- Series C Preferred Stock
On March 23, 1993, Pioneer LDCA, Inc. ("Pioneer") received 15,000
shares of the Company's Series C Preferred Stock, par value $1.00 per
share.
The Series C Preferred Stock bears a cash dividend rate of 5% ($50
per share) per annum, payable semi-annually on June 30 and December 31
of each year. Although dividends were accrued by the Company during
1993, the June 30, 1993 and December 31, 1993, dividends totaling
$589,000 ($39.27 per share) were not paid due to restrictions imposed on
the Company by the terms of the Series B Preferred Stock, which prohibit
the payment of dividends on the Series C Preferred Stock unless the
aggregate amount of such dividends, together with all cash dividends
paid on the Series B Preferred Stock, does not exceed the net income of
the Company (adding back specified net worth exclusions) since the March
23, 1993 date of issuance of the Series C Preferred Stock and the Series
B Preferred Stock. The Company has realized consolidated net losses
since the Series C Preferred Stock and the Series B Preferred Stock was
issued. Thus, pursuant to the terms of the Series B Preferred Stock,
the Company is prohibited from paying the June 30, 1993 and the December
31, 1993 cash dividends on the Series C Preferred Stock.
The Series C Preferred Stock ranks junior to the Series B Preferred
Stock and senior to all other classes of stock of the Company. The
Series C Preferred Stock is convertible into 5,119,389 shares of common
equity of the Company (either Common Stock or Series A Common Stock).
The number of shares into which the Series C Preferred Stock is
convertible was determined by dividing the $15,588,542 liquidation
preference of the Series C Preferred Stock by $3.045, which was 140% of
the average closing price of the Company's Common Stock on the New York
Stock Exchange for the ten trading days ending March 18, 1993, the date
that was three business days before the closing of the Restructuring.
Holders of the Series C Preferred Stock are entitled to vote with the
holders of Common Stock generally with each share entitled to as many
votes as the number of shares of Common Stock into which it may be
converted. The Series C Preferred Stock, in combination with the
Company's Common Stock owned by Pioneer, represents approximately 53% of
the voting equity of the Company (see Note 16). The Series C Preferred
Stock may not be redeemed until March 23, 1995. Thereafter, the Series
C Preferred Stock may only be redeemed in certain limited circumstances
in the event of increases in the trading price of the Company's Common
Stock or in the event of a merger of the Company with another entity.
Note 5 -- Acquisitions
In July 1991, the Company completed its acquisition of
substantially all of the assets and liabilities of Vestron Inc.
("Vestron") in exchange for a package of LIVE equity securities and
cash. The Company essentially purchased the program and video rights of
Vestron, a substantial portion of the value of which related to
unreleased titles. The Asset Purchase Agreement between LIVE and
Vestron, as amended (the "Purchase Agreement"), provided for the holders
of Vestron's $115,000,000 of subordinated debt to receive 1,050,000
shares of Series A Preferred Stock with a liquidation value of
$21,000,000, plus $6,325,000 in cash, and contingent rights representing
the right to receive future payments in LIVE Common Stock or cash if net
revenues realized by LIVE from the exploitation of Vestron's program
rights exceed certain levels over a period of approximately four and
one-half years. In addition, LIVE was required to fund $25,700,000 to
satisfy existing obligations of Vestron and to acquire certain
receivables and other assets held for sale.
The Purchase Agreement established what was substantially a fixed
purchase price based on estimated values assigned to program and video
rights, receivables, assets held for sale and certain other assets as
well as estimated liabilities associated with such assets and estimated
costs related to the termination of Vestron's remaining activities.
During the nine months between the date of the Purchase Agreement and
completion of the acquisition, proceeds received from completed sales of
assets and proceeds anticipated to be received from planned sales of
assets were substantially below those originally estimated.
Additionally, Vestron's operating losses and costs associated with its
bankruptcy proceedings during this nine-month period were significantly
higher than anticipated. As a result, upon a post-closing valuation of
the assets acquired and liabilities assumed, it was determined that the
consideration paid exceeded the fair value of the net assets acquired by
$29,394,000. Because of the decline in the value of the net assets
acquired, it was determined that a portion of the excess purchase price
was not expected to be recoverable. Accordingly, $15,000,000 of this
excess purchase price was written off during 1991. The remainder of the
excess purchase price will be amortized over the exploitation period of
the acquired rights (approximately seven years).
Note 6 -- Discontinued Operations
The Company is attempting to dispose of its interests in the
Specialty Retail Division and VCL. The Company expects the sales to be
effected in such a manner whereby the buyers assume all liabilities.
Accordingly, the Company's interests in the Specialty Retail Division
and VCL have been recorded as "Assets Held For Sale" and "Liabilities
Related To Assets Held For Sale" as of December 31, 1993 and have been
written down to their estimated net realizable or liquidation values.
The Company anticipates completing the disposal of the Specialty Retail
Division by the end of the second quarter and VCL by the end of the
third quarter. The operating statements presented have been restated to
separately disclose the results of operations of VCL and to account for
the Specialty Retail Division as a discontinued operation. The losses
on disposal of the Specialty Retail Division and VCL include provisions
for operating losses during the phase out period of $2,024,000 and
$3,885,000, respectively, which have been included in "Liabilities
Related To Assets Held For Sale." "Assets Held For Sale" consist
primarily of accounts receivable, inventories, properties, equipment and
video rights. "Liabilities Related To Assets Held For Sale" consist
primarily of accounts payable, accrued expenses, debts and video
obligations. Corporate general and administrative expenses have not
been allocated to either entity.
The Specialty Retail Division's revenues for the years ending
December 31, 1991, 1992 and 1993 were $96,944,000, $98,894,000 and
$106,124,000, respectively. (Losses)/income from operations for the
same periods were $(226,000), $1,090,000 and $1,690,000, respectively,
net of (benefit)/provision for income taxes of $(2,531,000), $(98,000)
and $632,000, respectively.
VCL has entered into a series of agreements with Rank Video
Services GmbH ("Rank Germany") whereby Rank Germany became the exclusive
provider of videocassette duplication services to VCL. As part of those
agreements, Rank paid VCL DM5,000,000. A portion of the funds advanced
to VCL must be repaid to Rank Germany if certain minimum volume
duplication requirements are not met. The DM5,000,000 paid by Rank
Germany to VCL has been recorded as a liability on the books of the
Company and this amount will be amortized against cost of sales as
product is received from Rank Germany. Prior to the effectiveness of
its agreements with Rank Germany, VCL had been satisfying its
duplication requirements through its in-house duplication facility,
which had been recorded as an asset held for sale since the date the
Company acquired VCL and which has since been disposed of. As of VCL's
1993 fiscal year end, $233,000 has been amortized against cost of sales
and the remaining balance is classified as deferred revenue and included
in "Liabilities Related To Assets Held For Sale." The net loss
associated with VCL's duplication operations and certain other
operations through June 30, 1991 of $810,000 was reserved for at the
acquisition date and has therefore been excluded from the results of
operations.
On July 26, 1991, a wholly owned subsidiary of the Company,
Lieberman Enterprises Incorporated ("Lieberman"), sold substantially all
of its assets (other than its accounts receivable and its Navarre
Independent Music and Navarre One-Stop businesses) to Handleman Company
("Handleman") for a total of approximately $74,600,000 in cash plus the
assumption by Handleman of approximately $2,000,000 in liabilities. The
Company has sold or liquidated all of the remaining assets and
liabilities of Lieberman. On October 4, 1991 Lieberman sold all of the
stock of Navarre Corporation ("Navarre") for $750,000 in cash to a group
headed by Navarre's Chief Operating Officer and Navarre agreed to
repayment terms for $6,000,000 of funds previously advanced to it by
Lieberman. The full amount was satisfied by December 31, 1992. The
loss on disposal of Lieberman and Navarre was $77,460,000 (net of an
income tax benefit of $2,569,000), including the write-off of
$37,000,000 of goodwill related to the acquisition of Lieberman in 1988
and Navarre in 1990 and $20,711,000 for operating losses during the
phase-out period. In segregating the components of the statement of
operations attributable to Lieberman and Navarre, interest expense has
been included in discontinued operations only to the extent it related
to debt directly attributable to the discontinued businesses. Corporate
general and administrative expenses have not been allocated to
discontinued operations. Between July 26, 1991 and December 31, 1992,
operating losses of $20,711,000 had been incurred and charged in full
against the provision originally provided for.
Lieberman's revenues for the year ended December 31, 1991 were
$150,423,000. The loss from operations of Lieberman and Navarre from
January 1, 1991 through July 25, 1991 was $11,629,000, net of income tax
benefits of $505,000.
Note 7 -- Foreign Operations
For the year ended December 31, 1993, net revenues, operating
(losses) and identifiable assets relating to foreign operations were
$34,009,000, ($3,289,000) and $28,871,000, respectively. At December
31, 1993 the assets of VCL have been included in "Assets Held For Sale."
For the year ended December 31, 1992, net revenues, operating (losses)
and identifiable assets relating to foreign operations were $32,993,000,
($3,043,000) and $42,983,000, respectively. For the year ended December
31, 1991, net revenues, operating profit and identifiable assets
relating to foreign operations were $27,788,000, $985,000 and
$52,913,000, respectively.
Note 8 -- Officer and Employee Receivables
Officer and employee receivables included a loan of $3,426,000 at
December 31, 1990, including interest, due from the estate of the
Company's late Chairman of the Board (the "Late Chairman"). The loan
was paid during 1991 from the Late Chairman's estate. In 1990, the
Company loaned $1,070,000 to six officers of the Company, due between
1992 and 1995. Certain of the loans are secured and bear interest at
10%. The balance outstanding as of December 31, 1993 is $407,000.
<PAGE>
Note 9 -- Video Rights
The components of video rights are as follows:
December 31,
1992 1993
(In Thousands)
Titles released . . . . . . . . . . . . . . . . . . $422,379 $443,161
Less amortization. . . . . . . . . . . . . . . . . . (382,326) (415,681)
40,053 27,480
Titles not released, masters received . . . . . . . 43,497 17,783
Advances paid, masters not received . . . . . . . . 7,729 16,804
Other . . . . . . . . . . . . . . . . . . . . . 978 --
TOTAL VIDEO RIGHTS . . . . . . . . . . . . . . . $ 92,257 $ 62,067
Current portion of video rights . . . . . . . . . . $ 40,716 $ 29,839
Non-current portion of video rights . . . . . . . . 51,541 32,228
$ 92,257 $ 62,067
The Company estimates that 65.7% of its video rights will be
amortized during the three years ending December 31, 1996.
Note 10 -- Property and Equipment
The components of property and equipment are as follows:
December 31,
1992 1993
(In Thousands)
Land . . . .. . . . . . . . . . . . . . . . . .$ 1,170 $ --
Building and improvements . . . . . . . . . . . . . 6,444 415
Equipment and furniture . . . . . .. . . . . . . . . 14,682 6,432
22,296 6,847
Less accumulated depreciation and amortization. . . . (11,348) (5,161)
$ 10,948 $ 1,686
Note 11 -- Debt and Other Financing
Debt and other financing consist of the following:
December 31,
1992 1993
(In Thousands)
Revolving lines of credit and term loans . . . . . $13,684 $ --
12% Subordinated Secured Notes due 1994 . . . . -- 36,707
Distribution agreements . . . . . . . . . . . . . 19,784 11,353
Increasing Rate Senior Subordinated
Notes due 1999 (see Note 14), including
capitalized interest of
$24,245 (1992) and $20,662 (1993). . . . . 64,245 60,662
Other . . . . . . . . . . . . . . .. . . . . . 103 23
97,816 108,745
Less current maturities . . . . . . . . . . . . . 18,755 48,541
$ 79,061 $ 60,204
The Series B Preferred Stock is mandatorily redeemable from
the net proceeds of any sale of the Specialty Retail Division. As a
result of the Company's decision to dispose of its interest in the
Specialty Retail Division, a total of $40,000,000 of the Series B
Preferred Stock has been re-classified from equity to current
liabilities as of December 31, 1993, reflecting the Company's
expectation to sell the Division for no less than $40,000,000.
On January 28, 1994, the Bank Credit Facility was amended.
The maximum credit available under the Bank Credit Facility was reduced to
$20,000,000 effective on the date of the amendment.
The commitments under the Bank Credit Facility will be
further reduced on a monthly basis to $10,000,000 by June 29, 1994.
Furthermore, the maximum credit amount available under the Bank Credit
Facility will continue to be further reduced by an amount equal to cash
dividends paid on the Series B Preferred Stock and Series C Preferred
Stock. On April 1, 1994, cash dividends totaling $750,000 were paid on
the Series B Preferred Stock, thereby reducing the maximum credit
currently available under the Bank Credit Facility to $15,916,000 as of
that date.
The term of the Bank Credit Facility ends July 29, 1994 and
earlier in the event of a default. Additionally, the 12% Notes are due
and payable on September 15, 1994.
As a result of the Company's operating results in 1993, as
well as its decision to dispose of the Specialty Retail Division and
VCL, the Company was not in compliance with a number of ratios under the
Bank Credit Facility and the 12% Note Indenture as of December 31, 1993.
The Company is in discussions with the Bank Group to obtain waivers of
the non-compliance and management believes that those waivers will be
obtained. If the Bank Group waives the non-compliance, such waiver
automatically acts as a waiver of the corresponding non-compliance under
the 12% Note Indenture. If the Company does not secure the waivers, an
event of default will exist under both the Bank Credit Facility and the
12% Note Indenture, allowing the Bank Group and the holders of the 12%
Notes to accelerate payment of the amounts due to them. If such
acceleration occurs, the Company might not be in a position to pay the
amounts due and might not be able to continue as a going concern.
The interest rate on the Bank Credit Facility equals either
the Alternate Base Rate (as defined in the Bank Credit Facility) plus 3%
per annum or the London Inter-Bank Offering Rate ("LIBOR") plus 4-1/4%
per annum and increases by an additional 1/4% every three months
commencing March 1, 1993. Fees payable by the Company to members of the
Bank Group in connection with the February 5, 1993 amendment to the Bank
Credit Facility totalled $1,250,000.
The Company is in negotiations with members of the Bank Group,
as well as others, to provide a replacement source of financing of up to
$40,000,000, having a term of at least one year, prior to the expiration
of the Bank Credit Facility (the "New Bank Credit Facility"). A
condition to obtaining the New Bank Credit Facility is the agreement of
the holders of at least $31,000,000 in principal amount of the 12% Notes
to extend the maturity date for payment of the 12% Notes held by them to
a date which would be not earlier than several months after the maturity
date of the New Bank Credit Facility (the "12% Note Extension").
Although management believes there is a realistic possibility of
obtaining both the New Bank Credit Facility and the 12% Note Extension
prior to the expiration of the Bank Credit Facility, there is no
assurance that management will be successful in these efforts. If the
Company is unable to obtain replacement financing, it may not be in a
position to pay the amounts due under the Bank Credit Facility and the
12% Notes upon the maturity thereof and might not be able to continue as
a going concern.
Management is also seeking to replace the Bank Credit
Facility, as well as the New Bank Credit Facility once the New Bank
Credit Facility is in place, with a new credit facility of approximately
$75,000,000 having a term of at least one year (the "Permanent
Facility"), prior to the expiration of the Bank Credit Facility (or the
New Bank Credit Facility, if the New Bank Credit Facility replaces the
Bank Credit Facility). Funds from the Permanent Facility may also be
used to pay all then-outstanding 12% Notes in full. Management does not
expect the Permanent Facility to be available unless and until after the
closing of the proposed business combination between the Company and
Carolco (see Note 23).
On February 5, 1993, the Company, LHV and certain of their
subsidiaries entered into a $20,000,000 credit facility (the "Junior
Credit Facility") with Pioneer North America, Inc., ("PNA"), the parent
of Pioneer, and a group of other participants. PNA committed to fund
$15,000,000 of the Junior Credit Facility conditioned upon completion of
Restructuring, and a group of participants (the "Junior Credit Facility
Participants") funded $5,000,000 of the Junior Credit Facility prior to
completion of the Restructuring. An affiliate of the Company was one of
the Junior Credit Facility Participants, and provided $250,000 of the
$5,000,000 funded by the Junior Credit Facility Participants.
Borrowings under the Junior Credit Facility bore interest at the
Chemical Bank prime rate plus six percentage points, resulting in an
interest rate of 12% per annum.
On March 26, 1993, the Junior Credit Facility was refinanced
by the 12% Note Indenture governing the $37,000,000 in principal amount
of the 12% Notes. An affiliate of the Company held $500,000 in
principal amount of the 12% Notes; a director of the Company held
$250,000 in principal amount of the 12% Notes. The 12% Notes held by
this same affiliate and director were sold to unrelated parties in July
1993. Repayment of the 12% Notes has been guaranteed by the same
subsidiaries of LIVE that are borrowers under the Bank Credit Facility.
The 12% Notes bear interest at the rate of 12% per annum, with interest
payable monthly, and are due and payable on September 15, 1994. The 12%
Note Indenture includes warranties, financial ratios, covenants and
restrictions which generally mirror the terms of the Bank Credit
Facility. Repayment of the 12% Notes is subordinated to repayment of
the Bank Credit Facility, and, until payment in full of the Bank Credit
Facility, the rights of holders of the 12% Notes to accelerate payment
thereunder are limited to payment defaults and/or acceleration of the
Bank Credit Facility. Repayment of the 12% Notes is secured by a lien
on all of the assets of LIVE and LHV, subordinate to the lien under the
Bank Credit Facility and other pre-existing liens. As of December 31,
1993, there was a principal amount of $37,000,000 outstanding under the
12% Notes (see Note 16).
On June 11, 1992, the Specialty Retail Division entered into a
two-year $10,000,000 line of credit with Foothill Capital Corporation
(the "Strawberries Credit Facility") to provide working capital as well
as funds for expansion for the Specialty Retail Division. Borrowings
under the Strawberries Credit Facility are secured by substantially all
of the assets of the Specialty Retail Division. Outstanding borrowings
under the Strawberries Credit Facility bear interest at the rate of 3.5%
per annum above the higher of the Bank of America reference rate or the
greater of the Citibank or Mellon Bank prime rate. In no event will
interest under the loan be less than 9% per annum or $25,000 per month.
As of the Specialty Retail Division's 1993 fiscal year end, $3,354,000
was outstanding under the Strawberries Credit Facility and the interest
rate under this facility was 9.5%. Such amounts are included in "Liabilities
Related To Assets Held For Sale" at December 31, 1993.
The Specialty Retail Division owns the building housing its
corporate headquarters and distribution center in Milford,
Massachusetts. In 1988, the Division entered into a $4,000,000 mortgage
loan on this building, bearing interest at the prime rate plus 0.5%,
with interest payable monthly, annual principal reduction payments of
$40,000 and a balloon payment of all unpaid principal and interest on
August 20, 1993. In July 1993, the Division agreed with the holder of
the mortgage loan to change the interest rate to a fixed rate of 9% per
annum, to continue annual principal reduction payments of $40,000 and to
extend the balloon payment date to August 20, 1995. At December 31,
1992 and 1993, there was $3,840,000 and $3,800,000, respectively,
outstanding under the loan. Such amounts are included in "Liabilities
Related To Assets Held For Sale" at December 31, 1993.
In December 1989, VCL entered into an agreement with a former
shareholder to acquire certain stock and video rights for $2,155,000, of
which $1,333,000 accrued interest at 2-1/2% above LIBOR and was paid in
1991. The balance accrues interest at 8% per annum and has required
principal payments of 48 equal monthly installments. At December 31,
1992 and 1993 there were $348,000 and $268,000, respectively,
outstanding under this obligation. In addition, as of December 31, 1992
and 1993, VCL owed $984,000 and $859,000, respectively, to another
former shareholder, of which $199,000 bears interest at 7% per annum and
is payable in eight quarterly installments beginning in April 1991. The
balance is non-interest bearing and is payable in four equal annual
installments commencing in April 1994. Such amounts are included in
"Liabilities Related To Assets Held For Sale" at December 31, 1993.
In 1992 and 1993, VCL had a demand note with a bank which
bears interest at 11.5%. As of December 31, 1992 and 1993 there was
$2,230,000 and $0, respectively, outstanding under this note which is
secured by cash collateral provided by the Company. Such amounts are
included in "Liabilities Related To Assets Held For Sale" at
December 31, 1993.
On May 11, 1992, LHV entered into a three-year distribution
agreement with WEA that became effective on May 31, 1992. Under the
terms of the agreement, WEA advanced $20,000,000 to LHV, recoupable from
distribution revenues during the three year term of the agreement at the
rate of $555,555 per month plus interest at LIBOR plus 0.2%, not to
exceed the prime rate. In order to obtain the advance, LHV granted WEA
a first priority security interest in most of LHV's Family Home
Entertainment catalog titles. LHV received an additional $4,900,000
advance from WEA, which was repaid in full in September 1992. At
December 31, 1992 and 1993 there was $16,667,000 and $10,000,000,
respectively, outstanding. Interest on the advance at December 31, 1993
was 3.45%.
LHV has an agreement with MCA Canada Ltd. ("MCA Canada") under
which MCA Canada is the exclusive distributor of LHV's videocassette
product in Canada through August 31, 1994. MCA Canada advanced
$10,000,000 to LHV in October 1991; $5,000,000 was recoupable from 100%
of the proceeds on sales commencing September 1, 1991 and $5,000,000 is
recoupable in 31 equal monthly installments commencing March 1, 1992,
plus interest at LIBOR plus 0.2%, not to exceed the prime rate. At
December 31, 1992 and 1993 there were $3,117,000 and $1,353,000, respectively,
outstanding. Interest on the advance at December 31, 1993 was 3.45%.
<PAGE>
The future maturities of long-term obligations are as follows:
Year Ending December 31, (In Thousands)
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . .$ 48,541
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,020
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,008
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,424
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . .23,503
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . . . . .21,249
$108,745
Interest paid for the years ended December 31, 1991, 1992 and 1993
was $27,257,000, $6,280,000 and $9,190,000, respectively, including
$1,404,000, $569,000 and $964,000 related to the Company's discontinued
operations.
Note 12 -- Leases
The Company generally conducts its operations through leased office
and retail store facilities. The Company also leases automobiles,
computer equipment, furniture, fixtures and other equipment. Most
leases require that the Company perform all necessary repairs and
maintenance, provide insurance and pay taxes assessed against the leased
property. The terms of leases range from four to ten years, some of
which have renewal options. Certain rents are adjusted for increases
based upon sales volumes and/or the Consumer Price Index. The leases
are classified as operating leases.
Future minimum operating lease payments for LHV and VCL, as of
December 31, 1993 are:
(In Thousands)
1994 . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,969
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,787
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,733
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,733
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,185
Thereafter. . . . . . . . . . . . . . . . . . . . . . . . . 368
Total net minimum lease payments. . . . . . . . . . . . . . $8,775
For the years ended December 31, 1991, 1992 and 1993, rent expense
under all operating leases aggregated $8,524,000, $7,505,000 and
$7,953,000, respectively, including $6,918,000, $5,964,000 and
$6,548,000 related to the Company's discontinued operations.
Minimum annual operating lease commitments relating to the
Specialty Retail Division as of December 31, 1993 are $6,872,000;
$6,602,000; $6,480,000; $6,125,000 and $5,552,000 for the years 1994
through 1998, respectively; and $16,314,000, thereafter.
Note 13 -- Video Rights Obligations
At December 31, 1993, the unrecorded future obligation for
undelivered film product approximates $40,525,000, including $11,321,000
related to VCL. Deposits made for guaranteed delivery of undelivered
film product are recorded as video rights.
LHV and LIVE NV entered into contractual agreements with Carolco
and certain of its affiliates for the acquisition of certain video
rights. The arrangements provide for the acquisition of home video
rights to approximately 43 films with an aggregate cost of $141,833,000.
Participating Preferred Stock, subsequently converted into Common Stock,
was issued to discharge $29,879,000 of this obligation. At December 31,
1993, none of the total obligation was outstanding and $1,100,000
represents unrecorded future obligations for undelivered product. The
amounts payable to Carolco are subject to revision based upon the
ultimate profits realized on groups of titles.
Certain agreements permit a reduction in the amount of video right
payments when stipulated conditions have not been met. Many agreements
also contain an obligation for the payment of royalties above the
minimum guarantee if sales exceed a stipulated amount. At December 31,
1993, $12,523,000 of royalties payable are included in video rights
obligations.
Note 14 -- Increasing Rate Senior Subordinated Notes Due 1999
On March 17, 1993, the Bankruptcy Court confirmed the Prepackaged
Plan for LIVE, providing for the issuance of the Public Notes. The
Public Notes mature on March 23, 1999. Interest accrues on the Public
Notes from September 1, 1992 at 10% per annum and increases to 12% on
March 23, 1996. Payment of the Public Notes is secured only by a lien
on the Common Stock of LHV, subject and subordinate to liens under the
Bank Credit Facility and the 12% Note Indenture and is subordinated to
all of the Company's present and future senior debt. The Public Notes
are subject to mandatory redemption of $20,000,000 of the principal
amount on March 23, 1998 and are redeemable at any time at par plus
accrued interest.
The Public Notes are governed by the terms of an Indenture between
the Company and American Stock Transfer & Trust Company, as Trustee (the
"Public Indenture"). The Public Indenture restricts the ability of the
Company and its Restricted Subsidiaries to incur additional senior debt
and subsidiary senior debt, to make restricted payments and restricted
investments, to merge, consolidate or sell assets of the Company or its
Restricted Subsidiaries, to create liens other than to secure senior
debt, subsidiary senior debt and certain other permitted debt, or to
enter into certain transactions with affiliates of the Company,
including Carolco.
Interest to maturity on $36,872,000 of the Public Notes of
$24,245,000 and $20,662,000 at December 31, 1992 and 1993, respectively,
has been included in the carrying value of the Public Notes, in
accordance with Financial Accounting Standards Board Statement No. 15,
"Accounting by Debtors and Creditors for Troubled Debt Restructurings,"
and will not be recognized as interest expense in current and future
years.
<PAGE>
Note 15 -- Income Taxes
As discussed in Note 2, the Company records its income tax
provision in accordance with SFAS No. 109.
Income (Loss) From Continuing Operations Before Income Taxes is as
Follows:
December 31,
1991 1992 1993
(In Thousands)
Domestic. . . . . . . . . .$(18,868) $(15,944) $ (8,037)
Foreign . . . . . . . . . 2,448 (3,334) (19,404)
$(16,420) $(19,278) $(27,441)
Income Tax Expense (Benefit) From Continuing Operations
December 31,
1991 1992 1993
(In Thousands)
Currently payable:
Federal . . . . .$ (7,613) $ 239 $ 453
State . . . . . 40 342 332
Foreign . . . . 95 263 54
(7,478) 844 839
Deferred:
Federal . . . . 1,075 (1,023) 411
State . . . . . 6,751 (2,639) (482)
7,826 (3,662) (71)
Expense in lieu of
income taxes resulting
from utilization of
pre-acquisition net
operating losses:
Foreign . .. . . 969 1,000 -0-
969 1,000 -0-
$ 1,317 $ (1,818) $ 768
Components of Deferred Income Taxes
December 31,
1991 1992 1993
(In Thousands)
Video rights. . . . . . . $ 5,274 $ (3,280) $ (71)
Sales returns and
other allowances. . . . . 887 286 1
Accelerated depreciation
and basis reduction (441) (20) 2
Accruals not currently
deductible for tax purposes 1,337 (685) (8)
Other . . . . .. . . . . 769 37 5
$ 7,826 $ (3,662) $ (71)
<PAGE>
Reconciliation of Effective Rate of Income Taxes
Percentage of Income (Loss)
December 31,
1991 1992 1993
Restated tax provision. . . $ 1,317 $ (1,818) $ 768
Book loss . . . . . . . . . (16,420) (19,278) (27,441)
Effective tax rate. (8.0)% 9.4% (2.8)%
Federal statutory rate. . 34.0% 34.0% 35.0%
State income taxes. . . . . . (27.3) 12.8 (0.4)
Alternative minimum tax
effect, other . . . . . . . . 4.7 (17.3) (4.4)
Utilized net operating loss . (7.8) -- (26.9)
Foreign income subject to
local taxes . . . . . . . . . (6.5) (6.5) (0.2)
Foreign deemed dividend . . . (13.3) (6.7) (0.9)
Worthless stock deduction . . 44.2 -- --
Goodwill amortization . . . . (36.0) (6.9) (5.0)
Effective tax rate. (8.0)% 9.4% (2.8)%
Components of Deferred Tax Liabilities and Assets
Current Non-current
Deferred tax liabilities:
Amortization of video rights. $ (5,941) $ (10,188)
Total deferred tax liabilities. . . . . (5,941) (10,188)
Deferred tax assets:
Sales returns and other allowances 7,619 --
Accelerated depreciation. . . . . . . -0- 47
Accruals not currently deductible . . 363 --
Federal tax effect of California franchise tax 223 --
Other . . . . . . . . . . . . . . 1,314 --
Tax effect of NOL carryforward. . . . -0- 9,450
Tax basis difference - debt . . . . . 1,291 5,595
10,810 15,092
Less valuation allowance. . . . . . . (693) (15,092)
Net deferred tax assets . . . . . . . 10,117 --
Total deferred tax assets/(liabilities) $ 4,176 $ (10,188)
Income taxes paid for the years ended December 31, 1991, 1992
and 1993 were $7,822,000, $196,000 and $1,766,000, respectively,
including $153,000, $89,000 and $230,000 related to the Company's
discontinued operations.
At December 31, 1992, the cumulative undistributed earnings of
the Company's foreign subsidiaries of approximately $3,824,000 were
deemed remitted as a dividend in accordance with certain provisions of
the U.S. Internal Revenue Code ("I.R.C."). During 1993, $4,400,000 of
undistributed earnings of the Company's foreign subsidiaries were deemed
remitted as a dividend in accordance with the provisions referred to
above. The related taxes were provided for these deemed dividends in
the Company's 1993 U.S. tax provision.
On March 17, 1993, the Bankruptcy Court confirmed the
Prepackaged Plan. In accordance with the I.R.C., this reorganization
has caused a "change in ownership" which will result in a limitation on
the future utilization of the Company's net operating loss carryforwards
beginning with the year ending December 31, 1993. The annual limitation
is approximately $1,600,000 per year subject to certain increases
relating to built-in gain items. The income tax effect of the
confirmation of the Prepackaged Plan was reflected in the Company's
statement of operations for the year ended December 31, 1992.
At December 31, 1993, approximately $27,000,000 of net
operating loss carryforwards are available for regular federal tax
return purposes. In accordance with Section 108 of the I.R.C., the
Company was required to reduce its "tax attributes" due to the
confirmation of the Prepackaged Plan. This resulted in the reduction of
net operating loss carryforwards by approximately $35,000,000.
Remaining federal net operating losses of $27,000,000 for regular income
tax purposes are subject to annual limitations as described above and
will expire between the years 1996 and 2006. State net operating loss
carryforwards were $13,000,000 prior to the reduction in "tax
attributes." This amount was fully absorbed after the reduction in "tax
attributes" due to the confirmation of the Prepackaged Plan, resulting
in the elimination of all net operating losses for state tax purposes.
For federal Alternative Minimum Tax ("AMT") return purposes, $5,000,000
of net operating loss carryforwards are available after the reduction in
"tax attributes." AMT net operating loss carryforwards will expire
between 1996 and 2006. AMT credits of $2,000,000 and foreign tax
credits of $300,000 are available to offset future regular federal
income tax liabilities.
The Company is currently under examination by the Internal
Revenue Service for the years ended 1989 through 1991 and by the
California Franchise Tax Board for the years ended 1988 through 1990.
The Company does not believe these examinations will have a material
impact on the financial position or the results of operations.
Note 16 -- Stockholders' Equity
On October 20, 1993, Carolco, formerly the owner of
approximately 51.7% of the outstanding Common Stock and 37% of the
voting equity of the Company, completed a financial restructuring (the
"Carolco Restructuring"). As part of the Carolco Restructuring,
Pioneer, RCS Video International Services B.V. ("RCS") and a subsidiary
of Le Studio Canal+ ("Canal+" and collectively with Pioneer and RCS, the
"Strategic Investors") received all 6,245,283, shares of LIVE Common
Stock owned by Carolco. Canal+ subsequently transferred to its
affiliate, Cinepole Productions B.V. ("Cinepole"), all of the Common
Stock in the Company owned by Canal+. As of March 31, 1994, the LIVE
voting ownership percentage held by Pioneer, RCS and Cinepole and their
affiliates was 53.2%, 7.5% and 7.5%, respectively.
On March 23, 1993, pursuant to the Prepackaged Plan, the
Series A Preferred Stock was exchanged for a combination of Public Notes
and Series B Preferred Stock. Effective upon the completion of the
Restructuring, 6,000,000 shares of Series B Preferred Stock were
outstanding. Each share of Series B Preferred Stock has a liquidation
value of $10.00 per share. Holders of the Series B Preferred Stock are
entitled to an annual dividend, payable quarterly, which accrues from
September 1, 1992 at 5% ($0.50 per share) if paid in cash or 8% if paid
in kind ("PIK") and increases on May 1, 1996 to 10% ($1.00 per share) if
paid in cash and 12% if PIK. Dividends of $3,000,000 ($0.50 per share)
and $1,000,000 ($0.17 per share) were accrued in 1993 and 1992,
respectively, on the Series B Preferred Stock and were paid in March
1993 and quarterly thereafter. The Series B Preferred Stock is subject
to mandatory redemption with the net proceeds of any sale of the
Specialty Retail Division. The Company may redeem the Series B
Preferred Stock at any time, initially at 80% of the liquidation value
until March 31, 1994, increasing 1% per month to 100% of the liquidation
value after October 31, 1995. In connection with the Company's decision
to dispose of the Specialty Retail Division, $40,000,000 of Series B
Preferred Stock has been re-classified to current liabilities.
The Series B Preferred Stock is mandatorily redeemable from
the net proceeds of any sale of the Specialty Retail Division. As a
result of the Company's decision to dispose of its interest in the
Specialty Retail Division, a total of $40,000,000 of the Series B
Preferred Stock has been re-classified from equity to current
liabilities as of December 31, 1993, reflecting the Company's
expectation to sell the Division for no less than $40,000,000.
Holders of the Series B Preferred Stock are entitled to elect
two directors, and in certain circumstances, up to four members, or
under certain other circumstances, a majority of the Company's Board of
Directors. In addition, commencing May 1, 1996, or earlier if the
Company has elected to pay PIK dividends for a total of four quarters,
holders can convert the Series B Preferred Stock into LIVE Common Stock.
The conversion price per share is obtained by dividing the liquidation
value by either the market price of the Common Stock or the "Floor
Price." The Floor Price is initially $4.00 per share of Common Stock,
decreasing $0.25 per share at the end of each three month period
thereafter. On September 1, 1998, the conversion price will be reset to
the lower of the market price or $1.00 per share, resulting in the
potential issuance of a minimum of 60,000,000 shares of the Company's
Common Stock.
The Company's Stock Option and Stock Appreciation Rights Plan
(the "Plan") provides for the granting of incentive stock options,
non-qualified stock options and stock appreciation rights ("SARs") to
its officers, directors, key employees, consultants and other persons.
Options to purchase a maximum of 1,500,000 shares of the Company's
Common Stock, of which 600,000 may be granted as SARs, are available
under the Plan. In March 1994, the Company's Board of Directors
resolved, subject to stockholder approval, to increase the maximum
number of shares which may become available under the Plan by 500,000
shares. The options vest over varying periods and expire in 10 years.
A summary of stock option transactions during the three years
ended December 31, 1993 follows:
Number of Option Price
Shares Per Share
Stock options outstanding:
December 31, 1990 . . . . . . . . . . 1,140,100 6.67-22.00
Canceled. . . . . . . . . . . . . . (160,750) 10.50-15.50
Granted . . . . . . . . . . . . . . 34,000 11.125-13.125
December 31, 1991 . . . . . . . . . . 1,013,350 6.67-22.00
Canceled. . . . . . . . . . . . . . (1,144,650) 1.875-22.00
Granted . . . . . . . . . . . . . . 813,700 1.875-6.67
December 31, 1992 . . . . . . . . . . 682,400 1.875-14.00
Canceled. . . . . . . . . . . . . . (120,650) 1.875-14.00
Granted . . . . . . . . . . . . . . 929,300 1.75-2.75
December 31, 1993 . . . . . . . . . . 1,491,050 1.75-14.00
At December 31, 1993, 363,250 options were exercisable and no stock
appreciation rights were outstanding. Options to purchase 565,650
(1991), 696,600 (1992) and 387,950 (1993) shares of the Company's Common
Stock were available for grant under the Plan.
In January 1992, the Board of Directors of the Company, acting as
the Stock Option Committee pursuant to the Plan, granted to current
employees and directors of LIVE, LHV and the Specialty Retail Division
who were holders of options pursuant to the Plan the right to agree to
cancel certain options ("Canceled Options") and to receive in return
therefore additional options ("New Options") pursuant to the Plan, all
on the following terms and conditions: (a) the exercise price for the
New Options would equal $2.875, the closing price of the Company's
Common Stock on the New York Stock Exchange on January 16, 1992; (b)
fifty percent (50%) of the New Options would vest on January 16, 1993,
the remainder would vest on January 16, 1994; (c) no New Options would
vest earlier than the scheduled vesting date for the corresponding
Canceled Options and (d) all New Options would expire on January 15,
2002. In connection with this arrangement, options to purchase 547,200
shares were exchanged for New Options.
Warrants to purchase 49,500 shares of the Company's Common Stock
were issued during 1990 and were outstanding as of December 31, 1993.
These warrants are currently exercisable at prices ranging from $14.25
to $14.50 per share (fair market value at the date of grant) and expire
over varying periods through 2000.
In 1993, the Company issued warrants to purchase 1,333,332 and
1,000,000 shares of the Company's Common Stock at a price of $2.00 and
$2.72 per share, respectively. The warrants are exercisable until March
1998 and the holders have been granted demand and piggyback registration
rights for the Common Stock underlying the Warrants. Proceeds of
$600,000 from the 12% Notes were allocated to the warrants and were
accounted for as additional paid-in capital in 1993.
Two directors of the Company owed $331,000 to the Company as of
December 31, 1990 in connection with the purchase of the Company's
Common Stock. The amounts owed were paid to the Company during 1991.
Note 17 -- Stockholders' Rights Plan
In July 1990, the Board of Directors of LIVE adopted a
Stockholders' Rights Plan and declared a dividend of one preferred stock
purchase right (a "Right") for each outstanding share of Company Common
Stock. Among other provisions, each Right may be exercised to purchase
one one-hundredth share of LIVE's Series R Junior Participating
Cumulative Preferred Stock at an exercise price of $90, subject to
adjustment (the "Exercise Price"). The Rights may only be exercised
after a party, exclusive of LIVE, Carolco or their affiliates, has
acquired or obtained the right to acquire 20% or more of the Company's
Common Stock or in the event certain mergers or sales of assets by LIVE
occur. The Rights, which do not have voting rights, expire on July 19,
2000 and may be redeemed by the Company at a price of $.01 per Right at
any time prior to their expiration or the acquisition of 20% of the
Company's Common Stock by any person other than LIVE, Carolco or their
affiliates.
In the event a party other than LIVE, Carolco or their affiliates
acquires 20% or more of the Company's outstanding Common Stock in
accordance with certain defined terms, each Right will entitle its
holder to purchase, at the Right's then Exercise Price, a number of
shares of Company Common Stock having a market value of twice the
Right's Exercise Price. The independent directors of LIVE may elect to
exchange the Rights at an exchange ratio of one share of Company Common
Stock per Right upon the occurrence of certain defined acquisition
events. If certain mergers or sales of assets by LIVE occur, each Right
shall entitle the holder to purchase, at the Exchange Price, a number of
shares of common stock of the surviving corporation or purchaser (so
long as it is not LIVE) having a market price of two times the Exercise
Price.
Note 18 -- Other Expenses
Other expenses in 1991 include expenses associated with a proposed
business combination with Carolco and the related corporate
restructuring.
Note 19 -- Related Party Transactions
Related party transactions between Lieberman and a former director
of the Company and his affiliates resulted in net payments by Lieberman
of $228,000 for the year ended December 31, 1991. The payments were for
rental of office and warehouse space, reimbursement of operating
expenses and fees for support services, including data processing and
administrative services.
Included in accrued and deferred compensation at December 31, 1990
was $3,320,000, payable to the Late Chairman, under a deferred
compensation arrangement. The deferred compensation bore interest at
the greater of 3% above LIBOR or 1-1/2% above prime and was paid in
1991. The Late Chairman also owed the Company $3,426,000 at December
31, 1990.
Revenues generated by LHV from Carolco titles amounted to 40.3%,
38.4% and 13.0% of combined LHV and VCL net sales for the years ended
December 31, 1991, 1992 and 1993, respectively. As of December 31, 1992
and 1993, the Company had a note receivable from Carolco bearing
interest at the rate set forth in the Bank Credit Facility aggregating
$5,364,000 and $8,047,000, respectively. The amount will be repaid
through the delivery of video rights to future films.
In 1991, a subsidiary of LHV granted Pioneer a license for United
States laser videodisc rights to LHV's library of motion pictures for a
term of four years. Pioneer paid $5,000,000 under this agreement as a
non-returnable advance recoupable on a cross-collateralized basis from
all royalties payable to LHV's subsidiary.
In 1991, an affiliate of a director of the Company received a
$100,000 cash retainer for investment banking services provided in
connection with the proposed business combination of the Company and
Carolco. During 1992, the same affiliate (together with a co-financial
advisor) received $850,000, plus out-of-pocket expenses, as payment for
financial advisory services rendered in connection with the
Restructuring. In January 1993, this same affiliate received a $100,000
retainer for investment banking services to be provided in connection
with the Company's consideration of a potential business combination of
the Company and Carolco. The fee for such services could increase to
$1,000,000 contingent upon consummation of the Combination.
Additionally, $850,000 was paid in connection with the March 1993
completion of the Restructuring. In 1993, the same affiliate and the
co-financial advisor received a $150,000 non-refundable retainer to
assist the Company in structuring and placing a long-term working
capital facility for LHV and to make recommendations regarding the
Company's capital structure. In addition, each received warrants to
purchase 16,667 and 14,706 shares of the Company's Common Stock at a
price of $2.00 and $2.72 per share, respectively.
In connection with the Restructuring, a director of the Company and
an affiliate of the same director received a total of $630,000, plus
expenses. The director received $92,000 of such amount.
In a July 1993 consulting agreement, the Company engaged a director
to provide consulting services as an independent contractor in
connection with the search by the Company for an individual to become
Chief Executive Officer of LIVE and LHV. The fee for such service was
$10,000 per month (pro rated for partial months) plus expenses. This
agreement terminated upon the hiring of a President and Chief Executive
Officer of the Company in January 1994. The Company paid this same
director a total of $62,200 in consideration of his services under this
agreement.
In 1993, the Company's Chairman of the Board was issued warrants to
purchase 14,706 shares of the Company's Common Stock at a price of $2.72
per share.
The Company and the Chairman of the Board are parties to an
agreement dated December 1993, pursuant to which the Company agreed, for
a term ending in December 1996, to pay the Chairman $25,000 per month,
plus normal directors expenses and other out-of-pocket expenses he may
incur in connection with his services to the Company, in return for the
Chairman making himself available to the Company or any video subsidiary
thereof to act as the Chief Executive Officer's primary reporting person
for the period ending December 31, 1996. Such compensation is payable
as long as the Chairman makes himself available for such purpose,
whether or not the Company actually utilizes his services and whether or
not any particular Chief Executive Officer is in the Company's employ.
An affiliate of a director of the Company received a cash fee of
$75,000, $79,000 and $75,000 in 1991, 1992 and 1993, respectively, for
services provided to a foreign subsidiary of the Company.
Note 20 -- Incentive Savings Plan
The Company has established the LIVE Incentive Savings Plan, a
profit sharing and 401(k) savings plan, in which eligible employees of
LIVE, LHV and the Specialty Retail Division may participate. Each
employee who has attained the age of 21 may become a participant as of
the beginning of each calendar quarter when such employee has completed
1,000 hours of service in the relevant one-year computation period. The
Company, at the discretion of the Board of Directors, may make annual
contributions to the LIVE Incentive Savings Plan. The Company's profit
sharing contributions are allocated to individual accounts of
participants in proportion to their compensation. A participant is
fully vested in his or her tax-deferred employee contributions at all
times. A participant whose employment terminates for any reason other
than death or disability is entitled only to the vested portion of the
contributions made by the Company on behalf of the plan participant.
The LIVE Incentive Savings Plan permits tax-deferred voluntary employee
contributions of an amount equal to not more than 10% of compensation,
to be matched by a LIVE contribution in an amount equal to 50% of the
employee's voluntary contributions which do not exceed 6% of his or her
compensation. With certain exceptions, contributions made by the
Company vest equally over a period of four years. Company contributions
to the Savings Plan were $33,000, $53,000 and $55,000 for the years
ended December 31, 1991, 1992 and 1993, respectively.
Note 21 -- Commitments and Contingencies
Letters of Credit and Guarantees:
At December 31, 1993 the Company had outstanding letters of credit
of $16,383,000 relating to certain video rights obligations, which are
secured by restricted cash, and $300,000 related to the lease of its
offices.
Employment and Separation Agreements:
The Company has employment agreements with certain of its officers
generally for a term of three years. Future minimum payments under
these contracts are $1,147,000, $713,000 and $422,000 for the years
ending December 31, 1994, 1995 and 1996. In addition, LHV has
separation agreements with several of its former officers, requiring
payments aggregating $245,000 in 1994. These separation payments have
been accrued for in the year ending December 31, 1993.
Legal Proceedings:
On January 9, 1992, a purported class action lawsuit was filed in
the U.S. District Court, Central District of California, by alleged
stockholders of the Company against the Company, Carolco and certain of
the Company's past and present directors and executive officers. The
complaint alleges, among other things, that the defendants violated
Section 10(b) of the Securities Exchange Act of 1934 (the "Exchange
Act") and Rule 10b-5 promulgated thereunder (a) by concealing the true
value of certain of LIVE's assets, and overstating goodwill,
stockholders' equity, operating profits and net income in LIVE's Form
10-K for the year ended December 31, 1990, in its 1990 Annual Report and
in its Forms 10-Q for the quarters ended March 31, 1991 and June 30,
1991, and (b) by materially understating the true extent of the write-
off of goodwill in connection with the sale of Lieberman Enterprises
Incorporated, a subsidiary of the Company ("Lieberman"), to Handleman
Company in July 1991. In addition, the complaint alleges that certain
of the defendants are liable as controlling persons under Section 20 of
the Exchange Act and alleges that certain other defendants are liable
for aiding and abetting the primary violations. Subsequently, two
additional lawsuits were filed in the U.S. District Court, Central
District of California, by alleged stockholders of the Company against
the same persons and entities who were defendants in the original
actions, making substantially the same allegations as were made in the
first lawsuit. On March 30, 1992, these lawsuits were consolidated.
Further, in April 1992, an amended complaint was filed in the
consolidated action, lengthening the alleged class period and adding as
defendants certain additional officers, directors and affiliates of the
Company and Carolco, including Pioneer, as well as a lender to LIVE Home
Video Inc. ("LHV") and Carolco. On June 17, 1992, the U.S. District
Court, Central District of California, entered an order conditionally
certifying the class, subject to possible decertification after
discovery is completed. On January 27, 1993, a second amended complaint
was filed in the consolidated class action making additional and
modified allegations against certain of the defendants claiming they are
liable as controlling persons under Section 20 of the Exchange Act and
claiming that certain other defendants are liable for aiding and
abetting the primary violations. On April 19, 1993, the court issued a
ruling dismissing Pioneer from this lawsuit.
In February 1992, a purported class action lawsuit was filed in the
U.S. District Court, District of Delaware, by an alleged holder of
Carolco's public debt, against the Company, Carolco and certain
directors and executive officers of Carolco. The Delaware complaint
alleges, among other things, that the defendants violated Section 10(b)
of the Exchange Act and Rule 10b-5 promulgated thereunder by concealing
the true value of certain of the Company's assets, and overstating
goodwill, stockholders' equity, operating profits and net income in the
Company's Form 10-K for the year ended December 31, 1990 and in its
Forms 10-Q for the quarters ended March 31, 1991 and June 30, 1991. In
April of 1992 this lawsuit was transferred to the U.S. District Court,
Central District of California. The proceedings are being coordinated
with the consolidated action described in the preceding paragraph. On
July 17, 1992, the U.S. District Court, Central District of California,
entered an order conditionally certifying the class, subject to possible
decertification after discovery is completed.
On March 24, 1994, the same day as the Company and Carolco
announced that they had reached agreement in principle on the
Combination, a purported class action lawsuit was filed in the Delaware
Chancery Court by an alleged stockholder of the Company against the
Company, Carolco, Pioneer, Cinepole and certain past and present
directors of the Company and Carolco. The complaint alleges, among
other things, that the defendants breached their fiduciary duties in
agreeing in principle to the Combination. The complaint seeks an
injunction prohibiting the Company and Carolco from proceeding with the
Combination, as well as unspecified monetary damages.
Management and counsel to the Company are unable to predict the
ultimate outcome of the above-described actions at this time. However,
the Company and the other defendants believe that all these lawsuits are
without merit and intend to defend them vigorously. Accordingly, no
material provision for any liability which may result has been made in
the Company's consolidated financial statements. In the opinion of
management, these actions, when finally concluded and determined, will
not have a material adverse effect upon the Company's financial position
or results of operations.
Other than as described above, there are no material legal
proceedings to which LIVE or any of its subsidiaries are a party other
than ordinary routine litigation in the ordinary course of business. In
the opinion of management (which is based in part on the advice of
outside counsel), resolution of these matters will not have a material
adverse impact on the Company's financial position or results of
operations.
<PAGE>
Note 22-Quarterly Financial Information (Unaudited)
<TABLE>
Certain quarterly financial information is presented below:
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
(Amounts in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
1992
Net sales . . . . . . . . . . . . . . . . . . . . .$ 46,686 $ 21,458 $ 68,407 $ 55,961 $192,512
Gross profit. . . . . . . . . . . . . . . . . . . . 12,333 (3,518) 14,390 856 24,061
Operating profit (loss) . . . . . . . . . . . . . . 4,693 (9,481) 6,684 (6,521) (4,625)
Income (loss) from continuing operations before
income taxes. . . . . . . . . . . . . . . . . . . (454) (13,889) 1,605 (6,540) (19,278)
Income (loss) from continuing operations (537) (13,273) 1,605 (5,255) (17,460)
Discontinued operations . . . . . . . . . . . . . . (826) (91) (523) 2,530 1,090
Extraordinary item. . . . . . . . . . . . . . . . . -- -- -- 3,967 3,967
Net income (loss) . . . . . . . . . . . . . . . . . (1,363) (13,364) 1,082 1,242 (12,403)
Preferred dividends . . . . . . . . . . . . . . . . 525 525 525 822 2,397
Net income (loss) attributable to Common Stock. . . (1,888) (13,889) 557 420 (14,800)
Net income (loss) per common share:
Continuing operations . . . . . . . . . . . . . . (0.09) (1.14) 0.09 (0.50) (1.64)
Discontinued operations . . . . . . . . . . . . . (0.07) (0.01) (0.04) 0.21 0.09
Extraordinary item. . . . . . . . . . . . . . . . -- -- -- 0.33 0.33
Net income (loss) . . . . . . . . . . . . . . . .$ (0.16) $ (1.15) $ 0.05 $ 0.04 $ (1.22)
1993
Net sales . . . . . . . . . . . . . . . . . . . . .$ 35,302 $ 44,250 $ 44,123 $ 48,571 $172,246
Gross profit. . . . . . . . . . . . . . . . . . . . 7,517 7,325 5,848 2,448 23,138
Operating profit (loss) . . . . . . . . . . . . . . 863 477 (1,207) (21,310) (21,177)
Income (loss) from continuing operations before
income taxes. . . . . . . . . . . . . . . . . . . 340 (1,096) (2,948) (23,737) (27,441)
Income (loss) from continuing operations. . . . . . (19) (1,132) (2,891) (24,167) (28,209)
Discontinued operations . . . . . . . . . . . . . . (709) (409) (387) (20,578) (22,083)
Net income (loss) . . . . . . . . . . . . . . . . . (728) (1,541) (3,278) (44,745) (50,292)
Preferred dividends . . . . . . . . . . . . . . . . 767 937 938 947 3,589
Net income (loss) attributable to Common Stock. . . (1,495) (2,478) (4,216) (45,692) (53,881)
Net income (loss) per common share:
Continuing operations . . . . . . . . . . . . . . (0.06) (0.17) (0.32) (2.08) (2.63)
Discontinued operations . . . . . . . . . . . . . (0.06) (0.03) (0.03) (1.70) (1.83)
Net loss. . . . . . . . . . . . . . . . . . . . . $ (0.12) $ (0.20) $ (0.35) $ (3.79) $ (4.46)
</TABLE>
Note 23 -- Subsequent Events
In March 1994, the Company and Carolco reached agreement in
principle on a business combination (the "Combination"). The
Combination will be structured as a tax free exchange whereby each
Carolco stockholder will receive one share of newly issued LIVE Common
Stock for each 5.5 shares of Carolco Common Stock held by them. The
exchange ratio will be subject to adjustment based on the market price
of Carolco Common Stock prior to the consummation of the Combination,
subject to two limitations. The first limitation is that the number of
Carolco shares to be exchanged for each share of LIVE will be adjusted
upward, if necessary, so that the market value of Carolco shares to be
exchanged is at least $3.00, but in no event will more than 6.5 shares
of Carolco be exchanged for each share of LIVE. The second limitation
is similar to the first in that the number of Carolco shares to be
exchanged for each share of LIVE will be adjusted downward, if
necessary, so that the market value of Carolco shares to be exchanged is
no more than $4.00, but in no event will fewer than 4.5 shares of
Carolco be exchanged for each share of LIVE. The market value of
Carolco shares will be deemed to be the average trading price of Carolco
Common Stock for the twenty (20) trading days ending no earlier than
three days prior to the closing of the Combination.
As a result of the Combination, the current LIVE stockholders
will own between 22% and 29% of the combined company, the name of which
will be changed to Carolco Entertainment Inc.
The Combination is subject to a number of conditions,
including (a) redemption of the Series B Preferred Stock, (b) amendments
to the 12% Note Indenture, the Public Indenture, and the terms of the
Series C Preferred Stock, (c) delivery of fairness opinions by the
independent financial advisors to each company, and (d) the availability
of financing commitments at each company prior to the closing of the
Combination. The Combination is also subject to the execution of a
definitive business combination agreement by no later than April 22,
1994 and the subsequent approval of the Combination by the majority of
the non-affiliated common stockholders of each of Carolco and LIVE.
The Series B Preferred Stock is mandatorily redeemable from
the net proceeds of any sale of the Specialty Retail Division. As a
result of the Company's decision to dispose of its interest in the
Specialty Retail Division, a total of $40,000,000 of the Series B
Preferred Stock has been re-classified from equity to current
liabilities as of December 31, 1993, reflecting the Company's
expectation to sell the Division for no less than $40,000,000.
Employment Agreements:
Subsequent to year end, the Company and LHV any entered into
employment agreements with certain of their officers generally for a
term of three years. Future minimum payments under these contracts are
$1,125,000, $1,063,000 and $1,106,000 for the years ending December 31,
1994, 1995 and 1996.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
<TABLE>
SCHEDULE II - AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
<CAPTION>
Column A Column B Column C Column D Column E
Balance at Deductions
Beginning Amounts Amounts Balance at End of Period
Name of Debtor of Period Additions Collected Written Off Current Non Current
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C> <C>
Year ended December 31,
1991:
Carolco Pictures Inc. . . $ 1,344 $11,642 (a) $11,296 (b) -- -- $ 1,690
Estate of Jose E. Menendez 3,426 (c) -- 3,426 -- -- --
Melvin A. Wilmore . . . . 237 (d) 11 (e) -- -- $ 248 --
David A. Mount. . . . . . 150 (f) -- -- -- 150 --
Devendra Mishra . . . . . 318 (g) 29 (e) 59 -- 288 --
Eric H. Paulson . . . . . 314 (h) -- -- $ 314 (h) -- --
Year ended December 31,
1992:
Carolco Pictures Inc. . . $ 1,690 $ 3,674 (i) -- -- -- $ 5,364
Melvin A. Wilmore . . . . 248 (d) -- -- $ 248 -- --
David A. Mount. . . . . . 150 (f) -- -- 50 $ 100 --
Devendra Mishra . . . . . 288 (g) -- -- 12 276 --
Year ended December 31,
1993:
Carolco Pictures Inc. . . $ 5,364 $ 2,683 (j) -- -- -- $ 8,047
David A. Mount. . . . . . 100 (f) -- 62 38 -- --
Devendra Mishra . . . . . 276 (g) 13 (e) -- -- $ 289 --
<FN>
(a) Amount represents loans ($10,000,000) and interest accrued during the period.
(b) Amount represents payments related to television rights ($1,596,000) and repayment of loan ($10,000,000),
net of allocated expenses due to Carolco ($300,000).
(c) Amount consists of a $2,285,000 demand loan including interest at the greater of 1-1/2% above prime or 3%
above LIBOR and a non interest bearing loan with an original balance of $170,000 under an employment
agreement. The amount payable under a deferred compensation arrangement was less than this balance by
$106,000 at December 31, 1990.
(d) Amount represents loan ($130,000) secured by a second deed of trust on Mr. Wilmore's residence and an
unsecured loan ($100,000) and accrued interest at 10%.
(e) Amount represents interest accrued during the period.
(f) Amount represents a non-interest bearing, unsecured loan of which $87,500 was forgiven through September
30, 1993, the date Mr. Mount resigned from the Company. The remaining balance of $62,500 was repaid in
December 1993.
(g) Amount represents loan ($300,000) secured by a second deed of trust on Mr. Mishra's residence and accrued
interest at 5%.
(h) Amount represents loan ($300,000) and accrued interest at 10%, which was written off in connection with the
sale of Navarre.
(i) Under an offset agreement with Carolco, all amounts, whether receivable from or payable to Carolco, were
netted in the "due from stockholder" account.
(j) Amount represents net adjustments to video rights.
</TABLE>
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance at
Beginning Costs and Other End
Description of Period Expenses Accounts Deductions of Period
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1991 Deducted from
Asset Accounts:
Allowance for future sales returns . . . . $31,292 $42,337 (a) $ -- $59,124 (b) $14,505
Allowance for doubtful accounts. . . . . . 9,018 154 -- 7,720 (c) 1,452
Allowance for advertising. . . . . . . . . 3,647 19,563 -- 18,123 (d) 5,087
Allowance for overstock inventory. . . . . 1,874 4,824 400 (e) 2,045 (f) 5,053
Allowance for video rights in excess of net
realizable value . . . . . . . . . . . . 4,732 -- -- 1,096 (g) 3,636
Year ended December 31, 1992 Deducted from
Asset Accounts:
Allowance for future sales returns . . . . $14,505 $33,206 (a) -- $29,647 (b) $18,064
Allowance for doubtful accounts. . . . . . 1,452 615 -- 297 (c) 1,770
Allowance for advertising. . . . . . . . . 5,087 13,166 -- 13,624 (d) 4,629
Allowance for overstock inventory. . . . . 5,053 3,735 -- 1,544 (f) 7,244
Allowance for video rights in excess of net
realizable value . . . . . . . . . . . . 3,636 1,912 -- 12 (g) 5,536
Year ended December 31, 1993 Deducted from
Asset Accounts:
Allowance for future sales returns . . . . $18,064 $18,308 (a) -- $18,566 (b) $17,806
Allowance for doubtful accounts. . . . . . 1,770 413 -- 742 (c) 1,441
Allowance for advertising. . . . . . . . . 4,629 11,215 -- 9,651 (d) 6,193
Allowance for overstock inventory. . . . . 7,244 2,490 -- 5,233 (f) 4,501
Allowance for video rights in excess of net
realizable value . . . . . . . . . . . . 5,536 -- -- 4,213 (g) 1,323
<FN>
(a) Amounts represent the gross profit impact of anticipated sales returns.
(b) Returns credited to customer accounts during the year and includes $649 re-classified VCL "Assets Held
For Sale."
(c) Net amount of accounts written-off and recoveries during the year. Also, includes $679 re-classified
VCL "Assets Held For Sale."
(d) Reimbursements for co-op advertising.
(e) Opening balance for Vestron.
(f) Disposal of overstock inventory and includes $103 re-classified VCL "Assets Held For Sale."
(g) Write-off of video rights and includes $513 re-classified VCL "Assets held for Sale."
</TABLE>
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
<TABLE>
SCHEDULE IX - SHORT TERM BORROWINGS
<CAPTION>
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Weighted Amount Amount Average
Balance Average Outstanding Outstanding Interest Rate
Category of Aggregate at End Interest During the During the During the
Short Term Borrowings of Period Rate Period Period(a) Period(b)
(Dollar Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1991:
Note Payable to Bank (c). . . . . $ -- 9.79% $10,000 $10,000 9.79%
Note Payable to Bank (d). . . . . 2,190 13.00% 2,190 2,190 13.00%
Note Payable to Bank (d). . . . . -- 10.25% 1,966 1,148 10.25%
Note Payable to Bank (e). . . . . 68,420 9.45% 75,783 55,035 8.83%
Note Payable to Bank (f). . . . . -- 10.60% 15,700 12,400 10.63%
Year ended December 31, 1992:
Note Payable to Bank (d). . . . . $ 2,230 11.52% $ 2,230 $ 2,230 11.52%
Note Payable to Bank (g). . . . . -- 7.65% 69,963 36,858 8.50%
Year ended December 31, 1993:
Note Payable to Bank (d). . . . . $ -0- 11.52% $ 2,880 $ 2,410 11.52%
12% Notes . . . . . . . . . . . . 36,707 12.0% 37,000 36,500 12.1%
Note Payable to Bank (h). . . . . -0- 9.67% 20,370 2,213 9.25%
<FN>
(a) The average amount outstanding during the period is calculated by dividing the total of month-end outstanding
principal balances by the number of months the balance was outstanding during the period.
(b) The weighted average interest rate during the period was computed by dividing the annualized interest expense
by the average amount outstanding during the period.
(c) Line of credit with interest at 1% above prime.
(d) Demand notes payable to foreign banks included in "Liabilities Related To Assets Held For Sale" in 1993.
(e) Line of credit with interest at the greater of 1-1/4% above the Alternate Base Rate (as defined in the credit
agreement) or 2-1/2% above LIBOR.
(f) Line of credit with interest at the higher of the banks' reference rate of 1/2 of 1% above the Federal Funds rate
payable quarterly.
(g) Line of credit with interest through November 1992 at the greater of 1-1/4% above the Alternate Base Rate or
2-1/2% above LIBOR and in December 1992 at the greater of 3% above the Alternate Base Rate or 4-1/4%
above LIBOR. Effective with the February 5, 1993 amendment to the line of credit, the term was extended to
July 29, 1994 and earlier in the event of default, provided that on January 29, 1994 any lender under the line
of credit may choose to terminate the obligation to lend funds. Due to the extension of the term, as of
December 31, 1992, the outstanding balance of $5,370,0000 under the line of credit was re-classified from
current to long-term.
(h) Line of credit with interest at the greater of 3% above the Alternate Base Rate or 4-1/4% above LIBOR
maturing July 29, 1994. Beginning March 31, 1993 and at the first day of each quarter thereafter, the interest
rate increases by an additional 1/4%.
</TABLE>
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
Column A Column B
Charged to Costs and Expenses
Year Ended Year Ended Year Ended
December 31, December 31, December 31,
Item 1991 1992 1993
(Dollar Amounts in Thousands)
Maintenance and Repairs . . . (a) (a) (a)
Depreciation and Amortization
of Intangible Assets,
Pre-operating Costs, and Similar
Deferrals . . . . . . . . . . $21,272 $ 6,864 $ 3,924
Taxes, Other Than Payroll
and Income Taxes. . . . . . . (a) (a) (a)
Royalties (a) 11,004 5,164
Advertising Costs . . . . . . 33,700 24,831 20,403
(a) Amounts are not presented as such amounts are less than 1% of total
sales and revenues.
=====================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
EXHIBITS
To
Form 10-K
Of
LIVE ENTERTAINMENT INC.
For the fiscal year ended December 31, 1993
--------------------------
=====================================================================
<PAGE>
INDEX TO EXHIBITS
Exhibit
Number Description
- - ------- -----------
3.1 Restated Certificate of Incorporation of the
Registrant (incorporated herein by reference to
Appendix C of Registrant's Registration Statement
No. 33-24396)
3.2 Form of Certificate of Amendment to Restated
Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 20
to the Registrant's Schedule 13E-4, filed on
December 15, 1992, as amended)
3.3 Form of Certificate of Designations, Preferences
and Relative, Participating, Optional or Other
Special Rights of Series B Cumulative Convertible
Preferred Stock of the Registrant (incorporated
herein by reference to Exhibit 36 to the
Registrant's Schedule 13E-4, filed on December
15, 1992, as amended)
3.4 Amended Certificate of Designations, Preferences
and Rights of Series C Cumulative Convertible
Preferred Stock of the Registrant (incorporated
herein by reference to Exhibit 3.4 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992)
3.5 Certificate of Designations specifying the terms
of the Series R Junior Participating Preferred
Stock, par value $1.00 per share, of the
Registrant, filed with the Secretary of State of
the State of Delaware (incorporated herein by
reference to Exhibit 3 to the Registrant's
Current Report on Form 8-K, dated August 1,
1990)
3.6 Bylaws of the Registrant (incorporated herein by
reference to Exhibit 3.4 to the Registrant's
Registration Statement No. 33-24396)
3.7 Amendment to Bylaws of the Registrant, adopted on
June 18, 1992 (incorporated herein by reference
to Exhibit 3.6 to the Registrant's Registration
Statement on Form S-4, filed on December 15,
1992, as amended)
3.8 Contingent Payment Rights Agreement, dated as of
June 28, 1991, between the Registrant, Vestron
Acquisition Corp., Vestron Inc. and American
Stock Transfer & Trust Company, as Rights Agent,
and Price Waterhouse, as Representative
(incorporated herein by reference to Exhibit 2.1
to the Registrant's Registration Statement on
Form 8-A, dated July 15, 1991)
4.1 Form of Common Stock Certificate (incorporated
herein by reference to Exhibit 4 to the
Registrant's Registration Statement No.
33-24396)
4.2 Rights Agreement, dated as of July 19, 1990,
between the Registrant and American Stock
Transfer & Trust Company, which includes as
exhibits thereto, the form of Right Certificate
and the Summary of Rights (incorporated herein by
reference to Exhibit 4a to the Registrant's
Current Report on Form 8-K, dated August 1,
1990)
4.3 First Amendment to Rights Agreement, dated as of
May 1, 1992, between the Registrant and American
Stock Transfer & Trust Company (incorporated
herein by reference to Exhibit 4 to the
Registrant's Current Report on Form 8-K, dated
May 1, 1992)
4.4 Form of Indenture between the Registrant and
American Stock Transfer & Trust Company, as
trustee, relating to the Exchange Notes
(including Note and Pledge Agreement)
(incorporated herein by reference to Exhibit 35
to the Registrant's Schedule 13E-4, filed on
December 15, 1992, as amended)
4.5 Form of Certificate of Series B Cumulative
Convertible Preferred Stock (incorporated herein
by reference to Exhibit 4.7 to the Registrant's
Registration Statement on Form S-4, filed on
December 15, 1992, as amended)
4.6 Form of Certificate of Series C Convertible
Preferred Stock (incorporated herein by reference
to Exhibit 4.8 to the Registrant's Registration
Statement on Form S-4, filed on December 15,
1992, as amended)
4.7 Indenture, dated as of March 26, 1993, between
the Registrant and U.S. Trust Company of
California, N.A., relating to the $37,000,000 of
12% Senior Subordinated Secured Notes due 1994
(including form of Note) (incorporated herein by
reference to Exhibit 4.7 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1992)
4.8 Agreement dated as of December 22, 1993 between
LIVE Ventures Inc. and U.S. Trust Company of
California, N.A.*
10.1 Exclusive Distribution Agreement, dated as of
March 1, 1987, between International Video
Entertainment Inc. and MCA Distribution
Corporation (incorporated herein by reference to
Exhibit 10.33 to Carolco Pictures Inc.'s Annual
Report on Form 10-K for the fiscal year ended
December 31, 1986)
10.2 Amendment, dated as of December 28, 1989, of
Exclusive Distribution Agreement between
International Video Entertainment Inc. and MCA
Distribution Corporation (incorporated herein by
reference Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the year ended
December 31, 1990)
10.3 Amendment, dated as of May 10, 1990, of Exclusive
Distribution Agreement between International
Video Entertainment Inc. and MCA Distribution
Corporation (incorporated herein by reference to
Exhibit 10.13 to the Registrant's Annual Report
of Form 10-K for the fiscal year ended December
31, 1990)
10.4 License and Distribution Agreement, dated as of
May 11, 1992, by and between LIVE Home Video
Inc., LIVE America Inc., LIVE Distributing Inc.,
Vestron Inc. and WEA Corp. (incorporated herein
by reference to Exhibit 10.4 to the Registrant's
Registration Statement on Form S-4, filed on
December 15, 1992, as amended)
10.5 Amendment to License and Distribution Agreement,
dated as of June 8, 1992, by and between LIVE
Home Video Inc., LIVE America Inc., LIVE
Distributing Inc., Vestron Inc. International
Video Productions Inc. and WEA Corp.
(incorporated herein by reference to Exhibit 10.5
to the Registrant's Registration Statement on
Form S-4, filed on December 15, 1992, as
amended)
10.6 Four-Party Agreement, dated as of May 19, 1992,
among Uni Distribution Corp. (formerly MCA), LIVE
Home Video Inc., LIVE America Inc. and WEA Corp.
(incorporated herein by reference to Exhibit 10.6
to the Registrant's Registration Statement on
Form S-4, filed on December 15, 1992, as
amended)
10.7 Acceptance of Assignment, dated as of June 17,
1992, from WEA Corp. to Chemical Bank
(incorporated herein by reference to Exhibit 10.7
to the Registrant's Registration Statement on
Form S-4, filed on December 15, 1992, as
amended)
10.8 Notice of Assignment and Irrevocable Authority,
dated as of June 16, 1992, from LIVE Home Video
Inc., LIVE America Inc., International Video
Productions Inc. and Vestron Inc. to WEA Corp.
(incorporated herein by reference to Exhibit 10.8
to the Registrant's Registration Statement on
Form S-4, filed on December 15, 1992, as
amended)
10.9 Security Agreement, dated as of June 8, 1992, by
and between LIVE Home Video Inc., LIVE America
Inc., International Video Productions Inc. and
WEA Corp. (incorporated herein by reference to
Exhibit 10.9 to the Registrant's Registration
Statement on Form S-4, filed on December 15,
1992, as amended)
10.10 Intercreditor Agreement, dated as of June 8,
1992, by and between Credit Lyonnais Bank
Nederland N.V., Chemical Bank, Imperial Bank, The
Bank of California, N.A., The Long-Term Credit
Bank of Japan, Ltd. and WEA Corp. (incorporated
herein by reference to Exhibit 10.10 to the
Registrant's Registration Statement on Form S-4,
filed on December 15, 1992, as amended)
10.11 Additional Security Agreement, dated as of June
8, 1992, by and between LIVE Home Video Inc. and
WEA Corp. (incorporated herein by reference to
Exhibit 10.11 to the Registrant's Registration
Statement on Form S-4, filed on December 15,
1992, as amended)
10.12 Additional Intercreditor Agreement, dated as of
June 8, 1992, by and between Credit Lyonnais Bank
Nederland N.V., Chemical Bank, The Bank of
California, N.A., The Long-Term Credit Bank of
Japan, Ltd. and WEA Corp. (incorporated herein by
reference to Exhibit 10.12 to the Registrant's
Registration Statement on Form S-4, filed on
December 15, 1992, as amended)
10.13 Amendment, dated April 12, 1990, to Video Rights
License Agreement, dated July 27, 1987, between
Carolco Pictures Inc. and International Video
Entertainment Inc., as amended as of October 15,
1987 (incorporated herein by reference to Exhibit
10.45 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1990)
10.14 Second Amendment, dated March 6, 1991, to Video
Rights License Agreement, dated July 27, 1987,
between Carolco Pictures Inc. and International
Video Entertainment Inc., as amended on October
15, 1987 and April 12, 1990 (incorporated herein
by reference to Exhibit 10.49 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1990)
10.15 Third Amendment, dated October 21, 1991, to Video
Rights License Agreement, dated July 27, 1987,
between Carolco Pictures Inc. and LIVE Home Video
Inc. (formerly known as International Video
Entertainment Inc.), as amended on October 15,
1987, April 12, 1990 and March 6, 1991
(incorporated herein by reference to Exhibit
10.15 to the Registrant's Registration Statement
on Form S-4, filed on December 15, 1992, as
amended)
10.16 Fourth Amendment, dated March 2, 1992, to Video
Rights License Agreement, dated July 27, 1987,
between Carolco Pictures Inc. and LIVE Home Video
Inc., as amended on October 15, 1987, April 12,
1990, March 6, 1991 and October 21, 1991
(incorporated herein by reference to Exhibit
10.16 to the Registrant's Registration Statement
on Form S-4, filed on December 15, 1992, as
amended)
10.17 Memorandum of Agreement, dated as of September 1,
1991, between LIVE America Inc. and MCA Canada
Ltd. (incorporated herein by reference to Exhibit
10.7 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1991)
10.18 Laser Videodisc Sublicense Deal Memorandum, dated
as of October 1, 1991, by and between LIVE
America Inc. and Pioneer LDCA, Inc. (incorporated
herein by reference to Exhibit 10.8 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991)
10.19 Employment Agreement, dated as of December 23,
1993, for the services of Roger A. Burlage*^
10.20 Employment Agreement, dated as of January 2,
1992, for the services of David A. Mount
(incorporated herein by reference to Exhibit
10.10 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1991)^
10.21 First Amendment to Employment Agreement, dated as
of November 20, 1992, to Employment Agreement for
the services of David A. Mount (incorporated
herein by reference to Exhibit 10.21.1 to the
Registrant's Registration Statement on Form S-4,
filed on December 15, 1992, as amended)^
10.22 Letter Agreement, dated as of September 29, 1993,
pertaining to the departure of David A. Mount as
President and Chief Executive Officer of the
Registrant*^
10.23 Employment Agreement, dated as of September 1,
1989, for the services of Devendra Mishra
(incorporated herein by reference to Exhibit
10.34 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1989)^
10.24 Letter Agreement, dated as of July 7, 1992,
pertaining to the Employment Agreement for the
services of Devendra Mishra (incorporated herein
by reference to Exhibit 10.20 to the Registrant's
Registration Statement on Form S-4, filed on
December 15, 1992, as amended)^
10.25 Separation Agreement, dated as of November 26,
1991, by and between the Registrant and Wayne H.
Patterson (incorporated herein by reference to
Exhibit 10.14 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December
31, 1991)^
10.26 Employment Agreement, dated as of February 1,
1994, for the services of Michael J. White*^
10.27 Employment Agreement, dated as of October 1,
1992, between LIVE Home Video Inc. and Rodney W.
Trovinger (incorporated herein by reference to
Exhibit 10.95 to the Registrant's Registration
Statement on Form S-4, filed on December 15,
1992, as amended)^
10.28 Employment Agreement, dated as of December 1,
1992, for the services of Ivan R. Lipton
(incorporated herein by reference to Exhibit
10.28 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1992)^
10.29 Memorandum Agreement dated as of December 23,
1993, by and between the Registrant and Anthony
J. Scotti*^
10.30 Jefferson Capital Group, Ltd. and Bear Stearns &
Co. Inc. Retainer Letter with the Registrant,
dated as of May 21, 1992, with Indemnification
Agreement (incorporated herein by reference to
Exhibit 27 to the Registrant's Schedule 13E-4,
filed on December 15, 1992, as amended)^
10.31 Agreement, dated as of July 31, 1992, between
Jefferson Capital Group, Ltd. and the Registrant
(incorporated herein by reference to Exhibit 28
to the Registrant's Schedule 13E-4, filed on
December 15, 1992, as amended)^
10.32 Agreement, dated as of August 13, 1992, between
Daniels & Associates and the Registrant
(incorporated herein by reference to Exhibit 29
to the Registrant's Schedule 13E-4, filed on
December 15, 1992, as amended)^
10.33 Agreement, dated as of July 7, 1993, between
Jefferson Capital Group, Ltd. and Daniels &
Associates and the Registrant*^
10.34 Engagement Letter between Houlihan Lokey Howard
& Zukin, Inc. and the Registrant dated May 27,
1992 (incorporated herein by reference to Exhibit
32 to the Registrant's Schedule 13E-3 and
Schedule 13E-4, filed on September 24, 1992, as
amended)^
10.35 Amendment dated August 17, 1992 to Engagement
Letter dated May 27, 1992 between Houlihan Lokey
Howard & Zukin, Inc. and the Registrant
(incorporated herein by reference to Exhibit 33
to the Registrant's Schedule 13E-3 and Schedule
13E-4, filed on September 24, 1992, as
amended)^
10.36 Consulting Agreement, dated as of July 26, 1993,
between Roger R. Smith and the Registrant*^
10.37 Letter of Understanding, dated as of January 26,
1993, by and between the Registrant and Jefferson
Capital Group, Ltd. (incorporated herein by
reference to Exhibit 10.30 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1992)^
10.38 Agreement, dated as of February 13, 1991, between
Metronome Productions N.V. and LEI-IVE
Entertainment N.V. (incorporated herein by
reference to Exhibit 10.39 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1990)^
10.39 Asset Purchase Agreement, dated as of October 30,
1990, between Vestron Acquisition Corp. and
Vestron Inc., including annexes (incorporated
herein by reference to Exhibit 10.66 of
Registrant's Current Report on Form 8-K, dated
October 30, 1990)
10.40 Indemnification Agreement, dated as of October
30, 1990, by and among Vestron Acquisition Corp.,
Furst Holdings, Inc., Frogtown Holdings Inc.,
Austin O. Furst, Jr., and Vestron Inc., including
annex (incorporated herein by reference to
Exhibit 10.67 of Registrant's Current Report on
Form 8-K, dated October 30, 1990)
10.41 Securities Indemnification Agreement, dated as of
October 30, 1990, by and among Vestron
Acquisition Corp., Furst Holdings, Inc., Frogtown
Holdings Inc., Austin O. Furst, Jr., and Vestron
Inc., including annex (incorporated herein by
reference to Exhibit 10.68 of Registrant's
Current Report on Form 8-K, dated October 30,
1990)
10.42 Third Amended and Restated Loan and Security
Agreement, dated as of July 26, 1990, by and
among the Registrant, LIVE Home Video Inc.
(formerly known as International Video
Entertainment Inc.), LIVE America Inc. (formerly
known as I.V.E. America Inc.), LEI-IVE
Entertainment N.V., International Video
Productions Inc., Credit Lyonnais Bank Nederland
N.V. and Chemical Bank (incorporated herein by
reference to Exhibit 10.40 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1990)
10.43 First Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of October
26, 1990, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Credit Lyonnais Bank Nederland
N.V., Chemical Bank and Imperial Bank
(incorporated herein by reference to Exhibit
10.41 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1990)
10.44 Second Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of December
4, 1990, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Credit Lyonnais Bank Nederland
N.V., Chemical Bank, Imperial Bank, The Bank of
California, N.A. and National Westminster Bank
PLC, San Francisco Overseas Branch (incorporated
herein by reference to Exhibit 10.42 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990)
10.45 Third Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of April
23, 1991, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Credit Lyonnais Bank Nederland
N.V., Chemical Bank, Imperial Bank, The Bank of
California, N.A., National Westminster Bank PLC,
San Francisco Overseas Branch and The Long-Term
Credit Bank of Japan, Ltd. (incorporated herein
by reference to Exhibit 10.38 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1991)
10.46 Fourth Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of July 16,
1991, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Acquisition Corp.,
Credit Lyonnais Bank Nederland N.V., Chemical
Bank, Imperial Bank, The Bank of California, N.A.
and The Long-Term Credit Bank of Japan, Ltd.
(incorporated herein by reference to Exhibit
10.39 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1991)
10.47 Fifth Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of November
21, 1991, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd. (incorporated
herein by reference to Exhibit 10.40 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991)
10.48 Sixth Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of January
27, 1992, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd. (incorporated
herein by reference to Exhibit 10.41 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991)
10.49 Seventh Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of March
20, 1992, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd. (incorporated
herein by reference to Exhibit 10.42 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991)
10.50 Eighth Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of June 16,
1992, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd. (incorporated
herein by reference to Exhibit 10.52 to the
Registrant's Registration Statement on Form S-4,
filed on December 15, 1992, as amended)
10.51 Ninth Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of November
25, 1992, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd. (incorporated
herein by reference to Exhibit 10.56.1 to the
Registrant's Registration Statement on Form S-4,
filed on December 15, 1992, as amended)
10.52 Tenth Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of February
5, 1993, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd. (incorporated
herein by reference to Exhibit 10.51 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992)
10.53 Eleventh Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of March
26, 1993, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd. (incorporated
herein by reference to Exhibit 10.52 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992)
10.54 Twelfth Amendment to Third Amended and Restated
Loan and Security Agreement, dated as of January
28, 1994, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd.*
10.55 Supplemental Agreement, dated as of July 16,
1991, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Acquisition Corp.,
Credit Lyonnais Bank Nederland N.V., Chemical
Bank, Imperial Bank, The Bank of California,
N.A., and The Long-Term Credit Bank of Japan,
Ltd. (incorporated herein by reference to Exhibit
10.43 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1991)
10.56 Limited Waiver, dated as of April 16, 1991, by
and among the Registrant, LIVE Home Video Inc.,
LIVE America Inc., LEI-IVE Entertainment N.V.,
International Video Productions Inc., Credit
Lyonnais Bank Nederland N.V., Chemical Bank,
Imperial Bank, The Bank of California, N.A., and
National Westminster Bank PLC, San Francisco
Overseas Branch (incorporated herein by reference
to Exhibit 10.44 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1991)
10.57 Consent and Waiver Letter Agreement, dated as of
August 25, 1992, by and among the Registrant,
LIVE Home Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Chemical Bank,
Imperial Bank, The Bank of California, N.A., and
The Long-Term Credit Bank of Japan, Ltd.
(incorporated herein by reference to Exhibit
10.55 to the Registrant's Registration Statement
on Form S-4, filed on December 15, 1992, as
amended)
10.58 Consent Agreement, dated as of September 11,
1992, by and among the Registrant, LIVE Home
Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Credit Lyonnais
Bank Nederland N.V., Chemical Bank, Imperial
Bank, The Bank of California, N.A., and The Long-
Term Credit Bank of Japan, Ltd. (incorporated
herein by reference to Exhibit 10.56 to the
Registrant's Registration Statement on Form S-4,
filed on December 15, 1992, as amended)
10.59 Consent and Waiver Letter Agreement, dated as of
March 5, 1993, by and among the Registrant, LIVE
Home Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Chemical Bank,
Imperial Bank, The Bank of California, N.A., and
The Long-Term Credit Bank of Japan, Ltd.*
10.60 Consent and Waiver Letter Agreement, dated as of
December 22, 1993, by and among the Registrant,
LIVE Home Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions Inc., Vestron Inc., Chemical Bank,
Imperial Bank, The Bank of California, N.A., and
The Long-Term Credit Bank of Japan, Ltd.*
10.61 Agreement, dated as of December 22, 1993 by and
among LIVE Ventures Inc., Chemical Bank, Imperial
Bank, The Bank of California, N.A., and The Long-
Term Credit Bank of Japan, Ltd.*
10.62 Consent Letter, dated as of January 28, 1994, by
and among the Registrant, LIVE Home Video Inc.,
LIVE America Inc., LEI-IVE Entertainment N.V.,
International Video Productions Inc., Vestron
Inc., LIVE Ventures Inc., Chemical Bank, Imperial
Bank, The Bank of California, N.A., and The Long-
Term Credit Bank of Japan, Ltd.*
10.63 New Notes Intercreditor Agreement, dated as of
March 26, 1993 by and between Chemical Bank, as
Administrative Agent and as Collateral Agent, and
U.S. Trust Company of California, N.A.
(incorporated herein by reference to Exhibit
10.57 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1992)
10.64 Addendum to New Notes Intercreditor Agreement,
dated as of December 22, 1993 by and between
Chemical Bank, as Administrative Agent and as
Collateral Agent, and U.S. Trust Company of
California, N.A.*
10.65 Amended and Restated Trustee Intercreditor
Agreement, dated as of March 26, 1993 by and
among Chemical Bank, as Administrative Agent and
as Collateral Agent, U.S. Trust Company of
California, N.A. and American Stock Transfer &
Trust Company (incorporated herein by reference
to Exhibit 10.58 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992)
10.66 Warrant Agreement and Warrant Certificate, dated
as of November 26, 1990, between the Registrant
and Jefferson Capital Group, Ltd. (incorporated
herein by reference to Exhibit 10.44 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1990)^
10.67 Loan Fund Warrant Agreement, dated as of March
23, 1993, between the Registrant and the Warrant
Holders (incorporated herein by reference to
Exhibit 10.60 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December
31, 1992)
10.68 Loan Fund Common Stock Purchase Warrants, dated
as of March 23, 1993, between the Registrant and
Jefferson Capital Group, Ltd. (incorporated
herein by reference to Exhibit 10.61 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992)^
10.69 Registration Rights Agreement for Loan Fund
Common Stock Purchase Warrants, dated as of March
23, 1993, by and among the Registrant and the
holders of the Loan Fund Common Stock Purchase
Warrants (incorporated herein by reference to
Exhibit 10.62 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December
31, 1992)
10.70 Class B Warrant Agreement, dated as of March 26,
1993, between the Registrant and the Class B
Warrant Holders (incorporated herein by reference
to Exhibit 10.63 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended
December 31, 1992)
10.71 Class B Common Stock Purchase Warrants, dated as
of March 29, 1993, between the Registrant and
Jefferson Capital Group, Ltd. (incorporated
herein by reference to Exhibit 10.64 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992)^
10.72 Class B Common Stock Purchase Warrants, dated as
of March 29, 1993, between the Registrant and
Anthony J. Scotti (incorporated herein by
reference to Exhibit 10.65 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1992)^
10.73 Registration Rights Agreement for Class B Common
Stock Purchase Warrants, dated as of March 26,
1993, by and among the Registrant and the holders
of the Class B Common Stock Purchase Warrants
(incorporated herein by reference to Exhibit
10.66 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1992)
10.74 1988 Stock Option and Stock Appreciation Rights
Plan of the Registrant as amended through June
30, 1993*^
10.75 Agency Agreement, dated as of December 31, 1986,
by and between International Video Entertainment
Inc. and Carolco International N.V. (incorporated
herein by reference to Exhibit 10.49 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991)
10.76 Agreement, dated as of June 1, 1988, by and
between Carolco International N.V. and Carolco-
LIVE International V.O.F. (incorporated herein by
reference to Exhibit 10.50 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1991)
10.77 Agreement of Partnership, dated as of November
16, 1988, of Carolco-LIVE International V.O.F. by
and between Carolco International N.V. and LEI-
IVE Entertainment N.V. (incorporated herein by
reference to Exhibit 10.51 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1991)
10.78 Master Agreement for Home Video Rights to German
Language Versions, dated as of April 25, 1991, by
and between LEI-IVE Entertainment N.V. d/b/a/
LIVE Entertainment International and Carolco
International N.V. (incorporated herein by
reference to Exhibit 10.52 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1991)
10.79 Short-Form Agreement, dated as of August 15,
1991, by and between Carolco Television Inc. and
Vestron Inc. (incorporated herein by reference to
Exhibit 10.53 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December
31, 1991)
10.80 Short-Form Agreement (International), dated as of
August 15, 1991, by and between Carolco
International N.V. and Vestron Inc. (incorporated
herein by reference to Exhibit 10.54 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1991)
10.81 Registration Rights Agreement, dated as of July
3, 1990, by and between the Registrant and
Pioneer LDCA, Inc. (incorporated herein by
reference to Exhibit 10.55 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1991)
10.82 Registration Rights Agreement, dated as of March
24, 1992, by and between the Registrant and
Carolco Pictures Inc., Pioneer LDCA, Inc., RCS
Video Services International B.V., RCS Video
Services Antilles N.V. and Le Studio Canal+ S.A.
(incorporated herein by reference to Exhibit
10.56 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1991)
10.83 Amendment to Registration Rights Agreement, dated
as of August 1992, by and between the Registrant
and Carolco Pictures Inc., Pioneer LDCA, Inc.,
RCS Video Services International B.V., RCS Video
Services Antilles N.V. and Le Studio Canal+ S.A.
(incorporated herein by reference to Exhibit
10.68 to the Registrant's Registration Statement
on Form S-4, filed on December 15, 1992, as
amended)
10.84 Registration Rights Agreement for Common Stock
dated as of July 20, 1993, by and among the
Registrant, Carolco Pictures Inc., Pioneer LDCA,
Inc., RCS Video Services International B.V., RCS
Video Services Antilles N.V., and Le Studio
Canal+ S.A.*
10.85 Reconciliation and Offset Agreement, dated as of
December 31, 1992, by and between Carolco
Pictures Inc., Carolco International N.V., the
Registrant, LIVE Home Video Inc. and LEI-IVE
Entertainment N.V.*
10.86 General Loan and Security Agreement, dated as of
June 11, 1992, by and between Foothill Capital
Corporation, Strawberries Inc., Strawberries
Connecticut Inc., Strawberries Maine Inc.,
Strawberries Massachusetts Inc., Strawberries New
York Inc., Strawberries New Jersey Inc.,
Strawberries Pennsylvania Inc., Strawberries
Rhode Island Inc., Strawberries Vermont Inc.,
Strawberries Records and Tapes New Hampshire Inc.
and Waxie Maxie Quality Music Co. (incorporated
herein by reference to Exhibit 10.69 to the
Registrant's Registration Statement on Form S-4,
filed on December 15, 1992, as amended)
10.87 Amendment Number One to General Loan and Security
Agreement, dated as of January 1, 1993, by and
between Foothill Capital Corporation,
Strawberries Inc. and Waxie Maxie Quality Music
Co. (incorporated herein by reference to Exhibit
10.78 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1992)
10.88 Amendment Number Two to General Loan and Security
Agreement, dated as of March 17, 1993, by and
between Foothill Capital Corporation,
Strawberries Inc. and Waxie Maxie Quality Music
Co. (incorporated herein by reference to Exhibit
10.79 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1992)
10.89 Amendment Number Three to General Loan and
Security Agreement, dated as of May 5, 1993, by
and between Foothill Capital Corporation,
Strawberries Inc. and Waxie Maxie Quality Music
Co.*
10.90 Amendment Number Four to General Loan and
Security Agreement, dated as of July 29, 1993, by
and between Foothill Capital Corporation,
Strawberries Inc. and Waxie Maxie Quality Music
Co.*
10.91 Agreement of Limited Partnership of LIVE Home
Video L.P., dated as of September 14, 1992, by
and among LIVE Distributing Inc. and Pioneer
LDCA, Inc. (incorporated herein by reference to
Exhibit 9 to the Registrant's Schedule 13E-4,
filed on December 15, 1992, as amended)
10.92 LHV Guarantee, dated as of September 14, 1992, by
LIVE Home Video Inc. to and for the benefit of
Pioneer LDCA, Inc. (incorporated herein by
reference to Exhibit 10 to the Registrant's
Schedule 13E-4, filed on December 15, 1992, as
amended)
10.93 Partnership Security Agreement, dated as of
September 14, 1992, by LIVE Home Video L.P. and
Pioneer LDCA, Inc. (incorporated herein by
reference to Exhibit 11 to the Registrant's
Schedule 13E-4, filed on December 15, 1992, as
amended)
10.94 LDI Security Agreement, dated as of September 14,
1992, between LIVE Distributing Inc. and Pioneer
LDCA, Inc. (incorporated herein by reference to
Exhibit 12 to the Registrant's Schedule 13E-4,
filed on December 15, 1992, as amended)
10.95 LHV Pledge and Security Agreement, dated as of
September 14, 1992, between LIVE Home Video Inc.
and Pioneer LDCA, Inc. (incorporated herein by
reference to Exhibit 13 to the Registrant's
Schedule 13E-4, filed on December 15, 1992, as
amended)
10.96 LHV Inducement Letter from LIVE Home Video Inc.
to LIVE Home Video L.P. and Pioneer LDCA, Inc.
(incorporated herein by reference to Exhibit 14
to the Registrant's Schedule 13E-4, filed on
December 15, 1992, as amended)
10.97 WEA Letter, dated September 14, 1992, from LIVE
Home Video Inc. to WEA Corp. (incorporated herein
by reference to Exhibit 15 to the Registrant's
Schedule 13E-4, filed on December 15, 1992, as
amended)
10.98 Stock Purchase Agreement, dated as of September
14, 1992, by and among the Registrant and Pioneer
LDCA, Inc. (incorporated herein by reference to
Exhibit 16 to the Registrant's Schedule 13E-4,
filed on December 15, 1992, as amended)
10.99 Registration Rights Agreement for Series C
Convertible Preferred Stock, dated as of
September 14, 1992, by and among the Registrant
and Pioneer LDCA, Inc. (incorporated herein by
reference to Exhibit 17 to the Registrant's
Schedule 13E-4, filed on December 15, 1992, as
amended)
10.100 Letter, dated as of September 14, 1992, from
Pioneer LDCA, Inc. to Chemical Bank, Credit
Lyonnais Bank Nederland N.V., The Bank of
California, N.A. and The Long-Term Credit Bank of
Japan, Ltd. (incorporated herein by reference to
Exhibit 25 to the Registrant's Schedule 13E-4,
filed on December 15, 1992, as amended)
10.101 Engagement Letter, dated as of August 27, 1992,
between the Registrant and Seidler Amdec
Securities Inc. (incorporated herein by reference
to Exhibit 26 to the Registrant's Schedule 13E-4,
filed on December 15, 1992, as amended)
10.102 Strawberries Incentive Compensation Plan, adopted
November 20, 1992 (incorporated herein by
reference to Exhibit 10.96 to the Registrant's
Registration Statement on Form S-4, filed on
December 15, 1992, as amended)^
10.103 Fiscal 1993 Incentive Cash Compensation Program
for the Registrant, dated July 1993*^
10.104 Fiscal 1994 Incentive Cash Compensation Program
for the Registrant and LIVE Home Video Inc.,
dated February 1994*^
10.105 Fiscal 1994 Incentive Cash Compensation Program
for the LIVE Specialty Retail Division, dated
February 1994*^
10.106 Settlement Agreement, dated as of October 31,
1992, among New Line International Releasing,
Inc., New Line Distributing, Inc. and LIVE
America Inc. (incorporated herein by reference to
Exhibit 10.97 to the Registrant's Registration
Statement on Form S-4, filed on December 15,
1992, as amended)
10.107 Securities Exchange Agreement, dated as of March
26, 1993, by and between the Registrant, LIVE
Home Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions, Inc., Vestron Inc., Daniels &
Associates and Jefferson Capital Group, Ltd.
(incorporated herein by reference to Exhibit
10.96 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31,
1992)
10.108 Form of Securities Purchase Agreement, dated as
of March 26, 1993, by and between the Registrant,
LIVE Home Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video
Productions, Inc., Vestron Inc. and various
purchasers (incorporated herein by reference to
Exhibit 10.97 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December
31, 1992)
10.109 Letter of Intent between the Registrant and
Carolco Pictures Inc. dated March 23, 1994*
11 Computation of Earnings Per Share*
21 Subsidiaries of the Company*
22.1 Prospectus, Consent Solicitation, Proxy Statement
and Solicitation of Prepackaged Plan Acceptances,
with Appendices of the Registrant dated as of
December 18, 1992 (incorporated herein by
reference to Exhibit 1 to the Registrant's
Schedule 13E-3, filed on December 15, 1992, as
amended)
22.2 Extension of Expiration Date to January 28, 1993
and First Supplement dated January 13, 1993 to
Prospectus, Consent Solicitation, Proxy Statement
and Solicitation of Prepackaged Plan Acceptances
dated December 18, 1992 (incorporated herein by
reference to Exhibit 54 to the Registrant's
Schedule 13E-4, filed on December 15, 1992, as
amended)
22.3 Second Supplement dated January 18, 1993 to
Prospectus, Consent Solicitation, Proxy Statement
and Solicitation of Prepackaged Plan Acceptances
dated December 18, 1992, as supplemented January
13, 1993 (incorporated herein by reference to
Exhibit 55 to the Registrant's Schedule 13E-4,
filed on December 15, 1992, as amended)
23 Consent of Independent Auditors*
24 Powers of Attorney and Board of Directors
resolution authorizing the same*
99.1 Presentation of Seidler Amdec Securities Inc.,
dated September 18, 1992, to the Board of
Directors of the Registrant (incorporated herein
by reference to Exhibit 49 to the Registrant's
Schedule 13E-3, filed on December 15, 1992, as
amended)
99.2 Update Letter, dated as of March 23, 1993, from
Seidler Amdec Securities Inc. (incorporated
herein by reference to Exhibit 28.2 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1992)
- - ---------------
*Filed Herewith
^Management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c)
AGREEMENT
THIS AGREEMENT is made and entered into as of this 22nd day of
December, 1993, by and between LIVE VENTURES INC., a Delaware
corporation ("LVI") and U.S. TRUST COMPANY OF CALIFORNIA, N.A., a
national banking association ("Trustee").
W I T N E S S E T H
WHEREAS, Trustee is the trustee under that certain Indenture
dated as of March 26, 1993, among (i) LIVE Entertainment Inc.
("LIVE"), (ii) LIVE Home Video Inc. (formerly known as
International Video Entertainment Inc.) ("LHV"), LIVE America Inc.
(formerly known as I.V.E. America Inc.), LEI-IVE Entertainment
N.V., International Video Productions Inc., and Vestron Inc., as
"Guarantors", and (iii) Trustee, as trustee (the "Indenture"); and
WHEREAS, Section 12.20 of the Indenture provides that each
Person, other than Lieberman, Strawberries or any of their
respective Subsidiaries, who becomes a Subsidiary of a Guarantor
shall be and be deemed to be a Guarantor under the Indenture, and
within ten (10) days after acquiring such status, shall execute and
deliver to Trustee an agreement agreeing to be bound by the
Indenture, the Notes, the Collateral Documents and all agreements
and instruments executed in connection therewith; and
WHEREAS, LHV has recently formed a Delaware wholly owned
subsidiary, LVI, for the purpose of entering into a joint venture
known as BET Film Productions; and
WHEREAS, by the execution and delivery of this Agreement and
subject to the terms and conditions hereinafter set forth, the
parties desire to add LVI as a Guarantor under the Indenture, the
Notes, the Collateral Documents and all agreements and instruments
executed in connection therewith; and
WHEREAS, capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
A G R E E M E N T
NOW, THEREFORE, for and in consideration of Ten Dollars
($10.00) and other good and valuable consideration by each of the
parties hereto in hand paid to the other, the receipt and adequacy
of which are hereby acknowledged, LVI and Trustee hereby agree as
follows:
1. LVI Added as Guarantor. Effective as of the date hereof,
LVI shall be added as and shall be deemed to be a Guarantor under
the Indenture, the Notes, the Collateral Documents and all
agreements and instruments executed in connection therewith. LVI
hereby assumes all of the obligations of a Guarantor under the
Indenture, the Notes, the Collateral Documents and all agreements
and instruments executed in connection therewith and agrees to be
bound by all of the terms and conditions thereof as if it had been
a Guarantor thereof from the inception thereof. From and after the
date hereof, all references in the Indenture, the Notes, the
Collateral Documents and all agreements and instruments executed in
connection therewith to a "Guarantor" or the "Guarantors" shall be
deemed to include LVI. From and after the date hereof, all
references in the Pledge Agreement to a "Pledgor" or the "Pledgors"
shall be deemed to include LVI. All assets of LVI shall be
included in the Collateral under the Indenture, the Notes, the
Collateral Documents and all agreements and instruments executed in
connection therewith, and all securities owned by LVI shall be
included as Pledged Securities under the Indenture, the Notes, the
Collateral Documents and all agreements and instruments executed in
connection therewith. In furtherance of the foregoing, LVI shall
execute and/or deliver to Trustee the following:
a. this Agreement;
b. all financing statements and amendments to existing
financing statements relating to the Collateral necessary to put
any security interest in the assets of LVI of record; and
c. such other counterpart copies of or amendments to
the Indenture, the Notes, the Collateral Documents or the
agreements and instruments executed in connection therewith as the
Trustee shall require.
In addition, LVI shall cause the Guarantors to deliver the
certificates representing any additional securities to be included
in the Pledged Securities, including, without limitation, the
shares representing all of the issued and outstanding shares of
capital stock of LVI and any and all promissory notes made by LVI
to the order of any of LIVE or the Guarantors, to Trustee.
2. Subordination. The provisions of this Agreement are
subject to Article Ten of the Indenture and the provisions of the
New Intercreditor Agreement, as the same has been and in the future
may be amended and supplemented from time to time.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
"LVI"
LIVE VENTURES INC., a Delaware corporation
By:
Rodney W. Trovinger, President
"TRUSTEE"
U.S. TRUST COMPANY OF CALIFORNIA, N.A.,
a national banking association
By:
Its:
ACKNOWLEDGED THIS 22ND DAY OF
DECEMBER, 1993
LIVE Entertainment Inc.,
a Delaware corporation
By:
Michael J. White, Senior VP
LIVE Home Video Inc.,
a Delaware corporation
By:
Rodney W. Trovinger, Senior VP
LIVE America Inc.,
a Delaware corporation
By:
Rodney W. Trovinger, Senior VP
LEI-IVE Entertainment N.V.,
a Netherlands Antilles corporation
By:
Michael J. White
Supervisory Director
International Video Productions Inc.,
a California corporation
By:
Rodney W. Trovinger, Senior VP
Vestron Inc.,
a Delaware corporation
By:
Rodney W. Trovinger, Senior VP
LIVE Entertainment Inc.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
DATE: As of December 23, 1993
Roger A. Burlage
5451 North Newcastle Lane
Calabassas, California 91302
Re: Employment Agreement
Dear Mr. Burlage:
When executed by you ("Executive") and by a duly authorized
representative of LIVE Entertainment Inc., a Delaware corporation
("Company"), this letter will set forth the terms and conditions of
your employment.
1. Services
1.1 Employment. Company employs Executive during the Term
(as hereinafter defined) to serve as Chief Executive Officer and
President of Company, and to render such other services
("Services"), as Company or corporations controlled by, directly or
indirectly, Company ("Company's Affiliates"), may from time to time
reasonably request which are consistent with the duties Executive
is to perform and Executive's stature and experience. Executive
shall also be appointed to the Board of Directors of Company as
soon as practicable after the date hereof and shall thereafter be
included in management's slate of directors nominated for approval
by the Company's shareholders. Executive shall comply with all of
the reasonable and customary employment policies of Company and its
Affiliates. The Services shall be generally performed at the
principal offices of Company, currently in Van Nuys, California.
In addition, the Services may be performed by Executive from time
to time on a temporary travel basis at such other locations as
Company shall reasonably request consistent with its reasonable
business needs. Executive agrees to perform such Services in a
competent and professional manner, consistent with the skills to be
possessed by a senior executive officer in Company's business.
1.2 Reporting Requirements and Authority. Executive shall
report to the Chairman of the Board of Directors of Company, the
Board of Directors, or the Executive Committee thereof. The
Company shall retain the services of Anthony J. Scotti as Chairman
of the Board of Company during the period ending December 31, 1996,
and, except as provided in Section 1.3.1 below, Executive's primary
reporting responsibility shall be to Anthony J. Scotti during such
period and no person shall be interposed between Executive and Mr.
Scotti. (Except as provided in Section 1.3.1 below, the failure of
Anthony J. Scotti to be available for such purposes during such
period, if due to a breach by Company of any obligation to, or
agreement with, Anthony J. Scotti, shall be a material breach of
Company's obligations to Executive hereunder.) Except for those
officers and employees subject to election by the Board of
Directors of Company Executive shall have the authority to select
and employ all staff necessary to conduct the business of Company
and each of its subsidiaries, and all such staff shall ultimately
report to, and be subject to the control and direction of,
Executive.
1.3 Public Board. Executive acknowledges that the Company
may not remain as a public corporation and that the failure of the
Company to so remain shall not be a breach hereunder. Executive
also acknowledges that Company has, in the past, had merger
discussions with Carolco Pictures Inc. and may have such
discussions in the future. In the event that Company is merged
with or acquired by Carolco Pictures Inc. or any other corporation,
Executive acknowledges and agrees that he may not be requested to
serve as a member of the Board of Directors of Carolco Pictures
Inc. or any other company which acquires the Company. The
Company's obligation to nominate Executive as a member of
management's slate of its Board may be satisfied by nomination to
the board or boards of nonpublic companies which operate and
control the businesses then operated or controlled by the Company,
such as the Board of LIVE Home Video Inc. In the event of such a
merger or acquisition, then, notwithstanding the provisions of
Section 1.2 above, Executive shall report directly to the Chief
Executive Officer and/or the Chairman of the Board of the combined
company. After such a merger or acquisition, the fact that
Executive may not report to Mr. Scotti shall not constitute a
breach of Company's obligations to Executive hereunder.
1.4 Ownership of Properties. Company, as employer, shall
own, and Executive hereby transfers and assigns to Company, all
rights in and to any material and/or ideas written, suggested or
submitted by Executive during the Term and all other results and
proceeds of the Services (the "Properties"). Company and its
licensees and assigns shall have the right to adapt, change,
revise, delete from, add to and/or rearrange the Properties or any
part thereof written or submitted by Executive and to combine the
same with other works to any extent, and to change or substitute
the title thereof and in this connection Executive hereby waives
any so-called "moral rights" of authors. Executive agrees to
execute and deliver to Company such assignments or other
instruments as Company may require from time to time to evidence
its ownership of the results and proceeds of Executive's services;
provided, however, that nothing in this Section 1.4 shall be deemed
in any manner to restrict or qualify Executive's ownership or right
to exploit Executive's personal memoirs.
1.5 Term/Exclusivity
1.5.1 The Term of this Agreement shall commence and
this Agreement shall become effective as soon as possible after the
date hereof, but no later than January 15, 1994, and shall end on
December 31, 1997 unless extended or sooner terminated in
accordance with the provisions of this Agreement (the "Term").
1.5.2 The Services shall be rendered on a full time
basis during normal working hours and all services of Executive
shall be exclusive to Company; provided, however, that Executive
may engage in other business activities with Company's prior
written consent which consent shall not be unreasonably withheld
provided that such other business activities shall not constitute
a Competitive Business (as defined in Section 1.5.3 hereof), and
shall not adversely affect the performance of Executive's Services
hereunder. Executive acknowledges that Executive's performances
and services hereunder are of a special, unique, unusual,
extraordinary and intellectual character which gives them peculiar
value, the loss of which cannot be reasonably or adequately
compensated in an action at law for damages and that a breach by
Executive of the terms hereof (including without limitation this
Section 1.5 and Section 1.7) will cause Company irreparable injury.
Executive agrees that Company is entitled to seek injunctive and
other equitable relief to prevent a breach or threatened breach of
this Agreement, which shall be in addition to any other rights or
remedies to which Company may be entitled.
1.5.3 During the term of this Agreement and of
Executive's employment by Company (the "Restricted Period"),
Executive shall not, directly or indirectly, (i) engage in any
business for his own account which is competitive with the
Businesses of Company or Company's Affiliates (collectively,
"Competitive Business") so long as Company or Company's Affiliates
(as the case may be) continue to engage in such business; (ii)
enter the employ of, or render any services to, any person engaged
in a Competitive Business; (iii) become interested in a Competitive
Business in any capacity, including, without limitation, as an
individual, partner, shareholder, officer, director, principal,
agent, trustee or consultant; or (iv) induce any customer or
supplier of Company or Company's Affiliates to terminate its
relationship with Company or Company's Affiliates (as the case may
be). Notwithstanding anything to the contrary, Executive may
acquire and/or retain, solely as an investment, and take customary
actions to maintain and preserve Executive's ownership of:
A. securities of any corporation which are
registered under Sections 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and which are publicly traded, as long as
Executive is not part of any control group of such corporation (the
Company is aware that Executive holds shares and options in Trimark
Holdings, Inc. and such holdings are not in conflict with this
Section 1.5.3A.); and
B. any securities of a partnership, trust,
corporation or other person so long as Executive remains a passive
investor in that entity and does not become part of any control
group thereof (except in a passive capacity) and so long as such
entity is not, directly or indirectly, in competition with Company
or its Affiliates.
1.6 Offices. Company may from time to time appoint Executive
to one or more offices of Company's subsidiaries or Affiliates and
to elect Executive to the Board of Directors of such subsidiaries
or Affiliates. Executive agrees to accept such offices if
consistent with his stature and experience and with the type of
offices previously held by Executive.
1.7 Confidentiality. Executive acknowledges that his
Services will, throughout the Term, bring Executive into close
contact with many confidential affairs of Company and its
Affiliates, including information about costs, profits, markets,
sales, products, key personnel, pricing policies, operational
methods, technical processes and other business affairs and methods
and other information not readily available to the public, and
plans for future development. Executive further acknowledges that
the businesses of Company and its Affiliates are international in
scope, that their products are marketed throughout the world, that
Company and its Affiliates compete in nearly all of their business
activities with other organizations which are or could be located
in nearly any part of the world and that the nature of Executive's
Services, position and expertise are such that he is capable of
competing with Company and its Affiliates from nearly any location
in the world. In recognition of the foregoing, Executive covenants
and agrees:
1.7.1 that Executive will keep secret all material
confidential matters of Company and its Affiliates which are not
otherwise in the public domain and will not intentionally disclose
them to anyone outside of Company or its Affiliates, either during
or after the Term, except with Company's written consent and except
for such disclosure as is necessary in the performance of
Executive's duties during the Term; and
1.7.2 that Executive will deliver promptly to Company
on termination of the Term or at any other time Company may so
request, at Company's expense, all confidential memoranda, notes,
records, reports and other documents (and all copies thereof)
relating to Company's and its Affiliates' business, which Executive
obtained while employed by, or otherwise serving or acting on
behalf of, Company, or which Executive may then possess or have
under his control.
1.8 Indemnification. Executive shall be entitled throughout
the Term to the benefit of the indemnification provisions contained
on the date hereof in the Bylaws of Company notwithstanding any
future changes therein, to the extent permitted by applicable law
at the time of the assertion of any liability against Executive,
and to the most favorable indemnification provisions or agreements
available to any other senior executive of Company.
2. Compensation
As compensation and consideration for all Services provided by
Executive during the Term pursuant to this Agreement, Company
agrees to pay to Executive the compensation set forth below.
2.1 Fixed Annual Compensation. For the period commencing on
the effective date hereof and ending on December 31, 1994 Executive
shall receive Fixed Annual Compensation in the amount of Four
Hundred Fifty Thousand Dollars ($450,000). Executive's Fixed
Annual Compensation shall be increased each calendar year
thereafter by 5% (or more at the Board's discretion) of the Fixed
Annual Compensation in effect in the prior calendar year.
Executive's Fixed Annual Compensation shall be payable in equal
installments on Company's regular pay dates following commencement
of the Term.
2.2 Incentive Compensation. Executive shall receive an
annual bonus equal to two percent (2%) of the Company's earnings
before interest and taxes on income ("EBIT") determined in
accordance with generally accepted accounting principles and the
Company's regular accounting methods, in excess of $10,000,000 per
annum, with losses, if any, on the disposition, if any, of the
Companies Strawberries or VCL subsidiaries excluded in determining
EBIT ("Incentive Compensation"). Incentive Compensation in any
year shall be capped at 100% of Fixed Annual Compensation for the
applicable year. The determination of Executive's annual Incentive
Compensation shall be based upon a report by the Company's regular
outside accounting firm (the "Accounting Firm") prepared upon
completion of the Company's regular year-end audits, delivered to
a committee of two independent Board members who shall verify such
calculation and cause the Company to pay such Incentive
Compensation no later than 15 days after completion of the
Company's year-end audit, but no later than May 1 of the following
year. Any dispute concerning the calculation of Incentive
Compensation shall be settled by the Company's Accounting Firm.
2.3 Stock Options. Upon Executive's execution of the stock
option agreement referred to hereinafter in this Section 2.3, as a
special inducement to Executive, Company will grant to Executive
options to acquire 600,000 shares of Company's common stock at the
closing price of Company's common stock on December 22, 1993 (the
"Options"), with the Options to vest as follows (unless they vest
earlier as provided in Section 3.2.2 or Section 3.3.3 (b)):
(i) 150,000 Options will vest on December 31, 1994;
(ii) an additional 150,000 Options will vest on December
31, 1995;
(iii) an additional 150,000 Options will vest on December
31, 1996;
(iv) the final 150,000 Options will vest on December 31,
1997.
The Options may be exercised until the earlier of: (a) ten (10)
years from the date hereof, (b) three (3) years after termination
of employment unless due to Executive's Material Breach (as
hereinafter defined); or (c) termination of employment due to
Executive's Material Breach. The Options will be subject to such
additional terms and conditions as may be set forth in Company's
1988 Stock Option and Stock Appreciation Rights Plan, as amended
through March 1993 (the "Option Plan"), as well as the form of
stock option agreement. In the event of a merger of the Company,
the Options will be converted into substantially similar options to
receive substantially the same consideration as received by the
holders of the Company's Common Stock, as determined by the
Company's Stock Option Committee. The Company covenants that it
shall secure shareholder approval for the Options and shall
register the shares underlying the Options with the Securities and
Exchange Commission on Form S-8 (if available for such purpose) on
or before the first anniversary hereof. The options may be
assigned to a trust established for the benefit of Executive's
family, if to do so does not make the underlying shares ineligible
for registration of Form S-8.
2.4 Signing Bonus. To provide to Executive in January 1994
upon commencement of employment a one-time "Signing Bonus" in the
amount of One Hundred Thousand Dollars ($100,000) (less applicable
taxes) which shall be paid to Executive in one lump sum.
2.5 Special Inducements. As a special inducement to
Executive to enter into this Agreement, during the Term, Company
agrees as follows:
2.5.1 To provide to Executive a life insurance policy
("Life Insurance Benefits") structured as the Company and Executive
shall agree with premiums approximately equal to those paid by the
Company for life insurance for Executive's predecessor
(approximately $16,000 per year) (taking into account the split-
dollar feature of such predecessor's policy) and to pay all
premiums thereon during the Term.
2.5.2 To provide, as additional compensation, long
term disability insurance coverage of the type generally provided
to the senior executives of Company ("Disability Benefits"), at the
maximum percentage of Executive's Fixed Annual Compensation
available for $10,000 per annum.
2.5.3 To provide Executive with a luxury automobile
consistent with Executive's stature with Company for business
purposes, or reimbursement to Executive of Executive's cost for
such an automobile. In addition, Company shall pay all costs of
reasonable maintenance, repair and insurance on such automobile
("Automobile Benefits"). Executive covenants and agrees that he
shall operate any automobile provided by the Company hereunder with
"reasonable care." Executive further agrees that Company shall
retain title to such automobile. At the end of the Term, Executive
shall have the right to acquire any automobile provided by Company
at its then lease retention price. Upon exercise of such right by
Executive and transfer to Executive of title to the automobile,
Company shall no longer be responsible for the payment of any costs
described herein.
2.5.4 During each year of the Term, to provide
Executive a paid vacation of up to four (4) weeks. Such vacation
shall be taken at such time or times during the applicable year as
may be determined by Executive subject to Company's business needs
("Vacation Benefits"). Any additional vacation period shall be
determined by Company consistent with the general customs and
practices of Company applicable to its executives.
2.5.5 To provide, as additional compensation, health
insurance coverage of the type generally provided to the senior
executives of Company ("Health Insurance Benefits").
2.5.6 Company shall increase Executive's compensation
in an amount sufficient to pay Executive's monthly membership dues
for the business use of a local country club (the "Club") for the
Term hereof, but in no event in excess of $10,000 per year. In
addition, Company agrees to provide Executive with an interest free
loan of up to $60,000 to allow Executive to purchase an equity
membership in such Club ("Club Benefits"). Upon termination of
Executive's employment hereunder for any reason, Executive shall
return to Company, in cash, the amount provided by Company to
purchase such membership.
The foregoing Life Insurance Benefits, Disability Benefits, Health
Insurance Benefits, Automobile Benefits, Vacation Benefits and Club
Benefits shall be hereinafter referred to as "Special Benefits."
2.6 Additional Benefits. Without limiting any other
provision hereof, Executive shall be entitled to participate in any
profit-sharing, pension, health, vacation, insurance or other
plans, benefits or policies available to the senior executive
employees of Company and not duplicative of those provided herein
on the terms determined by the Company in its sole and absolute
discretion from time to time, and will be entitled to reimbursement
of his reasonable and customary business expenses (including first-
class travel) incurred on behalf of Company or Company's Affiliates
("Additional Benefits").
3. Termination
3.1 Termination by Company.
3.1.1 Executive Material Breach. Company shall have
the right, at its election, to terminate the Term, by written
notice to Executive to that effect, only for "good cause" defined
for this purpose to mean (i) material and repeated instances of
misconduct or habitual inability to perform the Services, or
violation of Company's published policies or procedures after
written notice, (ii) a single act so grievous as to constitute the
equivalent of such repeated instances (including, without
limitation, theft, misappropriation of Company's assets, or sexual
harassment), (iii) unauthorized disclosure of confidential
information which is materially damaging to the Company, or (iv) a
material breach of any covenant, condition, agreement or term of
this Agreement ("Executive's Material Breach") and only if Company
shall have given written notice to Executive specifying the claimed
cause or breach and, provided such breach is curable, Executive
fails to correct the claimed breach or fails to alter the
objectional pattern of conduct specified in the applicable written
notice as soon as practical thereafter but no later than thirty
(30) days after receipt of the applicable notice or such longer
time as may be reasonably required by the nature of the claimed
breach. However, in no event shall a material breach of the
provisions of Sections 1.7 or 3.1.1(i), (ii) or (iii) be subject to
cure.
3.1.2 Effect of Termination by Company. Should the
Term be terminated by Company by reason of Executive's Material
Breach, Executive shall have no right to any further Fixed Annual
Compensation from and after termination, or to any Incentive
Compensation, Special Benefits, or Additional Benefits accruing for
the fiscal year of termination or thereafter, and all Options not
then vested shall terminate.
3.2 Termination by Executive.
3.2.1 Company's Material Breach. Executive shall
have the right, at his election, to terminate the Term by written
notice to Company to that effect if Company shall have failed to
substantially comply with or perform a material condition or
covenant of this Agreement ("Company's Material Breach"); provided
that, if such breach is curable, termination for Company's Material
Breach will not be effective until Executive shall have given
written notice specifying the claimed breach and Company fails to
correct the claimed breach within thirty (30) days after the
receipt of the applicable notice or such longer time as may be
reasonably required by the nature of the claimed breach (but within
five (5) business days, if the failure to perform is a failure to
pay monies when due under the terms of this Agreement).
3.2.2 Effect of Termination by Executive. Subject to
the provisions of Section 3.4 below, should Executive terminate the
Term due to Company's Material Breach, Company shall, for the then
remainder of the Term, pay to Executive or provide Executive with:
(i) Executive's Fixed Annual Compensation,
(ii) Incentive Compensation,
(iii) Life Insurance and Disability,
(iv) Health Insurance, and
(v) Automobile Benefits.
In addition, all Options shall vest on the date of such
termination. Executive also shall receive, through the date of
termination, such Vacation Benefits accrued but unpaid through such
date. All other benefits shall cease on the date of termination of
employment.
Should Executive terminate the Term other than for
Company's Material Breach, such termination shall be treated as a
termination by the Company for Executive's Material Breach.
3.3 Executive's Death or Disability.
3.3.1 Death. The Term shall immediately terminate
upon Executive's death as certified in accordance with the
provisions of California law ("Death").
3.3.2 Disability. As used herein, the term
"Disability" shall have such meaning as set forth in Company's
disability policy in effect as of the date hereof. If there is no
Company disability policy in effect on the date of a potential
Disability, the term "disability" shall mean Executive becoming
unable to perform the Services as a result of his permanent or
temporary, total or partial, physical or mental disability. In
such event, absent a Material Breach by Executive, Company shall
not have the right (notwithstanding any other provision of this
Agreement to the contrary) to terminate the Term due to Disability
prior to the expiration of the Disability Period. As used herein,
the term "Disability Period" shall mean the period commencing on
the first day of the calendar month following the month during
which such Disability occurs and ending on the first to occur of
the following: (i) the expiration of the Term; (ii) if the
Disability is continuous throughout the six (6) consecutive months
following the month during which the Disability occurs, then the
last day of such sixth consecutive calendar month; and (iii) if the
Disability is intermittent and shall exist throughout each of any
twelve (12) calendar months following the month during which the
Disability occurs, then the last day of such twelfth calendar
month.
3.3.3 Effect of Death or Disability.
(a) Fixed Annual Compensation, Special Benefits and
Additional Benefits: Should the Term be terminated in accordance
with the provisions of Sections 3.3.1 or 3.3.2 by reason of
Executive's Death or Disability, Executive or his estate (as the
case may be) shall have no right to any further Fixed Annual
Compensation, any Incentive Compensation, any Special Benefits, any
Additional Benefits or any other sums or benefits accruing to
Executive hereunder after the date of termination; provided,
however, that the Fixed Annual Compensation otherwise payable
during the Disability Period shall nevertheless be payable on the
terms set forth herein to Executive as a disability benefit
("Disability Benefit"). Any disability insurance proceeds actually
received by Executive during the Disability Period with respect to
such Disability shall reduce on a dollar-for-dollar basis the
Disability Benefit otherwise payable by Company during the
Disability Period pursuant to this Section 3.3.3.
(b) Incentive Compensation and Options: Should the
Term be terminated in accordance with the provisions of Sections
3.3.1 or 3.3.2 by reason of Executive's Death or Disability,
Executive or his estate (as the case may be) shall be entitled to
receive such prorated Incentive Compensation that shall have
accrued during that portion of the fiscal year prior to such Death
or Disability. All Options shall vest on the date of termination
by reason of Executive's Death or Disability, and Executive's
estate shall be entitled to exercise all such Options by reason of
Executive's Death as provided in the Option Agreement.
3.4 Mitigation. Executive agrees to attempt to mitigate the
damages he may incur in the event of termination due to Company's
Material Breach provided, however, that he shall not be required to
accept employment not consistent with his stature and position in
the entertainment industry. Executive agrees that if Executive
furnishes his services for other engagements or employment after
termination hereunder, the total compensation actually earned by
Executive together with any other benefits earned by Executive
shall reduce any amounts and benefits which Company would otherwise
be required to pay or provide to Executive. Executive agrees that
he shall give written notice to Company (promptly after accepting
employment or furnishing his services after termination of his
employment with Company) of any amounts earned (or to be earned) by
Executive and any benefits provided (or to be provided) to
Executive pursuant to his new employment arrangement. Executive's
inability to mitigate due to Disability shall not be a breach
hereof.
4. General
4.1 Applicable Law Controls. Nothing contained in this
Agreement shall be construed to require the commission of any act
contrary to law and wherever there is any conflict between any
provisions of this Agreement and any material statute, law,
ordinance or regulation contrary to which the parties have no legal
right to contract, then the latter shall prevail; provided,
however, that in any such event the provisions of this Agreement so
affected shall be curtailed and limited only to the extent
necessary to bring them within applicable legal requirements, and
provided further that if any obligation to pay the Fixed Annual
Compensation or any other amount due Executive hereunder is so
curtailed, then such compensation or amount shall be paid as soon
thereafter, either during or subsequent to the Term, as
permissible.
4.2 Waiver/Estoppel. Any party hereto may waive the benefit
of any term, condition or covenant in this Agreement or any right
or remedy at law or in equity to which any party may be entitled
but only by an instrument in writing signed by the party to be
charged. No estoppel may be raised against any party except to the
extent the other party relies on an instrument in writing, signed
by the party to be charged, specifically reciting that the other
party may rely thereon. The parties' rights and remedies under and
pursuant to this Agreement or at law or in equity shall be
cumulative and the exercise of any rights or remedies under one
provision hereof or rights or remedies at law or in equity shall
not be deemed an election of remedies; and any waiver or
forbearance of any breach of this Agreement or remedy granted
hereunder or at law or in equity shall not be deemed a waiver of
any preceding or succeeding breach of the same or any other
provision hereof or of the opportunity to exercise such right or
remedy or any other right or remedy, whether or not similar, at any
preceding or subsequent time.
4.3 Notices. Any notice which Company is required or may
desire to give to Executive hereunder shall be in writing and may
be served by delivering it to Executive, or by sending it to
Executive by mail (effective three (3) days after mailing) or
overnight delivery of same (effective the next business day), at
the address set forth on page one hereof, or by telecopy (effective
twelve (12) hours after confirmation), or such substitute address
as Executive may from time to time designate by notice to Company.
A courtesy copy of all notices to Executive shall be delivered to
Kenneth Kleinberg, Esq., Kleinberg & Lange, 1880 Century Park East,
Suite 1150, Los Angeles, California 90067. Any notice which
Executive is required or may desire to serve upon Company hereunder
shall be served in writing and may be served by delivering it
personally or by sending it by mail, telex or telegraph to the
address set forth on page one hereof, attention Chairman of the
Board, or such other substitute address as Company may from time to
time designate by notice to Executive.
4.4 Governing Law. This Agreement shall be governed by,
construed and enforced and the legality and validity of each term
and condition shall be determined in accordance with the internal,
substantive laws of the State of California applicable to
agreements fully executed and performed entirely in California.
4.5 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement.
4.6 No Joint Venture. Nothing herein contained shall
constitute a partnership between or joint venture by the parties
hereto or appoint any party the agent of any other party. No party
shall hold itself out contrary to the terms of this Section and,
except as otherwise specifically provided herein, no party shall
become liable for the representation, act or omission of any other
party. This Agreement is not for the benefit of any third party
who is not referred to herein and shall not be deemed to give any
right or remedy to any such third party.
4.7 Modification/Entire Agreement. This Agreement may not be
altered, modified or amended except by an instrument in writing
signed by all of the parties hereto. No person, whether or not an
officer, agent, employee or representative of any party, has made
or has any authority to make for or on behalf of that party any
agreement, representation, warranty, statement, promise,
arrangement or understanding not expressly set forth in this
Agreement or in any other document executed by the parties
concurrently herewith ("Parol Agreements"). This Agreement and all
other documents executed by the parties concurrently herewith
constitute the entire agreement between the parties and supersede
all express or implied, prior or concurrent, Parol Agreements and
prior written agreements with respect to the subject matter hereof.
The parties acknowledge that in entering into this Agreement, they
have not relied and will not in any way rely upon any Parol
Agreements.
Please confirm your agreement to the foregoing by signing
below where indicated.
Dated as of December 23, 1993 Very truly yours,
LIVE Entertainment Inc., a Delaware
corporation
By:______________________________
Anthony J. Scotti
Chairman of the Board
AGREED AND ACCEPTED
as of this 23rd day of December, 1993
___________________________________
Roger A. Burlage
LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
September 29, 1993
David A. Mount
4720 Golf Course Drive
Westlake Village, California 91362
Dear Mr. Mount:
We have received, and agreed to accept, your resignation
effective as of September 30, 1993 (the "Termination Date") as
President and Chief Executive Officer of LIVE Entertainment Inc.,
a Delaware corporation ("LIVE"), and from any and all other
positions you may have held from time to time with any of LIVE's
parents, subsidiaries and associated or affiliated companies (LIVE
and all of its subsidiaries and associated or affiliated companies
are hereinafter collectively referred to as the "Company"). We
understand, however, that you will remain as a member of the Board
of Directors of LIVE, although on the Termination Date you will
resign from all Committees of the Board of Directors of LIVE of
which you currently are a member. The purpose of this letter
agreement and general release (the "Agreement") is to confirm our
discussions concerning your resignation and to set forth the terms
and provisions agreed to among us in that connection.
In consideration of the mutual promises and agreements
contained herein, you and LIVE agree as follows:
1. Except for your Directorship of LIVE, you have resigned
as a Director, officer and employee of the Company effective as of
the Termination Date. You have signed and delivered the attached
resignation letter with your delivery of a copy of this letter.
2. On or before the Termination Date, the Company will pay
you the sum of $57,211.53, representing accrued and unpaid vacation
pay. On the Termination Date, the Company will pay you all accrued
and unpaid salary due to you. Both such payments will be reduced
by deductions required under the laws of the United States of
America and the State of California. You agree that said payments
represent, and are in lieu of, any and all accrued and outstanding
Fixed Annual Compensation, Incentive Compensation and Special
Benefits, all as defined in the Employment Agreement between you
and LIVE dated as of January 2, 1992, as amended as of November 20,
1992 (the "Employment Agreement"), and any other amounts or
benefits to which you may be entitled under the Employment
Agreement. You will not receive a bonus payment for 1993. As a
member of the Board of Directors of LIVE, effective October 1,
1993, you will be entitled to payment of regular Board fees and
expenses as an "outside Director."
3. Until your departure as a member of the Board of
Directors of LIVE, you will retain your 183,500 options to purchase
LIVE Common Stock in accordance with the various Option Agreements
between you and the Company related to such options. Upon your
departure as a member of LIVE's Board of Directors, all such
options not then vested shall terminate and be canceled. All
options that are vested on the date of such departure shall be
canceled ninety (90) days thereafter, unless such vested options
are exercised by you prior to the end of such ninety (90) day
period.
4. On the Termination Date, you will turn over to Michael J.
White, or his designee, any keys to Company offices or Company
credit cards, as well as the keys to the Mercedes automobile being
leased by the Company for your use. On that same date, you will
turn over to Mr. White, or his designee, any of the Company's
files, records, or equipment kept in or maintained by you in your
office or elsewhere. In addition, you will submit by thirty (30)
days from the Termination Date any and all expense account reports
and vouchers relating to your employment for which you seek
reimbursement.
5. You will remain entitled to any rights and benefits that
you may have under the Company's 401(k) Plan for employees in
accordance with the terms of such Plan.
6. Pursuant to Section 3.4.1 of the Employment Agreement,
the Company has been paying the premiums on the one million dollar
($1,000,000) whole life split dollar life insurance policy that the
Company is carrying for the benefit of your beneficiaries (the
"Policy"). In accordance with that Section 3.4.1, the Company
shall continue to pay all premiums on the Policy up to the
Termination Date, whereupon the Company shall stop paying premiums
on the Policy. On or before ninety (90) days after the Termination
Date, you will pay to the Company the sum of $22,843.22,
representing what the cash surrender value of the Policy would be
if the Policy were returned to the insurance company. Upon receipt
of such payment, the Company shall assign the Policy to you and
execute all documents reasonably requested either by you or the
insurance company to effectuate such assignment.
7. On or before ninety (90) days after the Termination Date,
you will pay to the Company the sum of sixty thousand dollars
($60,000), representing the amount paid by the Company to acquire
a membership in your name at North Ranch Country Club in Thousand
Oaks, California.
8. On or before ninety (90) days after the Termination Date,
you will repay the Company $62,500 of the principal amount of that
certain Promissory Note dated as of May 7, 1990 from you to the
order of the Company, as amended by First Amendment dated as of
January 2, 1992 (collectively, the "Note"), following which payment
the Company will return the original Note to you, marked canceled.
9. You will be entitled to the continued protection of the
indemnification provisions of Section 2.7 of the Employment
Agreement.
10. You acknowledge that you continue to be bound by the
provisions of Sections 2.3 and 2.6 of the Employment Agreement
dealing with "Ownership of Properties" and "Confidentiality" in
accordance with their terms.
11. You will be responsible for all local, state and federal
income and social security or self-employment taxes on the payments
and benefits to be provided to you hereunder.
12. Following termination of your employment with LIVE, you
will not be required to perform any further services for the
Company except:
(a) services rendered as a member of the Board of
Directors of LIVE;
(b) as is necessary to cooperate with and assist the
Company, its officers and employees, in the orderly transition of
management; and
(c) to assist and cooperate (including, but not limited
to, testifying or providing information to the Company) in the
investigation and handling of any actual or threatened court
action, arbitration or administrative proceeding involving any
matter that arose during the period of your employment with LIVE.
13. You, and anyone claiming through you, hereby
unconditionally release, remise, forever discharge and agree not to
sue the Company and any and all parents, divisions, subsidiaries,
affiliates and/or other related entities of the Company, including
but not limited to, LIVE Home Video Inc., Carolco Pictures Inc. and
each of the Company's past, present and future owners, directors,
officers, employees, and the predecessors, successors and assigns
of each of them, in their personal and corporate capacities
(hereinafter jointly referred to as the "released parties"), from
any and all liabilities, actions, claims, obligations, damages,
attorneys' fees, suits, and demands of any kind or nature, known
and unknown, liquidated or unliquidated, in law or in equity,
whether arising under any local, state, or federal statute or
ordinance, or under the common law of any state of the United
States, or under any federal common law of the United States, or
under any contract, from the beginning of time to the Termination
Date, including, but not limited to, all claims for breach of or
benefits under the Employment Agreement, which Employment Agreement
shall be terminated effective as of the Termination Date, and all
claims relating to your employment and resignation, including any
claims under the doctrines of defamation, libel, slander, invasion
of privacy, interference with contractual relations, or implied
contracts arising from employee handbooks, policies, manuals or
statements of procedure and wrongful discharge, it being the
intention of the Company and you to make this release as broad and
as general as the law permits; provided, however, that you do not
hereby release the Company from its obligations under this
Agreement and any rights you may have for indemnification by reason
of the fact that you were an officer, director, employee or agent
of the Company, and provided further that this Paragraph 13 does
not prohibit you, at your own expense, from filing a lawsuit for
the sole purpose of enforcing this Agreement. Further, to the
extent permitted by law, you hereby waive the provisions of
Section 1542 of the California Civil Code, which states:
A general release does not extend to
claims which the creditor does not know or
suspect to exist in his favor at the time of
executing the release, which if known by him
must have materially affected his settlement
with the debtor.
Except for enforcement of this Agreement, the Company similarly
releases you from any claims it may have against you. You accept
this Agreement as being in full accord, satisfaction, compromise
and settlement of any and all disputed claims and the payment
thereof and is not an admission by the Company or any of the
released parties, of any tort, breach of contract or violation of
any federal, state or local law, regulation or ordinance.
14. The parties hereto agree that they will not at any time
engage in any action either directly or indirectly which disparages
or results in the disparagement of the other party or any of the
released parties.
15. Neither you, on the one hand, nor the Company, on the
other, will cause or encourage any other legal proceedings to be
maintained or instituted against the other party or any of the
released parties, and neither will participate in any manner in any
other legal proceedings against the other party or any of the
released parties with respect to the matters referred to in this
Agreement except for enforcement of this Agreement. In the event
of a breach or a threatened or intended material breach of this
Agreement by one party, the other shall be entitled, in addition to
remedies otherwise available to it at law or in equity, to
injunctive relief, both preliminary and permanent, enjoining such
breach or threatened or intended breach, which shall be issued
forthwith by any court of competent jurisdiction.
16. This Agreement represents the entire agreement between
the parties relating to the subject matters covered hereby (and
supersedes any prior agreement as to such matters, except as
provided herein) and shall not be amended or waived except in a
writing signed by the parties hereto.
17. You acknowledge that the Company has encouraged you to
have this Agreement reviewed and negotiated by an attorney of your
own choosing and that you have carefully read, fully understand and
voluntarily executed this Agreement.
Please indicate your acceptance of the above arrangement by
signing and returning to us the enclosed copy of this letter and
the attachment.
Very truly yours,
LIVE ENTERTAINMENT INC.
By:
Title:
Agreed to:
David A. Mount
Date: September 29, 1993
<PAGE>
David A. Mount
4720 Golf Course Drive
Westlake Village, California 91362
September 29, 1993
The Board of Directors of
LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Gentlemen:
I hereby resign, effective September 30, 1993, as President
and Chief Executive Officer of LIVE Entertainment Inc., as well as
from any and all other positions I may have held with any of the
parents, subsidiaries or affiliates of LIVE Entertainment Inc. I
will remain as a member of the Board of Directors of LIVE
Entertainment Inc., although effective September 30, 1993, I hereby
resign from all Committees of the Board of Directors of LIVE
Entertainment Inc. of which I currently am a member.
Sincerely,
______________________________
David A. Mount
LIVE ENTERTAINMENT INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
DATE: As of February 1, 1994
Mr. Michael J. White
c/o LIVE Entertainment Inc.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
Re: Employment Agreement
Dear Mr. White:
When executed by you ("Employee") and by a duly authorized
representative of LIVE Entertainment Inc., a Delaware corporation
("Company"), this letter will set forth the terms and conditions of
Employee's employment.
1. Services
1.1 Employment. Company employs Employee during the Term (as
hereinafter defined) to serve as Executive Vice President/Chief
Administrative Officer and General Counsel of Company, and to
render such other services ("Services") as Company or corporations
controlled by, under common control with or controlling, directly
or indirectly, Company ("Company's Affiliates"), may from time to
time reasonably request which are consistent with the duties
Employee is to perform and Employee's stature and experience.
Employee shall comply with all of the reasonable and customary
employment policies of Company and its Affiliates. The Services
shall be generally performed at the principal offices of Company,
currently in Van Nuys, California. In addition, the Services may
be performed by Employee from time to time on a temporary travel
basis at such other locations as Company shall reasonably request
consistent with its reasonable business needs. Employee agrees to
perform such Services in a competent and professional manner,
consistent with the skills to be possessed by a senior executive
officer in Company's business.
1.2 Reporting Requirements. Employee shall report to the
Chief Executive Officer of Company.
1.3 Ownership of Properties. Company, as employer, shall
own, and Employee hereby transfers and assigns to Company, all
rights in and to any material and/or ideas written, suggested or
submitted by Employee during the Term and all other results and
proceeds of the Services ("Properties"). Company and its licensees
and assigns shall have the right to adapt, change, revise, delete
from, add to and/or rearrange the Properties or any part thereof
written or submitted by Employee and to combine the same with other
works to any extent, and to change or substitute the title thereof
and in this connection Employee hereby waives any so-called "moral
rights" of authors. Employee agrees to execute and deliver to
Company such assignments or other instruments as Company may
require from time to time to evidence its ownership of the results
and proceeds of Employee's services; provided, however, that
nothing in this Section 1.3 shall be deemed in any manner to
restrict or qualify Employee's ownership or right to exploit
Employee's personal memoirs.
1.4 Term/Exclusivity
1.4.1 The Term of this Agreement shall commence on
the date hereof and shall end upon notice of termination from one
party to the other (the "Term").
1.4.2 The Services shall be rendered on a full time
basis during normal working hours and all services of Employee
shall be exclusive to Company; provided, however, that Employee may
engage in other business activities with Company's prior written
consent which consent shall not be unreasonably withheld provided
that such other business activities shall not constitute a
Competitive Business (as defined in Section 1.4.3 hereof), and
shall not adversely affect the performance of Employee's Services
hereunder. Employee acknowledges that Employee's performances and
services hereunder are of a special, unique, unusual, extraordinary
and intellectual character which gives them peculiar value, the
loss of which cannot be reasonably or adequately compensated in an
action at law for damages and that a breach by Employee of the
terms hereof (including without limitation this Section 1.4 and
Section 1.5) will cause Company irreparable injury. Employee
agrees that Company is entitled to injunctive and other equitable
relief to prevent a breach or threatened breach of this Agreement,
which shall be in addition to any other rights or remedies to which
Company may be entitled.
1.4.3 During the term of this Agreement and of
Employee's employment by Company (the "Restricted Period"),
Employee shall not, directly or indirectly, (i) engage in any
business for his own account which is competitive with the
businesses of Company or Company's Affiliates (collectively,
"Competitive Business") so long as Company or Company's Affiliates
(as the case may be) continue to engage in such business; (ii)
enter the employ of, or render any services to, any person engaged
in a Competitive Business; (iii) become interested in a Competitive
Business in any capacity, including, without limitation, as an
individual, partner, shareholder, officer, director, principal,
agent, trustee or consultant; or (iv) induce any customer or
supplier of Company or Company's Affiliates to terminate its
relationship with Company or Company's Affiliates (as the case may
be). Notwithstanding anything to the contrary, Employee may
acquire and/or retain, solely as an investment, and take customary
actions to maintain and preserve Employee's ownership of:
A. securities of any corporation which are
registered under Sections 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and which are publicly traded, as long as
Employee is not part of any control group of such corporation; and
B. any securities of a partnership, trust,
corporation or other person so long as Employee remains a passive
investor in that entity and does not become part of any control
group thereof (except in a passive capacity) and so long as such
entity is not, directly or indirectly, in competition with Company
or its Affiliates.
1.5 Confidentiality. Employee acknowledges that his Services
will, throughout the Term, bring Employee into close contact with
many confidential affairs of Company and its Affiliates, including
information about costs, profits, markets, sales, products, key
personnel, pricing policies, operational methods, technical
processes and other business affairs and methods and other
information not readily available to the public, and plans for
future development. Employee further acknowledges that the
businesses of Company and its Affiliates are international in
scope, that their products are marketed throughout the world, that
Company and its Affiliates compete in nearly all of their business
activities with other organizations which are or could be located
in nearly any part of the world and that the nature of Employee's
Services, position and expertise are such that he is capable of
competing with Company and its Affiliates from nearly any location
in the world. In recognition of the foregoing, Employee covenants
and agrees:
1.5.1 that Employee will keep secret all material
confidential matters of Company and its Affiliates which are not
otherwise in the public domain and will not intentionally disclose
them to anyone outside of Company or its Affiliates, either during
or after the Term, except with Company's written consent and except
for such disclosure as is necessary in the performance of
Employee's duties during the Term; and
1.5.2 that Employee will deliver promptly to Company
on termination of the Term or at any other time Company may so
request, at Company's expense, all confidential memoranda, notes,
records, reports and other documents (and all copies thereof)
relating to Company's and its Affiliates' business, which Employee
obtained while employed by, or otherwise serving or acting on
behalf of, Company, or which Employee may then possess or have
under his control.
1.6 Indemnification. Employee shall be entitled throughout
the Term to the benefit of the indemnification provisions contained
on the date hereof in the Bylaws of Company notwithstanding any
future changes therein, to the extent permitted by applicable law
at the time of the assertion of any liability against Employee, and
to the most favorable indemnification provisions or agreements
available to any other senior executive of Company.
2. Compensation
As compensation and consideration for all Services provided by
Employee during the Term pursuant to this Agreement, Company agrees
to pay to Employee the compensation set forth below.
2.1 Fixed Annual Compensation. A Fixed Annual Compensation
in the amount of no less than Two Hundred Fifty Thousand Dollars
($250,000). Employee's Fixed Annual Compensation shall be payable
in equal installments on Company's regular pay dates following
commencement of the Term.
2.2 Incentive Compensation. Employee shall be eligible to
participate in Company's discretionary Corporate Bonus Program, as
determined, modified and published by Company from time to time
("Incentive Compensation").
2.3 Vacation Benefits. During each year of the Term,
Employee shall be entitled to a vacation of four (4) weeks, without
deduction of salary. Such vacations shall be taken at such time or
times during the applicable year as may be determined by Employee
subject to Company's business needs. Employee shall be entitled to
take any unused portion of his paid vacation in any subsequent year
of the Term, subject to the Company's business needs and policy and
consistent with applicable laws ("Vacation Benefits").
Notwithstanding the foregoing, Employee shall at no time have more
than six (6) weeks of accrued vacation, and at such time as six (6)
weeks of vacation are accrued by Employee, no additional vacation
will accrue unless and until vacation time is taken and the amount
of Employee's accrued vacation time becomes less than six (6)
weeks. Any additional vacation period shall be determined by
Company consistent with the general customs and practices of the
Company applicable to its executives.
2.4 Additional Benefits. Without limiting any other
provision hereof, Employee shall be entitled to participate in any
profit-sharing, pension, health, vacation, insurance or other
plans, benefits or policies available to the executives of Company
of similar stature and seniority on the terms generally applicable
to such executives and will be entitled to reimbursement of his
reasonable and customary business expenses incurred on behalf of
Company or Company's Affiliates ("Additional Benefits"). Employee
acknowledges that such benefits can change from time to time
without notice to Employee, and Employee shall retain no residual
rights in any superseded benefit plan.
3. Termination
3.1 Termination by Company.
3.1.1 Employee Material Breach. Company shall have
the right, at its election, to terminate the Term, by written
notice to Employee to that effect, only for "good cause" defined
for this purpose to mean (i) material and repeated instances of
misconduct or habitual inability to perform the Services, or
violation of Company's published policies or procedures, (ii) a
single act so grievous as to constitute the equivalent of such
repeated instances (including, without limitation, theft, mis-
appropriation of Company's assets, or sexual harassment), (iii)
unauthorized disclosure of confidential information related to
customers, employees or general business strategies, or (iv) a
material breach of any covenant, condition, agreement or term of
this Agreement ("Employee's Material Breach") and only if Company
shall have given written notice to Employee specifying the claimed
cause or breach and, provided such breach is curable, Employee
fails to correct the claimed breach or fails to alter the
objectional pattern of conduct specified in the applicable written
notice as soon as practical thereafter but no later than thirty
(30) days after receipt of the applicable notice or such longer
time as may be reasonably required by the nature of the claimed
breach. However, in no event shall a material breach of the
provisions of Section 1.3, 1.5 or 3.1.1(i), (ii) or (iii) be
subject to cure.
3.1.2 Effect of Termination by Company for Employee
Material Breach. Should the Term be terminated by Company by
reason of Employee's Material Breach, Employee shall have no right
to any further Fixed Annual Compensation from and after
termination, or to any Incentive Compensation or Additional
Benefits accruing for the fiscal year of termination or thereafter.
3.1.3 Company Notice of Termination and Effect
Thereof. Company shall have the right to terminate the Term at any
time as provided in Section 1.4 hereof upon notice from Company to
Employee, provided that such termination by Company shall be
treated as if Employee had terminated the Term as a result of
Company's Material Breach pursuant to Section 3.2.1 hereof, in
which event Employee shall be entitled to the payments and benefits
set forth in Section 3.2.2 hereof.
3.2 Termination by Employee.
3.2.1 Company's Material Breach. Employee shall have
the right, at his election, to terminate the Term by written notice
to Company to that effect if Company shall have failed to
substantially perform a material condition or covenant of this
Agreement, or if Company shall materially reduce Employee's job
duties or responsibilities in the absence of Employee's Material
Breach ("Company's Material Breach"); provided that, if such breach
is curable, termination for Company's Material Breach will not be
effective until Employee shall have given written notice specifying
the claimed breach and Company fails to correct the claimed breach
within thirty (30) days after the receipt of the applicable notice
or such longer time as may be reasonably required by the nature of
the claimed breach (but within ten (10) days, if the failure to
perform is a failure to pay monies when due under the terms of this
Agreement).
3.2.2 Effect of Termination by Employee. Subject to
the provisions of Section 3.4 below, should Employee terminate the
Term due to Company's Material Breach, Company shall, for a period
of one year after such termination, pay to Employee or provide
Employee with:
(i) Employee's Fixed Annual Compensation, and
(ii) Health Insurance.
In addition, all options held by Employee to purchase stock in the
Company pursuant to the Company's Stock Option Plan (collectively,
the "Options") shall vest on the date of termination. Employee
shall also receive such Incentive Compensation and Vacation
Benefits accrued through the date of termination. All other
benefits shall cease on the date of termination of employment.
Except with regard to a termination of the Term by reason
of Employee's Death or Disability (as both terms are defined in
Section 3.3), should Employee terminate the Term other than for
Company's Material Breach, such termination shall be treated as a
termination by Company for Employee's Material Breach.
3.3 Employee's Death or Disability.
3.3.1 Death. The Term shall immediately terminate
upon Employee's death as certified in accordance with the
provisions of California law ("Death").
3.3.2 Disability. In the event that during the Term
Employee becomes unable to perform the Services as a result of his
permanent or temporary, total or partial, physical or mental
disability (as defined in Company's disability insurance policy, if
any) ("Disability"):
3.3.2.1 the Fixed Annual Compensation otherwise
payable during the Disability Period (as herein defined) shall
nevertheless be payable on the terms set forth herein to Employee
as a disability benefit ("Disability Benefit");
3.3.2.2 any disability insurance proceeds actually
received by Employee during the Disability Period with respect to
such Disability shall reduce on a dollar-for-dollar basis the
Disability Benefit otherwise payable by Company during the
Disability Period pursuant to this Section 3; and
3.2.2.3 Company shall not have the right
(notwithstanding any other provision of this Agreement to the
contrary) to terminate the Term due to such Disability prior to the
expiration of the Disability Period.
As used herein, the term "Disability Period" shall have such
meaning as shall be defined in Company's disability insurance
policy in effect as of the date hereof, and if no such policy is in
effect it shall mean the period commencing on the first day of the
calendar month following the month during which such Disability
occurs and ending on the first to occur of the following: (i) if
the Disability is continuous throughout the six (6) consecutive
months following the month during which the Disability occurs, then
the last day of such sixth consecutive calendar month; and (ii) if
the Disability is intermittent and shall exist throughout each of
any twelve (12) calendar months following the month during which
the Disability occurs, then the last day of such twelfth calendar
month. Company shall have the right to terminate the Term at the
expiration of the Disability Period if and only if the Disability
of Employee is then continuing.
3.3.3 Effect of Death or Disability.
(a) Fixed Annual Compensation and Additional
Benefits: Should the Term be terminated in accordance with the
provisions of Sections 3.3.1 or 3.3.2 by reason of Employee's Death
or Disability, Employee or his estate (as the case may be) shall
have no right to any further Fixed Annual Compensation, any
Additional Benefits or any other sums or benefits accruing to
Employee hereunder; provided, however, that the sums identified in
Section 3.3.2 hereof shall be paid to Employee on the terms set
forth therein.
(b) Incentive Compensation and Options: Should the
Term be terminated in accordance with the provisions of Sections
3.3.1 or 3.3.2 by reason of Employee's Death or Disability,
Employee or his estate (as the case may be) shall be entitled to
receive such Incentive Compensation that shall have accrued during
that portion of the fiscal year prior to such Death or Disability.
All Options shall vest on the date of termination by reason of
Employee's Death or Disability, and Employee's estate shall be
entitled to exercise all Options which have vested on or prior to
the date of termination by reason of Employee's Death.
3.4 Mitigation. Employee agrees that if Employee furnishes
his services for other engagements or employment after termination
hereunder, the total compensation actually earned by Employee
together with any welfare or other benefits earned by Employee
shall reduce any amounts and benefits which Company would otherwise
be required to pay or provide to Employee. Employee agrees that he
shall give written notice to Company (promptly after accepting
employment or furnishing his services after termination of his
employment with Company) of any amounts earned (or to be earned) by
Employee and any benefits provided (or to be provided) to Employee
pursuant to his new employment arrangement.
4. General
4.1 Applicable Law Controls. Nothing contained in this
Agreement shall be construed to require the commission of any act
contrary to law and wherever there is any conflict between any
provisions of this Agreement and any material statute, law,
ordinance or regulation contrary to which the parties have no legal
right to contract, then the latter shall prevail; provided,
however, that in any such event the provisions of this Agreement so
affected shall be curtailed and limited only to the extent
necessary to bring them within applicable legal requirements, and
provided further that if any obligation to pay the Fixed Annual
Compensation or any other amount due Employee hereunder is so
curtailed, then such compensation or amount shall be paid as soon
thereafter, either during or subsequent to the Term, as
permissible.
4.2 Waiver/Estoppel. Either party hereto may waive the
benefit of any term, condition or covenant in this Agreement or any
right or remedy at law or in equity to which either party may be
entitled but only by an instrument in writing signed by the party
to be charged. No estoppel may be raised against either party
except to the extent the other party relies on an instrument in
writing, signed by the party to be charged, specifically reciting
that the other party may rely thereon. The parties' rights and
remedies under and pursuant to this Agreement or at law or in
equity shall be cumulative and the exercise of any rights or
remedies under one provision hereof or rights or remedies at law or
in equity shall not be deemed an election of remedies; and any
waiver or forbearance of any breach of this Agreement or remedy
granted hereunder or at law or in equity shall not be deemed a
waiver of any preceding or succeeding breach of the same or any
other provision hereof or of the opportunity to exercise such right
or remedy or any other right or remedy, whether or not similar, at
any preceding or subsequent time.
4.3 Notices. Any notice which Company is required or may
desire to give to Employee hereunder shall be in writing and may be
served by delivering it to Employee, or by sending it to Employee
by mail, telex or telegraph, at the address set forth on page 1
hereof, or such substitute address as Employee may from time to
time designate by notice to Company. Any notice which Employee is
required or may desire to serve upon Company hereunder shall be
served in writing and may be served by delivering it personally or
by sending it by mail, telex or telegraph to the address set forth
on page 1 hereof, attention of the Chief Executive Officer, or such
other substitute address as Company may from time to time designate
by notice to Employee.
4.4 Governing Law. This Agreement shall be governed by,
construed and enforced and the legality and validity of each term
and condition shall be determined in accordance with the internal,
substantive laws of the State of California applicable to
agreements fully executed and performed entirely in California.
4.5 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement.
4.6 No Joint Venture. Nothing herein contained shall
constitute a partnership between or joint venture by the parties
hereto or appoint either party the agent of the other party.
Neither party shall hold itself out contrary to the terms of this
Section and, except as otherwise specifically provided herein,
neither party shall become liable for the representation, act or
omission of the other party. This Agreement is not for the benefit
of any third party who is not referred to herein and shall not be
deemed to give any right or remedy to any such third party.
4.7 Modification/Entire Agreement. This Agreement may not be
altered, modified or amended except by an instrument in writing
signed by both of the parties hereto. No person, whether or not an
officer, agent, employee or representative of either party, has
made or has any authority to make for or on behalf of that party
any agreement, representation, warranty, statement, promise,
arrangement or understanding not expressly set forth in this
Agreement or in any other document executed by the parties
concurrently herewith ("Parol Agreements"). This Agreement and all
other documents executed by the parties concurrently herewith
constitute the entire agreement between the parties and supersede
all express or implied, prior or concurrent, Parol Agreements and
prior written agreements with respect to the subject matter hereof.
The parties acknowledge that in entering into this Agreement, they
have not relied and will not in any way rely upon any Parol
Agreements.
Please confirm your agreement to the foregoing by signing
below where indicated.
Dated as of February 1, 1994 Very truly yours,
LIVE ENTERTAINMENT INC.
a Delaware corporation
By:
Roger A. Burlage
President and Chief
Executive Officer
AGREED AND ACCEPTED
this ____ day of , 1994
MICHAEL J. WHITE
MEMORANDUM AGREEMENT BETWEEN LIVE ENTERTAINMENT INC.
AND ANTHONY J. SCOTTI
This is a memorandum agreement between LIVE Entertainment Inc.
("LIVE") and Anthony J. Scotti ("Scotti") dated as of this 23rd day
of December, 1993.
Scotti presently serves as Chairman of the Board of LIVE.
LIVE has engaged Roger A. Burlage to act as its Chief Executive
Officer and President pursuant to an employment agreement dated as
of December 23, 1993, which agreement extends through December 31,
1997. A provision in the Burlage employment agreement calls for
Burlage to report to Scotti and the Board of Directors of LIVE and
provides that LIVE "shall retain the services of Anthony J. Scotti
as Chairman of the Board of [LIVE] during the period ending
December 31, 1996" for such purposes. The employment agreement
further provides that "the failure of Anthony J. Scotti to be
available for such purposes during such period, if due to a breach
by [LIVE] of any obligation to or agreement with Anthony J. Scotti,
shall be a material breach of [LIVE's] obligations to [Burlage]."
This memorandum agreement confirms the understanding between
LIVE and Scotti with respect to Scotti's services as Chairman of
the Board of LIVE or in some similar capacity. Scotti agrees that
he will make himself available to to LIVE or any video subsidiary
to act as Burlage's primary reporting person for the period ending
December 31, 1996 on the same terms and conditions as are presently
in effect with respect to his services as the Chairman of the
Board, and LIVE agrees to engage Scotti for such purposes for such
period on such terms.
ANTHONY J. SCOTTI
LIVE Entertainment Inc.
By:
Michael J. White, Senior Vice
President
July 7, 1993
LIVE Entertainment Inc.
15400 Sherman Way
Suite 500
Van Nuys, CA 91406
Attention: David A. Mount
President and Chief Executive Officer
Gentlemen:
We are pleased to set forth the terms of the retention of
Jefferson Capital Group, Ltd. and Daniels & Associates
(collectively, the "Financial Advisors") by LIVE Entertainment Inc.
(collectively with its affiliates, the "Company"). The Financial
Advisors will assist the Company in connection with the activities
enumerated in Paragraph 1 below (collectively, the "Transaction").
1. In connection with their activities hereunder, the
Financial Advisors will, among other things, (a) continue to review
and familiarize themselves with the business, operations,
properties, financial condition and prospects of the Company and
its subsidiaries; (b) review the Company's capital structure; (c)
assist in structuring and placing an appropriate working capital
facility at the Company; (d) assist in structuring and placing of
debt or equity securities, the proceeds of which shall be used to
redeem all or a portion of the Company's Series B Cumulative
Convertible Preferred Stock; and (e) assist in an analysis of the
value of the Company and its subsidiaries under differing financing
scenarios.
2. In connection with the Financial Advisors' activities on
the Company's behalf, the Company will cooperate with the Financial
Advisors and will furnish the Financial Advisors with all
information and data concerning the Company and the Transaction
(the "Information") which the Financial Advisors deem appropriate
and will provide the Financial Advisors and any prospective
financing sources with access to the Company's officers, directors,
employees, independent accountants and legal counsel. The
Financial Advisors agree to use such information only in connection
with their agreement herein, unless otherwise agreed by the Company
in writing. The Company represents and warrants that to the best
of its knowledge all information (a) made available to the
Financial Advisors by the Company, or (b) contained in any
memorandum or offering document prepared by the Company with
respect to the Transaction (the "Memorandum") will, at all times
during the period of the engagement of the Financial Advisors
hereunder, be complete and correct in all material respects and
will not contain any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein not misleading in light of the circumstances under which
they are made. The Company further represents and warrants that
any projections provided by it to the Financial Advisors will have
been prepared in good faith and will be based upon assumptions
which, in light of the circumstances under which they are made, are
reasonable. The Company acknowledges and agrees that in rendering
their services hereunder, the Financial Advisors will be using and
relying on the information (and information available from public
sources and other sources deemed reliable by the Financial
Advisors) without independent verification thereof by the Financial
Advisors or independent appraisal by the Financial Advisors or any
of the Company's assets. The Financial Advisors do not assume
responsibility for the accuracy or completeness of the information
or any other information regarding the Company, or any Transaction.
Any advice rendered by the Financial Advisors pursuant to this
agreement may not be disclosed publicly without the Financial
Advisors' prior written consent unless required by law, rule or
regulation. The Financial Advisors acknowledge that the
relationship created pursuant to this Agreement between the Company
and the Financial Advisors will constitute a related party
transaction required to be publicly disclosed by the Company in
accordance with Federal securities laws.
3. In consideration of the services to be provided pursuant
to this Agreement, the Financial Advisors shall be entitled to
receive, and the Company agrees to pay, the Financial Advisors the
following compensation, without duplication:
(a) An initial non-refundable cash fee in the amount of
$150,000, the receipt of which is hereby
acknowledged.
(b) 1% of the aggregate amount of any working capital
facility arranged by the Financial Advisors.
(c) 2% of the aggregate amount of any senior debt
arranged by the Financial Advisors having a term of
three years or more.
(d) 3% of the aggregate amount of any subordinated debt
arranged by the Financial Advisors.
(e) 4% of the aggregate amount of any convertible
subordinated debt or preferred equity financing
arranged by the Financial Advisors.
(f) 5% of the aggregate amount of any equity financing
arranged by the Financial Advisors.
Notwithstanding the foregoing, the Financial Advisors agree
that they will approach the "Carolco Partners" consisting of Le
Studio Canal+, RCS Video International Services B.V. and Pioneer
LDCA, Inc. or their affiliates, for an equity or debt investment in
the Company only with the prior consent of the Company.
Furthermore, should the Financial Advisors arrange for a debt or
equity investment in the Company from the Carolco Partners, the
Financial Advisors shall receive, in lieu of the amounts set forth
above, a fee equal to fifty percent (50%) of the fee that would be
due were such lender or investor not a Carolco Partner, provided
however, that no fee shall be due to the Financial Advisors with
respect to a debt or equity investment in the Company from the
Carolco Partners unless the Financial Advisors have had substantial
and substantive involvement in arranging such debt or equity
investment.
4. The fees set forth in Paragraph 3 above shall be in
addition to any other fees that the Company may be required to pay
directly to any financing source (which may include the Financial
Advisors to the extent the Financial Advisors shall have actually
provided any such financing) to secure its financing commitment.
This Agreement does not constitute a commitment or undertaking on
the part of the Financial Advisors to provide any part of the
financing and does not ensure the successful arrangement or
completion of the financing or any portion thereof. This Agreement
does not apply to any underwritten offering of securities of the
Company, for which a separate fee arrangement will be negotiated.
5. In addition to the fees described in Paragraph 3 above,
the Company agrees to promptly reimburse the Financial Advisors,
upon request from time to time, for all reasonable out-of-pocket
expenses incurred by the Financial Advisors (including reasonable
fees and disbursements of counsel, and of other consultants and
advisors retained by the Financial Advisors, provided the retention
of such other consultants and advisors has been approved in advance
by the Company) in connection with the matters contemplated by this
agreement.
6. The Company agrees to indemnify the Financial Advisors in
accordance with the indemnification provisions (the
"Indemnification Provisions") attached to this Agreement, which
Indemnification Provisions are incorporated herein and made a part
hereof.
7. This Agreement may be terminated by either the Company or
the Financial Advisors upon receipt of written notice to that
effect by the other party. If at any time prior to the expiration
of twelve (12) months after the termination or expiration of this
agreement a Transaction is consummated, the Financial Advisors will
be entitled to payment in full of the fees described in the third,
fourth and fifth paragraphs of this letter. Upon any termination
of this agreement, the Financial Advisors will be entitled to
prompt reimbursement of its out-of-pocket expenses as described
above. The Indemnity Provisions contained in Schedule I hereto
will also remain operative and in full force and effect regardless
of any such termination.
8. The validity and interpretation of this Agreement shall
be governed by the laws of the State of New York applicable to
agreements made and to be fully performed therein.
9. The Financial Advisors and the Company are parties to
that certain engagement letter dated May 21, 1992, as amended by
Agreements dated July 31, 1992 and August 13, 1992 (collectively,
the "Prior Agreement"). The Financial Advisors and the Company
agree that except for the provisions of the Prior Agreement which
expressly survive the termination thereof, such as the
reimbursement of expenses of the Financial Advisors thereunder and
the indemnification obligations of the Company thereunder,
effective with the execution of this Agreement by the Company and
the Financial Advisors the Prior Agreement shall be terminated,
null and void and of no further force or effect.
10. The benefits of this Agreement shall inure to the
respective successors and assigns of the Company, and the
obligations and liabilities assumed in this Agreement by the
parties hereto shall be binding upon their respective successors
and assigns.
11. For the convenience of the parties, any number of
counterparts of this Agreement may be executed by the parties
hereto. Each such counterpart shall be, and shall be deemed to be,
an original instrument, but all such counterparts taken together
shall constitute one and the same Agreement. This Agreement may
not be modified or amended except in writing signed by the parties
hereto.
If the foregoing correctly sets forth our Agreement, please
sign the enclosed copy of this letter in the space provided and
return it to us.
Very truly yours,
JEFFERSON CAPITAL GROUP, LTD.
By:____________________________
President
JEFFERSON CAPITAL GROUP, LTD.
DANIELS & ASSOCIATES
By:____________________________
Executive Vice President
DANIELS & ASSOCIATES
Confirmed and Agreed to as of
this 7th day of July, 1993:
LIVE ENTERTAINMENT INC.
By:____________________
David A. Mount
President and Chief Executive Officer
<PAGE>
SCHEDULE I
LIVE Entertainment Inc. (the "Company") will indemnify and
hold harmless the Financial Advisors (the "Financial Advisors"),
their affiliates, the respective directors, officers, agents and
employees of the Financial Advisors, their affiliates and their
parent and their affiliates (collectively, the "Financial Advisors'
Group") from and against any claims, actions, proceedings,
investigations, demands, liabilities, damages, judgments,
assessments, losses and costs, including fees and expenses, arising
out of or in connection with any investigation or the services
rendered by the Financial Advisors under this agreement, and will
reimburse the Financial Advisors' Group for all such fees and
expenses including the reasonable fees of counsel as they are
incurred by the Financial Advisors' Group in connection with
pending or threatened litigation whether or not the Financial
Advisors' Group is a party. The Company will not, however, be
responsible for any claims, liabilities, losses, damages or
expenses that are determined by final judgement of a court of
competent jurisdiction to result primarily from the Financial
Advisors' Group's gross negligence, wilful misconduct or bad faith.
The Company also agrees that the Financial Advisors' Group shall
have no liability for claims, liabilities, damages, losses or
expenses, including legal fees, incurred by the Company unless they
are determined by final judgment of a court of competent
jurisdiction to result primarily from the Financial Advisors'
Group's gross negligence, wilful misconduct or bad faith.
In the event that the foregoing indemnity is unavailable to
the Financial Advisors' Group, then the Company shall contribute to
amounts paid or payable by the Financial Advisors' Group with
respect of such losses, claims, damages, cost, judgments, fines,
liabilities or amounts paid in settlement in the proportion that
the Company's interest bears to the Financial Advisors' Group's
interest in the matters contemplated by this agreement (if the
Financial Advisors' Group's engagement concerns an acquisition,
divestiture or financing, the Company's interest shall be deemed to
be an amount equal to the proposed or actual consideration to be
paid or received by the Company and the Financial Advisors' Group's
interest shall be deemed to be an amount equal to the fees actually
paid to it in connection with such engagement). If, however, the
allocation provided by the immediately preceding sentence is not
permitted by applicable law, or otherwise, then the Company shall
contribute to such amount paid or payable by it in such proportion
as is appropriate to reflect not only such relative interests but
also the relative fault of the Company on the one hand and the
Financial Advisors' Group on the other hand in connection with the
matters as to which such losses, claims, damages, costs, judgments,
fines, liabilities or amounts paid in settlement relate and other
equitable considerations.
In case any action shall be brought against the Financial
Advisors' Group with respect to which indemnity may be sought
against the Company under this agreement, the Financial Advisors'
Group shall promptly notify the Company in writing and the Company
shall, if requested by the Financial Advisors' Group, assume the
defense thereof, including the employment of counsel and payment of
all fees and expenses related thereto. The Financial Advisors'
Group shall have the right to employ separate counsel in such
action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of the Financial
Advisors' Group, unless: (i) the Company has failed to assume the
defense and employ counsel, or (ii) the named parties to any such
action (including any impleaded parties) include the Financial
Advisors' Group and the Company, and the Financial Advisors' Group
shall have been advised by such counsel that there may be one or
more legal defenses available to it which are different from or
additional to those available to the Company; provided, however,
that the Company shall not in such event be responsible hereunder
for the fees and expenses of more than one such firm of separate
counsel, in addition to any local counsel. The Company shall not
be liable for any settlement of any such action effected without
the written consent of the Company, and the Company agrees to
indemnify and hold harmless the Financial Advisors' Group from and
against any loss or liability by reason of settlement of any action
effected with the consent of the Company.
LIVE ENTERTAINMENT INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
As of July 26, 1993
Mr. Roger R. Smith
c/o River City Productions
1901 Avenue of the Stars
Suite 240
Los Angeles, California 90067
Re: Consulting Agreement
Dear Roger:
Pursuant to our previous conversations, this letter will confirm
the agreement between the Ad Hoc Transition Committee of the Board
of Directors of LIVE Entertainment Inc. (the "Committee") and you
that you will provide consulting services to the Committee as an
independent contractor in connection with the search by LIVE
Entertainment Inc. ("LIVE") for an individual to replace David
Mount as Chief Executive Officer of LIVE and of LIVE Home Video
Inc. upon Mr. Mount's departure from LIVE. Your services will
include collecting and reviewing resumes of potential candidates,
conducting preliminary interviews and suggesting candidates for
interview by the Committee. You shall not retain or agree to pay
any executive search firm or outside professional agency without
the prior consent and approval of the Committee.
In connection with your services hereunder, LIVE shall pay you the
sum of $10,000 per month (pro rated for partial months) beginning
August 1, 1993. The payment for the first month of your services
hereunder shall include a pro rated payment for your services from
July 26 through July 31. LIVE also will reimburse you, promptly
upon receipt of an invoice therefor, for the reasonable and
necessary out of pocket expenses incurred by you in connection with
your services. Either the Committee or you may terminate this
agreement at any time, provided that the terminating party has
given notice to the other at least fifteen (15) days before the
date of termination.
By your execution hereof, you acknowledge that your relationship
with LIVE in connection with this engagement is as an independent
contractor and not as a servant, agent or employee of LIVE. You
also acknowledge that LIVE is contracting for the results of your
services, and has no interest in the particular times during which
you perform your services or the manner by which such results are
achieved. As an independent contractor, you will receive a Form
1099 from LIVE and you will be responsible for paying in due course
any and all federal, state and local taxes that may be due as a
result of the compensation to be provided to you for your services.
By your execution hereof, you agree to indemnify and hold LIVE
harmless from and against any and all loss, cost, damage and
expense, including attorneys' fees, that may be suffered by LIVE
arising out of the failure by you to comply with the provisions of
the immediately preceding sentence.
If the terms of this letter reflect your understanding of our
agreement, please execute the enclosed copy of this letter and
return it to Michael J. White, the Corporate Secretary of LIVE.
Very truly yours,
AD HOC TRANSITION COMMITTEE OF
THE BOARD OF DIRECTORS OF LIVE
ENTERTAINMENT INC.
By:
Anthony J. Scotti
AGREED AND ACCEPTED
this ____ day of , 1993
ROGER R. SMITH
TWELFTH AMENDMENT TO THIRD AMENDED
AND RESTATED LOAN AND SECURITY AGREEMENT
This TWELFTH AMENDMENT TO THIRD AMENDED AND RESTATED LOAN
AND SECURITY AGREEMENT (this "Amendment") is dated as of January
28, 1994 (the "Execution Date"), by and among (i) LIVE
Entertainment Inc. ("LIVE"), a Delaware corporation, LIVE Home
Video Inc., a Delaware corporation, LIVE America Inc., a Delaware
corporation, LEI-IVE Entertainment N.V., a Netherlands Antilles
corporation, International Video Productions Inc., a California
corporation, Vestron Inc. (formerly known as Vestron Acquisition
Corp.), a Delaware corporation, and LIVE Ventures Inc., a Delaware
corporation (sometimes individually referred to herein as a
"Borrower", as the context so requires, and collectively referred
to as the "Borrowers"); (ii) Credit Lyonnais Bank Nederland N.V.,
a bank established in The Netherlands ("Credit Lyonnais"), Chemical
Bank, a New York banking corporation ("Chemical"), Imperial Bank,
a California state-chartered bank ("Imperial"), The Bank of
California, N.A., a national banking association ("Bank of
California"), The Long-Term Credit Bank of Japan, Ltd., Los Angeles
Agency ("LTCB"), and such additional lenders as may become parties
to the Loan Agreement (as hereinafter defined), as amended hereby
and as the same may be further amended from time to time (Credit
Lyonnais, Chemical, Imperial, Bank of California, LTCB and such
additional lenders being sometimes individually referred to herein
as a "Bank" and collectively as the "Banks"); (iii) Chemical, as
successor-in-interest to Credit Lyonnais, as administrative agent
(the "Administrative Agent") for the Banks, and (iv) Chemical, as
collateral agent (the "Collateral Agent") for the Banks (the
Administrative Agent and Collateral Agent are hereinafter
collectively referred to herein as the "Agent"), with reference to
the following facts:
R E C I T A L S
A. Pursuant to that certain Third Amended and Restated
Loan and Security Agreement, dated as of July 26, 1990, as amended
by that certain First Amendment to Third Amended and Restated Loan
and Security Agreement, dated as of October 26, 1990, as further
amended by that certain Second Amendment to Third Amended and
Restated Loan and Security Agreement, dated as of December 4, 1990,
as further amended by that certain Third Amendment to Third Amended
and Restated Loan and Security Agreement, dated as of April 23,
1991, as further amended by that certain Fourth Amendment to Third
Amended and Restated Loan and Security Agreement (the "Fourth
Amendment"), dated as of July 16, 1991, as further amended by that
certain Fifth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of November 21, 1991, as further
amended by that certain Sixth Amendment to Third Amended and
Restated Loan and Security Agreement, entered into on January 27,
1992, to be effective as of December 31, 1991, as further amended
by that certain Seventh Amendment to Third Amended and Restated
Loan and Security Agreement, entered into on March 20, 1992, to be
effective as of April 1, 1992, as further amended by that certain
Eighth Amendment to Third Amended and Restated Loan and Security
Agreement, dated as of June 16, 1992, as further amended by that
certain Ninth Amendment to Third Amended and Restated Loan and
Security Agreement, dated as of November 25, 1992, as further
amended by that certain Tenth Amendment to Third Amended and
Restated Loan and Security Agreement, dated as of February 5, 1993,
and as further amended by that certain Eleventh Amendment to Third
Amended and Restated Loan and Security Agreement, dated as of March
26, 1993 (as amended, the "Loan Agreement"), between the Borrowers
and the Banks, the Banks have extended certain credit to the
Borrowers, which extensions of credit are evidenced by the
Revolving Note. The Borrowers' obligations under the Loan
Agreement and the Revolving Note are secured by a first priority
security interest in the Collateral, subject to the rights, if any,
of WEA in the WEA Collateral.
B. By the execution and delivery of this Amendment and
subject to the terms and conditions hereinafter set forth, in
consideration of the waiver by the Banks of the right to declare a
Termination Event on January 29, 1994, the parties hereto desire
(i) to reduce the aggregate Commitments of the Banks as provided
herein, and (ii) to make certain other modifications to the terms
of the Loan Agreement as more particularly set forth herein.
C. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Loan Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual promises, covenants and agreements set
forth herein, the parties hereto agree as follows:
1. Waiver.
Subject to and in accordance with the terms and
conditions of this Amendment, the Agent and the Banks hereby waive
the right to declare a Termination Event on January 29, 1994 as
permitted under the terms of the Loan Agreement.
The foregoing waiver shall be limited to the
specific waiver hereunder and the specific events and facts
surrounding such waiver. Neither this Amendment nor any waiver
granted hereunder shall constitute or be deemed to constitute a
consent to, a departure from, or a waiver of any other provision of
the Loan Agreement or further instances of the same events or facts
surrounding the waiver effectuated hereby.
2. Subject to the prior satisfaction of the conditions
set forth in Section 4 hereof, and in consideration of the waiver
granted pursuant to Section 1 hereof, the Loan Agreement is hereby
amended as follows:
(a) The definition of "Permitted Encumbrances" in
Article I of the Loan Agreement is hereby amended by changing the
period at the end of subparagraph (xx) to a semicolon and then
adding the word "and" at the end thereof and then adding new
subparagraph (xxi) to read in full as follows:
"(xxi) The security interest of
Chemical Bank in all cash
collateral in Account No. 323-
601421 at Chemical Bank, 270 Park
Avenue, New York, New York 10017,
securing certain letters of credit
heretofore issued by such bank and
such letters of credit which may be
issued by such bank in the future."
(b) The table and final paragraph of Section 2.1(a)
of the Loan Agreement are hereby amended to read in full as
follows:
Participation
"Bank Percentage Commitment
CLBN 48.000000% $ 9,600,000.00
Chemical 34.666667% $ 6,933,333.40
Imperial 7.000000% $ 1,400,000.00
Bank of Cal 7.000000% $ 1,400,000.00
LTCB 3.333333% $ 666,666.60
Total 100.000000% $20,000,000.00"
(c) Subsection (vi) of Section 2.6 of the Loan
Agreement is hereby amended to read in full as follows:
"(vi) [intentionally
omitted]"
(d) A new subsection (viii) is hereby added to
Section 2.6 of the Loan Agreement to read in full as follows:
"(viii) The aggregate Commitments
hereunder shall be permanently
reduced on the following dates to
the following amounts:
Date Commitments
February 28, 1994 $18,333,000
March 29, 1994 $16,666,000
April 29, 1994 $14,999,000
May 29, 1994 $12,499,500
June 29, 1994 $10,000,000
Each such mandatory reduction in the
aggregate Commitments shall be in
addition to any other mandatory
Commitment reduction required
hereunder."
(e) The references to David A. Mount in Sections
8.1(h) and 13.1(c) of the Loan Agreement are hereby amended to
refer to Roger Burlage.
3. Representations and Warranties. The Borrowers
hereby represent and warrant, jointly and severally, to the Agent
and the Banks, on and as of the date hereof as follows:
(a) Each of the representations and warranties of
the Borrowers contained in the Loan Agreement is hereby reaffirmed
as of the date made, and except as disclosed on Schedule 3 hereto,
there have been no material changes to such representations and
warranties since such date. Except as disclosed on Schedule 3
hereto, there has been no material adverse change in the assets,
properties, liabilities, business or financial condition of the
Borrowers taken as a whole from that indicated on the most recent
financial statements delivered to the Agent as contemplated by
Section 6.11 of the Loan Agreement.
(b) The execution, delivery and performance of this
Amendment by each Borrower and the other agreements, instruments
and documents executed and delivered or to be executed and
delivered by each Borrower pursuant to this Amendment have been
duly authorized by all requisite corporate action and will not
violate any provision of law, any order of any court or other
agency of the United States or of any state thereof or foreign
state having jurisdiction thereof, the charter documents of any
Borrower or, in any respect, having a materially adverse effect on
any Borrower, any provision of any indenture, agreement or other
instrument to which any Borrower is a party, or by which any
Borrower or any of the properties or assets of any Borrower is
bound or affected, or be in material conflict with, result in a
material breach of or constitute (with or without due notice and/or
lapse of time), a material default under any indenture, agreement
or other instrument, or result in the creation or imposition of any
security interest, lien, charge or encumbrance (other than a
Permitted Encumbrance) of any nature whatsoever upon the Collateral
or any of the properties or assets of any of the Borrowers, other
than in favor of the Agent and the Banks as a result of this
Amendment, the Loan Agreement and the other Loan Documents.
(c) All consents, authorizations, approvals,
registrations or filings from or with any governmental or public
regulatory body or authority of the United States or of any state
thereof or any foreign state having jurisdiction or any other
person which are required for the execution, delivery and
performance by each Borrower of this Amendment and the other
agreements, instruments and documents to be executed and delivered
pursuant to this Amendment have been duly obtained, made or granted
and are in full force and effect, and if any further (or, with
respect to any other agreements, instruments and documents to be
executed and delivered by any of the Borrowers pursuant to this
Amendment) or additional consents, authorizations, approvals,
registrations or filings should hereafter become necessary, the
Borrowers shall use their respective best efforts to obtain or make
all such consents, authorizations, approvals, registrations or
filings.
(d) This Amendment and all agreements, instruments
and documents to be executed and delivered in connection herewith
will, when duly executed and delivered, constitute legally valid
and binding obligations of the Borrowers, enforceable jointly and
severally against them in accordance with the respective terms of
such agreements, instruments and documents.
(e) Except for the Event of Default or Potential
Event of Default described in Section 1(a)(v) of the Tenth
Amendment to the Loan Agreement, which were conditionally waived
pursuant to Section 1 thereof, the Borrowers are in compliance with
all terms and provisions of the Loan Agreement, the Revolving Note
and the other Loan Documents to be observed or performed on the
part of the Borrowers, and no Event of Default or Potential Event
of Default has occurred and is continuing or would occur by reason
of the execution and delivery of this Amendment or any document to
be executed and delivered in connection herewith.
4. Conditions Precedent. The effectiveness of this
Amendment shall be subject to the satisfaction in full of the
following conditions precedent on or before January 28, 1994 (the
"Closing Date"). Upon satisfaction in full of all of the following
conditions precedent, this Amendment shall be deemed effective as
of the Closing Date. Should any one or more of the following
conditions precedent not be satisfied in full by the Closing Date,
this Amendment, other than the provisions of Sections 3, 5, 6, 7,
8, 9, 10 and 11 shall be of no legal effect whatsoever and shall
not be binding on the Agent or any of the Banks. The Loan
Agreement, as heretofore amended, but unaffected by this Amendment,
shall be in full force and effect, and the Agent and the Banks
shall be deemed not to have waived the right to declare a
Termination Event on January 29, 1994.
(a) The Agent shall have received each of the
following on the Execution Date:
(i) this Amendment duly executed by each of
the Borrowers, the Agent and the Banks;
(ii) a Certificate of the Secretary of each
of the Borrowers in the form of Exhibit "E" to the Eleventh
Amendment to the Loan Agreement certifying, among other things, (x)
that attached thereto is a true and complete copy of resolutions of
the Board of Directors of such Borrower authorizing the execution,
delivery and performance of this Amendment, (y) as to the
incumbency and signature of each officer or agent of such Borrower
executing this Amendment or any other document furnished pursuant
hereto, and (z) that attached thereto are true and complete copies
of the Bylaws and charter documents or any and all amendments to
the Bylaws and the charter documents of such Borrower since the
closing of the Loan Agreement or that there have been no amendments
to such Bylaws or charter documents since the closing of the Loan
Agreement, as appropriate;
(iii) to the extent available, a certificate
of good standing issued by the Secretary of State of incorporation
of each Borrower and each state in which each Borrower is qualified
to do business; and
(iv) such other additional agreements,
documents and instruments as the Agent and/or the Banks and their
respective legal counsel may reasonably require.
(b) Each of the representations and warranties set
forth herein shall be true and correct on and as of the Execution
Date and the Closing Date, and there shall have been no material
adverse change in the assets, properties, liabilities, business or
financial condition of the Borrowers taken as a whole from that
indicated in the most recent financial statements delivered to the
Agent as contemplated by Section 6.11 of the Loan Agreement. Each
of the Borrowers shall deliver to the Agent a Certificate, dated
the Closing Date and signed by a duly authorized officer of each
such Borrower, certifying to the foregoing effect as of the Closing
Date.
(c) Except for the Events of Default and Potential
Events of Default referred to in Section 3(e) hereof, on the
Execution Date and the Closing Date, the Borrowers shall be in
compliance with all terms and provisions of the Loan Agreement, the
Revolving Note and the other Loan Documents to be observed or
performed on the part of the Borrowers, and no additional Event of
Default or Potential Event of Default shall have occurred and be
continuing nor shall any such event occur by reason of the
effectiveness of this Amendment and the agreements and instruments
and other documents executed and delivered in connection herewith.
Each of the Borrowers shall deliver to the Agent a Certificate,
dated the Closing Date and signed by a duly authorized officer of
each such Borrower, certifying as to the foregoing effect as of the
Closing Date.
(d) The Agent shall have been paid a waiver fee in
the amount of $37,500 to be shared pro rata among the Banks. On
April 29, 1994, an additional $37,500 shall be paid to the Agent to
be shared pro rata among the Banks in respect of the waiver granted
herein unless on such date the Obligations have been paid and
satisfied in full and the Commitments of the Banks have been
terminated.
(e) All other agreements, documents and instruments
relating to and/or contemplated by this Amendment or any of the
matters set forth herein shall be satisfactory in form and
substance to the Agent, the Banks and their respective legal
counsel in their sole and absolute discretions.
5. No Defenses; Ratification. The Borrowers hereby
expressly acknowledge that none of them has any defenses, offsets
or claims of any nature whatsoever against the Agent or any of the
Banks with respect to this Amendment or any other Loan Document,
and that except as amended by this Amendment and the other
agreements and instruments delivered pursuant hereto, the Loan
Documents shall remain in full force and effect and are hereby
ratified and affirmed. Subject to the timely satisfaction of the
conditions precedent to the effectiveness of this Amendment set
forth in Section 4 hereof, from and after the Closing Date, each
reference in the Loan Agreement to "this Loan Agreement,"
"hereunder," "herein," "hereof," or words of like import referring
to the Loan Agreement shall mean and refer to the Loan Agreement,
as amended by this Amendment.
6. Indemnification. The Borrowers hereby confirm and
agree that any and all claims, demands, losses, judgments and
liabilities (including liabilities for penalties) of any nature
whatsoever incurred by the Agent or any of the Banks arising out
of, resulting from or relating to this Amendment, any agreement or
document executed or delivered in connection herewith, the
transactions contemplated hereby or thereby, including, without
limitation, the making of any Loans hereunder or the administration
and enforcement or exercise of any right or remedy granted to the
Agent and the Banks under the Loan Agreement or any other Loan
Document shall be covered by the indemnification provision set
forth in Section 13.5 of the Loan Agreement.
7. Release. The Borrowers acknowledge and admit that
the Borrowers have no claims, defenses or offsets whatsoever
against the Agent or any of the Banks or any of their respective
officers, directors, shareholders, employees, representatives,
agents, contractors, attorneys, subsidiaries or Affiliates (the
"Bank Parties"), but in the event that any such claims should
exist, the Borrowers, and on behalf of their respective partners,
employees, agents, heirs, successors and assigns and each of them
(the "Borrowers' Parties") hereby release, relinquish and forever
discharge any and all claims, demands or causes of action
whatsoever, whether in tort, contract or any other theory of
recovery in law or equity, whether for compensatory or punitive
damages, equitable relief or otherwise, whether now known or
unknown, suspected or unsuspected, which the Borrowers' Parties may
have or hereafter assert to have against any of the Bank Parties,
arising out of, in connection with, or relating to the Obligations
of the Borrowers to the Agent or the Banks, this Amendment, the
Loan Agreement, the Revolving Note, the Collateral Documents or any
other Loan Document or any of the transactions contemplated
hereunder or thereunder. THE BORROWERS' PARTIES HEREBY WAIVE
WHATEVER RIGHTS THEY MAY HAVE UNDER ANY PROVISIONS OF APPLICABLE
LAW WHICH PROVIDES THAT A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS
WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR
AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST
HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.
8. Choice of Law. This Amendment shall be deemed to
be a contract under and subject to, and shall be construed for all
purposes in accordance with, the laws of the State of New York.
9. Counterparts. This Amendment may be executed in two
or more counterparts, each of which shall be deemed an original and
all of which together shall constitute one and the same instrument.
10. Entire Agreement. Regardless of the substance and
nature of any of the discussions which may have been had among any
of the parties during the discussion and/or negotiation of this
Amendment, this Amendment and the exhibits hereto are intended to
embody the entire agreement and understanding of the parties hereto
with respect to the subject matter hereof and expressly supersedes
all prior oral and written agreements and understandings of the
parties hereto relating to the subject matter hereof.
11. Interpretation. To the extent that any agreement
is defined in the Loan Agreement to include any amendments,
modifications and supplements to such agreement and the provisions
of the Loan Agreement prohibit any amendment, modification or
supplement to such agreement without the consent of the Agent or
the Banks, the Loan Agreement shall be construed with respect to
such agreement as originally executed and with only such
amendments, modifications and supplements as shall have been
consented to by the Agent and the Banks.
IN WITNESS WHEREOF, the undersigned have executed this
Amendment as of the date first written above.
"BORROWERS"
LIVE Entertainment Inc.,
a Delaware corporation
By:_____________________________
Its:_______________________
LIVE Home Video Inc.,
a Delaware corporation
By:____________________________
Its:______________________
LIVE America Inc.,
a Delaware corporation
By:___________________________
Its:_____________________
LEI-IVE Entertainment N.V.,
a Netherlands Antilles
corporation
By:___________________________
Its:_____________________
International Video Productions
Inc., a California corporation
By:___________________________
Its:_____________________
Vestron Inc., a Delaware
corporation (formerly known as
Vestron Acquisition Corp.)
By:___________________________
Its:_____________________
LIVE Ventures Inc., a Delaware
corporation
By:___________________________
Its:_____________________
"THE BANKS"
Credit Lyonnais Bank Nederland
N.V., a bank established in The
Netherlands,
Executed in Rotterdam,
The Netherlands on By:___________________________
January __, 1994 Its:_____________________
Chemical Bank, a New York
banking corporation,
individually and as the
Administrative Agent and the
Collateral Agent
Executed in
New York, New York on By:___________________________
January __, 1994 Its:_____________________
Imperial Bank, a California
state chartered bank
Executed in Beverly
Hills, California on By:____________________________
January __, 1994 Its:______________________
The Bank of California, N.A., a
national banking association
Executed in Los
Angeles, California on By:____________________________
January __, 1994 Its:______________________
The Long-Term Credit Bank of
Japan, Ltd., Los Angeles Agency
Executed in Los
Angeles, California on By:___________________________
January __, 1994 Its:_____________________
March 5, 1993
LIVE Entertainment Inc.
LIVE Home Video Inc.
LIVE America Inc.
LEI-IVE Entertainment N.V.
International Video Productions Inc.
Vestron Inc.
c/o LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Gentlemen:
Reference is made to that certain Third Amended and
Restated Loan and Security Agreement, dated as of July 26, 1990, as
amended (the "Loan Agreement"), between each of you, as the
Borrowers, each of the undersigned Banks, and Chemical Bank, as
Administrative Agent and Collateral Agent for the Banks (the
"Agent"). Capitalized terms used herein without definition shall
have the meanings ascribed to them in the Loan Agreement.
You have advised us that International Video Productions
Inc. ("IVP") wishes to acquire home video distribution rights to 28
Films in two packages from Miramax Film Corp. ("MFC") pursuant to
an Agreement, dated March 5, 1993 (the "Miramax Agreement"),
between IVP and MFC (the "Miramax Acquisition"). The purchase
price for the first package consisting of the home video
distribution rights to the eight "Group-A Pictures" listed on
Exhibit "A" hereto is $15,000,000. The purchase price for the
second package consisting of the home video distribution rights to
the 20 "Group-B Pictures" and "Group-C Pictures" listed on Exhibit
"A" hereto is $17,500,000. The rights to the "Group-B Pictures"
and "Group-C Pictures" will not vest in IVP unless the purchase
price is received by MFC on or before March 31, 1993 pursuant to
that certain Option Agreement, dated March 5, 1993 (the "Option
Agreement"). You have also advised us that two of the Films in the
first package have not yet commenced principal photography and that
while some of the Film Assets to be acquired in the Miramax
Acquisition are included in LIVE's 1993-1994 Business Plan, others
are not included in such Business Plan. Finally, you have advised
us that IVP will grant to MFC a security interest in the Rights (as
defined in the Miramax Agreement) and all proceeds actually
received by IVP from IVP's exploitation of such Rights which are
payable to MFC pursuant to the Miramax Agreement, but only to the
extent necessary to secure IVP's royalty payment obligations to MFC
under the Miramax Agreement.
Section 7.3 of the Loan Agreement prohibits you from
granting, creating or causing or allowing to exist any liens or
security interests other than Permitted Encumbrances, and Section
6.17 requires you to keep all receivables and account proceeds and
other Collateral free and clear of all liens other than Permitted
Encumbrances.
Section 7.10 of the Loan Agreement prohibits you from
making, paying or committing or agreeing to make or paying any
advances or other fixed payments aggregating in excess of
$7,000,000 in connection with the acquisition of Film Assets in
more than one Film pursuant to any single Film Asset Acquisition
Agreement (i.e. so-called "output" or "multiple picture" deals),
except for certain existing specified acquisitions.
In addition, Section 7.21 of the Loan Agreement prohibits
you from paying any advances or other sums with respect to any Film
Asset relating to any Film for which principal photography has not
commenced and for which a completion bond (in customary form and in
compliance with the terms of the Loan Agreement) has not been
issued naming the applicable IVE Company and the Agent as
beneficiaries and guaranteeing the completion and delivery of such
film to such IVE Company.
Finally, Section 7.25 of the Loan Agreement prohibits you
from agreeing or committing to acquire any Film Assets other than
the aggregate dollar amount for pre-existing commitments and the
specified contingency set forth in LIVE's 1993-1994 Business Plan.
You are permitted, however, to acquire Film Assets with any LHV
Excess Cash Flow which you are permitted to retain and the proceeds
of the Pioneer Credit Facility.
In view of the foregoing restrictions set forth in the
Loan Agreement, you have requested that the Agent and the Banks (a)
consent to the Miramax Acquisition, and (b) waive the provisions of
Sections 6.17, 7.3, 7.10, 7.21 and 7.25 of the Loan Agreement in
connection therewith.
Accordingly, the Agents and the Banks hereby (a) consent
to the Miramax Acquisition, and (b) waive the provisions of
Sections 6.17, 7.3, 7.10, 7.21 and 7.25 of the Loan Agreement in
connection therewith, provided that (a) you have delivered true and
complete copies of the Miramax Agreement, the Option Agreement, the
Intercreditor Agreement, the security agreements and any and all
other documents relating to the Miramax Acquisition to the Agent,
and the terms and conditions thereof have been determined to be
satisfactory to the Agent and the Banks in their sole and absolute
discretion; (b) you only acquire the home video rights to the
"Group-B Pictures" and the "Group-C Pictures" if you have obtained
financing therefor acceptable to the Agent and the Banks in their
sole and absolute discretion; (c) you execute and deliver to the
Agent appropriate Copyright Mortgages relating to the Film Assets
to be acquired pursuant to the Miramax Acquisition immediately upon
consummation of each stage thereof; and (d) you deliver to the
Agent a statement in writing from the Pioneer Agent or its counsel
acknowledging that, pursuant to Section 4.2 of the Pioneer
Intercreditor Agreement, the consent and waivers herein are deemed
a consent to and waivers by the Pioneer Agent and the Pioneer
Lenders of similar provisions of the Pioneer Loan Agreement and
other Pioneer Documents.
You hereby agree that the Loan Agreement is hereby
ratified and confirmed in all respects, that all of the terms and
conditions thereof, except as waived hereby, shall remain in full
force and effect and that you have no defenses, offsets or claims
whatsoever in respect thereto. You further agree that the consent
and waivers to be effected pursuant hereto shall be limited to the
specific provisions consented to or waived hereunder and the
specific events and facts surrounding such consent and waivers and
that such consent and waivers shall not be deemed to constitute a
consent to, a waiver of, or a departure from any other provision of
the Loan Agreement or any other agreement, document or instrument
executed and delivered in connection therewith, all of which are to
remain in full force and effect.
If the foregoing correctly sets forth your understanding
of our agreement, please indicate your acceptance below whereupon
this letter shall constitute an agreement between us in accordance
with its terms. This instrument may be executed in two or more
counterparts, each of which will be deemed an original and taken
together shall constitute the same instrument.
Very truly yours,
Credit Lyonnais Bank
Nederland N.V.
By____________________________
Its___________________________
Chemical Bank, individually and as
Administrative Agent and Collateral
Agent for the Banks
By____________________________
Its___________________________
Imperial Bank
By____________________________
Its___________________________
The Bank of California, N.A.
By____________________________
Its___________________________
The Long-Term Credit Bank of Japan,
Ltd., Los Angeles Agency
By____________________________
Its___________________________
AGREED TO AND ACCEPTED
AS OF MARCH __, 1993:
LIVE Entertainment Inc.
By____________________________
Its___________________________
LIVE Home Video Inc.
By____________________________
Its___________________________
LIVE America Inc.
By____________________________
Its___________________________
LEI-IVE Entertainment N.V.
By____________________________
Its___________________________
International Video Productions Inc.
By____________________________
Its___________________________
Vestron Inc.
By____________________________
Its___________________________
December 22, 1993
LIVE Entertainment Inc.
LIVE Home Video Inc.
LIVE America Inc.
LEI-IVE Entertainment N.V.
International Video Productions Inc.
Vestron Inc.
c/o LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Gentlemen:
Reference is made to that certain Third Amended and
Restated Loan and Security Agreement, dated as of July 26, 1990, as
amended (the "Loan Agreement"), between each of you, as the
Borrowers, each of the undersigned Banks, and Chemical Bank, as
Administrative Agent and Collateral Agent for the Banks (the
"Agent"). Capitalized terms used herein without definition shall
have the meanings ascribed to them in the Loan Agreement.
You have advised us that LIVE Home Video Inc. ("LHV")
intends to form a single purpose wholly owned Delaware subsidiary
to be known as LIVE Ventures Inc. ("LVI"), which will enter into a
Joint Venture Agreement in substantially the form of Exhibit "A"
hereto (the "Joint Venture Agreement"), pursuant to which LVI, BET
Films, Inc., a Delaware corporation ("BET"), and Encore Media
Corporation, a Colorado corporation, or its wholly owned subsidiary
("Encore"), will form a joint venture (the "Joint Venture") named
BET Film Productions under the Delaware Uniform Partnership Act for
the purpose of developing, producing and exploiting motion pictures
targeted primarily to minority audiences with budgets of no more
than $2,000,000 each (collectively, the "Joint Venture Films").
Pursuant to the terms of the Joint Venture Agreement, LVI will make
a total capital contribution of $5,000,000 to the Joint Venture.
LHV and/or the other Borrowers intend to invest an aggregate of
$5,000,000 in LVI by way of capital contributions or loans which
will be used by LVI to make its capital contribution to the Joint
Venture. No additional capital contributions shall be required of
LVI or any other joint venturer. The joint venturers will share in
the profits and losses of the Joint Venture in proportion to their
respective capital contributions.
Concurrently with the execution of the Joint Venture
Agreement, the Joint Venture will enter into distribution
agreements with each of the joint venturers or their affiliates.
In that connection, BET or its affiliate will exploit pay-per-view
rights in the United States, Canada and the Caribbean (the
"Territory"); Encore or its affiliate will exploit the pay
television rights in the Territory, and International Video
Productions Inc. ("IVP") will exploit the home video rights to such
films in the Territory. IVP will receive a thirty percent (30%)
distribution fee plus recoupment of distribution costs and expenses
in respect of its exploitation of the home video rights relating to
the Joint Venture Films from the gross revenues derived from
exploitation of such home video rights by IVP. Neither LHV nor IVP
will be required to make any advance or minimum guarantee payments
to the Joint Venture in consideration of such distribution rights.
IVP may grant the Joint Venture a first priority security interest
in the Joint Venture's share of the Home Video Gross Receipts
(i.e., all of IVP's gross receipts attributable to the Joint
Venture Films less only the distribution fee and distribution costs
which are retainable by IVP in accordance with the Distribution
Agreement to be entered into between IVP and the Joint Venture).
IVP's grant of such security interest will be conditioned upon the
Joint Venture receiving reciprocal security interests from each of
the other joint venturers or their affiliates which are engaged to
exploit the films produced or developed by the Joint Venture. In
any event, the Joint Venture will grant IVP a first priority
security interest in the home video distribution rights to the
Joint Venture Films.
Section 6.2 of the Loan Agreement requires the IVE
Companies at all times to remain engaged solely in activities
directly related to the home video business. Section 7.3 of the
Loan Agreement prohibits any Borrower, directly or indirectly, from
granting, creating or causing or allowing to exist any liens or
security interests other than Permitted Encumbrances. Section 7.9
of the Loan Agreement prohibits the Borrowers, directly or
indirectly, from incurring or becoming liable with respect to any
Contingent Obligations, except those specifically enumerated in the
Loan Agreement. Section 7.14 of the Loan Agreement prohibits the
Borrowers from, directly or indirectly, making any Investment in
any other Person or in property in excess of $5,000,000 excluding
certain specified Investments. Section 7.15 of the Loan Agreement
prohibits the Borrowers, directly or indirectly, from using any of
the proceeds of the Loan for any purpose other than those specified
in such section, and Section 7.25 of the Loan Agreement prohibits
the Borrowers, directly or indirectly, from agreeing to acquire any
Film Asset other than the aggregate dollar amount for pre-existing
commitments and the specified contingencies set forth in LIVE's
1993-1994 Business Plan, subject to certain exceptions set forth in
such section. Finally, Section 13.20 of the Loan Agreement
provides that each Person, other than Lieberman, Strawberries or
any of their respective subsidiaries, who becomes a Subsidiary of
any Borrower shall be deemed to be a Borrower under the Loan
Agreement and within ten (10) days after acquiring such status,
shall execute and deliver to the Agent an agreement agreeing to be
bound by the terms of the Loan Agreement, the Revolving Note, the
Collateral Documents and all of their agreements and instruments
executed in connection therewith, together with such executed
counterpart copies of any of the foregoing agreements or any such
instruments as the Agent may request, and all securities of such
Subsidiary shall be included as Pledged Securities under the Loan
Agreement and be subject to the terms and conditions of the Pledge
Agreement. The appropriate Borrower is to deliver the certificates
representing such securities to the Agent promptly after the
issuance thereof.
In view of the proposed formation of the Joint Venture
and the foregoing restrictive covenants in the Loan Agreement, you
have requested that the Agent and the Banks (a) consent to LIVE's
formation of a single purpose wholly owned Delaware subsidiary to
enter into the Joint Venture Agreement; (b) agree to waive the
covenants contained in Sections 6.2, 7.3, 7.9, 7.14, 7.15 and 7.25
of the Loan Agreement in connection with formation of the Joint
Venture; (c) approve the restriction on transfer set out in
paragraph 9.1 of the Joint Venture Agreement; and (d) consent to
IVP's grant to the Joint Venture of a first priority security
interest in the Joint Venture's share of the Home Video Gross
Receipts (as such term will be defined in the security agreement to
be executed by LVI in favor of the Joint Venture), subject to the
Joint Venture receiving reciprocal security interests from each of
the other joint venturers or their affiliates which are engaged to
exploit the films produced or acquired by the Joint Venture.
Subject to the terms and conditions hereof, the
undersigned Agent and Banks hereby consent and agree to the
foregoing; provided, that:
(a) All agreements and documents relating to the
formation and operation of the Joint Venture, including, without
limitation, the Joint Venture Agreement, the security agreement to
be executed by the Joint Venture in favor of IVP and the security
agreements to be executed by IVP and the other joint venturers or
their affiliates in favor of the Joint Venture are in form and
substance satisfactory to the Agent and the Banks and their
respective counsel, such satisfaction to be evidenced by delivery
of this Consent Letter, and copies of all of the foregoing
agreements, duly executed by all of the parties thereto, are
delivered to the Agent;
(b) Each of the Borrowers observes corporate formalities
between the Borrowers and the Joint Venture, including, without
limitation, ensuring that the Joint Venture contracts in its own
name to develop, produce and acquire Film Assets and enters into
separate and independent distribution or subdistribution agreements
in its own name with respect to Film Assets developed, produced or
acquired by the Joint Venture (the "Joint Venture Film Assets");
(c) The aggregate Investment of LHV and the other
Borrowers in LVI, whether by way of capital contribution, loans or
otherwise, shall not exceed an aggregate of $5,000,000, and all
funds so invested shall be used by LVI solely to make its capital
contribution to the Joint Venture. All loans from LHV or any of
the other Borrowers to LVI shall be evidenced by promissory notes
which shall be delivered to the Agent and be included in the
Collateral.
(d) No Borrower or any affiliate thereof (except LVI and
as provided in paragraph (c) above) shall make or be required to
make any Investment of any kind whatsoever in the Joint Venture or
any other Person or to incur directly or indirectly any Contingent
Obligation whatsoever in connection with the business or operations
of the Joint Venture or any of the Joint Venture Films;
(e) Within five (5) days of receipt by LHV or any
affiliate thereof of the quarterly draft financial statements and
annual financial statements of the Joint Venture referred to in
paragraph 8.7 of the Joint Venture Agreement, the Borrowers shall
deliver copies of such financial statements to the Agent and the
Banks; and
(f) Each of the Borrowers agrees that effective as of the
date hereof, LVI shall be and be deemed to be a Borrower under the
Loan Agreement, and that concurrently herewith (i) the Borrowers
shall cause LVI to execute and deliver to the Agent an agreement
agreeing to be bound by the terms of the Loan Agreement, the
Revolving Note, the Collateral Documents and all of the agreements
and instruments executed in connection therewith, together with
such executed counterpart copies of any of the foregoing
agreements, or any other agreements or instruments as the Agent and
the Banks may request, including, without limitation, an Addendum
to the New Notes Intercreditor Agreement in form and substance
satisfactory to the Agent and the Banks executed by the Trustee
under the New Notes Indenture and the other New Notes Documents;
(ii) all securities of LVI shall be included as Pledged Securities
under the Loan Agreement and be subject to the terms and conditions
of the Pledge Agreement; (iii) LHV shall deliver the certificates
representing such securities to the Agent; and (iv) the Borrowers
shall deliver any and all promissory notes made by LVI to the order
of any Borrower to the Agent to be included in the Pledged
Securities.
Under the terms of the Loan Agreement, any one Bank, at
its sole option, may call a Termination Event on January 29, 1994.
The cash flow projections, dated December 14, 1993, which you have
provided to the Agent and the Banks show that you may have
insufficient funds to make the required capital contributions to
the Joint Venture if and when a Termination Event is called on
January 29, 1994 and you are unable to find replacement financing.
You therefore acknowledge that you fully understand and agree that
if and when any one Bank calls a Termination Event on January 29,
1994, notwithstanding the consent and waivers granted herein or
your inability to find replacement financing, the Commitments of
the Banks shall terminate in accordance with the terms of the Loan
Agreement, and the Agent and the Banks shall have no further
obligation whatsoever to make any Loans under the Loan Agreement
whether in respect of your required capital contributions to the
Joint Venture or any other purpose.
You have also advised the Agent and the Banks that
Chemical Bank has issued certain letters of credit on your behalf,
which letters of credit are secured by certain cash collateral in
Account No. 323-601421 at Chemical Bank, 270 Park Avenue, New York,
New York 10017. The security interest of Chemical Bank in all cash
collateral in the foregoing account, whether with respect to
letters of credit heretofore issued by Chemical Bank or any letters
of credit which may be issued by Chemical Bank in the future, shall
be deemed a "Permitted Encumbrance" as such term is defined in
Article I of the Loan Agreement.
You hereby agree that the Loan Agreement is hereby
ratified and confirmed in all respects, that all of the terms and
conditions thereof, except as otherwise agreed herein, shall remain
in full force and effect and that you have no defenses, offsets or
claims whatsoever in respect thereto. You further agree that the
consents and waivers to be effected pursuant hereto shall be
limited to the specific provisions consented to or waived hereunder
and the specific events and facts surrounding such consents and
waivers and that such consents and waivers shall not be deemed to
constitute a consent to, a waiver of or a departure from any other
provision of the Loan Agreement or any other agreement, document or
instrument executed and delivered in connection therewith, all of
which are to remain in full force and effect.
If the foregoing correctly sets forth your understanding
of our agreement, please indicate your acceptance below whereupon
this letter shall constitute an agreement between us in accordance
with its terms. This instrument may be executed in two or more
counterparts, each of which shall be deemed an original and taken
together shall constitute the same instrument.
Very truly yours,
Credit Lyonnais Bank Nederland N.V.
By:_______________________________
Its:___________________________
Chemical Bank, in its individual
capacity and as Administrative Agent
and Collateral Agent for the Banks
By:_______________________________
Its:___________________________
Imperial Bank
By:_______________________________
Its:___________________________
The Bank of California, N.A.
By:_______________________________
Its:___________________________
The Long-Term Credit Bank of Japan,
Ltd., Los Angeles Agency
By:_______________________________
Its:___________________________
AGREED TO AND ACCEPTED
AS OF DECEMBER __, 1993:
LIVE Entertainment Inc.
By:____________________________
Its:________________________
LIVE Home Video Inc.
By:____________________________
Its:________________________
LIVE America Inc.
By:____________________________
Its:________________________
LEI-IVE Entertainment N.V.
By:____________________________
Its:________________________
International Video Productions
Inc.
By:____________________________
Its:________________________
Vestron Inc.
By:____________________________
Its:________________________
AGREEMENT
This AGREEMENT ( "Agreement") is dated as of December __,
1993, by and among (i) LIVE Ventures Inc., a Delaware corporation
("LVI") ; (ii) Credit Lyonnais Bank Nederland N.V., a bank
established in The Netherlands ("Credit Lyonnais"), Chemical Bank,
a New York banking corporation, Imperial Bank, a California state-
chartered bank, The Bank of California, N.A., a national banking
association ("Bank of California"), The Long-Term Credit Bank of
Japan, Ltd., Los Angeles Agency ("LTCB"), and such additional
lenders as may become parties to the Loan Agreement (as hereinafter
defined) (Credit Lyonnais, Chemical Bank, Imperial Bank, Bank of
California, LTCB and such additional lenders being sometimes
individually referred to herein as a "Bank" and collectively as the
"Banks"); (iii) Chemical, as successor-in-interest to Credit
Lyonnais, as administrative agent (the "Administrative Agent") for
the Banks, and (iv) Chemical, as collateral agent (the "Collateral
Agent") for the Banks, with reference to the following facts:
R E C I T A L S
A. Pursuant to that certain Third Amended and Restated
Loan and Security Agreement, dated as of July 26, 1990, as
heretofore amended (as heretofore amended, the "Loan Agreement"),
among (i) LIVE Entertainment Inc. ("LIVE"), a Delaware corporation,
LIVE Home Video Inc. ("LHV"), a Delaware corporation, LIVE America
Inc., a Delaware corporation, LEI-IVE Entertainment N.V., a
Netherlands Antilles corporation, International Video Productions
Inc., a California corporation, and Vestron Inc. (formerly known as
Vestron Acquisition Corp.), a Delaware corporation (collectively,
the "Borrowers"), (ii) the Banks, and (iii) the Administrative
Agent and the Collateral Agent for the Banks (collectively the
"Agent"), the Banks have extended certain credit to the Borrowers,
which extensions of credit are evidenced by the Revolving Note.
The Borrowers' obligations under the Loan Agreement and the
Revolving Note are secured by a first priority security interest in
the Collateral, subject to the rights, if any, of WEA in the WEA
Collateral.
B. Section 13.20 of the Loan Agreement provides that
each Person, other than Lieberman, Strawberries or any of their
respective subsidiaries, who becomes a Subsidiary of a Borrower
shall be and be deemed to be a Borrower under the Loan Agreement,
and within ten (10) days after acquiring such status, shall execute
and deliver to the Agent an agreement agreeing to be bound by the
terms of the Loan Agreement, the Revolving Note, the Collateral
Documents and all agreements and instruments executed in connection
therewith (in form and substance acceptable to the Agent), together
with such executed counterpart copies of any of the foregoing
agreements, or such other instruments as the Agent may request.
C. LHV has recently formed a Delaware wholly owned
subsidiary, LVI, for the purpose of entering into a joint venture
arrangement with BET Films, Inc. and Encore Media Corporation to be
known as BET Film Productions. The joint venture will develop,
produce and exploit motion pictures targeted primarily to minority
audiences.
D. By the execution and delivery of this Agreement and
subject to the terms and conditions hereinafter set forth, the
parties hereto desire to add LVI as a party to the Loan Agreement
and the other Loan Documents.
E. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Loan Agreement.
A G R E E M E N T
NOW, THEREFORE, in consideration of the foregoing
premises and the mutual promises, covenants and agreements set
forth herein, the parties hereto agree as follows:
1. LVI Added as Borrower. Effective as of the date
hereof, LVI shall be added as and shall be deemed to be a Borrower
under and a party to the Loan Agreement, the Revolving Note, the
Collateral Documents and all of the other Loan Documents. LVI
hereby assumes all of the obligations of a Borrower under the Loan
Agreement, the Revolving Note, the Collateral Documents and all of
the other Loan Documents and agrees to be bound by all of the terms
and conditions thereof as if it had been a party thereto from the
inception thereof. From and after the date hereof, all references
in the Loan Agreement or any other Loan Document to a "Borrower" or
the "Borrowers" shall be deemed to include LVI. From and after the
date hereof, all references in the Pledge Agreement to a "Pledgor"
or the "Pledgors" shall be deemed to include LVI. All assets of
LVI shall be included in the Collateral under the Loan Agreement,
the Collateral Documents and the other Loan Documents, and all
securities owned by LVI shall be included as Pledged Securities
under the Loan Agreement, the Collateral Documents and the other
Loan Documents, subject to the terms and conditions of the Loan
Agreement, the Collateral Documents and the other Loan Documents.
In furtherance of the foregoing, LVI shall execute and/or deliver
to the Agent the following:
(a) this Agreement;
(b) all financing statements and amendments to
existing financing statements relating to the Collateral necessary
to put any security interest in the assets of LVI of record;
(c) an Addendum to the New Notes Intercreditor
Agreement in form and substance satisfactory to the Agent and the
Banks executed by the Trustee under the New Notes Indenture and the
other New Notes Documents;
(d) a Certificate of the Secretary of LVI
certifying (i) that attached thereto is a true and complete copy of
resolutions of the Board of Directors of LVI authorizing the
execution, delivery and performance of this Agreement, the
agreements, instruments and documents to be executed and delivered
in connection herewith and the Loan Documents to which LVI will
become a party pursuant hereto; (ii) as to the incumbency and
signature of each officer or agent of LVI executing this Agreement
or any other document furnished pursuant hereto, and (iii) that
attached thereto are true and complete copies of the Bylaws and
charter documents of LVI;
(e) a certificate as to the good standing of LVI in
the State of Delaware and each state in which LVI is qualified to
do business;
(f) a copy of an insurance certificate evidencing
the policy of coverage required under Section 6.6 of the Loan
Agreement showing the Agent and the Banks as loss payees and/or
additional insured as required under such Section 6.6; and
(g) such other counterpart copies of or amendments
to any of the Loan Documents or such other agreements and
instruments as the Agent or any of the Banks shall require.
In addition, LVI shall cause the Borrowers to deliver the
certificates representing any additional securities to be included
in the Pledged Securities, including, without limitation, the
shares representing all of the issued and outstanding shares of
capital stock of LVI and any and all promissory notes made by LVI
to the order of any of the Borrowers, to the Agent.
2. Representations and Warranties. LVI hereby
represents and warrants to the Agent and the Banks on and as of the
date hereof as follows:
(a) The execution, delivery and performance of this
Agreement by LVI, the other agreements, instruments and documents
executed and delivered or to be executed and delivered by LVI
pursuant to this Agreement and the Loan Documents to which LVI will
become a party pursuant hereto have been duly authorized by all
requisite corporate action and will not violate any provision of
law, any order of any court or other agency of the United States or
of any state thereof or foreign state having jurisdiction thereof,
the charter documents of LVI or any other Borrower, the Joint
Venture Agreement of BET Film Productions or, in any respect,
having a materially adverse effect on LVI or any Borrower, any
provision of any agreement, indenture or other instrument to which
LVI or any other Borrower is a party, or by which LVI or any other
Borrower or any of the properties or assets of LVI or any other
Borrower is bound or affected, or be in material conflict with,
result in a material breach of or constitute (with or without due
notice and/or lapse of time) a material default under any
agreement, indenture or other instrument, or result in the creation
or imposition of any security interest, lien, charge or encumbrance
(other than a Permitted Encumbrance) of any nature whatsoever upon
the Collateral or any of the properties or assets of LVI or any of
the other Borrowers, other than in favor of the Agent and the Banks
as a result of this Agreement, the Loan Agreement and the other
Loan Documents.
(b) All consents, authorizations, approvals,
registrations or filings from or with any governmental or public
regulatory body or authority of the United States or of any state
thereof or any foreign state having jurisdiction or any other
Person which are required for the execution, delivery and perfor-
mance by LVI of this Agreement, the other agreements, instruments
and documents to be executed and delivered pursuant hereto and the
Loan Documents to which LVI will become a party pursuant hereto
have been duly obtained, made or granted and are in full force and
effect, and if any further (or, with respect to any other
agreements, instruments and documents to be executed and delivered
by LVI pursuant hereto) or additional consents, authorizations,
approvals, registrations or filings should hereafter become
necessary, LVI shall use its best efforts to obtain or make all
such consents, authorizations, approvals, registrations or filings.
(c) This Agreement, all agreements, instruments and
documents to be executed and delivered in connection herewith and
the Loan Documents to which LVI will become a party pursuant hereto
will, when duly executed and delivered or upon due execution and
delivery hereof, constitute legally valid and binding obligations
of LVI, enforceable against it in accordance with the respective
terms of such agreements, instruments and documents.
3. Choice of Law. This Agreement shall be deemed to be
a contract under and subject to, and shall be construed for all
purposes in accordance with, the laws of the State of New York.
4. Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original and
all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date first written above.
"LVI"
LIVE Ventures Inc., a Delaware
corporation
By:___________________________
Its:__________________________
"THE BANKS"
Credit Lyonnais Bank Nederland N.V.,
a bank established in The
Netherlands
By:___________________________
Its:__________________________
Chemical Bank, a New York banking
corporation, individually and as the
Administrative Agent and the
Collateral Agent
By:___________________________
Its:__________________________
Imperial Bank, a California state
chartered bank
By:___________________________
Its:__________________________
The Bank of California, N.A., a
national banking association
By:___________________________
Its:__________________________
The Long-Term Credit Bank of Japan,
Ltd., Los Angeles Agency
By:___________________________
Its:__________________________
ACKNOWLEDGED THIS __ DAY OF
DECEMBER, 1993:
LIVE Entertainment Inc., a
Delaware corporation
By____________________________
Its___________________________
LIVE Home Video Inc., a
Delaware corporation
By____________________________
Its___________________________
LIVE America Inc., a Delaware
corporation
By____________________________
Its___________________________
LEI-IVE Entertainment N.V., a
Netherlands Antilles corporation
By____________________________
Its___________________________
International Video Productions
Inc., a California corporation
By____________________________
Its___________________________
Vestron Inc., a Delaware
corporation
By____________________________
Its___________________________
January 28, 1994
LIVE Entertainment Inc.
LIVE Home Video Inc.
LIVE America Inc.
LEI-IVE Entertainment N.V.
International Video Productions Inc.
Vestron Inc.
LIVE Ventures Inc.
c/o LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Gentlemen:
Reference is made to that certain Third Amended and
Restated Loan and Security Agreement, dated as of July 26, 1990, as
amended (the "Loan Agreement"), between each of you, as the
Borrowers, each of the undersigned Banks, and Chemical Bank, as
Administrative Agent and Collateral Agent for the Banks (the
"Agent"). Capitalized terms used herein without definition shall
have the meanings ascribed to them in the Loan Agreement.
You have advised us that International Video Productions
Inc. ("IVP") wishes to enter into an Agreement, dated as of
November 15, 1993, substantially in the form of Exhibit "A" hereto
(the "Gladden Agreement") with Gladden Productions Inc. ("Gladden")
to acquire home video distribution rights in the United States and
Canada to ten Films to be produced by Gladden (the "Gladden Films")
during the period November 15, 1993 and December 31, 1998. Each
Gladden Film will have a Minimum Budgeted Negative Cost (as defined
in the Gladden Agreement) of not less than $10,000,000 and a
Maximum Budgeted Negative Cost (as defined in the Gladden
Agreement), subject to certain exceptions.
In consideration of the home video distribution rights to
the Gladden Films, IVP will pay to Gladden the various guarantee
amounts specified in the Gladden Agreement (the "Guarantee") as
advances chargeable against and recoupable from the share of the
Gross Receipts (as defined in the Gladden Agreement) payable to
Gladden pursuant to the Gladden Agreement. IVP may be required to
provide a letter of credit to Gladden or Gladden's designee to
secure its obligation to pay the Guarantee relating to a specific
Gladden Film 120 days prior to the scheduled start of principal
photography of such Gladden Film. The Guarantee relating to a
specific Gladden Film will be payable in two installments. Sixty
percent (60%) of the Guarantee will be payable upon mandatory
delivery of a Gladden Film, and forty percent (40%) will be payable
on the day following IVP's receipt of a certificate relating to
satisfaction of certain theatrical release requirements relating to
such Gladden Film. At no time will IVP be required to put up more
than three Guarantee payments in respect of mandatory delivery and
three Guarantee payments in respect of theatrical release at any
one time. Concurrently with IVP's payment of any portion of the
Guarantee with respect to any Gladden Film, under certain
circumstances, Gladden must cause the Qualified Theatrical
Distributor (as defined in the Gladden Agreement) of such Gladden
Film to deliver an irrevocable standby letter of credit in the
amount of the print and advertising commitment for such Gladden
Film.
To secure Gladden's performance obligations under the
Gladden Agreement, Gladden will grant IVP a security interest in
all of Gladden's right, title and interest in the physical
properties relating to the Gladden Films, the home video
distribution rights to the Gladden Films and certain other
collateral relating thereto pursuant to a Security Agreement
substantially in the form of Exhibit "E" to the Gladden Agreement
(the "Gladden Security Agreement"). Likewise, to secure IVP's
obligation to pay Gladden its share of the Gross Receipts from the
exploitation of the home video distribution rights to the Gladden
Films payable to Gladden after recoupment of the Guarantee by IVP,
IVP will be required to grant Gladden a security interest in the
share of the Gross Receipts from the exploitation of the home video
distribution rights to the Gladden Films payable to Gladden
pursuant to a Security Agreement substantially in the form of
Exhibit "F" to the Gladden Agreement (the "IVP Security
Agreement").
Section 7.3 of the Loan Agreement prohibits any Borrower,
directly or indirectly, from granting, creating or causing or
allowing to exist any liens or security interests other than
Permitted Encumbrances, and Section 6.17 requires you to keep all
receivables and account proceeds and other Collateral free and
clear of all liens other than Permitted Encumbrances.
Section 7.10 of the Loan Agreement prohibits you from
making, paying or committing or agreeing to make or paying any
advances or other fixed payments aggregating in excess of
$7,000,000 in connection with the acquisition of Film Assets in
more than one Film pursuant to any single Film Asset Acquisition
Agreement (i.e., so-called "output" or "multiple picture" deals),
except for certain existing specified acquisitions.
In view of the foregoing restrictive covenants in the
Loan Agreement, you have requested that the Agent and the Banks (a)
consent to IVP's entering into the Gladden Agreement and agree to
waive the covenant contained in Section 7.10 of the Loan Agreement
in connection therewith, and (b) consent to IVP's grant to Gladden
of a security interest pursuant to the IVP Security Agreement in
all of IVP's right, title and interest in Gladden's share of the
Gross Receipts from exploitation of the home video distribution
rights to the Gladden Films payable to Gladden after recoupment of
the Guarantee paid by IVP.
Subject to the terms and conditions hereof, the
undersigned Agent and Banks hereby consent and agree to the
foregoing; provided, that: (a) you have delivered true and complete
copies of the Gladden Agreement, the Gladden Security Agreement,
the IVP Security Agreement and any and all other agreements and
documents to be executed and delivered pursuant thereto to the
Agent, and the terms and conditions thereof have been determined to
be satisfactory to the Agent and the Banks in their sole and
absolute discretion, such satisfaction to be evidenced by delivery
of this Consent Letter, and copies of all of the foregoing
agreements, duly executed by all of the parties thereto, are
delivered to the Agent; (b) you execute and deliver to the Agent an
appropriate Copyright Mortgage relating to each of the Gladden
Films immediately upon issuance and delivery of any letter of
credit with respect to any such Gladden Film; (c) the Guarantee
amounts paid with respect to the Gladden Films do not exceed the
following maximum amounts: $7,000,000 for the first six Gladden
Films acquired pursuant to the Gladden Agreement, $7,276,500 for
the seventh and eighth Gladden Films acquired pursuant to the
Gladden Agreement, and $7,640,325 for the ninth and tenth Gladden
Films acquired pursuant to the Gladden Agreement; and (d) without
the prior written consent of the Agent and the Banks, you do not
agree to any amendment of the Gladden Agreement or any other
agreement executed and delivered in connection therewith,
including, without limitation, the Gladden Security Agreement and
the IVP Security Agreement, which would (x) increase the amount of
the maximum Guarantee payable with respect to any Gladden Film
above the amounts set forth in the preceding clause (c); (y)
accelerate or otherwise alter the payment terms of the Guarantee
amount with respect to any of the Gladden Films, or (z) alter the
terms in any way whatsoever of the security interests granted
pursuant to such agreements.
The cash flow projections, dated December 14, 1993, which
you provided to the Agent and the Banks show that you may have
insufficient funds to pay the guarantee amounts required under the
Gladden Agreement if you are unable to find additional financing.
You therefore acknowledge that you fully understand and agree that,
notwithstanding the consent and waivers granted herein or your
inability to find additional financing between the date hereof and
the Maturity Date or replacement financing following the Maturity
Date, the Agent and the Banks shall have no obligation whatsoever
to make any Loans under the Loan Agreement in excess of the
aggregate Commitments of the Agent and the Banks under the terms of
the Loan Agreement, as amended by the Twelfth Amendment thereto, or
to extend the Maturity Date to finance any guarantee payments or
other amounts due and payable under the Gladden Agreement or for
any other purpose.
You hereby agree that the Loan Agreement is hereby
ratified and confirmed in all respects, that all of the terms and
conditions thereof, except as otherwise agreed herein, shall remain
in full force and effect and that you have no defenses, offsets or
claims whatsoever in respect thereto. You further agree that the
consents and waivers to be effected pursuant hereto shall be
limited to the specific provisions consented to or waived hereunder
and the specific events and facts surrounding such consents and
waivers and that such consents and waivers shall not be deemed to
constitute a consent to, a waiver of or a departure from any other
provision of the Loan Agreement or any other agreement, document or
instrument executed and delivered in connection therewith, all of
which are to remain in full force and effect.
If the foregoing correctly sets forth your understanding
of our agreement, please indicate your acceptance below whereupon
this letter shall constitute an agreement between us in accordance
with its terms. This instrument may be executed in two or more
counterparts, each of which shall be deemed an original and taken
together shall constitute the same instrument.
Very truly yours,
Credit Lyonnais Bank Nederland N.V.
By:_______________________________
Its:___________________________
Chemical Bank, in its individual
capacity and as Administrative Agent
and Collateral Agent for the Banks
By:_______________________________
Its:___________________________
Imperial Bank
By:_______________________________
Its:___________________________
The Bank of California, N.A.
By:_______________________________
Its:___________________________
The Long-Term Credit Bank of Japan,
Ltd., Los Angeles Agency
By:_______________________________
Its:___________________________
AGREED TO AND ACCEPTED
AS OF JANUARY __, 1994:
LIVE Entertainment Inc.
By:____________________________
Its:________________________
LIVE Home Video Inc.
By:____________________________
Its:________________________
LIVE America Inc.
By:____________________________
Its:________________________
LEI-IVE Entertainment N.V.
By:____________________________
Its:________________________
International Video Productions
Inc.
By:____________________________
Its:________________________
Vestron Inc.
By:____________________________
Its:________________________
LIVE Ventures Inc.
By:____________________________
Its:________________________
ADDENDUM TO NEW NOTES INTERCREDITOR AGREEMENT
This Addendum to New Notes Intercreditor Agreement
("Addendum") is entered into as of December 22, 1993, by and
between (i) Chemical Bank, a New York banking corporation, as
Administrative Agent and Collateral Agent for the Banks under the
below-defined Bank Loan Agreement (the "Bank Group Agent") and in
all cases hereunder acting on behalf of the Banks and (ii) U.S.
Trust Company of California, N.A., a national banking association,
in its capacity as trustee and collateral agent under the New Notes
Indenture and the other New Notes Documents (the "Trustee"), with
reference to the following facts:
A. The Bank Group Agent and the Trustee have heretofore
entered into that certain New Notes Intercreditor Agreement, dated
as of March 26, 1993 (the "New Notes Intercreditor Agreement") in
order to clarify the relative priorities of the Liens on certain
Collateral which were granted pursuant to certain Bank Documents
and New Notes Documents and to provide for the exercise or non-
exercise of certain rights, remedies and options with respect to
such Collateral by such parties.
B. Section 13.20 of the Bank Loan Agreement provides
that each Person, other than Lieberman, Strawberries or any of
their respective subsidiaries, who becomes a Subsidiary of a
Borrower shall be deemed to be a Borrower under the Bank Loan
Agreement, and within ten (10) days after acquiring such status,
shall execute and deliver to the Bank Group Agent an agreement
agreeing to be bound by the terms of the Bank Loan Agreement and
the other Bank Documents. Section 12.20 of New Notes Indenture
contains an analogous provision requiring any new subsidiary of a
guarantor to become a guarantor under the New Notes Indenture and
the other New Notes Documents.
C. LIVE Home Video Inc. has recently formed a new
Delaware wholly owned subsidiary, LIVE Ventures Inc. ("LVI"), for
the purpose of entering into a joint venture arrangement to be
known as BET Film Productions with BET Films, Inc. and Encore Media
Corporation or its wholly owned subsidiary to develop, produce and
exploit motion pictures targeted primarily to minority audiences.
Accordingly, LVI will be added as a joint and several borrower
under the Bank Loan Agreement and the other Bank Documents and as
a guarantor under the New Notes Indenture and other New Notes
Documents, and all of the assets of LVI will be included in the
Collateral securing the Bank Obligations and any collateral
securing the New Notes Obligations.
D. By execution of this Addendum, the parties hereto
desire to reconfirm the relative priorities of the Liens on the
Collateral in view of the addition of LVI as a party to the Bank
Documents and the New Notes Documents.
E. Capitalized terms used herein without definition
shall have the meanings assigned to them in the New Notes
Intercreditor Agreement.
A G R E E M E N T
Now, therefore, in consideration of the foregoing
premises and the mutual promises, covenants and agreements set
forth herein, the parties hereto agree as follows:
1. Reaffirmation of Subordination. The Trustee and the
Bank Group Agent acknowledge that (i) LVI has been added as a joint
and several borrower under the Bank Loan Agreement and the other
Bank Documents and all of the assets of LVI are therefore included
in the Collateral securing the Bank Obligations, and (ii) LVI will
be added as a guarantor under the New Notes Indenture and the other
New Notes Documents and that all of the assets of LVI are therefore
included in the collateral securing the New Notes Obligations.
Notwithstanding (a) any contrary provision of any Bank Document or
New Notes Document; (b) the loss of priority by the Bank Group
Agent or any of the Banks to any other creditors or claimants of
LIVE or any of the other Borrowers; (c) the invalidity of any Lien
of the Bank Group Agent or any of the Banks on any of the
Collateral; (d) any priority in time of creation, attachment or
perfection of any Lien on the Collateral, including, without
limitation, the assets of LVI included in the Collateral, in favor
of the Bank Group Agent and the Banks or the Trustee, respectively,
or (e) any provision of, or any filing or recording under, the
Uniform Commercial Code of any state or any other applicable
statute, rule or regulation or the United States, including without
limitation, the United States Copyright Act of 1976, as amended,
any state thereof, their counties or municipalities or any other
country or other applicable jurisdiction or any subdivision of any
of the foregoing, the Trustee hereby agrees with the Bank Group
Agent that neither the addition of LVI as a joint and several
borrower under the Bank Loan Agreement and the other Bank Documents
and the pledge and inclusion of all of the assets of LVI pursuant
thereto as Collateral for the Bank Obligations, the addition of LVI
as a guarantor under the New Notes Indenture and the other New
Notes Documents and the pledge and inclusion of all of the assets
of LVI pursuant thereto as collateral for the New Notes
Obligations, nor any amendment, modification or change to any of
the Bank Documents or New Notes Documents in connection therewith,
shall in any way affect the seniority, superiority and priority of
the Lien of the Bank Group Agent on the Collateral, including,
without limitation, the assets of LVI included in the Collateral,
or the absolute subordination of right of payment by the Trustee
and the New Notes Holders to the prior indefeasible payment and
performance in full of all Bank Obligations (except as expressly
provided in the New Notes Intercreditor Agreement), and the Trustee
waives any rights to the contrary. Any Liens heretofore or here-
after granted to the Trustee on the Collateral, including, without
limitation, the assets of LVI included in the Collateral, shall be
subordinate, junior and inferior to any Liens of the Bank Group
Agent and the Banks on the Collateral, including, without
limitation, the assets of LVI included in the Collateral.
2. No Modification. Except as supplemented hereby, all
terms and provisions of the New Notes Intercreditor Agreement shall
remain in full force and effect.
3. Governing Law. This Addendum shall be governed by
and construed in accordance with the laws of the state of New York
without regard to its principles of conflicts of laws.
IN WITNESS WHEREOF, the undersigned have executed this
Addendum as of the date first set forth above.
"BANK GROUP AGENT"
Chemical Bank, a New York banking
corporation, as Administrative Agent and
Collateral Agent for the Banks
By____________________________
Its___________________________
"TRUSTEE"
U.S. Trust Company of California, N.A., a
national banking association, as trustee
and collateral agent under the New Notes
Indenture and the other New Notes
Documents
By____________________________
Its___________________________
ACKNOWLEDGED THIS __ DAY OF
DECEMBER, 1993:
LIVE Entertainment Inc., a
Delaware corporation
By____________________________
Its___________________________
LIVE Home Video Inc., a
Delaware corporation
By____________________________
Its___________________________
LIVE America Inc., a Delaware
corporation
By____________________________
Its___________________________
<PAGE>
LEI-IVE Entertainment N.V., a
Netherlands Antilles corporation
By____________________________
Its___________________________
International Video Productions
Inc., a California corporation
By____________________________
Its___________________________
Vestron Inc., a Delaware
corporation
By____________________________
Its___________________________
LIVE Ventures Inc., a Delaware
corporation
By____________________________
Its___________________________
1988 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
OF LIVE ENTERTAINMENT INC.
(As Amended through June 30, 1993)
1. Purpose.
The purpose of this 1988 Stock Option and Stock Appreciation
Rights Plan (the "Plan") of LIVE Entertainment Inc., a Delaware
corporation (the "Company"), is to secure for the Company and its
stockholders the benefits arising from stock ownership and
participation in stock appreciation by selected key employees of
the Company or its subsidiaries, Directors, consultants or other
persons ("Participants") as an independent committee of the
Company's Board of Directors (the "Board of Directors") may from
time to time determine. The Plan will provide a means whereby (i)
such employees may purchase shares of the Common Stock of the
Company pursuant to options that will qualify as "incentive stock
options" under Section 422 of the Internal Revenue Code of 1986, as
amended (the "Code"), (ii) such employees, Directors, consultants
or other persons, may purchase shares of the Common Stock of the
Company pursuant to "non-qualified stock options" and (iii) such
employees, Directors, consultants or other persons may acquire the
right to participate in the appreciation of the Common Stock of the
Company pursuant to "stock appreciation rights." Incentive stock
options and non-qualified stock options are sometimes referred to
collectively as "options."
2. Administration.
2.1 The Plan shall be administered by a committee (the
"Committee") consisting of at least two Directors, each of whom is
a "disinterested person" as that term is defined in Rule 16B-
3(c)(2) of the General Rules and Regulations under the Securities
Exchange Act of 1934, as amended (the "Exchange Act"). Any action
of the Committee with respect to administration of the Plan shall
be taken by a majority vote or written consent of its members.
2.2 Subject to the provisions of the Plan, the Committee
shall have authority (i) to construe and interpret the Plan, (ii)
to define the terms used therein, (iii) to prescribe, amend and
rescind rules and regulations relating to the Plan, (iv) to
determine the individuals to whom and the time or times at which
options or stock appreciation rights shall be granted, whether any
options granted will be incentive stock options or non-qualified
stock options, the number of shares to be subject to each option or
stock appreciation right, the exercise price of an option or the
Initial Value of a stock appreciation right, the number of
installments, if any, in which each option or stock appreciation
right may be exercised, and the duration of each option or stock
appreciation right, (v) to approve and determine the duration of
leaves of absence which may be granted to Participants without
constituting a termination of their employment for the purposes of
the Plan, and (vi) to make all other determinations necessary or
advisable for the administration of the Plan. All determinations
and interpretations made by the Committee shall be binding and
conclusive on all Participants in the Plan and their legal
representatives and beneficiaries. The Committee may delegate some
or all of its power and authority to the Chief Executive Officer of
the Company or the other executive officer, as the Committee deems
appropriate; provided, however, that the Committee may not delegate
its authority with regard to any matter or action affecting any
director or officer who is subject to Section 16 of the Exchange
Act.
3. Shares Subject to the Plan.
Subject to adjustments as provided in Paragraph 15 hereof, the
shares to be issued under the Plan shall consist of the Company's
authorized but unissued Common Stock. Subject to adjustment as
provided in Paragraph 15 hereof, the aggregate number of stock
appreciation rights that may be granted under the Plan shall not
exceed 600,000. The authorized, unissued stock appreciation rights
may be issued as stock options, notwithstanding anything contained
in this paragraph to the contrary. If any stock appreciation
rights granted under the Plan should expire or terminate for any
reason without having been exercised in full, the unexercised stock
appreciation rights shall again be available to be granted under
the Plan either as stock appreciation rights or stock options. The
aggregate amount of stock which may be issued upon exercise of all
options under the Plan shall not exceed 900,000 shares plus the
600,000 shares if all of the stock appreciation rights that may be
granted under the Plan are issued as stock options, for a total of
1,500,000 shares. If any option granted under the Plan shall
expire or terminate for any reason without having been exercised in
full, the unpurchased shares subject thereto shall again be
available for options to be granted under the Plan.
4. Eligibility and Participation.
4.1 All regular salaried employees of the Company or any
subsidiary corporation (as defined in Section 425(f) of the Code)
shall be eligible to receive incentive stock options, non-qualified
stock options and stock appreciation rights. Directors of the
Company or any subsidiary corporation, consultants and other
persons who are not regular salaried employees of the Company or
any subsidiary corporation are not eligible to receive incentive
stock options, but are eligible to receive non-qualified stock
options and stock appreciation rights.
4.2 No incentive stock options may be granted to any
employee, at the time the incentive stock option is granted, owns
shares possessing more than ten percent of the total combined
voting power of all classes of stock of the Company (or of its
subsidiary corporations as defined in Section 425(f) of the Code),
unless the exercise price of such incentive stock option is at
least one hundred ten percent of the fair market value of the stock
subject to the incentive stock option determining fair market value
as of the date each respective option is granted in accordance with
Paragraph 8 hereof, and such incentive stock option by its terms is
not exercisable after the expiration of five years from the date
such incentive stock option is granted.
4.3 The aggregate fair market value of the Common Stock for
which incentive stock options granted to any one employee under
this Plan or any other incentive stock option plan of the Company
may by their terms first become exercisable during any calendar
year shall not exceed $100,000, determining the fair market value
as of the date each respective option is granted.
4.4 All options and stock appreciation rights granted under
the Plan shall be granted within ten years from September 20, 1988.
4.5 Directors who are members of the Committee shall not be
eligible to receive any grants of stock options or stock
appreciation rights granted pursuant to the Committee's discretion
under the Plan. Such Directors shall be granted options to
purchase 5,000 shares of Common Stock per calendar year at the fair
market value of the Common Stock, pursuant to option grants of
equal amount on the first business day following January 1 of each
calendar year. Each option granted pursuant to this Paragraph 4.5
shall be fully exercisable on the date of grant and shall be
exercisable for a period of ten years from the date of grant.
5. Duration of Options and Stock Appreciation Rights.
Each option and stock appreciation right and all rights
associated therewith shall expire on such date as the Committee may
determine, but in no event later than ten years from the date on
which the option or stock appreciation right is granted, and shall
be subject to earlier termination as provided herein; provided,
however, that options granted in accordance with Paragraph 4.5
shall be exercisable for a period of ten years from the date on
which such an option is granted.
6. Price and Exercise of Options.
6.1 All options shall be evidenced by a stock option
agreement. Subject to Paragraph 4.2 and 4.5, the purchase price of
the Common Stock covered by each option shall be determined by the
Committee, but in the case of an incentive stock option shall not
be less than one hundred percent of the fair market value of such
Common Stock on the date the incentive stock option is granted.
The purchase price of the Common Stock upon exercise of an option
shall be paid in full at the time of exercise (i) in cash or by
certified cashier's check payable to the order of the Company, (ii)
by cancellation of indebtedness owed by the Company to the
Participant, (iii) by delivery of shares of Common Stock of the
Company already owned by, and in the possession of, the Participant
or by authorizing the Company to retain shares of Common Stock
otherwise issuable upon exercise of an option, (iv) if authorized
by the Committee or if specified in the option being exercised, by
a promissory note made by the Participant in favor of the Company,
subject to terms and conditions determined by the Committee,
secured by the Common Stock issuable upon exercise, and in
compliance with applicable law (including, without limitation,
state, corporate and federal requirements), (v) by any combination
thereof or (vi) in such other manner as the Committee may specify
in order to facilitate the exercise of options by the holders
thereof. Shares of Common Stock used to satisfy the exercise price
of an option shall be valued at their fair market value determined
in accordance with Paragraph 8 hereof.
6.2 No option granted under this Plan shall be exercisable if
such exercise would involve a violation of any applicable law or
regulation (including, without limitation, federal and state
securities laws and regulations). Subject to Section 4.5, each
option shall be exercisable in such installments during the period
prior to its expiration date as the Committee shall determine;
provided, however, that unless otherwise determined by the
Committee, if the Participant shall not in any given installment
period purchase all of the shares which the Participant is entitled
to purchase in such installment period, then such Participant's
right to purchase any shares not purchased in such installment
period shall continue until the expiration date or sooner
termination of the Participant's option. No option may be
exercised for a fraction of a share and no partial exercise of any
option may be for fewer than ten shares unless fewer than ten
shares remain unpurchased.
7. Terms and Conditions of Stock Appreciation Rights.
All stock appreciation rights shall be evidenced by a
Certificate of Grant (sometimes referred to herein as the
"Certificate") in such form as the Board of Directors or the
Committee shall from time to time approve. A grant of stock
appreciation rights shall be subject to the following terms and
conditions.
7.1 Each stock appreciation right shall entitle a Participant
to an amount (the "Appreciation") equal to the excess of the
Exercise Value of one share of Common Stock over the Initial Value
of one share of Common Stock. The Initial Value of each stock
appreciation right shall be specified in the Certificate of Grant.
The Exercise Value of each stock appreciation right shall be the
fair market value of a share of Common Stock on the date the stock
appreciation right is exercised, determined as set forth in
Paragraph 8. The total Appreciation available to a Participant
from the exercise of any stock appreciation right is a method of
incentive compensation for key employees, Directors, consultants
and other persons and does not constitute an offering or sale of
Common Stock to anyone.
7.2 The Appreciation available to a Participant upon exercise
of the Participant's stock appreciation rights shall be paid to the
Participant in cash or Common Stock as determined by the Committee.
If payment is made in Common Stock of the Company, then the fair
market value of the Common Stock for purposes of calculating the
number of shares of Common Stock that shall be issued to pay the
Appreciation of a stock appreciation right shall be based upon the
fair market value of the Common Stock as determined in Paragraph 8
on the date of exercise of the stock appreciation right. If the
total Appreciation is paid in Common Stock, the total Appreciation
will be reduced to the largest amount divisible by the fair market
value of one share of Common Stock. Appreciation shall be paid as
compensation and without interest by the Company as specified in
the Certificate of Grant.
7.3 All stock appreciation rights must have an Initial Value
no less than the fair market value of a share of Common Stock as
determined in Paragraph 8 as of the date of grant of the stock
appreciation right.
7.4 A stock appreciation right (a "Related Right") may be
granted under this Plan pursuant to a Certificate of Grant
providing that the exercise of the stock appreciation right affects
the exercise of an option granted pursuant to this Plan (the
"Related Option"). Unless the Certificate of Grant pursuant to
which the Related Right is granted provides otherwise, the Related
Right may be exercised only to the extent to which the Related
Option is exercisable. Upon the exercise or termination of the
related Right, the Related Option shall cease to be exercisable and
shall be canceled to the extent of the number of shares with
respect to which the Related Right was exercised or terminated.
Upon exercise or termination of the Related Option, the Related
Right shall cease to be exercisable and shall be canceled to the
extent of the number of shares to which the Related Option was
exercised or terminated. In addition to the foregoing, if the
Related Option is an "incentive stock option" granted pursuant to
the Plan, then the Related Right must satisfy the following
conditions:
(i) The Related Right must be granted only at the time
of grant of the Related Option;
(ii) The Related Right must expire no later than the
expiration of the Related Option;
(iii) The Related Right must be granted for an amount of
Appreciation equal to or less than one hundred percent of the
difference between the exercise price of the Related Option and the
market price of the Common Stock subject to the Related Option at
the time the Related Right is exercised;
(iv) The Related Right may be transferable only when
the Related Option is transferable, and only under the same
conditions;
(v) The Related Right may be exercised only when the
Related Option is eligible to be exercised; and
(vi) The Related Right may be exercised only when the
market price of the Stock subject to the Related Option exceeds the
exercise price of the Related Option.
7.5 No stock appreciation right granted under this Plan shall
be exercisable if such exercise would involve a violation of any
applicable law or regulation (including, without limitation,
federal and state securities laws and regulations). Each stock
appreciation right shall be exercisable in such installments during
the period prior to its expiration date as the Committee shall
determine; provided, however, that, unless otherwise determined by
the Committee, if the Participant shall not in any given
installment period exercise all of the stock appreciation rights
which the Participant is entitled to exercise in such installment
period, then the Participant's right to exercise any stock
appreciation rights not exercised in such installment period shall
continue until the expiration date or sooner termination of the
Participant's stock appreciation rights.
8. Fair Market Value of Common Stock.
The fair market value of a share of Common Stock of the
Company shall be determined for purposes of this Plan by reference
to the mean between the bid and asked price of a share as supplied
by the National Association of Securities Dealers through NASDAQ
(or its successor function) or, if such shares are then traded on
a principal stock exchange, by reference to the closing price of a
share on the principal stock exchange on which such shares are
traded, in each case as reported by the Wall Street Journal for the
business day immediately preceding the date on which the fair
market value is determined (or, if for any reason no such price is
available, in such other manner as the Committee may deem
appropriate to reflect the then fair market value thereof).
9. Withholding Tax.
Upon (i) the disposition of shares of Common Stock acquired
pursuant to the exercise of an incentive stock option granted
pursuant to the Plan within two years of the granting of the
incentive stock option or within one year after exercise of the
incentive stock option, (ii) the exercise of a non-qualified stock
option, or (iii) the exercise of a stock appreciation right, the
Company shall have the right to require such employee or other
person, and such employee or other person by accepting the options
or stock appreciation rights granted under the Plan agrees, to pay
the Company the amount of taxes which the Company may be required
to withhold with respect thereto. In the event of (i) or (ii), or
in the event of (iii) if the Appreciation is paid with Common
Stock, then such employee or other person may elect to pay the
amount of any taxes which the Company may be required to withhold
by delivering to the Company shares of the Company's Common Stock
having a fair market value determined in accordance with Paragraph
8 equal to the withholding tax obligation determined by the
Company. Such shares so delivered may be either shares withheld by
the Company upon the exercise of the option stock appreciation
right or other shares. Such election must be made by those persons
subject to the provisions of Section 16 of the Exchange Act in
accordance with the General Rules and Regulations under the
Exchange Act, but in no event later than the date as of which the
amount of tax to be withheld is determined.
<PAGE>
10. Non-transferability.
An option or stock appreciation right granted under the Plan
shall, by its terms, be nontransferable by the holder either
voluntarily or by operation of law, other than by will or the laws
of descent and distribution, and shall be exercisable during the
holder's lifetime only by the holder, regardless of any community
property interest therein of the spouse of the holder, or such
spouse's successors in interest. If the spouse of the holder shall
have acquired a community property interest in an option or stock
appreciation right, the holder, or the holder's permitted
successors in interest, may exercise the option or stock
appreciation right on behalf of the spouse of the holder or such
spouse's successors in interest.
11. Holding of Stock After Exercise of Option.
At the discretion of the Committee, any option or stock
appreciation right may provide that the Participant, by accepting
such option or stock appreciation right, represents and agrees, for
the Participant and the Participant's permitted transferees, that
none of the shares acquired upon exercise of an option or stock
appreciation right will be acquired with a view to any sale,
transfer or distribution of said shares in violation of the
Securities Act of 1933, as amended, (the "Act"), and the rules and
regulations promulgated thereunder and the person entitled to
exercise the same shall furnish evidence satisfactory to the
Company (including a written and signed representation) to that
effect in form and substance satisfactory to the Company, including
an indemnification of the Company in the event of any violation of
the Act by such person.
12. Termination of Employment.
If a holder of an incentive stock option ceases to be employed
by the Company or one of its subsidiary corporations (as defined in
Section 425(f) of the Code) for any reason other than the holder's
death or permanent disability (within the meaning of Section
105(d)(4) of the Code), the holder's incentive stock options shall
immediately become void and of no further force or effect;
provided, however, that if such cessation of employment shall be
due to the holder's voluntary resignation with the consent of the
Board of Directors of the Company or such subsidiary, expressed in
the form of a written resolution, or shall be due to the holder's
retirement under the provisions of any pension or retirement plan
of the Company or such subsidiary then in effect, then within three
months after the date the holder ceases to be an employee of the
Company or such subsidiary such incentive stock option may be
exercised to the extent exercisable on the date of such cessation
of employment. A leave of absence approved in writing by the Board
of Directors or the Committee shall not be deemed a termination of
employment for the purposes of this Paragraph 12, but no incentive
stock option may be exercised during any such leave of absence,
except during the first three months thereof. Termination of
employment or other relationship with the Company by the holder of
a non-qualified stock option or stock appreciation right will have
the effect specified in the individual option agreement or
Certificate of grant as determined by the Committee; provided,
however, that an option granted pursuant to Paragraph 4.5 shall be
exercisable for a period of 12 months following termination of
employment or other relationship with the Company to the extent
exercisable on the date of such cessation of employment or other
relationship.
13. Death or Permanent Disability of Option Holder.
If the holder of an incentive stock option dies or becomes
permanently disabled while the option holder is employed by the
Company or one of its subsidiary corporations (as defined in
Section 425(f) of the Code), the holder's option shall expire one
year after the date of such death of permanent disability unless by
its terms it expires sooner. During such period after death, such
incentive stock option may, to the extent that it remains
unexercised (but exercisable by the holder according to such
option's terms) upon the date of such death, be exercised by the
person or persons to whom the option holder's rights under the
incentive stock option shall pass by the option holder's will or by
the laws of descent and distribution. The death or permanent
disability of a holder of a non-qualified stock option or stock
appreciation right will have the effect specified in the individual
option agreement or Certificate of Grant as determined by the
Committee; provided, however, that a vested option granted pursuant
to Paragraph 4.5 shall be exercisable for a period of 12 months
following death or permanent disability of a holder of such an
option to the extent exercisable on the date of death or permanent
disability.
14. Privileges of Stock Ownership.
No person entitled to exercise any option or stock
appreciation right granted under the Plan shall have any of the
rights or privileges of a stockholder of the Company in respect of
any shares of Common Stock issuable upon exercise of such option or
stock appreciation right until certificates representing such
shares shall have been issued and delivered. No shares shall be
issued and delivered upon exercise of any option or stock
appreciation right unless and until in the opinion of counsel for
the Company there shall have been full compliance with any
applicable registration requirements of the Exchange Act, any
applicable listing requirements of any national securities exchange
on which the Common Stock is then listed, and any other
requirements of law or of any regulatory bodies having jurisdiction
over such issuance and delivery.
15. Adjustments.
15.1 If the outstanding shares of the Common Stock of the
Company are increased, decreased, changed into or exchanged for a
different number or kind of shares or securities as a result of a
reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split or other similar transaction, an
appropriate and proportionate adjustment shall be made in the
maximum number and kind of stock appreciation rights and shares as
to which options may be granted under this Plan. A corresponding
adjustment changing the number or kind of stock appreciation rights
and shares allocated to unexercised options or portions thereof,
which shall have been granted prior to any such change, shall
likewise be made. Any such adjustment in the outstanding options
shall be made without change to the aggregate purchase price
applicable to the unexercised portion of the option but with a
corresponding adjustment in the purchase price for each share
covered by the option. Any such adjustment in the outstanding
stock appreciation rights shall be made without change in the
aggregate Initial Value applicable to the unexercised portion of
the stock appreciation rights but with a corresponding adjustment
in the Initial Value for each share covered by the stock
appreciation right.
15.2 Upon the dissolution or liquidation of the Company, or
upon a reorganization, merger or consolidation of the Company with
one or more corporations as a result of which the Company is not
the surviving corporation, or upon the sale of substantially all
the property or more than eighty percent of the then outstanding
stock of the Company to another corporation, the Plan shall
terminate, and any stock appreciation rights and options granted
hereunder shall terminate.
15.3 Notwithstanding the foregoing, the Committee may provide
in writing in connection with such transaction for any or all of
the following alternatives (separately or in combinations): (i)
for the stock appreciation rights and options theretofore granted
to become immediately exercisable; (ii) for the assumption by the
successor corporation for the stock appreciation rights and options
theretofore granted or the substitution by such corporation for
such stock appreciation rights and options or new stock
appreciation rights and options covering the stock of the successor
corporation, or a parent or subsidiary thereof, with appropriate
adjustments as to the number and kind of shares and prices; or
(iii) for the continuance of the Plan by such successor corporation
in which event the Plan and the stock appreciation rights and
options theretofore granted shall continue in the manner and under
the terms so provided.
15.4 Adjustments under this Paragraph 15 shall be made by the
Committee, whose determination as to what adjustments shall be
made, and the extent thereof, shall be final, binding and
conclusive. No fractional share of stock shall be issued under the
Plan on any such adjustment.
16. Amendment and Termination of Plan.
16.1 The Committee may at any time suspend or terminate the
Plan. The Committee may also at any time amend or revise the terms
of the Plan provided that the number of shares subject to an option
granted to non-employee directors pursuant to Paragraph 4.5, the
purchase price therefor, the date of grant of any such option, the
termination provisions relating thereto and the category of persons
eligible to be granted such options shall not be amended more than
once every six months, other than to comport with changes in the
Code or the Employee Retirement Income Security Act of 1974, as
amended, or the rules and regulations thereunder and provided
further that no amendment or revision shall, unless appropriate
stockholder approval of such amendment or revision is obtained, (i)
increase the maximum number of shares which may be acquire pursuant
to options, and the maximum number of stock appreciation rights
granted under the Plan, except as permitted under the provisions of
Paragraph 15, (ii) change the minimum purchase price set forth in
Paragraphs 4.2 and 6 or the Initial Value set forth in Paragraph 7,
(iii) increase the maximum term of options or stock appreciation
rights provided for in Paragraph 5, or (iv) change the designation
of persons eligible to receive options or stock appreciation rights
as provided in Paragraph 4.
16.2 No amendment, suspension or termination of the Plan
shall, without the consent of the holder, alter or impair any
rights or obligations under any option or stock appreciation right
theretofore granted under the Plan.
17. Effective Date of Plan.
No option or stock appreciation right may be granted under the
Plan unless and until (i) the options and underlying shares and
stock appreciation rights have been registered under the Act and
qualified with the appropriate state regulatory agencies, or (ii)
the Company has been advised by counsel that such options, shares
and stock appreciation rights are exempt from such registration
and/or qualification. An amendment to the Plan to comply with
certain provisions of the Code was adopted by the Board of
Directors on June 30, 1993. The next most recent amendment and
restatement of the Plan was approved on July 19, 1990 by the
holders of the outstanding voting stock of the Company.
REGISTRATION RIGHTS AGREEMENT FOR
LIVE ENTERTAINMENT INC. COMMON STOCK
DATED AS OF JULY 20, 1993
BY AND AMONG
LIVE ENTERTAINMENT INC.
AND
CAROLCO PICTURES INC.
AND
THE STRATEGIC PARTNERS
<PAGE>
REGISTRATION RIGHTS AGREEMENT FOR
COMMON STOCK
This Registration Rights Agreement for Common Stock (the
"Agreement") is made and entered into as of July 20, 1993, by and
among LIVE Entertainment Inc., a Delaware corporation (the
"Company"), and Carolco Pictures Inc., a Delaware corporation
("Carolco"), and the Strategic Partners (as defined below), with
reference to the following facts:
A. Carolco Pictures Inc., a Delaware corporation, on the one
hand, and Pioneer LDCA, Inc., a Delaware corporation ("Pioneer"),
RCS Video Services International B.V., a Netherlands corporation
("RCS BV"), RCS Video Services Antilles N.V., a Netherlands
Antilles corporation ("RCS NV") (RCS BV and RCS NV collectively,
"RCS") and Le Studio Canal+ S.A., a French corporation ("Studio
Canal"), on the other hand, are parties to the Stock Pledge
Agreement and the Pioneer Stock Pledge Agreement (collectively, the
"Pledge Agreements"), dated as of March 20, 1992 and Carolco,
Pioneer, RCS BV and Studio Canal are parties to a Loan Agreement
dated as of March 20, 1992. Pioneer, RCS and Studio Canal are
known collectively herein as the Strategic Partners.
B. To induce some or all of the Strategic Partners to enter
into the Pledge Agreements, the Loan Agreement and the other
agreements referenced therein for the benefit of Carolco and for
the indirect benefit of the Company as the distributor in the
United States and Canada of Carolco's motion picture video product,
and in consideration of the performance of the obligations and
commitments of some or all of the Strategic Partners in the Loan
Agreement, the Company previously agreed to provide the
registration rights set forth in a Registration Rights Agreement
among the Company and some or all of the Strategic Partners dated
March 24, 1992, as amended (the "Original Agreement").
C. Carolco is engaged in a further restructuring pursuant to
a registration statement on Form S-1 filed with the Commission (as
defined below) on December 24, 1992, as amended (the "1993
Restructuring"), upon the completion of which Carolco will sell to
Pioneer 3,885,223 shares of Common Stock (the "Pioneer
Restructuring Shares"), Studio Canal 1,180,030 shares of Common
Stock (the "Studio Canal Restructuring Shares") and RCS 1,180,030
shares of Common Stock (the "RCS Restructuring Shares") of the
total 6,245,283 shares of Common Stock presently held by Carolco
(collectively, the "Restructuring Shares").
D. The Strategic Partners also hold 360,000 shares of Common
Stock which they purchased from Carolco in June 1992, of which
144,000 shares are held by Pioneer, 108,000 shares are held by
Studio Canal and 108,000 shares are held by RCS (collectively, the
"Purchased Shares").
E. The parties hereto, upon the closing (as defined in the
registration statement referred to in Recital C hereof) of the 1993
Restructuring (the "Carolco Closing"), wish to terminate their
prior agreements with respect to the registration of Registrable
Securities and to provide for registration of such Securities.
The parties hereby agree as follows:
1. Certain Definitions.
As used in this Agreement, the following terms shall have
the following respective meanings:
(a) "Affiliate" of a specified Person means any other
Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by or is under common
control with the Person specified, or who holds or beneficially
owns 50% or more of the equity interest in the Person specified or
50% or more of any class of voting securities of the Person
specified.
(b) "Commission" means the Securities and Exchange
Commission.
(c) "Common Stock" means the Company's common stock,
$.01 par value, as constituted on the date hereof, any stock into
which such common stock shall have been changed or any stock
resulting from any reclassification, stock split or stock dividend
of such common stock, and all other stock of any class or classes
(however designated) of the Company the holders of which have the
right, without limitation as to amount, either to all or to a share
of the balance of current dividends and liquidating dividends after
the payment of dividends and distributions on any shares entitled
to preference.
(d) "Exchange Act" means the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission
promulgated thereunder.
(e) "Holders" means the Strategic Partners and their
respective Affiliates holding Registrable Securities.
(f) "Majority Holders" means those Holders and
Transferees, if any, holding at least a majority of the shares of
each class of Registrable Securities held by Holders of such class
and Transferees, if any, at the time of determination.
(g) "Registrable Securities" means the Restructuring
Shares and the Purchased Shares as described in Recital C and
Recital D hereof, respectively. There shall be three classes of
Registrable Securities: the Registrable Securities held by Pioneer,
its Affiliates and its Transferees, if any, are known herein as the
"Pioneer Registrable Securities"; the Registrable Securities held
by Studio Canal, its Affiliates and its Transferees, if any, are
known herein as the "Studio Canal Registrable Securities"; and the
Registrable Securities held by RCS, its Affiliates and its
Transferees, if any, are known herein as the "RCS Registrable
Securities." As to any particular Registrable Securities, such
securities shall cease to be Registrable Securities for which no
demand registration under Section 2(a) or piggyback registration
rights under Section 2(b) may be requested when (x) such securities
shall have been disposed of pursuant to an effective registration
statement, (y) such securities shall have been transferred to any
person pursuant to Rule 144 (or any successor provision) under the
Securities Act, or (z) they shall have ceased to be held by the
Holders or Transferees. Furthermore, no shares of Common Stock of
a class of Registrable Securities shall be Registrable Securities
on or after the earlier of (i) a date which is three years after
the Carolco Closing (unless extended pursuant to Sections 2(a) and
4(c)) and (ii) a date on which any class of the Holders and their
Transferees collectively hold 25% or fewer of such class of
Registrable Securities which were outstanding on the date of the
Carolco Closing.
(h) "Registration Expenses" means all expenses incident
to the Company's performance of or compliance with the registration
rights granted herein, including, without limitation, all
registration, filing, listing and NASD fees, all fees and expenses
of complying with securities or blue sky laws, all word processing,
duplicating and printing expenses, messenger and delivery expenses,
the fees and expenses of Company counsel, the fees and expenses of
the Company's independent public accountants, including the
expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, and any fees and
disbursements of underwriters customarily paid by issuers and
sellers of securities; provided, however, that Registration
Expenses shall not include fees and expenses of the Holders's
counsel nor shall it include underwriting discounts, commissions
and transfer taxes, which shall not be the responsibility of the
Company.
(i) "Securities Act" means the Securities Act of 1933,
as amended, or any successor statute thereto, and the rules and
regulations of the Securities and Exchange Commission promulgated
thereunder, all as the same shall be in effect at the time.
(j) "Selling Holders" means those Holders and
Transferees, if any, who have requested registration pursuant to
Section 2(a) or 2(b) hereof.
(k) "Transferee" shall mean the first holder (other than
an Affiliate of the transferor Holder) of Registrable Securities by
a transfer from a Holder; provided, however, that a person
acquiring such Registrable Securities pursuant to a transfer under
an effective registration statement or pursuant to a sale under
Rule 144 shall not be a Transferee. Any Affiliate of a Transferee
shall also be deemed a Transferee for purposes of this Agreement.
If a Strategic Partner or any of its Affiliates acquires
Registrable Securities from an unaffiliated Holder, the Registrable
Securities so acquired shall remain Registrable Securities but
shall be part of the class of Registrable Securities associated
with the transferee Strategic Partner or Affiliate.
<PAGE>
2. Registration Rights.
(a) Requested Registration. Upon written request of the
Majority Holders of a class of Registrable Securities that the
Company effect the registration under the Securities Act of all or
part of their Registrable Securities and specifying the intended
method of disposition thereof (a "Requested Registration"), the
Company will use its best efforts to effect the registration under
the Securities Act of the then Registrable Securities requested to
be registered within 120 days of the request which the Company has
been so requested to register by such Holders (and any other
Holders of any class of Registrable Securities who within 10 days
of such request elect to join in the sale) for disposition in
accordance with the intended method of disposition stated in such
request; provided that the Company need not effect any Requested
Registration pursuant to this Section 2(a) unless the request
covers an aggregate number of shares of such class of Registrable
Securities at least equal to 50% of the class of Registrable
Securities then outstanding and not previously registered under any
prior registration statement of the Company; further provided, the
Company shall not be required to effect more than one Requested
Registration for each class of Registrable Securities pursuant to
this Section 2(a). Subject to Section 2(f), the Company may
include in such Requested Registration other securities of the
Company for sale, for the Company's account or for the account of
any other person. If the three year period referred to in
Section 1(g) would otherwise terminate during the 120 day period,
the expiration of such three year period shall toll during the 120
day period.
Notwithstanding anything in the foregoing paragraphs of
this Section 2(a), the Company shall have the right to delay any
registration of Registrable Securities requested pursuant to this
Section 2(a) for up to 90 days if such registration would, in the
sole reasonable judgment of the Company's Board of Directors or
Executive Committee of the Board of Directors, substantially
interfere with any material transaction being considered at the
time of receipt of the request. If the three year period of
Section 1(g) would otherwise terminate during such 90 day period,
the expiration of such three year period shall toll during the 90
day period.
(b) Company Registration. If (without any obligation to
do so) the Company proposes to register any of its Common Stock or
other securities under the Securities Act in connection with the
public offering of such securities solely for cash (other than a
registration on Forms S-4 or S-8 or equivalent successor forms),
then the Company shall, at such time, promptly give all Holders of
then Registrable Securities and Transferees written notice of such
registration. Any such registration effected by the Company other
than a Requested Registration is referred to herein as a "Company
Registration." Upon the written request of a Holder or Transferee
given within fifteen (15) days after the giving of such notice by
the Company, the Company shall, subject to the provisions of
Section 2(f) below, cause to be included (without priority over the
holders of similar registration rights) in such registration
statement and registered under the Securities Act all of the
Registrable Securities that each such Holder or Transferee has
requested to be registered. A registration under this Section 2(b)
shall not be deemed to be a Requested Registration.
(c) Registration Statement Form. The Company may, if
permitted by law, effect any registration requested under Section
2(a) by the filing of a registration statement on Form S-3 (or any
successor or similar short-form registration statement).
(d) Expenses. Carolco shall pay all Registration
Expenses incurred in connection with the registration of
Registrable Securities pursuant to Section 2(a) requested on or
after December 31, 1994. The Holders requesting registration shall
pay all Registration Expenses incurred in connection with the
registration of Registrable Securities pursuant to Section 2(a)
requested before such date. The Company need not comply with a
request for registration pursuant to Section 2(a) unless and until
it has received reasonable adequate assurance of payment of such
Registration Expenses. The Company, or such other person who is
responsible for such costs, shall pay the Registration Expenses of
any Company Registration pursuant to Section 2(b) hereof.
(e) Effective Registration Statement. The registration
requested pursuant to Section 2(a) shall not be deemed to have been
effected unless it has become effective with the Commission,
provided that a registration which does not become effective after
the Company has filed a registration statement with respect thereto
with the Commission solely by reason of the Selling Holders failing
to proceed with the registration shall be deemed to have been
effected by the Company in satisfaction of the Company's obligation
to register Registrable Securities pursuant to a Requested
Registration, unless the Holders reimburse the Company and Carolco
for all of their costs and expenses incurred in connection with
such registration statement. Notwithstanding the foregoing, a
registration statement will not be deemed to have been effected if
(i) after it has become effective with the Commission, such
registration is interfered with by any stop order, injunction or
other order or requirement of the Commission or other governmental
agency or any court proceeding for any reason other than a
misrepresentation or omission by a Holder or (ii) the conditions to
closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not
satisfied, other than by reason of some act or omission or failure
to agree to close by a Selling Holder.
(f) Priority in Registrations. If the registration
pursuant to Section 2(a) involves an underwritten offering, and the
managing underwriter shall advise the Company in writing (with a
copy to the Holders) that, in its opinion, the number of securities
requested to be included in such registration (including securities
of the Company which are not Registrable Securities) exceeds the
number which can be sold in such offering, the Company will include
in such registration to the extent of the number of securities
which the Company is so advised can be sold in such offering (i)
first, Registrable Securities of the class requested to be included
in such registration by the Holders making the request for
registration pro rata, and (ii) second, other Holders or
Transferees of the class desiring to participate in the
registration pro rata, and (iii) third, other securities of the
Company proposed to be included in such registration, in accordance
with the priorities, if any, then existing among the Company and
the holders of such other securities and if there are not
priorities, pro rata in accordance with the number of securities
they hold. In the event of a registration under Section 2(b), the
priority in registration shall be (i) first, other securities of
the Company proposed to be included in such registration, in
accordance with the priorities, if any, then existing among the
Company and the holders of such other securities and (ii) second,
Registrable Securities of any class requested to be included in
such registration by the Holders or Transferees making the request
for registration, pro rata in accordance with the number of shares
held.
(g) Conflicting Instructions from Holders. (i) The
Company shall not be bound in any way by any agreement or contract
among the Holders, Transferees, the Strategic Partners and Carolco,
or any Affiliates of any of them (whether or not the Company has
knowledge thereof) other than this Agreement, except as to those to
which the Company is a party. With respect to receipt of
instructions under this Section 2(g), the Company shall have no
liability with respect to any action taken by it except for its own
gross negligence or willful misconduct. The Company may rely and
shall be protected in relying upon any resolution, certificate,
opinion, request, communication, demand, receipt or other paper or
document in good faith believed by it to be genuine and to have
been signed or presented by the proper party or parties. The
Company may act in reliance upon the advice of its counsel in
reference to any matter in connection with this Agreement and shall
not incur any liability for any action taken in good faith in
accordance with such advice.
(ii) In the event the Company receives conflicting
instructions from the Holders regarding any action to be taken or
withheld hereunder, the Company will promptly notify all of the
Holders who have given instructions and, if taking action at that
time, may suspend further action relating to such instructions
until such time as the conflicting instructions are resolved by the
parties giving the same or until the Company is instructed to take
or withhold the requested action by a final order from which no
appeal may be taken issued by a court of competent jurisdiction.
(h) Effectiveness of the Agreement. This Agreement
shall become effective only upon the Carolco Closing (and only if
such closing shall have occurred on or before December 31, 1993).
Upon the effectiveness of this Agreement, the Original Agreement
shall no longer be effective for any purpose and all rights granted
thereunder shall cease.
<PAGE>
3. Registration Procedures.
(a) If and whenever the Company is required to use its
best efforts to effect the registration of any Registrable
Securities under the Securities Act as provided in Section 2, the
Company, as expeditiously as possible and subject to the terms and
conditions of Section 2, will:
(i) prepare and file with the Commission the
requisite registration statement to effect such registration and
use its best efforts to cause such registration to become effective
(the Company shall provide the Selling Holders and their counsel
with drafts of such registration statements);
(ii) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective and to comply with the
provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement until the
earlier of such time as all of such securities have been disposed
of in accordance with the intended methods of disposition by the
Selling Holders thereof set forth in such registration statement or
the expiration of 90 days after such registration statement becomes
effective;
(iii) furnish to the Selling Holders such number of
conformed copies of such registration statement and of each such
amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in
such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under
Rule 424 under the Securities Act, in conformity with the
requirements of the Securities Act, and such other documents, as
the Selling Holders may reasonably request;
(iv) use its best efforts to register or qualify
all Registrable Securities covered by such registration statement
under such other United States state securities or blue sky laws of
such jurisdictions as the Selling Holders shall reasonably request,
to keep such registration statement qualification in effect for so
long as such registration remains in effect, and take any other
action which may be reasonably necessary or advisable to enable the
Selling Holders to consummate the disposition in such jurisdictions
of the securities owned by the Selling Holders, except that the
Company shall not for any such purpose be required to (a) qualify
generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified, (b) subject
itself to taxation in any such jurisdiction or (c) consent to
general service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered
with or approved by such other United States state governmental
agencies or authorities as may be necessary to enable the Selling
Holders to consummate the disposition of such Registrable
Securities;
(vi) use its best efforts to furnish to the
Selling Holders a signed counterpart, addressed to the Selling
Holders or seller of Registrable Securities (and the underwriters,
if any), of
(x) an opinion of counsel for the
Company, dated the effective date of such registration
statement (and, if such registration includes an
underwritten public offering, dated the date of the
closing under the underwriting agreement), reasonably
satisfactory to the Selling Holders in their reasonable
judgment, and
(y) a "comfort" letter, reasonably
satisfactory to the Selling Holders dated the effective date
of such registration statement (and, if such registration
includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and,
in the case of the accountants' letter, with respect to events
subsequent to the date of such financial statements, as are
customarily covered in opinions of issuer's counsel and in
accountants' letters delivered to the underwriters in underwritten
public offerings of securities and, in the case of the accountants'
letter, such other financial matters as such seller or such Holders
(or the underwriters, if any) may reasonably request;
(vii) immediately notify the Selling Holders at any
time when a prospectus relating thereto is required to be delivered
under the Securities Act, of the happening of any event as a result
of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made, and at the
request of the Selling Holders promptly prepare and furnish to the
Selling Holders a reasonable number of copies of a supplement to or
an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact
or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made;
(viii) otherwise use its best efforts to comply with
all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably
practicable, an earnings statement covering the period of at least
twelve months, but not more than eighteen months, beginning with
the first full calendar month after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act, and not file any
amendment or supplement to such registration statement or
prospectus to which the Selling Holders shall have reasonably
objected in writing on the grounds that such amendment or
supplement does not comply in all material respects with the
requirements of the Securities Act or of the rules or regulations
thereunder, having been furnished with a copy thereof (other than
with respect to a 430A prospectus or pricing amendment) at least
two business days prior to the filing thereof;
(ix) provide a transfer agent and registrar for
all Registrable Securities covered by such registration statement
not later than the effective date of such registration statement;
and
(x) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities are then
listed.
(b) As a condition of these Registration Rights, the
Company may require the Selling Holders, at their own expense, to
furnish the Company with such information and undertakings as it
may reasonably request regarding the Selling Holders and the
distribution of such securities as the Company may from time to
time reasonably request in writing, and the Holders, by their
execution hereof, agree to provide such information and make such
undertakings as are requested.
(c) The Selling Holders shall agree as a condition to
receiving the benefits under this Agreement (A) that upon receipt
of any notice from the Company of the happening of any event of the
kind described in subdivision (vii) of Section 3(a), the Selling
Holders will forthwith discontinue their disposition of Registrable
Securities pursuant to the registration statement relating to such
Registrable Securities until the Selling Holders' receipt of the
copies of the supplemented or amended prospectus contemplated by
subdivision (vii) of Section 3(a) and, if so directed by the
Company, will deliver to the Company all copies, other than
permanent file copies, then in the Selling Holders' possession of
the prospectus relating to such Registrable Securities current at
the time of receipt of such notice and (B) that they will
immediately notify the Company, at any time when a prospectus
relating to the registration of such Registrable Securities is
required to be delivered under the Securities Act, of the happening
of any event as a result of which information previously furnished
by the Selling Holders to the Company for inclusion in such
prospectus contains an untrue statement of a material fact or omits
to state any material fact required to be stated therein or
necessary to make the statements therein not misleading in the
light of the circumstances under which they were made. In the
event the Company or the Selling Holders shall give any such
notice, the period referred to in subdivision (ii) of Section 3(a)
shall be extended by a number of days equal to the number of days
during the period from and including the giving of notice pursuant
to subdivision (vii) of this Section 3 to and including the date
when the Selling Holders shall have received the copies of the
supplemented or amended prospectus contemplated by subdivision
(vii) of Section 3(a).
(d) Notwithstanding anything in this agreement to the
contrary, the Company will not be required to file such a
registration statement if it receives an opinion of counsel in form
and substance reasonably satisfactory to the Majority Holders to
the effect that the sale of the Registrable Securities in the
manner contemplated by the Selling Holders may be effected without
registration regardless of the identity or status of the buyer(s)
of such Registrable Securities, and the Company shall reflect such
sale and effect such transfer on the books of the Company.
4. Underwritten Offerings.
(a) Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Selling Holders
pursuant to a registration requested under Section 2(a), the
Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to be in form and
substance reasonably satisfactory to the Company, the Selling
Holders and its underwriters in their reasonable judgment and to
contain such representations and warranties by the Company and such
other terms as are customarily contained in agreements of this
type, including, without limitation, indemnities to the effect and
to the extent provided in Section 6, which agreement (or a separate
agreement among the parties) shall also contain a provision
regarding the payment of Registration Expenses set forth in Section
2(d) hereof. The Selling Holders shall be a party to such
underwriting agreement and may, at their option, require that any
or all of the representations and warranties by, and the other
agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of the
Selling Holders and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting
agreement be conditions precedent to the obligations of the Selling
Holders.
(b) Selection of Underwriters. If a requested
registration pursuant to Section 2(a) involves an underwritten
offering, then the Majority Holders may select the underwriter from
underwriting firms of national reputation.
(c) Holdback Agreements. Each Holder agrees, if so
required in writing by the managing underwriter, not to effect any
public sale or distribution of Registrable Securities or sales of
such Registrable Securities pursuant to Rule 144 or Rule 144A under
the Securities Act, during the seven days prior to and the 90 days
after any firm commitment underwritten registration pursuant to
Section 2 has become effective (except as part of such
registration) or, if the managing underwriter advises the Company
in writing that, in its opinion, no such public sale or
distribution should be effected for a period of 120 days after such
underwritten registration in order to complete the sale and
distribution of securities included in such registration and the
Company gives notice to the Holders of such advice, each Holder
shall not effect any public sale or distribution of Registrable
Securities or sales of such Registrable Securities pursuant to Rule
144 or Rule 144A under the Securities Act during such 120-day
period after such underwritten registration, except as part of such
underwritten registration, whether or not the Holder participates
in such registration. If the three year period of Section 1(g)
would otherwise terminate during such 120 day period, the
expiration of such three year period shall toll during the 120 day
period. Regardless of whether the three year period of
Section 1(g) terminates during any such 120 day period, if a Holder
is prevented from effecting registration pursuant to this
Section 4(c), the expiration of the three year period of
Section 1(g) shall be extended by 120 days with respect to such
Holder.
5. Preparation, Reasonable Investigation.
In connection with the preparation and filing of each
registration statement under the Securities Act, the Company will
give the Selling Holders, the underwriters, if any, and their
respective counsel and accountants, the opportunity to participate
in the preparation of such registration statement, each prospectus
included therein or filed with the Commission and each amendment
thereof or supplement thereto, and will give each of them such
access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent
public accountants who have certified its financial statements as
shall be necessary, in the opinion of the Selling Holders' and such
underwriters' respective counsel, to conduct a reasonable
investigation within the meaning of the Securities Act.
6. Indemnification.
(a) Indemnification by the Company. In the event of any
registration under the Securities Act pursuant to Section 2 hereof
of any Registrable Securities covered by such registration, the
Company will, and hereby does, indemnify and hold harmless the
Selling Holders, their directors and officers, each other person
who participates as an underwriter in the offering or sale of such
securities (if so required by such underwriter as a condition to
including the Selling Holders' Registrable Securities in such
registration) and each other person, if any, who controls the
Selling Holders or any such underwriter within the meaning of the
Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which the Selling Holders or any such director
or officer or underwriter or controlling person may become subject
under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which
such securities were registered under the Securities Act, any
preliminary prospectus, final prospectus or summary prospectus
contained therein or any document incorporated therein by
reference, or any amendment or supplement thereto, or any omission
or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not
misleading, and the Company will reimburse the Selling Holders and
each such director, officer, underwriter and controlling person for
any legal or any other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
liability, action or proceeding; provided that the Company shall
not be liable in any such case to the extent that any such loss,
claim, damage, liability (or action or proceeding in respect
thereof) or expense arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with information
furnished to the Company by any Holder; provided further that the
Company shall not be liable to any person who participates as an
underwriter in the offering or sale of Registrable Securities or
any other person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that
any such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such person's failure to
send or give a copy of the final prospectus to the person claiming
an untrue statement or alleged untrue statement or omission or
alleged omission at or prior to the written confirmation of the
sale of Registrable Securities to such person if such statement or
omission was corrected in such final prospectus.
(b) Indemnification by the Selling Holders. The Company
may require, as a condition to including any Registrable Securities
of the Selling Holders in any registration statement filed pursuant
to Section 2, that the Company shall have received an undertaking
satisfactory to it from the Selling Holders to indemnify and hold
harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 6) the Company, each director of
the Company, each officer of the Company and each other person, if
any, who controls the Company within the meaning of the Securities
Act, with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any
preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such
statement or alleged statement or omission or alleged omission was
made in reliance upon and in conformity with written information
furnished to the Company by the Selling Holders either specifically
for inclusion therein or which the Company has informed the Selling
Holders will be used for such purposes.
(c) Notices of Claims, etc. Promptly after receipt by
an indemnified party of notice of the commencement of any action or
proceeding involving a claim referred to in the preceding
subdivisions of this Section 6, such indemnified party will, if a
claim in respect thereof is to be made against an indemnifying
party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying
party of its obligations under the preceding subdivisions of this
Section 6, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any
such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in
respect of such claim, the indemnifying party shall be entitled to
participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified to the extent that it
may wish, with counsel reasonably satisfactory to such indemnified
party, and after notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof,
the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof other than reasonable
costs of investigation. No indemnifying party shall consent to
entry of any judgment or enter into any settlement without the
consent of the indemnified party which does not include as an
unconditional term thereof the giving by the claimant or plaintiff
to such indemnified party of a release from all liability in
respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to
that specified in the preceding subdivisions of this Section 6
(with appropriate modifications) shall be given by the Company and
the Selling Holders with respect to any required registration or
other qualification of securities under any Federal or state law or
regulation of any governmental authority, other than the Securities
Act.
(e) Indemnification Payments. The indemnification
required by this Section 6 shall be made by periodic payments of
the amount thereof during the course of the investigation or
defense, as and when bills are received or expense, loss, damage or
liability is incurred.
(f) Contribution. If the indemnification provided for
in this Section 6 from the indemnifying party is unavailable to an
indemnified party hereunder in respect of any losses, claims,
damages, liabilities or expenses referred to herein, then the
indemnifying party, to the extent such indemnification is
unavailable, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or
expenses in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and indemnified parties in
connection with the actions that resulted in such losses, claims,
damages, liabilities or expenses. The relative fault of such
indemnifying party and indemnified parties shall be determined by
reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact, has been
made by, or relates to information supplied by, such indemnifying
party or indemnified parties, and the parties' relative intent,
knowledge, access to information and opportunity to correct or
prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses
referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection
with any investigation or proceeding.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 6(f) were
determined by pro rata allocation or by any other method of
allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 10(f) of the Securities Act) shall be entitled
to contribution from any person.
If indemnification is available under this Section 6, the
indemnifying parties shall indemnify each indemnified party to the
full extent provided in Sections 6(a) and 6(b) without regard to
the relative fault of said indemnifying parties or indemnified
party or any other equitable consideration provided for in this
Section 6(f).
7. Miscellaneous.
(a) Specific Performance. The parties hereto
acknowledge that there may be no adequate remedy at law if any
party fails to perform any of its obligations hereunder and that
each party may be irreparably harmed by any such failure, and
accordingly agree that each party, in addition to any other remedy
to which it may be entitled at law or in equity, shall be entitled
to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and
conditions of this Agreement.
(b) Notices. All notices, requests, claims, demands,
waivers and other communications required or permitted hereunder
shall be in writing and shall be deemed to have been duly given
when delivered by hand, if delivered personally by courier, or
three days after being deposited in the mail (registered or
certified mail, postage prepaid, return receipt requested) as
follows:
(i) Carolco:
8800 Sunset Boulevard
Los Angeles, California 90069
Attention: General Counsel
Telecopy No. 310/652-1343
(ii) Company:
15400 Sherman Way, Suite 500
Van Nuys, California 91405
Attention: General Counsel
Telecopy No. 818/908-9539
All notices to or from any Strategic Partner shall be copied to the
other Strategic Partners at the following addresses:
(iii) Pioneer:
Arco Tower, 8-1
Shimomeguro 1-chome
Meguro-ku
Tokyo 153, Japan
Attention: Mr. Ryuichi Noda, President
Telecopy No. 011-81-33-493-7861
with a copy to:
Mr. Kudo
Pioneer LDCA, Inc.
2265 East 220th Street
Long Beach, California 90801
Telecopy No. 310/816-0420
(iv) RCS:
Museumplein 11
1071 DJ Amsterdam
Netherlands
Attention: Mr. Koopsman or Mr. Peters
Telecopy No. 011-59-99-611-061
with a copy to:
Avv. Enzo Pulitano
Affari Legali e Societari
RCS Editori SPA
Corso Garibaldi 86
20121 Milan Italy
Telecopier No. 011-39-2-653-330
and
Paul D. Downs, Esq.
Werbel McMillin & Carnelutti
711 Fifth Avenue
New York, New York 10022
Telecopier No. 212/832-3353
(v) Studio Canal:
17 rue Dumont d'Urville
75116 Paris
France
Attention: Direction Financier
Telecopy No. 011-331-4720-1358
with a copy to:
<PAGE>
Coudert Freres
52, Avenue des Champs-Elysee
7508 Paris
France
Attention: Jonathan M. Wohl, Esq.
or to such other address as any person may have furnished to the
others in writing in accordance herewith, except that notices of
change of address shall be effective only upon receipt.
(c) Law Governing. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York.
(d) Headings. The descriptive headings of the several
Sections and paragraphs of this Agreement are inserted for
convenience only, and do not constitute a part of this Agreement
and shall not affect in any way the meaning or interpretation of
this Agreement.
(e) Entire Agreement; Amendments. This Agreement and
the other writings referred to herein or delivered pursuant hereto
which form a part hereof contain the entire understanding of the
parties with respect to its subject matter. This Agreement
supersedes all prior agreements and understandings between the
parties with respect to its subject matter. This Agreement may be
amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either
retroactively or prospectively) only by a written instrument duly
executed by the Company and the Majority Holders of a class of
Registrable Securities with respect to the rights of the Holders of
such class. Each Holder or Transferee of any class of Registrable
Securities at the time or thereafter outstanding shall be bound by
an amendment or waiver authorized by this Section 7(e), whether or
not any such Registrable Securities shall have been marked to
indicate such consent.
(f) Assignability. This Agreement shall be binding upon
and inure to the benefit of the respective successors and assigns
of the parties hereto provided, however, that the Registration
Rights hereunder shall only be available to the Holders or
Transferees as provided herein.
(g) Counterparts. This Agreement may be executed in two
or more counterparts, each of which shall be deemed an original,
but all of which together shall constitute one and the same
instrument.
By its execution hereof, the Company represents and warrants
that it has the corporate power to execute, deliver and perform the
terms and provisions of this Agreement and that it has taken all
appropriate and necessary corporate action to authorize the
transactions contemplated hereby and the execution, delivery and
performance of this Agreement. The Company further represents that
this Agreement will be, upon its execution and delivery, the legal,
valid and binding obligation of the Company enforceable in
accordance with its terms, except as such enforceability may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws related to or limiting creditors rights
generally.
LIVE ENTERTAINMENT INC.
By:____________________________________
Name:
Title:
Accepted and agreed as of the
date first written above
CAROLCO PICTURES INC.
By: ________________________________
Name:
Title:
STRATEGIC PARTNERS:
PIONEER LDCA, INC.
By: ________________________________
Name:
Title:
RCS VIDEO SERVICES INTERNATIONAL B.V.
By: ________________________________
Name:
Title:
LE STUDIO CANAL+ S.A.
By: ________________________________
Name:
Title:
In consideration of the Company's execution of this Agreement, RCS
Video Services Antilles N.V. hereby waives and releases all rights
it may have had under the Original Agreement.
RCS VIDEO SERVICES ANTILLES N.V.
By: ________________________________
Name:
Title:
RECONCILIATION AND OFFSET AGREEMENT
THIS RECONCILIATION AND OFFSET AGREEMENT is made as of this
31st day of December, 1992, among CAROLCO PICTURES INC., a Delaware
corporation ("CPI"), CAROLCO INTERNATIONAL N.V., a Netherlands
Antilles corporation ("CINV"), LIVE ENTERTAINMENT INC., a Delaware
corporation ("LEI"), LIVE HOME VIDEO INC., a Delaware corporation
("LHV") and LEI-IVE ENTERTAINMENT N.V., a Netherlands Antilles
corporation ("LIVE NV").
WHEREAS, CPI, CINV and their affiliates, on the one hand
(collectively, the "Carolco Group") and LEI, LHV, LIVE NV and their
affiliates, on the other hand (collectively, the "LIVE Group") are
parties to various transactions requiring the payment of sums from
members of one Group to members of the other; and
WHEREAS, the parties desire to reconcile the open account
relationship between them, confirm the various amounts owing by
members of each Group to members of the other, permit the offset of
the various accounts and memorialize the terms of payment of
amounts remaining owing from members of one Group to members of the
other.
NOW, THEREFORE, for and in consideration of TEN DOLLARS
($10.00) and other good and valuable consideration by each of the
parties hereto in hand paid to the others, the receipt and adequacy
of which are hereby acknowledged, CPI and CINV, on behalf of the
Carolco Group, and LEI, LHV and LIVE NV, on behalf of the LIVE
Group, hereby agree as follows:
1. As of the date hereof, the following amounts, totalling
$23,218,508, are due from members of the Carolco Group to members
of the LIVE Group for the reasons set forth on Exhibit 1 attached
hereto.
2. As of the date hereof, the following amounts, totalling
$14,209,502, are due from members of the LIVE Group to members of
the Carolco Group for the reasons set forth on Exhibit 2 attached
hereto.
3. CPI and CINV, on behalf of the Carolco Group, hereby
confirm that the LIVE Group may offset the amounts owing by members
of the LIVE Group to members of the Carolco Group under paragraph
2 against the amounts owed to members of the LIVE Group under
paragraph 1, and hereby agree that the remainder of $9,009,006
shall be paid as follows:
a. $3,644,567 of such amount shall be paid by CPI
assigning and delivering to LHV that certain Non-Negotiable
Promissory Note dated September 24, 1990, in the original principal
amount of Three Million Dollars ($3,000,000), together with accrued
interest through the date hereof of $644,567, issued by
Strawberries Inc. to the order of CPI; and
b. The remaining $5,364,439, plus interest thereon from
the date hereof until the date paid or satisfied at the rate set
forth in that certain Third Amended and Restated Loan and Security
Agreement dated as of July 26, 1990, as amended, between certain
members of the LIVE Group as borrowers and Chemical Bank and others
as lenders, shall be reduced by way of offset by the following:
i. All proceeds under the "Light Sleeper"
existing and future distribution and/or
sublicense agreements between CPI and/or
CINV and any sublicensor shall be
assigned to LHV (for domestic and
Canadian proceeds) or LIVE NV (for
international proceeds);
ii. All proceeds under the "Reservoir Dogs"
existing and future distribution and/or
sublicense agreements between LHV and
LIVE NV, on the one hand, and CPI and
CINV, on the other, shall be assigned to
LHV (for domestic and Canadian proceeds)
or LIVE NV (for international proceeds);
and
iii. All payments to be received by Orbis (now
Carolco Television Inc.) on sublicense, sale
or other transactions related to LIVE product;
and
iv. Payments currently due to, or to become
due to, CINV for German language home
video rights in Europe for the following
completed films, for which delivery has
not been made as of the date hereof:
1. "Career Opportunities";
2. "Opportunity Knocks"; and
3. "The Wizard."
Furthermore, the parties agree that if in the future amounts
are owing by any member of the LIVE Group to any member of the
Carolco Group, while at the same time other amounts are owing by
any member of the Carolco Group to any member of the LIVE Group,
such amounts may be offset against each other, with such offset to
be effected by the appropriate member of the offsetting Group
sending a notice thereof to the other Group identifying the amounts
being offset. In the case of notice to the Carolco Group, such
notice shall be sent in care of the Chief Financial Officer of CPI;
in the case of notice to any member of the LIVE Group, such notice
shall be sent in care of the Chief Financial Officer of LHV.
Notwithstanding the provisions of the immediately preceding
paragraph, the parties hereto agree that unless the written consent
of the appropriate member of the Carolco Group is first obtained,
members of the LIVE Group may not offset against any amounts
otherwise owing to any member of the Carolco Group any amounts
claimed owing to LHV by reason of profit shortfalls in Packages #1,
#2 or #3 above and beyond the amounts set forth in Exhibit 1
hereto, provided however, that, in accordance with the agreements
governing such Packages, LHV may offset such shortfalls against
amounts owing for advances for films to be provided by CPI to LHV
in the future.
4. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original and all of
which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this
Reconciliation and Offset Agreement as of the day and year first
above written.
CAROLCO PICTURES INC. CAROLCO INTERNATIONAL N.V.
By: By:
Title: Title:
LIVE HOME VIDEO INC. LEI-IVE ENTERTAINMENT N.V.
By: By:
Title: Title:
LIVE ENTERTAINMENT INC.
By:
Title:
AMENDMENT NUMBER THREE TO
GENERAL LOAN AND SECURITY AGREEMENT
STRAWBERRIES INC.
This AMENDMENT NUMBER THREE TO GENERAL LOAN AND SECURITY
AGREEMENT (this "Amendment") is entered into as of May 5, 1993 by
and between FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), with an office located at 11111 Santa Monica
Boulevard, Suite 1500, Los Angeles, California 90025-3333, on the
one hand, and STRAWBERRIES INC., a Delaware corporation, and WAXIE
MAXIE QUALITY MUSIC CO., a Delaware corporation (collectively
hereafter referred to as "Borrowers"), whose chief executive office
is located at 205 Fortune Boulevard, Milford, Massachusetts 01757,
on the other hand, in light of the following facts:
FACTS
FACT ONE: Foothill and Borrowers have previously entered into
that certain General Loan and Security Agreement dated June 11,
1992, as amended (the "Agreement").
FACT TWO: Foothill and Borrowers have agreed to amend the
Agreement as provided herein.
NOW, THEREFORE, Foothill and Borrowers hereby amend and
supplement the Agreement as follows:
1. All initially capitalized terms used in this Amendment
shall have the meanings ascribed thereto in the Agreement unless
specifically defined herein.
2. This Amendment may be executed in any number of
counterparts, each of which shall be deemed to be an original, and
all of which, when taken together, shall constitute one agreement.
3. The last sentence of the definition of "Eligible
Inventory" in Section 1.1. of the Agreement under Definitions and
Constructions is hereby deleted therefrom and a new sentence shall
be substituted therefor which shall read as follows: "Foothill
acknowledges that the 2.5% shrinkage reserve set by Borrower for
fiscal 1993 is satisfactory as of February 1, 1993."
4. Section 7.8 of the Agreement is hereby amended in its
entirety to read as follows: "Capital Expenditures. Make any
capital expenditure, or any commitment therefor, or lease any
property, which lease would constitute a capital lease in
accordance with GAAP, in excess of One Million Dollars ($1,000,000)
for any individual transaction or where the aggregate amount of
such transactions in any fiscal year is in excess of Five Million
Dollars ($5,000,000) in the aggregate for all Borrowers. In
addition to the foregoing, Borrowers shall be permitted to make a
capital expenditure of up to $2,500,000 in connection with the
acquisition and installation of a "point of sale" hardware and
software system."
5. Section 7.12 of the Agreement is hereby amended in its
entirety to read as follows: "Investments. Other than Permitted
Investments in an aggregate amount not to exceed Ten Million
Dollars ($10,000,000) at any one time, directly or indirectly make
or own any beneficial interest in (including stock, partnership
interest, or other securities of), or make any loan, advance, or
capital contribution to, any corporation, association, person, or
entity other than any other Borrower."
6. Borrower shall pay to Foothill as documentation fee in
the amount of $500.00 which shall be payable upon execution hereof.
Said fee shall be fully earned at the time of payment and shall be
non-refundable.
7. This Amendment Number Three to the General Loan And
Security Agreement amends, supercedes and replaces in its entirety
that certain Amendment Number Three to the General Loan And
Security Agreement dated April 22, 1993.
IN WITNESS WHEREOF, Foothill and Borrowers have executed this
Amendment as of the date first written above.
FOOTHILL CAPITAL CORPORATION STRAWBERRIES INC.
By: By:
Its: Its:
WAXIE MAXIE QUALITY
MUSIC CO.
By:
Its:
AMENDMENT NUMBER FOUR TO
GENERAL LOAN AND SECURITY AGREEMENT
STRAWBERRIES, INC.
This Amendment Number Four To General Loan And Security Agreement
(this "Amendment") is entered into as of July 29, 1993, by and between
FOOTHILL CAPITAL CORPORATION, a California corporation ("Foothill"),
with an office located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333 on the one hand, and STRAWBERRIES INC.,
a Delaware corporation, and WAXIE MAXIE QUALITY MUSIC CO., a Delaware
corporation (collectively hereinafter referred to as "Borrowers"), whose
chief executive office is located at 205 Fortune Boulevard, Milford,
Massachusetts 01757, in light of the following facts:
FACTS
FACT ONE: Foothill and Borrowers have previously entered into that
certain General Loan And Security Agreement dated June 11, 1992, (as
amended and supplemented, the "Agreement");
FACT TWO: Foothill and Borrowers have agreed to further amend and
supplement the Agreement as follows:
1. All initially capitalized terms used in this Amendment shall
have the same meanings ascribed thereto in the Agreement unless
specifically defined herein.
2. This Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all of which, when
taken together, shall constitute one agreement.
3. Section 1.1 of the Agreement is hereby amended to add a new
definition called "L/Cs" to read as follows: "L/Cs" has the meaning set
forth in Section 2.2(a)."
4. Section 1.1 of the Agreement is hereby amended to add a new
definition called "L/C Guarantees" to read as follows: "L/C Guarantees"
has the meaning set forth in Section 2.2(a).
5. The definition regarding the term "Obligations" under Section
1.1 of the Agreement, is hereby amended in its entirety to read as
follows: "Obligations" means all loans, advances, debts, principal,
interest (including any interest which, but for the provisions of the
United States Bankruptcy Code, would have accrued), contingent
reimbursement obligations owing to Foothill under any outstanding L/Cs
or L/C Guarantees, premiums, liabilities (including all amounts charged
to Borrowers' loan account pursuant to any provision of any Loan
Document authorizing Foothill to charge Borrowers' loan account),
obligations, fees (including the Early Termination Fee), guaranties,
covenants, and duties owing by any Borrower to Foothill of any kind and
description, pursuant to or evidenced by the Loan Documents, whether or
not for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and
further including all interest not paid when due and all Foothill
Expenses which Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise."
6. Section 2.2 of the Agreement shall hereafter become Section
2.10.
7. A new Section 2.2 is hereby added to the Agreement which shall
read as follows: "2.2 Letters of Credit and Letter of Credit
Guarantees. (a) Subject to the terms and conditions of this
Agreement, Foothill agrees to issue commercial or standby letters of
credit for the account of Borrower (each, an "L/C") or to issue
guarantees of payment with respect to L/Cs (each, an "L/C Guaranty") in
an aggregate face amount not to exceed the lesser of: (i) the Borrowing
Base less the amount of outstanding revolving advances pursuant to
Section 2.1, and (ii) Two Hundred Fifty Thousand Dollars ($250,000).
Borrower expressly understands and agrees that Foothill shall have no
obligation to arrange for the issuance by other financial institutions
of L/Cs that are to be the subject of L/C Guarantees and that certain of
such L/Cs may be outstanding on the date hereof. Each such L/C
(including those that are the subject of L/C Guarantees) shall have an
expiry date no later than sixty (60) days prior to the date on which
this Agreement is scheduled to terminate under Section 3.2 hereof and
all such L/Cs and L/C Guarantees shall be in form and substance
acceptable to Foothill in its sole discretion. Foothill shall not have
any obligation to issue L/Cs or L/C Guarantees to the extent that the
face amount of all outstanding L/Cs and L/C Guarantees, plus the amount
of revolving advances outstanding pursuant to Section 2.1, would exceed
the Maximum Amount. The L/Cs and the L/C Guarantees issued under this
Section 2.2 shall be used by Borrower, consistent with this Agreement,
for its general working capital purposes. If Foothill is obligated to
advance funds under an L/C or L/C Guaranty, the amount so advanced shall
be deemed to be an advance made by Foothill to Borrower pursuant to
Section 2.1 and, thereafter, shall bear interest on the terms and
conditions provided in Section 2.3.
(b) Borrower hereby agrees to indemnify, save, and hold
Foothill harmless from any loss, cost, expense, or liability, including
payments made by Foothill, expenses, and reasonable attorneys' fees
incurred by Foothill arising out of or in connection with any L/Cs or
L/C Guarantees. Borrower agrees to be bound by the issuing bank's
regulations and interpretations of any L/Cs guaranteed by Foothill and
opened to or for Borrower's account or by Foothill's reasonable
interpretations of any L/C issued by Foothill to or for Borrower's
account, even though this interpretation may be different from
Borrower's own, and Borrower understands and agrees that Foothill shall
not be liable for any error, negligence, or mistakes, whether of
omission or commission, in following Borrower's instructions or those
contained in the L/Cs or any modifications, amendments, or supplements
thereto, except as maybe caused by the gross negligence or willful
misconduct of Foothill. Borrower understands that the L/C Guarantees
may require Foothill to indemnify the issuing bank for certain costs or
liabilities arising out of claims by Borrower against such issuing bank.
Borrower hereby agrees to indemnify and hold Foothill harmless with
respect to any loss, cost, expense, or liability incurred by Foothill
under any L/C Guaranty as a result of Foothill's indemnification of any
such issuing bank.
(c) Borrower hereby authorizes and directs any bank that
issues an L/C guaranteed by Foothill to deliver to Foothill all
instruments, documents, and other writings and property received by the
issuing bank pursuant to the L/C, and to accept and rely upon Foothill's
instructions and agreements with respect to all matters arising in
connection with the L/C and the related application. Borrower may or
may not be the "account party" on such L/Cs.
(d) Any and all service charges, commissions, fees and costs
incurred by Foothill relating to the L/Cs guaranteed by Foothill shall
be considered Foothill Expenses for purposes of this Agreement and shall
be immediately reimbursable by Borrower to Foothill. On the first
Business Day of each month, Borrower will pay Foothill a fee equal to
three percent (3%) per annum times the average Daily Balance of the
undrawn L/Cs and L/C Guarantees that were outstanding during the
immediately preceding calendar month. Service charges, commissions,
fees and costs may be charged to Borrower's loan account at the time the
service is rendered or the cost is incurred.
(e) Immediately upon the termination of this Agreement,
Borrower agrees to either: (i) provide cash collateral to Foothill in
an amount equal to the maximum amount of Foothill's obligations under
L/Cs plus the maximum amount of Foothill's obligations to any issuing
bank under outstanding L/C Guarantees, or (ii) cause to be delivered to
Foothill releases of all of Foothill's obligations under its outstanding
L/Cs and L/C Guarantees. At Foothill's discretion, any proceeds of
Collateral received by Foothill may be held as the cash collateral
required by this Section 2.2(e). Upon the cancellation or other
termination of any L/C or L/C Guarantees, Foothill shall release such
cash collateral to Borrowers at such time when Borrower's other
Obligations have been paid in full to Foothill."
8. Section 2.3(a) of the Agreement is hereby amended in its
entirety to read as follows: "(a) Interest Rate. The Obligations,
except for undrawn L/Cs and L/C Guarantees, shall bear interest, on the
average Daily Balance, at a per annum rate of three and one half (3-1/2)
percentage points above the Reference Rate.
9. Section 2.3(b) of the Agreement is hereby amended in its
entirety to read as follows: "(b) Default Rate. All Obligations, except
for undrawn L/Cs and L/C Guarantees, shall bear interest, from and after
the occurrence of an Event of Default, at a rate of six and one half (6-
1/2) percentage points above the Reference Rate. From and after the
occurrence and during the continuance of an Event of Default, the fee
provided in Section 2.2 (d) shall be increased to a fee equal to six
percent (6%) per annum times the average Daily Balance of the undrawn
L/Cs and L/C Guarantees that were outstanding during the immediately
preceding calendar month."
10. The following shall be inserted after the word "Obligations"
and before the word "together" in the first sentence of Section 3.2 of
the Agreement to read as follows: "and providing the cash collateral or
releases as described in Section 2.2(e), . . ."
11. The first sentence under Section 3.2(b) of the Agreement shall
be amended in its entirety to read as follows: "(b) if such prepayment
is made after the first anniversary of the Closing Date, then an amount
equal to (i) fifty percent (50%) of the average monthly interest charges
plus fifty percent (50%) of the average monthly L/C and L/C Guarantee
fees for the immediately preceding six (6) months, times (ii) the number
of months remaining in the term of this Agreement."
12. The first sentence in Section 3.4 of the Agreement is hereby
amended in its entirety to read as follows: "Effect of Termination. On
the date of termination, all Obligations shall become immediately due
and payable without notice or demand and the Borrowers shall provide
Foothill with the cash collateral and/or releases described in Section
2.2(e)."
13. The first sentence in Section 5.13 of the Agreement shall be
amended in its entirety to read as follows: "Each warranty,
representation, and agreement contained in this Agreement shall be
automatically deemed repeated with each advance or issuance of an L/C or
L/C Guaranty and shall be conclusively presumed to have been relied on
by Foothill regardless of any investigation made or information
possessed by Foothill."
14. Section 9.1(a) of the Agreement is hereby amended in its
entirety to read as follows: "(a) Declare all Obligations, whether
evidenced by this Agreement, by any of the other Loan Documents, or
otherwise, immediately due and payable, and require that the Borrowers,
in addition, provide Foothill with the cash collateral and/or releases
described in Section 2.2(e);"
15. In the event of conflict between the terms and provisions of
this Amendment and the terms and provisions of the Agreement, the terms
of this Amendment shall govern. In all other respects, the Agreement,
as amended and supplemented hereby, shall remain in full force and
effect.
IN WITNESS WHEREOF, Foothill and Borrowers have executed this
Amendment as of the date first written above.
FOOTHILL CAPITAL CORPORATION STRAWBERRIES, INC.
By______________________________ By__________________________
Its_____________________________ Its_________________________
WAXIE MAXIE QUALITY MUSIC CO.
By__________________________
Its_________________________
LIVE ENTERTAINMENT INC.
FISCAL 1993
INCENTIVE CASH COMPENSATION PROGRAM
JULY, 1993
<PAGE>
I. Background
In 1992 LIVE Entertainment Inc. ("LIVE") and each of its domestic
operating subsidiaries - LIVE Home Video Inc. ("LHV") and the Specialty
Retail Group ("SRG") - adopted the Fiscal 1992 Incentive Cash
Compensation Program (the "1992 Program") that rewarded key managers of
LIVE, LHV and SRG with year end cash payments based upon a combination
of individual performance and company profitability. We believe that
the 1992 Program accomplished its goals and recommend that a similar
program be adopted for 1993, with the modifications suggested in this
Report. This Report is organized in the following manner:
1. Goals of Fiscal 1993 LIVE Incentive Cash Compensation Program
(the "1993 Program").
2. Identification of Who Should Participate in the 1993 Program.
3. Determination of Appropriate Bonus Parameters.
4. Suggested 1993 Program.
5. Expected Costs of the 1993 Program.
6. Miscellaneous Provisions of the 1993 Program.
A discussion of the various elements of the follows.
II. Goals of 1993 Program
We believe that the goals of the 1993 Program should be the same as they
were in the 1992 Program, namely:
1. To focus key manager attention and energy on achieving
targeted profitability.
2. To provide direct linkage between results and rewards and
thereby incent managers to improve performance.
3. To cover as many managers as possible within reasonable cost
constraints.
4. To be able to budget for bonuses at the beginning of the
fiscal year, rather than the end.
5. To create a stronger sense of the "team" by making profit
performance of the individual unit a part of everyone's bonus.
6. To place "at risk" (i.e., make subject to a bonus program) a
larger percentage of the base salaries of managers who have a
direct impact on profitability, as opposed to "support"
managers whose impact on profitability generally is indirect;
support managers should have a smaller percentage of their
total salaries subject to bonus awards.
7. To provide consistency among the bonus programs of LIVE and
its subsidiaries in order to foster internal equity.
We believe that the 1993 Program supports the above-stated goals.
<PAGE>
III. Who Should Participate in the 1993 Program
The Chief Executive Officers of each of LIVE, LHV and SRG have provided
lists of their key managers who have the greatest ability to impact
profitability. We have taken those lists and segregated them as
follows:
1. Type of Position
a. "Executive" - includes only senior managers who are in a
position to control the management policies of the entire
subsidiary; generally includes only "executive officers".
b. "Sales and Merchandising" - the position has direct
involvement in sales and margin, and with virtually every
decision the manager's performance has a direct impact on
the profitability of the unit.
c. "Support" - the position supports the activities of the
Sales and Merchandising group and therefore most of the
decisions made by managers in the position have an
indirect impact on the profitability of the unit.
2. Level of Authority within the Organization ("Management
Levels")
a. People occupying the same "type" of position who have a
similar ability to impact a unit's profits have been
grouped together.
b. Because of their positions within a unit, some groups are
ranked higher than others.
IV. Determination of Appropriate Bonus Parameters
There are as many ways to determine bonus amounts as there are managers
to design bonus programs. Nevertheless, there are basic elements in the
determination of bonus amounts that exist in most bonus programs, and
those elements are as follows:
1. Arbitrary
2. As a percentage of an individual's salary
3. As a percentage of the average salary for a group
4. Different potential bonus awards for different Management
Levels
5. Some combination of 1, 2, 3 and/or 4
Once those basic elements are determined, the "slope" of the bonus curve
for a particular target then needs to be determined, i.e.:
A. At what point does any bonus become payable for that target
(e.g., once the company reaches 80% of its profit goal).
B. What bonus is payable once a target is reached.
C. What is the maximum bonus achievable, and at what point is the
maximum reached.
Examples of "slopes" of various bonus curves are as follows:
i. Straight Line - e.g., a fixed amount if the "at Plan" target
is met, with 50% of that amount if the minimum threshold is
met (e.g., 85% of "at Plan") and 150% of that amount if the
maximum target is reached (e.g., 115% of "at Plan"). An
example of this type of bonus calculation, using an "at Plan"
bonus amount of $3,000, is attached as Figure 1.
ii. Stair Step - e.g., a fixed amount if a certain range around
the "at Plan" target is met (such as 95% to 105% of "at
Plan"), with 50% of that amount if the minimum threshold is
met (e.g., 85% of "at Plan") and 150% of that amount if the
maximum target is reached (e.g., 115% of "at Plan"). An
example of this type of bonus calculation, using an "at Plan"
bonus amount of $3,000, is attached as Figure 2.
iii. Varying Slopes - Adjust either the minimum threshold or the
maximum target, either up or down. In the example used in
paragraph (i) above, the 85% minimum threshold could be
changed to 70% or to 90%; similarly, the 115% maximum target
could be changed to 110% or 130%. An example of this type of
bonus calculation, using an "at Plan" bonus amount of $3,000,
is attached as Figure 3. The same variable slope result could
be achieved by changing the bonus awards at either the minimum
or maximum levels. For example, instead of awarding 50% of
the "at Plan" amount upon achievement of the minimum
threshold, the award could be 33% or 75% of that amount;
likewise, instead of awarding 150% of the "at Plan" amount
upon achievement of the maximum target, the award could be
125% or 175% of that amount. An example of this type of bonus
calculation, using an "at Plan" bonus amount of $3,000, is
attached as Figure 4.
iv. Some combination of (i), (ii) and/or (iii).
The 1993 Program described in this Report uses the basic parameters set
forth in this Section IV.
V. Suggested 1993 Program
A. Basis for Bonus Grants
As with the 1992 Program, we suggest that bonus awards be made based on
a percentage of the actual base salary of the particular individual at
the end of fiscal 1993 (as opposed to base salary at the beginning of
the year or actual salary paid over the course of the year). We
recommend that, over time, a greater percentage of the base salaries of
Sales and Merchandising managers be allocated to bonuses than their
Support counterparts. However, we believe that in order to avoid paying
a windfall to Sales and Merchandising managers such a process should
occur gradually, with base salary increases of Sales and Merchandising
managers being constrained while at the same time increasing bonus
potential as a percentage of base salary. Thus, as with the 1992
Program, for the 1993 Program we again recommend that the "at Plan"
bonus percentages be identical for Sales and Merchandising and Support
managers in equivalent Management Levels.
<PAGE>
We suggest that the bonus amounts be broken down as a percentage of
salary as follows:
1. Executive
Management
Level "At Plan" Bonus Percentage
CEO 33%
E1 25%
E2 22%
2. Sales and Merchandising and Support
Management
Level "At Plan" Bonus Percentage
SAM1/SUP1 20%
SAM2/SUP2 15%
SAM3/SUP3 10%
These percentages are the same as they were for the 1992 Program.
B. Allocation of Bonuses
i. Matrix Factors
We suggest that a matrix be established for each Management Level, and
that the elements of the matrix be allocated as follows as a percentage
of the total bonus award of an individual (the percentages for the 1992
Program are shown in italics):
1. CEO and Executive
a. Unit Profit - 100% (1992 Program - 100%)
2. Sales and Merchandising
a. Individuals with major corporate responsibility who are
not Executive Officers (generally Vice Presidents and
Directors)
i. Unit Profit - 50% (1992 Program - 80%)
ii. Individual Performance (based on formal
performance evaluation) - 10% (1992 Program - 20%)
iii. Quantifiable targets (such as sales, gross margin,
sub-unit profit, inventory turnover, expense
control (either two or three goals for each
manager)) - 40% total (1992 Program - 0%)
b. All other bonus-eligible managers
i. Unit Profit - 20% (1992 Program - 50%)
ii. Individual Performance (based on formal
performance evaluation) - 10% (1992 Program - 50%)
iii. Quantifiable targets (such as sales, gross margin,
sub-unit profit, inventory turnover, expense
control (either two or three goals for each
manager)) - 70% total (1992 Program - 0%)
3. Support
a. Individuals with major corporate responsibility who are
not Executive Officers (generally Vice Presidents and
Directors)
i. Unit Profit - 50% (1992 Program - 80%)
ii. Individual Performance (based on formal performance
evaluation) - 50% (1992 Program - 20%)
b. All other bonus-eligible managers
i. Unit Profit - 20% (1992 Program - 50%)
ii. Individual Performance (based on formal performance
evaluation) - 80% (1992 Program - 50%)
Because the 1992 Program was not approved until November 1992, the only
elements that were used to determine bonuses under the 1992 Program were
unit profits and individual performance. Since we anticipate adoption
of the 1993 Program before the mid-point of the fiscal year, we suggest
the use in the 1993 Program of quantifiable targets for bonus eligible
Sales and Merchandising managers. Those targets could be established
and agreed upon as part of the annual review process held each year.
ii. Thresholds and Maximums
The percentages described in Section V(A) above show amounts, as a
percentage of base salary, that an individual can receive once "Plan" is
achieved. The purpose of this Section V(B)(ii) is to identify, for
specific targets, what those "at Plan" amounts are and what maximum
amounts would be awardable for superior performance.
1. Unit Profit Target
a. Threshold - Minimum bonus (50% of "at Plan" amount)
awardable at 80% of Plan.
b. Maximum - Maximum bonus (150% of "at Plan" amount)
awardable at 130% of Plan.
2. Individual Performance Target
a. "Meets Expectations" - Individual receives "at Plan"
amount
b. "Greatly Exceeds Expectations" - Individual receives 150%
of "at Plan" amount.
c. "Exceeds Expectations" - Individual receives 125% of "at
Plan" amount.
d. "Misses Expectations by a Small Amount" - Individual
receives no bonus for the "Individual Performance"
target.
e. "Misses Expectations by a Significant Amount" - An amount
equal to (minus 0.75) times the "at Plan" bonus will be
subtracted from bonuses earned from attaining other
targets.
f. "Unsatisfactory" - No bonus at all; poor performance will
disqualify a manager from receiving any bonus under the
1993 Program.
<PAGE>
3. All Other Unit Targets (not a part of the 1992 Program)
a. Minimum - at or below 85% of Plan, an amount equal to (-
1) times the "at Plan" bonus will be subtracted from
bonuses earned from attaining other targets
b. As performance approaches the target, each 1% gain
offsets the "negative bonus" by 10%.
c. From 95% of Plan to One Dollar less than 100% of Plan, no
bonus will be awarded.
d. "At Plan" - 100% of Plan, at which point the "at Plan"
bonus will be awarded.
e. Maximum - 130% of Plan, at which point 200% of the "at
Plan" bonus will be awarded.
f. Example - a graphic representation of how the 1993
Program would operate with a unit target, and a $3,000
"at Plan" bonus for that target, is attached as Figure 5.
iii. Establishment of Matrices
As noted in Sections V(B)(i) and V(B)(ii) above, a matrix would be
established for each bonus eligible manager. Using the information
contained in this Section V, examples of matrices of hypothetical Sales
and Merchandising and Support Vice Presidents, whose base salary is
$100,000, are attached as Exhibit A and Exhibit B, respectively.
iv. 1993 Program Parameters for Each Unit
Using the 1993 Program design as suggested in this Section V, Management
Levels and bonus amounts for the current employees of LHV (including
LIVE) and SRG are shown in the attached Exhibits C and D. Exhibit C
shows actual 1993 base salaries and assumes a 5% base salary increase
for those employees who have not yet received their 1993 salary reviews.
Exhibit D shows actual 1993 base salaries assuming an across the board
5% base salary increase.
VI. Costs
The most important element of the 1993 Program is its cost to LIVE and
its subsidiaries. Under the 1993 Program as suggested in Section V
above, using the information contained in Exhibits C and D, assuming
that all bonus-eligible employees receive a raise during 1993 equal to
5% of their year-end 1992 base salaries, and assuming further that each
unit and each employee in that unit meet their planned performance
goals, a total of approximately $1,200,000 would be paid in bonuses in
early 1994. If bonuses of Chief Executive Officers are excluded, the
total bonuses would be approximately $1,000,000. As a percentage of
operating profits, the bonuses would be as follows:
Unit Including CEO's Excluding CEO's
LHV/LIVE 4.9% 4.1%
SRG 8.7% 7.2%
Overall 5.6% 4.7%
As with the 1992 Program, the bonus percentages for both "LHV/LIVE" and
"Overall" seem to us very appropriate. However, again as with the 1992
Program, the bonus percentages for SRG seem high at first glance.
Although 1992 showed a significant improvement in performance at SRG,
both in terms of sales and in terms of profits, and SRG's 1993 Business
Plan shows those trends to continue, SRG's operating profits for 1993
remain at relatively low levels; thus, as was the case for the 1992
Program, any meaningful bonus program for SRG probably would use a
significant portion of SRG's profits. We believe that implementation of
the 1993 Program suggested in this Report could continue to lead to
higher profits at SRG, meaning that over time the percentage of SRG's
profits devoted to the Program would continue to decrease substantially.
For purposes of comparison, "at Plan" bonuses under the 1992 Program for
SRG as a percentage of operating profits, including the 1992 "at Plan"
bonus for the CEO, were 10.3%. The corresponding percentage under the
1993 Program is 8.7%.
We therefore believe that it is appropriate to allocate the above
percentages of Company profits to senior manager bonuses under the 1993
Program.
The following table shows what portion of incremental profits (once
planned levels have been achieved) are devoted to bonuses under the 1993
Program:
Unit Including CEO's Excluding CEO's
LHV/LIVE 8.9% 7.5%
SRG 15.5% 13.1%
Overall 10.0% 8.5%
Once again, the incremental bonus percentages for both "LHV/LIVE" and
"Overall" seem appropriate, whereas the incremental bonus percentages
for SRG appear high. Once again for purposes of comparison, incremental
bonuses under the 1992 Program for SRG as a percentage of incremental
operating profits, including the 1992 incremental bonus for the CEO,
were 17.1%. The corresponding percentage under the 1993 Program is
15.5%. Therefore, for the same reasons that are discussed above, we
believe that it is proper to allocate the above percentages of
additional Company profits to increasing senior manager bonuses.
The 1993 Business Plan for LHV/LIVE includes $850,000 for senior
management bonuses. This is approximately $20,000 less than the bonuses
that would be awarded under the 1993 Program if LHV/LIVE's performance
in 1993 reached planned levels. The 1993 Business Plan for SRG includes
$300,000 for senior management bonuses. This is approximately $25,000
less than the bonuses that would be awarded under the 1993 Program if
SRG's performance in 1993 reached planned levels. We believe that the
variance is insignificant, and that as a result of turnover, the
performance review process and overall expense management in general,
bonuses under the 1993 Program will be equal to or less than budgeted
amounts, unless, of course, 1993 operating profit exceeds planned
levels, in which event bonuses under the 1993 Program also will exceed
planned levels.
<PAGE>
VII. Miscellaneous Provisions
A. Basic Rules
In addition to the other provisions of the 1993 Program discussed in
this Report, the following basic rules should apply to the 1993 Program:
1. Subject to the provisions of Section VII(A)(8) below, and
notwithstanding any other provision of the 1993 Program, if a
unit did not achieve 75% of its profit plan, no bonuses would
be payable pursuant to the 1993 Program.
2. When a person moves from one Management Level to another,
maximum bonus potential should be prorated based upon the
portion of year the person was in each job. The pro ration
should be calculated as of the month ending closest to the
effective date of the promotion/transfer.
3. When a person enters a bonus eligible position in the middle
of the year, maximum bonus potential should be prorated based
upon the portion of the year the person was in the bonus
eligible job. The pro ration should be calculated as of the
month ending closest to the effective date of the
hiring/promotion/transfer.
4. If managers are transferred from one bonus eligible position
to another, bonuses should be calculated by aggregating the
total bonus amount for each position; however, in the event
that the total bonus for one position is a negative amount,
the bonus for that particular position should be assumed to be
zero. Bonuses for a position should be calculated by taking
the results from the Department for the entire year and
multiplying those results by a fraction, the numerator of
which is the number of months during which the manager was in
the particular position, and the denominator of which is 12.
5. For managers who have multiple areas of responsibility (such
as Group Vice Presidents with SRG), then, for all Department
bonus targets, the 1993 Program aggregates the results of the
Departments for which the managers were responsible.
6. Except for individuals transferring from one bonus eligible
position into another, an individual hired or promoted into a
bonus eligible position should hold such position for three
(3) months prior to the fiscal year end to be eligible for a
bonus for the new position.
7. Individuals who (a) are no longer employed by LIVE or its
subsidiaries at the end of the fiscal year, (b) who have given
notice of their resignation before the fiscal year end, or (c)
who are demoted out of a bonus eligible position prior to the
fiscal year end, should not be eligible for a bonus under the
1993 Program.
8. Notwithstanding any other provision of the 1993 Program, the
Chief Executive Officers of LIVE and its subsidiaries would
retain discretion to modify bonus grants based on performance
and/or extraordinary factors. Any such modifications would
have to be approved by LIVE's Chief Executive Officer.
9. The profit target should be calculated using operating income
and excluding (a) extraordinary items, (b) amortization of
goodwill, and (c) any reduction for bonuses pursuant to the
1993 Program.
10. Bonus payments should be paid in cash as soon as possible
after the close of the fiscal year and the approval of LIVE's
financial statements by its auditors.
11. Prior to the distribution of details of the 1993 Program to
bonus eligible managers, the Chief Executive Officers of the
applicable business units should establish the data sources
that would be used in the 1993 Program.
12. If new Departments are added during the year, if Plan numbers
are modified, or if a Department head desires to add new
positions to the 1993 Program, the Chief Executive Officer of
the business unit should be notified prior to discussion with
the affected employee(s) so that appropriate adjustments can
be made.
13. At year end, the Human Resources Departments of each business
unit should calculate actual bonuses, the Accounting
Department should audit those calculations, and the Department
heads should review the calculations.
B. Communication
If the 1993 Program is adopted, we recommend the following method for
communicating its terms:
1. The Human Resources Department of each business unit would
send a customized copy of the letter attached hereto as
Exhibit E to each manager who is eligible for the 1993
Program. A similar letter also would be sent to managers who
are promoted/hired into bonus eligible positions during the
course of the fiscal year.
2. Attached to each letter would be the following:
a. A copy of the matrix for that manager;
b. If the manager is in "Sales and Merchandising", a copy of
the approved budget for the elements that are a part of
the bonus matrix;
c. A description of the data sources that would be used to
calculate the bonus at the end of the year; and
d. A summary of the basic rules of the 1993 Program (Section
VII(A) above).
3. The letter would state that all questions regarding the 1993
Program must be directed to the Human Resources Department.
The theory behind bonus programs is that they are effective as
incentives only if they can be understood. We believe that the
suggested communication process would assist in that understanding.
C. Test Program; Institutionalizing the Program
We recommend that if the 1993 Program is adopted we clearly communicate
that, for the first few years, the Program would be considered in a
"test phase" and therefore subject to significant modification or
elimination in its entirety. After completion of the "test phase"
LIVE's Incentive Cash Compensation Program then should be
"institutionalized". Such an action would allow managers at LIVE and
its subsidiaries to become familiar with the Program and to realize the
"test phase" had ended, rather than having to face major changes with
each passing year. The only changes that we then would expect after the
"test phase" would be the addition of more employees and fine tuning of
"at Plan" bonus amounts.
VIII. Conclusion
We believe that the 1993 Program described in this Report will
accomplish the goals set forth in Section II, the most important of
which is to have a bonus program that acts as a true incentive to
improve performance.
LIVE ENTERTAINMENT INC./LIVE HOME VIDEO INC.
FISCAL 1994
CORPORATE INCENTIVE CASH COMPENSATION PROGRAM
FEBRUARY, 1994
<PAGE>
I. Background
For the past few years LIVE Entertainment Inc. and each of its domestic
operating subsidiaries (LIVE Home Video Inc. and the Specialty Retail
Division) have had in place Incentive Cash Compensation Programs that
were designed to reward employees with year end cash payments based upon
a combination of individual performance and company profitability. We
believe that those prior Programs accomplished their goals and recommend
that a similar program be adopted for 1994. This Report is organized in
the following manner:
1. Goals of Fiscal 1994 LIVE Corporate Incentive Cash
Compensation Program (the "1994 LIVE Program").
2. Suggested 1994 LIVE Program.
3. Expected Costs of the 1994 LIVE Program.
4. Miscellaneous Provisions of the 1994 LIVE Program.
A discussion of the various elements of the 1994 LIVE Program follows.
II. Goals of 1994 LIVE Program
We believe that the goals of the 1994 LIVE Program should be the same as
they were in past Programs, namely:
1. To focus employee attention and energy on achieving targeted
profitability.
2. To provide direct linkage between results and rewards and
thereby incent employees to improve performance.
3. To cover all employees of LIVE other than those who are
eligible to receive sales commissions.
4. To be able to budget for bonuses at the beginning of the
fiscal year, rather than the end.
5. To create a stronger sense of the "team" by making LIVE's
profit performance a part of everyone's bonus.
We believe that the 1994 LIVE Program supports the above-stated goals.
III. Suggested 1994 LIVE Program
A. Basis for Bonus Grants
As with prior Programs, we suggest that bonus awards be made based on a
percentage of the actual base salary of the particular individual at the
end of fiscal 1994 (as opposed to base salary at the beginning of the
year or actual salary paid over the course of the year).
We suggest that the bonus amounts be broken down as a percentage of
salary as follows:
<PAGE>
Management
Level "At Plan" Bonus Percentage
CEO 15%
EXECUTIVE VICE PRESIDENT 12%
SENIOR VICE PRESIDENT 10%
VICE PRESIDENT 9%
DIRECTOR 8%
MANAGER 5%
NON-EXEMPT EMPLOYEES One week of base salary
These percentages are approximately one-half of what they were for the
1993 LIVE Program.
In the case of bonus eligible employees who have employment contracts
and whose contracts contain specific provisions regarding bonuses, we
recommend that the bonus awarded to such employees be the greater of the
bonus dictated by the contract or the bonus calculated pursuant to the
1994 LIVE Program.
B. Allocation of Bonuses
i. Performance Factors
We suggest that an individual's bonus potential be allocated among the
following performance factors:
1. CEO, Executive Vice Presidents and Senior Vice Presidents
a. Unit Profit - 100%
2. Vice Presidents and Directors
a. Unit Profit - 80%
b. Individual Performance (based
on formal performance evaluation) - 20%
3. Managers
a. Unit Profit - 50%
b Individual Performance (based
on formal performance evaluation) - 50%
4. Non-Exempt Employees
a. Unit Profit - 100%
ii. Thresholds and Maximums
The percentages described in Section III(A) above show amounts, as a
percentage of base salary, that an individual can receive once "Plan" is
achieved. The purpose of this Section III(B)(ii) is to identify, for
specific targets, what those "at Plan" amounts are and what maximum
amounts would be awardable for superior performance.
1. Unit Profit Target (all except non-exempt employees)
a. Threshold - "At Plan" bonus awardable at between 95% and
100% of Plan.
b. Maximum - an additional 1.5% of the "at Plan" bonus is
awardable for each 1% increase in profitability above
100% of Plan, with the maximum bonus (150% of "at Plan"
amount) awardable at 133% of Plan and above.
2. Unit Profit Target (non-exempt employees)
a. Threshold - One week base salary awardable at between 95%
and 115% of Plan.
b. Maximum - an additional one week of base salary is
awardable if LIVE exceeds 115% of its planned profit
goal.
3. Individual Performance Target
a. "Meets Expectations" - Individual receives "at Plan"
amount
b. "Greatly Exceeds Expectations" - Individual receives 150%
of "at Plan" amount.
c. "Exceeds Expectations" - Individual receives 125% of "at
Plan" amount.
d. "Misses Expectations" - Individual receives no bonus for
the "Individual Performance" target.
e. "Unsatisfactory" - No bonus at all; unsatisfactory
performance will disqualify an employee from receiving
any bonus under the 1994 LIVE Program.
iii. 1994 LIVE Program Parameters
Using the 1994 LIVE Program design as suggested in this Section III,
Management Levels and bonus amounts for the current employees of LIVE
who are not eligible to receive sales commissions are shown in the
attached Exhibit A. That Exhibit shows current base salaries and
assumes a base salary increase of 4.5% for those employees who are
scheduled to receive salary reviews in 1994.
IV. Costs
The most important element of the 1994 LIVE Program is its cost to LIVE.
Under the 1994 LIVE Program as suggested in Section III above, using the
information contained in Exhibit A, and assuming that LIVE meets its
1994 profit goal and that each bonus eligible employee meets their
planned performance goals, a total of approximately $500,000 would be
paid in bonuses in early 1995. If the bonus of LIVE's Chief Executive
Officer is excluded, the total bonuses would be approximately $435,000.
As a percentage of operating profits, the bonuses would be as follows:
Including CEO Excluding CEO
"At Plan" Bonus 3.5% 3.0%
Incremental Bonuses (as a
percentage of incremental
profits) 5.6% 4.9%
We believe that it is appropriate to allocate the above percentages of
Company profits to bonuses under the 1994 LIVE Program.
The 1994 Business Plan for LHV/LIVE includes $450,000 for corporate
bonuses. This is approximately $50,000 less than the bonuses that would
be awarded under the 1994 LIVE Program if LIVE's performance in 1994
reached planned levels. We believe that as a result of turnover, the
performance review process and overall expense management in general,
actual year end bonuses under the 1994 LIVE Program will be equal to or
less than budgeted amounts, unless, of course, 1994 operating profit
exceeds planned levels, in which event bonuses under the 1994 LIVE
Program also will exceed planned levels.
V. Miscellaneous Provisions
A. Basic Rules
In addition to the other provisions of the 1994 LIVE Program discussed
in this Report, the following basic rules should apply to the 1994 LIVE
Program:
1. Subject to the provisions of Section V(A)(6) below, and
notwithstanding any other provision of the 1994 LIVE Program,
if LIVE does not achieve 95% of its profit plan, no bonuses
would be payable pursuant to the 1994 LIVE Program.
2. When a person moves from one Management Level to another,
bonus potential should be prorated based upon the portion of
year the person was in each job. The pro ration should be
calculated as of the month ending closest to the effective
date of the promotion/transfer.
3. For all except non-exempt employees, when a person enters a
bonus eligible position in the middle of the year, bonus
potential should be prorated based upon the portion of the
year the person was in the bonus eligible job. The pro ration
should be calculated as of the month ending closest to the
effective date of the hiring/promotion/transfer. No pro
ration will be made for the bonuses of non-exempt employees,
provided they have met the minimum service requirement
identified in paragraph 4 below.
4. Except for individuals transferring from one bonus eligible
position into another, an individual hired or promoted into a
bonus eligible position should hold such position for three
(3) months prior to the fiscal year end to be eligible for a
bonus for the new position.
5. Individuals who (a) are no longer employed by LIVE at the end
of the fiscal year, (b) who have given notice of their
resignation before the fiscal year end, (c) who are
transferred out of a bonus eligible position prior to the end
of the fiscal year, or (d) who have in their personnel file a
current written warning stating that unless their work
performance improves, they will face termination of employment
on or before January 31, 1995, should not be eligible for a
bonus under the 1994 LIVE Program.
6. Notwithstanding any other provision of the 1994 LIVE Program,
LIVE's Chief Executive Officer would retain discretion to
modify bonus grants based on performance and/or extraordinary
factors.
7. The profit target should be calculated using operating income
before interest and amortization of goodwill and covenants and
excluding (a) extraordinary items, and (b) any reduction for
bonuses pursuant to the 1994 LIVE Program.
8. Bonus payments should be paid in cash as soon as possible
after the close of the fiscal year and the approval of LIVE's
financial statements by its auditors.
B. Communication
If the 1994 LIVE Program is adopted, we recommend that each employee be
sent a summary of the Program; an example of such a summary is attached
to this Report as Exhibit B. A summary also would be sent to employees
who are promoted/hired into bonus eligible positions during the course
of the fiscal year.
The theory behind bonus programs is that they are effective as
incentives only if they can be understood. We believe that the
suggested communication process would assist in that understanding.
VI. Conclusion
We believe that the 1994 LIVE Program described in this Report will
accomplish the goals set forth in Section II, the most important of
which is to have a bonus program that acts as a true incentive to
improve performance.
LIVE SPECIALTY RETAIL DIVISION
FISCAL 1994
CORPORATE AND DISTRIBUTION CENTER
INCENTIVE CASH COMPENSATION PROGRAM
FEBRUARY, 1994
<PAGE>
I. Background
For the past few years LIVE Entertainment Inc. and each of its domestic
operating subsidiaries (LIVE Home Video Inc. and the LIVE Specialty
Retail Division ("LSR")) have had in place Incentive Cash Compensation
Programs that were designed to reward employees with year end cash
payments based upon a combination of individual performance and company
profitability. We believe that those prior Programs accomplished their
goals and recommend that a similar program be adopted for 1994. This
Report is organized in the following manner:
1. Goals of Fiscal 1994 LIVE Specialty Retail Corporate and
Distribution Center Incentive Cash Compensation Program (the
"1994 LSR Program").
2. Suggested 1994 LSR Program.
3. Expected Costs of the 1994 LSR Program.
4. Miscellaneous Provisions of the 1994 LSR Program.
A discussion of the various elements of the 1994 LSR Program follows.
II. Goals of 1994 LSR Program
We believe that the goals of the 1994 LSR Program should be the same as
they were in past Programs, namely:
1. To focus employee attention and energy on achieving targeted
profitability.
2. To provide direct linkage between results and rewards and
thereby incent employees to improve performance.
3. To cover all corporate and distribution center employees of
LSR.
4. To be able to budget for bonuses at the beginning of the
fiscal year, rather than the end.
5. To create a stronger sense of the "team" by making LSR's
profit performance a part of everyone's bonus.
We believe that the 1994 LSR Program supports the above-stated goals.
III. Suggested 1994 LSR Program
A. Basis for Bonus Grants
As with prior Programs, we suggest that bonus awards be made based on a
percentage of the actual base salary of the particular individual at the
end of fiscal 1994 (as opposed to base salary at the beginning of the
year or actual salary paid over the course of the year).
We suggest that the bonus amounts be broken down as a percentage of
salary as follows:
<PAGE>
Management
Level "At Plan" Bonus Percentage
CEO 31%
EXECUTIVE VICE PRESIDENT 23%
SENIOR VICE PRESIDENT 23%
VICE PRESIDENT 18%
DIRECTOR 13%
MANAGER 8%
DISTRIBUTION CENTER
NON-MANAGERS AND CORPORATE
NON-EXEMPT EMPLOYEES One week of base salary
These percentages are approximately the same as what they were for the
1993 LSR Program.
B. Allocation of Bonuses
i. Performance Factors
We suggest that an individual's bonus potential be allocated among the
following performance factors:
1. CEO, Executive Vice Presidents and Senior Vice Presidents
a. Unit Profit - 100%
2. Vice Presidents and Directors
a. Unit Profit - 80%
b. Individual Performance (based
on formal performance evaluation) - 20%
3. Managers
a. Unit Profit - 50%
b. Individual Performance (based
on formal performance evaluation) - 50%
4. Distribution Center Non-Managers and Corporate Non-Exempt
Employees
a. Unit Profit - 100%
ii. Thresholds and Maximums
The percentages described in Section III(A) above show amounts, as a
percentage of base salary, that an individual can receive once "Plan" is
achieved. The purpose of this Section III(B)(ii) is to identify, for
specific targets, what those "at Plan" amounts are and what maximum
amounts would be awardable for superior performance.
1. Unit Profit Target (all except distribution center non-
managers and corporate non-exempt employees)
a. Threshold - "At Plan" bonus awardable at between 95% and
100% of Plan.
b. Maximum - an additional 1.5% of the "at Plan" bonus is
awardable for each 1% increase in profitability above
100% of Plan, with the maximum bonus (150% of "at Plan"
amount) awardable at 133% of Plan and above.
2. Unit Profit Target (distribution center non-managers and
corporate non-exempt employees)
a. Threshold - One week base salary awardable at between 95%
and 115% of Plan.
b. Maximum - an additional one week of base salary is
awardable if LSR exceeds 115% of its planned profit goal.
3. Individual Performance Target
a. "Meets Expectations" - Individual receives "at Plan"
amount
b. "Greatly Exceeds Expectations" - Individual receives 150%
of "at Plan" amount.
c. "Exceeds Expectations" - Individual receives 125% of "at
Plan" amount.
d. "Misses Expectations" - Individual receives no bonus for
the "Individual Performance" target.
e. "Unsatisfactory" - No bonus at all; unsatisfactory
performance will disqualify an employee from receiving
any bonus under the 1994 LSR Program.
iii. 1994 LSR Program Parameters
Using the 1994 LSR Program design as suggested in this Section III,
Management Levels and bonus amounts for the current corporate and
distribution center employees of LSR are shown in the attached Exhibit
A. That Exhibit shows current base salaries and assumes a base salary
increase of 3% for those employees who are scheduled to receive salary
reviews in 1994.
IV. Costs
The most important element of the 1994 LSR Program is its cost to LSR.
Under the 1994 LSR Program as suggested in Section III above, using the
information contained in Exhibit A, and assuming that LSR meets its 1994
profit goal and that each bonus eligible employee meets their planned
performance goals, a total of approximately $345,000 would be paid in
bonuses in early 1995. If the bonus of LSR's Chief Executive Officer is
excluded, the total bonuses would be approximately $290,000. As a
percentage of operating profits, the bonuses would be as follows:
Including CEO Excluding CEO
"At Plan" Bonus 5.4% 4.5%
Incremental Bonuses (as a
percentage of incremental
profits) 8.9% 7.7%
We believe that it is appropriate to allocate the above percentages of
LSR's profits to bonuses under the 1994 LSR Program.
The 1994 Business Plan for LSR includes $300,000 for corporate and
distribution center bonuses. This is approximately $45,000 less than
the bonuses that would be awarded under the 1994 LSR Program if LSR's
performance in 1994 reached planned levels. We believe that as a result
of turnover, the performance review process and overall expense
management in general, bonuses under the 1994 LSR Program will be equal
to or less than budgeted amounts, unless, of course, 1994 operating
profit exceeds planned levels, in which event bonuses under the 1994 LSR
Program also will exceed planned levels.
V. Miscellaneous Provisions
A. Basic Rules
In addition to the other provisions of the 1994 LSR Program discussed in
this Report, the following basic rules should apply to the 1994 LSR
Program:
1. Subject to the provisions of Section V(A)(6) below, and
notwithstanding any other provision of the 1994 LSR Program,
if LSR does not achieve 95% of its profit plan, no bonuses
would be payable pursuant to the 1994 LSR Program.
2. When a person moves from one Management Level to another,
bonus potential should be prorated based upon the portion of
year the person was in each job. The pro ration should be
calculated as of the month ending closest to the effective
date of the promotion/transfer.
3. For all except distribution center non-managers and corporate
non-exempt employees, when a person enters a bonus eligible
position in the middle of the year, bonus potential should be
prorated based upon the portion of the year the person was in
the bonus eligible job. The pro ration should be calculated
as of the month ending closest to the effective date of the
hiring/promotion/transfer. No pro ration will be made for the
bonuses of distribution center non-managers and corporate non-
exempt employees, provided they have met the minimum service
requirement identified in paragraph 4 below.
4. Except for individuals transferring from one bonus eligible
position into another, an individual hired or promoted into a
bonus eligible position should hold such position for three
(3) months prior to the fiscal year end to be eligible for a
bonus for the new position.
5. Individuals who (a) are no longer employed by LSR at the end
of the fiscal year, (b) who have given notice of their
resignation before the fiscal year end, (c) who are
transferred out of a bonus eligible position prior to the end
of the fiscal year, or (d) who have in their personnel file a
current written warning stating that unless their work
performance improves, they will face termination of employment
on or before January 31, 1995, should not be eligible for a
bonus under the 1994 LSR Program.
6. Notwithstanding any other provision of the 1994 LSR Program,
the Chief Executive Officer of LSR would retain discretion to
modify bonus grants based on performance and/or extraordinary
factors. Any such modifications would have to be approved by
LIVE's Chief Executive Officer.
7. The profit target should be calculated using operating income
before interest and amortization of goodwill and covenants and
excluding (a) extraordinary items, and (b) any reduction for
bonuses pursuant to the 1994 LSR Program.
8. Bonus payments should be paid in cash as soon as possible
after the close of the fiscal year and the approval of LIVE's
financial statements by its auditors.
B. Communication
If the 1994 LSR Program is adopted, we recommend that each employee be
sent a summary of the Program; an example of such a summary is attached
to this report as Exhibit B. A summary also would be sent to employees
who are promoted/hired into bonus eligible positions during the course
of the fiscal year.
The theory behind bonus programs is that they are effective as
incentives only if they can be understood. We believe that the
suggested communication process would assist in that understanding.
VI. Conclusion
We believe that the 1994 LSR Program described in this Report will
accomplish the goals set forth in Section II, the most important of
which is to have a bonus program that acts as a true incentive to
improve performance.
March 23, 1994
LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Gentlemen:
This letter sets forth our agreement concerning the terms and
conditions upon which Carolco Pictures Inc., a Delaware corporation
("Carolco"), and LIVE Entertainment Inc., a Delaware corporation
("LIVE"), will enter into the following business combination (the
"Merger"). The company which issues equity securities as a result of
the Merger is referred to herein as the "Surviving Company" and the
company or companies which will disappear in the Merger or the equity
securities of which are no longer held publicly as a result of the
Merger are referred to herein as the "Disappearing Companies."
1. The Merger.
In the Merger, (a) the Surviving Company shall issue to
holders of common stock of the Disappearing Companies a number of shares
of common stock of the Surviving Company (the "Survivor Common Stock")
determined in accordance with the Exchange Ratio set forth in paragraph
2 below, (b) if LIVE is not the Surviving Company, each share of Series
C Convertible Stock, par value $1.00 per share, of LIVE (the "LIVE
Series C Stock") shall be converted into the right to receive one share
of newly-designated preferred stock of the Surviving Company having the
designations, powers, preferences and limitations set forth on Exhibit
A hereto (the "Survivor Series C Preferred"), (c) if Carolco is not the
Surviving Company, each share of Series A Convertible Preferred Stock,
par value $1.00 per share, of Carolco (the "Carolco Series A Stock")
shall be converted into the right to receive one share of newly-
designated preferred stock of the Surviving Company having the
designations, powers, preferences and limitations equivalent to the
Carolco Series A Stock with appropriate adjustments to the conversion
price as provided for the Carolco Series A Stock (the "Survivor Series
A Preferred"), and (d) each option, warrant, convertible security or
other right to acquire (by exercise, exchange or conversion) shares of
the Disappearing Companies' common stock or other securities of the
Disappearing Companies and each stock option and other right to acquire
securities of the Disappearing Companies which has been granted to
directors, officers and employees of the Disappearing Companies and
their subsidiaries and which remain outstanding prior to the effective
date of the Merger (the "Closing Date") shall be converted into the
right to receive stock options or other rights of the Surviving Company
for a number of shares of Survivor Common Stock equal to the number of
shares of the Disappearing Companies' common stock as the holder of such
right would have been entitled to receive had it exercised such right
immediately prior to the Closing Date, multiplied by the Exchange Ratio
set forth in paragraph 2 below at an exercise price equal to the
exercise price of such right immediately prior to the Closing Date
divided by the Exchange Ratio set forth in paragraph 2 below.
2. Merger Exchange Ratio.
For each share of common stock, par value $.01 per share, of
LIVE ("LIVE Common Stock"), a holder will receive (or retain) a number
of shares of Survivor Common Stock that is 5.5 times the number of
shares of Survivor Common Stock received (or retained) by a holder of
common stock, par value $.01 per share, of Carolco ("Carolco Common
Stock") for each share of Carolco Common Stock (the "Exchange Ratio"),
subject to adjustment as provided in this paragraph 2. If the average
Trading Price (as defined below) of Carolco Common Stock for the 20
consecutive Trading Days (as defined below) ending on a date that is
three Trading Days prior to the date of the stockholders' meetings of
Carolco and LIVE called for the purpose of voting on the Merger, or
ending on such earlier date as may be required by the Securities and
Exchange Commission (the "Carolco Share Price") is less than $0.545 per
share, then the Exchange Ratio shall be determined by dividing $3.00 by
the Carolco Share Price; provided, however, that in no event shall the
Exchange Ratio increase above 6.5 to 1 as a result of the foregoing
adjustment. If the Carolco Share Price is greater than $0.727 per share,
then the Exchange Ratio shall be determined by dividing $4.00 by the
Carolco Share Price; provided, however, that in no event shall the
Exchange Ratio decrease below 4.5 to 1 as a result of the foregoing
adjustment.
"Trading Day" shall mean a day on which the New York Stock
Exchange is open for at least one-half of its normal business hours.
"Trading Price" shall mean, on any day, the last reported sale
price of a security regular way on the New York Stock Exchange or, if
such security is not listed on the New York Stock Exchange, the last
sale price of such security regular way, as reported in a composite
published report of transactions which includes transactions on the
exchange or other principal markets on which such security is traded or,
if there is no such composite report as to any day, the last reported
sale price, regular way (or if there is no such reported sale on such
day, the average of the closing reported bid and asked prices) on the
principal United States securities trading market (whether a stock
exchange, National Association of Securities Dealers Automated Quotation
System or otherwise) on which such security is traded.
3. Conditions of LIVE and Carolco to Execution of Merger
Agreement.
The obligations of Carolco and LIVE to enter into an agreement
governing the Merger (the "Merger Agreement") shall be subject to the
following conditions:
(a) The negotiation, execution and delivery of a
mutually satisfactory Merger Agreement which, in addition to the matters
specified in this letter, shall include the composition of the board of
directors and senior management of the Surviving Company, customary
representations and warranties, conditions, covenants, indemnifications,
and other provisions usually included in agreements governing similar
transactions and any others which are reasonable and appropriate in the
specific context of the Merger.
(b) Each of the Carolco Investors (as defined in
paragraph 4(a) below) shall have agreed (i) subject to receipt of proxy
materials to vote all of the shares of capital stock of Carolco which
they have the right to vote in favor of the transactions contemplated
hereby, (ii) not to sell, grant a proxy with respect to or otherwise
encumber any of such shares until the earlier of termination of the
Merger Agreement or the Closing Date, and (iii) subject to applicable
law, otherwise act in all respects in a manner consistent with, and in
furtherance of, the transactions contemplated hereby (including any
filings required pursuant to the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act")).
(c) Each of the LIVE Investors (as defined in paragraph
4(a) below) shall have agreed (i) subject to receipt of proxy materials
to vote all of the shares of capital stock of LIVE which they have the
right to vote in favor of the transactions contemplated hereby, (ii) not
to sell, grant a proxy with respect to or otherwise encumber any of such
shares until the earlier of termination of the Merger Agreement or the
Closing Date, and (iii) subject to applicable law, otherwise act in all
respects in a manner consistent with, and in furtherance of, the
transactions contemplated hereby (including any filings required
pursuant to the HSR Act).
(d) Each of LIVE and Carolco shall have completed its
investigation (made by its own personnel as well as its accountants and
counsel) of the assets, liabilities, properties, commitments and affairs
of the other and shall be satisfied with the results thereof.
4. Conditions of LIVE and Carolco to the Merger.
The obligations of Carolco and LIVE to consummate the Merger
shall be subject, among other things, to the following conditions:
(a) The Merger, the Merger Agreement and the
transactions contemplated hereby shall have been approved or consented
to by (i) holders of at least a majority of the combined voting power
with respect to Carolco's voting securities present at the meeting
(other than voting securities held by Pioneer LDCA, Inc. ("Pioneer"),
Cinepole Productions B.V. ("Cinepole"), MGM Holdings Corporation, RCS
International Communications N.V. and RCS Video International Services
B.V. (collectively, "RCS") and New Carolco Investments B.V.
(collectively in their capacity as holders of voting securities of
Carolco, the "Carolco Investors")), (ii) holders of at least a majority
of the combined voting power with respect to Carolco's voting securities
entitled to vote, (iii) holders of at least 80% of Carolco's Series A
Convertible Preferred Stock, par value $1.00 per share, voting as a
class, (iv) holders of at least a majority of the combined voting power
with respect to LIVE's voting securities present at the meeting (other
than voting securities held by Pioneer, Cinepole and RCS (collectively
in their capacity as holders of voting securities of LIVE, the "LIVE
Investors")), (v) holders of at least 66 2/3% of the combined voting
power with respect to LIVE's voting securities entitled to vote, (vi)
holders of at least a majority of LIVE's Series C Stock, voting as a
class, and (vii) if deemed necessary or advisable by the parties hereto,
holders of at least a majority of LIVE's Series B Cumulative Convertible
Preferred Stock, par value $1.00 per share (the "LIVE Series B Stock")
then outstanding, and/or the Special Committee, as defined in the
Certificate of Designations, Preferences and Rights governing LIVE's
Series B Stock.
(b) The Merger Agreement and the transactions
contemplated thereby shall have been approved by the Board of Directors
of Carolco and the Board of Directors of LIVE.
(c) Each of Carolco and LIVE shall have received
opinions from a reputable investment banking firm that the Merger is
fair from a financial point of view to holders of Carolco Common Stock
other than the Carolco Investors and LIVE Common Stock other than the
LIVE Investors, respectively.
(d) A registration statement with respect to (i) any
securities of the Surviving Company which are issued in exchange for
securities of the Disappearing Companies upon consummation of the
Merger, (ii) any Survivor Common Stock into which such securities may be
converted, and (iii) any other transactions relating to the Merger for
which a registration statement must be effective shall have become
effective and there shall not have been issued and in effect a stop
order with respect thereto or the securities registered thereunder by
the Securities and Exchange Commission.
(e) The Survivor Common Stock to be issued upon
consummation of the Merger shall have been accepted for listing (subject
to notice of issuance) on the New York Stock Exchange or, if the
Survivor Common Stock was listed on another exchange immediately prior
to the Closing Date, on such other exchange.
(f) Each of Carolco and LIVE shall be reasonably
satisfied that it will not recognize material taxable gain as a result
of the Merger and that its stockholders will not recognize any taxable
gain as a result of the Merger. Each party hereto shall receive such
opinions of counsel and accountants in respect of the tax and accounting
consequences of the Merger as such party may reasonably request.
(g) Aggregate commitments shall have been received
acceptable to Carolco and to LIVE for funding the working capital needs
of Carolco and LIVE, the proposed terms of which shall be set out more
fully in the Merger Agreement.
(h) There shall not have occurred any change or
development in or affecting the assets, liabilities, business,
operations, condition (financial or other) or prospects of Carolco or
LIVE which, in the aggregate, could be reasonably expected to have a
material adverse effect on such party, except for (i) such changes at
LIVE as are contemplated by and approved in accordance with paragraph
5(g) below or (ii) such changes resulting from facts disclosed as of the
date of the Merger Agreement in the public filings of such party.
(i) All consents and approvals of, and notices to and
filings with, any governmental authority or agency as are required in
connection with the consummation of the Merger and the transactions
contemplated hereby shall have been obtained, given and made, and all
waiting periods, if any, applicable to the consummation of the Merger
imposed by any applicable law, rule or regulations (including, but not
limited to, the HSR Act) shall have expired without any action,
proceeding or investigation being commenced or threatened which seeks to
enjoin or delay consummation of the Merger or to impose any material
restrictions or onerous requirements on the Surviving Company, Carolco,
LIVE or their respective stockholders.
(j) All actions, proceedings, instruments and documents
required to carry out the transactions contemplated hereby or incidental
hereto and all other related legal matters shall be reasonably
satisfactory to and approved by counsel for each of Carolco and LIVE and
such counsel shall have been furnished with such certified copies of
such corporate actions and proceedings and such other instruments and
documents as it shall have reasonably requested.
(k) All consents and approvals of, and notices to and
filings with, any non-governmental persons required in connection with
the consummation of the Merger and the transactions contemplated hereby
shall have been obtained, given or made, except for any thereof which,
if not obtained, given or made would not, in the aggregate, have a
material adverse effect on the ability of any party to consummate the
transactions contemplated hereby or on the assets, liabilities,
business, operations, condition (financial or other) or prospects of the
combined company or any of its direct or indirect subsidiaries.
(l) No court of competent jurisdiction shall have
enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of preventing the consummation of the Merger or making the
transactions contemplated hereby illegal (each party hereto agreeing to
use its best efforts to have any such order, injunction or the like
lifted or waived).
(m) The Carolco Investors or the LIVE Investors, as
applicable, shall have entered into a registration rights agreement with
the Surviving Company as to the Survivor Common Stock to be received by
them in connection with the Merger.
5. Conditions of Carolco to the Merger.
The obligations of Carolco to consummate the Merger shall be
subject, among other things, to the following conditions:
(a) LIVE shall have redeemed all outstanding shares of
the LIVE Series B Stock in accordance with the provisions of the
Certificate of Designations, Preferences and Rights governing the LIVE
Series B Stock.
(b) LIVE shall not have incurred any Indebtedness from
the date hereof through the Closing Date other than (i) borrowings under
its existing credit facility with Chemical Bank and any extensions or
replacements thereof (the "Chemical Facility") which borrowings may be
used solely for working capital purposes, and (ii) borrowings of up to
$7,500,000 which may be used solely for retirement of the LIVE Series B
Stock. "Indebtedness" shall mean (a) any liability, contingent or
otherwise, (i) for borrowed money (whether or not the recourse of the
lender is to the whole of the assets of LIVE or only to a portion
thereof), (ii) evidenced by a note, debenture or similar instrument
(including a purchase money obligation), or (iii) for the payment of
money relating to a capitalized lease obligation; (b) any liability of
others of the kind described in the preceding clause (a) which LIVE has
guaranteed or which is otherwise its legal liability; (c) any obligation
secured by a lien to which the property or assets of LIVE are subject,
whether or not the obligations secured thereby shall have been assumed
by or shall otherwise be LIVE's legal liability, and (d) any and all
deferrals, renewals, extensions and refundings of, or amendments,
modifications or supplements to, any liability of the kind described in
any of the preceding clauses (a), (b) or (c).
(c) LIVE shall have received amendments to the Indenture
governing its Increasing Rate Secured Senior Subordinated Notes due 1999
in form, scope and substance and on terms acceptable to LIVE and
Carolco.
(d) The Indenture governing LIVE's 12% Senior
Subordinated Secured Notes due 1994 shall have been amended to extend
the maturity date to September 15, 1995 or later and LIVE shall have
received other amendments to such indenture in form, scope and substance
and on terms acceptable to LIVE and Carolco.
(e) Carolco shall have received a comfort letter of
Ernst & Young, LIVE's independent accountants, dated immediately prior
to the date upon which the registration statement becomes effective, in
form and substance reasonably satisfactory to Carolco and customary in
scope and substance for letters delivered by independent public
accountants in connection with registration statements similar to the
registration statement contemplated by paragraph 4(d).
(f) The rights issued pursuant to that certain Rights
Agreement dated as of July 19, 1990 between LIVE and American Stock
Transfer & Trust Company, as amended (the "Rights Agreement") shall
either no longer be outstanding or the Rights Agreement shall be amended
in a manner satisfactory to Carolco.
(g) Any disposition of assets by LIVE or its
subsidiaries and any write-down of the carrying value of assets by LIVE
or its subsidiaries from the date hereof prior to the Merger shall be in
accordance with the business plan of LIVE previously delivered to
Carolco (the "Business Plan") and shall be on other terms and conditions
satisfactory to Carolco.
6. Conditions of LIVE to the Merger.
The obligations of LIVE to consummate the Merger shall be
subject, among other things, to the following conditions:
(a) LIVE shall have received a comfort letter of Ernst
& Young, Carolco's independent accountants, dated immediately prior to
the date upon which the registration statement for the Merger becomes
effective, in form and substance reasonably satisfactory to LIVE and
customary in scope and substance for letters delivered by independent
public accountants in connection with registration statements similar to
the registration statement contemplated by paragraph 4(d).
7. Actions Prior to Merger Agreement.
Except as otherwise contemplated herein, from the date hereof
prior to the execution of the Merger Agreement, neither party will,
without the prior written consent of the other party, take any of the
following actions: (a) pay any dividends or make any other distribution
on its stock, except for dividends required to be paid on series
preferred stock existing on the date hereof, (b) acquire or dispose of
any substantial assets or acquire any assets which would make completion
of the Merger by the other party impossible or a violation of applicable
laws, rules or regulations, or (c) enter into any other material
transaction or incur any material obligation outside of the ordinary
course of its business.
8. Reasonable Best Efforts.
The parties hereto acknowledge that the terms of this letter
have been approved by the respective Boards of Directors of Carolco and
LIVE. Each of the parties hereto agrees to proceed with the proposed
transactions on a prompt basis and to use their respective reasonable
best efforts to prepare all necessary documentation, obtain all
necessary consents, authorizations, approvals and waivers required in
connection with the consummation of the transactions contemplated hereby
(including all necessary stockholder and regulatory approvals) and take
all other actions necessary to consummate the transactions contemplated
hereby in a manner consistent with applicable law.
9. Cooperation.
Each party hereto will use its reasonable best efforts to (a)
furnish to the other party such necessary information and reasonable
assistance as such other party may reasonably request in connection with
the transactions contemplated hereby, (b) cooperate in preparing,
causing to be filed and to be declared effective a registration
statement containing a proxy statement in connection with the
transactions contemplated by the Merger (including, without limitation,
providing all information as may be required for inclusion in the
registration statement), (c) provide the officers, employees, attorneys,
accountants, investment bankers and other representatives of the other
party with reasonable access to the properties and personnel of such
party and furnish upon request copies of all books, records, documents
and other information of such party applicable to the financial
condition, business, assets or liabilities of such party (including,
without limitation, interim financial reports of such party), (d) defend
and cooperate with the other party in defending any legal proceedings,
whether judicial or administrative and whether brought derivatively or
on behalf of third parties, challenging any part of the transactions
contemplated hereby, and (e) provide such further assistance as the
other party hereby may reasonably request.
10. Termination.
This letter shall terminate without further obligation on the
part of either party the earlier of (i) the 30th day following the date
of this letter or (ii) the execution of the Merger Agreement, provided,
that such termination shall not excuse any breach arising prior to the
date of such termination. Additionally, this letter shall terminate if
one party accepts a proposal from any third party, or makes a proposal
to a third party which is accepted, for a merger, consolidation, sale of
a substantial portion of assets, tender offer or any similar transaction
or business combination involving such party or any transaction which
would defeat the intent of this letter (an "Acquisition Proposal"),
other than any Acquisition Proposal contemplated herein. This letter
may be terminated by Carolco if LIVE shall have failed to comply in any
material respect with its covenants herein, which failure has not been
cured within five business days following receipt by LIVE of notice of
such breach. This letter may be terminated by LIVE if Carolco shall
have failed to comply in any material respect with its covenants herein,
which failure has not been cured within five business days following
receipt by Carolco of notice of such breach.
11. Miscellaneous.
(a) Expenses. All legal, accounting and other costs and
expenses incurred in connection with the transactions contemplated
hereby shall be paid by the party incurring such costs or expenses.
Additionally, all compensation, commissions, fees and expenses of any
person or firm which is entitled to be compensated for services as a
broker, finder or in any similar capacity shall be paid by the party
incurring such expenses. Notwithstanding the foregoing, (i) if this
letter is terminated for any reason other than execution of the Merger
Agreement, legal fees and the expenses incurred in connection with
printing and mailing the registration statement referred to in paragraph
4(d) and related materials will be shared equally by LIVE and Carolco;
provided, however, that if this letter is terminated by a party as a
result of a breach by the other party, then the breaching party shall
bear all such legal fees and expenses, and (ii) if this letter is
terminated as a result of one party's acceptance of an Acquisition
Proposal, then the accepting party shall reimburse the other party for
all out-of-pocket expenses incurred by the other party through the date
of termination of the letter. Each of the parties hereto acknowledges
that, as of the date hereof, it is not engaged in discussions with
respect to any such Acquisition Proposal.
(b) Governing Law. The laws of the State of Delaware
shall govern the interpretation, validity and performance of the terms
of this letter, regardless of the law that might be applied under
applicable principles of conflicts of law.
(c) Confidentiality Agreement. Each party acknowledges
that this letter shall not affect either party's obligations under (i)
that certain Confidentiality and Review Letter dated January 28, 1994
from LIVE to Carolco, or (ii) that Certain Confidentiality and Review
Letter dated January 28, 1994 from Carolco to LIVE, each of which shall
remain in effect in accordance with the terms thereof.
(d) Counterparts. This letter may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
Please acknowledge your agreement to, and acceptance of, the
foregoing, by executing a copy of this agreement in the appropriate
space set forth below and returning the same to the undersigned,
whereupon it will constitute our agreement with respect to the matters
contained herein.
Very truly yours,
CAROLCO PICTURES INC.
By:______________________________
Name:
Title:
Agreed to and accepted as of
the date first written above:
LIVE ENTERTAINMENT INC.
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT A
Terms of Survivor Series C Preferred
Dividend: 5% of the liquidation value of the Survivor
Series C Preferred per annum, payable
quarterly out of funds legally available
therefor.
Liquidation Value: $1,000 per share, plus accrued and unpaid
dividends which will be added to the
liquidation value and accrue additional cash
dividends at the rate set forth above.
Ranking: Senior to all other series preferred stock of
the Surviving Company at the Closing Date.
Conversion: Convertible into Survivor Common Stock at the
option of the holder at a conversion price
equal to the Liquidation Value divided by
$0.5536, subject to adjustment as provided in
paragraph 2 (the "Conversion Price").
Protective Rights: Affirmative vote or consent of a majority of
the Survivor Series C Preferred, voting as a
class, shall be required to issue capital
stock which is senior to or pari passu with
the Survivor Series C Preferred or to
undertake any other action which materially
adversely affects the rights of the holders of
the Survivor Series C Preferred.
Voting Rights: Holders are entitled to the same voting rights
as if they had converted their Survivor Series
C Preferred to Survivor Common Stock.
Optional Redemption: The Surviving Company may, at its option,
redeem the Survivor Series C Preferred at a
redemption price equal to the Liquidation
Value at any time or from time to time after
the third anniversary of issuance, if (i) a
Redemption Event has occurred, and (ii) all
dividends on the Survivor Series C Preferred
have been paid in cash to the date of
redemption. A "Redemption Event" shall occur
(a) on the tenth day following any ten (10)
consecutive trading days on which the market
price of Survivor Common Stock is greater than
150% of the Conversion Price, or (b) in the
event of a merger or consolidation of the
Surviving Company with another corporation (or
other business entity) or a voluntary sale of
all or substantially all of the assets of the
Surviving Company (a "Redemption Event
Merger") in which the consideration to be paid
to holders of Survivor Common Stock in the
Redemption Event Merger is either payable
entirely in cash or is property with a fair
market value (as reasonably determined in good
faith by the Board of Directors of the
Surviving Company) of not less than 150% of
the Conversion Price on the date fixed for
purposes of determining the holders of
Survivor Common Stock entitled to receive
consideration in the Redemption Event Merger.
Transfer Restrictions: None.
Registration Rights: Registration rights shall be reasonably
satisfactory to Pioneer LDCA, Inc. and the
Surviving Company.
EXHIBIT 11
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
Year Ended
December 31,
1991 1992 1993
(Amounts in thousands,
except per share data)
PRIMARY:
Weighted average shares outstanding . . . 12,071 12,080 12,089
Net effect of dilutive stock options -
based on the treasury stock method
using average market price . . . . . . . -- -- --
Total . . . . . . . . . . . . . . . . . 12,071 12,080 12,089
Income (loss) from continuing operations. $ (17,737) $ (17,460) $ (28,209)
Less preferred dividends. . . . . . . . . 966 2,397 3,589
Income (loss) from continuing operations
attributable to Common Stock . . . . . . (18,703) (19,857) (31,798)
Income (loss) from discontinued operations (89,315) 1,090 (22,083)
Extraordinary item. . . . . . . . . . . . -- 3,967 --
Net income (loss) attributable to
common stock . . . . . . . . . . . . . . $(108,018) $ (14,800) $ (53,881)
Income (loss) per common share:
Continuing operations . . . . . . . . . $ (1.55) $ (1.64) $ (2.63)
Discontinued operations . . . . . . . . (7.40) 0.09 (1.83)
Extraordinary item. . . . . . . . . . . -- 0.33 --
Net income. . . . . . . . . . . . . . . $ (8.95) $ (1.22) $ (4.46)
FULLY DILUTED:
Weighted average shares outstanding . . . 12,071 12,080 12,089
Net effect of dilutive stock options -
based on the treasury stock method
using the year-end market price,
if higher than average market price. . . -- -- --
Assumed conversion of convertible
Subordinated 7-5/8% debentures . . . . . -- -- --
Total . . . . . . . . . . . . . . . . . 12,071 12,080 12,089
Income (loss) from continuing operations.$ (17,737) $ (17,460) $ (28,209)
Less preferred dividends. . . . . . . . . 966 2,397 3,589
Income (loss) from continuing operations,
attributable to Common Stock . . . . . . (18,703) (19,857) (31,798)
Income (loss) from discontinued operations (89,315) 1,090 (22,083)
Extraordinary item. . . . . . . . . . . . -- 3,967 --
Net income (loss) attributable to
Common Stock . . . . . . . . . . . . . . $(108,018) $ (14,800) $ (53,881)
Income per common share:
Continuing operations . . . . . . . . . $ (1.55) $ (1.64) $ (2.63)
Discontinued operations . . . . . . . . (7.40) 0.09 (1.83)
Extraordinary items . . . . . . . . . . -- 0.33 --
Net income. . . . . . . . . . . . . . . $ (8.95) $ (1.22) $ (4.46)
EXHIBIT 21
List of Subsidiaries of the Registrant
Jurisdiction of
Subsidiary Incorporation
LIVE Home Video Inc. Delaware
LIVE Distributing Inc. Delaware
LIVE America Inc. Delaware
Vestron Inc. Delaware
VAC Holding Inc. Delaware
Vestron Video Incorporated Delaware
International Video Productions Inc. California
Silent Films Inc. Delaware
Lieberman Enterprises Incorporated Delaware
LEI-IVE Entertainment N.V. Netherlands Antilles
Loud Films Inc. Delaware
Carolco Acquisition Corp. Delaware
LIVE Ventures Inc. Delaware
LIVE Entertainment International Inc. Delaware
Strawberries Inc. Delaware
Waxie Maxie Quality Music Co. Delaware
Strawberries Investments Inc. Delaware
VCL/Carolco Communications B.V. The Netherlands
VCL/Carolco Communications GmbH Germany
Rainbow Distribution Services GmbH Germany
EXHIBIT 23
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSENT OF INDEPENDENT AUDITORS
Consent to Independent Auditors
We consent to the incorporation by reference in the Registration
Statements (Forms S-8 and S-3 No. 33-30862 and No. 33-38902, respectively)
pertaining to the 1988 Stock Option and Stock Appreciation Rights Plan, and
in the Registration Statement (Form S-8 No. 33-34489) pertaining to the LIVE
Incentive Savings Plan of LIVE Entertainment Inc. and in the Related
Prospectuses of our report dated April 1, 1994, with respect to the
consolidated financial statements and schedules of LIVE Entertainment Inc.
included in the Annual Report (Form 10-K) for the year ended December 31,
1993.
Ernst & Young
Century City
Los Angeles, California
April 13, 1994
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
13th day of April, 1994.
FRANS J. AFMAN
Frans J. Afman
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of April, 1994.
R. TIMOTHY O'DONNELL
R. Timothy O'Donnell
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of April, 1994.
ANTHONY J. SCOTTI
Anthony J. Scotti
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of April, 1994.
ROGER R. SMITH
Roger R. Smith
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
11th day of April, 1994.
RODNEY W. TROVINGER
Rodney W. Trovinger
Chief Financial Officer
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of April, 1994.
DAVID A. MOUNT
David A. Mount
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
9th day of April, 1994.
LYNWOOD SPINKS
Lynwood Spinks
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of April, 1994.
MASAO NOMURA
Masao Nomura
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
11th day of April, 1994.
RONALD B. CUSHEY
Ronald B. Cushey
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
11th day of April, 1994.
JAY BURNHAM
Jay Burnham
Director
<PAGE>
LIVE ENTERTAINMENT INC.
POWER OF ATTORNEY TO SIGN ANNUAL REPORT ON FORM 10-K
KNOW ALL BY THESE PRESENTS, that the undersigned, in his capacity set
forth below, hereby constitutes and appoints Roger A. Burlage, Rodney W.
Trovinger and Michael J. White, and each of them severally, as his true and
lawful attorneys and agents with the power to act with or without the others
to execute the Annual Report on Form 10-K of LIVE Entertainment Inc. for the
fiscal year ended December 31, 1993, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
9th day of April, 1994.
JONATHAN D. LLOYD
Jonathan D. Lloyd
Director
<PAGE>
LIVE ENTERTAINMENT INC.
Certificate of Secretary
I, Michael J. White, Secretary of LIVE ENTERTAINMENT INC., a Delaware
corporation (the "Company"), do hereby certify that attached hereto as
Exhibit A is a true and correct copy of resolutions adopted by the Board of
Directors of the Company on March 3, 1994, and that such resolutions have not
been amended, modified or revoked and are in full force and effect on the
date hereof.
IN WITNESS WHEREOF, I have signed this Certificate on the 5th day of
April, 1994.
MICHAEL J. WHITE
Michael J. White
Secretary
I, Roger A. Burlage, President and Chief Executive Officer of the
Company, do hereby certify that Michael J. White has been duly elected (or
appointed) and is duly qualified as, and on this day is, Secretary of the
Company, and the signature above is his genuine signature.
IN WITNESS WHEREOF, I have signed this Certificate on the 5th day of
April, 1994.
ROGER A. BURLAGE
Roger A. Burlage
President and Chief Executive Officer
<PAGE>
EXHIBIT A
. . .
RESOLVED, that Michael J. White, Rodney W. Trovinger and
Roger A. Burlage, and each of them severally, are hereby
appointed as attorneys with the power to execute the
Corporation's Annual Report on Form 10-K for the
Corporation's fiscal year ended December 31, 1993
("Fiscal 1993") on behalf of such directors and officers
of the Corporation who approve such appointment in their
individual cases by the execution of appropriate powers
of attorney.
AND FURTHER RESOLVED, that Michael J. White, Rodney W.
Trovinger and Roger A. Burlage, and each of them
severally, shall have the authority to execute, on behalf
of the Corporation, the Corporation's Annual Report on
Form 10-K for Fiscal 1993.
. . .
