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, 1994
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, California91406
(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 Nasdaq SmallCap Market
Series B Cumulative Convertible Nasdaq SmallCap 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. [ ]
The aggregate market value of the voting common stock held by
non-affiliates of the Registrant as of February 28, 1995 was
approximately $3,527,969.
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 February 28, 1995, there were 2,418,700 shares of the
Registrant's Common Stock, 5,600,000 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 LIVE Entertainment
International Inc. (formerly known as LEI-IVE Entertainment N.V.)
("LEII"), which acquire rights to theatrical motion pictures,
children's films and special interest programs which they market
and distribute in all media to wholesalers, retailers and consumers
in the United States and internationally. The Company owns an 81%
interest in VCL/Carolco Communications GmbH ("VCL"), a home video
distribution and marketing company headquartered in Munich, Germany
and as discussed below under "Recent Developments for the Company -
Decision to Dispose of VCL," the Company has entered into a
preliminary agreement to dispose of its interest in VCL. In August
1994, the Company sold its "Specialty Retail Division," consisting
of its formerly wholly owned subsidiary, Strawberries Inc.
("Strawberries"), and Strawberries' wholly owned subsidiary, Waxie
Maxie Quality Music Co. ("Waxie Maxie"). The Specialty Retail
Division is engaged in the sale of audio records and tapes, compact
discs and video products through retail stores in the Northeastern
United States and the Baltimore/Washington D.C. metropolitan area.
The Company's continuing operations are primarily in a single
business segment, the distribution and 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.
Operating Structure
The following chart outlines the operating structure of
the Company as of December 31, 1994. All except LIVE Home Video
and LIVE Film and Mediaworks are unincorporated divisions of the
Company's subsidiaries.
<TABLE> LIVE Entertainment Inc.
<S> <C> <C> <C> <C> <C> <C>
LIVE Productions LIVE Entertainment LIVE Home Video LIVE LIVE Television LIVE Interactive LIVE Film and
(production and (theatrical (home video International (cable, pay, pay (interactive Mediaworks
acquisition distribution of distribution) (international per view, network products (contracting
of motion motion picture distribution) television including CD-ROM) entity for
picture product) product) licensing) productions,
acquisitions
and
programming)
Family Home
Entertainment
(FHE)
(children's
programming)
</TABLE>
Recent Developments for the Company
Amendment of Restated Certificate of Incorporation to Effectuate
One For Five Reverse Stock Split
On December 9, 1994, the Company filed with the Delaware
Secretary of State a Certificate of Amendment (the "Certificate of
Amendment") to the Company's Restated Certificate of Incorporation
(the "Restated Certificate"), amending Article FOURTH of the
Restated Certificate to reclassify every five outstanding shares of
its common stock, par value $.01 per share ("Prior Common Stock"),
as one share of the Company's common stock having the same par
value and other powers, preferences and rights as the Prior Common
Stock (such shares of reclassified Prior Common Stock are sometimes
hereinafter referred to as shares of "Common Stock") (the "Reverse
Stock Split").
The Reverse Stock Split was approved by the affirmative
written consent of holders of over 64% of the Prior Common Stock
and the Company's Series C Convertible Preferred Stock (the "Series
C Preferred Stock"), voting together as a single class, pursuant to
a Consent Solicitation Statement dated November 23, 1994. Only
holders of record of the Prior Common Stock and Series C Preferred
Stock at the close of business on October 31, 1994 were entitled to
consent to the Reverse Stock Split.
Holders of Prior Common Stock as of December 9, 1994 who held
a number of shares that was not evenly divisible by five will
receive cash in lieu of fractional shares of Common Stock that
arose as a result of the Reverse Stock Split valued at $3.8125 per
share.
The Company has authorized American Stock Transfer & Trust
Company to act as exchange agent (the "Exchange Agent") for
purposes of effecting an exchange of stock certificates, and has
sent letters of transmittal to holders of Prior Common Stock as of
December 9, 1994 for use by stockholders in transmitting their
stock certificates representing shares of Prior Common Stock to the
Exchange Agent in exchange for new certificates representing the
number of shares of Common Stock into which their shares of Prior
Common Stock have been reclassified in the Reverse Stock Split,
together with cash for any fractional shares. No cash payment or
delivery of a certificate representing Common Stock will be made to
a stockholder until the stockholder has surrendered his outstanding
certificates representing Prior Common Stock together with the
letter of transmittal to the Exchange Agent.
Until so surrendered, each stock certificate formerly
representing shares of Prior Common Stock shall be deemed for all
purposes to represent the number of whole shares of Common Stock to
which the holder thereof is entitled, together with the amount of
cash in lieu of fractional shares, if any, arising as a result of
the Reverse Stock Split.
Listing of Common Stock on Nasdaq SmallCap Market
On October 11, 1994, the New York Stock Exchange ("NYSE")
commenced de-listing proceedings for the Prior Common Stock (traded
under the symbol "LVE") due to the Company's failure to meet the
NYSE's listing criteria relating to net tangible assets available
to common stock and three year average net income. The Company
subsequently applied to have the Common Stock listed under the
Nasdaq Stock Market's SmallCap Market (the "SmallCap Market").
That application was accepted and on January 17, 1995, the Common
Stock was first listed on the SmallCap Market, under the symbol
"LIVE".
Termination of Agreement on Business Combination with Carolco
Pictures Inc. ("Carolco")
In March 1994, LIVE and Carolco reached agreement in principle
on a business combination (the "Merger"), and executed a Merger
Agreement with respect thereto on August 10, 1994 (the "Merger
Agreement"). On October 13, 1994 LIVE and Carolco jointly
announced that they had agreed to terminate the Merger Agreement
between the two companies and to end all discussions regarding a
possible business combination. In 1994, LIVE incurred
approximately $1,000,000 in expenses in connection with the Merger.
As a result of the December 1994 agreement discussed below under
"Compensation Committee Interlocks and Insider Participation -
Arrangements with Mr. Pierson or Affiliates - Carolco," which
settled all open accounts between LIVE and Carolco, LIVE wrote off
the remaining unpaid receivable amount of $6,211,000 that LIVE had
recorded in its financial records as owing from Carolco, the entire
amount of which previously had been reserved for.
Sale of Specialty Retail Division; Use of Proceeds
On August 31, 1994, LIVE sold its entire interest in its
Specialty Retail Division to a group including Castle Harlan, Inc.,
Ivan R. Lipton, the President of the Specialty Retail Division, and
other senior managers of the Specialty Retail Division. The
purchaser group also included Jefferson Capital Group, Ltd.
("Jefferson Capital"); R. Timothy O'Donnell, the President of
Jefferson Capital, is a Director of LIVE. The total purchase price
paid to LIVE for the Specialty Retail Division was $35,000,000 in
cash.
LIVE's Series B Cumulative Convertible Preferred Stock (the
"Series B Preferred Stock") was mandatorily redeemable from the net
proceeds of any sale of the Specialty Retail Division remaining
after the payment of transaction costs and the payment of any debt
secured by the Specialty Retail Division. LIVE's $37,000,000 of
12% Senior Secured Subordinated Notes (the "12% Notes") became due
and payable in September and October 1994, and repayment of the 12%
Notes was secured by the stock of the Specialty Retail Division.
Due to the demand for payment made by the holders of all
$37,000,000 in principal amount of the 12% Notes, LIVE used all of
the net proceeds from the sale of the Specialty Retail Division to
repay the 12% Notes, and no net proceeds remained from the sale to
redeem any of the Series B Preferred Stock.
As of December 31, 1994, the aggregate redemption price for
the Series B Preferred Stock was $50,400,000 ($9.00 per share) and
that redemption price increases by an additional $560,000 per month
through October 1995, when the redemption price reaches $56,000,000
($10.00 per share) and remains at that price thereafter.
Purchase of Series B Preferred Stock
Although LIVE has no obligation to redeem any Series B
Preferred Stock, subject to the availability of funds and the prior
approval of its Board of Directors and its lenders, LIVE may
acquire shares of its Series B Preferred from time to time, either
through private purchases or through open market purchases.
Through March 15, 1995, LIVE acquired, and subsequently retired, a
total of 1,800,000 shares of the Series B Preferred Stock at an
average price of under $4.00 per share.
Foothill Credit Facility
On November 16, 1994 LIVE replaced its prior credit facility
from a group of banks headed by Chemical Bank (the "Previous
Facility") with a three-year $30,000,000 revolving credit facility
with Foothill Capital Corporation (the "Foothill Credit Facility").
Borrowings available under the Foothill Credit Facility are limited
to $20,000,000 until additional participant lenders are added to
the Facility, at which time the borrowings available will be
increased to a maximum $30,000,000. Borrowings under the Foothill
Credit Facility are secured by substantially all of the assets of
LIVE and its subsidiaries. Outstanding borrowings under the
Foothill Credit Facility bear interest at the rate of 2% per annum
above the highest of the Bank of America, Mellon Bank or Citibank
prime rate, payable monthly. In no event will interest under the
Foothill Credit Facility be less than 7% per annum. The Foothill
Credit Facility provides for a closing fee of $500,000, an annual
facility fee of 1/4 of 1% and a commitment fee of 1/4 of 1% on any
unused amount. The Foothill Credit Facility also requires LIVE to
meet certain financial ratios, and as of December 31, 1994 the
Company was in compliance with all such financial ratios.
Removal of Net Worth Covenant from Indenture
By late 1994, LIVE believed that at the end of 1994 it may
have been in violation of the minimum consolidated net worth
covenant contained in the Indenture (the "Indenture") governing its
$40,000,000 of Increasing Rate Senior Subordinated Notes Due 1999
(the "LIVE Increasing Rate Notes"). Such default would have
permitted the trustee thereunder or holders of 25% in aggregate
principal amount of the LIVE Increasing Rate Notes to give notice
and accelerate maturity of the indebtedness represented by the LIVE
Increasing Rate Notes.
In November 1994, a majority of the holders of the LIVE
Increasing Rate Notes agreed to amend the Indenture to eliminate
the minimum net worth covenant contained in the Indenture, thereby
removing the possibility that LIVE might have defaulted under that
covenant in 1995. As part of the amendment of the Indenture, LIVE
agreed to increase the interest rate on the LIVE Increasing Rate
Notes from 10% per annum to 12% per annum effective October 18,
1994. The interest rate on the LIVE Increasing Rate Notes
previously was scheduled to increase to 12% in March 1996.
Decision to Dispose of 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 Merger, the Board of
Directors of the Company decided to dispose of the Company's
interest in VCL. Accordingly, the Company's interest in VCL was
recorded as "Assets Held For Sale" and "Liabilities Related To
Assets Held For Sale" as of December 31, 1993 and 1994 and was
written down to its estimated net realizable or liquidation value.
The operating statements presented were restated to separately
disclose the results of operations of VCL as a disposal of a
portion of a line of business.
In February 1995, the Company and certain of its affiliates,
on the one hand, and Datty Ruth, the owner of 19% of VCL, and
Apricot Computer GmbH ("Apricot"), on the other, entered into a
preliminary agreement whereby the Company's 81% interest in VCL, as
well as all receivables owed by VCL to the Company or its
affiliates, will be transferred to Ruth and Apricot. The total
consideration to be received by the Company and its affiliates in
connection with such transactions is approximately $7,900,000, of
which approximately $3,100,000 was received in February 1995. The
Company could receive additional amounts depending upon the post
closing profits of VCL; furthermore, the Company will be entitled
to share in the profits from future sales of VCL if, following
closing but no later than December 31, 1996, greater than 19% of
VCL is sold for greater than $4,800,000.
Consummation of the transactions contemplated by the
preliminary agreement is subject to the execution and completion of
definitive agreements. The parties expect the transactions
contemplated by their preliminary agreement to be finalized during
1995.
Management Changes
Since the beginning of 1994, Satoshi Matsumoto, Mario Kassar,
David Mount and Lynwood Spinks resigned from the Board of
Directors, and Gregory R. Pierson, Roger A. Burlage, Ryuichi Noda
and Michael J. White have been appointed as Directors. None of the
departures from the Board of Directors was the result of any
dispute with the Company.
<PAGE>
Entertainment Marketing and Distribution Operations
General
Historically, the operations of LHV and VCL 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 its 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. Further, in late 1994, LIVE released its first
interactive product through its newly formed interactive division.
This expansion is meant to enhance the core video business of LIVE
without the addition of significant overhead costs. Examples of
this activity include LIVE's acquisition of all rights to the film
Wagons East (a Western comedy starring John Candy and Richard
Lewis), as well as the Company's acquisition of various rights to
the motion picture Top Dog, a Chuck Norris film that will be
released theatrically in early 1995. International and television
rights were among the rights acquired in both these productions.
The theatrical success of a motion picture is a crucial factor in
generating revenues in all media. Given shifting consumer tastes
and the popularity and availability of other forms of
entertainment, and given also that the Company often commits to
acquire projects in the early stages of their development, it is
impossible to predict the profitability of any particular motion
picture.
LHV controls the United States and Canadian home video rights
(hereinafter referred to as "domestic home video rights") to a
catalog of approximately 2,000 titles, inclusive of approximately
1,000 titles acquired from Vestron Inc. in 1991. Vestron was an
independent home video supplier with approximately 1,000 titles in
its catalog, including such titles as Dirty Dancing, Platoon,
Hoosiers, the Smithsonian Series, the National Audubon Series and
others, including the rights to exploit all sequels to Dirty
Dancing. Vestron is a label exclusively distributed by LHV.
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 (such as international, television and
interactive), 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. Because of the
significant financial commitment made by the Company to acquire
distribution rights to its product, the Company frequently becomes
involved with, and has active input on, projects at the earliest
possible date, from development through physical production and
completion of the finished film, and generally has control over all
key production elements.
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,
other 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 typical cost of a motion picture produced by an
independent production company for limited distribution ranges from
approximately $1,000,000 to $15,000,000 as compared with an average
of more than $28,000,000 for commercial films produced by major
studios for wide release. Production costs consist of acquiring or
developing the screenplay, film studio rental, cinematography,
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" and negative pickup financing 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. Generally, the producer also is entitled to receive a
participation equal to an agreed-upon percentage of all net
revenues received from distribution of the motion picture over and
above the 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, CD-ROM, interactive) and various markets or
territories (e.g., the United States and Canada, Great Britain and
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 primarily
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, special interest products and interactive
programs.
As a result of its agreement with Carolco, LHV has in the past
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 on which principal
photography has commenced prior to July 31, 1995 or for which LHV
has paid an advance to Carolco prior to such date. 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. This agreement guarantees
that LHV will receive a certain minimum distribution fee; there is
a corresponding upper limit on the total gross distribution fee
that LHV can earn. In December 1994, as part of an agreement
settling all open accounts between them, LIVE and Carolco agreed
that for purposes of their settlement only, all films previously
produced under this agreement would be deemed to have earned the
minimum distribution fee. See "Compensation Committee Interlocks
and Insider Participation - Arrangements with Mr. Pierson or
Affiliates - Carolco," below. "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 1994, LHV released no Carolco
titles under this arrangement. Because the Company has entered
into a separate distribution agreement with the distributor of the
film Cutthroat Island outside of the terms of the LIVE/Carolco
output agreement (See "Compensation Committee Interlocks and
Insider Participation - Arrangements with Mr. Pierson or Affiliates
- - Carolco," below), the Company does not anticipate releasing any
additional video titles under this arrangement, if any, until 1996.
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, five titles under such distribution agreement,
including The Piano, during 1994, and one title will be released in
1995.
Pursuant to various other agreements with independent motion
picture producers, exclusive of Carolco and Miramax, LHV released
eighteen other feature film titles during 1994. LHV anticipates
releasing on home video a total of between 50 to 75 feature films
in 1995 through 1996. 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.
Domestic home video rights, when acquired under exclusive
licenses without other rights, are typically acquired 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, Bucky O'Hare, Hello Kitty and
Friends, The New Adventures of Gigantor, Phantom 2040, Papa Beaver,
The Highlander (animation), Enchanted Camelot, Skysurfer Strike
Force, The Bears Who Saved Christmas, Santa's Christmas Crash and
Santa's Christmas Snooze. Management of LHV intends to continue
LHV's emphasis on building and exploiting its FHE library.
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 and WEA are
currently negotiating the terms of an extension of this agreement,
although there can be no assurance such an extension will be agreed
upon, or if so, what the terms of such extension will be. 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 that expires in 1997, subject to a three year option to
extend in favor of LIVE America Inc.
In the past, LIVE generally acquired only home video rights
and not the rights to broadcast or cablecast programs or to exhibit
programs on pay-per-view television or in movie theaters or similar
locations. Historically, where these other rights were acquired,
LIVE exploited them by sublicensing the rights to third parties
whose principal businesses included exploitation of such rights.
In early 1994, LIVE expanded its business activities into the
theatrical distribution of a limited number of motion pictures and
the direct licensing of international and television rights to
third parties rather than through intermediaries. LIVE is
acquiring, and will continue to acquire, more of these titles with
worldwide or North American rights in all media.
In the second quarter of 1994, management of LHV decided to
begin releasing fewer rental titles per month than in prior years
for a number of reasons, among them being: (a) fewer titles being
purchased by LIVE since late 1991 due to the liquidity problems
encountered by LIVE since that time, (b) a shift in rental market
tastes, with a much greater portion of video store purchases being
devoted to theatrically released "A" titles than direct-to-video or
direct-to-television "B" titles that have been the predominant
titles released by LHV since 1992 and (c) an increase in the
absolute number of "B" titles in the marketplace, resulting in
increased competition for decreasing retailer purchase funds.
Management of LIVE has addressed these issues by (i) reducing its
number of rental titles released per month, particularly the
direct-to-video "B" titles, allowing LHV's marketing and sales
forces to place increased emphasis on a smaller number of titles,
(ii) acquiring more rights to films than only domestic video rights
(including theatrical, television, international and CD-ROM) and
diversifying its business to license such additional rights
directly rather than through intermediaries, (iii) continuing LHV's
focus on the sell-through business, exploiting LHV's library of
over 2,000 titles including children's and special interest
programs and (iv) attempting to release a higher percentage of "A"
titles by increasing its efforts to acquire films with greater
theatrical release potential.
Management of LIVE believes that the decrease in revenues due
to fewer rental releases per month will eventually be compensated
for through a combination of increased ancillary revenues (such as
theatrical, television, international and CD-ROM) and higher
revenues per rental release due to a combination of increased focus
on fewer titles and a higher percentage of "A" title acquisitions.
There is no assurance that this will be the case, however.
Other Domestic Distribution Rights
Historically, LHV only occasionally acquired theatrical
distribution rights to certain of its films. However, when those
rights were acquired - for films such as Tom and Jerry - The Movie,
Reservoir Dogs, Bad Lieutenant, American Heart, Light Sleeper and
Bob Roberts, for example - LHV exploited the rights by sublicensing
them to third parties whose principal businesses included
exploitation of such rights. Management of LIVE considers the
theatrical distribution of a film extremely important as a
marketing tool which enhances video and international sales and
thus LIVE intends to acquire theatrical distribution rights as part
of the overall acquisition where possible, even if a film
ultimately will not be released theatrically. While LIVE forecasts
at best a break even position for its theatrical division due to
the risks inherent in that business, management of LIVE believes
that the theatrical market has significant upside potential should
any particular film perform well. It is not uncommon for films
with theatrical losses to have increased performance in video and
other ancillary media that partially or totally offset such
theatrical losses.
Of those films to which LIVE holds domestic theatrical
distribution rights, LIVE intends to release some through its own
distribution channels or distribute through third parties. LIVE
will exploit Top Dog, a film staring Chuck Norris and for which the
Company acquired all U.S. domestic and Japanese distribution
rights, in the United States and Canada in early 1995 through the
theatrical distribution division of MGM. In addition, LIVE is in
various stages of development and pre-production on a number of
projects, including Shockwave, directed by David Twohy (writer of
The Fugitive and Waterworld), I, Assassin, executive produced by
Mace Neufeld and Robert G. Rehme (producers of Beverly Hills Cop
III, Patriot Games and Clear and Present Danger), and The
Substitute, directed by Robert Mandel (director of School Ties, fx
and Big Shots).
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, LIVE 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. Historically, LIVE only
occasionally acquired international distribution rights to certain
of its films, mainly through the acquisition of the Vestron
library. LIVE has for some time maintained a small in-house
international sales staff and utilized outside sales agents to
exploit those rights. However, often when international rights
were acquired (e.g., for films such as Light Sleeper), LIVE
exploited the rights by sublicensing them to third parties such as
Carolco whose principal businesses included the further
sublicensing of such rights, and LIVE paid a fee for such
sublicensing activities. In 1994, LIVE expanded its sales force to
manage international sales and to more aggressively 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 LIVE's enhanced international sales division,
the Company conducts its foreign home video operations through a
series of domestic and foreign subsidiaries, including LIVE Film
and Mediaworks Inc. ("LFM") and VCL. The activities of VCL are in
the German-speaking market in Europe. In March 1994, primarily as
a result of a desire of LIVE to focus its efforts on its core
domestic entertainment business, the Board of Directors of the
Company decided to seek to sell LIVE's interest in VCL.
In February 1995, the Company and certain of its affiliates,
on the one hand, and Datty Ruth, the owner of 19% of VCL, and
Apricot Computer GmbH ("Apricot"), on the other, entered into a
preliminary agreement whereby the Company's 81% interest in VCL, as
well as all receivables owed by VCL to the Company or its
affiliates, will be transferred to Ruth and Apricot. The total
consideration to be received by the Company and its affiliates in
connection with such transactions is approximately $7,900,000, of
which approximately $3,100,000 was received in February 1995. The
Company could receive additional amounts depending upon the post
closing profits of VCL; furthermore, the Company will be entitled
to share in the profits from future sales of VCL if, following
closing but no later than December 31, 1996, greater than 19% of
VCL is sold for greater than $4,800,000.
Consummation of the transactions contemplated by the
preliminary agreement is subject to the execution and completion of
definitive agreements. The parties expect the transactions
contemplated by their preliminary agreement to be finalized during
1995.
Sale of Specialty Retail Division
As described above under "Recent Developments - Sale of
Specialty Retail Division; Use of Proceeds," LIVE sold its entire
interest in the Specialty Retail Division in August 1994. The
Company acquired Strawberries in June 1989 and Strawberries
acquired Waxie Maxie in March 1990. The Specialty Retail Division
engaged in the sale of audio records and tapes, compact discs and
video products through retail stores in the Northeastern United
States and the Baltimore/Washington D.C. metropolitan area.
Competition
Success in the entertainment marketplace is largely dependent
on a company's ability to acquire rights to programming at
attractive prices and upon the subsequent performance of this
programming in the marketplace. With the exception of the Carolco
and Miramax output agreements described above under "Acquisition of
Motion Picture Distribution Rights by the Company; Domestic Home
Video Distribution Rights," the Company generally acquires
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 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.
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, 1992, one customer
accounted for approximately 16.6% of the combined net sales of LHV
and VCL. During the years ended December 31, 1993 and 1994, no one
customer accounted for more than 10% of the combined net sales of
LHV and VCL.
Employees
As of February 28, 1995, LHV had 106 full-time regular
employees and 1 part-time employee and VCL had 69 full-time
employees and 18 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. VCL leases its offices
and distribution center, which are all located in Munich, Germany.
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 LIVE against LIVE, Carolco and certain of
LIVE'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 LIVE'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 LIVE 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 LIVE and Carolco, including Pioneer LDCA, Inc.
("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 defendant 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 LIVE, 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 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 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.
Discovery is currently taking place in both lawsuits.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described actions at this time.
However, LIVE 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 LIVE's consolidated financial statements. In the
opinion of management, these actions, when finally concluded and
determined, will not have a material adverse effect upon LIVE's
financial position or results of operations.
On March 24, 1994, the same day that the signing of a letter
of intent with respect to the Merger was announced, a purported
class action lawsuit was filed in the Court of Chancery of the
State of Delaware in and for New Castle County by an alleged
stockholder of LIVE against LIVE, Carolco, certain of Carolco's and
LIVE's past and present executive officers and directors, Pioneer
and Cinepole Productions B.V., a stockholder of both LIVE and
Carolco ("Cinepole"). The complaint alleged, among other things,
that the defendants violated their fiduciary duties owed to LIVE's
stockholders in connection with the Merger. The plaintiff sought
a preliminary and permanent injunction enjoining the Merger under
its announced financial terms; an open market auction of LIVE; to
the extent the Merger was consummated prior to the entry of a final
judgment in the action, rescission of the Merger; repayment of
profits and benefits obtained as a result of the defendants'
alleged conduct; and attorneys fees and expenses. As a result of
the termination of the Merger Agreement, the plaintiff agreed to
voluntarily dismiss this lawsuit, without prejudice, in November
1994.
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 LIVE's financial position or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
As described above under "Recent Developments for the Company
- - Amendment of Restated Certificate of Incorporation to Effectuate
One For Five Reverse Stock Split," the Company filed a Certificate
of Amendment with the Delaware Secretary of State on December 9,
1994 in order to effectuate the Reverse Stock Split. The Reverse
Stock Split was approved by the affirmative written consent of
holders of the Prior Common Stock and the Series C Preferred Stock,
voting together as a single class, pursuant to a Consent
Solicitation Statement dated November 23, 1994. Only holders of
record of the Prior Common Stock and Series C Preferred Stock at
the close of business on October 31, 1994 were entitled to consent
to the Reverse Stock Split. The results of the voting were as
follows:
In Favor Opposed Abstaining
Type of Votes Shares Shares Shares
Prior Common Stock 5,859,498 451 60
Prior Common Stock into
which Series C Preferred
Stock was convertible 5,247,417 0 0
TOTAL VOTES 11,106,915 451 60
Percentage of eligible votes
(out of total 17,341,027
votes) 64% 0% 0%
As described above under "Recent Developments for the Company
- - Removal of Net Worth Covenant from Indenture," in November 1994,
a majority of the holders of the LIVE Increasing Rate Notes agreed
to eliminate the minimum net worth covenant contained in the
Indenture pursuant to a Consent Solicitation Statement dated as of
October 12, 1994. Only holders of record of the LIVE Increasing
Rate Notes at the close of business on September 12, 1994 were
entitled to consent to the amendments to the Indenture. The
results of the voting were as follows:
In Favor Opposed Abstaining
Prinicpal Amount $33,408,000 $0 $100
Percentage of Total 83.5% 0% 0%
No other 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, 1994.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Prices
On October 11, 1994, the NYSE commenced de-listing proceedings
for the Prior Common Stock (traded under the symbol "LVE") due to
the Company's failure to meet the NYSE's listing criteria relating
to net tangible assets available to common stock and three year
average net income. The Company subsequently applied to have the
Common Stock listed under the Nasdaq Stock Market's SmallCap Market
(the "SmallCap Market"). That application was accepted and on
January 17, 1995, the Common Stock was first listed on the SmallCap
Market, under the symbol "LIVE". As of February 28, 1995, there
were 1,262 holders of record of the Company's Common Stock. As of
the same date, 2,418,700 shares of the Company's Common Stock were
outstanding out of 24,000,000 shares authorized. On December 9,
1994 the Company effected the Reverse Stock Split. All amounts
indicated reflect the retroactive application of such reverse
split.
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 and The Nasdaq Stock Market.
Year Ended December 31, 1993
Quarter Ended High Low
March 31, 1993 . . . . . . . . . . $14.375 $8.125
June 30, 1993. . . . . . . . . . . 11.875 8.125
September 30, 1993 . . . . . . . . 13.125 8.750
December 31, 1993. . . . . . . . . 14.375 8.750
Year Ended December 31, 1994
Quarter Ended High Low
March 31, 1994 . . . . . . . . . . $15.625 $11.875
June 30, 1994. . . . . . . . . . . 10.000 8.125
September 30, 1994 . . . . . . . . 8.125 6.250
December 31, 1994. . . . . . . . . 7.500 2.750
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. 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 Waxie Maxie and VCL prior to their
respective acquisition dates in 1990, or for Strawberries and Waxie
Maxie subsequent to their sale in August 1994. 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 1990 through 1993 to conform to the 1994
presentations.
<TABLE>
<CAPTION> Year Ended December 31,
1990 1991 1992 1993 1994
(Amounts in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Summary of Operations
Combined net sales (1) . . . . . . . . . . $322,878 $264,418 $192,513 $172,246 $139,917
Operating profit (loss). . . . . . . . . . 59,851 (586) (4,854) (21,177) (6,174)
Interest expense, net. . . . . . . . . . . (8,852) (15,834) (14,424) (6,264) (3,300)
Income (loss) from continuing operations . 38,008 (17,737) (17,460) (28,209) (9,674)
Income (loss) from discontinued operations (12,460) (89,315) 1,090 (22,083) (100)
Extraordinary item . . . . . . . . -- -- 3,967 -- --
Net income (loss). . . . . . . . . 25,548 (107,052) (12,403) (50,292) (9,774)
Income (loss) per common share:
Continuing operations. . . . . . . . . . . 15.60 (7.75)(2) (8.20)(2) (13.15)(2) (8.05)(2)
Discontinued operations. . . . . . . . . (5.10) (37.00) .45 (9.15) (0.04)
Extraordinary item . . . . . . . . . . -- -- 1.65 -- --
Net income (loss) per common share . . . $ 10.50 $ (44.75)(2) $ (6.10)(2) $ (22.30)(2) $ (8.09)(2)
</TABLE>
<TABLE>
<CAPTION> December 31,
1990 1991 1992 1993 1994
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Data
Cash and receivables . . . . . . . . . . . $149,408 $ 97,597 $ 33,183 $ 44,790 $26,214
Inventories . . . . . . . . . . . 118,576 49,205 48,961 10,124 7,842
Total assets. . . . . . . . . . . 567,600 413,977 297,048 253,549 156,794
Total long-term debt obligations . . . . . 154,955 118,937 79,061 60,204 53,184
Total stockholders' equity . . . . . . . . 149,084 61,597 89,059 10,742 35,717
Working capital. . . . . . . . . . . . . . 94,762 17,109 15,763 5,797 40,878
<FN>
(1) Combined net sales include sales of VCL of $16,258,000, $26,713,000, $31,560,000, $28,511,000 and
$22,712,000 for the years ended December 31, 1990, 1991, 1992, 1993 and 1994, respectively.
(2) Income (loss) per common share in 1991, 1992, 1993 and 1994 is net of preferred dividends of $966,000,
$2,397,000, $3,589,000 and $3,791,000, respectively, and, for 1994, also is net of accretion in the
redemption value of the Series B Preferred Stock of $6,000,000.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Continuing Operations
Combined net sales of LHV and VCL decreased to $139,917,000
during 1994 compared to $172,246,000 during 1993. The decrease of
$32,329,000, or 18.8%, is primarily attributable to a weaker
release schedule at LHV in 1994 compared to 1993. LHV released
twenty-three rental titles during 1994 compared to thirty-three
rental titles during 1993. Results for 1994 included revenues from
the initial rental release of the films Fortress, The Piano,
Gunmen, The House of the Spirits, Beyond The Law and Wagons East.
There was also a decrease in sell-through sales during 1994
compared to 1993, primarily due to the sell-through release of Tom
& Jerry: The Movie in 1993. There was no comparable sell-through
title released in 1994.
Combined gross profits of LHV and VCL decreased $6,291,000, or
27.2%, to $16,847,000 during 1994 compared to $23,138,000 during
1993. The decrease in gross profit dollars was primarily related
to the decrease in sales and an increase in amortization of film
rights costs related to adjustments in projected values of certain
film properties. As a percentage of sales, gross profit decreased
from 13.4% during 1993 to 12.0% during 1994. The decrease in gross
profit as a percentage of sales is primarily due to the decrease in
rental sales, which usually generate higher gross profits as a
percentage of sales.
Combined selling, general and administrative expenses of LHV
and VCL increased $369,000, or 1.6%, to $23,069,000 during 1994
compared to $22,700,000 during 1993. As a percentage of sales, the
amount increased from 13.2% during 1993 to 16.5% during 1994. The
dollar increase is primarily a result of the write-off of the
entire $6,211,000 receivable owed to LIVE by Carolco (of which all
but $2,177,000 was reserved for in prior years) and approximately
$1,000,000 in expenses related to the proposed Merger, offset by
reduced overhead expenses. The percentage increase is primarily
due to the decrease in sales.
Combined interest income of LHV and VCL increased $1,256,000,
or 93.4%, to $2,601,000 during 1994 compared to $1,345,000 during
1993. The increase is primarily due to increased cash on hand
throughout 1994.
Combined interest expense of LHV and VCL decreased $1,708,000,
or 22.4%, to $5,901,000 during 1994 compared to $7,609,000 during
1993. Interest to maturity on $36,872,000 of the Company's
$40,000,000 of LIVE Increasing Rate Notes has been included in the
carrying value of the LIVE Increasing Rate Notes and will not be
recognized as interest expense in 1994 and future years. Interest
expense recognized in 1993 and 1994 on the remaining $3,128,000 of
LIVE Increasing Rate Notes was $312,000 and $476,000, respectively.
The decrease in interest expense in 1994 was primarily due to
reduced bank borrowings in 1994.
LHV and VCL had a combined operating loss of $6,174,000 during
1994 compared to a combined operating loss of $5,436,000 during
1993. Both LHV and VCL had operating losses for 1993 and LHV had
an operating loss for 1994. The combined loss of LHV and VCL
before income tax expense was $9,474,000 during 1994 compared to a
combined loss of $27,441,000 during 1993. The decrease in the
combined pre-tax loss of $17,967,000 was primarily due to the write
down of the carrying value of VCL in 1993 in anticipation of the
disposition thereof, offset by a reduction in interest expense in
1994.
Preferred dividends of $3,589,000 and $3,791,000 in 1993 and
1994 represents the 5% cash dividend accrued on both the Series B
Preferred Stock and the Series C Preferred Stock as well as, in the
case of the Series C Preferred Stock, additional 5% dividends on
accrued but unpaid dividends.
The effective income tax (benefit) rate from continuing
operations for 1994 was (2.1)%. The effective tax rate from
continuing operations for 1993 was (2.8)%.
Revenues, operating profits/(losses) and identifiable assets
of the Company's foreign operations were $26,629,000, $2,945,000
and $33,262,000, respectively, in 1994 compared to $34,009,000,
($3,289,000) and $28,871,000, respectively, in 1993.
Discontinued Operations
As a result of the Board of Directors' decision in early 1994
to dispose of LIVE's interests in the Specialty Retail Division and
VCL, the Specialty Retail Division's results of operations for 1993
have been restated and accounted for as a discontinued operation.
VCL's operating results for 1993 and 1994 have been restated and
accounted for as a disposal of a portion of a line of business.
Accordingly, the provision for losses during the phase-out period
totaling $2,024,000 for the Specialty Retail Division and
$3,885,000 for VCL have been accrued and accounted for at December
31, 1993 and are not included in the results of operations for
1994. Losses of $1,858,000 and $2,994,000 have been charged
against the respective provisions during 1994.
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 financial
restructuring of the Company that was completed in March 1993 (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 interest income of LHV and VCL decreased $935,000, or
41.0%, to $1,345,000 during 1993 compared to $2,280,000 during
1992. The decrease is primarily due to decreased cash on hand
throughout 1993.
Combined interest expense of LHV and VCL decreased $9,095,000,
or 54.4%, to $7,609,000 during 1993 compared to $16,704,000 during
1992. Effective September 1, 1992, interest stopped accruing on
the then - outstanding $110,000,000 principal amount of 14.5%
Senior Subordinated Notes due May 15, 1999 (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 LIVE Increasing Rate
Notes has been included in the carrying value of the LIVE
Increasing Rate 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 LIVE Increasing Rate
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 $3,579,000 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.
Liquidity and Capital Resources
In its report on the consolidated financial statements of the
Company for the fiscal year ended December 31, 1993, LIVE's
auditors noted that there was substantial doubt concerning LIVE's
ability to continue as a going concern for the following reasons:
a. LIVE was in default under the Previous Facility and the
Previous Facility was scheduled to expire during 1994;
b. The 12% Notes became due and payable in 1994; and
c. At the time of the issuance of that report, LIVE had not
arranged for the repayment and/or replacement of those debts.
Since the issuance of that report, LIVE has accomplished the
following:
1. On November 16, 1994 LIVE replaced the Previous Facility
with the Foothill Credit Facility.
2. On August 31, 1994, LIVE sold its entire interest in the
Specialty Retail Division for a cash price of $35,000,000. The net
proceeds of the sale, together with other cash on hand, were used
to repay the full amount of the 12% Notes - $5,750,000, plus
accrued interest, on September 15, 1994, and the remaining
$31,250,000, plus accrued interest, on October 17, 1994.
3. LIVE received the consent of the holders of a majority of
the principal amount of the LIVE Increasing Rate Notes removing
from the Indenture a minimum consolidated net worth covenant,
thereby removing a potential event of default.
Based upon the effectiveness of the Foothill Credit Facility,
the repayment in full of the 12% Notes and the elimination of net
worth covenant from the Indenture, management believes that its
existing financial resources and anticipated cash flows from
operations will be sufficient to fund its cash requirements for at
least the next twelve months. The report of LIVE's auditors on the
consolidated financial statements of the Company for the fiscal
year ended December 31, 1994, contains no expression of doubt
concerning LIVE's ability to continue as a going concern.
In the second quarter of 1994, management of LIVE decided to
begin releasing fewer rental titles per month than in prior years
for a number of reasons, among them being: (a) fewer titles being
purchased by LIVE since late 1991 due to the liquidity problems
encountered by LIVE since that time, (b) a shift in rental market
tastes, with a much greater portion of video store purchases being
devoted to theatrically released "A" titles than lower budgeted,
straight to video or television "B" titles that have been the
predominant titles released by LIVE since 1992, and (c) an increase
in the absolute number of "B" titles in the marketplace, resulting
in increased competition for decreasing retailer purchase funds.
Management currently intends to address these issues by (i)
reducing its number of rental titles released per month,
particularly the direct-to-video "B" titles, allowing LIVE's
marketing and sales forces to place increased emphasis on a smaller
number of titles, (ii) acquiring more rights to films than only
domestic video rights (including theatrical, television,
international and CD-ROM) and diversifying its business to license
such additional rights directly rather than through intermediaries,
(iii) continuing LIVE's focus on the sell-through business,
exploiting LIVE's library of over 2,000 titles including children's
and special interest programs, and (iv) attempting to release a
higher percentage of "A" titles by increasing its efforts to
acquire films with greater theatrical release potential. Obtaining
the Foothill Credit Facility was a critical factor in this latter
effort. LHV anticipates releasing on home video a total of between
50 to 75 feature films in 1995 through 1996.
Management believes that the decrease in revenues due to fewer
rental releases per month will eventually be compensated for
through a combination of increased ancillary revenues (such as
theatrical, television, international and CD-ROM) and higher
revenues per rental release due to a combination of increased focus
on fewer titles and a higher percentage of "A" title acquisitions.
There is no assurance that this will be the case, however.
At December 31, 1994, LIVE had total current assets of
$103,631,000 and total current liabilities of $62,753,000,
resulting in working capital of $40,878,000, an increase of
$35,081,000 compared to LIVE's working capital at December 31,
1993. The increase is primarily due to the reclassification of
$40,000,000 related to the anticipated redemption of the Series B
Preferred Stock from a liability in 1993 to equity in 1994.
Historically, LIVE 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 12% Notes. For the twelve months
ending December 31, 1994, LIVE generated positive cash flow from
continuing operations of $35,055,000.
On May 11, 1992, LHV entered into a three-year distribution
agreement with WEA Corp. ("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 (6.0% at December 31, 1994) 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. The
amount of the advance outstanding as of December 31, 1994 was
$3,333,333. LHV is currently in negotiations for a potential
extension of the distribution agreement with WEA beyond its May
1995 expiration date. There is no assurance that such an extension
will be agreed upon or, if so, what the terms of such extension may
be.
On August 31, 1994, LIVE sold its entire interest in its
Specialty Retail Division to a group including Castle Harlan, Inc.,
Ivan R. Lipton, the President of the Specialty Retail Division, and
other senior managers of the Specialty Retail Division. The
purchaser group also included Jefferson Capital; R. Timothy
O'Donnell, the President of Jefferson Capital, is a Director of
LIVE. The total purchase price paid to LIVE for the Specialty
Retail Division was $35,000,000 in cash.
LIVE's Series B Preferred Stock was mandatorily redeemable
from the net proceeds of any sale of the Specialty Retail Division
remaining after the payment of transaction costs and the payment of
any debt secured by the Specialty Retail Division. LIVE's
$37,000,000 of the 12% Notes, issued in 1993, became due and
payable in September and October 1994, and repayment of the 12%
Notes was secured by the stock of the Specialty Retail Division.
Due to the demand for payment made by the holders of all
$37,000,000 in principal amount of the 12% Notes, LIVE used all of
the net proceeds from the sale of the Specialty Retail Division to
repay the 12% Notes and no net proceeds remained from the sale to
redeem any of the Series B Preferred Stock.
As of December 31, 1994, the aggregate redemption price for
the Series B Preferred Stock was $50,400,000 ($9.00 per share) and
that redemption price increases by an additional $560,000 per month
through October 1995, when the redemption price reaches $56,000,000
($10.00 per share) and remains at that price thereafter.
Although LIVE has no obligation to redeem any Series B
Preferred Stock, subject to the availability of funds and the prior
approval of its Board of Directors and its lenders, LIVE may
acquire shares of its Series B Preferred from time to time, either
through private purchases or through open market purchases.
Through March 15, 1995, LIVE acquired, and subsequently retired, a
total of 1,800,000 shares of the Series B Preferred Stock at an
average price of under $4.00 per share.
Investing activities generated a negative cash flow during the
twelve months of 1994 of $459,000, primarily as a result of the
acquisition of property and equipment at LHV.
On November 16, 1994 LIVE entered into the Foothill Credit
Facility. Borrowings available under the Foothill Credit Facility
are limited to $20,000,000 until additional participant lenders are
added to the Facility, at which time the borrowings available will
be increased to a maximum of $30,000,000. Borrowings under the
Foothill Credit Facility are determined under a borrowing base
calculation, which includes certain allowable accounts receivable,
film rights and inventory balances, and are secured by
substantially all of the assets of LIVE and its subsidiaries.
Outstanding borrowings under the Foothill Credit Facility bear
interest at the rate of 2% per annum above the highest of the Bank
of America, Mellon Bank or Citibank prime rate (10.5% at December
31, 1994), payable monthly. In no event will interest under the
loan be less than 7% per annum. The Foothill Credit Facility
provided for a closing fee of $500,000, an annual facility fee of
1/4% of 1% and a commitment fee of 1/4 of 1% on any unused amount.
The Foothill Credit Facility also requires LIVE to meet certain
financial ratios, and as of December 31, 1994 the Company was in
compliance with all such financial ratios.
The Foothill Credit Facility replaced the Previous Facility on
which no amounts were outstanding.
By late 1994, LIVE believed that at the end of 1994 it may
have been in violation of the minimum consolidated net worth
covenant contained in the Indenture (the "Indenture") governing the
LIVE Increasing Rate Notes. Such default would have permitted the
trustee thereunder or holders of 25% in aggregate principal amount
of the LIVE Increasing Rate Notes to give notice and accelerate
maturity of the indebtedness represented by the LIVE Increasing
Rate Notes. In November 1994, a majority of the holders of the
LIVE Increasing Rate Notes agreed to eliminate the minimum net
worth covenant contained in the Indenture, thereby removing the
possibility that LIVE might have defaulted under that covenant in
1995. As part of the amendment of the Indenture, LIVE agreed to
increase the interest rate on the LIVE Increasing Rate Notes from
10% per annum to 12% per annum effective October 18, 1994. The
interest rate on the LIVE Increasing Rate Notes was scheduled to
increase to 12% in March 1996.
Dividends on 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
and December 31, 1993, and June 30 and December 31, 1994 were
accrued by LIVE, those dividends were not paid due to restrictions
imposed on LIVE 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 LIVE (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. LIVE has had a
consolidated net loss for the period subsequent to March 23, 1993.
Thus, pursuant to the terms of the Series B Preferred Stock, LIVE
was prohibited from paying the June 30 and December 31, 1993, and
June 30 and December 31, 1994 cash dividends on the Series C
Preferred Stock which, together with accrued and unpaid dividends
thereon, totalled $1,378,000 as of December 31, 1994.
The unpaid LIVE Series C Preferred dividend itself bears a
dividend of 5% per annum, and is due on the next regularly
scheduled dividend payment date for the LIVE Series C Preferred.
LIVE intends to pay the June 30 and December 31, 1993, and June 30
and December 31, 1994 dividends, plus the additional dividends
thereon, as soon as it has sufficient net income to permit such
payment to occur or as soon as the LIVE Series B Preferred has been
redeemed, provided that such payment does not impair the capital of
LIVE and is permitted under the Delaware General Corporation Law
("DGCL").
LIVE experienced negative cash flows from financing activities
of $52,590,000 during 1994 primarily due to interest payments on
bank debt, repayment of the 12% Notes and interest payments on long
term obligations.
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.
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 February 28,
1995.
Started
with the
Name Age Position Company
Anthony J. Scotti 55 Director; Chairman of the Board 1988
Frans J. Afman 61 Director 1988
Jay Burnham 32 Director 1993
Jonathan D. Lloyd 42 Director 1993
Ryuichi Noda 60 Director 1994
Masao Nomura 45 Director 1993
R. Timothy O'Donnell 39 Director 1988
Gregory R. Pierson 36 Director 1994
Roger R. Smith 52 Director 1988
Roger A. Burlage 52 Director; President and Chief 1994
Executive Officer
of the Company and LHV
Ronald B. Cushey (1) 38 Director; Executive Vice 1993
President and Chief
Financial Officer of the Company
and LHV
Michael J. White 39 Director; Executive Vice 1990
President/Chief
Administrative Officer,
General Counsel and
Corporate Secretary of
the Company
Paul Almond (2) 52 Executive Vice President/ 1994
Programming and Acquisitions of LHV
Steven E. Mangel (2) 41 Executive Vice President/Legal and 1986
Business Affairs and General Counsel
of LHV
Elliot Slutzky (2) 46 Executive Vice President/Sales and 1994
Marketing of LHV
- ------------------
(1) Became Executive Vice President/Chief Financial Officer of the
Company and LHV in January 1995.
(2) Executive officers of LHV who were determined by the Board of
Directors of the Company to be executive officers of the
Company effective as of January 1, 1995 by virtue of the
policy making functions that they perform for the Company.
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 ("Scotti Brothers"), 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 Bank Nederland N.V. ("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 Libra Investments ("Libra"), a
diversified investment services firm, since January 1995. From
June 1990 until he joined Libra, Mr. Burnham performed investment
analyst services for Paul D. Sonz Partners, a diversified
investment services firm. 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 Las Vegas, a hotel and gaming establishment located in Las
Vegas, Nevada.
Mr. Lloyd, a Director of the Company since June 1993, is
currently the Chairman, President and Chief Executive Officer of
OpTel, Inc. ("OpTel"), a national developer and operator of cable
television and telephone systems. Prior to joining OpTel, Mr.
Lloyd was the President of Qintex Entertainment, Inc. ("Qintex"),
a company engaged in the development and production of television
programming, a position he held from January 1990 until December
1993. 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.
Mr. Noda became a Director of the Company in December 1994.
Mr. Noda became President of Pioneer LDC, Inc., a subsidiary of
Pioneer Electronic Corporation, in April 1991 and has been a
Director of Pioneer Electronic Corporation since December 1988.
From October 1988 to April 1991, he was Deputy General Manager of
the International Division of Pioneer Electronic Corporation. From
January 1986 until October 1988, he was President and Chief
Executive Officer of Pioneer Electronics (USA) Inc., a company
engaged in sales and marketing of consumer electronics in the
United States. From 1985 to 1986, he served as General Manager of
the Planning and Coordination Department of the International
Division of Pioneer Electronic Corporation. Mr. Noda also serves
as a Director of Carolco.
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, a
privately held investment banking group which he co-founded in
September 1989. Mr. O'Donnell has been a Director of All American
since January 1992, a Director of Shorewood Packaging Corporation,
a packager of records, audiocassettes and videocassettes, since
1992, and a Director of Cinergi Pictures Entertainment Inc., an
independent motion picture distribution company, since 1994.
Mr. Pierson became a Director of LIVE in April 1994. Mr.
Pierson has been the General Counsel of Pioneer North America, Inc.
("PNA") since 1991. From 1985 to 1991, Mr. Pierson was an attorney
with the law firm of Adams, Duque & Hazeltine in Los Angeles. Mr.
Pierson also serves as a Director of Carolco.
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. Burlage has served as President and Chief Executive
Officer of LIVE and LHV since January 1994 and became a Director of
the Company in December 1994. From 1989 until joining LIVE, Mr.
Burlage served as President and Chief Executive Officer of Trimark
Holdings, Inc., a 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. ("New World") and with AVCO Corporation
and AVCO Embassy Pictures.
Mr. Cushey has served as Executive Vice President and Chief
Financial Officer of LIVE and LHV since January 1995. He became a
Director of the Company on November 9, 1993. He was an Executive
Consultant for PNA from April 1992 until December 1994. 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. White became a Director of the Company in December 1994.
He 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. Almond was named Executive Vice President, Acquisitions
and Productions, of LHV in January 1994. From 1986 until joining
LIVE, Mr. Almond was Senior Vice President, Worldwide Acquisitions
at ITC Entertainment Group, an international motion picture
production and distribution company.
Mr. Mangel became LHV's Executive Vice President in July 1994
and currently supervises the Company's international sales division
and its legal and business affairs department. Previously, Mr.
Mangel served as General Counsel and Senior Vice President/Legal
and Business Affairs since August 1989 after serving as its Vice
President since January 1986. From 1979 until joining LHV, Mr.
Mangel was a private practitioner, specializing in copyright and
entertainment law, becoming a member of the law offices of Shapiro
and Mangel in 1984.
Mr. Slutzky was named Executive Vice President, Sales and
Marketing of LHV in February 1994. From 1989 until his appointment
at LIVE, Mr. Slutzky was President, Marketing and Distribution, for
Epic Productions, Inc. and Vision International.
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, Gregory R. Pierson and R. Timothy O'Donnell, whose terms
expired at the 1994 annual meeting of stockholders and who are
serving until the election of their successors at the 1995 annual
meeting of stockholders; Roger A. Burlage, Roger R. Smith and
Michael J. White at the 1995 annual meeting of stockholders; and
Frans J. Afman, Ryuichi Noda, 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, 1994,
December 31, 1993 and December 31, 1992 to Mr. Burlage, who has
served as the Chief Executive Officer of the Company from January
1994 and to each of the other executive officers of the Company
during 1994 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, 1994, there were only two executive officers of the
Company (Mr. Burlage and Michael J. White). Rodney W. Trovinger,
formerly the Senior Vice President and Acting Chief Financial
Officer of the Company, passed away in April 1994 and his annual
salary and bonus between January 1, 1994 and April 17, 1994 was
less than $100,000. Ivan R. Lipton, the President of the Specialty
Retail Division, ceased serving as an executive officer of the
Company by virtue of the sale of the Specialty Retail Division in
August 1994; Mr. Lipton's annual salary and bonus between January
1, 1994 and August 31, 1994 was greater than $100,000. Messrs.
White and Lipton are referred to herein as the "Named Executives."
Ronald B. Cushey became Executive Vice President and Chief
Financial Officer of the Company in January 1995, and Paul Almond,
Steven Mangel and Elliot Slutzky - all executive officers of LHV -
were named as executive officers of the Company effective as of
January 1, 1995 by virtue of the policy making functions that they
perform for the Company.
Following the Summary Compensation Table are certain
additional charts and tables detailing other aspects of the
compensation of the Named Executives including (a) an Option Grants
Table that includes information regarding individual grants of
options made to the Named Executives during fiscal 1994 along with
the potential realizable values of such options and (b) a Fiscal
Year End Option Table that indicates whether any of the Named
Executives exercised options in fiscal 1994 and includes the number
and value of unexercised options held by the Named Executives at
December 31, 1994.
<TABLE> SUMMARY COMPENSATION TABLE
<CAPTION>
Long Term
Compensation
Annual Compensation Awards (1)
Other
Annual Securities All Other
Compen- Underlying Compen-
Name and sation Options/ sation
Principal Position Year Salary ($) Bonus ($) ($)(2) SARs (#)(3) ($)
<S> <C> <C> <C> <C> <C> <C>
Roger A. Burlage 1994 432,692 100,000 (5) 84,213 (6) 120,000 -
Chief Executive 1993 - - - - -
Officer (4) 1992 - - - - -
Michael J. White 1994 248,450 - - 4,000 3,288 (7)
Executive Vice 1993 236,385 50,000 (8) - 2,000 3,090 (9)
President/Chief 1992 220,423 95,000 - 6,000 3,404 (10)
Administrative
Officer and
General Counsel
Ivan R. Lipton 1994 113,333 25,000 (12) - 0 4,620 (7)
President/Straw- 1993 161,250 70,499 - 4,000 3,090 (9)
berries Inc. (11) 1992 150,000 124,250 (13) - 6,000 2,250 (10)
<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) 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.
(3) Gives effect to the Reverse Stock Split.
(4) Mr. Burlage became Chief Executive Officer of the Company in January
1994.
(5) Represents a signing bonus paid for signing a four year employment
agreement with the Company.
(6) Represents $35,000 paid for life insurance for Mr. Burlage's benefit
in addition to the life insurance benefits provided to all employees
of the Company, and other amounts, each equaling less than 25% of the
total prerequisites and other personal benefits provided to
Mr. Burlage, for the following costs: reimbursement for automobile
leasing costs, disability insurance in addition to the disability
insurance benefits provided to all employees of the Company, country
club dues, reimbursement of legal fees and imputed interest on a loan
of $29,500 made by the Company to Mr. Burlage to enable Mr. Burlage
to obtain a country club membership, which loan is repayable by
Mr. Burlage upon any termination of his employment relationship
with the Company.
(7) Represents for Messrs. White and Lipton matching contributions in
the amount of $3,288 and $4,620, respectively, under the LIVE
Incentive Savings Plan, which is a 401(k) savings plan.
(8) Represents a bonus paid in recognition of Mr. White's efforts in
connection with the completion of the Company's financial
restructuring in March 1993.
(9) Represents for Messrs. White and Lipton matching contributions in
the amount of $3,090 each under the LIVE Incentive Savings Plan.
(10) Represents for Messrs. White and Lipton matching contributions in
the amount of $3,404 and $2,250, respectively, under the LIVE
Incentive Savings Plan.
(11) For 1994, represents amount paid between January 1, 1994 and
August 31, 1994, the date of the sale of the Specialty Retail
Division.
(12) Represents amount awarded to Mr. Lipton following the sale of
the Specialty Retail Division in recognition of his special
and exceptional service on behalf of the Division while the
Division was owned by the Company
(13) Includes a $50,000 signing bonus to extend Mr. Lipton's
employment agreement through January 1996.
</FN>
</TABLE>
<PAGE>
The following table sets forth certain information regarding the Chief
Executive Officer and the other Named Executives identified in the Summary
Compensation Table.
<TABLE> OPTION/SAR GRANTS IN THE LAST FISCAL YEAR
<CAPTION>
Potential Realizable Value
at Assumed Annual Rates
of Stock Price Appreciation
Individual Grants for Option Term
% of
Total
Options/
SARs
Options/ Granted to Exercise
SARs Employees or Base Expir-
Granted in Fiscal Price ation
Name (#) (1) Year (2) ($/Share) (3) Date 5% ($) (4) 10% ($) (4)
<S> <C> <C> <C> <C> <C> <C>
Roger A. Burlage 0 0% N/A N/A N/A N/A
Michael J. White 4,000 4.6% 15.625 2/18/04 39,306 99,607
Ivan R. Lipton 0 0% N/A N/A N/A N/A
<FN>
(1) Gives effect to the Reverse Stock Split.
(2) Total of 86,570 granted.
(3) The closing price of the Company's Common Stock on the Nasdaq Stock
Market's SmallCap Market on December 31, 1994 was $2.75.
(4) Based upon the number of shares of the Company's Common Stock
outstanding as of December 31, 1994, a 5% and 10% increase in the annual
rates of stock price appreciation over the option term would result
in an aggregate increase of $4,183,080 and $10,600,746, respectively,
in the value of the Common Stock held by all the Company's Common
Stockholders (assuming no exercise of warrants, other stock options
or conversion of Series B Preferred Stock or Series C Preferred Stock).
</FN>
</TABLE>
<PAGE>
The following table sets forth certain information regarding option
exercises and option values for the Chief Executive Officer and the other
Named Executives identified in the Summary Compensation Table.
AGGREGATE OPTION/SAR EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
Shares Acquired Value Exercisable/ Exercisable/
Name on Exercise (#) Realized Unexercisable* Unexercisable
Roger A. Burlage -0- - 30,000 (E) 0 (E)
90,000 (U) 0 (U)
Michael J. White -0- - 6,800 (E) 0 (E)
5,200 (U) 0 (U)
Ivan R. Lipton -0- - 0 (E) 0 (E)
0 (U) 0 (U)
(*) Gives effect to the Reverse Stock Split.
Board Fees
Directors Fees
During 1994, all Directors of the Company were entitled to
receive non-qualified options to acquire 1,000 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 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.
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.
Arrangements with Board Members
In September 1994, LIVE offered to amend the applicable stock
option agreements with respect to all stock options held by members
of its Board of Directors to provide that such options shall be
exercisable for a period of twelve months following termination of
employment or other relationship with LIVE to the extent such
options are exercisable on the date of such cessation of employment
or other relationship. Other than agreements concerning options
granted to members of the Stock Option Committee of LIVE's Board of
Directors in January 1994, which agreements include the twelve-
month exercise provision, the applicable stock option agreements of
all members of LIVE's Board currently provide that options shall be
exercisable for a period of ninety (90) days following termination
of employment or other relationship with LIVE to the extent such
options are exercisable on the date of such cessation of employment
or other relationship. All of the members of LIVE's Board of
Directors accepted this offer.
On March 6, 1995, the Stock Option Committee of the Board of
Directors granted to all current employees and Directors of LIVE
and LHV (other than members of the Stock Option Committee) who were
holders of options pursuant to the Company's 1988 Stock Option and
Stock Appreciation Rights Plan, as amended (the "1988 Plan"), the
option to agree to cancel certain options (the "Canceled Options")
and to receive in return therefor new options (the "New Options")
pursuant to the 1988 Plan, all on the following terms and
conditions: (i) the exercise price for the New Options would equal
$3.50, the closing price of the Common Stock on the SmallCap Market
on March 6, 1995, (ii) fifty percent (50%) of the New Options would
vest on March 6, 1996; the remainder would vest on March 6, 1997,
provided that no New Options would vest earlier than the scheduled
vesting date for the corresponding Canceled Options, and (iv) all
New Options would expire on the expiration date of the
corresponding Canceled Options.
Compensation Committee Interlocks and Insider Participation
During the fiscal year ended December 31, 1994, the following
Board members served on the Company's Compensation Committee: Mr.
Afman, Mr. O'Donnell, Mr. Scotti (until December 1994) and Mr.
Pierson (effective December 1994). During the fiscal year ended
December 31, 1994, none of the members of the Compensation
Committee were officers or employees of LIVE or any of its
subsidiaries. Furthermore, none of the members of the Compensation
Committee are former officers of LIVE or any of its subsidiaries.
The Company or its subsidiaries had the following relationships and
transactions with members of the Compensation Committee and/or
their affiliates.
Arrangements with Mr. Scotti or Affiliates
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.
Arrangements with Mr. O'Donnell or Affiliates
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 obtaining the Foothill Credit Facility and in
December 1994 received a total fee of $300,000 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 any consideration by the
Company of a potential business combination of the Company and
Carolco. As a result of the Company's execution of the Merger
Agreement, an additional $400,000 was paid to Jefferson Capital in
August 1994. 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 October 1994, LIVE retained Jefferson Capital as its
advisor in connection with LIVE's efforts to obtain the agreement
of the holders of the LIVE Increasing Rate Notes to eliminate the
minimum net worth covenant contained in the Indenture. Jefferson
Capital received a total fee of $200,000 (one half paid in October
1994 and the second half paid in November 1994) for investment
banking services provided in connection with such efforts.
Jefferson Capital's fee was not contingent upon the success of
LIVE's efforts to amend the Indenture. LIVE 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 for this engagement.
In August 1994, LIVE sold the Specialty Retail Division for
the total purchase price of $35,000,000. The purchaser is an
affiliate of each of (i) Jefferson Capital and (ii) Ivan Lipton,
President of the Specialty Retail Division.
Arrangements with Mr. Afman or Affiliates
In July 1994, LIVE entered into an agreement with affiliates
of Mr. Afman whereby such affiliates agreed to provide services
with respect to the international licensing of film rights held by
LIVE. The fees payable to the affiliates of Mr. Afman are based on
the license fee paid for such rights by unaffiliated third parties.
Such affiliates of Mr. Afman also are entitled to be reimbursed for
certain expenses they incur in connection with the services they
perform under the agreement. The agreement is terminable by either
party upon thirty days prior notice.
Arrangements with Mr. Pierson or Affiliates
Pioneer
Pursuant to an agreement dated October 1991, LIVE America
Inc., an affiliate of the Company ("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. Such
advance has been recouped by Pioneer and no further amounts are
owing thereunder.
Pioneer is the owner of all of the Series C Preferred Stock.
The Series C Preferred Stock bears dividends at the rate of 5% per
annum, payable semi-annually on January 1 and July 1. The semi-
annual dividends on the Series C Preferred Stock scheduled to be
paid to Pioneer on July 1, 1993, January 1, 1994, July 1, 1994 and
January 1, 1995, were not paid due to restrictions on LIVE imposed
by the terms of the Series B Preferred Stock. Under the terms of
the Certificate of Designations, Preferences and Rights of the
Series C Preferred Stock, any accrued but unpaid dividends on the
Series C Preferred Stock are added to the liquidation preference of
the Series C Preferred Stock on the semi-annual payment date. As
of January 2, 1995, unpaid dividends totalling $1,378,000 from July
1, 1993, January 1, 1994, July 1, 1994 and January 1, 1995 had been
added to the liquidation preference resulting in a total
liquidation preference of $16,378,000.
Under the terms of the Certificate of Designations,
Preferences and Relative, Participating, Optional or Other Special
Rights of the Series B Preferred Stock, LIVE is prohibited from
paying dividends on any junior series of LIVE preferred stock,
including the Series C Preferred Stock, other than from the
cumulative net income of LIVE from and after the date of issuance
of the Series B Preferred Stock (March 23, 1993). LIVE has had a
cumulative net loss since March 23, 1993 and thus has been
prohibited from paying dividends on the Series C Preferred Stock.
As a result of such non-payment, the unreturned liquidation
preference of the Series C Preferred Stock increased to $16,378,000
as of December 31, 1994. It is the intention of LIVE, immediately
upon any redemption or retirement of the Series B Preferred Stock,
to pay all accrued and unpaid dividends on the Series C Preferred
Stock, provided that the payment of such dividends does not impair
the capital of LIVE and is not prohibited under the DGCL.
Immediately following such payment, the liquidation preference of
the Series C Preferred Stock would equal $15,000,000.
Giving effect to the Reverse Stock Split, the Series C
Preferred Stock is convertible into that number of shares of Common
Stock that is equal to the unreturned liquidation preference of the
Series C Preferred Stock divided by $15.225. Thus, as of December
31, 1994, the Series C Preferred Stock was convertible into
1,075,753 shares of Common Stock. Upon the payment of all accrued
and unpaid dividends on the Series C Preferred Stock, the Series C
Preferred Stock will be convertible into 985,221 shares of Common
Stock.
In July 1993, LIVE granted Pioneer, Le Studio Canal+ S.A. ("Le
Studio") and RCS Video International Services B.V. ("RCS") the
right to require LIVE to use its best efforts to register all
Common Stock in the Company owned by either Pioneer, Le Studio or
RCS, 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 financial restructuring of Carolco
that occurred in October 1993.
Due to the illness and subsequent death of Rodney Trovinger,
LIVE's former Acting Chief Financial Officer, PNA agreed to allow
LIVE to use the services of Mr. Cushey, a director of LIVE who was
at that time an Executive Consultant for PNA, on an indefinite
basis to provide assistance to LIVE's accounting and finance
departments pursuant to an agreement dated as of April 1, 1994.
The agreement was terminable by either party upon ten days' notice.
During the term of this agreement, LIVE agreed to reimburse PNA for
all of the costs to PNA of Mr. Cushey's employment by PNA. LIVE
also agreed to indemnify both Mr. Cushey and PNA for Mr. Cushey's
activities while providing services to LIVE under such agreement.
This agreement terminated in December 1994 as a result of Mr.
Cushey's departure from PNA in order to become a full time employee
of LIVE. LIVE paid PNA a total of $157,500 under this agreement.
In July 1994, LIVE paid Mr. Cushey an additional fee of $25,000 for
financial advisory services then expected to be rendered by Mr.
Cushey to LIVE during 1994 in connection with the Merger.
In July 1994, LIVE NV and an affiliate of Pioneer reached an
agreement whereby the Pioneer affiliate will receive the Japanese
theatrical, video and television distribution rights to the films
Wagons East, Top Dog, The Beans of Egypt, Maine and Goldy III.
Carolco
Pioneer owns approximately 41% of the outstanding voting
equity of Carolco. Le Studio and its affiliates own approximately
17% of the outstanding voting equity of Carolco. RCS and its
affiliates own approximately 5.8% of the outstanding voting equity
of Carolco.
In March 1994, LIVE and Carolco reached agreement in principle
on a business combination (the "Merger"), and executed a Merger
Agreement with respect thereto on August 10, 1994 (the "Merger
Agreement"). On October 13, 1994 LIVE and Carolco jointly
announced that they had agreed to terminate the Merger Agreement
between the two companies and to end all discussions regarding a
possible business combination. In 1994, LIVE incurred
approximately $1,000,000 in expenses in connection with the Merger.
As a result of the December 1994 agreement discussed below, which
settled all open accounts between LIVE and Carolco, LIVE wrote off
the remaining unpaid receivable amount of $6,211,000 that LIVE had
recorded in its financial records as owing from Carolco, the entire
amount of which previously had been reserved for.
LHV is party to 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 on which
principal photography has commenced prior to July 31, 1995 or for
which LHV has paid an advance to Carolco prior to such date, 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, March 1992 and
December 1994 (the "Domestic Master Agreement"). Canadian home
video rights have not been granted to LHV in the case of several
films produced or acquired by Carolco. Pioneer, Le Studio, RCS
and/or their affiliates (collectively, the "Carolco Strategic
Investors") have co-financed certain of the motion pictures
produced by Carolco subject to the Domestic Master Agreement. The
Domestic 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.
The Domestic Master Agreement also guarantees that LHV will receive
a certain minimum distribution fee; there is a corresponding upper
limit on the total gross distribution fee that LHV can earn. "Net
receipts" generally are LHV's wholesale receipts less certain
expenses such as marketing and costs of manufacturing. All aspects
of the Domestic 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 1994, LHV made
no payments to Carolco and at December 31, 1994 had no recorded
contractual obligations under the Domestic Master Agreement.
Additional advances will be due if additional films are made
available from Carolco under the Domestic Master Agreement.
LEII is party to an agreement with Carolco International N.V.
(now Carolco International Inc.) ("CII") entitling LEII to acquire
home video rights in the German-speaking European market for most
motion pictures produced or controlled by CII on which principal
photography has commenced prior to July 31, 1995 or for which LHV
has paid an advance to CII prior to such date (other than rights
granted by CII to other parties prior to April 1991), under a
master agreement entered into in April 1991 (the "German Master
Agreement"). The Carolco Strategic Investors have co-financed
certain of the motion pictures produced by CII subject to the
German Master Agreement. The German Master Agreement provides for
the payment by LEII of certain advances for each picture, which
advances are recoupable from LEII's net receipts from video
distribution of these pictures. LEII is guaranteed to earn a
certain minimum overall distribution fee on each film; there is a
corresponding upper limit on the total gross distribution fee that
LEII can earn on each film. "Net receipts" generally are the
wholesale receipts of LEII 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
1994, LEII did not pay any advances to CII and at December 31, 1994
had no recorded contractual obligations under the German Master
Agreement. Additional advances will be due if additional films are
made available from Carolco under the German Master Agreement.
In December 1992, the Company, Carolco and certain of their
affiliates reconciled the amounts owing to each by the others (the
"Reconciliation Agreement"). In December 1994, as part of an
agreement settling all open accounts between them, including those
that arose as a result of the Reconciliation Agreement, LIVE and
Carolco agreed that all individual films previously delivered to
LHV or LEII under either the Domestic Master Agreement or the
German Master Agreement would no longer be cross-collateralized
with other films, either within individual packages or among so
called "film packages"; the companies also agreed that for purposes
of their settlement only, all such films would be deemed to have
earned the minimum distribution fee that was guaranteed to LHV and
LEII.
LEII and CII were general partners in a Netherlands Antilles
general partnership which was involved in the international
marketing and distribution of video rights. LEII's contribution to
the partnership consisted of international video rights, and CII's
contribution consisted of international distribution services.
LEII had a 99% interest in the partnership and CII's interest was
1%. By mutual agreement of LEII and CII, the partnership was
dissolved, and the service agreement was canceled, both effective
as of September 30, 1994.
In December 1993, an affiliate of Carolco commenced principal
photography of Wagons East, starring John Candy and Richard Lewis.
As a result of the untimely death of Mr. Candy, in March 1994
Carolco entered into an arrangement with the insurance carrier and
an affiliate of LIVE pursuant to which certain rights in the film
were conveyed to LIVE, LIVE agreed to fund completion of the film,
and LIVE engaged Carolco to complete production and servicing of
certain pre-existing distribution agreements.
In January 1995, in order to settle disputes between them with
respect to the ownership of the United States and Canada video
distribution rights to the film Cutthroat Island, LIVE and Carolco
reached agreement that Cutthroat Island would not be subject to
either the Domestic Master Agreement or the German Master
Agreement. LIVE also reached agreement with the distributor of
Cutthroat Island whereby LIVE obtained video distribution rights to
such film in the United States and Canada, and Carolco made certain
payments to LIVE to compensate LIVE for the fact that its
distribution fee under the Cutthroat Island video distribution
agreement was less favorable to LIVE than the terms of the Domestic
Master Agreement.
In connection with the class action litigation described above
under "Item 3 - Legal Proceedings," LIVE and Carolco entered into
an agreement dated April 8, 1992, with respect to the division of
legal fees and costs relating to that litigation. Pursuant to the
agreement, 65% of the legal fees and costs will be paid by LIVE and
35% of the legal fees and costs will be paid by Carolco.
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.
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 was $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
120,000 shares of the Company's Common Stock at a price of $9.375
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 30,000 of such options
vesting annually commencing December 31, 1994. LIVE also paid
approximately $11,000 in legal fees incurred by Mr. Burlage in
connection with his employment agreement with LIVE. 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.
The stock option information contained in this paragraph has been
adjusted to give effect to the Reverse Stock Split.
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. Lipton and Strawberries were parties to a December 1992
employment agreement which provided that he would serve as
President of Strawberries though January 1996. The agreement
provided that Mr. Lipton would 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 was sold above a minimum price during the term of Mr.
Lipton's contract and, in certain circumstances, within two years
after such term, then Mr. Lipton would have been entitled to
additional compensation based upon the net proceeds received in
connection with such sale; no amounts were paid to Mr. Lipton as a
result of this clause of his agreement upon the Company's sale of
the Specialty Retail Division in August 1994. Mr. Lipton's
employment agreement was cancelled and replaced by the new owners
concurrently with the sale of the Specialty Retail Division.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
The following table sets forth as of February 28, 1995,
certain information concerning the ownership of shares of Common
Stock and Series C Preferred Stock, and all such information gives
effect to the Reverse Stock Split. The Series C Preferred Stock
votes on an as converted basis on all matters which may come before
the holders of Common Stock, voting together on such matters with
the Common Stock. As of February 28, 1995 the Series C Preferred
Stock was convertible into 1,075,753 shares of Common Stock.
Information is provided concerning the ownership of Common Stock
and Series C Preferred Stock by (i) the holders known to LIVE of
more than 5% of the outstanding shares of Common Stock or Series C
Preferred Stock, (ii) each executive officer and director of LIVE
and (iii) all executive officers and directors of LIVE as a group.
Columns (A) and (B) of the table provide information regarding
the voting power of the foregoing persons, entities and groups.
Columns C through E of the table show their beneficial ownership of
Common Stock and Series C Preferred Stock issued and outstanding as
of February 28, 1995. Beneficial ownership has been determined in
accordance with Rule 13d-3(a) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), which provides that a
beneficial owner of a security includes any person who, directly or
indirectly, through any contract, arrangement, understanding,
relationship, or otherwise has or shares (i) voting power, which
includes the power to vote, or to direct the voting of, such
security and/or (ii) investment power which includes the power to
dispose of, or to direct the disposition of, such security. Where
known by LIVE, the footnotes to the table indicate when shares have
been included in the table based upon beneficial ownership
resulting other than from actual ownership of the shares.
Column C of the table ("Number of Shares of Issued and
Outstanding Common Stock") includes only shares of Common Stock
actually issued and outstanding as of February 28, 1995. Column E
("Shares of Common Stock in Which Person Has Right to Acquire
Beneficial Ownership Within 60 Days") provides information with
respect to shares of Common Stock that are not held by a person as
of February 28, 1995, but which a person has the right to acquire
beneficial ownership of within 60 days of that date (such as upon
the exercise of options or warrants, the conversion of convertible
securities or through other similar securities or arrangements).
Shares of Common Stock issuable upon exercise of options or
warrants, upon conversion of convertible securities, or through
other similar securities or arrangements are included in Column E
if such options, warrants, convertible securities or other similar
securities or arrangements are exercisable (or convertible) within
60 days of February 28, 1995, regardless of whether the exercise,
conversion or other acquisition price is above or below the current
market price for Common Stock.
Columns (F) and (G) of the table show each of the person's,
entity's and group's beneficial ownership of Common Stock
calculated in accordance with Rule 13d-3(d)(1) under the Exchange
Act, and includes shares of Common Stock issued and outstanding as
of February 28, 1995, as well as shares for which beneficial
ownership may be acquired within 60 days of that date. In
accordance with Rule 13d-3(d)(1) under the Exchange Act, any
securities not outstanding but which are the subject of options,
warrants, rights, or conversion privileges (or other arrangements
which could result in the issuance of additional shares of Common
Stock by LIVE) exercisable within 60 days of February 28, 1995, are
deemed to be outstanding for the purpose of computing the
percentage of outstanding securities of the class owned by such
person, but are not deemed to be outstanding for the purpose of
computing the percentage of the class owned by any other person.
Certain members of the Board of Directors named in the table
are affiliated with one of the beneficial owners of more than 5% of
the Common Stock or Series C Preferred Stock (a "5% Owner"). In
certain circumstances, a 5% Owner may be deemed to beneficially own
Common Stock or Series C Preferred Stock held by such directors,
and vice versa. For purposes of the table below, (i) the
beneficial ownership of a 5% Owner includes such director's
ownership where indicated by footnote even though the 5% Owner may
disclaim beneficial ownership of such shares and (ii) the
beneficial ownership of the director does not include such 5%
Owner's beneficial ownership solely by reason of such director's
affiliation with such 5% Owner.
<PAGE>
<TABLE> BENEFICIAL OWNERSHIP OF COMMON STOCK AND SERIES C PREFERRED STOCK
<CAPTION>
(E)
Shares of
(C) Common (F) (G)
Number Stock in
(B) of Shares Which Person Amount of Beneficial
of Issued (D) Has Right Ownership of Common
Percent of and to Acquire Stock as of
(A) Votes that Outstanding Percent Beneficial February 28, 1995 (1)
Name of Beneficial Owner or Votes Entitled may be Common of Ownership
Identity of Group to Cast Cast (2) Stock Class Within 60 Days Number of Shares Percent
<S> <C> <C> <C> <C> <C> <C> <C>
5% Owners
Pioneer. . . . . . . . . . . 1,881,597(3) 53.8% 805,844 33.3% 1,077,753 1,883,597(4) 53.9%
Le Studio (5). . . . . . . . 257,606 7.4% 257,606 10.7% 0 257,606 10.7%
RCS Editori S.p.A.(6). . . . 257,606 7.4% 257,606 10.7% 0 257,606 10.7%
FMR Corp (7) . . . . . . . . 0 * 0 * 391,176 391,176 13.9%
Management
Anthony J. Scotti (8). . . . 2,829 * 2,829 * 10,841 13,670 *
Roger A. Burlage (9) . . . . 0 * 0 * 30,000 30,000 1.2%
Frans J. Afman (10). . . . . 0 * 0 * 4,900 4,900 *
Jay Burnham (11) . . . . . . 0 * 0 * 2,000 2,000 *
Ronald B. Cushey (12). . . . 0 * 0 * 1,000 1,000 *
Ryuichi Noda (13). . . . . . 0 * 0 * 0 0 *
Jonathan D. Lloyd (14) . . . 0 * 0 * 2,000 2,000 *
Masao Nomura (15). . . . . . 0 * 0 * 1,000 1,000 *
R. Timothy O'Donnell (16). . 3,000 * 3,000 * 14,074 17,074 *
Gregory R. Pierson (17). . . 0 * 0 * 1,000 1,000 *
Roger R. Smith (18). . . . . 152 * 152 * 18,900 19,052 *
Michael J. White (19). . . . 0 * 0 * 8,800 8,800 *
Paul Almond (20) . . . . . . 0 * 0 * 4,000 4,000 *
Steve Mangel (21). . . . . . 134 * 134 * 10,400 10,534 *
Elliot Slutzky (22). . . . . 6,000 * 6,000 * 3,800 9,800 *
Ivan R. Lipton . . . . . . . 0 * 0 * 0 0 *
All executive officers and
directors as a
group**(23). . . . . . . . . 12,115 * 12,115 * 112,715 124,830 4.9%
*Less than 1%
**16 persons comprised of all
of those named above
All of the persons listed in
the chart above have sole
voting power and sole
investment power over the
capital stock they
beneficially own unless
otherwise indicated in the
footnotes below.
<FN>
(1) The number of shares and percentages are based upon 2,418,700
shares of Common Stock outstanding as of February 28, 1995.
The shares of Common Stock underlying immediately exercisable
options, warrants or rights, immediately convertible
securities, or options, warrants, rights or convertible
securities that become exercisable or convertible within 60
days of February 28, 1995 are deemed to be outstanding for the
purpose of calculating the number and percentage owned by the
holders of such options, warrants, rights or convertible
securities.
(2) Based upon 3,494,453 possible votes (comprised of (i) the
2,418,700 votes which may be cast by all holders of
outstanding Common Stock and (ii) the 1,075,753 votes which
may be cast by Pioneer as the sole holder of the Series C
Preferred Stock) as of February 28, 1995. Pioneer, as the
sole holder of the Series C Preferred Stock, has the same
voting rights (and thus is entitled to the same number of
votes) as it would be entitled to if it had converted the
Series C Preferred Stock into Common Stock.
(3) Includes 805,844 shares of Common Stock directly owned by
Pioneer, and 1,075,753 shares of Common Stock issuable upon
conversion of the 15,000 shares of Series C Preferred Stock
(plus accrued but unpaid dividends through February 28, 1995)
held by Pioneer.
(4) Includes 1,075,753 shares of Common Stock issuable upon
conversion of the 15,000 shares of Series C Preferred Stock
(plus accrued but unpaid dividends through February 28, 1995)
held by Pioneer. The Series C Preferred Stock is entitled to
vote together with the Common Stock on all matters coming
before the holders of the Common Stock as if its holder had
converted the Series C Preferred Stock into Common Stock. On
that basis, Pioneer is entitled to cast 1,075,753 votes on
matters coming before the holders of Common Stock pursuant to
its ownership of the Series C Preferred Stock. Includes
options to purchase 2,000 shares of Common Stock held by
Pioneer affiliated or nominated directors. Pioneer Electronic
Corporation owns all of the outstanding shares of capital
stock of PNA which in turn owns all of the outstanding shares
of common stock of Pioneer. In their most recent Schedules
13D filed with the Securities and Exchange Commission (the
"Commission"), Pioneer Electronic Corporation and PNA also
claimed beneficial ownership over all of the securities of
LIVE held by Pioneer. The address of Pioneer and PNA is 2265
East 220th Street, Long Beach, California 90810. The address
of Pioneer Electronic Corporation is 4-1 Meguro, 1 Chome,
Meguro-ku, Tokyo 153, Japan.
(5) Represents shares of Common Stock indirectly owned by Le
Studio Canal+ S.A. ("Le Studio") through its wholly-owned
subsidiary Cinepole. In their most recent Schedules 13D filed
with the Commission, Cinepole claimed shared voting power and
shared investment power over all of its 236,006 shares of
Common Stock with Le Studio and Le Studio's corporate parent,
Canal+ S.A., and Le Studio claimed shared voting power and
shared investment power over all of its 21,600 shares of
Common Stock with Canal+ S.A. The address of Cinepole is
Surinameweg 2, NL - 2035 VA Haarlem, The Netherlands. The
address of Le Studio is 17, rue Dumont d'Urville, 75116 Paris,
France. The address of Canal+ S.A. is 85-89 Quai Andre
Citroen, 75015 Paris, France.
(6) 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. RCS
International Communications N.V. ("RCS Communications") is
100% owned by RCS Editori S.p.A. RCS Editori S.p.A. may
therefore be deemed to own beneficially all of the securities
owned by RCS and RCS Communications. Includes 21,600 shares
of Common Stock directly owned by RCS and 236,006 shares of
Common Stock directly owned by RCS Communications. In their
most recent Schedules 13D filed with the Commission, RCS
Editori S.p.A. claimed shared voting power and shared
investment power over all of its beneficially owned securities
with RCS and RCS Communications, RCS claimed shared voting
power and shared investment power over 21,600 shares of Common
Stock and RCS Communications claimed shared voting power and
shared investment power over 236,006 shares of Common Stock.
The address of RCS Editori S.p.A. is Via A. Rizzoli 2, 20132
Milan, Italy. The address of RCS and RCS Communications is
Museumplein 11, 1071 DJ Amsterdam, The Netherlands.
(7) Represents 391,176 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.
(8) Includes 10,841 shares of Common Stock which are issuable to
Mr. Scotti upon exercise of presently exercisable options and
warrants. Does not include 33,475 shares of Common Stock held
by Scotti Brothers.
(9) Includes 30,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(10) Includes 4,900 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(11) Includes 2,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(12) Includes 1,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(13) Although Mr. Noda may be deemed to own beneficially the
securities owned by Pioneer, Mr. Noda has disclaimed
beneficial ownership of such securities.
(14) Includes 2,000 shares of Common Stock which are issuable upon
exercise of presently exercisable options.
(15) Although Mr. Nomura may be deemed to own beneficially the
securities owned by Pioneer, Mr. Nomura has disclaimed
beneficial ownership of such securities. Includes 1,000
shares of Common Stock which are issuable to Mr. Nomura upon
exercise of presently exercisable options.
(16) Includes 4,900 shares of Common Stock which are issuable upon
exercise of presently exercisable options and 9,174 shares of
Common Stock underlying three warrants issued to Jefferson
Capital. Does not include 33,475 shares of Common Stock held
by Scotti Brothers.
(17) Although Mr. Pierson may be deemed to own beneficially the
securities owned by Pioneer, Mr. Pierson has disclaimed
beneficial ownership of such securities. Includes 1,000
shares of Common Stock which are issuable to Mr. Pierson upon
exercise of presently exercisable options.
(18) Includes 18,900 shares of Common Stock which are issuable upon
exercise of presently exercisable options, warrants and
rights.
(19) Includes 8,800 shares of Common Stock which are issuable (a)
upon exercise of presently exercisable options, warrants and
rights and (b) upon exercise of options, warrants and rights
that become exercisable within 60 days of February 28, 1995.
(20) Includes 4,000 shares of Common Stock which are issuable (a)
upon exercise of presently exercisable options, warrants and
rights and (b) upon exercise of options, warrants and rights
that become exercisable within 60 days of February 28, 1995.
(21) Includes 10,400 shares of Common Stock which are issuable (a)
upon exercise of presently exercisable options, warrants and
rights and (b) upon exercise of options, warrants and rights
that become exercisable within 60 days of February 28, 1995.
(22) Includes 3,800 shares of Common Stock which are issuable (a)
upon exercise of presently exercisable options, warrants and
rights and (b) upon exercise of options, warrants and rights
that become exercisable within 60 days of February 28, 1995.
(23) Includes shares of Common Stock which are issuable (a) upon
exercise of presently exercisable options, warrants and rights
and (b) upon exercise of options, warrants and rights that
become exercisable within 60 days of February 28, 1995.
</FN>
</TABLE>
The following table sets forth, as of December 31, 1994, the
beneficial ownership of shares of LIVE's Series B Preferred Stock,
by each stockholder who is known by LIVE to own more than 5% of the
outstanding shares of the Series B Preferred Stock based upon
5,600,000 shares of the Series B Preferred Stock outstanding as of
December 31, 1994. Although 6,000,000 shares of Series B Preferred
Stock were originally issued by LIVE, LIVE purchased 400,000 shares
by December 31, 1994 (See "Recent Developments for the Company -
Purchase of Series B Preferred Stock," above) leaving 5,600,000
shares outstanding as of that date.
Shares of Percentage of
Name of Beneficial Series B Outstanding
Owner Preferred Series B
Stock Owned Preferred Stock
FMR Corp. (1) 2,832,756 50.6%
Metropolitan Life Insurance Company (2) 369,770 6.6%
(1) FMR Corp. is the parent of Fidelity Management & Research
Company which manages or advises various funds that hold
these shares of Series B Preferred Stock.
(2) Represents shares of Series B Preferred Stock indirectly
owned by Metropolitan Life Insurance Company
("Metropolitan") through its wholly-owned subsidiary State
Street Research & Management Company ("State Street
Research") and State Street Research's affiliate State
Street Research Investment Services, Inc. ("State Street
Services"). State Street Research and State Street
Services are investment advisers registered under the
Investment Advisers Act of 1940. In its most recent
Schedule 13G filed with the Commission, Metropolitan
claimed sole voting power and sole investment power over
all 369,770 shares of Series B Preferred Stock. In their
most recent Schedule 13G filed with the Commission, State
Street Research and State Street Services claimed that
various of their clients are the beneficial owners of all
369,770 shares of Series B Preferred Stock held by them and
State Street Research and State Street Services disclaimed
any beneficial interest in those securities. The address
of Metropolitan is One Madison Avenue, New York, New York
10010. The address of State Street Research and State
Street Services is One Financial Center, Boston,
Massachusetts 02111-2690.
As of February 28, 1995, none of the directors or executive
officers of LIVE beneficially owned any shares of LIVE's Series B
Preferred Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Arrangements with Members of the Compensation Committee or Their
Affiliates
See "Executive Compensation - Compensation Committee
Interlocks and Insider Participation," above.
Arrangements with Le Studio
In July 1994, Carolco and an affiliate of Le Studio reached an
agreement whereby the Le Studio affiliate received the rights in
certain French-speaking territories to the motion picture Wagons
East. This agreement was performed by an affiliate of LHV after
such affiliate acquired rights to Wagons East pursuant to the
agreements described above in "Executive Compensation -
Compensation Committee Interlocks and Insider Participation."
In July 1994, LHV and an affiliate of Le Studio executed a
definitive agreement whereby LHV licensed the United States and
Canadian video rights to the motion picture Stargate.
Arrangements with RCS
Pursuant to a pre-existing output agreement, an affiliate of
RCS received the rights in certain Italian-speaking territories in
Europe and Africa to the motion picture Wagons East. Certain of
Carolco's rights and obligations under the output agreement
relating to the motion picture Wagons East were performed by an
affiliate of LHV after such affiliate acquired rights to Wagons
East pursuant to the agreements described above in "Executive
Compensation - Compensation Committee Interlocks and Insider
Participation."
Transactions with FMR Corp.
In October 1994, the Company repaid the entire remaining
amount of principal and accrued interest on the 12% Notes. Funds
managed or advised by Fidelity Management & Research Company held
approximately $31,250,000 in principal amount of the 12% Notes.
FMR Corp. is the parent of Fidelity Management & Research Company.
On March 7, 1995, the Company acquired 1,400,000 shares of
Series B Preferred Stock from various funds managed or advised by
Fidelity Management & Research Company, at the market price in
effect on that date.
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.
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 Commission and Nasdaq 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
Commission 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, 1994 all Section 16(a) filing requirements
applicable to its officers, directors and greater than ten-percent
beneficial owners were complied with except that Mr. Noda, a
Director of the Company, failed to file on a timely basis his
initial report on Form 3, which report was filed one day late.
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, 1993 and
1994
Consolidated Statements of Operations for the Years Ended
December 31, 1992, 1993 and 1994
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1992, 1993 and 1994
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1992, 1993 and 1994
Notes to Consolidated Financial Statements
(a)(2) The following consolidated financial statement
schedule is included in Item 14(d):
Schedule II -- Valuation and Qualifying Accounts
All other schedules for which provision is made in the
applicable accounting regulation of the 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 December 19, 1994, the Company filed a report on Form
8-K, dated December 19, 1994, announcing the December 9, 1994,
filing of the Certificate of Amendment with the Delaware Secretary
of State, amending the Restated Certificate to effectuate the
Reverse Stock Split.
<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: March 20, 1995
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 March 20, 1995
Anthony J. Scotti
/s/ ROGER A. BURLAGE Chief Executive Officer March 20, 1995
Roger A. Burlage (principal executive officer);
Director
/s/ RONALD B. CUSHEY Chief Financial Officer March 20, 1995
Ronald B. Cushey (principal financial officer);
Director
/s/ ROBERT L. DENTON Vice President and March 20, 1995
Robert L. Denton Chief Accounting Officer
(principal accounting officer)
FRANS J. AFMAN* Director March 20, 1995
Frans J. Afman
JAY BURNHAM* Director March 20, 1995
Jay Burnham
/s/ MICHAEL J. WHITE Director March 20, 1995
Michael J. White
<PAGE>
Signature Title Date
JONATHAN D. LLOYD* Director March 20, 1995
Jonathan D. Lloyd
RYUICHI NODA* Director March 20, 1995
Ryuichi Noda
MASAO NOMURA* Director March 20, 1995
Masao Nomura
R. TIMOTHY O'DONNELL* Director March 20, 1995
R. Timothy O'Donnell
ROGER R. SMITH* Director March 20, 1995
Roger R. Smith
GREGORY R. PIERSON* Director March 20, 1995
Gregory R. Pierson
* 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
Roger A. Burlage
Chief Executive Officer
Dated: March 20, 1995
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 March 20, 1995
Anthony J. Scotti
Chief Executive Officer March 20, 1995
Roger A. Burlage (principal executive officer);
Director
Chief Financial Officer March 20, 1995
Ronald B. Cushey (principal financial officer);
Director
Vice President and March 20, 1995
Robert L. Denton Chief Accounting Officer
(principal accounting officer)
FRANS J. AFMAN* Director March 20, 1995
Frans J. Afman
JAY BURNHAM* Director March 20, 1995
Jay Burnham
Director March 20, 1995
Michael J. White
<PAGE>
Signature Title Date
JONATHAN D. LLOYD* Director March 20, 1995
Jonathan D. Lloyd
RYUICHI NODA* Director March 20, 1995
Ryuichi Noda
MASAO NOMURA* Director March 20, 1995
Masao Nomura
R. TIMOTHY O'DONNELL* Director March 20, 1995
R. Timothy O'Donnell
ROGER R. SMITH* Director March 20, 1995
Roger R. Smith
GREGORY R. PIERSON* Director March 20, 1995
Gregory R. Pierson
* 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:
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, 1993
and 1994, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1994. Our audits also included the
financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an
opinion on these financial statements and schedule 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, 1993 and 1994, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related
financial statement schedule, when considered in relation to the
basic financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
ERNST & YOUNG LLP
Century City
Los Angeles, California
March 15, 1995
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
December 31,
1993 1994
ASSETS
CURRENT ASSETS:
Cash and cash equivalents, including restricted cash
of $17,173 and $4,663 . . . . . . . . . . . . . $ 42,358 $ 24,264
Accounts receivable, less allowances
of $25,440 and $19,469. . . . . . . . . . . . . 2,432 1,950
Inventories . . . . . . . . . . . . . . . . . . . 10,124 7,842
Film rights . . . . . . . . . . . . . . . . . . . 29,839 50,288
Deferred income taxes . . . . . . . . . . . . . . 4,176 --
Other . . . . . . . . . . . . . . . . . . . . . . 1,543 1,371
Assets held for sale. . . . . . . . . . . . . . . 86,000 17,916
TOTAL CURRENT ASSETS . . . . . . . . . . . 176,472 103,631
PROPERTY AND EQUIPMENT, net. . . . . . . . . . . . . 1,686 1,400
RECEIVABLE FROM AFFILIATE. . . . . . . . . . . . . . 8,047 --
FILM RIGHTS, net of accumulated amortization
of $415,681 and $466,260. . . . . . . . . . . . 32,228 20,820
OTHER ASSETS . . . . . . . . . . . . . . . . . . . . 1,320 1,072
GOODWILL, net of accumulated amortization
of $32,193 and $36,118 . . . . . . . . . . . . 33,796 29,871
$253,549 $156,794
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
12% Subordinated Secured Notes due 1994 . . . . . $ 36,707 $ --
Current maturities of long-term obligations . . . 8,043 3,478
Current maturities of Increasing
Rate Senior Subordinated Notes . . . . . . . . 3,791 3,954
Film rights obligations . . . . . . . . . . . . . 15,850 19,776
Accounts payable. . . . . . . . . . . . . . . . . 9,697 7,305
Accrued expenses. . . . . . . . . . . . . . . . . 8,646 9,499
Liabilities related to assets held for sale . . . 46,601 13,542
Series B Cumulative Convertible
Preferred Stock (5,000,000 shares 1993) . . . . 40,000 --
Dividends payable . . . . . . . . . . . . . . . . 1,340 2,131
Income taxes payable and deferred income taxes. . -- 3,068
TOTAL CURRENT LIABILITIES . . . . . . . . . 170,675 62,753
LONG-TERM OBLIGATIONS, less current maturities . . . 3,333 --
INCREASING RATE SENIOR SUBORDINATED NOTES
DUE 1999, including capitalized interest
of $20,662 and $16,871, less current
maturities . . . . . . . . . . . . . . . . 56,871 53,184
ACCRUED EXPENSES, less current portion . . . . . . . 1,740 1,572
DEFERRED INCOME TAXES. . . . . . . . . . . . . . . . 10,188 3,568
STOCKHOLDERS' EQUITY:
Series B Cumulative Convertible Preferred
Stock--authorized 9,000,000 shares;
$1.00 par value; $60,000,000 liquidation
preference (1993); $56,000,000 liquidation
preference (1994); 1,000,000 (1993)
and 5,600,000 (1994) shares outstanding . . . . 1,000 5,600
Series C Convertible Preferred Stock--15,000
shares authorized and outstanding; $1.00
par value; $15,000,000 liquidation preference . 15 15
Common Stock -- authorized 120,000,000 shares
(1993) and 24,000,000 shares (1994); $0.01 par
value; 12,090,016 (1993) and 2,418,720 (1994)
shares outstanding . . . . . . . . . . . . . . 121 121
Additional paid-in capital. . . . . . . . . . . . 106,507 136,656
Retained deficit. . . . . . . . . . . . . . . . . (96,901) (106,675)
10,742 35,717
$253,549 $156,794
See notes to consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
Year Ended
December 31,
1992 1993 1994
Net sales. . . . . . . . . . . . . . . . . $ 160,953 $ 143,735 $ 117,205
Cost of goods sold . . . . . . . . . . . . 142,000 124,336 101,781
GROSS PROFIT. . . . . . . . . . . . . 18,953 19,399 15,424
Operating expenses:
Selling, general and administrative expenses. 16,092 17,248 17,673
Amortization of goodwill. . . . . . . . 3,924 3,924 3,925
20,016 21,172 21,598
(1,063) (1,773) (6,174)
Disposal of VCL/Carolco Communications GmbH (VCL):
Net Sales . . . . . . . . . . . . . . . 31,560 28,511 22,712
Costs and Expenses. . . . . . . . . . . 35,351 32,174 22,712
(3,791) (3,663) --
Loss on disposal of VCL . . . . . . . . -- (15,741) --
(3,791) (19,404) --
OPERATING LOSS. . . . . . . . . . (4,854) (21,177) (6,174)
Interest income . . . . . . . . . . . . 2,280 1,345 2,601
Interest expense. . . . . . . . . . . . (16,704) (7,609) (5,901)
LOSS FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES (BENEFIT). . . . . (19,278) (27,441) (9,474)
Income tax (benefit) expense. . . . . . (1,818) 768 200
LOSS FROM CONTINUING OPERATIONS . (17,460) (28,209) (9,674)
Discontinued Operations:
Income (loss) from discontinued
operations net of income taxes. . . . 1,090 1,690 (100)
Loss on disposal and operating losses
during phase-out period, net of
income tax benefit . . . . . . . . . -- (23,773) --
INCOME (LOSS) FROM DISCONTINUED
OPERATIONS. . . . . . . . . . . 1,090 (22,083) (100)
LOSS BEFORE EXTRAORDINARY ITEM. . (16,370) (50,292) (9,774)
EXTRAORDINARY ITEM-Gain from debt
restructuring, including income
tax benefit of $790 . . . . . . . . . 3,967 -- --
NET LOSS. . . . . . . . . . . . . $ (12,403) $ (50,292) $ (9,774)
(Loss) income per common share:
Continuing operations . . . . . . . . . $ (8.20) $ (13.15) $ (8.05)
Discontinued operations . . . . . . . . 0.45 (9.15) (0.04)
Extraordinary item. . . . . . . . . . . 1.65 -- --
Net loss. . . . . . . . . . . . . . . . $ (6.10) $ (22.30) $ (8.09)
Net loss attributable to common stock. . . $ (14,800) $ (53,881) $(19,565)
Weighted average number of shares
outstanding . . . . . . . . . . . . . . 2,416,047 2,417,801 2,418,003
See notes to consolidated financial statements.
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Dollar Amounts in Thousands)
<CAPTION>
Year Ended December 31,
1992 1993 1994
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. .
Exchange of Series A Cumulative
Convertible Preferred Stock . (1,050,000) (1,050)
Ending balance. . . . . . . . . -- --
Series B Cumulative Convertible
Preferred Stock
Beginning balance . . . . . . . 6,000,000 $ 6,000 1,000,000 $1,000
Series B Cumulative Convertible
Preferred Stock issued. . . . 6,000,000 6,000
Repurchase of Series B Cumulative
Convertible Preferred Stock . (400,000) (400)
Transferred (to) from current
liabilities . . . . . . . . . (5,000,000) (5,000) 5,000,000 5,000
Ending balance. . . . . . . . . 6,000,000 6,000 1,000,000 1,000 5,600,000 5,600
Series C Convertible Preferred
Stock
Beginning balance . . . . . . . 15,000 15
Series C Convertible Preferred
Stock issued. . . . . . . . . 15,000 15
Ending balance. . . . . . . . . 15,000 15 15,000 15
Common Stock
Beginning balance . . . . . . . 2,415,533 121 2,417,306 121 2,418,003 121
Common Stock issued . . . . . . 1,773 697 717
Ending balance. . . . . . . . . 2,417,306 121 2,418,003 121 2,418,720 121
</TABLE>
(Continued)
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Continued)
(Dollar Amounts in Thousands)
Year Ended December 31,
1992 1993 1994
Additional Paid-in Capital
Beginning balance . . . . . . . . . . . . $ 92,615 $ 126,405 $106,507
Series B Cumulative Convertible
Preferred Stock dividend accrual. . . . (3,000)
Series C Convertible Preferred
Stock dividend accrual . (791)
Common Stock issued . . . . . . . . . . . 9 7
Series B Cumulative Convertible Preferred
Stock repurchase. . . . . . . . . . . . (1,060)
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) from
current liabilities . . . . . . . . . . (35,000) 35,000
Ending balance. . . . . . . . . . . . . . 129,994 106,507 136,656
Retained Earnings (Deficit)
Beginning balance . . . . . . . . . . . . (34,206) (46,609) (96,901)
Net loss . . . . . . . . . . . . . . . . (12,403) (50,292) (9,774)
Ending balance. . . . . . . . . . . . . . (46,609) (96,901) (106,675)
Other
Beginning balance . . . . . . . . . . . . (380) (447) --
Translation adjustment. . . . . . . . . . (67) 447 --
Ending balance. . . . . . . . . . . . . . (447) -- --
Total Stockholders' Equity . . . . . . . . . $ 89,059 $ 10,742 $ 35,717
See notes to consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
Year Ended
December 31,
1992 1993 1994
OPERATING ACTIVITIES:
Loss from continuing operations . . . . . $ (17,460) $ (28,209) $ (9,674)
Adjustments to reconcile net loss to
net cash provided by (used for)
continuing operating activities:
Depreciation and amortization of
property and equipment . . . . . . . . 1,496 880 745
Amortization of goodwill . . . . . . . . 4,875 3,924 3,925
Loss on disposal of VCL. . . . . . . . . -- 15,741 --
Extraordinary item - gain from debt
restructuring. . . . . . . . . . . . . 3,967 -- --
Amortization of and adjustments to
film rights . . . . . . . . . . . . . 78,961 53,091 49,056
Income taxes payable and deferred
income taxes . . . . . . . . . . . . . (2,353) (478) 624
Utilization of pre-acquisition net
operating loss carryforwards . . . . . 1,000 -- --
(Increase) decrease in operating assets,
net of acquisitions:
Accounts receivable. . . . . . . . . . . 56,088 6,515 482
Refundable income taxes. . . . . . . . . 7,718 -- --
Inventories. . . . . . . . . . . . . . . 5,250 5,802 2,282
Assets held for sale . . . . . . . . . . 9,095 (12,637) 68,084
Receivable from affiliate. . . . . . . . (329) (2,683) 8,047
Other assets . . . . . . . . . . . . . . 1,468 427 420
Increase (decrease) in operating
liabilities, net of acquisitions:
Accounts payable and accrued expenses. . 2,263 (13,888) (1,707)
Liabilities related to assets held for sale. (2,028) 6,436 (33,059)
Acquisition of and adjustment to
film rights . . . . . . . . . . . . . (53,331) (31,907) (58,096)
Film rights obligations incurred . . . . 51,360 31,907 58,096
Payments on film rights obligations. . . (70,856) (43,631) (54,170)
Cash provided by (used for)
continuing operating activities. . . 77,184 (8,710) 35,055
Cash (used for) provided by
discontinued operations. . . . . . . (17,040) 1,150 (100)
Cash provided by (used for) operating
activities . . . . . . . . . . . . . 60,144 (7,560) 34,955
INVESTING ACTIVITIES:
Acquisition of property and equipment . . (3,051) (3,676) (459)
Cash used for investing activities . . (3,051) (3,676) (459)
FINANCING ACTIVITIES:
Issuance of bank debt and long-term
obligations . . . . . . . . . . . . . . 166,131 211,260 2,500
Payments on bank debt and long-term
obligations . . . . . . . . . . . . . . (220,410) (189,381) (50,631)
Payment of debt restructuring expenses. . (2,533) -- --
Issuance of Common Stock. . . . . . . . . 10 -- --
Repurchase of Series B Cumulative
Preferred Stock . . . . . . . . . . . . . -- -- (1,460)
Dividends paid on Preferred Stock
(Series B and Series C) . . . . . . . . (2,397) (2,249) (2,999)
Issuance of Series C Preferred Stock. . . -- 15,117 --
Cash provided by (used for) financing
activities . . . . . . . . . . . . . (59,199) 34,747 (52,590)
Effect of exchange rate changes. . . . 190 -- --
Increase (decrease) in cash and cash
equivalents . . . . . . . . . . . . (1,916) 23,511 (18,094)
Cash and cash equivalents at
beginning of period . . . . . . . . 20,763 18,847 42,358
Cash and cash equivalents at end of
period . . . . . . . . . . . . . . . $ 18,847 $ 42,358 $ 24,264
See notes to consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994
Note 1 - Summary of Significant Accounting Policies
Background and Operations: LIVE Entertainment Inc. ("LIVE" or
the "Company") was formed in 1988 and its largest ongoing
businesses are LIVE Home Video ("LHV") and LIVE Entertainment
International Inc. (formerly LEI-IVE Entertainment N.V.)("LEII"),
which acquire rights to theatrical motion pictures, children's
films and special interest programs (including CD-ROM) which they
market and distribute in all media to wholesalers, retailers and
consumers in the United States and Canada (LHV) and internationally
(LEII). As part of its international activities, the Company also
owns an 81% interest in VCL/Carolco Communications GmbH ("VCL"), a
home video distribution and marketing company headquartered in
Munich, Germany. VCL's year-end is November 30. In March 1994,
the Company decided to dispose of its interests in the "Specialty
Retail Division," consisting of its former wholly owned subsidiary,
Strawberries Inc. ("Strawberries") and Strawberries' wholly owned
subsidiary, Waxie Maxie Quality Music Co. ("Waxie Maxie"), and VCL.
In August 1994, the Company completed the sale of the Specialty
Retail Division and in February 1995 executed a preliminary
agreement providing for the disposal of its interest in VCL.
Accordingly, the Company's interests in the Specialty Retail
Division, as of December 31, 1993, and VCL, as of December 31, 1993
and 1994, have been recorded as "Assets Held For Sale" and
"Liabilities Related To Assets Held For Sale." The results of
operations for the Specialty Retail Division have been included
through August 31, 1994 (the disposal date). 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, LEII 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.
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. The Specialty
Retail Division's (in 1993) and VCL's (in 1993 and 1994)
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.
Film Rights: Acquisition, production, print and advertising
costs (which benefit future periods) are capitalized as film
rights. Film rights are stated at the lower of unamortized cost or
estimated net realizable value. In accordance with Financial
Accounting Standards Board Statement No. 53, the individual film
forecast method is used to amortize film rights. Costs accumulated
in the acquisition, production and distribution of a film are
amortized in the proportion that gross revenues realized bear to
management's estimate of the total gross revenues expected to be
received. Estimated liabilities for residuals and participations
are accrued and expensed in the same manner as film rights are
amortized. Where film rights are acquired from producers for a
guaranteed minimum payment and the producer retains a participation
in the film profits, the film profits are allocated to the Company
until the guaranteed minimum payment is recovered, after which the
producer's share is accrued.
Revenue estimates on a film by film basis are reviewed
periodically by management and are revised, if warranted, based
upon management's appraisal of current market conditions. When
necessary, unamortized film rights are written down to net
realizable value based on this appraisal.
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. The recoverable goodwill
balance relating from the acquisition of the Specialty Retail
Division (in 1993) and VCL (in 1993 and 1994) 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.
Revenue Recognition: Minimum guaranteed amounts from
theatrical exhibition and revenues from home video, television and
pay television license agreements are recognized when the license
period begins from each motion picture and such motion pictures are
available pursuant to the terms of the license agreement. Revenues
from theatrical exhibition in excess of minimum guaranteed amounts
are recognized ratably during the period of exhibition. Cash
collected in advance of the time of availability is recorded as
advance collections on contracts.
<PAGE>
Once completed, a typical theatrical film will generally be
made available for license as follows:
Months After Approximate
Marketplace Initial Release Release Period
Domestic theatrical ---- 4-6 months
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
Sales Revenue and Returns Recognition: Revenue from sales is
generally recognized upon delivery 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 Common 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. Per share information has been determined on the
basis of 2,416,047, 2,417,801 and 2,418,003 weighted average shares
outstanding for the years ended December 31, 1992, 1993 and 1994,
respectively. The net loss per common share for the year ended
December 31, 1994 gives effect to the accretion of the redemption
value of the Series B Preferred Stock of $6,000,000. The net loss
per common share for the years ended December 31, 1992, 1993 and 1994
gives effect to total dividends on both the Series B Preferred
Stock and the Series C Preferred Stock of $2,397,000, $3,589,000 and
$3,791,000, respectively.
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 1992,
1993 and 1994.
Concentration of Credit Risk: The Company sells film
properties and videocassettes to wholesalers, retailers and
consumers worldwide. Sales by LHV are made to customers
nationwide. Sales by LEII are made to customers in various
territories worldwide. 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 8).
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, 1994,
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 publicly held debt has been
determined based on quoted market prices.
Re-classification: Certain re-classifications were made to
the 1992 and 1993 financial statements to conform to the 1994
presentations.
Note 2 - 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 "LIVE
Increasing Rate Notes") (see Note 11), 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 13) 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.
In 1992, the Company recognized an extraordinary gain on the
debt restructuring of $3,967,000, including a tax benefit of
$790,000.
Note 3 - 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 and 1994, the June 30 and December 31, 1993,
and June 30 and December 31, 1994 dividends totaling $1,378,000
($91.87 per share) (including dividends on the unpaid 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 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 were issued. Thus, pursuant to the terms
of the Series B Preferred Stock, the Company is prohibited from
paying the June 30 and December 31, 1993 and June 30 and December
31, 1994 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
1,075,753 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 $16,378,000 liquidation preference of the Series C
Preferred Stock by $15.225, 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
13). 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 4 - Discontinued Operations
On August 31, 1994, LIVE sold its entire interest in its
Specialty Retail Division to a group including Castle Harlan, Inc.,
the President of the Specialty Retail Division, and other senior
managers of the Specialty Retail Division. The purchaser group
also included Jefferson Capital Group, Ltd. ("Jefferson Capital").
The total purchase price paid to LIVE for the Specialty Retail
Division was $35,000,000 in cash, resulting in a loss on disposal of
$23,773,000, which was accrued in 1993.
In February 1995, the Company and certain of its affiliates,
on the one hand, and Datty Ruth, the owner of 19% of VCL, and
Apricot Computer GmbH ("Apricot"), on the other, entered into a
preliminary agreement whereby the Company's 81% interest in VCL, as
well as all receivables owed by VCL to the Company or its
affiliates, will be transferred to Ruth and Apricot. The total
consideration to be received by the Company and its affiliates in
connection with such transactions is approximately $7,900,000, of
which approximately $3,100,000 was received in February 1995. The
Company could receive additional amounts depending upon the post
closing profits of VCL; furthermore, the Company will be entitled
to share in the profits from future sales of VCL if, following
closing but no later than December 31, 1996, greater than 19% of
VCL is sold for greater than $4,800,000.
Consummation of the transactions contemplated by the
preliminary agreement is subject to the execution and completion of
definitive agreements. The parties expect the transactions
contemplated by their preliminary agreement to be finalized during
1995.
Accordingly, the Company's interests in the Specialty Retail
Division, as of December 31, 1993, and VCL as of December 31, 1993
and 1994, have been recorded as "Assets Held For Sale," and
"Liabilities Related To Assets Held For Sale" and have been
written down to their estimated net realizable values. The Company
anticipates completing the disposal of VCL by the end of 1995. 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 in 1993. 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" as of December 31,
1993. "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, 1992, 1993 and the seven months ended August 31, 1994
were $98,894,000, $106,124,000 and $57,846,000, respectively.
Income/(losses) from operations for the same periods were
$1,090,000, $1,690,000 and ($3,339,000), respectively, net of
(benefit)/provision for income taxes of ($98,000), $632,000 and
$100,000, respectively.
Note 5 - Foreign Operations
For the year ended December 31, 1994, net revenues, operating
profits and identifiable assets relating to foreign operations were
$26,629,000, $2,945,000 and $33,262,000, respectively. At December
31, 1993 and 1994 the assets of VCL have been included in "Assets
Held For Sale." 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. 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.
<PAGE>
Note 6 - Film Rights
The components of film rights are as follows:
December 31,
1993 1994
(In Thousands)
Titles released. . . . . . . . . . . . . . . . . $443,161 $491,576
Less amortization. . . . . . . . . . . . . . . . (415,681) (466,260)
27,480 25,316
Titles not released, masters received. . . . . . 17,783 34,872
Advances paid, masters not received. . . . . . . 16,804 10,920
TOTAL FILM RIGHTS . . . . . . . . . . . . . . $ 62,067 $ 71,108
Current portion of film rights . . . . . . . . . $ 29,839 $ 50,288
Non-current portion of film rights . . . . . . . 32,228 20,820
Total. . . . . . . . . . . . . . . . . . . . . $ 62,067 $ 71,108
The Company estimates that 78.8% of its film rights will be amortized
during the three years ending December 31, 1997.
Note 7 - Property and Equipment
The components of property and equipment are as follows:
December 31,
1993 1994
(In Thousands)
Building and improvements. . . . . . . . . . . . $ 415 $ 447
Equipment and furniture. . . . . . . . . . . . . 6,432 6,128
6,847 6,575
Less accumulated depreciation and amortization . (5,161) (5,175)
$ 1,686 $ 1,400
<PAGE>
Note 8 - Debt and Other Financing
Debt and other financing consist of the following:
December 31,
1993 1994
(In Thousands)
12% Subordinated Secured Notes due 1994. . . . . $ 36,707 $ --
Distribution agreements. . . . . . . . . . . . . 11,353 3,478
Increasing Rate Senior Subordinated Notes
due 1999 (see Note 11), including
capitalized interest of $20,662 (1993) and
$16,871 (1994) . . . . . . . . . . . . . . . . 60,662 57,138
Other. . . . . . . . . . . . . . . . . . . . . . 23 --
108,745 60,616
Less current maturities. . . . . . . . . . . . . 48,541 7,432
$ 60,204 $ 53,184
On November 16, 1994 LIVE entered into a three year $30,000,000
revolving credit facility with Foothill Capital Corporation (the
"Foothill Credit Facility"). Borrowings available under the
Foothill Credit Facility are limited to $20,000,000 until
additional participant lenders are added to the Facility, at which
time the borrowings available will be increased to a maximum
$30,000,000. Borrowings under the Foothill Credit Facility are
determined under a borrowing base calculation, which includes
certain allowable accounts receivable, film rights and inventory
balances, and are secured by substantially all of the assets of
LIVE and its subsidiaries. Outstanding borrowings under the
Foothill Credit Facility bear interest at the rate of 2% per annum
above the highest of the Bank of America, Mellon Bank or Citibank
prime rate (10.5% at December 31, 1994), payable monthly. In no
event will interest under the Foothill Credit Facility be less than
7% per annum. The Foothill Credit Facility provides for a closing
fee of $500,000, an annual facility fee of 1/4 of 1% and a
commitment fee of 1/4 of 1% on any unused amount. The Foothill
Credit Facility also requires LIVE to meet certain financial
ratios, and as of December 31, 1994 the Company was in compliance
with all such financial ratios. As of December 31, 1994 there were
no amounts outstanding under the revolving credit facility.
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 an Indenture governing
$37,000,000 in principal amount of the 12% Subordinated Secured
Notes due 1994 (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.
On August 31, 1994, LIVE sold its entire interest in its
Specialty Retail Division to a group including Castle Harlan, Inc.,
Ivan R. Lipton, the President of the Specialty Retail Division, and
other senior managers of the Specialty Retail Division. The
purchaser group also included Jefferson Capital Group, Ltd.; R.
Timothy O'Donnell, the President of Jefferson Capital Group, Ltd.,
is a Director of LIVE. The total purchase price paid to LIVE for
the Specialty Retail Division was $35,000,000 in cash. LIVE's
Series B Cumulative Convertible Preferred Stock (the "Series B
Preferred Stock") was mandatorily redeemable from the net proceeds
of any sale of the Specialty Retail Division remaining after the
payment of transaction costs and the payment of any debt secured by
the Specialty Retail Division. Repayment of the 12% Notes was
secured by the stock of the Specialty Retail Division. As a result
of LIVE's early 1994 decision to dispose of its interest in the
Specialty Retail Division, a total of $40,000,000 of Series B
Preferred Stock had been re-classified from equity to current
liabilities as of December 31, 1993 reflecting LIVE's then
expectation to sell the Specialty Retail Division for $40,000,000.
LIVE at that time had also expected that the holders of the 12%
Notes would extend the maturity date of the 12% Notes on a long
term basis beyond September 15, 1994. Due to the demand for
payment made by the holders of all $37,000,000 in principal amount
of the 12% Notes, LIVE used all of the net proceeds from the sale
of the Specialty Retail Division to repay the 12% Notes and no net
proceeds remained from the sale to redeem any of the Series B
Preferred Stock. The net proceeds of the sale, together with other
cash on hand, were used to repay the full amount of the 12% Notes -
$5,750,000, plus accrued interest, on September 15, 1994, and the
remaining $31,250,000, plus accrued interest, on October 17, 1994.
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, 1993 and 1994
there was $10,000,000 and $3,333,000, respectively, outstanding.
Interest on the advance at December 31, 1994 was 6.2%. LHV is
currently in negotiations with WEA for a possible extension of this
agreement. There is no assurance that such an extension will be
agreed upon or, if so, what the terms of such extension may be.
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. This agreement expires in
December 1997, subject to a three year option to extend in favor of
LHV. 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,
1993 and 1994 there were $1,353,000 and $145,000, respectively,
outstanding. Interest on the advance at December 31, 1994 was
6.2%.
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 were
secured by substantially all of the assets of the Specialty Retail
Division. Outstanding borrowings under the Strawberries Credit
Facility bore 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 was interest under
the loan 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 were 9.5%. Such amounts were 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, 1993, there was
$3,800,000 outstanding under the loan. Such amount was 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 accrued interest at 8% per
annum and had required principal payments of 48 equal monthly
installments. At December 31, 1993 there was $268,000 outstanding
under this obligation. In addition, as of December 31, 1993, VCL
owed $859,000 to another former shareholder, of which $199,000 bore
interest at 7% per annum and was payable in eight quarterly
installments beginning in April 1991. The balance was non-interest
bearing and was payable in four equal annual installments
commencing in April 1994. Such amounts were included in
"Liabilities Related To Assets Held For Sale" at December 31, 1993.
The future maturities of long-term obligations are as follows:
Year Ending December 31,
(In Thousands)
1995 . . . . . . . . . . . . . . . . . . . . . .$ 7,432
1996 . . . . . . . . . . . . . . . . . . . . . . 4,008
1997 . . . . . . . . . . . . . . . . . . . . . . 4,425
1998 . . . . . . . . . . . . . . . . . . . . . . 23,502
1999 . . . . . . . . . . . . . . . . . . . . . . 21,249
$ 60,616
Interest paid for the years ended December 31, 1992, 1993 and
1994 was $6,280,000, $9,190,000 and $4,621,000 respectively,
including $569,000, $964,000 and $787,000 related to the Company's
discontinued operations.
Note 9 - Leases
The Company generally conducts its operations through leased
office facilities. The Company also leases automobiles, computer
equipment, furniture, fixtures and other equipment. Most leases
require that the Company perform all necessary repairs and
maintenance, provide insurance and pay taxes assessed against the
leased property. The terms of leases range from month-to-month to
five years, some of which have renewal options. Certain rents are
adjusted for increases based upon the Consumer Price Index. The
leases are classified as operating leases.
Future minimum operating lease payments for the Company, as of
December 31, 1994 are:
(In Thousands)
1995 . . . . . . . . . . . . . . . . . . . . . .$ 810
1996 . . . . . . . . . . . . . . . . . . . . . . 794
1997 . . . . . . . . . . . . . . . . . . . . . . 794
1998 . . . . . . . . . . . . . . . . . . . . . . 792
1999 . . . . . . . . . . . . . . . . . . . . . . 371
Total net minimum lease payments . . . . . . . . $3,561
For the years ended December 31, 1992, 1993 and 1994, rent
expense under all operating leases aggregated $7,505,000,
$7,953,000 and $6,685,000,, respectively, including $5,964,000,
$6,548,000 and $5,213,000, related to the Company's discontinued
operations.
Note 10 - Film Rights Obligations
At December 31, 1994, the unrecorded future obligation for
undelivered film product approximates $11,478,000. Deposits made
for guaranteed delivery of undelivered film product are recorded as
film rights.
Certain agreements permit a reduction in the amount of film
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, 1994, $11,545,000 of royalties payable are included
in film rights obligations.
Note 11 - 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 LIVE
Increasing Rate Notes. The LIVE Increasing Rate Notes mature on
March 23, 1999. Interest accrued on the LIVE Increasing Rate Notes
from September 1, 1992 at 10% per annum and was scheduled to
increase to 12% on March 23, 1996. The LIVE Increasing Rate Notes
are governed by the terms of an Indenture between the Company and
American Stock Transfer & Trust Company, as Trustee (the "Public
Indenture"). LIVE believed that at the end of 1994 it may have
been in violation of the minimum consolidated net worth covenant
contained in the Indenture. Such default would have permitted the
trustee thereunder or holders of 25% in aggregate principal amount
of the LIVE Increasing Rate Notes to give notice and accelerate
maturity of the indebtedness represented by the LIVE Increasing
Rate Notes. In November 1994, a majority of the holders of the
LIVE Increasing Rate Notes agreed to eliminate the minimum net
worth covenant contained in the Indenture, thereby removing the
possibility that LIVE might have defaulted under that covenant in
1995. As part of the amendment of the Indenture, LIVE agreed to
increase the interest rate on the LIVE Increasing Rate Notes from
10% per annum to 12% per annum effective October 18, 1994. Payment
of the LIVE Increasing Rate Notes is secured only by a lien on the
Common Stock of LHV, subject and subordinate to a lien under the
Foothill Credit Facility and is subordinated to all of the
Company's present and future senior debt. The LIVE Increasing Rate
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 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 Pictures Inc. ("Carolco").
Interest to maturity on $36,872,000 of the LIVE Increasing
Rate Notes of $20,622,000 and $16,871,000 at December 31, 1993 and
1994, respectively, has been included in the carrying value of the
LIVE Increasing Rate Notes, in accordance with Financial Accounting
Standards Board Statement No. 15, "Accounting by Debtors and
Creditors for Troubled Debt Restructurings," and will not be
recognized as interest expense in current and future years.
<PAGE>
Note 12 - Income Taxes
As discussed in Note 1, the Company records its income tax
provision in accordance with SFAS No. 109.
Loss From Continuing Operations Before Income Taxes is as Follows:
December 31,
1992 1993 1994
(In Thousands)
Domestic . . . . . . . . . . . .$ (15,944) $ (8,037) $ (7,945)
Foreign. . . . . . . . . . . . . (3,334) (19,404) (1,529)
$ (19,278) $(27,441) $ (9,474)
Income Tax Expense (Benefit) From Continuing Operations
December 31,
1992 1993 1994
(In Thousands)
Currently payable:
Federal. . . . . . $ 239 $ 453 $ --
State. . . . . . . 342 332 (494)
Foreign. . . . . . 263 54 70
844 839 (424)
Deferred:
Federal. . . . . . (1,023) 411 624
State. . . . . . . (2,639) (482) --
(3,662) (71) 624
Expense in lieu of income taxes resulting
from utilization of pre-acquisition net
operating losses:
Foreign. . . . . . 1,000 -- --
1,000 -- --
$ (1,818) $ 768 $ 200
Components of Deferred Income Taxes
December 31,
1992 1993 1994
(In Thousands)
Film rights. . . . . . . . . . . . . . $ (3,280) $ (71) $ 368
Sales returns and other allowances . . 286 1 35
Accelerated depreciation and basis
reduction . . . . . . . . . . . . . (20) 2 3
Accruals not currently deductible
for tax purposes . . . . . . . . . . (685) (8) 218
Other. . . . . . . . . . . . . . 37 5 --
$ (3,662) $ (71) $ 624
Reconciliation of Effective Rate of Income Taxes
Percentage of Income (Loss)
December 31,
1992 1993 1994
Restated tax provision . . . . . $ (1,818) $ 768 $ 200
Book loss. . . . . . . . . . . . (19,278) (27,441) (9,474)
Effective tax rate . . . . . . 9.4% (2.8)% (2.1)%
Federal statutory rate . . . . . 4.0% 35.0% 35.0%
State income taxes . . . . . . . 12.8 (0.4) (3.0)
Alternative minimum tax effect,
other. . . . . . . . . . . . . (17.3) (4.4) (1.2)
Utilized net operating loss. . . -- (26.9) (17.6)
Foreign income subject to
local taxes. . . . . . . . . . (6.5) (0.2) (0.7)
Foreign deemed dividend. . . . . (6.7) (0.9) (0.1)
Goodwill amortization. . . . . . (6.9) (5.0) (14.5)
Effective tax rate . . . . . . 9.4% (2.8)% (2.1)%
Components of Deferred Tax Liabilities and Assets
Current Non-current
Deferred tax liabilities:
Amortization of film rights and other. . . . $ (4,440) $ (3,568)
Total deferred tax liabilities . . . . . . (4,440) (3,568)
Deferred tax assets:
Sales returns and other allowances . . . . . 6,743 --
Accelerated depreciation . . . . . . . . . . -- 71
Accruals not currently deductible. . . . . . 2,187 --
Other. . . . . . . . . . . . . . . . . . . . 2,447 --
Tax effect of NOL carryforward . . . . . . . -- 3,325
Tax basis difference - debt. . . . . . . . . 1,290 4,072
12,667 7,468
Less valuation allowance . . . . . . . . . . (11,295) (7,468)
Net deferred tax assets . . . . . . . . . . 1,372 --
Total deferred tax assets/(liabilities). . $ (3,068) $ (3,568)
Income taxes paid for the years ended December 31, 1992, 1993
and 1994 were $196,000, $1,766,000 and $1,456,000, respectively,
including $89,000, $230,000 and $580,000, related to the Company's
discontinued operations. The valuation allowance has increased
$2,978,000, from $15,785,000 at December 31, 1993 to $18,763,000 at
December 31, 1994.
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. Effective September 13, 1994 LEI-IVE Entertainment N.V.
was domesticated as a Delaware corporation under the name LIVE
Entertainment International Inc. Such reorganization should not
result in United States or California tax liability to the Company.
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, 1994, approximately $31,000,000 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 $31,000,000
for regular income tax purposes are subject to annual limitations
as described above and will expire between the years 1996 and 2010.
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, $4,000,000 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 $370,000 are available to offset future regular federal
income tax liabilities. The disposal of the Specialty Retail
Division on August 31, 1994 resulted in a capital loss of
approximately $22,000,000 for regular tax purposes and $22,800,000
for AMT purposes, which may be carried forward, but expire in 1999.
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 13 - Stockholders' Equity
On December 9, 1994, the Company filed with the Delaware
Secretary of State a Certificate of Amendment (the "Certificate of
Amendment") to the Company's Restated Certificate of Incorporation
(the "Restated Certificate"), amending Article FOURTH of the
Restated Certificate to reclassify every five outstanding shares of
its common stock, par value $.01 per share ("Prior Common Stock"),
as one share of the Company's common stock having the same par
value and other powers, preferences and rights as the Prior Common
Stock (such shares of reclassified Prior Common Stock are sometimes
hereinafter referred to as shares of "Common Stock") (the "Reverse
Stock Split").
The Reverse Stock Split was approved by the affirmative
written consent of holders of over 64% of the Prior Common Stock
and the Company's Series C Preferred Stock, voting together as a
single class, pursuant to a Consent Solicitation Statement dated
November 23, 1994. Only holders of record of the Prior Common
Stock and Series C Preferred Stock at the close of business on
October 31, 1994 were entitled to consent to the Reverse Stock
Split. All share amounts indicated herein have been adjusted to
reflect the retroactive application of such Reverse Stock Split.
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 1,249,057, 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 February 28, 1995 the LIVE
voting ownership percentage held by Pioneer, RCS and Cinepole and
their affiliates was 53.8%, 7.4% and 7.4%, respectively.
On March 23, 1993, pursuant to the Prepackaged Plan, the
Series A Preferred Stock was exchanged for a combination of LIVE
Increasing Rate 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) in each
of 1994 and 1993, and $1,000,000 ($0.17 per share) in 1992 were
accrued on the Series B Preferred Stock and were paid beginning in
March 1993 and quarterly thereafter. 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.
Although LIVE has no obligation to redeem any Series B
Preferred Stock, subject to the availability of funds and the prior
approval of its Board of Directors and its lenders, LIVE may
acquire shares of its Series B Preferred from time to time, either
through private purchases or through open market purchases. On
December 9, 1994, and March 7, 1995, LIVE acquired, and
subsequently retired, 400,000 shares and 1,400,000 shares,
respectively, of the Series B Preferred Stock at average prices
under $4.00 per share.
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. No other voting rights exist. 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 $20.00 per share of Common
Stock, decreasing $1.25 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 $5.00 per share,
resulting in the potential issuance of a minimum of 12,000,000
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 300,000 shares of the
Company's Common Stock, of which 120,000 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 100,000 shares. The options vest over varying periods and
expire in 10 years.
On March 6, 1995, the Stock Option Committee of the Board of
Directors granted to all current employees and Directors of LIVE
and LHV (other than members of the Stock Option Committee) who were
holders of options pursuant to the Company's 1988 Stock Option and
Stock Appreciation Rights Plan, as amended (the "1988 Plan"), the
option to agree to cancel certain options (the "Canceled Options")
and to receive in return therefor new options (the "New Options")
pursuant to the 1988 Plan, all on the following terms and
conditions: (i) the exercise price for the New Options would equal
$3.50, the closing price of the Common Stock on the SmallCap Market
on March 6, 1995, (ii) fifty percent (50%) of the New Options would
vest on March 6, 1996; the remainder would vest on March 6, 1997,
provided that no New Options would vest earlier than the scheduled
vesting date for the corresponding Canceled Options, and (iv) all
New Options would expire on the expiration date of the
corresponding Canceled Options.
A summary of stock option transactions during the three years
ended December 31, 1994 follows:
Number of Option Price
Shares Per Share
Stock options outstanding:
December 31, 1991. . . . . . . . . . . . . 202,670 33.35-110.00
Canceled . . . . . . . . . . . . . . . . (228,930) 9.38-110.00
Granted. . . . . . . . . . . . . . . . . 162,740 9.38- 33.35
December 31, 1992. . . . . . . . . . . . . 136,480 9.38- 70.00
Canceled . . . . . . . . . . . . . . . . (24,130) 9.38- 70.00
Granted. . . . . . . . . . . . . . . . . 185,860 8.75- 13.75
December 31, 1993. . . . . . . . . . . . . 298,210 8.75- 70.00
Canceled . . . . . . . . . . . . . . . . (85,960) 8.75- 70.00
Granted. . . . . . . . . . . . . . . . . 86,570 2.75- 15.63
December 31, 1994. . . . . . . . . . . . . 298,820 2.75- 15.63
At December 31, 1994, 133,260 options were exercisable, at an
average exercise price of $12.76 per share, and no stock
appreciation rights were outstanding. Options to purchase 139,320
(1992), 77,590 (1993) and 76,860 (1994) 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 ("Previous Canceled
Options") and to receive in return therefore additional options
("Previous New Options") pursuant to the Plan, all on the following
terms and conditions: (a) the exercise price for the Previous New
Options would equal $14.38, 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 Previous New Options would vest on
January 16, 1993, the remainder would vest on January 16, 1994; (c)
no Previous New Options would vest earlier than the scheduled
vesting date for the corresponding Previous Canceled Options and
(d) all Previous New Options would expire on January 15, 2002. In
connection with this arrangement, options to purchase 109,440
shares were exchanged for Previous New Options.
Warrants to purchase 9,900 shares of the Company's Common
Stock were issued during 1990 and were outstanding as of December
31, 1994. These warrants are currently exercisable at prices
ranging from $71.25 to $72.50 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 266,666 and
200,000 shares of the Company's Common Stock at a price of $10.00
and $13.60 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.
Note 14 - 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 15 - Related Party Transactions
Revenues generated by LHV from Carolco titles amounted to
38.4%, 13.0% and 4.6% of combined LHV and VCL net sales for the
years ended December 31, 1992, 1993 and 1994, respectively. As of
December 31, 1993, the Company had a note receivable from Carolco
bearing interest aggregating $8,047,000. In December 1992, the
Company, Carolco and certain of their affiliates reconciled the
amounts owing to each by the others (the "Reconciliation
Agreement"). In December 1994, as part of an agreement settling
all open accounts between them, including those that arose as a
result of the Reconciliation Agreement, LIVE and Carolco agreed
that all individual films previously delivered to LHV or LEII under
either the Domestic Master Agreement or the German Master Agreement
would no longer be cross-collateralized with other films, either
within individual packages or among so called "film packages"; the
companies also agreed that for purposes of their settlement only,
all such films would be deemed to have earned the minimum
distribution fee that was guaranteed to LHV and LEII.
In December 1993, an affiliate of Carolco commenced principal
photography of Wagons East, starring John Candy and Richard Lewis.
As a result of the untimely death of Mr. Candy, in March 1994
Carolco entered into an arrangement with the insurance carrier and
an affiliate of LIVE pursuant to which certain rights in the film
were conveyed to LIVE, LIVE agreed to fund completion of the film,
and LIVE engaged Carolco to complete production and servicing of
certain pre-existing distribution agreements.
In March 1994, LIVE and Carolco reached agreement in principle
on a business combination (the "Merger"), and executed a Merger
Agreement with respect thereto on August 10, 1994 (the "Merger
Agreement"). On October 13, 1994 LIVE and Carolco jointly
announced that they had agreed to terminate the Merger Agreement
between the two companies and to end all discussions regarding a
possible business combination. In 1994, LIVE incurred
approximately $1,000,000 in expenses in connection with the Merger.
As a result of the December 1994 agreement discussed above which
settled all open accounts between LIVE and Carolco, LIVE wrote off
the remaining unpaid receivable amount of $6,211,000 that LIVE had
recorded in its financial records as owing from Carolco (of which all
but $2,177,000 was reserved for in prior years).
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. As of December 31, 1994 the advance had been fully
recouped.
In July 1994, LIVE NV and an affiliate of Pioneer reached an
agreement whereby the Pioneer affiliate will receive the Japanese
theatrical, video and television distribution rights to the films
Wagons East, Top Dog, The Beans of Egypt, Maine and Goldy III.
In July 1994, Carolco and an affiliate of Le Studio Canal+
S.A. ("Le Studio"), a greater than 5% owner of LIVE, reached an
agreement whereby the Le Studio affiliate received the rights in
certain French-speaking territories to the motion picture Wagons
East. This agreement was performed by an affiliate of LHV after
such affiliate acquired rights to Wagons East pursuant to the
agreements described above.
In July 1994, LHV and an affiliate of Le Studio executed a
definitive agreement whereby LHV licensed the United States and
Canadian video rights to the motion picture Stargate.
Pursuant to a pre-existing output agreement, an affiliate of
RCS Video International Services B.V. ("RCS"), a greater than 5%
owner of LIVE, received the rights in certain Italian-speaking
territories in Europe and Africa to the motion picture Wagons East.
Certain of Carolco's rights and obligations under the output
agreement relating to the motion picture Wagons East were performed
by an affiliate of LHV after such affiliate acquired rights to
Wagons East pursuant to the agreements described above.
In 1991, Jefferson Capital, 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, Jefferson
Capital (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 and, in
January 1993 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. As a result of the Company's execution of the Merger
Agreement, an additional $400,000 was paid under this agreement in
August 1994. Additionally, $850,000 was paid in connection with
the completion of the Restructuring. In 1993, Jefferson Capital
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 3,333 and 2,941 shares of the
Company's Common Stock at a price of $10.00 and $13.60 per share,
respectively. In 1994 these parties assisted the Company in
negotiating and obtaining the Foothill Credit Facility and received
a total fee of $300,000 for such services.
In October 1994, LIVE retained Jefferson Capital as its
advisor in connection with LIVE's efforts to obtain the agreement
of the holders of the LIVE Increasing Rate Notes to eliminate the
minimum net worth covenant contained in the Indenture. Jefferson
Capital received a total fee of $200,000 (one half paid in October
1994 and the second half paid in November 1994) for investment
banking services provided in connection with such efforts.
Jefferson Capital's fee was not contingent upon the success of
LIVE's efforts to amend the Indenture. LIVE 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 for this engagement.
In connection with the Restructuring, a director of the
Company and Jefferson Capital 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 2,941 shares of the Company's Common Stock at
a price of $13.60 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 $79,000 and $75,000 in 1992 and 1993, respectively, for services
provided to the Company.
Note 16 - 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 $53,000 $55,000 and $46,000 for the years ended December 31,
1992, 1993 and 1994, respectively.
Note 17 - Commitments and Contingencies
Letters of Credit and Guarantees:
At December 31, 1994 the Company had outstanding letters of
credit of $3,675,000 relating to certain video rights obligations,
which are secured by restricted cash, and $370,000 related to other
miscellaneous obligations.
Employment and Separation Agreements:
The Company has employment agreements with certain of its
officers generally for a term of one to four years. Future minimum
payments under these contracts are approximately $2,376,000,
$1,812,000 and $1,283,000 for the years ending December 31, 1995,
1996 and 1997.
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 LIVE against LIVE, Carolco and certain of
LIVE'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 LIVE's wholly owned subsidiary,
Lieberman, to 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 LIVE 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 LIVE 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 defendant 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 LIVE, 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 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 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.
Discovery is currently taking place in both lawsuits.
In connection with the above described class action
litigation, LIVE and Carolco entered into an agreement dated April
8, 1992, with respect to the division of legal fees and costs
relating to that litigation. Pursuant to the agreement, 65% of the
legal fees and costs will be paid by LIVE and 35% of the legal fees
and costs will be paid by Carolco.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described actions at this time.
However, LIVE 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 LIVE's consolidated financial statements. In the
opinion of management, these actions, when finally concluded and
determined, will not have a material adverse effect upon LIVE's
financial position or results of operations.
On March 24, 1994, the same day that the signing of a letter
of intent with respect to the Merger was announced, a purported
class action lawsuit was filed in the Court of Chancery of the
State of Delaware in and for New Castle County by an alleged
stockholder of LIVE against LIVE, Carolco, certain of Carolco's and
LIVE's past and present executive officers and directors, Pioneer
and Cinepole. The complaint alleged, among other things, that the
defendants violated their fiduciary duties owed to LIVE's
stockholders in connection with the Merger. The plaintiff sought
a preliminary and permanent injunction enjoining the Merger under
its announced financial terms; an open market auction of LIVE; to
the extent the Merger was consummated prior to the entry of a final
judgment in the action, rescission of the Merger; repayment of
profits and benefits obtained as a result of the defendants'
alleged conduct; and attorneys fees and expenses. As a result of
the termination of the Merger Agreement between LIVE and Carolco,
the plaintiff agreed to voluntarily dismiss this lawsuit, without
prejudice, in November 1994.
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 LIVE's financial position or
results of operations.
<PAGE>
<TABLE>Note 18 - Quarterly Financial Information (Unaudited)
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>
1993
Combined net sales (1) . . . . $ 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). . . . 837 493 (1,226) (21,281) (21,177)
Income (loss) from
continuing operations before
income taxes . . . . . . . . 340 (1,096) (2,948) (23,737) (27,441)
Income (loss) from
continuing operations. . . . 340 (1,096) (2,948) (24,505) (28,209)
Discontinued operations. . . . (1,068) (445) (330) (20,240) (22,083)
Net (loss) . . . . . . . . . . (728) (1,541) (3,278) (44,745) (50,292)
Preferred dividends. . . . . . 767 937 938 947 3,589
Net (loss) attributable to
Common Stock . . . . . . . . (1,495) (2,478) (4,216) (45,692) (53,881)
Net (loss) per common share:
Continuing operations. . . . (0.30) (0.85) (1.60) (10.40) (13.15)
Discontinued operations. . . (0.30) (0.15) (0.15) (8.55) (9.15)
Net loss . . . . . . . . . . $ (0.60) $ (1.00) $ (1.75) $ (18.95) $ (22.30)
1994
Combined net sales (2) . . . . $ 23,606 $ 34,692 $ 37,673 $ 43,946 $139,917
Gross profit . . . . . . . . . 3,856 5,433 387 7,171 16,847
Operating (loss) profit. . . . (1,630) 151 (5,264) 569 (6,174)
(Loss) income from
continuing operations before
income taxes . . . . . . . . (2,838) (1,069) (6,626) 1,059 (9,474)
(Loss) income from
continuing operations. . . . (2,838) (1,369) (6,626) 1,159 (9,674)
Discontinued operations. . . . -- -- -- (100) (100)
Net loss . . . . . . . . . . . (2,838) (1,369) (6,626) 1,059 (9,774)
Accretion in redemption value of
Series B Preferred Stock. . . 600 1,800 1,800 1,800 6,000
Preferred dividends. . . . . . 937 937 942 975 3,791
Net loss attributable to
Common Stock . . . . . . . . (4,375) (4,106) (9,368) (1,716) (19,565)
Net loss per common share:
Continuing operations. . . . (1.81) (1.70) (3.87) (0.67) (8.05)
Discontinued operations. . . -- -- -- (0.04) (0.04)
Net loss . . . . . . . . . . $ (1.81) $ (1.70) $ (3.87) $ (0.71) $ (8.09)
<FN>
(1) Combined net sales include net sales of VCL of $5,770, $9,083, $5,494 and $8,164 for each of
the fiscal quarters of 1993, respectively.
(2) Combined net sales include net sales of VCL of $5,341, $5,541, $3,828 and $8,002 for each of
the fiscal quarters of 1994, respectively.
</FN>
</TABLE>
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
SCHEDULE II - 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, 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 (e) 7,244
Allowance for film rights in excess of net
realizable value. . . . . 3,636 1,912 -- 12 (f) 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 (e) 4,501
Allowance for film rights in excess of net
realizable value. . . . . . . . . . . . 5,536 -- -- 4,213 (f) 1,323
Year ended December 31, 1994 Deducted from
Asset Accounts:
Allowance for future sales returns. . . . $17,806 $11,554 (a) -- $18,513 (b) $10,847
Allowance for doubtful accounts . . . . . 1,441 75 256 30 (c) 1,742
Allowance for advertising . . . . . . . . 6,193 10,633 -- 9,945 (d) 6,881
Allowance for overstock inventory . . . . 4,501 469 -- 2,282 (e) 2,688
Allowance for film rights in excess of net
realizable value. . . . . . . . . . . . 1,323 -- -- -- 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 (1993) re-classified VCL "Assets
Held For Sale."
(c) Net amount of accounts written-off and recoveries during the year. Also, includes $679 (1993) re-classified
VCL "Assets Held For Sale."
(d) Reimbursements for co-op advertising.
(e) Disposal of overstock inventory and includes $103 (1993) re-classified VCL "Assets Held For Sale."
(f) Write-off of film rights and includes $513 (1993) re-classified VCL "Assets Held For Sale."
</FN>
</TABLE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS
To
Form 10-K
Of
LIVE ENTERTAINMENT INC.
For the fiscal year ended December 31, 1994
<PAGE>
INDEX TO EXHIBITS
Sequentially
Exhibit Numbered
Number Description Page
2.1 Agreement and Plan of Merger dated as of August
31, 1994 among the Registrant, Strawberries Inc.,
Strawberries Merger Corp. and Strawberries
Holding, Inc. (without exhibits) (incorporated by
reference to Exhibit 2.1 to Registrant's Current
Report on Form 8-K dated September 15, 1994) . .
2.2 Agreement and Plan of Merger dated as of August
10, 1994 among Carolco Pictures Inc., the
Registrant and Carolco Acquisition Corp.
(including certain exhibits) (incorporated by
reference to Exhibit 2 to Mario F. Kassar and New
Carolco Investments B.V.'s Schedule 13D (Amendment
No. 14) under the Securities Exchange Act of 1934
filed with the Commission on August 16, 1994). .
2.3 Termination Agreement, dated as of October 13,
1994, among the Registrant, Carolco Acquisition
Corp. and Carolco Pictures Inc. (incorporated by
reference to Exhibit 10.1 to Current Report on
Form 8-K of Carolco Pictures Inc. filed with the
Commission on October 13, 1994). . . . . . . . .
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 Form of Certificate of Amendment to Restated
Certificate of Incorporation of the Registrant
(incorporated by reference to Exhibit 2.1 to
Registrant's Current Report on Form 8-K dated
December 19, 1994) . . . . . . . . . . . . . . .
3.7 Bylaws of the Registrant (incorporated herein by
reference to Exhibit 3.4 to the Registrant's
Registration Statement No. 33-24396) . . . . . .
3.8 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). . . . . . . . . . . . . . . . . . .
3.9 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 LIVE Increasing Rate
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 Supplemental Indenture between the
Registrant and American Stock Transfer & Trust
Company, as trustee, relating to the LIVE
Increasing Rate Notes* . . . . . . . . . . . . .
4.6 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) . . . . . . . . .
4.7 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). . . . . . . . . . . . . . . . . . .
4.8 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). . . . . . . . . . . . . . . . . . . . . .
4.9 Agreement dated as of December 22, 1993 between
LIVE Ventures Inc. and U.S. Trust Company of
California, N.A. (incorporated herein by reference
to Exhibit 4.8 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December
31, 1993). . . . . . . . . . . . . . . . . . .
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 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)
. . . . . . . . . . . . . . . . . . . . . . . .
10.8 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)
. . . . . . . . . . . . . . . . . . . . . . . .
10.9 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) . . . . . . . . . . . .
10.10 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) . .
10.11 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) . .
10.12 Agreement, dated as of January 1, 1995, between
Carolco Pictures Inc. and LIVE Film and Mediaworks
Inc.*# . . . . . . . . . . . . . . . . . . . . .
10.13 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) .
10.14 Term Extension Letter Agreement, dated December
16, 1994, among LIVE Film and Mediaworks Inc.,
LIVE America Inc. and MCA Home Video Canada* . .
10.15 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) . . . . . . . . . . . .
10.16 Employment Agreement, dated as of December 23,
1993, for the services of Roger A. Burlage
(incorporated herein by reference to Exhibit 10.19
to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)^. . . .
10.17 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 (incorporated herein by reference to
Exhibit 10.22 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1993)^ . . . . . . . . . . . . . . . . . . . . .
10.18 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)^. . . . . . . . .
10.19 Employment Agreement, dated as of February 1,
1994, for the services of Michael J. White
(incorporated herein by reference to Exhibit 10.26
to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)^. . . .
10.20 Memorandum Agreement dated as of December 23,
1993, by and between the Registrant and Anthony J.
Scotti (incorporated herein by reference to
Exhibit 10.29 to the Registrant's Annual Report on
Form 10-K for the fiscal year ended December 31,
1993)^ . . . . . . . . . . . . . . . . . . . . .
10.21 Agreement dated as of April 1, 1994 between the
Registrant and Pioneer North America Inc. with
respect to the services of Ronald B. Cushey*^. .
10.22 Employment Agreement, dated as of December 31,
1994, for the services of Ronald B. Cushey*^ . .
10.23 Employment Agreement, dated as of April 29, 1994,
for the services of Steve Mangel*^ . . . . . . .
10.24 Employment Agreement, dated as of January 20,
1994, for the services of Paul S. Almond*^ . . .
10.25 First Amendment to Employment Agreement, dated as
of February 2, 1994, for the services of Paul S.
Almond*^ . . . . . . . . . . . . . . . . . . . .
10.26 Employment Agreement, dated as of January 31,
1994, for the services of Elliot Slutzky*^ . . .
10.27 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)^ . . . .
10.28 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)^ . . . . . . . . . . . . .
10.29 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)^ . . . . . . . . . . . . .
10.30 Agreement, dated as of July 7, 1993, between
Jefferson Capital Group, Ltd. and Daniels &
Associates and the Registrant (incorporated herein
by reference to Exhibit 10.33 to the Registrant's
Annual Report on Form 10-K for the fiscal year
ended December 31, 1993)^ . . . . . . . . . . .
10.31 Consulting Agreement, dated as of July 26, 1993,
between Roger R. Smith and the Registrant
(incorporated herein by reference to Exhibit 10.36
to the Registrant's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993)^. . . .
10.32 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)^. . . . . . . . . . . .
10.33 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). . . . . . . . . . . . . . . .
10.34 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). . . . . . . . . . . . .
10.35 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)
10.36 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) . . . .
10.37 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. (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, 1993). . . . . . . . . . . . . . . . . . . .
10.38 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). . . . . . . . . . . . . . . . . . . . . .
10.39 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)^. . . . . .
10.40 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). . . . . . . . . . . . . . . . . . . . . .
10.41 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)^. . . . . . . . . . . .
10.42 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) . . . .
10.43 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). . . . . . . . . . . . . . . . . . . .
10.44 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)^. . . . . . . . . . . .
10.45 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)^. . . . . . . . . . . .
10.46 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) . . . .
10.47 1988 Stock Option and Stock Appreciation Rights
Plan of the Registrant as amended through March 6,
1995*^ . . . . . . . . . . . . . . . . . . . . .
10.48 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) . . . . . . . . . . . .
10.49 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)
. . . . . . . . . . . . . . . . . . . . . . . .
10.50 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) . . . . . .
10.51 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). . . . . . . . . . . . . . . . . . . . . .
10.52 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) . . . .
10.53 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) . .
10.54 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. (incorporated herein by reference to Exhibit
10.84 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1993)
. . . . . . . . . . . . . . . . . . . . . . . .
10.55 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. (incorporated herein by reference to Exhibit
10.85 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1993)
. . . . . . . . . . . . . . . . . . . . . . . .
10.56 Compromise Settlement Agreement and Release dated
as of December 31, 1994, between the Registrant
and Carolco Pictures Inc.* . . . . . . . . . . .
10.57 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). . . . .
10.58 Fiscal 1993 Incentive Cash Compensation Program
for the Registrant, dated July 1993 (incorporated
herein by reference to Exhibit 10.103 to the
Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993)^. . . . . .
10.59 Fiscal 1994 Incentive Cash Compensation Program
for the Registrant and LIVE Home Video Inc., dated
February 1994 (incorporated herein by reference to
Exhibit 10.104 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December
31, 1993)^ . . . . . . . . . . . . . . . . . . .
10.60 Fiscal 1994 Incentive Cash Compensation Program
for the LIVE Specialty Retail Division, dated
February 1994 (incorporated herein by reference to
Exhibit 10.105 to the Registrant's Annual Report
on Form 10-K for the fiscal year ended December
31, 1993)^ . . . . . . . . . . . . . . . . . . .
10.61 Fiscal 1995 Incentive Cash Compensation Program
for the Registrant, dated March 6, 1995*^. . . .
10.62 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) . . . .
10.63 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). . . . . . . . . . . . . . . . . . . . . .
10.64 Agreement, dated as of October 11, 1994, between
Jefferson Capital Group, Ltd. and the Registrant*^
. . . . . . . . . . . . . . . . . . . . . . . .
10.65 Agreement, dated as of August 1, 1994, among LEI-
IVE Entertainment N.V., International Video
Productions Inc., Atrium Productions Kft. and
Beleggingsmaatschappijmaasmond II B.V.*^ . . . .
10.66 Amended and Restated Loan and Security Agreement
dated as of November 14, 1994 among Foothill
Capital Corporation, and each of LIVE Home Video
Inc., LIVE Film and Mediaworks Inc., LIVE
Entertainment International Inc., LIVE America
Inc. and Vestron Inc. (without schedules or
exhibits)* . . . . . . . . . . . . . . . . . . .
10.67 Continuing Guaranty dated as of November 14, 1994
from the Registrant in favor of Foothill Capital
Corporation* . . . . . . . . . . . . . . . . . .
10.68 Assignment of Liens and Loan Documents effective
as of November 14, 1994, among, Chemical Bank,
Foothill Capital Corporation, and each of the
Registrant, LIVE Home Video Inc., LIVE Film and
Mediaworks Inc., LIVE Entertainment International
Inc., LIVE America Inc., LIVE Ventures Inc. and
Vestron Inc.*. . . . . . . . . . . . . . . . . .
10.69 Notice of Assignment, dated November 14, 1994,
from Chemical Bank to WEA Corp.*
10.70 Notice of Assignment and Irrevocable Authority,
dated November 16, 1994, from LIVE Home Video
Inc., LIVE America Inc., LIVE Film and Mediaworks
Inc. (formerly known as International Video
Productions Inc.) and Vestron Inc. to WEA Corp.*
10.71 Notice of Inventory Access Rights, dated November
16, 1994, from LIVE Home Video Inc., LIVE America
Inc., LIVE Film and Mediaworks Inc. (formerly
known as International Video Productions Inc.) and
Vestron Inc. to WEA Corp.*
10.72 Intercreditor Agreement, dated as of November 16,
1994, by and between Foothill Capital Corporation
and WEA Corp.* . . . . . . . . . . . . . . . . .
10.73 Trustee Intercreditor Agreement, dated as of
November 16, 1994, by and between Foothill Capital
Corporation and American Stock Transfer & Trust
Company* . . . . . . . . . . . . . . . . . . . .
10.74 Agreement dated April 8, 1992 between the
Registrant and Carolco Pictures Inc. with respect
to the division of legal fees and costs* . . . .
10.75 Tax Agreement dated as of August 31, 1994 among
the Registrant, Strawberries Inc., Strawberries
Investments Inc., Waxie Maxie Quality Music Co.
and Strawberries Holding, Inc. (incorporated by
reference to Exhibit 10.1 to Registrant's Current
Report on Form 8-K dated September 15, 1994) . .
10.76 Heads of Agreement, dated February 15, 1995, among
the Registrant, LIVE Home Video, Inc., LIVE
Entertainment International Inc., VCL/Carolco
Communications B.V., VCL/Carolco Communications
GmbH, Apricot Computer GmbH and Gunther Detlef
Ruth*. . . . . . . . . . . . . . . . . . . . . .
10.77 Short Form Deal Memo dated as of June 21, 1994
between International Video Productions Inc. and
Le Studio Canal+(U.S.)*# . . . . . . . . . . . .
11 Computation of Earnings Per Share* . . . . . . .
21 Subsidiaries of the Company* . . . . . . . . . .
23 Consent of Independent Auditors* . . . . . . . .
24 Powers of Attorney and Board of Directors
resolution authorizing the same* . . . . . . . .
99.1 Letter dated August 30, 1994 from Chemical
Securities Inc. to the Board of Directors of the
Registrant (incorporated by reference to Exhibit
99.1 to Registrant's Current Report on Form 8-K
dated September 15, 1994). . . . . . . . . . . .
*Filed Herewith
^Management contract or compensatory plan or arrangement
required to be filed pursuant to Item 14(c)
#Confidential treatment has been requested for portions
of this document
LIVE ENTERTAINMENT INC.,
Issuer
and
AMERICAN STOCK TRANSFER & TRUST COMPANY,
Trustee
Supplemental Indenture
dated as of November 14, 1994
amending and supplementing
Indenture dated as of September 1, 1992
$40,000,000
Increasing Rate Secured Senior Subordinated Notes
due 1999<PAGE>
SUPPLEMENTAL INDENTURE
SUPPLEMENTAL INDENTURE, dated as of November 14, 1994,
between LIVE ENTERTAINMENT INC., a Delaware corporation (the
"Company"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, a New York
trust company (the "Trustee"), amending and supplementing that
certain Indenture dated as of September 1, 1992 between the Company
and the Trustee (the "Indenture"), pursuant to which the Company's
Increasing Rate Secured Senior Subordinated Notes due 1999 (the
"Securities") were issued.
RECITALS
1. The Company did make, execute and deliver the
Indenture to the Trustee.
2. The Company desires to amend and supplement the
Indenture as more fully set forth below.
3. Section 9.02 of the Indenture provides for and
permits the Company, when duly authorized, and the Trustee to enter
into this Supplemental Indenture with the written consent of the
registered holders of at least a majority in aggregate principal
amount of the Securities outstanding under the Indenture on
September 12, 1994, the record date fixed by the Company in
accordance with Section 9.04 of the Indenture (the "Record Date").
4. At the close of business on the Record Date, there
were outstanding under the Indenture forty million dollars
($40,000,000) in aggregate principal amount of the Securities, such
Securities being all the securities then outstanding under the
Indenture.
5. The Board of Directors of the Company by resolution
has approved this Supplemental Indenture, the registered holders of
at least a majority in aggregate principal amount of the Securities
outstanding on the Record Date have consented to the substance of
this Supplemental Indenture, and a copy of such resolution and
evidence of the giving of the consent of such holders have been
filed with the Trustee as provided in Section 9.02 of the
Indenture.
NOW, THEREFORE, the parties hereto hereby execute this
Supplemental Indenture to amend and supplement the Indenture as
follows:
SECTION 1. The definition of "Net Worth Floor" set forth
in Section 1.01 of the Indenture is hereby deleted.
SECTION 2. Section 4.01 of Indenture is hereby amended
by adding the following sentence at the end thereof.
"Anything in this Indenture, including without
limitation the form of the Securities set forth in
Exhibit A hereto, to the contrary notwithstanding,
from (and including) October 18, 1994, the rate of
interest borne by the Securities shall be twelve
percent (12%) per annum."
SECTION 3. Section 4.23 of the Indenture is hereby
deleted.
SECTION 4. The Trustee hereby accepts the trusts hereby
declared and agrees to perform the same upon the terms and
conditions set forth in the Indenture and in this Supplemental
Indenture. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture (other than for its due execution hereof) or
the due execution hereof by the Company or for or in respect of the
recitals contained herein, all of which recitals are made by the
Company solely. In general, each and every term and condition
contained in Article Seven of the Indenture shall apply to this
Supplemental Indenture.
IN WITNESS WHEREOF, LIVE ENTERTAINMENT INC. has caused
this Supplemental Indenture to be signed in its corporate name by
its President or one of its Vice Presidents and AMERICAN STOCK
TRANSFER & TRUST COMPANY, to evidence its acceptance of the trusts
created hereunder, has caused this Supplemental Indenture to be
signed in its corporate name by its President or one of its Vice
Presidents, all as of the day and year first above written.
LIVE ENTERTAINMENT INC.
By:__________________________
[CORPORATE SEAL] Name: Michael J. White
Title: Executive Vice
President
AMERICAN STOCK TRANSFER &
TRUST COMPANY
By:___________________________
[CORPORATE SEAL] Name:
Title:
<PAGE>
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) SS
On the 14th day of November, in the year 1994, before me
personally came MICHAEL J. WHITE, to me known, who, being by me
duly sworn, did depose and say that he resides at 4423 Dulcinea
Court, Woodland Hills, California, that he is an Executive Vice
President of LIVE Entertainment Inc., the corporation described in
and which executed the foregoing instrument; that he knows the seal
of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the
Board of Directors of said corporation, and that he signed his name
thereto by like authority.
____________________________
Notary Public
[NOTARIAL SEAL]
STATE OF NEW YORK )
COUNTY of NEW YORK ) SS
On the ____ day of _______, in the year 1994, before me
personally came _________________________________, to me known,
who, being by me duly sworn, did depose and say that he resides at
___________________________________, that he is a [_________]
President of American Stock Transfer & Trust Company, the
corporation described in and which executed the foregoing
instrument; that he knows the seal of said corporation; that the
seal affixed to said instrument is such corporate seal; that it was
so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
____________________________
Notary Public
[NOTARIAL SEAL]
JMG94D30.SEC (3/14/95 1:29p)
AGREEMENT
This Agreement, made as of this first day of January, 1995, is
made and entered into by LIVE Film and Mediaworks Inc. ("LIVE") and
Carolco Pictures Inc. ("Carolco") with respect to the following
facts:
A. WHEREAS, LIVE, as (as successor in interest to LIVE Home
Video Inc.) and Carolco Pictures Inc. are parties to that certain
Agreement dated July 27, 1987, as the same has been restated and
amended from time to time up to the date hereof (the "Domestic
Master Agreement").
B. WHEREAS, Carolco has developed a screenplay called
"Cutthroat Island" and has assigned all rights in such screenplay
to Cutthroat Productions L.P. ("CPLP").
C. WHEREAS, CPLP is producing a motion picture tentatively
entitled "Cutthroat Island" based substantially on such screenplay
(the "Picture").
D. WHEREAS, CPLP has granted all distribution rights in the
Picture to Cutthroat Distribution Inc., a California corporation
("CDI").
E. WHEREAS, CPLP solely and exclusively owns and controls the
right to cause the production and exploitation of Remakes and
Sequels (as defined in paragraph 4 below) of the Picture
(collectively, the "Cutthroat Sequel Rights").
F. WHEREAS, the Cutthroat Sequel Rights have been pledged
("Bank Security") to Credit Lyonnais Bank Nederland N.V.
("Collateral Agent") as Collateral Agent for itself and other
participating banks ("Banks") to secure repayment of certain
obligations to the Banks pursuant to a certain loan or loans made
by the Banks with respect to the Picture.
G. WHEREAS, pursuant to agreements between Carolco and CPLP,
conditioned only upon, and immediately upon, the release of the
Bank Security, CPLP is required to reconvey the Cutthroat Sequel
Rights to Carolco.
H. WHEREAS, the parties desire to confirm that the Picture is
not covered by the Domestic Master Agreement and to induce LIVE to
enter into a home video distribution agreement with CDI pursuant to
which LIVE shall license from CDI, upon terms and conditions upon
which LIVE and CDI have agreed, the exclusive home video
distribution rights in and to the Picture throughout the United
States and Canada (the "CDI Video Agreement"), and Carolco will
benefit from LIVE doing so.
I. WHEREAS, the terms of the Domestic Master Agreement are
more favorable to LIVE than the terms of the CDI Video Agreement.
J. WHEREAS, in order to settle and resolve the dispute
between them whether the Picture is covered by the Domestic Master
Agreement and to induce LIVE not to make claims against CPLP or CDI
that the Picture is covered by the Domestic Master Agreement,
Carolco and LIVE are willing to enter into the agreements, and
Carolco is willing to make the payments, all as hereinafter set
forth.
K. WHEREAS, LIVE and Carolco agree that the compensation to
be provided to LIVE pursuant to this Agreement represents their
fair and reasonable current estimation of the value of the
anticipated economic loss which LIVE will suffer as a result of the
less favorable terms to LIVE of the CDI Video Agreement, in light
of the fact that the actual amount of the loss is impossible to
calculate as of the date of execution of this Agreement.
NOW, THEREFORE, for and in consideration of the promises,
terms and conditions set forth herein, the parties agree as
follows:
1. Except as expressly provided in paragraph 4(a) below with
respect to the Cutthroat Video Sequel Rights (as defined in
such paragraph 4(a)), the Picture shall not be subject to the
Domestic Master Agreement.
2. Concurrently with the execution of this Agreement by Carolco,
LIVE shall execute the CDI Video Agreement.
3. Carolco agrees to pay to LIVE the sum of XXXXXXXXXX (the
"Agreed Fee").
a. Carolco agrees to pay the Agreed Fee to LIVE as follows:
i. XXXXXXXXXXXXXXXXXXXXXXXXXX ("First Payment");
ii. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX ("Second Payment");
iii. XXXXXXXXXXXXXXXXXXXXXXXXXXX ("Third Payment"); and,
iv. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXX ("Fourth Payment").
b. Solely to secure Carolco's full and timely payment of the
Second, Third and Fourth Payments, concurrently upon the
execution of this Amendment, Carolco shall, at its own
cost, deliver or cause to be delivered to LIVE or its
designee a documentary letter of credit issued by a bank
in a form reasonably satisfactory to LIVE and drawable
upon LIVE's delivery to the issuing bank of all drawing
certificates as required by the terms of the letter of
credit ("Carolco LC"). The Carolco LC shall have a face
value of XXXXXXXXXX and partial drawings in the amounts
of the Second, Third and Fourth Payments shall be
permitted thereunder. Carolco may, at its election, pre-
pay any or all of the Second, Third or Fourth Payments at
any time, without discount.
4. a. Carolco hereby agrees that throughout the Agreement Term
(as defined in the CDI Video Agreement) Remakes and
Sequels of the Picture produced during the Agreement Term
shall be treated in the same manner as under the Domestic
Master Agreement (the "Cutthroat Video Sequel Rights").
LIVE acknowledges that its rights in the Cutthroat Video
Sequel Rights shall not survive the completion of any
foreclosure of the Bank Security by the Collateral Agent
or the Banks and the lapse of all rights of Carolco to
the Cutthroat Sequel Rights as a result thereof.
b. Carolco hereby represents and warrants to LIVE that (i)
conditioned only upon, and immediately upon, the release
of the Bank Security, CPLP is obligated to reconvey to
Carolco the Cutthroat Video Sequel Rights, free and clear
of any lien or adverse interest in favor of any party,
(ii) immediately upon the release of the Bank Security,
Carolco will take any and all action that is necessary or
appropriate to cause the Cutthroat Video Sequel Rights to
be reconveyed to Carolco, (c) if, following the release
of the Bank Security, Carolco does not exercise its
rights to obtain the reconveyance of the Cutthroat Video
Sequel Rights from CPLP, free and clear of any lien or
adverse interest in favor of any party, Carolco shall
allow LIVE to exercise such rights to cause CPLP to
reconvey the Cutthroat Video Sequel Rights to Carolco,
and (d) Carolco will not convey or authorize the
conveyance of the Cutthroat Sequel Rights except to a
party that acknowledges that the conveyance is subject to
LIVE's rights as described in this paragraph 4 applicable
to the Cutthroat Video Sequel Rights.
5. This Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and each of their predecessors,
successors, agents and assigns.
6. Each party confirms that with regard to the terms and
provisions hereof, they have been presented with and have
exercised the opportunity to confer with counsel of their
choice. The parties further confirm and represent that (a)
each of the persons executing this Agreement on behalf of a
corporation or other entity has full power and authority to do
so on behalf of the corporation or entity for which he is
signing and that no other or further authority or execution by
any other person for such corporation or entity is necessary;
(b) they have read and understand the effect of this
Agreement, that they have talked with their attorneys
regarding the terms, conditions and effects, including but not
limited to income tax consequences, of executing this
Agreement; and, (c) this Agreement has been executed freely,
voluntarily and willingly by them.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the dates set forth opposite their respective names,
to be effective as of the last of such dates.
LIVE Film and Mediaworks Inc.
BY: ________________________
ITS: ________________________ DATE:
________________________
Carolco Pictures Inc.
BY: ________________________
ITS: ________________________ DATE:
________________________
December 16, 1994
LIVE Film and Mediaworks Inc.
LIVE America Inc.
15400 Sherman Way
Suite 500
Van Nuys, California
91406
Gentleman:
Re: Term Extension Letter Agreement
Reference is made to the Agreement between LIVE America Inc.
("LIVE") and MCA Canada Ltd. ("MCA Canada") dated September 1,
1991, (the "Agreement"). All terms defined in the Agreement and
used below will have the same meaning as when used in the
Agreement.
Under the Agreement, MCA Canada is currently the sole and
exclusive distributor for Live product in the home video medium
for Canada. The Agreement was to have expired on August 31,
1994, except where any of the Advances payable under the
Agreement remain unrecouped. Since such Advances remain
unrecouped, MCA Canada has continued to distribute Live product.
Notwithstanding the potential recoupment or repayment of the
outstanding Advances, Live and MCA Canada agree, effective as the
date hereof, to extend the Agreement for a further defined period
in accordance with the terms and conditions set forth
hereinbelow:
1. Effective as of the date hereof, LIVE and MCA Canada agree
to extend the Term of the Agreement until December 31, 1997.
LIVE shall have the option to extend the Term until December 31,
2000, upon all the same terms and conditions of the Agreement, as
amended hereby. Such option shall be exercisable by LIVE sending
to MCA written notice of its election to extend the Term of the
Agreement, provided such notice is sent to MCA not later than
September 30, 1997.
2. Upon execution of this term extension letter agreement
("Letter Agreement"). MCA Canada agrees to reduce the total
outstanding amounts which remain payable to MCA pursuant to the
First and Second Advances as set out in Paragraph 4 of the
Agreement by the amount of Three Hundred Thousand United States
Dollars (U.S. $300,000.00) (the "Extension Advance"). Such
reduction shall be a nonrefundable, non-recoupable forgiveness of
that portion of the total debt owing to MCA under the Agreement.
In the event, however, that upon execution of the Letter
Agreement, the First and Second Advances are fully recouped, MCA
Canada agrees to pay LIVE the Extension Advance upon such actual
date of execution.
3. Effective from and after January 1, 1995, Paragraph 6 of the
Agreement shall be deleted in its entirety and replaced with the
following:
DISTRIBUTION FEES: MCA Canada's distribution fee shall be
ten percent (10%) ("Distribution Fee") of all net amounts
invoiced (net of all amounts deducted during the month in
question pursuant to Paragraph 9(ii) and net of any amounts
constituting market development funds) for LIVE product shipped
to and not returned from MCA Canada's customers with the
following exceptions where the lesser fee specified shall apply:
(a) For major sell-through titles (defined as titles
initially released during the Term in the U.S. at a list price
equal to or less than U.S. $29.99) where U.S. sales volume in the
first ninety (90) days exceeds 1,000,000 units net of returns and
subject to MCA Canada's right to audit such sales figures), the
Distribution Fee shall be seven and one-half percent (7-1/2%);
(b) For all other sell through titles not qualifying as
major sell-through titles, the Distribution Fee shall be nine
percent (9%);
(c) The Distribution Fee chargeable by MCA Canada hereunder
is inclusive of, but not limited to, a charge for overhead,
freight to customers, bad debt, returns processing, storage and
insurance of inventory and storage of P.O.P. materials, and all
the distribution services enumerated in Paragraph 1 hereof except
as expressly provided in Paragraphs 7 and 8.
4. Effective from and after January 1, 1995, Paragraph 9(v)
shall be deleted in its entirety and replace with the following:
(v) A reasonable reserve to be withheld in an amount to be
determined by MCA Canada in accordance with MCA Canada's then
current return policy with respect to particular Live product
which MCA shall establish in its reasonable discretion consistent
with then prevailing industry practices in the Territory, but the
amount of such reserve shall not at any given time exceed the
reserve for returns then included in MCA's actual books therefor,
subject to the limitations set forth below. MCA Canada shall
fully liquidate each such reserve no more than nine (9) months
from the date such reserve was first taken. Notwithstanding the
foregoing, at the start of each of the last six (6) months of the
Term, MCA Canada shall, in good faith, fairly and reasonably
determine its outstanding return exposure with respect to LIVE
product, and shall immediately release all or such portion of the
reserves which MCA Canada has so determined to be unnecessary for
protection against returns of LIVE product. Moreover at or after
the expiration of the Term of this Agreement, MCA Canada shall
fully liquidate each such reserve, except for the return
authorizations ("RA's") then currently open, immediately upon its
receipt of written confirmation that LIVE has entered into an
agreement ("New distribution Agreement") with another
creditworthy distribution company (("New Distributor") providing
for the distribution in the Territory of LIVE product and that
the New Distributor has agreed to accept all of MCA Canada's
customers' returns of LIVE product other than returns pursuant to
the RA's then currently open. MCA Canada is not authorized to
and shall not accept or commit to accept the returns of any
particular LIVE product, or issue or committ to issue credits to
customers with respect thereto, in excess of the return policy
MCA Canada has established with respect thereto, in excess of the
return policy MCA Canada has established with respect thereto
unless the prior written approval of LIVE shall have been given.
The return policy which MCA Canada may establish from time to
time with respect to any particular LIVE product shall, in all
material respects, be no more favourable to customers than are
the terms and conditions of the then current return policy which
LIVE shall have established in respect of the sale distribution
in the United States of such particular LIVE product. Any
returns policy established by MCA Canada for any particular LIVE
product which, in any material respects, is more favourable to
customers than the then current returns policy established by
LIVE for such particular product shall be subject to LIVE's prior
written consent.
5. Effective from and after January 1, 1995, Paragraph 7(b) of
the Agreement shall be amended by deleting the second and third
sentences of the paragraph and inserting the following in its
place:
"During the Term of this Agreement, manufacturing costs
shall only be charged to LIVE with respect to units sold and
not returned, it being understood and agreed that until the
expiration of the Term of this Agreement, the manufacturing
cost of inventory will be deferred until such inventory is
actually sold.
On a monthly basis commencing January 1, 1995, MCA Canada
shall furnish LIVE an inventory listing which shall set
forth, on a title by title basis, the following information:
(a) the cumulative number of videocassettes (in units) of
each particular LIVE product manufactured by or under the
authority of MCA Canada during the period commencing January
1, 1995 and ending on the last day of such particular month;
(b) the cumulative number of videocassettes (in units) of
each particular LIVE product manufactured by or under the
authority of MCA Canada during the period commencing on the
first day and ending on the last day of such particular
month;
(c) the aggregate manufacturing costs actually paid or
incurred by MCA during the same period in respect of the
videocassettes referred to in (a) above;
(d) the aggregate sum of all rebates, discounts (including
volume discounts), credits or other allowances which are or
shall be paid or credited to MCA Canada during the same
period in respect of the manufacturing costs referred to in
(c) above;
(e) the aggregate manufacturing costs actually paid or
incurred by MCA during the same time period in respect of
the videocassettes referred to in (b) above;
(f) the aggregate sum of all rebates, discounts (including
volume discounts), credits or other allowances which are or
shall be paid or credited to MCA Canada during the same
period in respect of the manufacturing costs referred to in
(e) above;
(g) the cumulative number of videocassettes (in units) of
each such particular LIVE product shipped by or under the
authority of MCA Canada during the period commencing January
1, 1995 and ending on the last day of such particular month;
(h) the cumulative number of videocassettes (in units) of
each such particular LIVE product shipped by or under the
authority of MCA Canada during the period commencing on the
first day and ending on the last day of such particular
month;
(i) the cumulative number of videocassettes (in units) of
each such particular LIVE product sold by or under the
authority of MCA Canada during the period commencing January
1, 1995 and ending on the last day of such particular month;
(j) the cumulative number of videocassettes (in units) of
each such particular LIVE product sold by or under the
authority of MCA Canada during the period commencing on the
first day and ending on the last day of such particular
month;
(k) the cumulative number of videocassettes (in units) of
each such particular LIVE product returned to MCA Canada
from its customers during the period commencing January 1,
1995 and ending on the last day of such particular month;
(l) the cumulative number of videocassettes (in units) of
each such particular LIVE product returned to MCA Canada
from its customers during the period commencing on the first
day and ending on the last day of such particular month.
Provided MCA Canada has not accepted or committed to accept
the returns of any particular LIVE product, or issued or
committed to issue credits to customers with respect
thereto, in excess of the authorised return policy therefor
(it is acknowledged that with respect to LIVE rental product
and/or catalogue product, return policies are established
generally on a group basis for all LIVE rental and/or
catalogue product unless a return policy is designated on an
individual title basis as in the case of major sell through
titles (e.g., "Tom & Jerry") or special promotion titles
(e.g., "Christmas Classic")), then promptly following the
expiration of the Term, LIVE shall purchase or cause its
designee to purchase from MCA canada, and MCA Canada shall
sell to LIVE or its designee, the videocassettes of each
such particular LIVE product shipped but not sold by or
under the authority of MCA Canada during the period
commencing January 1, 1995 and ending on the last day of the
Term. In consideration therefor, LIVE shall pay or cause to
be paid to MCA Canada, and MCA Canada shall accept from LIVE
or its designee, a sum equal to the cumulative manufacturing
costs actually paid by MCA Canada therefor less the
aggregate sum of all rebates, discounts, (including volume
discounts), credits or other allowances which shall have
been paid or credited to MCA Canada with respect thereto.
The parties recognise that the manufacturing costs of
videocassettes of each such particular LIVE product may vary
from time to time. In that respect, of the number of
videocassettes of each such particular LIVE product which
are manufactured and sold, the parties agree that the
videocassettes carrying the highest manufacturing costs
shall be deemed to be the units sold first and the
videocassettes carrying the lowest manufacturing costs shall
be deemed to be the units sold last.
EXAMPLE: For purposes of example only, assume that from
January 1, 1995 until the end of the Term, MCA Canada
manufactured 100 videocassettes of a particular LIVE
product, of which, 60 were manufactured at a per unit cost
of $4.00, 30 were manufactured at a per unit cost of $3.00
and 10 were manufactured at a per unit cost of $2.00.
Further assume that from January 1, 1995 until the end of
the Term, MCA Canada shipped 90 such videocassettes; 70 of
which were sold, and 20 returned, leaving a total of 30 such
videocassettes in MCA Canada's inventory at the end of the
Term. In such instance, at the end of the Term, LIVE would
purchase from MCA Canada 20 such videocassettes at a total
purchase price of $50.00 (i.e. 10 x $2.00 + 10 x $3.00).
For the avoidance of doubt, the parties understand, agree
and acknowledge that at the expiration for the Term, LIVE or
its designee shall have the right, but not the obligation,
to additionally purchase from MCA Canada all or any part of
its on-hand inventory of videocassettes of LIVE product at a
price calculated in the manner described above. At the
expiration of the Term, MCA Canada agrees to promptly erase
or destroy all or any part of such inventory which LIVE does
not elect to purchase, and MCA shall furnish to LIVE a
customary affidavit of erasure or destruction with respect
thereto. With respect to the videocassettes of any
particular LIVE product which are manufactured by or under
the authority of MCA Canada from and after January 1, 1995,
the provisions of this Paragraph 7(b) shall replace and
supersede the provisions of Paragraphs 8(a), (b) and (c) of
the Agreement, which shall remain in full force and effect
only with regards to videocassettes of any particular LIVE
product which have been manufactured by or under the
authority of MCA Canada before January 1, 1995. MCA Canada
shall, no later than four (4) weeks following the date of
execution of this Term Extension Letter Agreement, furnish
to LIVE a listing of its inventory on hand as December 31,
1994"
6. Effective as of January 1, 1995, Paragraph 1(d)(ii) of the
Agreement shall be amended by adding the following to the end:
"..., including, without limitation, compact discs, CD ROM, CD-I
(Interactive) and DVD (digital video disc)."
7. Effective as of January 1, 1995, the second of the last line
of Paragraph 1(d)(ii), the sum "Cdn. $0.25" shall be replaced
with "Cdn. $.05".
8. Effective as of January 1, 1995, Paragraph 4 of the
agreement shall be deleted in its entirety.
9. Effective as of January 1, 1995, Paragraph 5(b), (c) and (d)
shall be deleted in their entirety.
10. In Paragraph 12(a), the maximum deductible shall be
increased to US$50,000.
11. Effective as of January 1, 1995, Paragraph 14 shall be
deleted in its entirety.
12. The parties agree and acknowledge that LIVE has expressed
its intention to conduct an audit of MCA Canada's books and
records for the period commencing upon the inception of the
Agreement and ending December 31, 1994. MCA Canada shall allow
such audit and shall fully co-operate with LIVE and its
representative in the conduct of such audit.
13. The parties mutually acknowledge and agree that through
December 31, 1994, each party fulfilled its obligations under the
Agreement in full, except for continuing obligations to account
and pay royalties and those representations and warranties which,
if breached, would result in claims made by or in respect to
third parties (e.g. without limitation, LIVE product will not
violate third party rights; federal; provincial and local laws
will be compiled with; no distribution of LIVE product in
contravention of LIVE's exclusive rights, etc.), as opposed to
claims between LIVE and MCA Canada. Nothing contained in this
previous sentence, however, shall be construed as a waiver of any
audit rights or claims that LIVE has or has made or may
hereinafter have or make against MCA Canada (i.e. claims that
LIVE may discover in the course of the exercise of its audit
rights under the terms of the Agreement or at law).
14. Effective as of January 1, 1995, in the event of any
contradiction between the provisions of this Letter Agreement and
the provisions of the Agreement, the provisions of this Letter
Agreement shall prevail.
15. Should any provisions of this Letter Agreement be held to be
invalid or unenforceable by a court of competent jurisdiction,
the validity and enforceability of the remaining provisions or
portions thereof shall not be affected thereby.
16. Except as modified above, the Agreement shall remain in full
force and effect and is hereby ratified and affirmed.
17. This Letter Agreement may be executed in counterparts, each
of which shall have the force and effect of an original.
18. Effective as of January 1, 1995, LIVE Film and Mediaworks
Inc. shall become a party to the Agreement, and all references to
"LIVE" herein and in the Agreement shall refer individually and
collectively to LIVE Film and Mediaworks Inc. and LIVE America
Inc.
IN WITNESS WHEREOF, the parties have executed this Letter
Agreement as of the day and year first above written.
Agreed and Accepted
MCA Home Video Canada,
a division of MCA Canada Ltd.
LIVE America Inc.
Per: Per:
LIVE Film and Mediaworks Inc.
Per:
LIVE ENTERTAINMENT INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
DATE: As of April 1, 1994
Pioneer North America, Inc.
2265 East 220th Street
Long Beach, California 90810
Attention: Gregory R. Pierson
Re: Ronald B. Cushey
Dear Mr. Pierson:
This letter sets forth the agreement under which Pioneer North
America, Inc. ("Pioneer") will permit LIVE Entertainment Inc.
("Company") to utilize the services of Ronald B. Cushey
("Employee"), an employee of Pioneer, on a temporary full time
basis. That agreement is as follows:
1. Services. Pioneer hereby assigns Employee to LIVE to
perform such finance, accounting and related services, on a full
time basis, as may be assigned to Employee by the Chief Executive
Officer of LIVE or his designates. Such services shall be
generally performed at the principal offices of LIVE, currently in
Van Nuys, California.
2. Term. This Agreement shall commence as of the date
hereof and shall continue until ten (10) days after written notice
from one party to the other wherein the notifying party informs the
other that it intends to terminate this Agreement.
3. Fees. Pioneer shall remain liable to Employee for paying
all of the cost of Employee as an employee of Pioneer, including
salary, benefits and the like and for providing Employee with
whatever employment benefits Employee may be entitled to receive
under his agreement of employment with Pioneer. At the end of each
month during the term hereof, Pioneer shall provide an invoice to
LIVE listing the direct out-of-pocket cost of Employee to Pioneer
during that portion of the prior month when Employee was providing
services to LIVE pursuant to the terms of this letter. LIVE agrees
to reimburse Pioneer for the costs listed in such invoice within
ten (10) days after receipt thereof.
4. Expenses. LIVE agrees to reimburse Employee for all
reasonable expenses incurred by Employee in connection with his
services to LIVE in accordance with this Agreement, with such
reimbursement to be pursuant to the same policy, and in the same
manner, that LIVE reimburses the business expenses of its senior
executives.
5. Employment Issues. Nothing contained in this Agreement
shall serve to make Employee an employee or agent of LIVE. Pioneer
agrees to pay in due course any and all federal, state and local
taxes that may be due as a result of the compensation provided by
Pioneer to Employee. Pioneer also agrees that LIVE shall have no
obligation to obtain any insurance on behalf of Employee,
including, but not limited to, workers' compensation insurance, and
Pioneer hereby agrees to provide and pay for all of such insurance
for the benefit of Employee.
6. Indemnification. In connection with his provision of
services to LIVE pursuant to this Agreement, Employee shall be
entitled throughout the term hereof to the benefit of the
indemnification provisions contained on the date hereof in the
Bylaws of LIVE 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 senior
executive of LIVE. Furthermore, LIVE agrees to indemnify and hold
Pioneer harmless from and against any and all loss, cost, damage or
expense incurred by or asserted against Pioneer arising out of
Employee's provision of services to LIVE pursuant to this
Agreement. The provisions of this paragraph 6 shall expressly
survive any termination of this Agreement.
Please confirm Pioneer's agreement to the foregoing by signing
below where indicated.
Very truly yours,
LIVE ENTERTAINMENT INC.
a Delaware corporation
By:
Michael J. White
Executive Vice
President
AGREED AND ACCEPTED
this ____ day of May, 1994
PIONEER NORTH AMERICA, INC.
By:
Title:
LIVE ENTERTAINMENT INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
DATE: As of December 31, 1994
Mr. Ronald B. Cushey
c/o LIVE Entertainment Inc.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
Re: Employment Agreement
Dear Mr. Cushey:
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
Financial Officer 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.
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 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 on December 31, 1996 unless extended
or sooner terminated in accordance with the provisions of this
Agreement (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. 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.
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. Fixed Annual Compensation in
the amount of no less than One Hundred Ninety Thousand Dollars
($190,000). 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 Stock Options. Upon (a) approval by the Stock Option
Committee of the Board of Directors of Company, and (b) Employee's
execution of the stock option agreement referred to hereinafter in
this Section 2.3, as a special inducement to Employee, Company will
grant to Employee options to acquire 5,000 shares of Company's
common stock at the price per share equal to the average of the bid
and asked prices of Company's Common Stock on the OTC Bulletin
Board at the closing of the market on the date of this Agreement
(the "Options"), with such Options to vest as follows:
(i) 2,500 Options will vest on December 31, 1995; and
(ii) 2,500 Options will vest on December 31, 1996;
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 (the "Option Plan"), as well
as the form of stock option agreement as may be adopted by
Company's Board of Directors or the Stock Option Committee thereof
from time to time pursuant to the Option Plan.
2.4 Vacation Benefits. During each year of the Term,
Employee shall be entitled to a vacation of three (3) 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 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.
2.5 Automobile Benefits. Until June 27, 1995 (the
"Automobile Termination Date"), Company shall make available to
Employee, by way of direct payment, the use of a 1990 Mercedes
300SL (the "Automobile") currently leased by Company and used by
Employee (the "Automobile Benefits"). Until the Automobile
Termination Date, Employee covenants and agrees that he shall
operate the Automobile with "reasonable care." Employee agrees
that Company shall retain title to the Automobile. On the
Automobile Termination Date, Employee shall return the Automobile
to Company. From and after the Automobile Termination Date,
Company shall have no further obligation to provide the Automobile
Benefits to Employee.
2.6 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 employees of Company
of similar stature and seniority on the terms generally applicable
to such employees 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.
2.7 Extension of Term. Unless earlier terminated in
accordance with the provisions hereof, the Term of this Agreement
shall automatically be extended from and after December 31, 1996
unless and until the date that is three (3) months following
Employee's receipt of written notice that Company desires to
terminate Employee's employment hereunder (the "Period of
Extension"), which notice may be given to Employee no sooner than
September 30, 1996; provided, however, that at any time during the
Period of Extension, Employee shall have the right, by giving
written notice to Company, to elect to terminate his employment
hereunder, without any obligation to Company, whereupon the Period
of Extension shall end. During the Period of Extension, and during
a period of three (3) months thereafter (i.e., the first three
months following the end of Employee's employment hereunder),
subject to the provisions of Section 3.4 below, Company shall
continue to pay Employee's Fixed Annual Compensation, as well as
provide Employee with health insurance benefits.
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. 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.
3.2 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 substan-
tially perform a material condition or covenant of this Agreement,
or if Company shall terminate Employee's employment or 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 pay to
Employee or provide Employee with:
(i) Employee's Fixed Annual Compensation for the
remainder of the Term, paid in equal installments
on Company's regular pay dates during the term of
such payments, and
(ii) Health insurance for the remainder of the Term.
In addition, all Options shall vest on the date of termination.
Employee shall also receive such Incentive Compensation as has been
accrued through the date of termination, and, to the extent that
the accrued vacation pay of Employee as of the date of termination
exceeds the amount of Employee's Fixed Annual Compensation for the
remainder of the Term, Employee shall also receive an amount equal
to such excess. All other benefits shall cease on the date of
termination of employment, except as otherwise required by law.
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 3.3.2; and
3.3.2.3 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) 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. 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
Incentive Compensation, any Additional Benefits or any other sums
or benefits accruing to Employee hereunder, except as otherwise
required by law; provided, however, that the sums identified in
Section 3.3.2 and Section 3.3.3(b) 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 personally to Employee, or by sending it to
Employee by certified mail, return receipt requested, or by
overnight courier service, 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 certified mail, return receipt requested, or by
overnight courier service, 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. Neither party shall hold itself out contrary to the terms
of this Section. 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 December 31, 1994 Very truly yours,
LIVE ENTERTAINMENT INC.
a Delaware corporation
By:
Roger A. Burlage
President and Chief
Executive Officer
AGREED AND ACCEPTED
RONALD B. CUSHEY
LIVE HOME VIDEO INC.
15400 Sherman Way
Van Nuys, California 91406
DATE: As of April 29, 1994
Steve Mangel
17552 Osborne Street
Northridge, California 91325
Re: Employment Agreement
Gentlemen:
When executed by you ("Executive") and by a duly authorized
representative of LIVE Home Video Inc., a Delaware corporation
("Company"), this letter will set forth the terms and conditions of
Executive's employment from and after commencement of the Term (as
defined in Paragraph 2.3.1 below).
1. Background
1.1. Executive has served as General Counsel and Senior Vice
President of Legal and Business Affairs of Company.
1.2. Executive desires to continue to be employed by Company,
and Company considers Executive to be a valuable employee and
desires to continue to employ Executive pursuant to the terms and
conditions of this Agreement.
2. Services
2.1. Employment. Company shall employ Executive during the
Term to serve as Executive Vice President of Company and Company's
subsidiaries, and to render such services (collectively,
"Services") as Company or corporations controlled by, under common
control with or controlling, directly or indirectly, Company or
Company's subsidiaries ("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.
Such Services may include serving on the Board of Directors of
Company and Company's Affiliates. The Services shall be performed
at Company's principal offices in Van Nuys, California, and 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 the Services in a
competent and professional manner, consistent with the skills to be
possessed by a senior executive officer in Company's business.
2.2. Duties; Reporting Requirements. Among the duties that
Executive shall perform in connection with the Services is that
Executive shall do and perform all services, acts or things
reasonably necessary or advisable to manage, supervise and conduct
the international sales business of Company and its subsidiaries.
In performing his duties hereunder, Executive shall report to the
Chief Executive Officer of Company.
2.3. Term/Exclusivity
2.3.1. The Term of this Agreement shall commence on
July 1, 1994 and shall end on June 30, 1997 unless extended or
sooner terminated in accordance with the provisions of this
Agreement (the "Term").
2.3.2. During the Term, the Services shall be rendered
on a full-time basis during normal working hours and all services
of Executive shall be exclusive to Company. 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 Paragraph and Paragraph 2.4)
will cause Company irreparable injury. Executive 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.
2.3.3. During the term of Executive's employment by
Company pursuant to this Agreement (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 and which are publicly traded as long as Executive 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 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.
2.4. 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:
2.4.1. 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
2.4.2. 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.
2.5. Indemnification. Executive shall be entitled throughout
the Term to the benefit of the indemnification provisions contained
on the commencement of the Term 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. Company acknowledges that because Company is a wholly
owned subsidiary of LIVE Entertainment Inc., and because Executive
is an officer of Company, Executive is covered, and throughout the
Term shall remain covered, under the Directors and Officers
Insurance Policy of LIVE Entertainment Inc. and its successor(s).
3. 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.
3.1. Fixed Annual Compensation. For the period commencing on
the beginning of the Term, Executive shall receive Fixed Annual
Compensation in the amount of Two Hundred Sixty Thousand Dollars
($260,000). Executive's Fixed Annual Compensation shall be
increased on each anniversary of the commencement of the Term by
not less than five percent (5%) of the Fixed Annual Compensation in
effect in the prior twelve month period. Executive's Fixed Annual
Compensation shall be payable in equal installments on Company's
regular pay dates following commencement of the Term.
3.2. Incentive Compensation. Executive 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").
3.3. Special Inducements. As a special inducement to
Executive to enter into this Agreement, Company agrees as follows:
3.3.1. Subject to Executive's taking and passing such
physical exams as Company's regular insurance carrier requests,
from and after the commencement of the Term to continue to provide
to Jay Mangel, or his successor, Trustee of the Steven E. Mangel
Irrevocable Trust dated September 1, 1992 (the "Trust") a Five
Hundred Thousand Dollar ($500,000) whole-life split dollar
insurance policy ("Life Insurance") and Company shall continue to
pay all premiums thereon during the Term of this Agreement. The
arrangement will be pursuant to a separate, currently existing
split dollar agreement, as amended as of the date hereof. Such
policy shall be payable to the Trust. Notwithstanding the
foregoing, Company shall not be required to pay insurance premiums
in excess of those customarily available for policies covering male
nonsmokers in good health of like age and, if the premiums exceed
such amount per year, then Executive shall either pay such excess
or the insurance coverage will be reduced to the amount that can be
purchased for such amount. Such split dollar insurance policy will
provide that at the end of the Term, Executive shall have the right
to request that Company assign such policy to the Trust at no cost
to Executive, provided that Company shall not be responsible to pay
for any future insurance premiums following such assignment.
3.3.2. To provide Executive with the following:
A. Until August 11, 1994 (the "Automobile
Termination Date"), and pursuant to the Original Agreement (as
defined in Paragraph 5.7 below), Company shall make available to
Executive, by way of direct payment, the use of a 1990 Lexus LS400
(the "Automobile") currently leased by Company for Executive.
Until the Automobile Termination Date, Company shall pay all costs
of reasonable gas, maintenance, repair and insurance (including any
deductible) on the Automobile ("Automobile Benefits"). Until the
Automobile Termination Date, Executive covenants and agrees that he
shall operate the Automobile with "reasonable care." Executive
agrees that Company shall retain title to the Automobile, unless
and until Executive acquires the Automobile pursuant to the
provisions hereof. On the Automobile Termination Date, Executive
shall have the right to acquire title to the Automobile from
Company, provided that (i) on or before August 1, 1994, Executive
has provided Company with a written notice stating that Executive
desires to acquire title to the Automobile on the Automobile
Termination Date, and (ii) on or before the Automobile Termination
Date, Executive provides to Company $24,670 in cash or other
immediately available funds, whereupon Company shall concurrently
execute and deliver to Executive all necessary documents
transferring to Executive title to the Automobile. From and after
the Automobile Termination Date, Company shall have no further
obligation to provide Automobile Benefits to Executive other than
for payment of telephone costs and reimbursement of mileage
expenses, both in accordance with the policies of Company from time
to time with respect thereto.
B. From and after commencement of the Term, and
during each year of the Term, Executive 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 Executive subject to
Company's business needs. Executive shall be entitled to take any
unused portion of his paid vacation in any subsequent year of the
Term, subject to Company's business needs and policy and consistent
with applicable laws ("Vacation Benefits"). Notwithstanding the
foregoing, Executive shall at no time have more than six (6) weeks
of accrued vacation. Any additional vacation period shall be
determined by Company consistent with the general customs and
practices of Company applicable to its executives.
The foregoing Life Insurance, Automobile Benefits and Vacation
Benefits shall be hereinafter referred to as "Special Benefits."
3.4. Additional Benefits. Without limiting any other
provision hereof, Executive shall be entitled to participate in any
profit-sharing, pension, stock option, stock ownership, health,
vacation, insurance or other plans, benefits or policies available
to the senior executive employees of Company on the terms generally
applicable to such employees and will be entitled to reimbursement
of his reasonable and customary business expenses, including,
without limitation, reimbursement for expenses while on the
business of Company, its subsidiaries or Company's Affiliates
("Additional Benefits").
3.5 Extension of Term. Unless earlier terminated in
accordance with the provisions hereof, the Term of this Agreement
shall automatically be extended from and after June 30, 1997 unless
and until the date that is three (3) months following Executive's
receipt of written notice that Company desires to terminate
Executive's employment hereunder (the "Period of Extension"), which
notice may be given to Executive no sooner than April 1, 1997;
provided, however, that at any time during the Period of Extension,
Executive shall have the right, by giving written notice to
Company, to elect to terminate his employment hereunder, without
any obligation to Company, whereupon the Period of Extension shall
end. During the Period of Extension, and during a period of three
(3) months thereafter (i.e., the first three months following the
end of Executive's employment hereunder), subject to the provisions
of Paragraph 4.4 below, Company shall continue to pay Executive's
Fixed Annual Compensation, as well as provide Executive with Life
Insurance and health insurance benefits.
4. Termination
4.1 Termination by Company.
4.1.1. Termination by Company. 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 material and habitual inability to perform the Services, or
material violation of Company's published policies or procedures,
(ii) a single act so grievous as to constitute the equivalent of
such material and repeated instances (including, without
limitation, theft, misappropriation 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 ("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 Paragraphs 2.4 or 4.1.1(ii) or (iii) be
subject to cure.
4.1.2 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, Special Benefits or Additional Benefits (other than
any Fixed Annual Compensation, Special Benefits or Additional
Benefits earned by Executive but unpaid at the date of
termination), from and after termination, or to any Incentive
Compensation accruing for the fiscal year of termination or
thereafter.
4.2 Termination by Executive.
4.2.1 Termination by Executive. 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 perform a material condition or covenant of this
Agreement ("Company's Material Breach"); provided, however, that
termination for Company's Material Breach will not be effective
until Executive shall have given written notice specifying the
claimed breach and, provided such breach is curable, 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).
4.2.2 Effect of Termination by Executive. Subject to
the provisions of Paragraph 4.4 below, should Executive terminate
the Term due to Company's Material Breach, Company shall pay to
Executive or provide Executive with:
(i) Executive's Fixed Annual Compensation for the then
remainder of the Term, paid in equal installments
on Company's regular pay dates during such
remainder, and
(ii) Life Insurance and health insurance benefits for
the then remainder of the Term.
In addition, all options held by Executive to purchase stock in
LIVE Entertainment Inc. or its successor pursuant to the LIVE
Entertainment Inc. Stock Option Plan or any successor, replacement,
substituted or amended plan (collectively, the "Options") shall
vest on the date of termination. Executive shall also receive any
Incentive Compensation that has 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 Executive's Death or Disability (as both terms are defined in
Paragraph 4.3), or by Executive pursuant to Paragraph 4.2.3, should
Executive terminate the Term other than for Company's Material
Breach, such termination shall be treated as a termination by
Company for Executive's Material Breach.
4.2.3 Termination by Executive Due to Change in Duties.
Executive shall have the right, at his election and upon not less
than thirty (30) days, nor more than ninety (90) days, prior
written notice to Company, to terminate the Term, without any
obligation or liability to Company whatsoever (provided that in
such event all Options held by Executive shall vest on the date of
termination), by written notice to Company to that effect if
Company eliminates its international sales division, or if
Executive is no longer the senior executive directly in charge of
Company's international sales division. If Executive does not
provide to Company written notice of his election to terminate the
Term pursuant to this Paragraph 4.2.3 within thirty (30) days after
receiving written notice from Company that Company intends to
eliminate its international sales division, or that Executive will
no longer be the senior executive directly in charge of Company's
international sales division, then Executive's right to terminate
this Agreement pursuant to this Paragraph 4.2.3 shall be deemed
waived and shall be of no further force or effect.
4.3 Executive's Death or Disability.
4.3.1 Death. The Term shall immediately terminate
upon Executive's death as certified in accordance with the
provisions of California law ("Death").
4.3.2 Disability. In the event that during the Term
Executive 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"):
4.3.2.1 the Fixed Annual Compensation otherwise
payable during the Disability Period (as herein defined) shall
nevertheless be payable on the terms set forth herein to Executive
as a disability benefit ("Disability Benefit");
4.3.2.2 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 Paragraph 4.3; and
4.3.2.3 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 commencement of the Term, 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) 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. Company
shall have the right to terminate the Term at the expiration of the
Disability Period if and only if the Disability of Executive is
then continuing.
4.3.3 Effect of Death or Disability.
(a) Fixed Annual Compensation and Additional
Benefits: Should the Term be terminated in accordance with the
provisions of Paragraphs 4.3.1 or 4.3.2 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 (other
than accrued and unpaid Fixed Annual Compensation), Special
Benefits (other than benefits under the Life Insurance and any
other life insurance proceeds provided to Executive by Company
pursuant to Company's benefit plans), Additional Benefits or any
other sums or benefits accruing to Executive hereunder; provided,
however, that in the event of termination due to Disability, the
sums identified in Paragraph 4.3.2 hereof shall be paid to
Executive on the terms set forth therein.
(b) Incentive Compensation, Options and Life
Insurance: Should the Term be terminated in accordance with the
provisions of Paragraphs 4.3.1 or 4.3.2 by reason of Executive's
Death or Disability, Executive or his estate (as the case may be)
shall be entitled to receive such 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 Options which
have vested on or prior to the date of termination by reason of
Executive's Death. Upon termination due to Disability, Company
shall, at no cost to Executive, assign the Life Insurance policy to
the Trust provided that Company shall not be responsible to pay any
future insurance premiums following such assignment.
4.4. Mitigation. Executive shall have no obligation to seek
employment if Executive's employment hereunder is terminated;
provided, however, that Executive agrees that if Executive fur-
nishes his services for other engagements or employment after
termination hereunder, the total compensation actually earned by
Executive together with any welfare or other benefits earned by
Executive for the period which would have been the remainder of the
Term hereunder but for the termination 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.
5. General
5.1 Applicable Law Controls. Nothing contained in this
Agreement shall be construed to require the commission of any act
contrary to law and wherever there is any conflict between any
provisions of this Agreement and any material statute, law,
ordinance or regulation contrary to which the parties have no legal
right to contract, then the latter shall prevail; provided,
however, that in any such event the provisions of this Agreement so
affected shall be curtailed and limited only to the extent
necessary to bring them within applicable legal requirements, and
provided further that if any obligation to pay the Fixed Annual
Compensation 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.
5.2 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 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 parties may rely thereon. The parties' rights and remedies
under and pursuant to this Agreement or at law or in equity shall
be cumulative and the exercise of any rights or remedies under one
provision hereof or rights or remedies at law or in equity shall
not be deemed an election of remedies; and any waiver or
forbearance of any breach of this Agreement or remedy granted
hereunder or at law or in equity shall not be deemed a waiver of
any preceding or succeeding breach of the same or any other
provision hereof or of the opportunity to exercise such right or
remedy or any other right or remedy, whether or not similar, at any
preceding or subsequent time.
5.3 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, telex or telegraph, at the address set forth on
page 1 hereof, or such substitute address as Executive may from
time to time designate by notice to Company. Any notice which
Executive is required or may desire to serve upon Company hereunder
shall be 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, or such other substitute addresses as
Company may from time to time designate by notice to Executive.
5.4 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.
5.5 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.
5.6 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 Paragraph and,
except as otherwise specifically provided herein, no party shall
become liable for the representation, act or omission of any other
party. This Agreement is not for the benefit of any third party
who is not referred to herein and shall not be deemed to give any
right or remedy to any such third party.
5.7 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"). The parties also
expressly acknowledge and agree that from and after the
commencement of the Term this Agreement shall supersede and replace
in its entirety that certain Employment Agreement dated as of July
2, 1990 between Executive and Company (the "Original Agreement"),
and that, from and after the commencement of the Term, the Original
Agreement shall be null and void and of no further force or effect.
Except as expressly provided in the immediately preceding
sentience, 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 and 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 April 29, 1994 Very truly yours,
LIVE HOME VIDEO INC.
a Delaware corporation
By:
Its:
AGREED AND ACCEPTED
this ____ day of April, 1994
STEVE MANGEL
LIVE HOME VIDEO INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
DATE: As of January 20, 1994
Mr. Paul S. Almond
c/o LIVE Home Video Inc.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
Re: Employment Agreement
Dear Mr. Almond:
When executed by you ("Employee") and by a duly authorized
representative of LIVE Home Video 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/Production and Acquisitions 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. Duties; Reporting Requirements. Among the duties that
Employee shall perform in connection with the Services is that
Employee shall do and perform all services, acts or things
reasonably necessary or advisable to manage and conduct the
programming business of Company and all of Company's employees in
such area of Company's business shall report to Employee or his
designates. For purposes of this Agreement, "programming" shall be
deemed to mean the include acquisition, development and production
of programs distributed by Company. The above statement of
Employee's duties shall not be deemed exclusive, and Employee's
duties hereunder shall be those which are identified by Company
from time to time, as modified by Company from time to time. In
performing his duties hereunder, Employee shall report to the Chief
Executive Officer of Company or his successor(s).
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 and
this Agreement shall become effective on the date Employee begins
to work full time at Company's offices (which Employee agrees shall
be no later than March 14, 1994) (the "Effective Date") and shall
end on the third anniversary of the Effective Date unless extended
or sooner terminated in accordance with the provisions of this
Agreement (the "Term"). If neither party shall have given notice
to the other, on or before three months before the third
anniversary of the Effective Date, of such party's intent not to
extend this Agreement, this Agreement shall automatically be
extended for an additional year to the fourth anniversary of the
Effective Date.
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 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.
1.4.3 During the term 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. Notwithstanding the foregoing, Employee shall
be entitled to retain a copy of his rolodex (address and phone
number) files.
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 Thousand Dollars
($200,000). 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 LIVE Entertainment Inc. Stock Options. Upon (a) approval
by the Stock Option Committee of the Board of Directors of LIVE
Entertainment Inc., Company's parent ("LIVE"), (b) the occurrence
of the Effective Date, and (c) Employee's execution of the stock
option agreement referred to hereinafter in this Section 2.3, as a
special inducement to Employee, LIVE will grant to Employee options
to acquire 60,000 shares of LIVE's common stock at the closing
price of LIVE's common stock on the Effective Date ("Options"),
with such Options to vest as follows:
(i) 20,000 Options will vest on the first anniversary of
the Effective Date;
(ii) 20,000 Options will vest on the second anniversary
of the Effective Date; and
(iii) 20,000 Options will vest on the third
anniversary of the Effective Date.
The Options will be subject to such additional terms and conditions
as may be set forth in LIVE's 1988 Stock Option and Stock
Appreciation Rights Plan, as amended (the "Option Plan"), as well
as the form of stock option agreement as may be adopted by LIVE's
Board of Directors from time to time pursuant to the Plan.
2.4 Special Inducements. As a special inducement to Employee
to enter into this Agreement, during the Term, Company agrees as
follows:
2.4.1 During each year of the Term, Employee shall be
entitled to a vacation of three (3) 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. Any additional vacation
period shall be determined by Company consistent with the general
customs and practices of the Company applicable to its executives.
2.4.2 From and after the Effective Date and until
Employee becomes eligible for coverage under Company's group health
insurance plan, Company shall pay all COBRA payments required to be
made by Employee to his former employer to retain health insurance
coverage under such prior employer's group health plan.
2.5 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 all 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. 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, Automobile Benefits, or Additional Benefits accruing
for the fiscal year of termination or thereafter.
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 substan-
tially perform a material condition or covenant of this Agreement,
or if Company shall terminate Employee's employment or 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 pay to
Employee or provide Employee with:
(i) Employee's Fixed Annual Compensation for the
remainder of the Term, paid in equal installments
on Company's regular pay dates during the Term, and
(ii) Health insurance for the remainder of the Term.
In addition, all 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. Notwithstanding the foregoing, in the event that
employment agreements entered into after January 13, 1994 between
Company and other executives of Company of similar stature and
seniority provide for termination of employment benefits in
addition to those set forth in this Section 3.2.2, Company agrees
to enter into an amendment to this Agreement in order to provide
such additional benefits to Employee.
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
3.3.2.3 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) 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. 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.
<PAGE>
Please confirm your agreement to the foregoing by signing
below where indicated.
Dated as of January , 1994 Very truly yours,
LIVE HOME VIDEO INC.
a Delaware corporation
By:
Its:
AGREED AND ACCEPTED
this ____ day of January, 1994
PAUL A. ALMOND
FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT is made and
entered into as of the 2nd day of February, 1994, by and between
LIVE HOME VIDEO INC., a Delaware corporation ("Company"), and PAUL
S. ALMOND ("Employee").
RECITALS:
WHEREAS, Company and Employee entered into that certain
Employment Agreement dated as of January 20, 1994 (the
"Agreement"); and
WHEREAS, Section 3.2.2 of the Agreement requires that in the
event that employment agreements entered into after January 13,
1994 between Company and other executives of Company of similar
stature and seniority provide for termination of employment
benefits greater than one year or in addition to those set forth in
Section 3.2.2 of the Agreement, Company will enter into an
amendment to the Agreement in order to provide such additional
benefits to Employee; and
WHEREAS, subsequent to January 13, 1994, Company entered into
an employment agreement with another executive of Company of
similar stature and seniority to Employee, and such agreement
provides for termination of employment benefits for a term equal to
the remaining term of such agreement, without a one year
limitation; and
WHEREAS, as a result of such agreement and Section 3.2.2 of
the Agreement, Company and Employee have agreed to enter into this
Amendment in order to provide such additional benefits to Employee.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, it is hereby CONTRACTED, COVENANTED
and AGREED as follows, to wit:
1. Section 3.2.2 of the Agreement shall be deleted and shall
be replaced in its entirety by the following:
"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 pay to
Employee or provide Employee with:
(i) Employee's Fixed Annual Compensation for the
remainder of the Term, paid in equal installments
on Company's regular pay dates during the Term, and
(ii) Health insurance for the remainder of the Term.
In addition, all 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. Notwithstanding the foregoing, in the event that
employment agreements entered into after January 13, 1994 between
Company and other executives of Company of similar stature and
seniority provide for termination of employment benefits in
addition to those set forth in this Section 3.2.2, Company agrees
to enter into an amendment to this Agreement in order to provide
such additional benefits to Employee.
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."
2. Except as modified hereby, the Agreement shall remain
unmodified and in full force and effect. In the event of any
conflict between the terms of the Agreement and the terms of this
First Amendment, the terms of this First Amendment shall control.
IN WITNESS WHEREOF, the parties have executed this First
Amendment to Employment Agreement as of the day and year first
above written.
LIVE HOME VIDEO INC.
By:
Roger A. Burlage Paul S. Almond
Chief Executive Officer
LIVE HOME VIDEO INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
DATE: As of January 31, 1994
Mr. Elliot Slutzky
c/o LIVE Home Video Inc.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
Re: Employment Agreement
Dear Mr. Slutzky:
When executed by you ("Employee") and by a duly authorized
representative of LIVE Home Video 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/Sales and
Marketing 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. Duties; Reporting Requirements. Among the duties that
Employee shall perform in connection with the Services is that
Employee shall do and perform all services, acts or things
reasonably necessary or advisable to manage and conduct the
domestic (United States and Canada) sales and marketing business of
Company (other than sales and marketing of television rights) and
all of Company's employees in such areas of Company's business
shall report to Employee or his designates. The above statement of
Employee's duties shall not be deemed exclusive, and Employee's
duties hereunder shall be those which are identified by Company
from time to time, as modified by Company from time to time. In
performing his duties hereunder, Employee shall report to the Chief
Executive Officer of Company or his successor(s).
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 on December 31, 1997 unless extended
or sooner terminated in accordance with the provisions of this
Agreement (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. Fixed Annual Compensation of
the following amounts during the following periods:
January 31, 1994 through January 30, 1995 -
$275,000
January 31, 1995 through January 30, 1996 -
$285,000
January 31, 1996 through January 30, 1997 -
$300,000
January 31, 1997 through December 31, 1997 -
$310,000
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 LIVE Entertainment Inc. Stock Options. Upon (a) approval
by the Stock Option Committee of the Board of Directors of LIVE
Entertainment Inc., Company's parent ("LIVE"), and (b) Employee's
execution of the stock option agreement referred to hereinafter in
this Section 2.3, as a special inducement to Employee, LIVE will
grant to Employee options to acquire 75,000 shares of LIVE's common
stock at the closing price of LIVE's common stock on January 31,
1994 ("Options"), with such Options to vest as follows:
(i) 19,000 Options will vest on January 31, 1995;
(ii) 19,000 Options will vest on January 31, 1996;
(iii) 19,000 Options will vest on January 31, 1997;
(iv) 18,000 Options will vest on January 31, 1998.
The Options will be subject to such additional terms and conditions
as may be set forth in LIVE's 1988 Stock Option and Stock
Appreciation Rights Plan, as amended (the "Option Plan"), as well
as the form of stock option agreement as may be adopted by LIVE's
Board of Directors from time to time pursuant to the Plan. Such
additional terms and conditions shall be implemented in a non-
discriminatory manner with respect to Employee as compared to other
employee holders of options under the Plan.
2.4 Special Inducements. As a special inducement to Employee
to enter into this Agreement, during the Term, Company agrees as
follows:
2.4.1 During each year of the Term, Employee shall be
entitled to a vacation of three (3) 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.
2.4.2 From and after the date hereof and until
Employee becomes eligible for coverage under Company's group health
insurance plan, Company shall pay all COBRA payments required to be
made by Employee to his former employer to retain health insurance
coverage under such prior employer's group health plan.
2.5 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 all 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
material 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)
knowingly 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 (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 Employee's Material
Breach, Employee shall have no right to any further Fixed Annual
Compensation from and after termination, or to any Incentive
Compensation, Automobile Benefits, or Additional Benefits accruing
for the fiscal year of termination or thereafter.
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 substan-
tially perform a material condition or covenant of this Agreement,
or if Company shall terminate Employee's employment or 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 pay to
Employee or provide Employee with:
(i) Employee's Fixed Annual Compensation for the
remainder of the Term, paid in equal installments
on Company's regular pay dates during the Term, and
(ii) Health insurance for the remainder of the Term.
In addition, all 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
3.3.2.3 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) 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. 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 personally to Employee, or by sending it to
Employee by certified mail, return receipt requested, or by
overnight courier service, 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 certified mail, return receipt requested, or by
overnight courier service, 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 January 31, 1994 Very truly yours,
LIVE HOME VIDEO INC.
a Delaware corporation
By:
Its:
AGREED AND ACCEPTED
this ____ day of February, 1994
ELLIOT SLUTZKY
1988 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
OF LIVE ENTERTAINMENT INC.
(As Amended through March 6, 1995 [Subject to Stockholder
Approval])
(Amounts Adjusted to Reflect December 1994 One-For-Five Reverse
Stock Split)
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 120,000. 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 280,000 shares plus the
120,000 shares if all of the stock appreciation rights that may be
granted under the Plan are issued as stock options, for a total of
400,000 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 1,000 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.
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.
AGREEMENT
This Compromise Settlement Agreement and Release
("Agreement") dated as of December 31, 1994, is made and entered
into by LIVE Entertainment Inc. ("LIVE") and Carolco Pictures
Inc. ("Carolco") with respect to the following facts:
A. WHEREAS, on or before the date of this Agreement, the
parties have entered into various agreements, arrangements or
understandings, oral or written (collectively, the "Agreements"),
including, but not limited to, the following:
i. That certain agreement between LIVE Film and
Mediaworks Inc. (as successor in interest to LIVE Home Video
Inc.) and Carolco Pictures Inc. dated July 27, 1987, and restated
October 15, 1987, as amended (the "Domestic Master Agreement").
ii. That certain agreement between LIVE Entertainment
International Inc. (formerly known as LEI-IVE Entertainment N.V.)
and Carolco International Inc. (formerly known as Carolco
International N.V.) dated April 25, 1991, as amended (the "German
Master Agreement").
iii. That certain agreement among Carolco Pictures
Inc., Carolco International Inc. (formerly known as Carolco
International N.V.), LIVE Entertainment Inc., LIVE Home Video
Inc., and LIVE Entertainment International Inc. (formerly known
as LEI-IVE Entertainment N.V.) dated as of December 31, 1992 (the
"Reconciliation and Offset Agreement").
iv. Those certain license agreements, as amended,
pursuant to which Carolco has granted to LIVE certain home video
distribution rights to exploit in certain countries and
territories during certain license periods, all as specified
therein, with respect to various motion pictures including
specifically, but not exclusively, the motion pictures entitled:
"Rambo Animation Series" (65 episodes), "Angel Heart", "Extreme
Prejudice", "Rambo: First Blood Part II", "Rambo III", "Red
Heat", "Iron Eagle II", "Watchers", "Deep Star Six", "Food of the
Gods II", "Pound Puppies, The Movie", "First Blood", "Dice
Live", "Get Back", "The Dawning" and "Dead Sleep" (collectively,
the "Home Video License Agreements").
v. That certain quitclaim agreement dated as of 12:01
a.m. on March 8, 1994, amongst LIVE Film and Mediaworks Inc.
(formerly known as International Video Productions Inc.), Wagons
East N.V., and Wagons East Productions Inc. (the "Wagons East
Quitclaim"); that certain agreement dated as of March 8, 1994
between LIVE Film and Mediaworks Inc. (formerly known as
International Video Productions Inc.) and Carolco Pictures Inc.
(the "Wagons East Agreement"); that certain assignment dated as
of August 23, 1994 between LIVE Film and Mediaworks Inc.
(formerly known as International Video Productions Inc.),
Fireman's Fund Insurance Company and Carolco Pictures Inc. (the
"Wagons East Assignment"), and all other agreements or
understandings between the parties with respect to the motion
picture entitled "Wagons East" (collectively, the "Wagons East
Agreements").
vi. That certain agreement dated as of May 8, 1990
between LIVE Home Video Inc. (formerly known as International
Video Entertainment Inc.) and The Vista Organization, Ltd., and
that certain letter agreement between LIVE Home Video Inc., The
Vista Organization Ltd. and Carolco Pictures Inc. dated May 21,
1992 (collectively, the "Vista Agreements").
vii. That certain agreement between LIVE Entertainment
International Inc. (formerly known as LEI-IVE Entertainment N.V.)
and Carolco International Inc. (formerly known as Carolco
International N.V.) dated as of June 1, 1991 with respect to the
motion picture entitled "Light Sleeper" (the "Light Sleeper
Agreement").
viii. Those certain memoranda from Steven Mangel,
on behalf of LIVE Home Video Inc., to Jim Gianopolis, on behalf
of Carolco International Inc. (formerly known as Carolco
International N.V.), dated December 11, 1991 and December 18,
1991, respectively, with respect to the motion picture entitled
"Reservoir Dogs" (collectively, the "Reservoir Dogs Agreement").
ix. That certain agreement between LIVE America Inc.
and Carolco Television Inc. (formerly known as Orbis
Communications Inc.) dated as of October 1, 1990, as amended,
pursuant to which LIVE has granted to Carolco certain television
distribution rights to exploit in certain countries and
territories during certain license periods, all as specified
therein, with respect to various motion pictures including
specifically, but not exclusively, the motion pictures entitled:
"Age Isn't Everything", "The Brain", "Bride of Reanimator",
"Cover Up", "Dream Machine", "Delta Force Commando II",
"Disturbed", "Chicago Joe and the Showgirl", "Endless Decent",
"Girlfriend from Hell", "Happy Together", "Hollywood Hot Tubs
II", "Hostile Takeover", "Howling IV", "Howling V", "Howling VI",
"The Kid", "King of New York", "Megaville", "Out of the Rain",
"The Palermo Connection", "Prom Night III", "Prom Night IV",
"Pyrates", "Rock and Roll High School Forever", "Silent Night,
Deadly Night III", "Silent Night, Deadly Night IV", Silent Night,
Deadly Night V", "Tommy Tricker and the Stamp Traveler", "Twisted
Obsession", "Up Your Alley", "When The Wind Blows", "Dean Koontz'
Whispers", and "Zandalee", and those certain licenses between
Carolco and LIVE, as amended, pursuant to which LIVE has granted
to Carolco certain television distribution rights to exploit in
certain countries and territories during certain license periods,
all as specified therein, with respect to the motion pictures
entitled: "Homeboy", "King of New York" and "The Punisher"
(collectively, the "Television License Agreements").
B. WHEREAS, LIVE claims that certain sums are currently
owed from Carolco to LIVE pursuant to the Agreements, Carolco
claims that certain sums are currently owed from LIVE to Carolco
pursuant to the Agreements, and, without limiting the generality
of the foregoing, bona fide disputes and controversies exist
between the parties with regards to claims between them which
have been asserted or could have been asserted on or before the
date of this Agreement resulting from or arising out of the
Agreements.
C. WHEREAS, the parties desire to compromise and settle
such disputes in order to avoid the uncertainty, distraction and
further expense of mutual investigations, examinations and
audits, and the potential of there being further claims, demands,
suits, actions or proceedings between them resulting therefrom.
D. WHEREAS, the parties desire, by this Agreement, to
compromise and settle all such disputes.
NOW, THEREFORE, for and in consideration of the promises,
terms and conditions set forth herein, the parties agree as
follows:
1. Mutual Releases: Except as herein set forth, the parties
generally release each other of and from any and all claims
and obligations, as follows:
a. LIVE hereby fully and forever releases and discharges
Carolco of and from any and all actions, causes of
action, suits, liabilities, debts, dues, sums of money,
accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements,
promises, obligations, variances, trespasses, damages,
judgments, extents, executions, claims, and demands of
any kind or nature whatsoever, known or 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 the laws of any
other countries or territories, or under any contract,
which LIVE has had, may have had or now has or
hereafter can, shall or may have against Carolco for,
upon, or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the day
of the date of this Agreement, including specifically,
but not exclusively, (i) any claims or rights of LIVE
set forth in Exhibit "A" annexed hereto and by its
reference made a part hereof and (ii) any action or
omission by or on the part of Carolco committed or
omitted on or before the date of this Agreement
relating to the Agreements.
b. Carolco hereby fully and forever releases and
discharges LIVE of and from any and all actions, causes
of action, suits, liabilities, debts, dues, sums of
money, accounts, reckonings, bonds, bills, specialties,
covenants, contracts, controversies, agreements,
promises, obligations, variances, trespasses, damages,
judgments, extents, executions, claims, and demands of
any kind or nature whatsoever, known or 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 the laws of any
other countries or territories, or under any contract,
which Carolco has had, may have had or now has or
hereafter can, shall or may have against LIVE for,
upon, or by reason of any matter, cause or thing
whatsoever from the beginning of the world to the day
of the date of this Agreement, including specifically,
but not exclusively, (i) any claims or rights of
Carolco set forth in Exhibit "A" annexed hereto and by
its reference made a part hereof and (ii) any action or
omission by or on the part of LIVE committed or omitted
on or before the date of this Agreement relating to the
Agreements.
c. It is expressly understood that Section 1542 of the
Civil Code of California provides as follow:
"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."
d. LIVE and Carolco hereby specifically WAIVE any rights
they may have under Section 1542 of the Civil Code of
California as well as the provisions of all comparable,
equivalent or similar statutes and principles of common
law of California or of any other jurisdiction and
acknowledge and agree that this waiver is an essential
and material term of this Agreement without which the
releases given by them would not have been given. The
parties hereto have been advised by their respective
attorneys and legal counsel and understand and
acknowledge the significance and consequence of such
release and of their specific waiver of Section 1542.
e. The parties hereby acknowledge and agree that this is a
compromise settlement which is not in any respect nor
for any purpose to be deemed or construed to be or in
any way used as evidence of an admission or concession
of any liability whatsoever on the part of either of
them or any other person, firm or corporation
whatsoever. Each party further denies any wrongdoing
or that it is in any respect indebted to the other
party, and each of them is entering into this Agreement
only to avoid the distraction and expense of further
examinations, audits and potential litigation.
f. Each party hereto (i) warrants and represents that it
has not assigned or in any other way conveyed,
transferred or encumbered all or any portion of the
claims or matters which are being released by this
Agreement, (ii) acknowledges and agrees that this
warranty and representation is an essential and
material term of this Agreement without which the
releases given by the other party hereto would not have
been given and (iii) agrees to defend, indemnify, save
and hold harmless the other party of and from any and
all claims, damages, costs and expenses (including,
without limitation, for all reasonable attorneys' fees
actually incurred), actions, causes of action, suits or
proceedings resulting from or arising out of any
claimed or actual breach of the warranties and
representations made by the respective party in clause
(i) of this sentence.
g. Expressly excluded from the claims or matters which are
being released by this Agreement are the following, all
of which shall survive the execution of this Agreement
and shall remain in full force and effect subject to
and in accordance with the terms and conditions of the
Agreements.
i. all claims and rights of either party set forth in
Exhibit "B" annexed hereto and by its reference
made a part hereof;
ii. each party's continuing rights and obligations
under the Agreements from and the date of this
Agreement, including without limitation, each
party's obligation to render accounting statements
and any payments due subject to and in accordance
with the terms and conditions of the Agreements in
respect of all applicable accounting periods
thereunder commencing from and after January 1,
1995; it being understood and agreed that if and
to the extent either party's account under any of
the Agreements shall be unrecouped as at December
31, 1994, then, subject to the provisions of
Paragraph 2 (c) below, the full amount of such
unrecouped (i.e., negative) account balance shall
be carried forward and shall be deemed to
constitute the opening balance of such party's
account thereunder as at January 1, 1995; and,
iii. all warranties and representations made from one
party to the other under the Agreements, including
a party's obligation to defend, indemnify, save or
hold harmless the other party from any claims,
damages, costs and expenses (including, without
limitation, for all reasonable attorneys' fees
actually incurred), actions, causes of action,
suits or proceedings resulting from or arising out
of any claimed or actual breach of such warranties
and representations.
2. Effect of the Releases: Without limiting the generality of
the mutual releases contained herein, the parties hereto do
hereby agree as follows:
a. Solely with respect to any and all matters and
transactions having arisen or occurred on or before the
date of this Agreement, whether or not any such items
or transactions have been or should have been reflected
on any accounting statements furnished to LIVE from
Carolco, LIVE hereby agrees to forever waive any right
or entitlement of LIVE (i) to the production,
examination or audit of the books and records of
Carolco or any other party pursuant to the terms of the
Agreements, (ii) to any accountings at law, in equity
or otherwise, and (iii) to contest, dispute or object
to any accounting statements or payments which Carolco
had or should have made to LIVE pursuant to the
Agreements; all of which shall be deemed binding and
conclusive upon LIVE. All of LIVE's rights to examine,
audit, or contest Carolco's books and records for any
accounting periods which commence on or after January
1, 1995 are expressly reserved by LIVE, subject to and
in accordance with the terms and conditions of the
Agreements.
b. Solely with respect to any and all matters and
transactions having arisen or occurred on or before the
date of this Agreement, whether or not any such items
or transactions have been or should have been reflected
on any accounting statements furnished to Carolco from
LIVE, Carolco hereby agrees to forever waive any right
or entitlement of Carolco (i) to the production,
examination or audit of the books and records of LIVE
or any other party pursuant to the terms of the
Agreements, (ii) to any accountings at law, in equity
or otherwise, and (iii) to contest, dispute or object
to any accounting statements or payments which LIVE had
or should have made to Carolco pursuant to the
Agreements; all of which shall be deemed binding and
conclusive upon Carolco. All of Carolco's rights to
examine, audit, or contest LIVE's books and records for
any accounting periods which commence on or after
January 1, 1995 are expressly reserved by Carolco,
subject to and in accordance with the terms and
conditions of the Agreements.
c. LIVE hereby agrees to forever waive any right or
entitlement of LIVE pursuant to the terms of the
Domestic Master Agreement and the German Master
Agreement to charge, deduct, set-off or seek
reimbursement from or against Carolco of the
Recoverable Cash Losses (as such term is defined in
said agreements) existing as at December 31, 1994.
Commencing from and after January 1, 1995, the
calculation of, and reporting of, any and all amounts
due from LIVE to Carolco under either the Domestic
Master Agreement or the German Master Agreement, as the
case may be, shall be in accordance with the provisions
of clauses 2(d) and 2(e) below.
d. Commencing from and after January 1, 1995, the parties
hereto to hereby agree to amend and modify the Domestic
Master Agreement and the German Master Agreement, as
the case may be, in the following respects: (i) the
receipts, costs, profits and losses attributable under
each such Agreement to each Picture shall be not be
cross-collateralized with that of any other Picture,
(ii) LIVE shall render accountings with respect to each
Picture under each such Agreement on a separate and
individual basis, and (iii) LIVE will make the
following continuing payments and recoupments from the
cumulative gross receipts actually received by or
credited to LIVE or its Primary Subdistributors (as
defined below) under each such Agreement during the
period commencing on January 1, 1995 and ending on the
last day of the applicable accounting period ("Gross
Receipts") in the following order of priority:
(1) First, LIVE will retain for its own account
the following distribution fee ("Distribution
Fee"):
(a) In instances where LIVE uses a Primary
Subdistributor: XXX of such Gross
Receipts, less any returns and/or
customary reserves for returns, which
are actually received by or credited to
the Primary Subdistributor, in which
case LIVE shall be responsible to absorb
the net distribution fee charged by such
Primary Subdistributor (i.e., the gross
distribution fee charged by such Primary
Subdistributor less any credits,
discounts, rebates or other allowances
given by such Primary Subdistributor to
LIVE). "Primary Subdistributor(s)"
means (A) WEA Corp. or any other company
which LIVE shall engage or appoint in
place of WEA Corp. to act as its primary
subdistributor of rental and sell-
through priced videocassettes in
traditional channels of retail
distribution in the United States and
(B) MCA Canada Ltd. or any other company
which LIVE shall engage or appoint in
place of MCA Canada Ltd. to act as its
primary subdistributor of rental and
sell-through priced videocassettes in
traditional channels of retail
distribution in Canada. The parties
acknowledge, understand and agree that
VCL/Carolco Communications GmbH shall
not constitute a Primary Subdistributor;
or,
(b) Except in instances where LIVE uses a
Primary Subdistributor: XXX of such
Gross Receipts, less any returns and/or
customary reserves for returns, which
are actually received by or credited to
LIVE.
(2) Second, LIVE will apply the remaining XXX of
such Gross Receipts to recoup the following
amounts in the following order of priority:
(a) The cumulative direct and out-of-pocket
distribution costs and expenses relating
to such Picture which are paid or
incurred from and after January 1, 1995
("Distribution Expenses");
(b) The amount ("Shortfall"), if any,
corresponding to such Picture listed in
Exhibit "C" regarding the Domestic
Master Agreement or Exhibit "D"
regarding the German Master Agreement,
both annexed hereto and by their
reference made a part hereof. The
parties hereto do hereby acknowledge,
understand and agree that the amount of
the Shortfall corresponding to such
Picture listed in Exhibits "C" and "D",
if any, shall be binding and conclusive
upon each of them, and each of them
hereby forever waives any right to
contest, dispute or object to said
Shortfall or the manner or method by
which said Shortfall was calculated or
determined. If a Shortfall shall exist
with respect to such Picture; then,
(c) The interest accruing on the unrecouped
portion of such Shortfall computed
quarterly at an annual rate of PRIME +2%
from January 1, 1995 and continuing
until such time as the Shortfall is
recouped in full from Carolco's share of
such Gross Receipts. For purposes of
calculating interest pursuant to this
clause 2(d)(2)(c), all amounts received
by LIVE in any calendar quarter shall be
deemed to have been received by LIVE on
the fifteenth day of the second month of
such calendar quarter, regardless of the
date that such amounts are actually
received by LIVE.
(3) Third, LIVE will pay Carolco one hundred
percent (100%) of such Gross Receipts
remaining, if any.
The parties hereto agree that, effective as of the date
of this Agreement, the method set forth in this clause
2(d) for calculating LIVE's and Carolco's respective
shares of the Gross Receipts applicable to each of the
Pictures covered under the Domestic Master Agreement
and the German Master Agreement, as the case may be,
shall replace any other or alternative methods
contained in the Domestic Master Agreement and the
German Master Agreement therefor. As to each Picture
for which a Shortfall, as indicated in Exhibit "C" or
"D" hereto, shall exist, LIVE will render accountings
to Carolco on a yearly basis, within 90 days following
the end of each calendar year, but LIVE agrees to
resume rendering accountings to Carolco on a quarterly
basis, within 60 days following the end of each
calendar quarter, with respect to each such Picture
from and after the calendar quarter in which such
Shortfall and the interest thereon is recouped in full.
As to each Picture for which a Shortfall does not
exist, LIVE will render accountings to Carolco on a
quarterly basis, within 60 days following the end of
each calendar quarter. Concurrently with the rendition
of each such statement, LIVE will make payment to
Carolco of any sums shown to be due to Carolco thereon.
e. Notwithstanding anything herein contained to the
contrary, the provisions of clauses 2(d)(2)(b) and (c)
above shall apply only to those Pictures covered under
the Domestic Master Agreement which are listed in
Exhibit "C" and to those Pictures covered under the
German Master Agreement which are listed in Exhibit "D"
("Previously Licensed Pictures"). With respect to all
Pictures other than Previously Licensed Pictures,
clauses 2(d)(2)(b) and (c) hereof shall be deemed
deleted from clause 2(d) in their entirety, and
substituted in their place and stead shall be the
following provisions:
"(b) The amount of the Advance applicable to
such Picture, and,
(c) The interest accruing on the unrecouped
portion of such Advance computed at an
annual rate of PRIME +2% from the date
each installment of such Advance is paid
to or on behalf of Carolco and
continuing until the end of the
applicable accounting period in which
such Advance is recouped in full from
Carolco's share of such Gross Receipts."
f. The parties hereto to hereby agree that for the
purposes of the Domestic Master Agreement and the
German Master Agreement, the terms "remakes," "sequels"
and "right of first negotiation" shall have the
following meanings:
(1) Remake is, with regard to any Picture, a
motion picture based upon all or any part of
such Picture or a Sequel to such Picture or
upon the same elements, the plot or story of
such Picture or a Sequel to such Picture, or
the same literary material upon which such
Picture or a Sequel to such Picture is based.
(2) Right of First Negotiation shall mean:
(a) Carolco will negotiate with LIVE in good
faith for a period of ten (10) business
days regarding the Rights to Remakes or
Sequels to any Picture before entering
into negotiations on such Rights with
any other person or entity. Such
negotiations will be limited to
objective matters that can be met by any
third party.
(b) If no agreement is reached within the
ten (10) business day time period
identified in step (a) above, then
immediately following such period
Carolco will give LIVE a written
statement of the terms that Carolco is
willing to accept for such Remake or
Sequel Rights (the "Final Offer"),
specifying all material terms and
identifying the minimum guarantee to be
paid from LIVE to Carolco (the
"Guarantee") and the maximum
distribution fee to be retained by LIVE
(the "Fee").
(c) LIVE will have two (2) business days
after its receipt of the Final Offer to
decide whether to accept the Final
Offer.
(d) If LIVE does not accept the Final Offer,
then Carolco will be free to negotiate a
deal for such Remake or Sequel Rights
with any other person or entity,
provided that Carolco may not conclude a
deal for such Remake or Sequel Rights on
any terms less favorable to Carolco
than, or providing for a Guarantee that
is less than, or a Fee that is greater
than, the Guarantee and Fee set forth in
the Final Offer, without first notifying
LIVE of such revised terms in writing
and according LIVE three (3) business
days following receipt thereof to accept
such deal on such revised terms.
(e) If Carolco does not conclude a deal for
such Remake or Sequel Rights with any
person or entity other than LIVE during
a ninety (90) day period commencing upon
the delivery of the Final Offer to LIVE,
LIVE's Right of First Negotiation shall
be revived and step (a) through this
step (e) shall be repeated until Carolco
concludes a deal for such Remake or
Sequel Rights.
(3) Sequel is, with regard to any Picture, a
motion picture in which one or more of the
characters are taken from such Picture or
portrayed in events and situations which are
new and differ substantially from the events
and situations in which they were portrayed
in such Picture and in which the story is
substantially different from the story of
such Picture.
3. Other Agreements:
a. LIVE hereby agrees to forever waive any right or
entitlement of LIVE to license from Carolco the motion
picture entitled "Cutthroat Island" pursuant to the
terms of the German Master Agreement. The parties
agree that all of their respective rights and
obligations under the German Master Agreement with
respect to "Cutthroat Island" are hereby terminated.
b. LIVE hereby agrees to use its best efforts to cause
VCL/Carolco Communications B.V., VCL/Carolco
Communications GmbH and Carolco Insurance N.V. to
change their respective corporate and/or fictitious
business names as soon as is practicable such that the
name "Carolco" is removed from each of said names.
c. In order to enable LIVE to perfect its security
interest in and lien on the distribution rights granted
to LIVE under the Domestic Master Agreement and in
accordance with the terms of the Domestic Master
Agreement, Carolco shall execute and deliver to LIVE a
security agreement (including UCC-1 Financing
Statement) and exclusive short-form assignment and
mortgage of distribution rights, each in a form
reasonably acceptable to LIVE, in respect of each
Previously Licensed Picture. Carolco will fully
cooperate with LIVE reasonably and in good faith to
obtain the agreement of applicable third parties that
LIVE's lien on and mortgage of distribution rights in
each of the Previously Licensed Pictures shall be of
first priority to all other liens granted therein to
any third party except LIVE will accept a lien junior
and subordinate to the any lien granted therein to a
production lender, completion guarantor, DGA or SAG,
provided each such production lender, completion
guarantor, DGA or SAG shall execute and deliver to LIVE
a customary non-disturbance letter in a form acceptable
to LIVE pursuant to which any such lienholder shall
acknowledge the rights in the Previously Licensed
Picture granted to LIVE pursuant to the Domestic Master
Agreement and that its foreclosure will not affect or
disturb any of such rights or LIVE's entitlement to
make any recoupments from the Gross Receipts (as
defined in the Domestic Master Agreement) and
attributable to such Previously Licensed Picture in
accordance with the terms of the Domestic Master
Agreement. Additionally, if and to the extent LIVE
reasonably requests any other instruments or documents
with respect to the Previously Licensed Pictures that
are expressly or by necessary implication to be
delivered to LIVE, such as, but not limited to, chain
of title documents, lab access agreements, etc., then
Carolco agrees to fully cooperate with LIVE in an
effort to deliver all available documents as soon as is
reasonably practicable.
4. Miscellaneous Provisions:
a. This Agreement shall be binding upon and shall inure to
the benefit of the parties and each of their
predecessors, successors, agents and assigns. Without
limiting the generality of the foregoing, each release
and other agreement given herein by or to a corporation
or other entity is given for and on behalf of and to
each and all of its subsidiary, parent, and affiliated
corporations, companies and divisions, its and their
predecessors, successors, and assigns and its and their
directors, stockholders, officers, partners,
principals, employees, attorneys and agents.
b. Each party confirms that with regard to the terms and
provisions hereof, they have been presented with and
have exercised the opportunity to confer with counsel
of their choice. The parties further confirm and
represent that (i) each of the persons executing this
Agreement on behalf of a corporation or other entity
has full power and authority to do so on behalf of the
corporation or entity for which he is signing and that
no other or further authority or execution by any other
person for such corporation or entity is necessary;
(ii) they have read and understand the effect of this
Agreement, that they have talked with their attorneys
regarding the terms, conditions and effects, including
but not limited to income tax consequences, of
executing this Agreement; and, (iii) this Agreement has
been executed freely, voluntarily and willingly by
them.
c. This Agreement constitutes the entire agreement and
understanding between the parties hereto relating to
the subject matter hereof and all other prior
agreements, arrangements or understandings, oral or
written, with respect thereto are merged into and
superseded by the terms of this Agreement.
d. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an
original, but all of which together shall constitute
one and the same instrument.
e. This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
Each of the parties agrees that any action to enforce
any of the provisions of this Agreement shall be
commenced in a court of competent jurisdiction in the
State of California and each of the parties hereby
consents to the subject matter jurisdiction of such
court. It is the intent of the parties hereto to
release fully their claims and obligations under the
laws of any jurisdiction, as herein provided, and to
reserve only such right as are expressly or by
necessary implication reserved herein.
f. Each of the parties hereto shall execute and deliver
such other and further documents or instruments as are
reasonably requested by the other party and do such
acts as may be required or convenient in order to
accomplish and carry forward the intent and purpose of
this Agreement or to effectuate the provisions hereof
or the claims and obligations released hereunder.
Furthermore, each of the parties hereto agrees to
remain reasonably available to consult with the other
party and to cooperate fully with any reasonable
requests for information from other party in respect
to, without limitation, any inquiries, investigations,
claims, demands, audits, suits, actions or other
proceedings which have been or may hereinafter be
brought by any third party against either of the
parties hereto.
g. None of the provisions of this Agreement shall be
deemed, nor shall constitute, a waiver of any other
provisions, whether or not similar, nor shall any
waiver constitute a continuing waiver. No waiver of
any provisions hereof, including this clause (g), by
either party shall be binding unless executed in
writing by the party making the waiver. In the event
that any provisions of this Agreement shall be held to
be invalid, it shall not effect, in any respect
whatsoever, the validity or enforceability of the
remainder of this Agreement.
h. In the event of the commencement of any dispute
resolution proceeding by either party to this Agreement
to enforce any of the provisions of this Agreement, the
prevailing party shall be entitled to recover, in
addition to any other relief to which it may be
entitled, the reasonable attorneys' fees it incurs.
IN WITNESS WHEREOF, the parties have executed this Agreement
effective as of the 31st day of December, 1994.
LIVE Entertainment Inc. Carolco Pictures
Inc.
BY: ________________________ BY:
________________________
ITS: ________________________ ITS:
________________________
LIVE ENTERTAINMENT INC.
FISCAL 1995
CORPORATE INCENTIVE CASH COMPENSATION PROGRAM
MARCH 6, 1995
<PAGE>
I. Background
For the past few years LIVE Entertainment Inc. has 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 1995. This Report is organized in
the following manner:
1. Goals of Fiscal 1995 LIVE Corporate Incentive Cash
Compensation Program (the "1995 LIVE Program").
2. Suggested 1995 LIVE Program.
3. Expected Costs of the 1995 LIVE Program.
4. Miscellaneous Provisions of the 1995 LIVE Program.
A discussion of the various elements of the 1995 LIVE Program
follows.
II. Goals of 1995 LIVE Program
We believe that the goals of the 1995 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 1995 LIVE Program supports the above-stated
goals.
III. Suggested 1995 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 1995 (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, compared to what those percentages were for the
1994 LIVE Program:
Management Suggested 1995 Program Actual 1994
Program
Level "At Plan" Bonus Percentage "At Plan"
Bonus Percentage
CEO Not Eligible 15%
EXECUTIVE VICE PRESIDENT 13% 12%
SENIOR VICE PRESIDENT 11% 10%
VICE PRESIDENT 10% 9%
DIRECTOR 9% 8%
MANAGER 5% 5%
NON-EXEMPT EMPLOYEES One and one-half
weeks of base salary One week of
base salary
B. Allocation of Bonuses
i. Performance Factors
We suggest that an individual's bonus potential be allocated among
the following performance factors (the allocations are the same as
they were for the 1994 Program):
1. 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. Except where identified in this Section III(B)(ii),
the targets and percentages set forth below are identical to the
targets and percentages in the 1994 Program.
1. Unit Profit Target (all except non-exempt employees)
a. Threshold - 80% of "At Plan" bonus awardable at 80%
of Plan (in 1994 Program, "At Plan" bonus was
awardable at 95% of Plan).
b. Maximum -
i. Executive Vice Presidents - an additional .54%
of base salary is awardable for each 1%
increase in profitability above 100% of Plan,
with the maximum bonus (40% of base salary)
awardable at 150% of Plan and above.
ii. Senior Vice Presidents - an additional .38% of
base salary is awardable for each 1% increase
in profitability above 100% of Plan, with the
maximum bonus (30% of base salary) awardable
at 150% of Plan and above.
iii. Vice Presidents - an additional .2% of base
salary is awardable for each 1% increase in
profitability above 100% of Plan, with the
maximum bonus (20% of base salary) awardable
at 150% of Plan and above.
iv. All other non-exempt - an additional 1% 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 150% of Plan and above.
(in 1994 Program, maximum bonus for all employees was 1.5 times "at
Plan" amount, and maximum was awardable at 133% of Plan).
2. Unit Profit Target (non-exempt employees)
a. Threshold - One week base salary awardable at 80%
of Plan (in 1994 Program, one week salary was
awardable at 95% of Plan).
b. At Plan - an additional one-half week base salary
awardable at 100% of Plan.
c. Maximum - an additional one-half 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 1995 LIVE Program.
iii. 1995 LIVE Program Parameters
Using the 1995 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 both current base
salaries and year end base salaries as projected by the 1995
Business Plan.
IV. Costs
The most important element of the 1995 LIVE Program is its cost to
LIVE. Under the 1995 LIVE Program as suggested in Section III
above, using the information contained in Exhibit A, and assuming
that LIVE meets its 1995 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 1996. "At
Plan" bonuses would be 3.89% of operating profits, and incremental
bonuses would be 14.74% of incremental operating profits. We
believe that it is appropriate to allocate the above percentages of
Company profits to bonuses under the 1995 LIVE Program.
LIVE's 1995 Business Plan includes $550,000 for corporate bonuses.
This is approximately $50,000 less than the bonuses that would be
awarded under the 1995 LIVE Program if LIVE's performance in 1995
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 1995 LIVE Program will
be equal to or less than budgeted amounts, unless, of course, 1995
operating profit exceeds planned levels, in which event bonuses
under the 1995 LIVE Program also will exceed planned levels.
V. Miscellaneous Provisions
A. Basic Rules
In addition to the other provisions of the 1995 LIVE Program
discussed in this Report, the following basic rules should apply to
the 1995 LIVE Program (except where identified, all of the
following rules are identical to the rules for the 1994 Program):
1. Subject to the provisions of Section V(A)(6) below, and
notwithstanding any other provision of the 1995 LIVE
Program, if LIVE does not achieve 80% of its profit plan,
no bonuses would be payable pursuant to the 1995 LIVE
Program (in 1994 Program, bonuses could be awarded if
LIVE achieved 95% of its profit plan).
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, 1996,
should not be eligible for a bonus under the 1995 LIVE
Program.
6. Notwithstanding any other provision of the 1995 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 1995 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 or such
earlier date as may be approved by LIVE's Chief Executive
Officer.
B. Communication
If the 1995 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 1995 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.
Jefferson Capital Group, Ltd.
1 James Center
901 East Cary Street
Richmond, Virginia 23219
As of October 11, 1994
LIVE Entertainment Inc.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
Attention: Michael J. White
Executive Vice President
Dear Mr. White:
This letter confirms our understanding that LIVE
Entertainment Inc. (which together with any of its subsidiaries is
hereinafter referred to as the "Company") has engaged Jefferson
Capital Group, Ltd. ("JCG") to act as its financial advisor
(together with such other financial advisors as the Company may
retain from time to time) on an exclusive basis for a period of
twelve (12) months commencing upon your acceptance of this
agreement, with respect to the Company's efforts to obtain from a
majority of the holders of the Company's $40 million of Increasing
Rate Secured Senior Subordinated Notes due 1999 (the "Subordinated
Notes") a consent to amend the Indenture for the Subordinated Notes
to remove therefrom the minimum net worth requirement contained in
Section 4.23 thereof (the "Consent").
In connection with our engagement, we propose to
undertake certain services on your behalf including, to the extent
requested by you: identifying the holders of the Subordinated Notes
(the "Existing Holders"), advising on the form and amount of
consideration to be offered to the Existing Holders in order to
obtain the Consent, assisting in drafting a solicitation statement
for obtaining the Consent, and advising the Company on its
negotiations with Existing Holders to obtain the Consent.
As compensation for the services to be provided by JCG
hereunder, the Company agrees to pay to JCG: (i) $100,000, payable
promptly upon execution of this agreement; (ii) $100,000 upon the
one month anniversary of the execution of this agreement; and (iii)
upon request from JCG from time to time, to reimburse JCG promptly
for its reasonable out-of-pocket expenses (including the reasonable
fees and expenses of counsel) incurred by JCG pursuant to its
engagement hereunder. The amounts payable pursuant to the terms of
the immediately preceding sentence shall be due and payable whether
or not the Consent is obtained. As JCG will be acting on your
behalf, the Company agrees to indemnify JCG as set forth in
Schedule I hereto.
The Company shall make available to JCG all information
concerning its business and operations which JCG reasonably
requests and any other information relating to the Consent prepared
by the Company or any of its other advisors. JCG shall be entitled
to rely upon all information supplied to it by the Company or its
advisors and shall not in any respect be responsible for the
adequacy or completeness of, or have any obligation to verify, the
same or to conduct any appraisal of any of the Company's assets.
To the extent consistent with legal requirements, all information
given to JCG by the Company, unless publicly available or otherwise
available to JCG without restriction or breach of any
confidentiality agreement, will be held by JCG in confidence and
will not be disclosed to anyone without the Company's prior written
approval or used for any purposes other than those referred to in
this agreement.
This agreement may be terminated by either the Company or
JCG upon receipt of written notice to that effect by the other
party, provided that such termination shall not affect JCG's right
to receive the compensation and expense reimbursement set forth
above. The indemnity provisions contained in Schedule I hereto
will also remain operative and in full force and effect regardless
of any such termination.
This letter agreement shall be governed by, and construed
and enforced in accordance with, the laws of the State of New York.
This letter agreement shall be binding upon and inure to
the benefit of the Company, JCG and their respective successors and
assigns.
After reviewing this letter, please confirm that the
foregoing is in accordance with your understanding by signing and
returning to me the duplicate of this letter attached hereto,
whereupon it shall be our binding agreement.
Very truly yours, Accepted and agreed to as
of
this 11th day of October, 1994
JEFFERSON CAPITAL GROUP, LTD. LIVE ENTERTAINMENT INC.
By: By:
R. Timothy O'Donnell Michael J. White
President Executive Vice President
<PAGE>
SCHEDULE I
LIVE Entertainment Inc. (the "Company") will indemnify and hold
harmless Jefferson Capital Group, Ltd. ("JCG"), its affiliates and
its parent and its affiliates, the respective directors, officers,
agents and employees of JCG, its affiliates and its parent and its
affiliates (collectively, the "JCG 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 JCG under this agreement, and will reimburse
the JCG Group for all such fees and expenses including the reasonable
fees of counsel as they are incurred by the JCG Group in connection
with pending or threatened litigation whether or not the JCG Group is
a party. The Company will not, however, be responsible for any
claims, liabilities, losses, damages or expenses that are determined
by final judgment of a court of competent jurisdiction to result
primarily from the JCG Group's gross negligence, wilful misconduct or
bad faith. The Company also agrees that the JCG 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 JCG Group's gross negligence, wilful
misconduct or bad faith.
In the event that the foregoing indemnity is unavailable to the
JCG Group, then the Company shall contribute to amounts paid or
payable by the JCG 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
JCG Group's interest in the matters contemplated by this agreement
(if the JCG 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 JCG 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 JCG 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 JCG Group with
respect to which indemnity may be sought against the Company under
this agreement, the JCG Group shall promptly notify the Company in
writing and the Company shall, if requested by the JCG Group, assume
the defense thereof, including the employment of counsel and payment
of all fees and expenses related thereto. The JCG 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 JCG 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 JCG Group and the Company, and the JCG 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 JCG Group
from and against any loss or liability by reason of settlement of any
action effected with the consent of the Company.
AGREEMENT
THIS AGREEMENT is made and entered into as of August 1, 1994,
by, between and among INTERNATIONAL VIDEO PRODUCTIONS INC., a
California corporation doing business as "LIVE International"
("IVP"), LEI-IVE ENTERTAINMENT N.V., a Netherlands Antilles
corporation ("LIVE NV"), on the one hand, and ATRIUM PRODUCTIONS
KFT., a Hungarian corporation ("Atrium"), and
BELEGGINGSMAATSCHAPPIJ MAASMOND II B.V., a Netherlands corporation
("Maasmond"), on the other.
WHEREAS, IVP, LIVE NV and their affiliates (collectively,
"LIVE") are in the business of, among other matters, acquiring and
exploiting international rights to a wide variety of entertainment
products, including but not limited to motion pictures (such
international rights being hereinafter referred to as the
"Rights"); and
WHEREAS, Atrium, Maasmond and their affiliates (collectively,
"Licensor") are in the business of licensing rights to
entertainment products throughout the world; and
WHEREAS, LIVE desires to take advantage of Licensor's services
in connection with the licensing of the Rights.
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 is hereby acknowledged, LIVE and Licensor hereby agree as
follows:
1. Whenever LIVE desires to utilize the services of Licensor
to license particular Rights (the "Licensed Rights") that will be
exploited by a third party (the "Ultimate Licensee"), LIVE will
inform Licensor of the identity of the Ultimate Licensee and will
license the Licensed Rights to Licensor under a form of agreement
to be agreed upon in good faith between LIVE and Licensor. LIVE
will also provide Licensor with the form of agreement to be used by
Licensor to license the Licensed Rights to Ultimate Licensees.
2. All amounts received by Licensor from Ultimate Licensees
shall be placed in a lock box account at a bank approved by LIVE.
Such amounts shall be disbursed by Licensor to a lock box account
designated by LIVE (less the fee and expenses, if any, identified
in paragraph 3 below) immediately upon the receipt thereof. Copies
of all accounting statements and other documents received by
Licensor relating to the Licensed Rights shall immediately be
delivered by Licensor to LIVE. Licensor agrees not to exercise any
audit rights with respect to any Licensed Rights and/or any
Ultimate Licensees without first having obtained the prior written
consent of LIVE. Licensor agrees that upon the written request of
LIVE, it will exercise audit rights with respect to particular
Licensed Rights identified by LIVE and particular Ultimate
Licensees identified by LIVE.
3. Licensor shall receive a fee for the services provided
pursuant to paragraph 1 above on the following schedule:
a. All amounts received by Licensor
from Ultimate Licensees under this
Agreement until Licensor has
received a total of $2 million from
Ultimate Licensees.<PAGE>
1.5% of the
amounts
received<PAGE>
b. All amounts received by Licensor
from Ultimate Licensees under this
Agreement after Licensor has
received a total of $2 million from
Ultimate Licensees and until
Licensor has received a total of $4
million from Ultimate Licensees.<PAGE>
1.25% of the
amounts
received<PAGE>
c. All amounts received by Licensor
from Ultimate Licensees under this
Agreement after Licensor has
received a total of $4 million from
Ultimate Licensees.<PAGE>
1% of the
amounts
received<PAGE>
<PAGE>
All expenses of Licensor in performing the services contemplated by
this Agreement shall be paid by Licensor and not reimbursed by
LIVE. Notwithstanding the provisions of the immediately preceding
sentence, the following expenses shall be the responsibility of
LIVE:
i. Legal fees that have been specifically authorized in
advance and in writing by LIVE, which will be billed
directly to LIVE; and
ii. Bank fees for the transfer of funds (1) to Licensor from
Ultimate Licensees, and (2) to LIVE from Licensor, which
bank fees shall be deducted from amounts remitted to LIVE
pursuant to paragraph 2 above.
4. The term of this Agreement shall continue until either
LIVE or Licensor has given the other no less than thirty (30) days'
advance notice of termination. Upon termination of this Agreement,
Licensor shall assign all of its right, title and interest in the
Licensed Rights to such party or parties as may be identified by
LIVE.
5. Licensor and LIVE shall execute and deliver to each other
such additional instruments and documents as either party may
reasonably request or as otherwise may be necessary to more
effectively carry out the transactions contemplated hereby.
6. Nothing herein contained shall constitute a partnership
between or joint venture between 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 paragraph 6 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 and shall not be deemed to give any right or remedy to any
such third party.
7. 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.
8. LIVE hereby agrees to indemnify and hold Licensor
harmless from and against any and all loss, cost, damage and
expense, including attorneys' fees and costs, that may be suffered
by Licensor arising out of or in connection with the performance by
Licensor of its obligations hereunder, except for any such loss,
cost, damage or expense that is caused by or results from the
wilful misconduct or gross negligence of Licensor.
9. 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. Each of Licensor
and LIVE (a) hereby irrevocably submits itself to the exclusive
jurisdiction of either the state courts of the State of California
or the United States District Court for the Central District of
California for the purpose of any suit action or other proceeding
arising out of or based upon this Agreement or the subject matter
hereof, and (b) hereby waives and agrees not to assert, by way of
motion, as a defense, or otherwise, in any suit or proceeding, any
claim that it is not subject personally to the jurisdiction of the
above courts, that its property is exempt or immune from attachment
or execution, that the suit, action or proceeding is brought in an
inconvenient forum, that the venue of the suit, action or
proceeding is improper or that this Agreement or the subject matter
hereof may not be enforced in any such court.
<PAGE>
IN WITNESS WHEREOF, LIVE and Licensor have executed this
Agreement as of the day and year first above written.
"LIVE"
INTERNATIONAL VIDEO LEI-IVE ENTERTAINMENT N.V.
PRODUCTIONS INC.
By: By:
Title: Title:
"LICENSOR"
BELEGGINGSMAATSCHAPPIJ ATRIUM PRODUCTIONS KFT.
MAASMOND II B.V.
By: By:
Title: Title:
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
by and among
LIVE HOME VIDEO INC.
LIVE FILM AND MEDIAWORKS INC.
LIVE ENTERTAINMENT INTERNATIONAL INC.
LIVE AMERICA INC.
and
VESTRON INC.
and
FOOTHILL CAPITAL CORPORATION
Dated as of November 14, 1994
<PAGE>
TABLE OF CONTENTS
Page
1. DEFINITIONS AND CONSTRUCTION. . . . . . . . . . . . . . . . . . . . 1
1.1 Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Accounting Terms . . . . . . . . . . . . . . . . . . . . . . . 10
1.3 Code . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.4 Construction . . . . . . . . . . . . . . . . . . . . . . . . . 10
1.5 Schedules and Exhibits.. . . . . . . . . . . . . . . . . . . . 11
2. LOAN AND TERMS OF PAYMENT . . . . . . . . . . . . . . . . . . . . . 11
2.1 Revolving Advances.. . . . . . . . . . . . . . . . . . . . . . 11
2.2 Letters of Credit and Letter of Credit Guarantees.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
2.3 Term Loan. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.4 Overadvances . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.5 Interest: Rates, Payments, and Calculations . . . . . . . . . 13
2.6 Crediting Payments; Application of Collections . . . . . . . . 15
2.7 Statements of Obligations. . . . . . . . . . . . . . . . . . . 15
2.8 Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3. CONDITIONS; TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . 16
3.1 Conditions Precedent to Initial Advance, L/C, or
L/C Guaranty . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.2 Conditions Precedent to All Advances, L/Cs, or L/C
Guarantees.. . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.3 Term; Automatic Renewal. . . . . . . . . . . . . . . . . . . . 18
3.4 Effect of Termination. . . . . . . . . . . . . . . . . . . . . 18
3.5 Early Termination by Borrower. . . . . . . . . . . . . . . . . 18
3.6 Termination Upon Event of Default. . . . . . . . . . . . . . . 19
4. CREATION OF SECURITY INTEREST . . . . . . . . . . . . . . . . . . . 19
4.1 Grant of Security Interest . . . . . . . . . . . . . . . . . . 19
4.2 Negotiable Collateral. . . . . . . . . . . . . . . . . . . . . 19
4.3 Collection of Accounts, General Intangibles,
Negotiable Collateral. . . . . . . . . . . . . . . . . . . . . 19
4.4 Delivery of Additional Documentation Required. . . . . . . . . 20
4.5 Power of Attorney. . . . . . . . . . . . . . . . . . . . . . . 20
4.6 Right to Inspect . . . . . . . . . . . . . . . . . . . . . . . 20
5. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . . . . . 21
5.1 No Prior Encumbrances. . . . . . . . . . . . . . . . . . . . . 21
5.2 Eligible Accounts. . . . . . . . . . . . . . . . . . . . . . . 21
5.3 Eligible Inventory . . . . . . . . . . . . . . . . . . . . . . 21
5.4 Location of Inventory and Equipment. . . . . . . . . . . . . . 21
5.5 Inventory Records. . . . . . . . . . . . . . . . . . . . . . . 21
5.6 Location of Chief Executive Office; FEIN . . . . . . . . . . . 21
5.7 Due Organization and Qualification . . . . . . . . . . . . . . 21
5.8 Due Authorization; No Conflict . . . . . . . . . . . . . . . . 22
5.9 Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.10 No Material Adverse Change in Financial Condition. . . . . . . 22
5.11 Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.12 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 22
5.13 Environmental Condition. . . . . . . . . . . . . . . . . . . . 23
5.14 Reliance by Foothill; Cumulative . . . . . . . . . . . . . . . 23
6. AFFIRMATIVE COVENANTS.. . . . . . . . . . . . . . . . . . . . . . . 23
6.1 Accounting System. . . . . . . . . . . . . . . . . . . . . . . 23
6.2 Collateral Reports . . . . . . . . . . . . . . . . . . . . . . 24
6.3 Schedules of Accounts. . . . . . . . . . . . . . . . . . . . . 24
6.4 Financial Statements, Reports, Certificates. . . . . . . . . . 24
6.5 Tax Returns. . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.6 Guarantor Reports. . . . . . . . . . . . . . . . . . . . . . . 25
6.7 Designation of Inventory . . . . . . . . . . . . . . . . . . . 25
6.8 Returns. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
6.9 Title to Equipment . . . . . . . . . . . . . . . . . . . . . . 26
6.10 Maintenance of Equipment . . . . . . . . . . . . . . . . . . . 26
6.11 Taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.12 Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . 26
6.13 Financial Covenants. . . . . . . . . . . . . . . . . . . . . . 27
6.14 No Setoffs or Counterclaims. . . . . . . . . . . . . . . . . . 27
6.15 Location of Inventory and Equipment. . . . . . . . . . . . . . 28
6.16 Compliance with Laws . . . . . . . . . . . . . . . . . . . . . 28
6.17 Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . 28
7. NEGATIVE COVENANTS. . . . . . . . . . . . . . . . . . . . . . . . . 29
7.1 Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.2 Liens. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
7.3 Restrictions on Fundamental Changes. . . . . . . . . . . . . . 29
7.4 Extraordinary Transactions and Disposal of Assets. . . . . . . 30
7.5 Change Name. . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.6 Guarantee. . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.7 Restructure. . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.8 Prepayments. . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.9 Change of Control. . . . . . . . . . . . . . . . . . . . . . . 30
7.10 Capital Expenditures . . . . . . . . . . . . . . . . . . . . . 30
7.11 Consignments . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.12 Distributions. . . . . . . . . . . . . . . . . . . . . . . . . 30
7.13 Accounting Methods . . . . . . . . . . . . . . . . . . . . . . 30
7.14 Investments. . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.15 Transactions with Affiliates . . . . . . . . . . . . . . . . . 31
7.16 Suspension . . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.17 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . 31
7.18 Use of Proceeds. . . . . . . . . . . . . . . . . . . . . . . . 31
7.19 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees.. . . . . . . . . . . . . 31
8. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . . . . . . . . . . . 31
9. FOOTHILL'S RIGHTS AND REMEDIES. . . . . . . . . . . . . . . . . . . 33
9.1 Rights and Remedies. . . . . . . . . . . . . . . . . . . . . . 33
9.2 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . 35
10. TAXES AND EXPENSES REGARDING THE COLLATERAL . . . . . . . . . . . . 36
11. WAIVERS; INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . 36
11.1 Demand; Protest; etc.. . . . . . . . . . . . . . . . . . . . . 36
11.2 Foothill's Liability for Collateral. . . . . . . . . . . . . . 36
11.3 Indemnification. . . . . . . . . . . . . . . . . . . . . . . . 36
12. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. . . . . . . . . . . . . 37
14. DESTRUCTION OF BORROWERS' DOCUMENTS . . . . . . . . . . . . . . . . 38
15. GENERAL PROVISIONS. . . . . . . . . . . . . . . . . . . . . . . . . 38
15.1 Effectiveness. . . . . . . . . . . . . . . . . . . . . . . . . 38
15.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . 38
15.3 Section Headings . . . . . . . . . . . . . . . . . . . . . . . 39
15.4 Interpretation . . . . . . . . . . . . . . . . . . . . . . . . 39
15.5 Severability of Provisions . . . . . . . . . . . . . . . . . . 39
15.6 Amendments in Writing. . . . . . . . . . . . . . . . . . . . . 39
15.7 Counterparts; Telefacsimile Execution. . . . . . . . . . . . . 39
15.8 Revival and Reinstatement of Obligations . . . . . . . . . . . 39
15.9 Integration. . . . . . . . . . . . . . . . . . . . . . . . . . 40
SCHEDULES
Schedule E-1 Not Applicable
Schedule E-2 Location of Inventory
Schedule E-3 Eligible Letter of Credit
Schedule P-1 Permitted Indebtedness
Schedule P-2 Permitted Investments
Schedule P-3 Permitted Liens
Schedule P-3(a) WEA Liens
Schedule 5.9 Litigation
Schedule 5.14 Subsidiaries and Promissory Notes
Schedule 5.15(a) Film Assets
Schedule 5.15(b) Key Films
Schedule 5.18 Exploitation Agreements
Schedule 7.19 Acquisitions of Film Assets
<PAGE>
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT, is
entered into as of November 14, 1994, among FOOTHILL CAPITAL
CORPORATION, a California corporation ("Foothill"), with a place of
business located at 11111 Santa Monica Boulevard, Suite 1500, Los
Angeles, California 90025-3333, on the one hand, and LIVE HOME
VIDEO INC., a Delaware corporation ("LHV"), LIVE FILM AND
MEDIAWORKS INC. (formerly known as INTERNATIONAL VIDEO PRODUCTIONS
INC.), a California corporation ("LFM"), LIVE ENTERTAINMENT
INTERNATIONAL INC., a Delaware corporation ("LEI"), LIVE AMERICA
INC., a Delaware corporation ("LAI"), and VESTRON INC., a Delaware
corporation ("VESTRON"), each with its chief executive office
located at 15400 Sherman Way, Suite 500, Van Nuys, California 91406
(sometimes individually referred to herein as a "Borrower," and
collectively as the "Borrowers"), on the other hand, with reference
to the following:
WHEREAS, the Borrowers and/or their Affiliates are
parties to that certain Third Amended and Restated Loan Agreement
dated as of July 26, 1990, as amended, with Chemical Bank (the "Old
Lender") (the "Prior Loan Agreement");
WHEREAS, in connection with the Prior Loan Agreement,
Borrowers and/or one or more of their Affiliates executed and
delivered to Old Lender various copyright mortgages, trademark
mortgages, pledges, UCC filings, security agreements and other loan
documents (as amended, modified and supplemented prior to the
effectiveness of this Agreement, together with the Prior Loan
Agreement, the "Existing Credit Documents");
WHEREAS, the Old Lender and Foothill are entering into
that certain Assignment of Liens and Loan Documents pursuant to
which Old Lender is assigning to Foothill all of Old Lender's
right, title and interest in and to the Existing Credit Documents
and all liens and security interests created thereby;
WHEREAS, Borrowers and Foothill desire to amend and
restate the Prior Loan Agreement to provide for changes to the
terms and conditions thereof, and therefore desire to execute this
Agreement to effectuate same;
WHEREAS, this Agreement replaces and refinances the Prior
Loan Agreement;
NOW, THEREFORE, the parties agree as follows:
1. DEFINITIONS AND CONSTRUCTION.
1.1 Definitions. As used in this Agreement, the
following terms shall have the following definitions:
"Account Debtor" means any Person who is or who may
become obligated under, with respect to, or on account of an
Account.
"Accounts" means all currently existing and hereafter
arising accounts, contract rights, and all other forms of
obligations owing to a Borrower arising out of the sale or lease of
goods or the rendition of services by such Borrower, irrespective
of whether earned by performance, and any and all credit insurance,
guaranties, or security therefor.
"Adjusted Net Book Value of Film Assets" means the
aggregate costs, advances and prepaid royalties paid by a Borrowing
Base Company for Film Assets under Film Asset Acquisition
Agreements less Film Obligations and as adjusted for amortization
in accordance with industry standards, changes in value based upon
market conditions, and other reserves and adjustments as may be
deemed appropriate by Foothill in Foothill's reasonable credit
judgment. Adjusted Net Book Value of Film Assets shall not include
and no Borrowing Base credit shall be given for the costs, advances
and prepaid royalties and participations paid by any Borrowing Base
Company for any Film Assets (i) with respect to which royalties,
participations or other amounts payable by a Borrower are
delinquent by more than thirty (30) days or where any Borrower is
in material breach of the applicable Film Asset Acquisition
Agreement and/or the Exploitation Agreement or where any such
agreement has been terminated or cancelled or in the reasonable
judgment of Foothill there is a material threat of termination or
cancellation of any such agreement, or (ii) with respect to which
a Borrowing Base Company has not released videocassettes prior to
one year after commencement of the initial theatrical release of
the Film, or (iii) if such Film is not to be released theatrically,
with respect to which a Borrowing Base Company has not released
videocassettes of such Film prior to one year after delivery of the
Film to such Borrowing Base Company.
"Affiliate" means, as applied to any Person, any other
Person directly or indirectly controlling, controlled by, or under
common control with, that Person. For purposes of this definition,
"control" as applied to any Person means the possession, directly
or indirectly, of the power to direct or cause the direction of the
management and policies of that Person, whether through the
ownership of voting securities, by contract, or otherwise.
"Agreement" means this Amended and Restated Loan and
Security Agreement and any extensions, riders supplements, notes,
amendments, or modifications to or in connection with this Amended
and Restated Loan and Security Agreement.
"Amount of Eligible Letters of Credit" means (i) the
original face amount of an Eligible Letter of Credit prior to
delivery of the Masters relating to the Film Assets in respect of
which the Eligible Letter of Credit was issued, and (ii) after
delivery of such Masters, to the extent that there is still a
balance of the Eligible Letter of Credit outstanding to guaranty
remaining payments to the producer, production company or
production lender for the Film Assets acquired, the amount of such
balance of the Eligible Letter of Credit outstanding; provided,
however, that the sum of the Adjusted Net Book Value of the Film
Assets acquired in respect of such Eligible Letter of Credit plus
the outstanding balance of such Eligible Letter of Credit shall not
exceed the amount that the Adjusted Net Book Value of the Film
Assets would have been had the full amount of the Eligible Letter
of Credit been drawn upon.
"Applicable Amount of Adjusted Net Book Value of Film
Assets" means a percentage of the Adjusted Net Book Value of Film
Assets of a Borrowing Base Company determined as follows:
With respect to Films for which the related
Masters have not been delivered to a Borrowing
Base Company and for which a completion bond
(in customary form and in compliance with the
terms of this Agreement) has been issued
naming the applicable Borrowing Base Company
and Foothill as beneficiaries and guaranteeing
the completion and delivery of such Film to
the Borrowing Base Company: 65%
With respect to Films for which the related
Masters have been delivered to the Borrowing
Base Company, but no videocassettes of such
Film have been released: 65%
With respect to Films for which videocassettes
have been released: 20%
"Authorized Officer" means any officer of a Borrower.
"Average Unused Portion of Maximum Amount" means (a) the
Maximum Amount; less (b) the sum of: (i) the average Daily Balance
of advances made by Foothill under Section 2.1 that were
outstanding during the immediately preceding month; plus (ii) the
average Daily Balance of the undrawn L/Cs and L/C Guarantees issued
by Foothill under Section 2.2 that were outstanding during the
immediately preceding month.
"Bankruptcy Code" means the United States Bankruptcy Code
(11 U.S.C. Section 101 et seq.), as amended, and any successor statute.
"Borrower" and "Borrowers" have the meanings set forth in
the preamble to this Agreement.
"Borrowers' Books" means all of Borrowers' books and
records including: ledgers; records indicating, summarizing, or
evidencing Borrowers' properties or assets (including the
Collateral) or liabilities; all information relating to Borrowers'
business operations or financial condition; and all computer
programs, disc or tape files, printouts, runs, or other computer
prepared information, and the equipment containing such
information.
"Borrowing Base" has the meaning set forth in Section
2.1.
"Borrowing Base Company" means LFM, LHV, LAI or VESTRON
(collectively, the "Borrowing Base Companies").
"Business Day" means any day which is not a Saturday,
Sunday, or other day on which national banks are authorized or
required to close.
"Change of Control" shall be deemed to have occurred (i)
with respect to LIVE at such time as a "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934), other than Pioneer, becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Securities Exchange Act
of 1934), directly or indirectly, of more than 20% of the total
voting power of all classes of stock then outstanding of LIVE
normally entitled to vote in the election of directors, and (ii)
with respect to any Borrower or any Guarantor (other than LIVE), at
such time as it is no longer a wholly owned subsidiary of LIVE, a
Borrower or a Guarantor.
"Closing Date" means the date of the initial advance or
the date of the initial issuance of an L/C or an L/C Guaranty,
whichever occurs first.
"Code" means the California Uniform Commercial Code.
"Collateral" means, for any Borrower, all of the assets
and property of every kind of such Borrower, including all assets
and property now owned and hereafter acquired by such Borrower,
whether tangible or intangible, wherever located or situated, and
whether or not in possession of such Borrower, including but not
limited to, all of such Borrower's right, title and interest in and
to the following: Accounts; Borrowers' Books; Equipment; General
Intangibles; Inventory; Negotiable Collateral; any money, or other
assets which now or hereafter come into the possession, custody, or
control of Foothill; and the proceeds and products, whether
tangible or intangible, of any of the foregoing including the
proceeds of any completion bonds and the proceeds of insurance
covering any or all Collateral, and any and all Accounts,
Borrowers' Books, Equipment, General Intangibles, Inventory,
Negotiable Collateral, money, deposit accounts, or other tangible
or intangible property resulting from the sale, exchange,
collection, or other disposition of any of the foregoing, or any
portion thereof or interest therein, and the proceeds thereof.
"Collateral Documents" shall mean all present and future
guaranties, security agreements, assignments, pledge agreements,
laboratory pledgeholder agreements, copyright mortgages, trademark
mortgages, subordination agreements, intercreditor agreements,
financing statements, landlord waivers, consents, estoppel
certificates and other documents granting liens or other security
interests to Foothill pursuant to this Agreement, including,
without limitation, the Pledge Agreement, the Laboratory
Pledgeholder Agreements, the Copyright Mortgages, the Trademark
Mortgages and all other security agreements, financing statements,
subordination agreements, intercreditor agreements, estoppel
certificates, consents and/or waivers to be delivered pursuant to
the various provisions of this Agreement.
"Consolidated Current Assets" means, as of any date of
determination, the aggregate amount of all current assets of LHV
and its Subsidiaries calculated on a consolidated basis that would,
in accordance with GAAP, be classified on a balance sheet as
current assets. For purposes of the calculations of the Financial
Covenants contained in Section 6.13 of this Agreement, Consolidated
Current Assets shall include the Borrowers' book value of Film
Assets.
"Consolidated Current Liabilities" means, as of any date
of determination, the aggregate amount of all current liabilities
of LHV and its Subsidiaries, calculated on a consolidated basis
that would, in accordance with GAAP, be classified on a balance
sheet as current liabilities. For purposes of this definition, all
advances outstanding under this Agreement shall be deemed to be
current liabilities without regard to whether they would be deemed
to be so under GAAP.
"Copyright Mortgages" shall mean the instruments of
transfer pursuant to which the Borrowers (to the extent that any
Borrower is a copyright proprietor or owns any rights under
copyright) grant to Foothill a copyright mortgage and/or security
interest in their respective interest in the United States,
Canadian and/or worldwide copyrights (including but not limited to
the distribution rights) to any Film.
"Daily Balance" means the amount of an Obligation owed at
the end of a given day.
"Early Termination Premium" has the meaning set forth in
Section 3.6.
"Eligible Accounts" means those Accounts created by a
Borrowing Base Company in the ordinary course of business that
arise out of the Borrowing Base Company's sale of goods or
rendition of services, that strictly comply with all of Borrowers'
representations and warranties to Foothill, and that are and at all
times shall continue to be acceptable to Foothill in all respects;
provided, however, that standards of eligibility may be fixed and
revised from time to time by Foothill in Foothill's reasonable
credit judgment. Eligible Accounts shall be net of reserves
relating to return allowances, co-op advertising and other items
deemed appropriate in Foothill's reasonable discretion. Eligible
Accounts shall not include the following:
(a) Accounts that the Account Debtor has failed to
pay within thirty (30) days of the due date or Accounts with
selling terms of more than one hundred and twenty (120) days and
all Accounts owed by an Account Debtor that has failed to pay fifty
percent (50%) or more of its Accounts owed to any Borrower within
thirty (30) days of the due date;
(b) Accounts with respect to which the Account
Debtor is an officer, employee, Affiliate (other than Pioneer), or
agent of a Borrower;
(c) Accounts with respect to which goods are placed
on consignment, guaranteed sale, sale or return outside the
ordinary course of business, sale on approval, bill and hold, or
other terms by reason of which the payment by the Account Debtor
may be conditional;
(d) Accounts with respect to which the Account
Debtor is not a resident of the United States, and which are not
supported by one or more letters of credit that are assignable by
their terms and have been delivered to Foothill in an amount, of a
tenor, and issued by a financial institution, acceptable to
Foothill;
(e) Accounts with respect to which the Account
Debtor is the United States or any department, agency, or
instrumentality of the United States;
(f) Accounts with respect to which a Borrower is or
may become liable to the Account Debtor for goods sold or services
rendered by the Account Debtor to such Borrower;
(g) Accounts with respect to an Account Debtor
(other than WEA or MCA) whose total obligations owing to Borrowers
exceed ten percent (10%) of all Eligible Accounts, to the extent of
the obligations owing by such Account Debtor in excess of such
percentage;
(h) Accounts with respect to which the Account
Debtor disputes liability or makes any claim with respect thereto
to the extent of such dispute or claim, or is subject to any
Insolvency Proceeding, or becomes insolvent, or goes out of
business;
(i) Accounts the collection of which Foothill, in
its reasonable credit judgment, believes to be doubtful by reason
of the Account Debtor's financial condition;
(j) Accounts that are payable in other than United
States Dollars; and
(k) Accounts that represent progress payments or
other advance billings that are due prior to the completion of
performance by a Borrower of the subject contract for goods or
services.
"Eligible Inventory" means Inventory of a Borrowing Base
Company consisting only of first quality completed videocassettes
(each containing a Film that is included in the Film Assets) which
are held for sale in the ordinary course of a Borrowing Base
Company's business, that are located at the premises identified on
Schedule E-2, are acceptable to Foothill in all respects, and
strictly comply with all of Borrowers' representations and
warranties to Foothill. Eligible Inventory shall not include
depleted or expired titles, slow moving or obsolete items,
restrictive or custom items, work-in-process, components that are
not part of finished goods, spare parts, packaging and shipping
materials, supplies used or consumed in Borrowers' business,
Inventory at any location other than those set forth on
Schedule E-2, Inventory subject to a security interest or lien in
favor of any third Person, bill and hold goods, Inventory that is
not subject to Foothill's perfected security interests, defective
goods, "seconds," and Inventory acquired or transferred on
consignment. Eligible Inventory shall be valued at the lower of
the Borrowing Base Company's cost or market value and shall be net
of reserves for obsolescence and unapplied reserve.
"Eligible Letters of Credit" means (i) the letter of
credit identified on Schedule E-3, and (ii) any other letter of
credit issued or guarantied by Foothill in favor of a producer,
production company or production lender to guaranty payment by a
Borrowing Base Company for the acquisition of Film Assets by such
Borrowing Base Company prior to delivery of the related Masters, in
each case where the terms of the letter of credit expressly provide
that the letter of credit cannot be drawn upon prior to the date
that the related Masters are delivered to the Borrowing Base
Company.
"Equipment" means all of a Borrower's present and
hereafter acquired machinery, machine tools, motors, equipment
(including all recording, transposition, duplication, viewing and
other electronic equipment used in a Borrower's businesses, all
cameras and other photographic, sound recording and editing
equipment, projectors, film developing equipment and machinery),
furniture, furnishings, fixtures, vehicles (including all motor
vehicles and trailers), tools, parts, dies, jigs, goods (other than
consumer goods, farm products, or Inventory), wherever located, and
any interest of a Borrower in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions,
additions, and improvements to any of the foregoing, wherever
located.
"ERISA" means the Employee Retirement Income Security Act
of 1974, as amended from time to time, or any predecessor,
successor, or superseding laws of the United States of America,
together with all regulations promulgated thereunder.
"ERISA Affiliate" means any trade or business (whether or
not incorporated) which, within the meaning of Section 414 of the
IRC, is: (i) under common control with a Borrower; (ii) treated,
together with a Borrower, as a single employer; (iii) treated as a
member of an affiliated service group of which a Borrower is also
treated as a member; or (iv) is otherwise aggregated with Borrower
for purposes of the employee benefits requirements listed in IRC
Section 414(m)(4).
"ERISA Event" means any one or more of the following:
(i) a Reportable Event with respect to a Qualified Plan or a
Multiemployer Plan; (ii) a Prohibited Transaction with respect to
any Plan; (iii) a complete or partial withdrawal by a Borrower or
any ERISA Affiliate from a Multiemployer Plan; (iv) the complete or
partial withdrawal of a Borrower or an ERISA Affiliate from a
Qualified Plan during a plan year in which it was, or was treated
as, a "substantial employer" as defined in Section 4001(a)(2) of
ERISA; (v) a failure to make full payment when due of all amounts
which, under the provisions of any Qualified Plan subject to
Title IV of ERISA, a Borrower or any ERISA Affiliate is required to
make; (vi) the filing of a notice of intent to terminate, or the
treatment of a plan amendment as a termination, under Sections 4041
or 4041A of ERISA; (vii) an event or condition which might
reasonably be expected to constitute grounds under Section 4042 of
ERISA for the termination of, or the appointment of a trustee to
administer, any Qualified Plan or Multiemployer Plan; (viii) the
imposition of any liability under Title IV of ERISA, other than
PBGC premiums due but not delinquent under Section 4007 of ERISA,
upon a Borrower or any ERISA Affiliate; and (ix) a violation of the
applicable requirements of Sections 404 or 405 of ERISA, or the
exclusive benefit rule under Section 403(c) of ERISA, by any
Borrower or ERISA Affiliate with respect to any Plan for which a
Borrower or any ERISA Affiliate may be directly or indirectly
liable.
"Event of Default" has the meaning set forth in Section
8.
"Exploitation Agreements" shall mean all agreements
pursuant to which a Borrower has granted to any Person, or any
Person has acquired from a Borrower, rights to exploit all or any
of such Borrower's distribution rights in any Film Assets.
"FEIN" means Federal Employer Identification Number.
"Film" shall mean any and every motion picture, tape or
other recording of moving images by any means, manner, process or
device now known or hereafter devised.
"Film Asset Acquisition Agreements" shall mean all
agreements, licenses, instruments, writings and understandings
evidencing any Film Assets or any rights therein or thereto
acquired by a Borrower or pursuant to which such Film Assets and
rights were acquired by or granted to any Borrower.
"Film Assets" shall mean all rights and interests granted
to or acquired by the Borrowers in connection with or related to
the distribution or exploitation of, or otherwise respecting, any
Films, including but not limited to any distribution rights,
license rights and rights as a subdistributor or sublicensee in all
media, including without limitation, distribution, license,
subdistribution and sublicense rights; all rights to distribute,
license, subdistribute, sublicense, copy, exhibit, transmit,
broadcast, package, edit, reformat, advertise or exploit a Film, in
any and all media, and any syndication, television or cable
television rights; all copyrights or interests in any copyright on
or relating to a Film; and any collateral, allied, subsidiary or
merchandising rights appurtenant or related to a Film.
"Film Obligations" means the unpaid balance of all
advance royalty, participations, overages, residuals and other
accrued obligations owed in respect of any Film Asset.
"Film Rights" means all Film Assets; all contract rights
relating to any Film Assets, including without limitation, all
rights under any Film Asset Acquisition Agreements and Exploitation
Agreements and all exploitation rights with respect to any Film;
all sums, proceeds, money, products, profits or increases,
including money profits or increases or other property obtained or
to be obtained from the exploitation of any Film Assets; all other
collateral, allied, subsidiary and merchandising rights relating to
any Films; all Masters and all documents and the rights of the
Borrowers thereunder issued by any pledgeholder or bailee with
respect to any Masters; and all other assets and property relating
to any Film or Film Assets, including but not limited to, all
related goods, accounts, contract rights, general intangibles,
equipment, ancillary rights and copyrights.
"Foothill" has the meaning set forth in the preamble to
this Agreement.
"Foothill Expenses" means all: costs or expenses
(including taxes (other than those on income), photocopying,
notarization, telecommunication and insurance premiums) required to
be paid by any Borrower under any of the Loan Documents that are
paid or advanced by Foothill; documentation, filing, recording,
publication, appraisal (including periodic Collateral appraisals),
real estate survey, environmental audit, and search fees assessed,
paid, or incurred by Foothill in connection with Foothill's
transactions with Borrowers; costs and expenses incurred by
Foothill in the disbursement of funds to a Borrower (by wire
transfer or otherwise); charges paid or incurred by Foothill
resulting from the dishonor of checks; costs and expenses paid or
incurred by Foothill to correct any default or enforce any
provision of the Loan Documents, or in gaining possession of,
maintaining, handling, preserving, storing, shipping, selling,
preparing for sale, or advertising to sell the Collateral, or any
portion thereof, irrespective of whether a sale is consummated;
costs and expenses paid or incurred by Foothill in examining
Borrowers' Books; costs and expenses of third party claims or any
other suit paid or incurred by Foothill in enforcing or defending
the Loan Documents; and Foothill's reasonable attorneys fees and
expenses incurred in advising, structuring, drafting, reviewing,
administering, amending, terminating, enforcing (including
attorneys fees and expenses incurred in connection with a
"workout," a "restructuring," or an Insolvency Proceeding
concerning a Borrower or any guarantor of the Obligations),
defending, or concerning the Loan Documents, irrespective of
whether suit is brought.
"GAAP" means generally accepted accounting principles as
in effect from time to time in the United States, consistently
applied.
"General Intangibles" means all of a Borrower's present
and future general intangibles and other personal property
(including contract rights, rights arising under common law,
statutes, or regulations, choses or things in action, goodwill,
patents, trade names, trademarks, service marks, copyrights, Film
Rights, blueprints, drawings, purchase orders, customer lists,
monies due or recoverable from pension funds, route lists, rights
to payment and other rights under any royalty or licensing
agreements (including royalty advances), infringement claims,
computer programs, computer discs, computer tapes, literature,
reports, catalogs, deposit accounts, insurance premium rebates, tax
refunds, and tax refund claims), other than goods and Accounts.
"Guarantor" means LIVE or LVI (collectively, the
"Guarantors").
"Hazardous Materials" means all or any of the following:
(a) substances that are defined or listed in, or otherwise
classified pursuant to, any applicable laws or regulations as
"hazardous substances," "hazardous materials," "hazardous wastes,"
"toxic substances," or any other formulation intended to define,
list, or classify substances by reason of deleterious properties
such as ignitability, corrosivity, reactivity, carcinogenicity,
reproductive toxicity, or "EP toxicity"; (b) oil, petroleum, or
petroleum derived substances (other than video tape or video
cassettes), natural gas, natural gas liquids, synthetic gas,
drilling fluids, produced waters, and other wastes associated with
the exploration, development, or production of crude oil, natural
gas, or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; and (d) asbestos in any
form or electrical equipment which contains any oil or dielectric
fluid containing levels of polychlorinated biphenyls in excess of
fifty (50) parts per million.
"Indebtedness" means: (a) all obligations of a Borrower
for borrowed money; (b) all obligations of a Borrower evidenced by
bonds, debentures, notes, or other similar instruments and all
reimbursement or other obligations of a Borrower in respect of
letters of credit, letter of credit guaranties, bankers
acceptances, interest rate swaps, controlled disbursement accounts,
or other financial products; (c) all obligations of a Borrower
under capitalized leases; (d) all obligations or liabilities of
others secured by a lien or security interest on any property or
asset of a Borrower, irrespective of whether such obligation or
liability is assumed; and (e) any obligation of a Borrower
guaranteeing or intended to guarantee (whether guaranteed,
endorsed, co-made, discounted, or sold with recourse to such
Borrower) any indebtedness, lease, dividend, letter of credit, or
other obligation of any other Person.
"Insolvency Proceeding" means any proceeding commenced by
or against any Person under any provision of the Bankruptcy Code or
under any other bankruptcy or insolvency law, including assignments
for the benefit of creditors, formal or informal moratoria,
compositions, extensions generally with its creditors, or
proceedings seeking reorganization, arrangement, or other similar
relief.
"Inventory" means all present and future inventory in
which a Borrower has any interest, including goods held for sale or
lease or to be furnished under a contract of service and all of
such Borrower's present and future raw materials, work in process,
finished goods, videocassettes, and packing and shipping materials,
wherever located, and any documents of title representing any of
the above.
"IRC" means the Internal Revenue Code of 1986, as
amended, and the regulations thereunder.
"Key Film Rights" means Film Rights to the following
properties:
(i) Film Rights to Films that have not been released on
home video but which any of the Borrowing Base Companies has
acquired within the past twelve (12) months.
(ii) Film Rights to Films which a Borrowing Base Company
has initially released in home video within the last twelve
(12) months; and
(iii) Film Rights to those Films listed on
Schedule 5.15(b) attached hereto.
"Laboratory" shall mean each laboratory where any Masters
are located.
"Laboratory Pledgeholder Agreement" shall mean a
Laboratory Pledgeholder Agreement or Laboratory Access Letter in
such form as shall be acceptable to Foothill, to be executed by
Foothill, a third party completion guarantor (with regard to Films
which are not yet completed, if and as required under the terms
hereof), one or more Laboratories, and the applicable Borrower
which owns, holds or controls the rights in the Masters located at
such Laboratory, with respect to each Laboratory.
"L/C" has the meaning set forth in Section 2.2(a).
"L/C Guaranty" has the meaning set forth in Section
2.2(a).
"LIVE" means LIVE Entertainment Inc., a Delaware
corporation.
"Loan Documents" means this Agreement, the Lock Box
Agreements, the Collateral Documents, any note or notes executed by
a Borrower and payable to Foothill, and any other agreement entered
into in connection with this Agreement.
"Lock Box" has the meaning provided in the respective
Lock Box Agreements.
"Lock Box Agreements" means those certain Lockbox
Operating Procedural Agreements and Depository Account Agreements,
in form and substance satisfactory to Foothill, each of which is
among Borrowers, Foothill, and one of the Lock Box Banks.
"Lock Box Banks" means Imperial Bank or a replacement
bank acceptable to LHV and Foothill.
"Lien Reserve" means an amount equal to all liens
(whether choate or otherwise) upon any of any Borrower's assets
held by the United States Government, or any department, agency, or
instrumentality thereof, or by any state, county, municipal, or
other governmental agency, which are not subordinated on terms and
conditions acceptable to Foothill in its sole discretion, but
excluding liens for amounts that are not yet due and payable.
"LVI" means LIVE Ventures Inc., a Delaware corporation.
"Masters" shall mean all film negatives, masters, prints,
pre-print and/or soundtrack materials and other physical materials
relating to any Film.
"Maximum Amount" has the meaning set forth in Section
2.1.
"Maximum Foothill Amount" means that portion of the
Maximum Amount for which Foothill shall be responsible, exclusive
of any participations with Participants, which amount is Twenty
Million Dollars ($20,000,000).
"MCA" means MCA Canada, Ltd., a Canadian corporation.
"MCA Reserve" means an amount equal to all sums owed by
Borrowers to MCA from time to time.
"Multiemployer Plan" means a multiemployer plan as
defined in Sections 3(37) or 4001(a)(3) of ERISA or Section 414 of
the IRC in which employees of a Borrower or an ERISA Affiliate
participate or to which a Borrower or any ERISA Affiliate
contribute or are required to contribute.
"Negotiable Collateral" means all of a Borrower's present
and future letters of credit, notes, drafts, instruments,
certificated and uncertificated Securities (including the shares of
stock of each Subsidiary of each Borrower other than Subsidiaries
of LEI or Vestron), documents, personal property leases (wherein
Borrower is the lessor), chattel paper, and Borrowers' Books
relating to any of the foregoing.
"Obligations" means all loans, advances, debts,
principal, interest (including any interest that, but for the
provisions of the 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
agreement authorizing Foothill to charge Borrowers' loan account),
obligations, fees (including Early Termination Premiums), lease
payments, guaranties, covenants, and duties owing by a Borrower to
Foothill of any kind and description (whether pursuant to or
evidenced by the Loan Documents, by any note or other instrument,
or pursuant to any other agreement between Foothill and a Borrower,
and irrespective of whether for the payment of money), whether
direct or indirect, absolute or contingent, due or to become due,
now existing or hereafter arising, and including any debt,
liability, or obligation owing from a Borrower to others that
Foothill may have obtained by assignment or otherwise, and further
including all interest not paid when due and all Foothill Expenses
that a Borrower is required to pay or reimburse by the Loan
Documents, by law, or otherwise.
"Old Lender" means Chemical Bank.
"Other Film Rights" are Film Rights other than Key Film
Rights.
"Overadvance" has the meaning set forth in Section 2.4.
"Participant" means any Person, other than Foothill, that
has committed to provide a portion of the financing contemplated
herein.
"PBGC" means the Pension Benefit Guaranty Corporation as
defined in Title IV of ERISA, or any successor thereto.
"Permitted Indebtedness" means the Indebtedness listed on
Schedule P-1.
"Permitted Investments" means those investments listed on
Schedule P-2.
"Permitted Liens" means: (a) liens and security interests
held by Foothill; (b) liens for unpaid taxes that are not yet due
and payable; (c) liens and security interests set forth on Schedule
P-3 attached hereto; (d) purchase money security interests and
liens of lessors under capitalized leases to the extent that the
acquisition or lease of the underlying asset was permitted under
Section 7.10, and so long as the security interest or lien only
secures the purchase price of the asset; (e) obligations and duties
as lessee under any lease existing on the date of this Agreement;
and (f) mechanics', materialmen's, warehousemen's, or similar
liens.
"Permitted Payments" means for so long as no Event of
Default under Section 8.1 hereof has occurred and is not cured or
waived, payments or distributions by Borrowers to LIVE to enable
LIVE to (i) pay interest on the Senior Subordinated Indebtedness,
(ii) pay dividends on the Series B Preferred Stock and Series C
Preferred Stock, (iii) redeem or repurchase of up to Four Million
Dollars ($4,000,000) in liquidation value (400,000 shares) of
LIVE's Series B Preferred Stock so long as after giving effect to
any such redemption or repurchase Borrowers will have not less than
Five Million Dollars ($5,000,000) of borrowing availability under
this Agreement, and (iv) pay LIVE's overhead expenses of up to Two
Million Five Hundred Thousand Dollars ($2,500,000) per year
including professional fees, directors and officers liability
insurance premiums, corporate overhead and director's fees.
"Person" means and includes natural persons,
corporations, limited partnerships, general partnerships, joint
ventures, trusts, land trusts, business trusts, or other
organizations, irrespective of whether they are legal entities, and
governments and agencies and political subdivisions thereof.
"Pioneer" means Pioneer Electronic Corp., a Japanese
corporation, and its wholly-owned subsidiaries.
"Plan" means an employee benefit plan (as defined in
Section 3(3) of ERISA) which a Borrower or any ERISA Affiliate
sponsors or maintains or to which a Borrower or any ERISA Affiliate
makes, is making, or is obligated to make contributions, including
any Multiemployer Plan or Qualified Plan.
"Pledge Agreement" means the Security Agreement - Pledge
pursuant to which LIVE shall pledge to Foothill (i) the outstanding
shares of capital stock of LHV, and (ii) certain promissory notes
payable to LIVE; which such Security Agreement - Pledge shall be in
form and substance satisfactory to Foothill.
"Pledged Securities" means (i) the promissory notes set
forth on Schedule 5.14 hereto, (ii) the rights and interests of LVI
in BET Film Productions, a Delaware general partnership, (iii) and
all other Securities required to be pledged hereunder and/or under
the Pledge Agreement.
"Prohibited Transaction" means any transaction engaged in
by a Borrower or an ERISA Affiliate described in Section 406 of
ERISA which is not exempt by reason of Section 408 of ERISA, and
any transaction described in Section 4975(c) of the IRC which is
not exempt by reason of Section 4975(c) of the IRC.
"Qualified Plan" means a pension plan (as defined in
Section 3(2) of ERISA) intended to be tax-qualified under Section
401(a) of the IRC which a Borrower or any ERISA Affiliate sponsors,
maintains, or to which any such person makes, is making, or is
obligated to make, contributions, or, in the case of a multiple-
employer plan (as described in Section 4064(a) of ERISA), has made
contributions at any time during the immediately preceding period
covering at least five (5) plan years, but excluding any
Multiemployer Plan.
"Rank" means Rank Video Services America, a Delaware
corporation, and any permitted successor Laboratory under
Section 6.25.
"Reference Rate" means the highest of the variable rates
of interest, per annum, most recently announced by (a) Bank of
America, N.T. & S.A., (b) Mellon Bank, N.A., and (c) Citibank,
N.A., or any successor to any of the foregoing institutions, as its
"prime rate" or "reference rate," as the case may be, irrespective
of whether such announced rate is the best rate available from such
financial institution.
"Reportable Event" means any event described in Section
4043 (other than Subsections (b)(7) and (b)(9)) of ERISA.
"Securities" means any stock, shares, partnership
interests, voting trust certificates, bonds, debentures, notes, or
other evidences of indebtedness, secured or unsecured, convertible,
subordinated or otherwise, or in general any instruments commonly
known as "securities" or any certificates of interest, depository
trust receipts, shares or participations in temporary or interim
certificates, and any options or warrants for the purchase or
acquisition of, or any other right to subscribe to, purchase or
acquire, any of the foregoing.
"Senior Subordinated Indebtedness" means the Indebtedness
represented by that certain Indenture dated as of September 1, 1992
(as amended to increase the interest rate from ten percent (10%) to
twelve (12%) and to eliminate the net worth covenant) by and
between LIVE and the Trustee for Forty Million Dollars
($40,000,000) of Increasing Rate Secured Senior Subordinated Notes
due 1999.
"Series B Preferred Stock" means LIVE's Series B
Cumulative Convertible Preferred Stock, and any additional Series
B Cumulative Convertible Preferred Stock issued as dividends on
such Stock.
"Series C Preferred Stock" means LIVE's Series C
Convertible Preferred Stock, and any additional Series C
Convertible Preferred Stock issued as dividends on such Stock.
"Solvent" means, with respect to any Person on a
particular date, that on such date (a) at fair valuations, all of
the properties and assets of such Person are greater than the sum
of the debts, including contingent liabilities, of such Person,
(b) the present fair salable value of the properties and assets of
such Person is not less than the amount that will be required to
pay the probable liability of such Person on its debts as they
become absolute and matured, (c) such Person is able to realize
upon its properties and assets and pay its debts and other
liabilities, contingent obligations and other commitments as they
mature in the normal course of business, (d) such Person does not
intend to, and does not believe that it will, incur debts beyond
such Person's ability to pay as such debts mature, and (e) such
Person is not engaged in business or a transaction, and is not
about to engage in business or a transaction, for which such
Person's properties and assets would constitute unreasonably small
capital after giving due consideration to the prevailing practices
in the industry in which such Person is engaged. In computing the
amount of contingent liabilities at any time, it is intended that
such liabilities will be computed at the amount that, in light of
all the facts and circumstances existing at such time, represents
the amount that reasonably can be expected to become an actual or
matured liability.
"Subsidiary" shall mean any Person of which a Borrower
shall now or hereafter own or control, directly or indirectly,
sufficient voting stock or other beneficial interest to entitle
such Borrower to elect at least a majority of the managing body of
such Person, whether at the time of determination or only so long
as no senior class of stock has voting rights by reason of any
contingency.
"Syndicated Amount" means that portion of the Maximum
Amount equal to the aggregate financing commitments (to the extent
obtained and not breached or terminated) of all Participants.
"Tangible Net Worth" means, as of the date any
determination thereof is to be made, the difference of: (a) LHV's
total stockholder's equity; minus (b) the sum of: (i) all
intangible assets of LHV; (ii) all of LHV's prepaid expenses; and
(iii) all amounts due to LHV from Affiliates (other than Pioneer),
calculated on a consolidated basis.
"Technicolor" means Technicolor Videocassette of
Michigan, Inc., a Delaware corporation, and any permitted successor
Laboratory under Section 6.25.
"Trademark Mortgages" shall mean the instruments of
transfer pursuant to which the Borrowers grant to Foothill a
trademark mortgage and/or security interest in their respective
trademarks in form acceptable to Foothill.
"Trustee" shall mean American Stock Transfer & Trust
Company as Trustee under the Indenture relating to the Senior
Subordinated Indebtedness.
"Unfunded Benefit Liability" means the excess of a Plan's
benefit liabilities (as defined in Section 4001(a)(16) of ERISA)
over the current value of such Plan's assets, determined in
accordance with the assumptions used by the Plan's actuaries for
funding the Plan pursuant to Section 412 of the IRC for the
applicable plan year.
"Vestron" means Vestron Inc., a Delaware corporation.
"Voidable Transfer" has the meaning set forth in Section
15.8.
"WEA" means WEA Corp., a New York corporation.
"WEA Reserve" means an amount equal to all sums owed by
Borrowers to WEA from time to time.
"Working Capital" means the result of subtracting LHV's
Consolidated Current Liabilities from LHV's Consolidated Current
Assets.
1.2 Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with
GAAP. When used herein, the term "financial statements" shall
include the notes and schedules thereto. Whenever the term
"Borrower" is used in respect of a financial covenant or a related
definition, it shall be understood to mean such Borrower on a
consolidated basis unless the context clearly requires otherwise.
1.3 Code. Any terms used in this Agreement which are
defined in the Code shall be construed and defined as set forth in
the Code unless otherwise defined herein.
1.4 Construction. Unless the context of this Agreement
clearly requires otherwise, references to the plural include the
singular, references to the singular include the plural, the term
"including" is not limiting, and the term "or" has, except where
otherwise indicated, the inclusive meaning represented by the
phrase "and/or." The words "hereof," "herein," "hereby,"
"hereunder," and similar terms in this Agreement refer to this
Agreement as a whole and not to any particular provision of this
Agreement. Section, subsection, clause, schedule, and exhibit
references are to this Agreement unless otherwise specified. Any
reference in this Agreement or in the Loan Documents to this
Agreement or any of the Loan Documents shall include all
alterations, amendments, changes, extensions, modifications,
renewals, replacements, substitutions, and supplements, thereto and
thereof, as applicable.
1.5 Schedules and Exhibits. All of the schedules and
exhibits attached to this Agreement shall be deemed incorporated
herein by reference.
2. LOAN AND TERMS OF PAYMENT.
2.1 Revolving Advances.
(a) Subject to the terms and conditions of this
Agreement, Foothill agrees to make revolving advances to LHV in an
amount not to exceed the lowest of (i) the Borrowing Base, (ii) the
Maximum Amount, or (iii) the Maximum Foothill Amount plus the
Syndicated Amount. For purposes of this Agreement, "Borrowing
Base" shall mean, at any date for which the amount thereof is to be
determined, an amount equal to the sum of the following (after
adjustment to delete double counting or amounts payable by any
Affiliates of a Borrower):
(1) Up to the Applicable Amount of Adjusted Net Book
Value of Film Assets; plus
(2) Up to ninety five percent (95%) of Eligible Accounts
from: WEA, MCA and such other distributor(s) approved by
Foothill in its sole discretion for which any Borrowing Base
Company has an agreement in form and substance satisfactory to
Foothill causing such distributor(s) to be directly
responsible for billing, collecting and bad debts, if any;
plus
(3) Up to eighty percent (80%) of all other Eligible
Accounts; plus
(4) Up to sixty five percent (65%) of the Amount of
Eligible Letters of Credit; plus
(5) Up to an amount equal to the lesser of: (a) fifty
percent 50% of Eligible Inventory, or (b) Five Million Dollars
($5,000,000).
The Borrowing Base shall be reduced dollar for dollar by an amount
equal to (i) the WEA Reserve, (ii) the MCA Reserve, but only to the
extent of the amount of Accounts from MCA included in Eligible
Accounts, and (iii) the Lien Reserve.
(b) Anything to the contrary in Section 2.1(a)
above notwithstanding, Foothill may reduce its advance rates based
upon Applicable Amount of Adjusted Net Book Value of Film Assets,
Eligible Accounts, Amount of Eligible Letters of Credit or Eligible
Inventory without declaring an Event of Default if it determines,
in its reasonable discretion, that there is a material impairment
of the prospect of repayment of all or any portion of the
Obligations or a material impairment of the value or priority of
Foothill's security interests in the Collateral.
(c) Foothill shall have no obligation to make
advances hereunder to the extent they would cause the outstanding
Obligations to exceed the lesser of: (i) Thirty Million Dollars
($30,000,000) ("Maximum Amount"), or (ii) the Maximum Foothill
Amount plus the Syndicated Amount.
(d) Foothill is authorized to make advances under
this Agreement based upon telephonic or other instructions received
from anyone purporting to be an Authorized Officer of a Borrower,
or without instructions if pursuant to Section 2.5(d). Borrowers
agree to establish and maintain a single designated deposit account
for the purpose of receiving the proceeds of the advances requested
by a Borrowing Base Company and made by Foothill hereunder. Unless
otherwise agreed by Foothill and Borrowers, any advance requested
by a Borrowing Base Company and made by Foothill hereunder shall be
made to such designated deposit account. Amounts borrowed pursuant
to this Section 2.1 may be repaid and, subject to the terms and
conditions of this Agreement, reborrowed at any time during the
term of this Agreement.
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 a Borrowing Base Company (each, an
"L/C") or to issue standby letters of credit or guarantees of
payment (each such letter of credit or guaranty, an "L/C Guaranty")
with respect to commercial or standby letters of credit issued by
another Person for the account of Borrowing Base Company in an
aggregate face amount not to exceed the lesser of: (i) the
Borrowing Base less the amount of advances outstanding pursuant to
Section 2.1, and (ii) Fifteen Million Dollars ($15,000,000). Each
Borrower expressly understands and agrees that Foothill shall have
no obligation to arrange for the issuance by other financial
institutions of letters of credit that are to be the subject of L/C
Guarantees. Borrowers and Foothill acknowledge and agree that
certain of the letters of credit that are to be the subject of L/C
Guarantees may be outstanding on the Closing Date. Each such L/C
(including those that are the subject of L/C Guarantees) shall have
an expiry date no later than thirty (30) days prior to the date on
which this Agreement is scheduled to terminate under Section 3.4
(without regard to any potential renewal term) 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 advances outstanding pursuant to Section 2.1, would
exceed the lesser of: (y) the Maximum Amount, or (z) the Maximum
Foothill Amount plus the Syndicated Amount. The L/Cs and the L/C
Guarantees issued under this Section 2.2 shall be used by a
Borrowing Base Company, consistent with this Agreement, for its
general working capital purposes or to support its obligations with
respect to workers' compensation premiums or other similar
obligations. If Foothill is obligated to advance funds under an
L/C or L/C Guaranty, the amount so advanced immediately shall be
deemed to be an advance made by Foothill to Borrower pursuant to
Section 2.1 and, thereafter, shall bear interest at the rates then
applicable under Section 2.5.
(b) Each Borrower hereby agrees to indemnify, save,
defend, 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. Each Borrower agrees
to be bound by the issuing bank's regulations and interpretations
of any letters of credit guarantied by Foothill and opened to or
for such Borrower's account or by Foothill's interpretations of any
L/C issued by Foothill to or for such Borrower's account, even
though this interpretation may be different from such Borrower's
own, and such Borrower understands and agrees that Foothill shall
not be liable for any error, negligence, or mistakes, whether of
omission or commission, in following such Borrower's instructions
or those contained in the L/Cs or any modifications, amendments, or
supplements thereto. Such 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. Such Borrower hereby agrees to
indemnify, save, defend, and hold Foothill harmless with respect to
any loss, cost, expense (including attorneys fees), or liability
incurred by Foothill under any L/C Guaranty as a result of
Foothill's indemnification of any such issuing bank.
(c) Each Borrower hereby authorizes and directs any
bank that issues a letter of credit guaranteed by Foothill to
deliver to Foothill all instruments, documents, and other writings
and property received by the issuing bank pursuant to the letter of
credit, and to accept and rely upon Foothill's instructions and
agreements with respect to all matters arising in connection with
the letter of credit and the related application. A Borrower may
or may not be the "applicant" or "account party" with respect to
such letter of credit.
(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 immediately shall be reimbursable by Borrowers to
Foothill. On the first day of each month, Borrowers will pay
Foothill a fee equal to two percent (2.0%) per annum times the
average Daily Balance of the undrawn L/Cs and L/C Guarantees that
were outstanding during the immediately preceding month. Service
charges, commissions, fees, and costs may be charged to Borrowers'
loan account at the time the service is rendered or the cost is
incurred.
(e) Immediately upon the termination of this
Agreement, Borrowers agree to either: (i) provide cash collateral
to be held by 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 Person 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 after the occurrence and during the
continuation of an Event of Default may be held as the cash
collateral required by this Section 2.2(e).
2.3 [Intentionally Omitted]
2.4 Overadvances. If, at any time or for any reason,
the amount of Obligations owed by Borrowers to Foothill pursuant to
Sections 2.1 and 2.2 is greater than either the dollar or
percentage limitations set forth in Sections 2.1 or 2.2 (an
"Overadvance"), Borrowers immediately shall pay to Foothill, in
cash, the amount of such excess to be used by Foothill first, to
repay non-contingent Obligations and, thereafter, to be held by
Foothill as cash collateral to secure Borrowers' obligation to
repay Foothill for all amounts paid pursuant to L/Cs or L/C
Guarantees.
2.5 Interest: Rates, Payments, and Calculations.
(a) Interest Rate. All Obligations, except for
undrawn L/Cs and L/C Guarantees, shall bear interest, on the
average Daily Balance, at a per annum rate of two (2.0) percentage
points above the Reference Rate.
(b) Default Rate. All Obligations, except for
undrawn L/Cs and L/C Guarantees, shall bear interest, from and
after the occurrence and during the continuance of an Event of
Default, at a per annum rate equal to five (5) 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 five percent (5%) per
annum times the average Daily Balance of the undrawn L/Cs and L/C
Guarantees that were outstanding during the immediately preceding
month.
(c) Minimum Interest. In no event shall the rate
of interest chargeable hereunder be less than seven percent (7.0%)
per annum. To the extent that interest accrued hereunder at the
rate set forth herein (including the minimum interest rate) would
yield less than the foregoing minimum amount, the interest rate
chargeable hereunder for the period in question automatically shall
be deemed increased to that rate that would result in the minimum
amount of interest being accrued and payable hereunder.
(d) Payments. Interest hereunder shall be due and
payable on the first day of each month during the term hereof in
arrears. Each Borrower hereby authorizes Foothill, at its option,
without prior notice to such Borrower, to charge such interest, all
Foothill Expenses (as and when incurred), and all installments or
other payments due under any note or other Loan Document to
Borrowers' loan account, which amounts shall thereafter accrue
interest at the rate then applicable hereunder. Any interest not
paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at
the rate then applicable hereunder.
(e) Computation. The Reference Rate as of this
date is seven and three quarters percent (7 3/4%) per annum. In
the event the Reference Rate is changed from time to time
hereafter, the applicable rate of interest hereunder automatically
and immediately shall be increased or decreased by an amount equal
to such change in the Reference Rate. The rates of interest
charged hereunder shall be based upon the average Reference Rate in
effect during the month. All interest and fees chargeable under
the Loan Documents shall be computed on the basis of a three
hundred sixty (360) day year for the actual number of days elapsed.
(f) Intent to Limit Charges to Maximum Lawful Rate.
In no event shall the interest rate or rates payable under this
Agreement, plus any other amounts paid in connection herewith,
exceed the highest rate permissible under any law that a court of
competent jurisdiction shall, in a final determination, deem
applicable. Borrowers and Foothill, in executing this Agreement,
intend to legally agree upon the rate or rates of interest and
manner of payment stated within it; provided, however, that,
anything contained herein to the contrary notwithstanding, if said
rate or rates of interest or manner of payment exceeds the maximum
allowable under applicable law, then, ipso facto as of the date of
this Agreement, Borrowers are and shall be liable only for the
payment of such maximum as allowed by law, and payment received
from Borrowers in excess of such legal maximum, whenever received,
shall be applied to reduce the principal balance of the Obligations
to the extent of such excess.
2.6 Crediting Payments; Application of Collections. The
receipt of any wire transfer of funds, check, or other item of
payment by Foothill (whether from transfers to Foothill by the Lock
Box Banks pursuant to the Lock Box Agreements or otherwise)
immediately shall be applied to provisionally reduce the
Obligations, but shall not be considered a payment on account
unless such wire transfer is of immediately available federal funds
and is made to the appropriate deposit account of Foothill or
unless and until such check or other item of payment is honored
when presented for payment. From and after the Closing Date,
Foothill shall be entitled to charge Borrowers for two (2) Business
Days of `clearance' at the applicable rates set forth in Sections
2.5(a) and 2.5(b) (applicable to advances under Section 2.1) on all
collections, checks, wire transfers, or other items of payment that
are received by Foothill (regardless of whether forwarded by the
Lock Box Banks to Foothill, whether provisionally applied to reduce
the Obligations, or otherwise). This across-the-board two (2)
Business Day clearance charge on all receipts is acknowledged by
the parties to constitute an integral aspect of the pricing of
Foothill's facility to Borrowers, and shall apply irrespective of
the characterization of whether receipts are owned by a Borrower or
Foothill, and irrespective of the level of Borrowers' Obligations
to Foothill. Should any check or item of payment not be honored
when presented for payment, then Borrowers shall be deemed not to
have made such payment, and interest shall be recalculated
accordingly. Anything to the contrary contained herein
notwithstanding, any wire transfer, check, or other item of payment
shall be deemed received by Foothill only if it is received into
Foothill's Operating Account (as such account is identified in the
Lock Box Agreements) on or before 11:00 a.m. Los Angeles time. If
any wire transfer, check, or other item of payment is received into
Foothill's Operating Account (as such account is identified in the
Lock Box Agreements) after 11:00 a.m. Los Angeles time it shall be
deemed to have been received by Foothill as of the opening of
business on the immediately following Business Day.
2.7 Statements of Obligations. Within fifteen (15)
Business Days after the end of each month Foothill shall render
statements to LHV (on behalf of the Borrowers) of the Obligations,
including principal, interest, fees, and including an itemization
of all charges and expenses constituting Foothill Expenses owing,
and such statements shall be conclusively presumed to be correct
and accurate and constitute an account stated between Borrowers and
Foothill unless, within forty five (45) days after receipt thereof
by LHV, LHV shall deliver to Foothill by registered or certified
mail at its address specified in Section 12, written objection
thereto describing the error or errors contained in any such
statements.
2.8 Fees. Borrowers shall pay to Foothill the following
fees:
(a) Closing Fee. A one time closing fee of Five
Hundred Thousand Dollars ($500,000) which is earned, in full, on
the Closing Date and is due and payable by Borrowers to Foothill in
connection with this Agreement on the Closing Date.
(b) Unused Line Fee. On the first day of each
month during the term of this Agreement, a fee in an amount equal
to one-quarter of one percent (.25%) per annum times the Average
Unused Portion of the Maximum Foothill Amount plus the Syndicated
Amount.
(c) Annual Facility Fee. On each anniversary of
the Closing Date, a fee in an amount equal to one-quarter of one
percent (.25%) of the Maximum Foothill Amount plus the Syndicated
Amount, such fee to be fully earned on each such anniversary.
(d) Financial Examination and Appraisal Fees.
Foothill's customary fee of Six Hundred Dollars ($600) per day per
examiner, plus out-of-pocket expenses for each financial analysis
and examination of Borrowers performed by Foothill or its agents,
up to an aggregate maximum amount respecting financial analyses and
examinations for all Borrowers of Ten Thousand Dollars ($10,000)
per calendar quarter (so long as no Event of Default has occurred
and is continuing) plus out-of-pocket expenses. Foothill's
customary appraisal fee of One Thousand Dollars ($1,000) per day
per appraiser, plus out-of-pocket expenses for each appraisal of
the Collateral performed by Foothill or its agents. So long as no
Event of Default has occurred and is continuing, Borrowers will not
be required to pay for more than one appraisal each year during the
term of this Agreement. After the occurrence and during the
continuation of an Event of Default, Borrowers shall be required to
pay all fees and out-of-pocket expenses without limitation.
(e) Collateral Management Fee. On the first day of
each month during the term of this Agreement, and thereafter so
long as any Obligations are outstanding, a collateral management
fee in an amount equal to Four Thousand Dollars ($4,000) per month.
2.9 Joint Borrower Provisions.
(a) Any advances made by Foothill hereunder shall
be deemed to be made jointly to Borrowers and shall be charged to
each Borrower jointly and severally and each Borrower shall be
jointly and severally liable for all advances. Any payments
received by Foothill hereunder likewise shall be credited to each
Borrower.
(b) Foothill will credit the amount of advances
made to Borrowers under Section 2.1 to Borrowers' designated
deposit account. It is expressly agreed and understood by each
Borrower that Foothill shall have no responsibility to inquire into
the apportionment, allocation, or disposition of any advances made
to Borrowers. All advances are to be made for the collective
account of Borrowers.
(c) For the purpose of implementing the joint
borrower provisions of the Loan Documents, each Borrower hereby
irrevocably appoints the other Borrower as its agent and
attorney-in-fact for all purposes of the Loan Documents, including
the making of requests for advances, the execution and delivery of
certificates, and the receiving and allocating of disbursements
from Foothill.
(d) It is understood and agreed that the handling
of the revolving credit facility on a joint borrowing basis as set
forth in this Agreement is solely as an accommodation to Borrowers
and at their request, and that Foothill shall not incur any
liability to Borrowers as a result thereof. To induce Foothill to
do so, and in consideration thereof, each Borrower hereby agrees to
indemnify Foothill and hold Foothill harmless from and against any
and all liabilities, expenses, losses, damages, or claims of damage
or injury asserted against Foothill by Borrowers or by any other
Person arising from or incurred by reason of Foothill's handling of
the financing arrangement of Borrowers, as herein provided,
reliance by Foothill on any requests or instructions from any
Borrower, or any other action taken by Foothill hereunder.
(e) Each Borrower represents and warrants to
Foothill that the request for joint handling of the advances and
other financial accommodations to be made by Foothill hereunder was
made because Borrowers are engaged in an integrated operation that
requires financing on a basis permitting the availability of credit
from time to time to each Borrower. Each Borrower expects to
derive benefit, directly or indirectly, from such availability
because the successful operation of Borrowers is dependent on the
continued successful performance of the functions of the integrated
group.
(f) Each Borrower represents and warrants to
Foothill that (i) such Borrower has established adequate means of
obtaining from the other Borrower, on a continuing basis, financial
and other information pertaining to the business, operations, and
condition (financial and otherwise) of the other Borrower, and its
property, and (ii) such Borrower now is and hereafter will be
completely familiar with the business, operations, and condition
(financial and otherwise) of the other Borrower and its property.
Each Borrower hereby waives and relinquishes any duty on the part
of Foothill to disclose to such Borrower any matter, fact or thing
relating to the business operations, or condition (financial or
otherwise) of each of the other Borrower, or the property of the
other Borrower, whether now or hereafter known by Foothill during
the term of this Agreement.
3. CONDITIONS; TERM OF AGREEMENT.
3.1 Conditions Precedent to Initial Advance, L/C, or L/C
Guaranty. The obligation of Foothill to make the initial advance
or to provide the initial L/C or L/C Guaranty is subject to the
fulfillment, to the satisfaction of Foothill and its counsel, of
each of the following conditions on or before the Closing Date:
(a) the Closing Date shall occur on or before
November 30, 1994;
(b) Old Lender shall have confirmed in writing to
Foothill that no amounts are owed to Old Lender by Borrowers,
Guarantors and/or their Subsidiaries under the Prior Loan Agreement
and Old Lender shall have assigned to Foothill the Existing Credit
Documents and all related UCC filings, copyright mortgages,
trademark mortgages and other agreements and documents relating to
the liens and security interests in and to the properties and
assets of Borrowers, in form and substance satisfactory to Foothill
in its sole discretion;
(c) Credit Lyonnais Bank Nederland N.V. shall have
assigned to Foothill all UCC filings, copyright mortgages,
trademark mortgages and other agreements and documents relating to
the liens and security interests in and to the properties and
assets of Borrowers granted in connection with the Prior Loan
Agreement, in form and substance satisfactory to Foothill in its
sole discretion;
(d) Foothill shall have received evidence of the
filing of its financing statements, fixture filings, Copyright
Mortgages and Trademark Mortgages;
(e) Foothill shall have received each of the
following documents, duly executed, and each such document shall be
in full force and effect:
i) the Lock Box Agreements;
ii) a Continuing Guaranty from each Guarantor;
iii) a Security Agreement from LVI;
iv) the Pledge Agreement accompanied by the stock
certificates representing the outstanding shares of
capital stock of LHV, stock assignments or stock powers
executed in blank and undated covering such stock
certificates and the original Promissory Notes being
pledged to Foothill thereunder;
v) one or more Copyright Mortgages for the
Collateral;
vi) one or more Trademark Mortgages for the
Collateral;
vii) an intercreditor agreement with the Trustee in
form and substance satisfactory to Foothill;
viii) an intercreditor agreement with WEA in form and
substance satisfactory to Foothill; and
ix) subordination agreements (as to both priority
and payment) and intercreditor agreements and amendments
to any existing subordination agreements or intercreditor
agreements, all in form and substance satisfactory to
Foothill, executed by each Person which holds any
Indebtedness of any Borrower or a security interest in
any Collateral, other than security interests which
constitute Permitted Liens hereunder;
(f) Foothill shall have received a certificate from
the Secretary of each Borrower attesting to the resolutions of such
Borrower's Board of Directors authorizing its execution and
delivery of this Agreement and the other Loan Documents to which
such Borrower is a party and authorizing specific officers of such
Borrower to execute same;
(g) Foothill shall have received a certificate from
the Secretary of each Guarantor attesting to the resolutions of
such Guarantor's Board of Directors authorizing its execution and
delivery of this Agreement and the other Loan Documents to which
such Guarantor is a party and authorizing specific officers of such
Guarantor to execute same;
(h) Foothill shall have received copies of each
Borrower's By-laws and Articles or Certificate of Incorporation, as
amended, modified, or supplemented to the Closing Date, certified
by the Secretary of such Borrower;
(i) Foothill shall have received copies of each
Guarantor's By-laws and Articles or Certificate of Incorporation,
as amended, modified, or supplemented to the Closing Date,
certified by the Secretary of such Guarantor;
(j) Foothill shall have received a certificate of
corporate status with respect to each Borrower and Guarantor, dated
within forty five (45) days of the Closing Date, by the Secretary
of State of the state of incorporation of each such corporation,
which certificate shall indicate that such corporation is in good
standing in such state;
(k) Foothill shall have received certificates of
corporate status with respect to each Borrower and Guarantor, each
dated within forty five (45) days of the Closing Date, such
certificates to be issued by the Secretary of State of the states
in which such corporation's failure to be duly qualified or
licensed would have a material adverse effect on the financial
condition or properties and assets of such corporation, which
certificates shall indicate that such corporation is in good
standing;
(l) Foothill shall have received the certified
copies of the policies of insurance, together with the endorsements
thereto, as are required by Section 6.12 hereof, the form and
substance of which shall be satisfactory to Foothill and its
counsel;
(m) Foothill shall have received a landlord waiver
from the lessor of the location where Borrowers' chief executive
office is located;
(n) Foothill shall have received evidence
(including, without limitation, appropriate copyright filings
and/or reports) satisfactory to Foothill that each Borrower has
sufficient right, title and interest in and to the Key Film Rights
which it purports to own (including appropriate licenses under
copyright), to enable it to perform its obligations under the
Exploitation Agreements to which such Borrower is a party, to
collect the Eligible Accounts and to grant to Foothill the security
interests therein as contemplated by this Agreement, the Collateral
Documents and the other documents and instruments delivered or to
be delivered pursuant hereto or thereto;
(o) Foothill shall have received an opinion of
Borrowers' counsel in form and substance satisfactory to Foothill
in its sole discretion; and
(p) all other documents and legal matters in
connection with the transactions contemplated by this Agreement
shall have been delivered or executed or recorded and shall be in
form and substance satisfactory to Foothill and its counsel.
3.2 Conditions Precedent to All Advances, L/Cs, or L/C
Guarantees. The following shall be conditions precedent to all
advances, L/Cs, or L/C Guarantees hereunder:
(a) the representations and warranties contained in
this Agreement and the other Loan Documents shall be true and
correct in all material respects on and as of the date of such
advance, L/C, or L/C Guaranty, as though made on and as of such
date (except to the extent that such representations and warranties
relate solely to an earlier date);
(b) no Event of Default or event which with the
giving of notice or passage of time would constitute an Event of
Default shall have occurred and be continuing on the date of such
advance, L/C, or L/C Guaranty, nor shall either result from the
making of the advance; and
(c) no injunction, writ, restraining order, or
other order of any nature prohibiting, directly or indirectly, the
making of such advance or the issuance of such L/C or L/C Guaranty
shall have been issued and remain in force by any governmental
authority against Borrower, Foothill, or any of their Affiliates.
3.3 Condition Subsequent. The obligations of Foothill
hereunder including, without limitation, the obligation to continue
to make any advances and to provide L/Cs and L/C Guarantees is
further subject to and contingent upon the Borrowers providing to
Foothill, on or before thirty (30) calendar days following the date
of this Agreement, Laboratory Pledgeholder Agreements from Rank,
Technicolor, Pacific Title Archives, All Post and
Foto-Kem/Foto-Tronics. Borrowers' failure to satisfy this
condition subsequent on or before the date indicated above shall
constitute an immediate Event of Default hereunder.
3.4 Term. This Agreement shall become effective upon
the execution and delivery hereof by Borrowers and Foothill and
shall continue in full force and effect for a term ending on the
date that is three (3) years from the Closing Date, unless sooner
terminated pursuant to the terms hereof. Notwithstanding the
foregoing, Foothill shall have the right to terminate its
obligation to provide advances and exercise its other remedies
provided under this Agreement as set forth in Articles 8 and 9
hereof.
3.5 Effect of Termination. On the date of termination,
all Obligations (including contingent reimbursement obligations
under any outstanding L/Cs or L/C Guarantees) immediately shall
become due and payable without notice or demand. No termination of
this Agreement, however, shall relieve or discharge Borrowers of
Borrowers' duties, Obligations, or covenants hereunder, and
Foothill's continuing security interests in the Collateral shall
remain in effect until all Obligations have been fully and finally
discharged and Foothill's obligation to provide advances hereunder
is terminated.
3.6 Early Termination by Borrower. The provisions of
Section 3.4 notwithstanding, Borrowers have the option, at any time
upon sixty (60) days prior written notice to Foothill, to terminate
this Agreement by paying to Foothill, in cash, the Obligations
(including an amount equal to the full amount of the L/Cs or L/C
Guarantees), together with a premium (the "Early Termination
Premium") equal to the greater of: (a) the total interest and L/C
and L/C Guaranty fees for the immediately preceding six (6) months;
and (b) Two Hundred Fifty Thousand Dollars ($250,000). The
foregoing notwithstanding, so long as no Event of Default has
occurred and is continuing, no Early Termination Premium shall be
payable if Borrowers exercise their option to terminate this
Agreement during the third year of the term of this Agreement.
3.7 Termination Upon Event of Default. If Foothill
terminates this Agreement upon the occurrence of an Event of
Default which Foothill reasonably determines was caused by any
Borrower solely to circumvent the payment of the Early Termination
Premium, then, in view of the impracticability and extreme
difficulty of ascertaining actual damages and by mutual agreement
of the parties as to a reasonable calculation of Foothill's lost
profits as a result thereof, Borrowers shall be jointly and
severally obligated to immediately pay to Foothill upon the
effective date of such termination, a premium in an amount equal to
the Early Termination Premium. The Early Termination Premium shall
be presumed to be the amount of damages sustained by Foothill as
the result of the early termination and each Borrower agrees that
it is reasonable under the circumstances currently existing. The
Early Termination Premium provided for in this Section 3.7 shall be
deemed included in the Obligations.
4. CREATION OF SECURITY INTEREST.
4.1 Grant of Security Interest. Each Borrower hereby
grants to Foothill a continuing security interest in all currently
existing and hereafter acquired or arising Collateral in order to
secure prompt repayment of any and all Obligations and in order to
secure prompt performance by Borrowers of each of their covenants
and duties under the Loan Documents. Foothill's security interests
in the Collateral shall attach to all Collateral without further
act on the part of Foothill or any Borrower. Anything contained in
this Agreement or any other Loan Document to the contrary
notwithstanding, and other than sales and licenses made in the
ordinary course of business, no Borrower has any authority, express
or implied, to dispose of any item or portion of the Collateral.
4.2 Negotiable Collateral. In the event that any
Borrower's Collateral, including proceeds, is evidenced by or
consists of Negotiable Collateral, such Borrower shall, immediately
upon the request of Foothill, endorse and assign such Negotiable
Collateral to Foothill and deliver physical possession of such
Negotiable Collateral to Foothill.
4.3 Collection of Accounts, General Intangibles,
Negotiable Collateral. Foothill, Borrowers, and the Lock Box Banks
shall enter into the Lock Box Agreements, in form and substance
satisfactory to Foothill in its sole discretion, pursuant to which
all of Borrowers' cash receipts, checks, and other items of payment
(including, insurance proceeds, proceeds of completion bonds,
proceeds of cash sales, rental proceeds, and tax refunds) will be
forwarded to Foothill on a daily basis. Foothill agrees to
promptly readvance to Borrowers any of Borrowers' funds received by
Foothill at any time that Borrowers do not have any outstanding
Obligations to Foothill. At any time, Foothill or Foothill's
designee may: (a) notify customers or Account Debtors of each
Borrower that the Accounts, General Intangibles, or Negotiable
Collateral have been assigned to Foothill or that Foothill has a
security interest therein; and (b) collect the Accounts, General
Intangibles, and Negotiable Collateral directly and charge the
collection costs and expenses to Borrowers' loan account; but,
unless and until Foothill does so or gives Borrowers other written
instructions, Borrowers shall instruct all Account Debtors and
obligors to make payment on any Accounts, General Intangibles, and
Negotiable Collateral directly to a lockbox or restricted account
satisfactory to Foothill, pursuant to the Lock Box Agreements, and
immediately deliver any such payments to Foothill which are
actually received by any Borrower, in their original form. Each
Borrower agrees that it will hold in trust for Foothill, as
Foothill's trustee, any cash receipts, checks, and other items of
payment (including, insurance proceeds, proceeds of completion
bonds, proceeds of cash sales, rental proceeds, and tax refunds)
that it receives and immediately will deliver said cash receipts,
checks, and other items of payment to a lockbox or restricted
account satisfactory to Foothill, pursuant to the Lock Box
Agreements, in their original form as received by such Borrower.
4.4 Delivery of Additional Documentation Required. At
any time upon the request of Foothill, each Borrower shall execute
and deliver to Foothill all financing statements, continuation
financing statements, fixture filings, security agreements, chattel
mortgages, pledges, assignments, endorsements of certificates of
title, applications for title, affidavits, reports, notices,
schedules of accounts, letters of authority, and all other
documents that Foothill may reasonably request, in form
satisfactory to Foothill, to perfect and continue perfected
Foothill's security interests in the Collateral and in order to
fully consummate all of the transactions contemplated hereby and
under the other the Loan Documents.
4.5 Power of Attorney. Each Borrower hereby irrevocably
makes, constitutes, and appoints Foothill (and any of Foothill's
officers, employees, or agents designated by Foothill) as such
Borrower's true and lawful attorney, with power to: (a) if such
Borrower refuses to, or fails timely to execute and deliver any of
the documents described in Section 4.4, sign the name of such
Borrower on any of the documents described in Section 4.4; (b) at
any time that an Event of Default has occurred and is continuing,
sign such Borrower's name on any invoice or bill of lading relating
to any Account, drafts against Account Debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to
Account Debtors; (c) send requests for verification of Accounts;
(d) endorse such Borrower's name on any checks, notices,
acceptances, money orders, drafts, or other item of payment or
security that may come into Foothill's possession; (e) at any time
that an Event of Default has occurred and is continuing, notify the
post office authorities to change the address for delivery of such
Borrower's mail to an address designated by Foothill, to receive
and open all mail addressed to such Borrower, and to retain all
mail relating to the Collateral and forward all other mail to such
Borrower; (f) at any time that an Event of Default has occurred and
is continuing, make, settle, and adjust all claims under such
Borrower's policies of insurance and make all determinations and
decisions with respect to such policies of insurance; and (g) at
any time that an Event of Default has occurred and is continuing,
settle and adjust disputes and claims respecting the Accounts
directly with Account Debtors, for amounts and upon terms which
Foothill determines to be reasonable, and Foothill may cause to be
executed and delivered any documents and releases which Foothill
determines to be necessary. The appointment of Foothill as each
Borrower's attorney, and each and every one of Foothill's rights
and powers, being coupled with an interest, is irrevocable until
all of the Obligations have been fully and finally repaid and
performed and Foothill's obligation to extend credit hereunder is
terminated.
4.6 Right to Inspect. Foothill (through any of its
officers, employees, or agents) shall have the right, from time to
time hereafter during usual business hours to inspect Borrowers'
Books and to check, test, and appraise the Collateral in order to
verify any Borrower's financial condition or the amount, quality,
value, condition of, or any other matter relating to, the
Collateral.
5. REPRESENTATIONS AND WARRANTIES.
Each Borrower represents and warrants to Foothill as
follows:
5.1 No Prior Encumbrances. Each Borrower has good and
indefeasible title to its Collateral, free and clear of liens,
claims, security interests, or encumbrances, except for Permitted
Liens. The Borrowers have good and valid legal title to their
respective assets and properties shown on the LHV Consolidated
Balance Sheet, dated September 30, 1994, including, without
limitation, all Film Assets set forth on Schedule 5.15(a) hereto.
The Borrowers have good and valid legal title to all Collateral
they purport to own by including such Collateral in any Borrowing
Base calculation, subject only to Permitted Liens. Schedule P-3 to
this Agreement accurately sets forth and describes all security
interests, copyright mortgages, liens, pledges or other
encumbrances to which any of the Collateral is subject. This
Agreement, the Collateral Documents and all other agreements,
instruments and documents delivered or to be delivered to Foothill
(including, without limitation, the certificates evidencing the
Pledged Securities) pursuant to this Agreement or otherwise, have
created and granted or, as the case may be, when executed and
delivered to Foothill, will create and grant, in favor of Foothill
valid security interests in the Collateral. Upon the filing of UCC
financing statements under the applicable Uniform Commercial Codes
with respect thereto, the delivery of the certificates or other
instruments evidencing the Pledged Securities to Foothill, the
filing of assignments and/or other instruments in the United States
Copyright Office and the execution and delivery of the Collateral
Documents, all to the extent required, and Foothill shall have a
perfected first priority security interest in and to the
Collateral, subject only to the Permitted Liens and to no other
security interest prior, paramount, superior, equal to or on parity
with the right, title and interest of Foothill therein or thereto.
5.2 Eligible Accounts. The Eligible Accounts are, at
the time of the creation thereof and as of each date on which
Borrowers include them in a Borrowing Base calculation or
certification, bona fide existing obligations created by the
license/sale and delivery of Inventory or Film Rights or the
rendition of services to Account Debtors in the ordinary course of
a Borrower's business, unconditionally owed to such Borrower
without defenses, disputes, offsets, counterclaims, or rights of
return or cancellation. The property giving rise to such Eligible
Accounts has been delivered to the Account Debtor, or to the
Account Debtor's agent for immediate shipment to and unconditional
acceptance by the Account Debtor. At the time of the creation of
an Eligible Account and as of each date on which such Borrowers
include an Eligible Account in a Borrowing Base calculation or
certification, no Borrower has received notice of actual or
imminent bankruptcy, insolvency, or material impairment of the
financial condition of any applicable Account Debtor regarding such
Eligible Account.
5.3 Eligible Inventory. All Eligible Inventory is now
and at all times hereafter shall be of good and merchantable
quality, free from defects.
5.4 Location of Inventory and Equipment. The Inventory
and Equipment are not stored with a bailee, warehouseman, or
similar party (without Foothill's prior written consent) and are
located only at the locations identified on Schedule E-2 or
otherwise permitted by Schedule E-2.
5.5 Inventory Records. Each Borrower now keeps, and
hereafter at all times shall keep, correct and accurate records
itemizing and describing the kind, type, quality, and quantity of
the Inventory, and such Borrower's cost therefor.
5.6 Location of Chief Executive Office; FEIN. The chief
executive office of each Borrower is located at the address
indicated in the preamble to this Agreement and each Borrower's
FEIN is as follows:
LHV 95-3577158
LFM 13-3424672
LEI 95-4500319
LAI 77-0211944
VESTRON 95-4300175
5.7 Due Organization and Qualification. Each Borrower
is duly organized and existing and in good standing under the laws
of the state of its incorporation and qualified and licensed to do
business in, and in good standing in, any state where the failure
to be so licensed or qualified could reasonably be expected to have
a material adverse effect on the business, operations, condition
(financial or otherwise), finances, or prospects of such Borrower
or on the value of the Collateral to Foothill.
5.8 Due Authorization; No Conflict. The execution,
delivery, and performance of the Loan Documents are within each
Borrower's corporate powers, have been duly authorized, and are not
in conflict with nor constitute a breach of any provision contained
in such Borrower's Articles or Certificate of Incorporation, or By-
laws, nor will they constitute an event of default under any
material agreement to which such Borrower is a party or by which
its properties or assets may be bound. All 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 which
are required for the execution, delivery and performance by each
Borrower of this Agreement and the Collateral Documents have been
duly obtained, made or granted and are in full force and effect,
and if any further (or, with respect to any other instruments and
documents to be executed and delivered by the Borrowers pursuant to
this Agreement or the Collateral Documents, any additional)
authorizations, approvals, registrations or filings should
hereafter become necessary, the Borrowers shall use their
respective best efforts to obtain or make all such authorizations,
approvals, registrations or filings.
5.9 Litigation. There are no actions or proceedings
pending by or against any Borrower before any court or
administrative agency and Borrowers do not have knowledge or belief
of any material pending, threatened, or imminent litigation,
governmental investigations, or claims, complaints, actions, or
prosecutions involving any Borrower except for: (a) ongoing
collection matters in which a Borrower is the plaintiff; (b)
matters disclosed on Schedule 5.9; and (c) matters arising after
the date hereof that, if decided adversely to a Borrower, would not
materially impair the prospect of repayment of the Obligations or
materially impair the value or priority of Foothill's security
interests in the Collateral.
5.10 No Material Adverse Change in Financial Condition.
All financial statements relating to any Borrower that have been
delivered to Foothill have been prepared in accordance with GAAP
and fairly present such Borrower's financial condition as of the
date thereof and such Borrower's results of operations for the
period then ended. There has not been a material adverse change in
the financial condition of Borrower since the date of the latest
financial statements submitted to Foothill on or before the Closing
Date.
5.11 Solvency. LHV and its Subsidiaries on a
consolidated basis are Solvent. No transfer of property is being
made by any Borrower and no obligation is being incurred by any
Borrower in connection with the transactions contemplated by this
Agreement or the other Loan Documents with the intent to hinder,
delay, or defraud either present or future creditors of any
Borrower.
5.12 Employee Benefits. Each Plan is in compliance in
all material respects with the applicable provisions of ERISA and
the IRC. Each Qualified Plan and Multiemployer Plan has been
determined by the Internal Revenue Service to qualify under Section
401 of the IRC, and the trusts created thereunder have been
determined to be exempt from tax under Section 501 of the IRC, and,
to the best knowledge of each Borrower, nothing has occurred that
would cause the loss of such qualification or tax-exempt status.
There are no outstanding liabilities under Title IV of ERISA with
respect to any Plan maintained or sponsored by any Borrower or any
ERISA Affiliate, nor with respect to any Plan to which any Borrower
or any ERISA Affiliate contributes or is obligated to contribute
which could reasonably be expected to have a material adverse
effect on the financial condition of any Borrower. No Plan subject
to Title IV of ERISA has any Unfunded Benefit Liability which could
reasonably be expected to have a material adverse effect on the
financial condition of any Borrower. Neither of the Borrowers nor
any ERISA Affiliate has transferred any Unfunded Benefit Liability
to a person other than such Borrower or an ERISA Affiliate or has
otherwise engaged in a transaction that could be subject to
Sections 4069 or 4212(c) of ERISA which could reasonably be
expected to have a material adverse effect on the financial
condition of any Borrower. Neither any Borrower nor any ERISA
Affiliate has incurred nor reasonably expects to incur (x) any
liability (and no event has occurred which, with the giving of
notice under Section 4219 of ERISA, would result in such liability)
under Sections 4201 or 4243 of ERISA with respect to a
Multiemployer Plan, or (y) any liability under Title IV of ERISA
(other than premiums due but not delinquent under Section 4007 of
ERISA) with respect to a Plan, which could, in either event,
reasonably be expected to have a material adverse effect on the
financial condition of any Borrower. No application for a funding
waiver or an extension of any amortization period pursuant to
Section 412 of the IRC has been made with respect to any Plan. No
ERISA Event has occurred or is reasonably expected to occur with
respect to any Plan which could reasonably be expected to have a
material adverse effect on the financial condition of any Borrower.
Each Borrower and each ERISA Affiliate have complied in all
material respects with the notice and continuation coverage
requirements of Section 4980B of the IRC.
5.13 Environmental Condition. None of any Borrower's
properties or assets has ever been used by any Borrower or, to the
best of Borrowers' knowledge, by previous owners or operators in
the disposal of, or to produce, store, handle, treat, release, or
transport, any Hazardous Materials. None of any Borrowers'
properties or assets has ever been designated or identified in any
manner pursuant to any environmental protection statute as a
Hazardous Materials disposal site, or a candidate for closure
pursuant to any environmental protection statute. No lien arising
under any environmental protection statute has attached to any
revenues or to any real or personal property owned or operated by
any Borrower. No Borrower has received a summons, citation,
notice, or directive from the Environmental Protection Agency or
any other federal or state governmental agency concerning any
action or omission by any Borrower resulting in the releasing or
disposing of Hazardous Materials into the environment.
5.14 Subsidiaries and Promissory Notes. Schedule 5.14 to
this Agreement lists all Subsidiaries of every Borrower and
accurately and completely sets forth, separately with respect to
each Borrower and each such Subsidiary, (a) the numbers and the
titles of classes and/or series of equity securities which
constitute the authorized and the issued and outstanding capital
stock of the Borrowers; and (b) the number of shares and percentage
ownership of each class and/or series, and the percentage ownership
of the total combined voting power of all classes and series, of
the issued and outstanding capital stock of all other Borrowers and
their Subsidiaries held by each Borrower. Schedule 5.14 to this
Agreement also lists all notes receivable held by each Borrower and
Guarantor. Except as set forth on Schedule 5.14, there are no
Securities issued by any Borrower which are held by or in the name
of another Borrower or Guarantor. Except as set forth on
Schedule 5.14, each Borrower and/or Guarantor has full right, title
and interest in and to all Securities set forth on Schedule 5.14,
owned by it, free of any liens, encumbrances, other pledges or
restrictions, and has full power and authority to pledge such
Securities. Except as set forth on Schedule 5.14, all Securities
set forth on Schedule 5.14, were duly and validly issued, and are
validly outstanding, fully paid and nonassessable.
5.15 Film Assets. Schedule 5.15(a) to this Agreement
names all of the Film Assets of the Borrowers as of September 30,
1994. Schedule 5.15(b) accurately and completely identifies the
Films to which Key Film Rights relate and, as to each such Film,
indicates the title, the date of copyright registration, the
registration number and whether the document granting rights in
such Key Film Rights to a Borrower was recorded with the United
States Copyright Office. Each Borrower has sufficient right, title
and interest in and to such Film Assets to enable such Borrower to
perform such Exploitation Agreements as have been entered into by
such Borrower relating to such Film Assets. To the best of the
Borrowers' knowledge, neither the Film Assets nor any Borrower's
exploitation thereof violates or infringes, or will violate or
infringe upon any copyright, right privacy or publicity, trademark,
patent, trade name, performing right or any literary, dramatic
musical, artistic, personal, private, contract or copyright or any
right of any other person or contains any defamatory material in
any manner which would have a material adverse affect on the
financial condition of Borrowers taken as a whole, except as set
forth on Schedule 5.9.
5.16 Masters. Borrowers have delivered to Foothill three
(3) volumes of documents which accurately and completely identify
as of September 30, 1994 all Laboratories at which the Masters
relating to Key Film Rights and all other material Masters are
located and the specific Masters that are located at each such
Laboratory.
5.17 Trademarks. Borrowers have delivered to Foothill
one (1) volume of documents which accurately and completely
identifies as of September 30, 1994 all material trademarks with
respect to which the Borrowers own any interest and the nature of
the interest owned by each such Borrower.
5.18 Exploitation Agreements. Schedule 5.18 accurately
and completely identifies as of September 30, 1994 all Exploitation
Agreements for Key Film Rights.
5.19 Film Asset Acquisition Agreements. Schedule 5.15(b)
to this Agreement accurately and completely identifies as of
September 30, 1994 all Film Asset Acquisition Agreements for Key
Film Rights.
5.20 Agreements. No Borrower nor any Subsidiary thereof
is in default in the performance, observance or fulfillment of any
of the material obligations, covenants or conditions contained in
any agreement or instrument to which it is a party and no Borrower
knows of any existing or threatened default by any other party to
any such agreement or instrument, which default could result in any
material adverse change in the business, properties or assets,
operation or condition, financial or otherwise, of the Borrowers
taken as a group. No Borrower is a party to any agreement or
instrument or subject to any restriction materially adversely
affecting its operations, business, properties, assets or condition
(financial or otherwise).
5.21 Disclosure. No written statement made or document
delivered by any Borrower to Foothill in connection with this
Agreement contains any untrue statement of a material fact or omits
(when considered in conjunction with other written statements made
by any Borrower to Foothill) a material fact necessary to make the
statements made therein not misleading. To the best knowledge of
the Borrowers, there is no fact which the Borrowers have not
disclosed to Foothill which materially and adversely affects or, so
far as the Borrowers can now foresee, is reasonably likely to prove
to affect materially and adversely the business, operations,
assets, properties, prospects, profits or condition (financial or
otherwise) of the Borrowers, or the ability of the Borrowers to
perform their Obligations under this Agreement and the Collateral
Documents.
5.22 Reliance by Foothill; Cumulative. Each warranty and
representation contained in this Agreement automatically shall be
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. The warranties and representations set
forth herein shall be cumulative and in addition to any and all
other warranties and representations that each Borrower now or
hereafter shall give, or cause to be given, to Foothill.
6. AFFIRMATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until full and final
payment of the Obligations, and unless Foothill shall otherwise
consent in writing, each Borrower shall do all of the following:
6.1 Accounting System. LHV, on behalf of each Borrower,
shall maintain a standard and modern system of accounting in
accordance with GAAP with ledger and account cards or computer
tapes, discs, printouts, and records pertaining to the Collateral
which contain information as from time to time may be requested by
Foothill. LHV, on behalf of each Borrower, also shall keep proper
books of account showing all sales, claims, and allowances on their
Inventory.
6.2 Collateral Reports. LHV, on behalf of each
Borrower, shall deliver to Foothill, no later than the fifteenth
(15th) day of each month during the term of this Agreement the
following with respect to the prior month:
(a) a Borrowing Base statement;
(b) copies of all monthly sales and returns reports from
WEA and, upon Foothill's request, copies of all such other WEA
reports that are provided to Borrowers;
(c) a detailed aging, by total, of the Accounts, a
reconciliation statement, and a summary aging, by vendor, of
all accounts payable and any book overdraft;
(d) a list of Film Assets acquired and a summary of the
material terms of each Film Asset Acquisition Agreement and
each Exploitation Agreement entered into by any Borrower and,
upon Foothill's request, copies of each such agreement;
(e) copies of all completion bonds issued where a
Borrower and Foothill are named as beneficiaries and where a
Borrower has prepaid any sums prior to delivery of the
Masters;
(f) copies of all copyright registrations filed (and
written evidence of filing) by any Borrower relating to any
Film Asset or Film as to which any Film Rights have vested in
a Borrower, together with a summary of the chain of title of
such Film and Film Rights;
(g) duly executed Copyright Mortgages relating to each
Film Asset owned or acquired by a Borrower as to which Film
Rights have vested in a Borrower;
(h) summaries of all Film Obligations; and
(i) a report identifying each Film in which a Borrower
has any Film Rights and the net book value of each such Film.
LHV, on behalf of each Borrower, shall deliver to Foothill
annually, or more frequently at Foothill's request, an update of
Schedules 5.15 and 5.18 and the volumes delivered pursuant to
Sections 5.16 and 5.17. LHV, on behalf of each Borrower, also
shall deliver to Foothill, as Foothill may from time to time
require, an updated listing of the location of Masters to each
Film, collection reports, sales journals, invoices, original
delivery receipts, customer's purchase orders, shipping
instructions, bills of lading, and other documentation respecting
shipment arrangements. Absent such a request by Foothill, copies
of all such documentation shall be held by each Borrower as
custodian for Foothill.
6.3 Schedules of Accounts. With such regularity as
Foothill shall require, each Borrower shall provide Foothill with
schedules describing all Accounts. Foothill's failure to request
such schedules or any Borrower's failure to execute and deliver
such schedules shall not affect or limit Foothill's security
interests or other rights in and to the Accounts.
6.4 Financial Statements, Reports, Certificates. LHV,
on behalf of each Borrower, agrees to deliver, or cause to be
delivered, to Foothill: (a) as soon as available, but in any event
within (i) one hundred five (105) days of the end of each month
ending a fiscal year, (ii) fifty (50) days of the end of each month
ending its first three (3) fiscal quarters, and (iii) thirty (30)
days after the end of each other month during each of its fiscal
years, a company prepared consolidated balance sheet, income
statement and cash flow statement covering Borrowers' operations
during such period; and (b) as soon as available, but in any event
within one hundred five (105) days after the end of each of LIVE's
fiscal years, financial statements of LIVE for each such fiscal
year, audited by Ernst & Young or other independent certified
public accountants acceptable to Foothill and certified, without
any qualifications other than as may exist as set forth in, or
which may result from events or facts which are disclosed in, the
audited financial statements or the public filings of LIVE in
effect on the Closing Date, by such accountants to have been
prepared in accordance with GAAP, consistently applied. Such
audited financial statements shall include a balance sheet, profit
and loss statement, and cash flow statement, and such auditor's
report to LIVE's board of directors. Borrowers shall cause LIVE to
have issued written instructions to its independent certified
public accountants, authorizing them to communicate with Foothill
and to release to Foothill whatever financial information
concerning Borrowers that Foothill may request. In addition,
Borrowers agree to cause LIVE to deliver financial statements
prepared on a consolidating basis so as to present Borrowers as a
separate group, with details of consolidation. Such statements
shall be accompanied by a letter from LIVE's independent certified
public accountants respecting the consolidated statements only
confirming that such statements have been audited by them as part
of the audit of LIVE.
Together with the above, LHV, on behalf of each
Borrower, shall also cause to be delivered to Foothill LIVE's
Form 10-Q Quarterly Reports, Form 10-K Annual Reports, and Form 8-K
Current Reports, and any other filings made by LIVE with the
Securities and Exchange Commission, if any, promptly after the same
are filed, and any other report reasonably requested by Foothill
relating to the Collateral and the financial condition of any
Borrower.
Concurrently with the monthly statements
required to be delivered in clause 6.4(a) above, LHV shall deliver
to Foothill a certificate signed by its chief financial officer to
the effect that: (a) all financial reports and financial
statements delivered or caused to be delivered to Foothill
hereunder have been prepared in accordance with GAAP, consistently
applied and such reports, together with any computer prepared
information of any kind or nature delivered to Foothill hereunder,
fully and fairly present the financial condition of Borrowers;
(b) Borrowers are in timely compliance with all representations,
warranties, and covenants hereunder; and (c) on the date of
delivery of such certificate to Foothill there does not exist any
condition or event which constitutes an Event of Default.
Each Borrower hereby irrevocably authorizes and
directs all auditors, accountants, or other third parties to
deliver to Foothill after the occurrence and during the
continuation of an Event of Default, at such Borrower's expense,
copies of such Borrower's financial statements, papers related
thereto, and other accounting records of any nature in their
possession, and to disclose to Foothill any information they may
have regarding such Borrower's business affairs and financial
condition.
6.5 Tax Returns. LHV, on behalf of each Borrower,
agrees to deliver to Foothill copies of LIVE's consolidated future
federal income tax returns, and any amendments thereto, within
thirty (30) days of the filing thereof with the Internal Revenue
Service.
6.6 Corporate Name Change. LFM shall timely file all
appropriate documents with the United States Copyright Office
reflecting its corporate name change from International Video
Productions Inc. to LIVE Film and Mediaworks Inc. and shall provide
Foothill with copies of all such filings.
6.7 Designation of Inventory. LHV, on behalf of each
Borrower, shall now and from time to time hereafter, but not less
frequently than monthly, execute and deliver to Foothill a
designation of Inventory specifying the lower of cost or market
value of Borrowers' raw materials, work in process, and finished
goods, and further specifying book reserves (including reserves for
returns and obsolescence) and such other information as Foothill
may reasonably request.
6.8 Returns. Returns and allowances, if any, as between
each Borrower and its Account Debtors shall be on the same basis
and in accordance with the usual customary practices of such
Borrower, as they exist at the time of the execution and delivery
of this Agreement. If, at a time when no Event of Default has
occurred and is continuing, any Account Debtor returns any
Inventory to a Borrower, such Borrower promptly shall determine the
reason for such return and, if such Borrower accepts such return,
issue a credit memorandum (with a copy to be sent to Foothill, if
requested by Foothill) in the appropriate amount to such Account
Debtor.
6.9 Title to Equipment. Upon Foothill's request, each
Borrower immediately shall deliver to Foothill, properly endorsed,
any and all evidences of ownership of, certificates of title, or
applications for title to any items of Equipment.
6.10 Maintenance of Equipment. Each Borrower shall keep
and maintain the Equipment in good operating condition and repair
(ordinary wear and tear excepted), and make all necessary
replacements thereto so that the value and operating efficiency
thereof shall at all times be maintained and preserved. No
Borrower shall permit any item of Equipment to become a fixture to
real estate or an accession to other property, and the Equipment is
now and shall at all times remain personal property.
6.11 Taxes. All assessments and taxes, whether real,
personal, or otherwise, due or payable by, or imposed, levied, or
assessed against any Borrower or any of its property have been
paid, and shall hereafter be paid in full, before delinquency or
before the expiration of any extension period. Each Borrower shall
make due and timely payment or deposit of all federal, state, and
local taxes, assessments, or contributions required of it by law,
and will execute and deliver to Foothill, on demand, appropriate
certificates attesting to the payment thereof or deposit with
respect thereto. Each Borrower will make timely payment or deposit
of all tax payments and withholding taxes required of it by
applicable laws, including those laws concerning F.I.C.A.,
F.U.T.A., state disability, and local, state, and federal income
taxes, and will, upon request, furnish Foothill with proof
satisfactory to Foothill indicating that such Borrower has made
such payments or deposits. Notwithstanding the foregoing, no such
tax needs be paid if it is being contested by a Borrower in good
faith by appropriate proceedings promptly initiated and diligently
conducted, if Foothill has been notified in advance of such
contest, and if such Borrower establishes a reserve or other
appropriate provision required by GAAP.
6.12 Insurance.
(a) The Borrowers, at their expense, shall keep or
cause to be kept the Collateral insured against loss or damage by
fire, theft, explosion, sprinklers, and all other hazards and
risks, and in such amounts, as are ordinarily insured against by
other owners in similar businesses. The Borrowers also shall
maintain business interruption, public liability, product
liability, and property damage insurance relating to their
ownership and use of the Collateral, as well as insurance against
larceny, embezzlement, and criminal misappropriation.
(b) The Borrowers will also maintain or cause to be
maintained with respect to all Film Assets acquired or exploited by
any Borrower, a so-called "Errors and Omissions" ("E&O") policy, of
the sort customarily maintained by distributors of motion pictures,
and shall keep such policy current and effective at all times
during which this Agreement remains in force and effect (including
any extended period provided for in any amendment to and/or
restatement of this Agreement, or any extension of the Maturity
Date hereunder). Such policy shall provide for coverage in an
amount of not less than Five Million Dollars ($5,000,000) per
occurrence and Five Million Dollars ($5,000,000) in the aggregate
per year, without exclusions, and shall have a deductible of not
more than Fifty Thousand Dollars ($50,000) per occurrence. With
respect to each Film which has not yet been completed as to which
any Borrower has acquired a Film Asset, such Borrower will use its
best efforts to cause the producer of such Film, or the other party
from whom the Borrower acquired such Film Asset in such Film, to
name Foothill as additional insured under the E&O policy maintained
by such producer or such other party and to name such Borrower and
Foothill as loss payees on any policies maintained by such producer
and/or other party insuring against the loss of or damage to any
preprint materials, negatives and/or sound tracks of the final
theatrical version of the Film, and on any policies of so called
"cast" and other production-related insurance maintained by such
producer and/or other party. Subject to the terms of the
immediately preceding sentence, all such insurance (except for
workers' compensation insurance), hereafter obtained shall (a)
provide for the benefit of Foothill that 30 days' prior written
notice of suspension, cancellation, termination, modification, non-
renewal or lapse or material change of coverage shall be given to
Foothill; (b) name Foothill as a loss payee; (c) name Foothill as
an additional insured party; and (d) to the extent obtainable by
the Borrowers using their best efforts, contain an endorsement
which negates the "other insurance" clause in the policy and a
statement that the insurance being provided is primary and any
insurance carried by Foothill is neither primary nor contributory;
all without any liability on the part of Foothill to pay for any
premiums or calls with respect to any such insurance policies.
(c) All such policies of insurance shall be in such
form, with such companies, and in such amounts as may be reasonably
satisfactory to Foothill. All such policies of insurance (except
those of public liability and property damage) shall contain a
438BFU lender's loss payable endorsement, or an equivalent
endorsement in a form satisfactory to Foothill, showing Foothill as
a loss payee thereof, and shall contain a waiver of warranties, and
shall specify that the insurer must give at least ten (10) days
prior written notice to Foothill before canceling its policy for
any reason. Each Borrower shall deliver to Foothill certified
copies of such policies of insurance and evidence of the payment of
all premiums therefor. All proceeds payable under any such policy
shall be payable to Foothill to be applied on account of the
Obligations.
6.13 Financial Covenants. LHV shall maintain:
(a) Current Ratio. A ratio of Consolidated Current
Assets divided by Consolidated Current Liabilities of at least one
and one-half to one (1.5 : 1.0), measured on a fiscal quarter-end
basis;
(b) Total Liabilities to Tangible Net Worth Ratio.
A ratio of total liabilities divided by Tangible Net Worth of not
more than one and one-quarter to one (1.25 : 1.0), measured on a
fiscal quarter-end basis;
(c) Tangible Net Worth. Tangible Net Worth of at
least Fifty Million Dollars ($50,000,000), measured on a fiscal
quarter-end basis; and
(d) Working Capital. Working Capital of not less
than Forty One Million Dollars ($41,000,000), measured on a fiscal
quarter-end basis.
6.14 No Setoffs or Counterclaims. All payments hereunder
and under the other Loan Documents made by or on behalf of a
Borrower shall be made without setoff or counterclaim and free and
clear of, and without deduction or withholding for or on account
of, any federal, state, or local taxes.
6.15 Location of Inventory and Equipment. Each Borrower
shall keep the Inventory and Equipment only at the locations
identified on Schedule E-2; provided, however, that Borrowers may
amend Schedule E-2 so long as such amendment occurs by written
notice to Foothill not less than thirty (30) days prior to the date
on which the Inventory or Equipment is moved to such new location,
so long as such new location is within the continental United
States, and so long as, at the time of such written notification,
Borrowers provide Foothill with access agreements (in form and
substance acceptable to Foothill) and any financing statements or
fixture filings necessary to perfect and continue perfected
Foothill's security interests in such assets and Borrowers also use
their best efforts to provide to Foothill a landlord's waiver in
form and substance satisfactory to Foothill.
6.16 Compliance with Laws. Borrowers shall comply with
the requirements of all applicable laws, rules, regulations, and
orders of any governmental authority, including the Fair Labor
Standards Act and the Americans With Disabilities Act, other than
laws, rules, regulations, and orders the non-compliance with which,
individually or in the aggregate, would not have and would not
reasonably be expected to have a material adverse effect on the
business, operations, condition (financial or otherwise), finances,
or prospects of Borrowers or on the value of the Collateral to
Foothill.
6.17 Employee Benefits.
(a) LHV, on behalf of the Borrowers, shall deliver
to Foothill a written statement by the chief financial officer of
the Borrowers specifying the nature of any of the following events
and the actions which the Borrowers propose to take with respect
thereto promptly, and in any event within ten (10) days of becoming
aware of any of them, and when known, any action taken or
threatened by the Internal Revenue Service, PBGC, Department of
Labor, or other party with respect thereto: (i) an ERISA Event
with respect to any Plan; (ii) the incurrence of an obligation to
pay additional premium to the PBGC under Section 4006(a)(3)(E) of
ERISA with respect to any Plan; and (iii) any lien on the assets of
such Borrower arising in connection with any Plan.
(b) LHV, on behalf of the Borrowers, shall also
promptly furnish to Foothill copies prepared or received by such
Borrower or an ERISA Affiliate of: (i) at the request of Foothill,
each annual report (Internal Revenue Service Form 5500 series) and
all accompanying schedules, actuarial reports, financial
information concerning the financial status of each Plan, and
schedules showing the amounts contributed to each Plan by or on
behalf of the Borrowers or their ERISA Affiliates for the most
recent three (3) plan years; (ii) all notices of intent to
terminate or to have a trustee appointed to administer any Plan;
(iii) all written demands by the PBGC under Subtitle D of Title IV
of ERISA; (iv) all notices required to be sent to employees or to
the PBGC under Section 302 of ERISA or Section 412 of the IRC;
(v) all written notices received with respect to a Multiemployer
Plan concerning (x) the imposition or amount of withdrawal
liability pursuant to Section 4202 of ERISA, (y) a termination
described in Section 4041A of ERISA, or (z) a reorganization or
insolvency described in Subtitle E of Title IV of ERISA; (vi) the
adoption of any new Plan that is subject to Title IV of ERISA or
Section 412 of the IRC by such Borrower or any ERISA Affiliate;
(vii) the adoption of any amendment to any Plan that is subject to
Title IV of ERISA or Section 412 of the IRC, if such amendment
results in a material increase in benefits or Unfunded Benefit
Liability; or (viii) the commencement of contributions by such
Borrower or any ERISA Affiliate to any Plan that is subject to
Title IV of ERISA or Section 412 of the IRC.
6.18 Nature and Conduct of Business. To the extent
within each Borrower's control, cause Borrowers at all times to
remain engaged solely in activities directly related to the
exploitation of Film Rights.
6.19 Completion Bonds. In connection with any Film with
respect to which any Borrower acquires a Film Asset pursuant to a
Film Asset Acquisition Agreement entered into after the date hereof
which requires or commits such Borrower to make or pay any
advances, investments, royalties, participations or other sums
prior to delivery of such Film to such Borrower, cause the producer
of such Film and a completion guarantor reasonably approved by
Foothill to include the Borrower and Foothill as beneficiaries for
purposes of payment, under the completion bond guaranteeing the
completion and delivery of such Film, if any, at least to the
extent of the aggregate amount of all advances, investments,
royalties, participations and other sums paid and/or to be paid by
such Borrower prior to the completion and delivery of such Film;
provided, however, that the Borrowers may acquire Film Assets and
pay sums prior to delivery without completion bonds for any single
Film Asset up to Two Million Dollars ($2,000,000) and in the
aggregate of not more than Five Million Dollars ($5,000,000)
outstanding at any one time for all such Film Assets.
6.20 Film Assets. Enter into such Film Asset Acquisition
Agreements and obtain such rights as are necessary to perform all
Exploitation Agreements and perfect the Borrowers' entitlement to
Eligible Accounts, take any and all actions necessary to establish
and protect its rights in all Film Assets, and take or cause to be
taken any and all actions (including, without limitation,
registration in the United States Copyright Office and affixing the
appropriate copyright notices to each Film as required in each
applicable jurisdiction) necessary to obtain and maintain copyright
protection of such Films and Film Assets in conformity with the
laws of the United States.
6.21 [Intentionally Omitted].
6.22 Agreements Entered Into. Only enter into Film Asset
Agreements and Exploitation Agreements which are customary in the
trade.
6.23 Observance of Agreements. Duly observe and perform
all material terms and conditions of all Film Asset Acquisition
Agreements, Exploitation Agreements and all other material
agreements to which any Borrower is a party, and diligently protect
and enforce the rights of the Borrowers under all such agreements
in a manner consistent with prudent business judgment.
6.24 Film Properties and Rights. Act as pledgeholder for
Foothill with respect to, with the same effect as if such parties
were pledgees in possession of, all Masters owned, held or
controlled by any Borrower relating to any Films and all other
elements of the Collateral which are now or hereafter in the actual
or constructive possession of the Borrowers.
6.25 Video Duplication and Distribution Agreements.
Abide in all material respects by the terms of (a) that certain
agreement, dated as of August 12, 1988, as amended, with Rank with
respect to engagement in the video duplication or any similar
manufacturing business, (b) that certain agreement, dated as of
February 10, 1988, as amended, with Technicolor with respect to
engagement in the video duplication or any similar manufacturing
business, (c) that certain Agreement, dated as of May 11, 1992, as
amended, with WEA with respect to the distribution of
videocassettes released by Borrowers, and (d) that certain
Agreement, dated as of September 1, 1991, as amended, with MCA with
respect to the distribution of videocassettes released by
Borrowers; provided, however, that if any of such agreements
expires or terminates or is terminated prior to the term of this
Agreement, no Borrower shall enter into any similar or replacement
agreement or arrangement with a permitted successor unless Foothill
receives an assignment of Borrowers' rights thereunder (including
an acknowledgement from the other party thereto), a Laboratory
Pledgeholder Agreement and inventory access rights on the same
terms as provided in this Agreement or otherwise on terms
satisfactory to Foothill.
6.26 Laboratory Pledgeholder Agreements. Use best
efforts to provide to Foothill within ninety (90) days after the
date of this Agreement a Laboratory Pledgeholder Agreement from
each Laboratory where any material Masters owned, held or
controlled by Borrowers are located.
7. NEGATIVE COVENANTS.
Each Borrower covenants and agrees that, so long as any
credit hereunder shall be available and until full and final
payment of the Obligations, such Borrower will not do any of the
following without Foothill's prior written consent:
7.1 Indebtedness. Create, incur, assume, permit,
guarantee, or otherwise become or remain, directly or indirectly,
liable with respect to any Indebtedness, except:
(a) Indebtedness evidenced by this Agreement;
(b) Indebtedness set forth in the latest financial
statements of Borrowers submitted to Foothill on or prior to the
Closing Date;
(c) Permitted Indebtedness;
(d) Indebtedness secured by Permitted Liens; and
(e) refinancings, renewals, or extensions of
Indebtedness permitted under clauses (b), (c) and (d) of this
Section 7.1 (and continuance or renewal of any Permitted Liens
associated therewith) so long as: (i) the terms and conditions of
such refinancings, renewals, or extensions do not materially impair
the prospects of repayment of the Obligations by any Borrower, (ii)
the net cash proceeds of such refinancings, renewals, or extensions
do not result in an increase in the aggregate principal amount of
the Indebtedness so refinanced, renewed, or extended, (iii) such
refinancings, renewals, refundings, or extensions do not result in
a shortening of the average weighted maturity of the Indebtedness
so refinanced, renewed, or extended, and (iv) to the extent that
Indebtedness that is refinanced was subordinated in right of
payment to the Obligations, then the subordination terms and
conditions of the refinancing Indebtedness must be at least as
favorable to Foothill as those applicable to the refinanced
Indebtedness. Anything contained in this Agreement to the contrary
notwithstanding, Borrowers shall not, without the prior written
consent of Foothill: (i) borrow any additional funds or otherwise
obtain any additional advances from WEA, or (ii) borrow any
additional funds or otherwise obtain any additional advances from
MCA.
7.2 Liens. Create, incur, assume, or permit to exist,
directly or indirectly, any lien on or with respect to any of its
property or assets, of any kind, whether now owned or hereafter
acquired, or any income or profits therefrom, except for Permitted
Liens (including liens that are replacements of Permitted Liens to
the extent that the original Indebtedness is refinanced under
Section 7.1(e) and so long as the replacement liens secure only
those assets or property that secured the original Indebtedness).
7.3 Restrictions on Fundamental Changes. Enter into any
acquisition, merger, consolidation, reorganization, or
recapitalization, or reclassify its capital stock, or liquidate,
wind up, or dissolve itself (or suffer any liquidation or
dissolution), or convey, sell, assign, lease, transfer, or
otherwise dispose of, in one transaction or a series of
transactions, all or any substantial part of its business,
property, or assets, whether now owned or hereafter acquired, or
acquire by purchase or otherwise all or substantially all of the
properties, assets, stock, or other evidence of beneficial
ownership of any Person other than another Borrower.
7.4 Extraordinary Transactions and Disposal of Assets.
Except for transactions among Borrowers and as otherwise permitted
by this Section 7.4, enter into any transaction not in the ordinary
and usual course of any Borrower's business, including the sale,
lease, or other disposition of, moving, relocation, or transfer,
whether by sale or otherwise, of any of Borrower's properties or
assets (other than licenses/sales of Inventory and Film Assets to
buyers in the ordinary course of such Borrower's business as
currently conducted). LEI may sell or otherwise dispose of its
eighty one percent (81%) subsidiary, VCL/Carolco Communications
GmbH, a german company. The net proceeds of any such
sale/disposition shall be remitted to Foothill to be applied
against the Obligations.
7.5 Change Name. Change a Borrower's name, FEIN,
business structure, or identity, or add any new fictitious name.
7.6 Guarantee. Guarantee or otherwise become in any way
liable with respect to the obligations of any third Person (other
than a Borrower) except by endorsement or instruments or items of
payment for deposit to the account of a Borrower or which are
transmitted or turned over to Foothill.
7.7 Restructure. Make any change in a Borrower's
financial structure, the principal nature of Borrower's business
operations, or the date of its fiscal year.
7.8 Prepayments. Except in connection with a
refinancing permitted by Section 7.1(d), prepay any Indebtedness
owing to any third Person.
7.9 Change of Control. Cause, permit, or suffer,
directly or indirectly, any Change of Control; provided, however,
that any Borrower may merge or consolidate with any other Borrower.
7.10 Capital Expenditures. Make any capital expenditure,
or any commitment therefor, in excess of Five Hundred Thousand
Dollars ($500,000) for any individual transaction or where the
aggregate amount of such capital expenditures, made or committed
for in any fiscal year, is in excess of One Million Dollars
($1,000,000).
7.11 Consignments. Consign any Inventory or sell any
Inventory on bill and hold, sale on approval, or other conditional
terms of sale in excess of Five Hundred Thousand Dollars ($500,000)
of Inventory at book value at any one time.
7.12 Distributions. Except as permitted by this Section,
make any distribution or declare or pay any dividends (in cash or
in stock) on, or purchase, acquire, redeem, or retire any of any
Borrower's capital stock, of any class, whether now or hereafter
outstanding. So long as no Event of Default has occurred and is
continuing under Section 8.1, Borrowers may make Permitted
Payments.
7.13 Accounting Methods. Modify or change its method of
accounting or enter into, modify, or terminate any agreement
currently existing, or at any time hereafter entered into with any
third party accounting firm or service bureau for the preparation
or storage of a Borrower's accounting records without said
accounting firm or service bureau agreeing to provide Foothill
information regarding the Collateral or such Borrower's financial
condition. Each Borrower waives the right to assert a confidential
relationship, if any, it may have with any accounting firm or
service bureau in connection with any information requested by
Foothill pursuant to or in accordance with this Agreement, and
agrees that Foothill may contact directly any such accounting firm
or service bureau in order to obtain such information.
7.14 Investments. Directly or indirectly make or acquire
any beneficial interest in (including stock, partnership interest,
or other securities of), or make any loan, advance, or capital
contribution to, any Person except for Permitted Investments.
7.15 Transactions with Affiliates. Directly or
indirectly enter into or permit to exist any material transaction
with any Affiliate of any Borrower except for transactions that are
in the ordinary course of such Borrower's business, upon fair and
reasonable terms, that are fully disclosed to Foothill, and that
are no less favorable to such Borrower than would be obtained in
arm's length transaction with a non-Affiliate except for
transactions among Borrowers.
7.16 Suspension. Allow LHV or LFM to suspend or go out
of a substantial portion of its respective business.
7.17 Use of Proceeds. Use the proceeds of the advances
made hereunder for any purpose other than to: (a) acquire Film
Assets, manufacture videocassettes or purchase, invest in, or pay
the costs of a Film Asset; (b) finance its working capital needs in
the ordinary course of business, (c) make Permitted Payments, (d)
make Permitted Investments, (e) pay transactional fees, costs and
expenses incurred in connection with this Agreement; and (f) pay
any monetary obligations to Foothill.
7.18 Change in Location of Chief Executive Office;
Inventory and Equipment with Bailees. Each Borrower covenants and
agrees that it will not, without thirty (30) days prior written
notification to Foothill, relocate its chief executive office to a
new location and so long as, at the time of such written
notification, such Borrower provides any financing statements or
fixture filings necessary to perfect and continue perfected
Foothill's security interests and also provides to Foothill a
landlord's waiver in form and substance satisfactory to Foothill.
Not more than Five Hundred Thousand Dollars ($500,000) of book
value of Inventory in the aggregate shall at any time now or
hereafter be stored with bailees, warehousemen, or similar parties
at a location not set forth on Schedule E-2 without Foothill's
prior written consent.
7.19 Acquisitions of Film Assets. Make, pay or commit or
agree to make or pay any investments, loans, advances, guaranteed
minimum royalties, participations or other fixed payments in
connection with the acquisition of a Film Asset or Assets in any
single Film in an aggregate amount which exceeds Ten Million
Dollars ($10,000,000), or make, pay or commit or agree to make or
pay any investments, loans, advances, guaranteed minimum royalties,
participations or other fixed payments aggregating in excess of Ten
Million Dollars ($10,000,000) 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 as set forth on Schedule 7.19.
8. EVENTS OF DEFAULT.
Any one or more of the following events shall constitute
an event of default (each, an "Event of Default") under this
Agreement:
8.1 If Borrowers fails to pay when due and payable or
when declared due and payable, any portion of the Obligations
(whether of principal, interest (including any interest which, but
for the provisions of the Bankruptcy Code, would have accrued on
such amounts), fees and charges due Foothill, reimbursement of
Foothill Expenses, or other amounts constituting Obligations);
8.2 If Borrowers fail or neglect to perform, keep, or
observe any term, provision, condition, covenant, or agreement:
(a) contained in Sections 6.2, 6.3 or 6.4 hereof and the same is
not remedied within ten (10) days thereof, or (b) contained in
Section 6.7 hereof and the same is not remedied with two (2) days
thereof, or (c) contained in any Section of this Agreement, other
than Sections 6.2 - 6.4 or 6.7, or in any of the Loan Documents;
8.3 If there is a material impairment of the value or
priority of Foothill's security interests in the Collateral;
8.4 If any material portion of any Borrower's assets is
attached, seized, subjected to a writ or distress warrant, or is
levied upon, or comes into the possession of any Person;
8.5 If an Insolvency Proceeding is commenced by any
Borrower;
8.6 If an Insolvency Proceeding is commenced against any
Borrower and any of the following events occur: (a) such Borrower
consents to the institution of the Insolvency Proceeding against
it; (b) the petition commencing the Insolvency Proceeding is not
timely controverted; (c) the petition commencing the Insolvency
Proceeding is not dismissed within forty-five (45) calendar days of
the date of the filing thereof; provided, however, that, during the
pendency of such period, Foothill shall be relieved of its obliga-
tion to make additional advances or issue additional L/Cs or L/C
Guarantees hereunder; (d) an interim trustee is appointed to take
possession of all or a substantial portion of the properties or
assets of, or to operate all or any substantial portion of the
business of, such Borrower; or (e) an order for relief shall have
been issued or entered therein;
8.7 If any Borrower is enjoined, restrained, or in any
way prevented by court order from continuing to conduct all or any
material part of its business affairs;
8.8 If a notice of lien, levy, or assessment is filed of
record with respect to any of any Borrower's assets by the United
States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or other governmental
agency, or if any taxes or debts owing at any time hereafter to any
one or more of such entities becomes a lien, whether choate or
otherwise, upon any of any Borrower's assets and the same is not
paid on the payment date thereof, except to the extent such tax is
being contested as permitted under Section 6.11 hereof; provided,
however, that if Foothill determines, in its reasonable discretion,
that there is a material impairment of the prospect of repayment of
all or any portion of the Obligations or a material impairment of
the value or priority of Foothill's security interests in the
Collateral as a result of such lien or notice of lien, levy or
assessment, then an Event of Default shall be deemed to have
occurred regardless of whether such tax is being contested as
permitted under Section 6.11;
8.9 If a judgment or other claim becomes a lien or
encumbrance (other than a Permitted Lien) upon any material portion
of any Borrower's assets;
8.10 If there is a default in any agreement to which any
Borrower is a party with third parties resulting in a right by such
third parties, whether or not exercised, to accelerate the maturity
of any Borrower's indebtedness for borrowed money and the amount of
such indebtedness of all Borrowers subject to acceleration is
greater than One Hundred Thousand Dollars ($100,000) at any one
time;
8.11 If any Borrower makes any payment on account of
Indebtedness that has been contractually subordinated in right of
payment to the payment of the Obligations, except to the extent
such payment is permitted by the terms hereof or the subordination
provisions applicable to such Indebtedness;
8.12 If any material misstatement or misrepresentation
exists now or hereafter in any written warranty, certificate,
representation, statement, or report made to Foothill in connection
with the Loan Documents or the transactions contemplated thereby,
by any Borrower or any officer, employee, agent, or director of any
Borrower, or if any such warranty or representation is withdrawn by
any officer, employee, agent, or director;
8.13 If the obligation of any guarantor or other third
Person under any Loan Document is limited or terminated by
operation of law or by the guarantor or other third Person
thereunder, or any such guarantor or other third Person becomes the
subject of an Insolvency Proceeding; or
8.14 If (a) with respect to any Plan, there shall occur
any of the following which could reasonably be expected to have a
material adverse effect on the financial condition of the Borrowers
taken as a whole: (i) the violation of any of the provisions of
ERISA; (ii) the loss by a Plan intended to be a Qualified Plan of
its qualification under Section 401(a) of the IRC; (iii) the
incurrence of liability under Title IV of ERISA; (iv) a failure to
make full payment when due of all amounts which, under the
provisions of any Qualified Plan subject to Title IV of ERISA or
applicable law, such Borrower or any ERISA Affiliate is required to
make; (v) the filing of a notice of intent to terminate a Plan
under Sections 4041 or 4041A of ERISA; (vi) the complete or partial
withdrawal of a Borrower or an ERISA Affiliate from a Qualified
Plan during a plan year in which it was, or was treated as, a
"substantial employer" as defined in Section 4001(a)(2) of ERISA;
(vii) the receipt of a notice by the plan administrator of a Plan
that the PBGC has instituted proceedings to terminate such Plan or
appoint a trustee to administer such Plan; and (viii) the
assessment against such Borrower or any ERISA Affiliate of a tax
under Section 4980B of the IRC; or (b) there is any Unfunded
Benefit Liability of the Plans of any of the Borrowers or any of
their ERISA Affiliates.
9. FOOTHILL'S RIGHTS AND REMEDIES.
9.1 Certain Events. Foothill may, at its election and
without declaring an Event of Default, cease advancing money or
extending credit to or for the benefit of Borrowers under this
Agreement, under any of the Loan Documents, and under any other
agreement between any Borrower and Foothill upon the occurrence and
during the continuation of any event which, with the passage of
time and the failure to cure or remedy such event, would constitute
an Event of Default.
9.2 Event of Default. Upon the occurrence of an Event
of Default Foothill may, at its election, without notice of its
election and without demand, do any one or more of the following,
all of which are authorized by Borrower:
(a) Declare all Obligations, whether evidenced by
this Agreement, by any of the other Loan Documents, or otherwise,
immediately due and payable;
(b) Cease advancing money or extending credit to or
for the benefit of Borrowers under this Agreement, under any of the
Loan Documents, or under any other agreement between any Borrower
and Foothill;
(c) Terminate this Agreement and any of the other
Loan Documents as to any future liability or obligation of
Foothill, but without affecting Foothill's rights and security
interests in the Collateral and without affecting the Obligations;
(d) Settle or adjust disputes and claims directly
with Account Debtors for amounts and upon terms which Foothill
considers advisable, and in such cases, Foothill will credit
Borrowers' loan account with only the net amounts received by
Foothill in payment of such disputed Accounts after deducting all
Foothill Expenses reasonably incurred or expended in connection
therewith;
(e) Cause each Borrower, WEA and MCA to hold all
returned Inventory in trust for Foothill, segregate all returned
Inventory from all other property of Borrowers, WEA and MCA or in
their possession and conspicuously label said returned Inventory as
the property of Foothill;
(f) Make such payments and do such acts as Foothill
considers necessary or reasonable to protect its security interest
in the Collateral. Each Borrower agrees to assemble the Collateral
if Foothill so requires, and to make the Collateral available to
Foothill as Foothill may designate. Each Borrower authorizes
Foothill to enter the premises where the Collateral is located, to
take and maintain possession of the Collateral, or any part of it,
and to pay, purchase, contest, or compromise any encumbrance,
charge, or lien which in Foothill's determination appears to be
prior or superior to its security interest and to pay all expenses
incurred in connection therewith. With respect to any Borrower's
owned premises, such Borrower hereby grants Foothill a license to
enter into possession of such premises and to occupy the same,
without charge, for up to one hundred twenty (120) days in order to
exercise any of Foothill's rights or remedies provided herein, at
law, in equity, or otherwise;
(g) Set off and apply to the Obligations any and
all (i) balances and deposits of any Borrower held by Foothill, or
(ii) indebtedness at any time owing to or for the credit or the
account of any Borrower held by Foothill;
(h) Hold, as cash collateral, any and all balances
and deposits of a Borrower held by Foothill, and any amounts
received in the Lock Boxes, to secure the full and final repayment
of all of the Obligations;
(i) Ship, reclaim, recover, store, finish,
maintain, repair, prepare for sale, advertise for sale, and sell
(in the manner provided for herein) the Collateral. Foothill is
hereby granted a license or other right to use, without charge,
each Borrower's labels, patents, copyrights, rights of use of any
name, trade secrets, trade names, trademarks, service marks, and
advertising matter, or any property of a similar nature, as it
pertains to the Collateral, in completing production of,
advertising for sale, and selling any Collateral and each
Borrower's rights under all licenses and all franchise agreements
shall inure to Foothill's benefit;
(j) Sell the Collateral at either a public or
private sale, or both, by way of one or more contracts or
transactions, for cash or on terms, in such manner and at such
places (including each Borrower's premises) as Foothill determines
is commercially reasonable. It is not necessary that the
Collateral be present at any such sale;
(k) Foothill shall give notice of the disposition
of the Collateral as follows:
(1) Foothill shall give the Borrower and each
holder of a security interest in the Collateral who has filed with
Foothill a written request for notice, a notice in writing of the
time and place of public sale, or, if the sale is a private sale or
some other disposition other than a public sale is to be made of
the Collateral, then the time on or after which the private sale or
other disposition is to be made;
(2) The notice shall be personally delivered
or mailed, postage prepaid, to the applicable Borrower as provided
in Section 12, at least five (5) days before the date fixed for the
sale, or at least five (5) days before the date on or after which
the private sale or other disposition is to be made; no notice
needs to be given prior to the disposition of any portion of the
Collateral that is perishable or threatens to decline speedily in
value or that is of a type customarily sold on a recognized market.
Notice to Persons other than the applicable Borrower claiming an
interest in the Collateral shall be sent to such addresses as they
have furnished to Foothill;
(3) If the sale is to be a public sale,
Foothill also shall give notice of the time and place by publishing
a notice one time at least five (5) days before the date of the
sale in a newspaper of general circulation in the county in which
the sale is to be held;
(l) Foothill may credit bid and purchase at any
public sale; and
(m) Any deficiency that exists after disposition of
the Collateral as provided above will be paid immediately by
Borrowers. Any excess will be returned, without interest and
subject to the rights of third Persons, by Foothill to Borrowers.
9.3 Remedies Cumulative. Foothill's rights and remedies
under this Agreement, the Loan Documents, and all other agreements
shall be cumulative. Foothill shall have all other rights and
remedies not inconsistent herewith as provided under the Code, by
law, or in equity. No exercise by Foothill of one right or remedy
shall be deemed an election, and no waiver by Foothill of any Event
of Default shall be deemed a continuing waiver. No delay by
Foothill shall constitute a waiver, election, or acquiescence by
it.
10. TAXES AND EXPENSES REGARDING THE COLLATERAL.
If any Borrower fails to pay any monies (whether taxes,
rents, assessments, insurance premiums, or otherwise) due to third
Persons, or fails to make any deposits or furnish any required
proof of payment or deposit, all as required under the terms of
this Agreement, then, to the extent that Foothill determines that
such failure by such Borrower could have a material adverse effect
on Foothill's interests in the Collateral, in its discretion and
upon concurrent notice to Borrowers, Foothill may do any or all of
the following: (a) make payment of the same or any part thereof
(except for taxes being contested in good faith in accordance with
Section 6.11 hereof); (b) set up such reserves in Borrowers' loan
account as Foothill deems necessary to protect Foothill from the
exposure created by such failure; or (c) obtain and maintain
insurance policies of the type described in Section 6.12, and take
any action with respect to such policies as Foothill deems prudent.
Any such amounts paid by Foothill shall constitute Foothill
Expenses. Any such payments made by Foothill shall not constitute
an agreement by Foothill to make similar payments in the future or
a waiver by Foothill of any Event of Default under this Agreement.
Foothill need not inquire as to, or contest the validity of, any
such expense, tax, security interest, encumbrance, or lien and the
receipt of the usual official notice for the payment thereof shall
be conclusive evidence that the same was validly due and owing.
11. WAIVERS; INDEMNIFICATION.
11.1 Demand; Protest; etc. Each Borrower waives demand,
protest, notice of protest, notice of default or dishonor, notice
of payment and nonpayment, notice of any default, nonpayment at
maturity, release, compromise, settlement, extension, or renewal of
accounts, documents, instruments, chattel paper, and guarantees at
any time held by Foothill on which such Borrower may in any way be
liable.
11.2 Foothill's Liability for Collateral. So long as
Foothill complies with its obligations, if any, under Section 9207
of the Code, Foothill shall not in any way or manner be liable or
responsible for: (a) the safekeeping of the Collateral; (b) any
loss or damage thereto occurring or arising in any manner or
fashion from any cause; (c) any diminution in the value thereof; or
(d) any act or default of any carrier, warehouseman, bailee,
forwarding agency, or other Person. All risk of loss, damage, or
destruction of the Collateral shall be borne by Borrowers.
11.3 Indemnification. Each Borrower agrees to defend,
indemnify, save, and hold Foothill and its officers, employees, and
agents harmless against: (a) all obligations, demands, claims, and
liabilities claimed or asserted by any other Person arising out of
or relating to the transactions contemplated by this Agreement or
any other Loan Document, and (b) all losses (including attorneys
fees and disbursements) in any way suffered, incurred, or paid by
Foothill as a result of or in any way arising out of, following, or
consequential to the transactions contemplated by this Agreement or
any other Loan Document; provided, however, that Borrowers shall
not be required to indemnify or hold Foothill harmless where such
obligations, demands, claims, liabilities, or losses are found, by
a final determination of a court of competent jurisdiction, to be
the result of Foothill's gross negligence, wilful misconduct, or
bad faith. This provision shall survive the termination of this
Agreement.
11.4 Suretyship Waivers and Consents.
(a) Each Borrower acknowledges that the obligations
of such Borrower undertaken herein might be construed to consist,
at least in part, of the guaranty of obligations of persons or
entities other than such Borrower (including the other Borrowers)
and, in full recognition of that fact, each Borrower consents and
agrees that Foothill may, at any time and from time to time,
without notice or demand, whether before or after any actual or
purported termination, repudiation or revocation of this Agreement
by any Borrower, and without affecting the enforceability or
continuing effectiveness hereof as to each Borrower, subject to the
provisions of Section 15.6: (i) increase, extend, accelerate, or
otherwise change the time for payment or the terms of the
Obligations or any part thereof; (ii) supplement, restate, modify,
amend, increase, decrease, or waive, or enter into or give any
agreement, approval or consent with respect to, the Obligations or
any part thereof, or any of the Loan Documents or any additional
security or guarantees, or any condition, covenant, default,
remedy, right, representation, or term thereof or thereunder;
(iii) accept new or additional instruments, documents, or
agreements in exchange for or relative to any of the Loan Documents
or the Obligations or any part thereof; (iv) accept partial
payments on the Obligations; (v) receive and hold additional
security or guarantees for the Obligations or any part thereof;
(vi) release, reconvey, terminate, waive, abandon, fail to perfect,
subordinate, exchange, substitute, transfer, or enforce any
security or guarantees, and apply any security and direct the order
or manner of sale thereof as Foothill in its sole and absolute
discretion may determine; (vii) release any person or entity from
any personal liability with respect to the Obligations or any part
thereof; (viii) settle, release on terms satisfactory to Foothill
or by operation of applicable laws or otherwise liquidate or
enforce any Obligations and any security therefor or guaranty
thereof in any manner, consent to the transfer of any security and
bid and purchase at any sale; or (ix) consent to the merger,
change, or any other restructuring or termination of the corporate
or partnership existence of any Debtor or any other Person, and
correspondingly restructure the Obligations, and any such merger,
change, restructuring, or termination shall not affect the
liability of any Borrower or the continuing effectiveness hereof,
or the enforceability hereof with respect to all or any part of the
Obligations.
(b) Upon the occurrence and during the continuance
of any Event of Default, Foothill may enforce this Agreement
independently as to each Borrower and independently of any other
remedy or security Foothill at any time may have or hold in
connection with the Obligations, and it shall not be necessary for
Foothill to marshal assets in favor of any Borrower or any other
Person or to proceed upon or against or exhaust any security or
remedy before proceeding to enforce this Agreement. Each Borrower
expressly waives any right to require Foothill to marshal assets in
favor of any Borrower or any other Person or to proceed against any
other Borrower or any collateral provided by any Person, and agrees
that Foothill may proceed against Borrowers or any collateral in
such order as Foothill shall determine in its sole and absolute
discretion.
(c) Foothill may file a separate action or actions
against any Borrower, whether action is brought or prosecuted with
respect to any security or against any other Person, or whether any
other Person is joined in any such action or actions. Each
Borrower agrees that Foothill and each Borrower and any affiliate
of any Borrower may deal with each other in connection with the
Obligations or otherwise, or alter any contracts or agreements now
or hereafter existing between any of them, in any manner
whatsoever, all without in any way altering or affecting the
continuing efficacy of this Agreement. Each Borrower expressly
waives the benefit of any statute of limitations affecting its
liability hereunder or the enforcement of the Obligations or any
rights of Foothill created or granted herein.
(d) Foothill's rights hereunder shall be reinstated
and revived, and the enforceability of this Agreement shall
continue, with respect to any amount at any time paid on account of
the Obligations which thereafter shall be required to be restored
or returned by Foothill, all as though such amount had not been
paid. The rights of Foothill created or granted herein and the
enforceability of this Agreement at all times shall remain
effective to cover the full amount of all the Obligations even
though the Obligations, including any part thereof or any other
security or guaranty therefor, may be or hereafter may become
invalid or otherwise unenforceable as against any Borrower and
whether or not any Borrower shall have any personal liability with
respect thereto.
(e) Each Borrower expressly waives any and all
defenses now or hereafter arising or asserted by reason of (a) any
disability or other defense of any other Borrower with respect to
the Obligations; (b) the unenforceability or invalidity of any
security or guaranty for the Obligations or the lack of perfection
or continuing perfection or failure of priority of any security for
the Obligations of any other Borrower; (c) the cessation for any
cause whatsoever of the liability of any other Borrower (other than
by reason of the full payment and performance of all Obligations);
(d) any failure of Foothill to marshal assets in favor of any
Borrower or any other Person; (e) any failure of Foothill to give
notice of sale or other disposition of collateral to such Borrower
or any other Person or any defect in any notice that may be given
in connection with any sale or disposition of collateral securing
the Obligations of any other Borrower; (f) any failure of Foothill
to comply with applicable law in connection with the sale or other
disposition of any collateral or other security for any Obligation
of any other Borrower, including any failure of Foothill to conduct
a commercially reasonable sale or other disposition of any
collateral or other security for any Obligation of any other
Borrower; (g) any act or omission of Foothill or others that
directly or indirectly results in or aids the discharge or release
of any other Borrower or the Obligations of any other Borrower or
any security or guaranty therefor by operation of law or otherwise;
(h) any law which provides that the obligation of a surety or
guarantor must neither be larger in amount nor in other respects
more burdensome than that of the principal or which reduces a
surety's or guarantor's obligation in proportion to the principal
obligation; (i) any failure of Foothill to file or enforce a claim
in any bankruptcy or other proceeding with respect to any Person;
(j) the avoidance of any lien or security interest in assets of any
other Borrower, in favor of Foothill for any reason; or (a) any
action taken by Foothill that is authorized by this section or any
other provision of any Loan Document. Until such time, if any, as
all of the Obligations have been paid and performed in full and no
portion of any commitment of Foothill to Borrowers under any Loan
Document remains in effect, no Borrower shall have any right of
subrogation, contribution, reimbursement, or indemnity, and each
Borrower expressly waives any right to enforce any remedy that
Foothill now has or hereafter may have against any other Person and
waives the benefit of, or any right to participate in, any
collateral now or hereafter held by Foothill. Each Borrower
expressly waives all setoffs and counterclaims and all
presentments, demands for payment or performance, notices of
nonpayment or nonperformance, protests, notices of protest, notices
of dishonor and all other notices or demands of any kind or nature
whatsoever with respect to the Obligations, and all notices of
acceptance of this Agreement or of the existence, creation or
incurring of new or additional Obligations.
(f) In the event that all or any part of the
Obligations at any time are secured by any one or more deeds of
trust or mortgages or other instruments creating or granting liens
on any interests in real property, each Borrower authorizes
Foothill, upon the occurrence of and during the continuance of any
Event of Default, at its or their sole option, without notice or
demand and without affecting the obligations of any Borrower, the
enforceability of this Agreement, or the validity or enforceability
of any liens of Foothill on any collateral, to foreclose any or all
of such deeds of trust or mortgages or other instruments by
judicial or nonjudicial sale to the extent permitted by applicable
law.
(g) To the fullest extent permitted by applicable
law, each Borrower expressly waives and agrees not to assert, any
and all defenses in its favor based upon an election of remedies by
Foothill which destroys, diminishes, or affects such Borrower's
subrogation rights against any other Borrower, or against any other
party liable to Foothill, and/or any rights to proceed against each
other Borrower, or any other party liable to Foothill, for
reimbursement, contribution, indemnity, or otherwise including,
without limitation, any election(s) by Foothill to conduct a
nonjudicial foreclosure sale under any mortgage(s) or deed(s) of
trust upon real property, and further including, without
limitation, any and all defenses, rights, or estoppels which might
otherwise arise under or in connection with California Code of
Civil Procedure Sections 580d, 580b, 580a, or 726 (or comparable
provisions of the laws of any other jurisdictions) as a result of
any such election(s) or otherwise. Each Borrower acknowledges and
agrees that it knowingly is waiving in advance and agreeing in
advance not to assert, as a result of the foregoing sentence, a
complete or partial defense to its obligations hereunder which such
Borrower may have had in the future arising from California Code of
Civil Procedure Sections 580d, 580b, 580a, or 726 (or comparable
provisions of the laws of any other jurisdictions) based upon
Foothill's subsequent election to conduct a private, nonjudicial
foreclosure sale, which election may destroy, diminish, or affect
such Borrower's rights of subrogation against any other Borrower or
any other party liable to Foothill and such Borrower's rights to
pursue any other Borrower or such other party for reimbursement,
contribution, indemnity, or otherwise. Each Borrower expressly
waives, and agrees not to assert, all other suretyship defenses it
otherwise might or would have under California law or other
applicable law.
(h) Borrowers and each of them warrant and agree
that each of the waivers and consents set forth herein are made
after consultation with legal counsel and with full knowledge of
their significance and consequences, with the understanding that
events giving rise to any defense or right waived may diminish,
destroy, or otherwise adversely affect rights which Borrowers
otherwise may have against each other, Foothill, or others, or
against Collateral, and that, under the circumstances, the waivers
and consents herein given are reasonable and not contrary to public
policy or law. If any of the waivers or consents herein are
determined to be contrary to any applicable law or public policy,
such waivers and consents shall be effective to the maximum extent
permitted by law.
11.5 Joint and Several Liability of Borrowers. Each
Borrower has determined that it is in its best interests and in
pursuance of its legitimate business purposes to induce Foothill to
extend credit to Borrowers pursuant to this Agreement. Each
Borrower acknowledges and represents that its business is
integrally related to the business of the other Borrowers, that the
availability of the advances provided for herein benefits each
Borrower individually, and that advances made hereunder will be for
and inure to the benefit of all of the Borrowers individually and
as a group. Each Borrower has determined that it has and, after
giving effect to the transactions contemplated by this Agreement,
will have, access to adequate capital for the conduct of its
business and the ability to pay its debts from time to time
incurred in connection therewith as such debts mature.
Accordingly, the Borrowers are and will be jointly and severally
liable for each and every representation, covenant and obligation
to be performed by the Borrowers under this Agreement and the
Collateral Documents, and the invalidity, unenforceability or
illegality of this Agreement or any Collateral Document as to one
of the Borrowers, or the release by Foothill of a Borrower
hereunder or thereunder, will not affect the Obligations of the
other Borrowers under this Agreement or the Collateral Documents,
all of which will otherwise remain valid and legally binding
obligations of such other Borrowers. Each of the Borrowers agrees,
on behalf of itself, that it will not seek to exercise any rights
of contribution or exoneration from payment which it may have as a
matter of law or otherwise as against the other Borrowers hereunder
so long as any of the Obligations are outstanding, and if by law
any right of contribution or exoneration from payment may not be
postponed, then such right shall be subordinate to the rights of
Foothill against the Borrowers under this Agreement and the
Collateral Documents. None of the Borrowers shall be subrogated in
whole or in part to the rights of Foothill, and if by law one is so
subrogated, such rights shall be subordinate and junior to the
rights of Foothill under this Agreement, the Collateral Documents
or any other agreement or document referred to herein or therein,
until payment and discharge in full of all Obligations.
12. NOTICES.
Unless otherwise provided in this Agreement, all notices
or demands by any party relating to this Agreement or any other
Loan Document shall be in writing and (except for financial
statements and other informational documents which may be sent by
first-class mail, postage prepaid) shall be personally delivered or
sent by overnight or same day messenger or air courier service,
registered or certified mail, postage prepaid, return receipt
requested, or by prepaid telex, TWX, telefacsimile, or telegram
(with messenger delivery specified) to Borrowers or to Foothill, as
the case may be, at its address set forth below:
If to Borrowers: c/o LIVE Home Video Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Attention: President
Telefacsimile No. (818) 908-9539
with courtesy
copies to: SIDLEY & AUSTIN
555 West Fifth Street
40th Floor
Los Angeles, California 90013
Attn: Gary J. Cohen, Esq.
Telefacsimile No. (213) 896-6600
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Business Finance Division Manager
Telefacsimile No. (310) 479-2690
The parties hereto may change the address at which they
are to receive notices hereunder, by notice in writing in the
foregoing manner given to the other. All notices or demands sent
in accordance with this Section 12, other than notices by Foothill
in connection with Sections 9504 or 9505 of the Code, shall be
deemed received on the date of actual receipt. Each Borrower
acknowledges and agrees that notices sent by Foothill in connection
with Sections 9504 or 9505 of the Code shall be deemed sent when
deposited in the mail or transmitted by telefacsimile or other
similar method set forth above.
13. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER.
THE VALIDITY OF THIS AGREEMENT, ITS CONSTRUCTION,
INTERPRETATION, AND ENFORCEMENT, AND THE RIGHTS OF THE PARTIES
HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER OR RELATED
HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO ITS CONFLICT OF LAWS PRINCIPLES. THE PARTIES AGREE THAT
ALL ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS
AGREEMENT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF
CALIFORNIA OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT
IN WHICH FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND
WHICH HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN
CONTROVERSY. EACH OF BORROWERS AND FOOTHILL WAIVES, TO THE EXTENT
PERMITTED UNDER APPLICABLE LAW, ANY RIGHT EACH MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
13. BORROWERS AND FOOTHILL HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF ANY OF THE LOAN DOCUMENTS OR ANY OF THE TRANSACTIONS
CONTEMPLATED THEREIN, INCLUDING CONTRACT CLAIMS, TORT CLAIMS,
BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR STATUTORY
CLAIMS. BORROWERS AND FOOTHILL REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY
TRIAL RIGHTS FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE
EVENT OF LITIGATION, A COPY OF THIS AGREEMENT MAY BE FILED AS A
WRITTEN CONSENT TO A TRIAL BY THE COURT.
14. DESTRUCTION OF BORROWERS' DOCUMENTS.
All documents, schedules, invoices, agings, or other
papers delivered to Foothill may be destroyed or otherwise disposed
of by Foothill four (4) months after they are delivered to or
received by Foothill, unless Borrowers request, in writing, the
return of said documents, schedules, or other papers and makes
arrangements, at Borrowers' expense, for their return.
15. GENERAL PROVISIONS.
15.1 Effectiveness. This Agreement shall be binding and
deemed effective when executed by Borrowers and Foothill.
15.2 Successors and Assigns. This Agreement shall bind
and inure to the benefit of the respective successors and assigns
of each of the parties; provided, however, that no Borrower may
assign this Agreement or any rights or duties hereunder without
Foothill's prior written consent and any prohibited assignment
shall be absolutely void. No consent to an assignment by Foothill
shall release any Borrower from its Obligations. Foothill may
assign this Agreement and its rights and duties hereunder and no
consent or approval by any Borrower is required in connection with
any such assignment. Following an assignment by Foothill of its
interest under the Loan Documents (other than in connection with a
transfer of all or a material portion of Foothill's loan portfolio)
Borrowers shall be entitled to prepay the Obligations in full and
terminate this Agreement, in accordance with Section 3.6 hereof,
without being required to pay the Early Termination Premium.
Foothill reserves the right to sell, assign, transfer, negotiate,
or grant participations in all or any part of, or any interest in
Foothill's rights and benefits hereunder. In connection with any
such assignment or participation, Foothill may disclose all
documents and information which Foothill now or hereafter may have
relating to any Borrower or any Borrower's business. To the extent
that Foothill assigns its rights and obligations hereunder to a
third Person, Foothill shall thereafter be released from such
assigned obligations to Borrowers and such assignment shall effect
a novation between Borrowers and such third Person.
15.3 Section Headings. Headings and numbers have been
set forth herein for convenience only. Unless the contrary is
compelled by the context, everything contained in each section
applies equally to this entire Agreement.
15.4 Interpretation. Neither this Agreement nor any
uncertainty or ambiguity herein shall be construed or resolved
against Foothill or Borrowers, whether under any rule of
construction or otherwise. On the contrary, this Agreement has
been reviewed by all parties and shall be construed and interpreted
according to the ordinary meaning of the words used so as to fairly
accomplish the purposes and intentions of all parties hereto.
15.5 Severability of Provisions. Each provision of this
Agreement shall be severable from every other provision of this
Agreement for the purpose of determining the legal enforceability
of any specific provision.
15.6 Amendments in Writing. This Agreement can only be
amended by a writing signed by both Foothill and Borrowers.
15.7 Counterparts; Telefacsimile Execution. This
Agreement may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original, and all
of which, when taken together, shall constitute but one and the
same Agreement. Delivery of an executed counterpart of this
Agreement by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Agreement. Any
party delivering an executed counterpart of this Agreement by
telefacsimile also shall deliver a manually executed counterpart of
this Agreement but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Agreement.
15.8 Revival and Reinstatement of Obligations. If the
incurrence or payment of the Obligations by Borrowers or any
guarantor of the Obligations or the transfer by either or both of
such parties to Foothill of any property of either or both of such
parties should for any reason subsequently be declared to be void
or voidable under any state or federal law relating to creditors'
rights, including provisions of the Bankruptcy Code relating to
fraudulent conveyances, preferences, and other voidable or
recoverable payments of money or transfers of property
(collectively, a "Voidable Transfer"), and if Foothill is required
to repay or restore, in whole or in part, any such Voidable
Transfer, or elects to do so upon the reasonable advice of its
counsel, then, as to any such Voidable Transfer, or the amount
thereof that Foothill is required or elects to repay or restore,
and as to all reasonable costs, expenses, and attorneys fees of
Foothill related thereto, the liability of Borrower or such
guarantor automatically shall be revived, reinstated, and restored
and shall exist as though such Voidable Transfer had never been
made.
15.9 Amendment and Restatement. Borrowers acknowledge
and agree that the security interests and assignments granted by
them pursuant to the Existing Credit Documents and maintained
pursuant to this Agreement continue without interruption in full
force and effect in favor of Foothill. Upon the effectiveness of
this Agreement, the terms and conditions of the Existing Credit
Documents are hereby amended and restated in their entirety by this
Agreement and the Collateral Documents. Borrowers agree and
acknowledge that concurrently herewith they have released Old
Lender from all obligations and liabilities under the Existing
Credit Documents arising out of events occurring prior to the
Closing Date, and that such release also shall be for the express
benefit of Foothill as assignee of such Existing Credit Documents.
15.10 Integration. This Agreement, together with the
other Loan Documents, reflect the entire understanding of the
parties with respect to the transactions contemplated hereby and
shall not be contradicted or qualified by any other agreement, oral
or written, before the date hereof.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in Los Angeles, California.
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By_________________________________
Title:______________________________
"Borrowers"
LIVE HOME VIDEO INC.,
a Delaware corporation
By_________________________________
Title:______________________________
LIVE FILM AND MEDIAWORKS INC.,
a California corporation
By_________________________________
Title:______________________________
LIVE ENTERTAINMENT
INTERNATIONAL INC.,
a Delaware corporation
By_________________________________
Title:______________________________
LIVE AMERICA INC.,
a Delaware corporation
By_________________________________
Title:______________________________
VESTRON INC.,
a Delaware corporation
By_________________________________
Title:______________________________
CONTINUING GUARANTY
This Continuing Guaranty ("Guaranty"), dated as of
November 16, 1994, is executed and delivered by LIVE
ENTERTAINMENT INC., a Delaware corporation ("Guarantor") in favor
of FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill") and in light of the following:
FACT ONE: LIVE HOME VIDEO INC., a Delaware
corporation, LIVE FILM AND MEDIAWORKS INC. (formerly known as
INTERNATIONAL VIDEO PRODUCTIONS INC.), a California corporation,
LIVE ENTERTAINMENT INTERNATIONAL INC., a Delaware corporation,
LIVE AMERICA INC., a Delaware corporation, and VESTRON INC., a
Delaware corporation (collectively, the "Borrowers") and Foothill
are, contemporaneously herewith, entering into the Loan
Documents; and
FACT TWO: In order to induce Foothill to extend
financial accommodations to Borrowers pursuant to the Loan
Documents, and in consideration thereof, and in consideration of
any loans or other financial accommodations heretofore or
hereafter extended by Foothill to Borrowers, whether pursuant to
the Loan Documents or otherwise, Guarantor has agreed to
guarantee the Guaranteed Obligations.
NOW, THEREFORE, in consideration of the foregoing,
Guarantor hereby agrees, in favor of Foothill, as follows:
1. Definitions and Construction.
(a) Definitions. The following terms, as used in
this Guaranty, shall have the following meanings:
"Bankruptcy Code" means The Bankruptcy Reform
Act of 1978 (11 U.S.C. Sections 101-1330), as amended or
supplemented from time to time, and any successor statute, and
any and all rules issued or promulgated in connection therewith.
"Guaranteed Obligations" means any and all
obligations, indebtedness, or liabilities of any kind or
character owed by Borrowers to Foothill including all such
obligations, indebtedness, or liabilities, whether for principal,
interest (including any interest which, but for the application
of the provisions of the Bankruptcy Code, would have accrued on
such amounts), premium, reimbursement obligations, fees, costs,
expenses (including attorneys' fees), or indemnity obligations,
whether heretofore, now, or hereafter made, incurred, or created,
whether voluntarily or involuntarily made, incurred, or created,
whether secured or unsecured (and if secured, regardless of the
nature or extent of the security), whether absolute or
contingent, liquidated or unliquidated, determined or
indeterminate, whether Borrowers are liable individually or
jointly with others, and whether recovery is or hereafter becomes
barred by any statute of limitations or otherwise becomes
unenforceable for any reason whatsoever, including any act or
failure to act by Foothill.
"Loan Documents" shall mean that certain
Amended and Restated Loan and Security Agreement, dated as of
November 14, 1994, between Foothill and Borrowers (the "Loan
Agreement"), any promissory notes issued by Borrowers in
connection therewith, and those documents, instruments, and
agreements which either now or in the future exist among
Borrowers, Guarantor, or any affiliate of any of the Borrowers,
on the one hand, and Foothill, on the other hand.
(b) Construction. Unless the context of
this Guaranty clearly requires otherwise, references to the
plural include the singular, references to the singular include
the plural, and the term "including" is not limiting. The words
"hereof," "herein," "hereby," "hereunder," and other similar
terms refer to this Guaranty as a whole and not to any particular
provision of this Guaranty. Any reference herein to any of the
Loan Documents includes any and all alterations, amendments,
extensions, modifications, renewals, or supplements thereto or
thereof, as applicable. Neither this Guaranty nor any
uncertainty or ambiguity herein shall be construed or resolved
against Foothill or Guarantor, whether under any rule of
construction or otherwise. On the contrary, this Guaranty has
been reviewed by Guarantor, Foothill, and their respective
counsel, and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the
purposes and intentions of Foothill and Guarantor.
2. Guaranteed Obligations. Guarantor hereby
irrevocably and unconditionally guarantees to Foothill, as and
for its own debt, until final and indefeasible payment thereof
has been made, (a) payment of the Guaranteed Obligations, in each
case when and as the same shall become due and payable, whether
at maturity, pursuant to a mandatory prepayment requirement, by
acceleration, or otherwise; it being the intent of Guarantor that
the guaranty set forth herein shall be a guaranty of payment and
not a guaranty of collection; and (b) the punctual and faithful
performance, keeping, observance, and fulfillment by Borrowers of
all of the agreements, conditions, covenants, and obligations of
Borrowers contained in the Loan Documents.
3. Continuing Guaranty. This Guaranty includes
Guaranteed Obligations arising under successive transactions
continuing, compromising, extending, increasing, modifying,
releasing, or renewing the Guaranteed Obligations, changing the
interest rate, payment terms, or other terms and conditions
thereof, or creating new or additional Guaranteed Obligations
after prior Guaranteed Obligations have been satisfied in whole
or in part. To the maximum extent permitted by law, Guarantor
hereby waives and agrees not to assert any right it has under
Section 2815 of the California Civil Code, or otherwise, to
revoke this Guaranty as to future indebtedness. If such a
revocation is effective notwithstanding the foregoing waiver,
Guarantor acknowledges and agrees that (a) no such revocation
shall be effective until written notice thereof has been received
by Foothill, (b) no such revocation shall apply to any Guaranteed
Obligations in existence on such date (including, any subsequent
continuation, extension, or renewal thereof, or change in the
interest rate, payment terms, or other terms and conditions
thereof), (c) no such revocation shall apply to any Guaranteed
Obligations made or created after such date to the extent made or
created pursuant to a legally binding commitment of Foothill in
existence on the date of such revocation, (d) no payment by
Guarantor, any of the Borrowers, or from any other source, prior
to the date of such revocation shall reduce the maximum
obligation of Guarantor hereunder, and (e) any payment by any of
the Borrowers or from any source other than Guarantor, subsequent
to the date of such revocation, shall first be applied to that
portion of the Guaranteed Obligations as to which the revocation
is effective and which are not, therefore, guaranteed hereunder,
and to the extent so applied shall not reduce the maximum
obligation of Guarantor hereunder.
4. Performance Under This Guaranty. In the event
that any of the Borrowers fails to make any payment of any
Guaranteed Obligations on or before the due date thereof, or if
any of the Borrowers shall fail to perform, keep, observe, or
fulfill any other obligation referred to in clause (b) of Section
2 hereof in the manner provided in the Loan Documents, Guarantor
immediately shall cause such payment to be made or each of such
obligations to be performed, kept, observed, or fulfilled.
5. Primary Obligations. This Guaranty is a primary
and original obligation of Guarantor and is an absolute,
unconditional, and continuing guaranty of payment and performance
which shall remain in full force and effect without respect to
future changes in conditions, including any change of law.
Guarantor agrees that it is directly, and jointly and severally
with any other guarantor of the Guaranteed Obligations, liable to
Foothill, that the obligations of Guarantor hereunder are
independent of the obligations of Borrowers or any other
guarantor, and that a separate action may be brought against
Guarantor whether such action is brought against any of the
Borrowers or any other guarantor or whether any of the Borrowers
or any such other guarantor is joined in such action. Guarantor
agrees that its liability hereunder shall be immediate and shall
not be contingent upon the exercise or enforcement by Foothill of
whatever remedies it may have against any of the Borrowers or any
other guarantor, or the enforcement of any lien or realization
upon any security Foothill may at any time possess. Guarantor
agrees that any release which may be given by Foothill to any of
the Borrowers or any other guarantor shall not release Guarantor.
Guarantor consents and agrees that Foothill shall be under no
obligation to marshal any assets of any of the Borrowers or any
other guarantor in favor of Guarantor, or against or in payment
of any or all of the Guaranteed Obligations.
6. Waivers.
(a) Guarantor hereby waives: (1) notice of
acceptance hereof; (2) notice of any loans or other financial
accommodations made or extended under the Loan Documents or the
creation or existence of any Guaranteed Obligations; (3) notice
of the amount of the Guaranteed Obligations, subject, however, to
Guarantor's right to make inquiry of Foothill to ascertain the
amount of the Guaranteed Obligations at any reasonable time; (4)
notice of any adverse change in the financial condition of any of
the Borrowers or of any other fact that might increase
Guarantor's risk hereunder; (5) notice of presentment for
payment, demand, protest, and notice thereof as to any promissory
notes or other instruments among the Loan Documents; (6) notice
of any event of default under the Loan Documents; and (7) all
other notices (except if such notice is specifically required to
be given to Guarantor hereunder or under any Loan Document to
which Guarantor is a party) and demands to which Guarantor might
otherwise be entitled.
(b) Guarantor hereby waives its right, under
Sections 2845 or 2850 of the California Civil Code, or otherwise,
to require Foothill to institute suit against, or to exhaust any
rights and remedies which Foothill has or may have against, any
of the Borrowers or any third party, or against any collateral
for the Guaranteed Obligations provided by any of the Borrowers,
Guarantor, or any third party. In this regard, Guarantor agrees
that it is bound to the payment of all Guaranteed Obligations,
whether now existing or hereafter accruing, as fully as if such
Guaranteed Obligations were directly owing to Foothill by
Guarantor. Guarantor further waives any defense arising by
reason of any disability or other defense (other than the defense
that the Guaranteed Obligations shall have been fully and finally
performed and indefeasibly paid) of any of the Borrowers or by
reason of the cessation from any cause whatsoever of the
liability of any of the Borrowers in respect thereof.
(c) Guarantor hereby waives: (1) any rights to
assert against Foothill any defense (legal or equitable), set-
off, counterclaim, or claim which Guarantor may now or at any
time hereafter have against any of the Borrowers or any other
party liable to Foothill; (2) any defense, set-off,
counterclaim, or claim, of any kind or nature, arising directly
or indirectly from the present or future lack of perfection,
sufficiency, validity, or enforceability of the Guaranteed
Obligations or any security therefor; (3) any defense Guarantor
has to performance hereunder, and any right Guarantor has to be
exonerated, provided by Sections 2819, 2822, or 2825 of the
California Civil Code, or otherwise, arising by reason of: any
claim or defense based upon an election of remedies by Foothill;
the impairment or suspension of Foothill's rights or remedies
against any of the Borrowers; the alteration by Foothill of the
Guaranteed Obligations; any discharge of any of the Borrowers'
obligations to Foothill by operation of law as a result of
Foothill's intervention or omission; or the acceptance by
Foothill of anything in partial satisfaction of the Guaranteed
Obligations; (4) the benefit of any statute of limitations
affecting Guarantor's liability hereunder or the enforcement
thereof, and any act which shall defer or delay the operation of
any statute of limitations applicable to the Guaranteed
Obligations shall similarly operate to defer or delay the
operation of such statute of limitations applicable to
Guarantor's liability hereunder.
(d) [Intentionally Omitted]
(e) Guarantor hereby expressly waives any and all
defenses in its favor based upon an election of remedies by
Foothill which destroys, diminishes, or affects Guarantor's
subrogation rights against any of the Borrowers or any other
party and/or Guarantor's rights to proceed against any of the
Borrowers or any other party for reimbursement, contribution,
indemnity, or otherwise, including without limitation any
election(s) by Foothill to conduct a nonjudicial foreclosure sale
under any deed(s) of trust, and further including without
limitation any and all defenses, rights, or estoppels which might
otherwise arise under or in connection with California Code of
Civil Procedure ("CCP") sections 580d or 580a as a result of any
such election(s) or otherwise. Guarantor acknowledges and agrees
that it is knowingly waiving in advance as a result of the
foregoing sentence a complete or partial defense to this Guaranty
it may later have had arising from CCP sections 580d or 580a
based upon Foothill's subsequent election to conduct a private
nonjudicial foreclosure sale, even though such election would
destroy, diminish, or affect Guarantor's rights of subrogation
against any of the Borrowers or any other party and Guarantor's
rights to pursue any of the Borrowers or such other party for
reimbursement contribution, indemnity, or otherwise.
(f) WITHOUT LIMITING THE GENERALITY OF ANY OTHER
WAIVER OR OTHER PROVISION SET FORTH IN THIS GUARANTY, GUARANTOR
HEREBY WAIVES AND AGREES NOT TO ASSERT ANY AND ALL BENEFITS OR
DEFENSES ARISING DIRECTLY OR INDIRECTLY UNDER ANY ONE OR MORE OF
CALIFORNIA CIVIL CODE SECTIONS 2799, 2808, 2809, 2810, 2815,
2819, 2820, 2821, 2822, 2825, 2839, 2845, 2848, 2849, AND 2850,
CALIFORNIA CODE OF CIVIL PROCEDURE SECTIONS 580a, 580b, 580c,
580d, AND 726, AND CHAPTER 2 OF TITLE 14 OF THE CALIFORNIA CIVIL
CODE.
7. Releases. Guarantor consents and agrees that,
without notice to or by Guarantor and without affecting or
impairing the obligations of Guarantor hereunder, Foothill may,
by action or inaction:
(a) compromise, settle, extend the duration or the
time for the payment of, or discharge the
performance of, or may refuse to or otherwise not
enforce the Loan Documents;
(b) release all or any one or more parties to any one
or more of the Loan Documents or grant other
indulgences to any of the Borrowers in respect
thereof;
(c) amend or modify in any manner and at any time (or
from time to time) any of the Loan Documents; or
(d) release or substitute any other guarantor, if any,
of the Guaranteed Obligations, or enforce,
exchange, release, or waive any security for the
Guaranteed Obligations (including, the collateral
referred to in Section 17 hereof) or any other
guaranty of the Guaranteed Obligations, or any
portion thereof.
8. No Election. Foothill shall have the right to
seek recourse against Guarantor to the fullest extent provided
for herein, and no election by Foothill to proceed in any other
form of action or proceeding, or against any party, or on any
obligation, shall constitute a waiver of Foothill's right to
proceed in any other form of action or proceeding or against
other parties unless Foothill has expressly waived such right in
writing. Specifically, but without limiting the generality of
the foregoing, no action or proceeding by Foothill under any
document or instrument evidencing the Guaranteed Obligations
shall serve to diminish the liability of Guarantor under this
Guaranty except to the extent that Foothill finally and
unconditionally shall have realized indefeasible payment by such
action or proceeding.
9. Indefeasible Payment. The Guaranteed Obligations
shall not be considered indefeasibly paid for purposes of this
Guaranty unless and until all payments to Foothill are no longer
subject to any right on the part of any person, including any of
the Borrowers, any of the Borrowers as a debtor in possession, or
any trustee (whether appointed under the Bankruptcy Code or
otherwise) of any of the Borrowers' assets to invalidate or set
aside such payments or to seek to recoup the amount of such
payments or any portion thereof, or to declare same to be
fraudulent or preferential. Upon such full and final performance
and indefeasible payment of the Guaranteed Obligations whether by
Guarantor or any of the Borrowers, Foothill shall have no
obligation whatsoever to transfer or assign its interest in the
Loan Documents to Guarantor. In the event that, for any reason,
any portion of such payments to Foothill is set aside or
restored, whether voluntarily or involuntarily, after the making
thereof, then the obligation intended to be satisfied thereby
shall be revived and continued in full force and effect as if
said payment or payments had not been made, and Guarantor shall
be liable for the full amount Foothill is required to repay plus
any and all costs and expenses (including attorneys' fees) paid
by Foothill in connection therewith.
10. Financial Condition of Borrowers. Guarantor
represents and warrants to Foothill that Guarantor is currently
informed of the financial condition of Borrowers and of all other
circumstances which a diligent inquiry would reveal and which
bear upon the risk of nonpayment of the Guaranteed Obligations.
Guarantor further represents and warrants to Foothill that
Guarantor has read and understands the terms and conditions of
the Loan Documents. Guarantor hereby covenants that Guarantor
will continue to keep informed of Borrowers' financial condition,
the financial condition of other guarantors, if any, and of all
other circumstances which bear upon the risk of nonpayment or
nonperformance of the Guaranteed Obligations.
11. Payments; Application. All payments to be made
hereunder by Guarantor shall be made in lawful money of the
United States of America at the time of payment, shall be made in
immediately available funds, and shall be made without deduction
(whether for taxes or otherwise) or offset. All payments made by
Guarantor hereunder shall be applied as follows: first, to all
costs and expenses (including attorneys' fees) incurred by
Foothill in enforcing this Guaranty or in collecting the
Guaranteed Obligations; second, to all accrued and unpaid
interest, premium, if any, and fees owing to Foothill
constituting Guaranteed Obligations; and third, to the balance of
the Guaranteed Obligations.
12. Attorneys' Fees and Costs. Guarantor agrees to
pay, on demand, all reasonable attorneys' fees and all other
costs and expenses which may be incurred by Foothill in the
enforcement of this Guaranty (including those brought relating to
proceedings pursuant to 11 U.S.C.) or in any way arising out of,
or consequential to the protection, assertion, or enforcement of
the Guaranteed Obligations (or any security therefor), whether or
not suit is brought.
13. Indemnification. Guarantor agrees to indemnify
Foothill and hold Foothill harmless against all obligations,
demands, or liabilities asserted by any party and against all
losses in any way suffered, incurred, or paid by Foothill as a
result of or in any way arising out of, following, or
consequential to Foothill's transactions with any of the
Borrowers.
14. Notices. All notices or demands by Guarantor or
Foothill to the other relating to this Guaranty shall be in
writing and shall be personally delivered or sent by overnight or
same day messenger or air courier service, registered or
certified mail, postage prepaid, return receipt requested, or by
prepaid telex, TWX, telefacsimile, or telegram (with messenger
delivery specified) to Guarantor or to Foothill, as the case may
be, at its address set forth below:
If to Guarantor: LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Attention: President
Telefacsimile No. (818) 908-9539
with courtesy
copies to: SIDLEY & AUSTIN
555 West Fifth Street
40th Floor
Los Angeles, California 90013
Attn: Gary J. Cohen, Esq.
Telefacsimile No. (213) 896-6600
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Business Finance Division Manager
Telefacsimile No. (310) 479-2690
Foothill and Guarantor may change the address at which
they are to receive notices hereunder, by notice in writing in
the foregoing manner given to the other.
15. Cumulative Remedies. No remedy under this
Guaranty or under any Loan Document is intended to be exclusive
of any other remedy, but each and every remedy shall be
cumulative and in addition to any and every other remedy given
hereunder or under any Loan Document, and those provided by law
or in equity. No delay or omission by Foothill to exercise any
right under this Guaranty shall impair any such right nor be
construed to be a waiver thereof. No failure on the part of
Foothill to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right hereunder preclude any other or
further exercise thereof or the exercise of any other right.
16. Books and Records. Guarantor agrees that
Foothill's books and records showing the account between Foothill
and Borrowers shall be admissible in any action or proceeding and
shall be binding upon Guarantor for the purpose of establishing
the items therein set forth and shall constitute prima facie
proof thereof.
17. Collateral. The obligations of Guarantor
hereunder are secured, as provided in that certain Security
Agreement - Stock Pledge, Copyright Mortgage and Assignment and
Trademark Mortgage and Assignment each of which are of even date
herewith.
18. Severability of Provisions. Any provision of this
Guaranty which is prohibited or unenforceable under applicable
law, shall be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions
hereof.
19. Entire Agreement; Amendments. This Guaranty
constitutes the entire agreement between Guarantor and Foothill
pertaining to the subject matter contained herein. This Guaranty
may not be altered, amended, or modified, nor may any provision
hereof be waived or noncompliance therewith consented to, except
by means of a writing executed by both Guarantor and Foothill.
Any such alteration, amendment, modification, waiver, or consent
shall be effective only to the extent specified therein and for
the specific purpose for which given. No course of dealing and
no delay or waiver of any right or default under this Guaranty
shall be deemed a waiver of any other, similar or dissimilar
right or default or otherwise prejudice the rights and remedies
hereunder.
20. Successors and Assigns. This Guaranty shall be
binding upon Guarantor's administrators, representatives,
successors and assigns and shall inure to the benefit of the
successors and assigns of Foothill; provided, however, Guarantor
shall not assign this Guaranty or delegate any of its duties
hereunder without Foothill's prior written consent. Any
assignment without the consent of Foothill shall be absolutely
void. In the event of any assignment or other transfer of rights
by Foothill, the rights and benefits herein conferred upon
Foothill shall automatically extend to and be vested in such
assignee or other transferee.
21. Subordination. Guarantor agrees that any and all
present and future indebtedness of Borrowers owing to Guarantor
is postponed in favor of and subordinated to payment, in full, in
cash, of the Guaranteed Obligations. In this regard, except as
otherwise expressly permitted by the Loan Agreement, no payment
of any kind whatsoever shall be made with respect to such
indebtedness until the Guaranteed Obligations have been
indefeasibly paid in full.
22. Choice of Law and Venue. THE VALIDITY OF THIS
GUARANTY, ITS CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT, AND
THE RIGHTS OF GUARANTOR AND FOOTHILL, SHALL BE DETERMINED UNDER,
GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS
OF THE STATE OF CALIFORNIA. GUARANTOR HEREBY AGREES THAT ALL
ACTIONS OR PROCEEDINGS ARISING IN CONNECTION WITH THIS GUARANTY
SHALL BE TRIED AND DETERMINED ONLY IN THE STATE AND FEDERAL
COURTS LOCATED IN THE COUNTY OF LOS ANGELES, STATE OF CALIFORNIA,
OR, AT THE SOLE OPTION OF FOOTHILL, IN ANY OTHER COURT IN WHICH
FOOTHILL SHALL INITIATE LEGAL OR EQUITABLE PROCEEDINGS AND WHICH
HAS SUBJECT MATTER JURISDICTION OVER THE MATTER IN CONTROVERSY.
GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT IT MAY HAVE TO ASSERT
THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT TO VENUE TO THE
EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION.
23. Waiver of Jury Trial. GUARANTOR HEREBY EXPRESSLY
WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY ACTION, CAUSE OF ACTION,
CLAIM, DEMAND, OR PROCEEDING ARISING UNDER OR WITH RESPECT TO
THIS GUARANTY, OR IN ANY WAY CONNECTED WITH, RELATED TO, OR
INCIDENTAL TO THE DEALINGS OF GUARANTOR AND FOOTHILL WITH RESPECT
TO THIS GUARANTY, OR THE TRANSACTIONS RELATED HERETO, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT, TORT, OR OTHERWISE. GUARANTOR HEREBY
AGREES THAT ANY SUCH ACTION, CAUSE OF ACTION, CLAIM, DEMAND, OR
PROCEEDING SHALL BE DECIDED BY A COURT TRIAL WITHOUT A JURY AND
THAT FOOTHILL MAY FILE AN ORIGINAL COUNTERPART OF THIS SECTION
WITH ANY COURT OR OTHER TRIBUNAL AS WRITTEN EVIDENCE OF THE
CONSENT OF GUARANTOR TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
24. Waivers, Consents. Guarantor warrants and agrees
that each of the waivers and consents set forth herein is made
after consultation with legal counsel and with full knowledge of
its significance and consequence, with the understanding that
events giving rise to any defense or right waived may diminish,
destroy, or otherwise adversely affect rights which Guarantor
otherwise may have against any of the Borrowers, Foothill, or
others, or against any collateral, and that, under the
circumstances, the waivers and consents herein given are
reasonable and not contrary to public policy or law. If any of
the waivers or consents herein are determined to be unenforceable
under applicable law, such waivers and consents shall be
effective to the maximum extent permitted by law.
25. Counterparts; Telefacsimile Execution. This
Guaranty may be executed in any number of counterparts and by
different parties on separate counterparts, each of which, when
executed and delivered, shall be deemed to be an original, and
all of which, when taken together, shall constitute but one and
the same Guaranty. Delivery of an executed counterpart of this
Guaranty by telefacsimile shall be equally as effective as
delivery of a manually executed counterpart of this Guaranty.
Any party delivering an executed counterpart of this Guaranty by
telefacsimile also shall deliver a manually executed counterpart
of this Guaranty but the failure to deliver a manually executed
counterpart shall not affect the validity, enforceability, and
binding effect of this Guaranty.
IN WITNESS WHEREOF, Guarantor has executed and
delivered this Guaranty as of the date set forth in the first
paragraph hereof.
LIVE ENTERTAINMENT INC.
By:____________________________________
Title:_________________________________
ASSIGNMENT OF LIENS AND LOAN DOCUMENTS
THIS ASSIGNMENT OF LIENS AND LOAN DOCUMENTS ("Assignment")
is made effective as of November 14, 1994 by and among
(i) CHEMICAL BANK, a New York banking corporation ("Assignor"),
individually, and as Administrative Agent and Collateral Agent
for the Banks, (ii) FOOTHILL CAPITAL CORPORATION, a California
corporation ("Assignee"), and (iii) LIVE ENTERTAINMENT INC., a
Delaware corporation, LIVE HOME VIDEO INC. (formerly known as
International Video Entertainment Inc.), a Delaware corporation,
LIVE AMERICA, INC. (formerly known as I.V.E. America, Inc.), a
Delaware corporation, LIVE FILM AND MEDIAWORKS INC. (formerly
known as International Video Productions Inc.), a California
corporation, LIVE ENTERTAINMENT INTERNATIONAL INC. (formerly
known as LEI-IVE Entertainment N.V.), a Delaware corporation,
VESTRON INC. (formerly known as Vestron Acquisition Corp.), a
Delaware corporation, and LIVE VENTURES INC., a Delaware
corporation, (collectively, the "Borrowers"), with reference to
the following:
A. Borrowers are parties to that certain Third Amended and
Restated Loan Agreement dated as of July 26, 1990, as amended
through the Effective Date (as defined below), with Assignor (the
"Credit Agreement"). Initially capitalized terms that are used
but not otherwise defined herein shall have the meanings as
defined in the Credit Agreement.
B. In connection with the Credit Agreement, Borrowers
executed and delivered to Assignor and its predecessors various
copyright mortgages, trademark mortgages, pledges, UCC filings,
security agreements and other loan documents described on
Exhibit A.
C. Borrowers have requested, and as an accommodation to
Borrowers, Assignor has agreed to assign to Assignee all of the
right, title and interest of Assignor, the Banks, the
Administrative Agent and the Collateral Agent in and to the
Loans, the Credit Agreement, copyright mortgages, trademark
mortgages, pledges, UCC filings, security agreements, laboratory
access letters, laboratory pledgeholder agreements, and all other
loan documents and security interests securing the Loans and
Obligations under the Credit Agreement, including, without
limitation, those described on Exhibit A (all such documents
being referred to herein collectively as the "Loan Documents"),
and Assignee has agreed to accept an assignment of the Loan
Documents from Assignor.
NOW, THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Assignor
hereby agrees as follows:
1. Assignment. Assignor hereby irrevocably TRANSFERS,
ASSIGNS, GRANTS and CONVEYS, WITHOUT REPRESENTATION, WARRANTY, OR
RECOURSE OF ANY KIND and without any promise, agreement,
statement, or undertaking whatsoever by the Assignor (except as
expressly set forth in this Assignment), unto Assignee, all of
the rights and obligations of Assignor, the Banks, the
Administrative Agent and the Collateral Agent under the Loan
Documents, together with all attendant liens, rights, titles,
assignments and interests (including security interests granted
to Assignor, the Banks, the Administrative Agent and the
Collateral Agent in connection with the Loan Documents),
pertaining to or in connection with the Loan Documents; and
Assignee hereby ACCEPTS and ASSUMES all of such rights and
obligations under the Loan Documents as of the Effective Date (as
defined below). Nothing herein contained shall, or is intended
to, warrant the validity, collectibility or enforceability with
respect to the Loans, the Loan Documents or Assignor's security
interest in the collateral described in the Loan Documents.
2. Assignor Representations and Warranties. Assignor
represents and warrants that:
(a) The Credit Agreement was amended so that Assignor
is the sole remaining Bank, Administrative Agent and
Collateral Agent under the Credit Agreement;
(b) Assignor is legally authorized to enter into this
Assignment;
(c) Assignor is the sole legal and beneficial owner of
the interests being assigned hereunder and such interests
are free and clear of any lien created by Assignor; and
(d) The unpaid balance of the Loans is zero dollars
($0) as of the date hereof.
Assignor makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or
representations made in or in connection with the Loan Documents
or any other instrument or document furnished pursuant thereto or
the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Loan Documents or any other
instrument or document furnished pursuant thereto; and makes no
representation or warranty and assumes no responsibility with
respect to the financial condition of Borrowers or the
performance or observance by Borrowers of any of their respective
obligations under the Loan Documents or any other instrument or
document furnished pursuant thereto or that this Assignment is
effective to make the transfer contemplated hereby.
3. Assignee Representations and Warranties. The Assignee
(i) represents and warrants that Assignee is legally authorized
to enter into this Assignment; (ii) confirms that it has received
a copy of the Loan Documents, together with copies of recent
financial statements and such other documents and information as
it has deemed appropriate to make its own credit analysis and
decision to enter into this Assignment; (iii) agrees that it
will, independently and without reliance upon the Assignor and
based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit
decisions in taking or not taking action under the Credit
Agreement; and (iv) agrees that it will perform in accordance
with their terms all the obligations which by the terms of the
Credit Agreement are required to be performed by it as a Bank and
as the Agent under the Credit Agreement. The Assignee and the
Borrowers hereby acknowledge and agree that they have determined
to seek the assignment contemplated by this Assignment for their
own independent purposes and for their own convenience, based on
their independent factual and legal review and without any
reliance on the Assignor and that the Assignor has only a One
Thousand Dollars ($1,000) Commitment to make Loans to the
Borrowers which Commitment has a maturity date of November 28,
1994. The Assignee acknowledges and agrees, both for itself and
for each and all of its subsidiaries, affiliates, successors and
assigns (including, without limitation, any subsequent holder or
transferee of any of the rights or interests transferred hereby
or pursuant hereto) that:
(a) Credit Lyonnais Bank Nederland N.V., Imperial
Bank, The Bank of California, N.A. and The Long-Term Credit
Bank of Japan, Ltd. (collectively, the "Old Lenders") shall
have no liability in respect of the Credit Agreement or the
Loan Documents or in respect of this Assignment or any
rights or interests transferred hereby;
(b) Assignor shall have no liability in respect of the
Credit Agreement or the Loan Documents or, except as
expressly set forth in this Assignment, in respect of this
Assignment or any rights or interests transferred hereby;
(c) Except as expressly set forth in this Assignment,
neither the Assignor nor any of its directors, officers,
employees, attorneys, agents or affiliates is making or will
make any promise, agreement, statement, representation or
warranty, or shall have any duty of care, duty of disclosure
or other duty or liability whatsoever to anyone, in respect
of the authorization, execution, delivery, validity,
enforceability, adequacy, sufficiency, collectibility or
assignability of, or any other matter relating to, the
Credit Agreement or any Loan Documents or this Assignment or
any rights or interests which may be transferred hereby or
pursuant hereto or in respect of the existence, value,
creation, attachment, perfection, priority, enforceability
or assignability of any collateral security, lien or other
rights purported to be granted or available to the Assignor
under the Credit Agreement or Loan Documents or in respect
of any discharge, subordination, impairment or release of
any rights or interests in any bankruptcy proceeding or
otherwise or as to any legal or factual matters whatsoever;
and
(d) The Assignee is taking the Credit Agreement and
the Loan Documents "as is," without the benefit of any
representations and warranties, except as expressly set
forth in this Assignment.
4. Assumption by Assignee. The Assignee hereby assumes
all obligations of the Assignor under the Credit Agreement and
the Loan Documents transferred to the Assignee hereunder, and
(without limiting the generality of the foregoing) the Assignee
specifically agrees to assume in full all obligations of the
Assignor to make future loans or to extend additional credit or
to protect any collateral security or rights or otherwise to
perform any act under the Loan Documents as hereafter amended
from time to time.
5. Delivery of Documents. Concurrently herewith and as
Assignee shall from time to time reasonably request, and at the
sole cost and expense of Borrowers, Assignor agrees to execute
and deliver unto Assignee such financing statement assignments,
copyright assignments, trademark assignments, notices of
assignments of liens and loan documents as Assignee shall
require, and such other assignments and agreements as Assignee
shall reasonably request, to evidence and/or carry out the
transfer and assignment contemplated by this Assignment.
6. Resignation as Agent. As of the Effective Date,
Assignor in its capacity as Administrative Agent and Collateral
Agent hereby resigns as Administrative Agent and Collateral Agent
under each of the Loan Documents and shall have no further
obligations with respect thereto as Agent or as a Bank. The
Assignee is hereby appointed and accepts appointment as the new
Agent and assumes all of the obligations of the Agent under each
of the Loan Documents, effective as of the Effective Date.
7. No Further Obligations. As of the Effective Date
(a) Assignee shall be a party to the Loan Documents and, to the
extent provided herein, shall have the rights and obligations
under the Loan Documents of a Bank thereunder, and (b) Assignor
shall have been released from all of its obligations under the
Loan Documents and have no rights thereunder except those rights
which survive the termination of the Loan Documents; provided,
however, that (i) any claim Assignor may have thereunder is fully
subordinated to the rights and claims of Assignee, and (ii)
Assignor agrees not to ask the Assignee to pursue any remedies as
a secured party on behalf of the Assignor for the period from the
Effective Date until one hundred eighty (180) days after the
Effective Date; provided, further, that (i) the Assignor may
pursue at any time any remedies it may have as a general
unsecured creditor of the Borrowers, and (ii) the foregoing
agreement of the Assignor is made solely on behalf of the
Assignor and not on behalf of any Bank that was a party to the
Credit Agreement prior to the effectiveness of the Thirteenth
Amendment to the Credit Agreement. Assignor acknowledges that
Assignee may at any time terminate and/or release any and all
copyright mortgages, trademark mortgages, UCC filings and other
Loan Documents assigned to Assignee hereunder and that upon any
such termination/release any rights that survive the termination
of the Loan Documents may be pursued by Assignor and the Banks
only as general unsecured creditors of the Borrowers.
8. Borrowers' Consent and Representation and Warranty.
The Borrowers hereby consent and agree to the transfers and
assignments by the Assignor to the Assignee effected pursuant
hereto and to the other terms hereof, and each Borrower
specifically agrees that:
(a) It will look solely to the Assignee for the
performance and observance of all obligations of the
Assignor under or with respect to the Credit Agreement or
any Loan Documents;
(b) The Assignor shall not be obligated to make any
future loans or to extend any additional credit or to
protect any collateral security or rights or otherwise to
perform any act under the Credit Agreement or any Loan
Documents;
(c) The Assignor shall not be liable for any
obligation, act, omission, breach of duty or wrongful
conduct of the Assignee or any of its subsidiaries,
affiliates, successors or assigns;
(d) The Borrowers shall pay all out-of-pocket expenses
incurred by the Assignor in connection with the execution
and delivery of this Assignment and any documentation
contemplated hereby, including but not limited to the fees
and disbursements of Morgan, Lewis & Bockius.
(e) Pursuant to Section 13.5 of the Credit Agreement,
the obligations of the Borrowers under Section 13.5 of the
Credit Agreement shall also continue to inure to the benefit
of the Assignor, Credit Lyonnais Bank Nederland N.V.,
Imperial Bank, The Bank of California, N.A. and The Long-
Term Credit Bank of Japan, Ltd. notwithstanding the
Assignor's execution and delivery of this Assignment.
Borrowers, jointly and severally, represent and warrant that
Exhibit A contains a complete and accurate description of all of
the Loan Documents.
9. Release. (a) The Assignee, for itself and for each
and all of its subsidiaries, affiliates, successors and assigns
(including, without limitation, any subsequent holder or
transferee of any of the rights or interests transferred hereby
or pursuant hereto), and each Borrower (each of the foregoing, a
"releasing party") agrees that such releasing party will never
assert or enforce (and hereby forever waives and releases, and
agrees never to sue upon) any claim it might otherwise have
against the Assignor, the Old Lenders or any of their directors,
officers, employees, attorneys, agents or affiliates (each of the
foregoing, a "released party"), on any theory of liability, in
any manner based upon or arising out of or relating to or by
reason of the Credit Agreement or any Loan Documents or this
Assignment or any event, circumstance or condition related
thereto, or any obligation at any time undertaken or promise at
any time made by the released party thereunder, or any breach of
contract, tort, wrongful conduct or other action at any time
engaged in, taken or omitted to be taken thereunder or in respect
thereof by the released party, in each case whether or not any
such claim or any fact related thereto is presently known to such
releasing party (the foregoing, collectively, the "Released
Claims"), it being the intention of each releasing party to
settle and release, fully and forever, all losses, demands,
promises, undertakings, disputes, breaches, torts, wrongful
conduct, differences, duties, liabilities and other claims of
every type and nature which it might otherwise have or have had
on or prior to the Effective Date of this Assignment by reason of
any of the Released Claims, whether known or unknown and whether
or not suspected; provided, however, that the foregoing shall not
release the Assignor from its representations, warranties and
covenants expressly set forth in this Assignment.
(b) Each releasing party acknowledges that it has been
advised by counsel with respect to the release contained herein.
Each releasing party hereby waives and relinquishes all the
rights and benefits which it may have with respect to the
Released Claims and under Section 1542 of the California Civil
Code and any similar provision of law or rule of decision. Each
releasing party is familiar with and waives the provisions of
Section 1542 of the California Civil Code, which provides as
follows:
"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."
(c) Each releasing party acknowledges that:
(i) it is receiving full and adequate
consideration for the Released Claims;
(ii) the foregoing waiver of the provisions of
Section 1542 of the California Civil Code was
separately bargained for; and
(iii) each releasing party is executing his release
voluntarily, with full knowledge of its significance,
and with the express intention of affecting the legal
consequences anticipated by Section 1542 California
Civil Code.
10. Assignor Not Original Agent. The parties hereto
acknowledge that Assignor was not the original Agent under the
Credit Agreement or the Loan Documents, but is the successor to
Credit Lyonnais Bank Nederland N.V. As a result there may be UCC
filings of record in the name of Credit Lyonnais Bank Nederland
N.V. The Assignor shall not be liable to the Assignee in the
event such UCC filings are not assigned to the Assignee by Credit
Lyonnais Bank Nederland N.V.
11. Governing Law. This Assignment shall be governed by,
and construed in accordance with, the laws of the State of New
York.
12. Counterparts. This Assignment may be executed in one
or more counterparts, each of which when so executed shall be
deemed to be an original, but all of which when taken together
shall constitute one and the same instrument.
EXECUTED effective as of November 14, 1994 (the "Effective
Date").
"Assignor"
CHEMICAL BANK, individually, and as
Administrative Agent and Collateral
Agent for the Banks
By:____________________________________
Title:_________________________________
"Assignee"
FOOTHILL CAPITAL CORPORATION
By:____________________________________
Title:_________________________________
"Borrowers"
LIVE ENTERTAINMENT INC.
By_________________________________
Title:______________________________
LIVE HOME VIDEO INC.
By_________________________________
Title:______________________________
LIVE AMERICA INC.
By_________________________________
Title:______________________________
LIVE FILM AND MEDIAWORKS INC.
By_________________________________
Title:______________________________
LIVE ENTERTAINMENT
INTERNATIONAL INC.
By_________________________________
Title:______________________________
VESTRON INC.
By_________________________________
Title:______________________________
LIVE VENTURES INC.
By_________________________________
Title:______________________________
<PAGE>
Exhibit A
Loan Documents
(See Attached List)
<PAGE>
LIVE Entertainment Inc.
and Subsidiaries
Agreements with Chemical Bank
1. Third Amended and Restated Loan and Security Agreement dated
as of July 26, 1990 by and among LIVE Entertainment Inc.,
LIVE Home Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video Productions Inc.,
Credit Lyonnais Bank Nederland N.V. and Chemical Bank
2. Amended and Restated Revolving Note dated July 26, 1990 in
the principal amount of $100,000,000.
3. Amended and Restated Pledge Agreement (Stock) dated as of
July 26, 1990 between LIVE Entertainment Inc., LIVE Home
Video Inc., LIVE America Inc., LEI-IVE Entertainment N.V.,
International Video Productions Inc., Credit Lyonnais Bank
Nederland N.V. and Chemical Bank
4. Amended and Restated Copyright Mortgage dated as of July 26,
1990 executed by LIVE Entertainment Inc., LIVE Home Video
Inc., LIVE America Inc., LEI-IVE Entertainment N.V. and
International Video Productions Inc.
5. Laboratory Pledgeholder Agreement dated as of July 26, 1990
between Rank Video Services America, LIVE Home Video Inc.,
Credit Lyonnais Bank Nederland N.V. and Chemical Bank
6. Consent and Waiver Letter dated July 26, 1990 regarding
dividends payable to Carolco
7. Waiver Letter dated July 26, 1990 regarding VCL
Communications GmbH
8. UCC Financing Statements:
a. California UCC-2 amending financing statement filed on
May 1, 1989
b. California UCC-2 terminating financing statement filed
on October 22, 1986
c. Delaware UCC-3
d. Illinois UCC-1
e. New York (county) UCC-3
f. New York (state) UCC-3
9. Notice of Pledge of LEI-IVE shares dated July 26, 1990 for
delivery to registered office of LEI-IVE in the Netherland
Antilles
10. First Amendment to Third Amended and Restated Loan and
Security Agreement dated as of October 26, 1990 by and among
LIVE Entertainment Inc., LIVE Home Video Inc., LIVE America
Inc., LEI-IVE Entertainment N.V., International Video
Productions Inc., Credit Lyonnais Bank Nederland N.V. and
Chemical Bank
11. Second Amendment to Third Amended and Restated Loan and
Security Agreement dated as of December 4, 1990 by and among
LIVE Entertainment Inc., 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
12. Limited Waiver dated as of April 16, 1991 by and among LIVE
Entertainment Inc., 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 The Long-
Term Credit Bank of Japan, Ltd.
13. Third Amendment to Third Amended and Restated Loan and
Security Agreement dated as of April 23, 1991 by and among
LIVE Entertainment Inc., 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.
14. Fourth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of July 16, 1991 by and among
LIVE Entertainment Inc., 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.
15. Supplement Agreement dated as of July 16, 1991 by and among
LIVE Entertainment Inc., 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.
16. Second Amended and Restated Revolving Note dated July 16,
1991 in the principal amount of $100,000,000.
17. Second Amended and Restated Pledge Agreement dated as of
July 16, 1991 between LIVE Entertainment Inc., 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.
18. Second Amended and Restated Pledge Agreement Irrevocable
Proxy
19. UCC Financing Statements:
a. California UCC-2
b. Connecticut UCC-1
c. Delaware UCC-3
d. Illinois UCC-3
e. Michigan UCC-1
f. New York (county) UCC-3
g. New York (state) UCC-3
20. Mortgage and Assignment of Copyright (VAC Domestic Rights)
dated as of July 16, 1991
21. Mortgage and Assignment of Copyright (Dirty Dancing Sequel
Rights) dated as of July 16, 1991
22. Mortgage and Assignment of Copyright (LEI-IVE Foreign
Rights) dated as of July 16, 1991
23. Trademark Mortgage and Assignment (LIVE Domestic Rights)
dated as of July 16, 1991
24. Trademark Mortgage and Assignment (LEI-IVE Foreign Rights)
dated as of July 16, 1991
25. Laboratory Pledgeholder Agreement dated as of July 16, 1991
between Laboratory, LIVE Home Video Inc., Credit Lyonnais
Bank Nederland N.V. and Chemical Bank
26. Screen Actors Guild Subordination Agreement dated as of July
16, 1991.
27. Fifth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of November 21, 1991 by and
among LIVE Entertainment Inc., 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.
28. First Amendment to Second Amended and Restated Pledge
Agreement (Stock) dated as of November 21, 1991
29. Pledge Agreement (Stock) dated as of November 21, 1991
30. Sixth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of January 27, 1992 by and among
LIVE Entertainment Inc., 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.
31. Waiver Letter dated March 2, 1992 regarding delivery of
$27,000,000 Subsidiary Note dated May 25, 1989 made by
Lieberman Enterprises Incorporated to the order of LIVE
Entertainment Inc.
32. Seventh Amendment to Third Amended and Restated Loan and
Security Agreement dated as of March 20, 1992 by and among
LIVE Entertainment Inc., 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.
33. Supplemental Mortgage of Copyright dated March 26, 1992
34. Mortgage and Assignment of Copyright dated June 3, 1992
35. 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.
36. 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.
37. Eighth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of June 16, 1992 by and among
LIVE Entertainment Inc., 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.
38. Notice of Assignment and Irrevocable Authority to WEA Corp.
dated June 16, 1992 with copy of transmittal letter dated
June 17, 1992 from Steven E. Mangel, Esq. to John T.
O'Connell at WEA Corp.
39. Acceptance of Assignment dated as of June 17, 1992 from WEA
Corp. to Chemical Bank
40. Consent and Waiver Letter Agreement dated as of August 25,
1992 regarding Pioneer, Worldvision and National Geographic
transactions and waiver of event of default by and among
LIVE Entertainment Inc., 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.
41. Re Worldvision transaction:
a. Partial Release and Reassignment of Amended and
Restated Mortgage of Copyright dated as of August 31,
1992 with respect to Amended and Restated Mortgage of
Copyright dated July 26, 1990
b. Partial Release and Reassignment of Supplemental
Mortgage of Copyright dated as of August 31, 1992 with
respect to Supplemental Mortgage of Copyright dated
March 11, 1991
c. Partial Release and Reassignment of Mortgage and
Assignment of Copyright dated as of August 31, 1992
with respect to Mortgage and Assignment of Copyright
dated July 16, 1991 by Vestron Acquisition Corp.
d. Partial Release and Reassignment of Mortgage and
Assignment of Copyright dated as of August 31, 1992
with respect to Mortgage and Assignment of Copyright
dated July 16, 1991 by LEI-IVE Entertainment N.V.
e. Partial Release and Reassignment of Supplemental
Mortgage of Copyright dated as of August 31, 1992 with
respect to Supplemental Mortgage of Copyright dated
September 30, 1991
f. Partial Release and Reassignment of Supplemental
Mortgage of Copyright dated as of August 31, 1992 with
respect to Supplemental Mortgage of Copyright dated
March 26, 1992
g. Mortgage and Assignment of Copyright dated as of August
27, 1992
42. Re National Geographic transaction:
a. Partial Release and Reassignment of Mortgage and
Assignment of Copyright dated as of August 31, 1992
with respect to Mortgage and Assignment of Copyright
dated July 16, 1991 by Vestron Acquisition Corp.
b. Partial Release and Reassignment of Mortgage and
Assignment of Copyright dated as of August 31, 1992
with respect to Mortgage and Assignment of Copyright
dated July 16, 1991 by LEI-IVE Entertainment N.V.
c. Mortgage and Assignment of Copyright dated as of August
27, 1992
43. Consent Agreement dated as of September 11, 1992 regarding
Pioneer transaction by and among LIVE Entertainment Inc.,
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.
44. Letter dated September 14, 1992 from LIVE Distributing Inc.
45. Letter dated 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.
46. Ninth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of November 25, 1992 by and
among LIVE Entertainment Inc., 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.
47. Tenth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of February 5, 1993 by and among
LIVE Entertainment Inc., 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.
48. Intercreditor Agreement dated as of February 5, 1993 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., Pioneer Agent and the Pioneer Lenders
49. Mortgage and Assignment of Copyright dated February 10, 1993
50. Memorandum of Third Amended and Restated Loan and Security
Agreement Regarding Trademarks dated February 10, 1993
51. Consent and Waiver Letter Agreement dated as of March 5,
1993 re Miramax transaction by and among LIVE Entertainment
Inc., 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.
52. Fourth Amended and Restated Promissory Note dated March 23,
1993
53. Letter Agreement dated March 23, 1993 regarding LIVE
Consolidated Net Worth and LHV Net Worth covenants, together
with corresponding form of Letter Agreement dated March 23,
1993 between LIVE Entertainment Inc., LIVE Home Video Inc.,
LIVE America Inc., LEI-IVE Entertainment N.V., International
Video Productions Inc., Vestron Inc. and Pioneer regarding
the foregoing covenants
54. Trustee Intercreditor Agreement dated as of March 23, 1993
between Chemical Bank, the Pioneer Agent, the Pioneer
Lenders and American Stock Transfer & Trust Company
55. Mortgage and Assignment of Copyright dated March 23, 1993
relating to LIVE Home Video L.P. assets transferred to
International Video Productions Inc.
56. Letter Agreement dated March 8, 1993 consent to assignment
by Canyon Partners Incorporated ("Canyon") of interest in
Pioneer Credit Facility to CPI Securities, L.P. ("CPI") and
Assignment dated as of February 5, 1993 from Canyon to CPI
57. Notice Letter dated as of February 5, 1993 from Pioneer
North America, Inc. to Chemical Bank, as Administrative
Agent and Collateral Agent for the Banks with respect to
securities interest in Pledged Securities
58. Notice Letter dated as of February 5, 1993 from Pioneer
North America, Inc. to Chemical Bank, as Administrative
Agent and Collateral Agent for the Banks regarding deposit
accounts
59. Eleventh Amendment to Third Amended and Restated Loan and
Security Agreement dated as of March 26, 1993 by and among
LIVE Entertainment Inc., 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.
60. 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.
61. Amended and Restated Trustee Intercreditor Agreement dated
as of March 26, 1993 by and between Chemical Bank, as
Administrative Agent and as Collateral Agent, U.S. Trust
Company of California, N.A. and American Stock Transfer &
Trust Company
62. Mortgage and Assignment of Copyright executed as of March
30, 1993 relating to the Group B and Group C Miramax titles
63. Consent and Waiver Letter Agreement dated as of December 22,
1993 by and among LIVE Entertainment Inc., 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.
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.
65. 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.
66. UCC-1 Financing Statements for LIVE Ventures Inc.:
a. California
b. Connecticut
c. Delaware
d. Illinois
e. Michigan
f. New York (county)
g. New York (state)
67. Twelfth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of January 28, 1994 by and among
LIVE Entertainment Inc., LIVE Home Video Inc., LIVE America
Inc., LEI-IVE Entertainment N.V., International Video
Productions Inc., Vestron Inc., LIVE Ventures 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.
68. Consent Letter dated as of January 28, 1994 regarding
Gladden Agreement by and among LIVE Entertainment Inc., 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.
69. Consent Letter dated as of July 6, 1994 re Stargate and
Congo Square by and among LIVE Entertainment Inc., 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.
70. Thirteenth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of July 29, 1994 by and among
LIVE Entertainment Inc., LIVE Home Video Inc., LIVE America
Inc., LEI-IVE Entertainment N.V., International Video
Productions Inc., Vestron Inc., LIVE Ventures 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.
71. Fourteenth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of August 29, 1994 by and among
LIVE Entertainment Inc., LIVE Home Video Inc., LIVE America
Inc., LEI-IVE Entertainment N.V., International Video
Productions Inc., Vestron Inc., LIVE Ventures Inc. and
Chemical Bank
72. Waiver Letter dated August 29, 1994 re Strawberries
Agreement and Plan of Merger by and among LIVE Entertainment
Inc., LIVE Home Video Inc., LIVE America Inc., LEI-IVE
Entertainment N.V., International Video Productions Inc.,
Vestron Inc., LIVE Ventures Inc. and Chemical Bank
73. Fifteenth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of September 14, 1994 by and
among LIVE Entertainment Inc., LIVE Home Video Inc., LIVE
America Inc., LEI-IVE Entertainment N.V., International
Video Productions Inc., Vestron Inc., LIVE Ventures Inc. and
Chemical Bank
74. Waiver Letter dated September 21, 1994 re redemption of New
Notes by and among LIVE Entertainment Inc., LIVE Home Video
Inc., LIVE America Inc., LEI-IVE Entertainment N.V.,
International Video Productions Inc., Vestron Inc., LIVE
Ventures Inc. and Chemical Bank
75. Sixteenth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of October 14, 1994 by and among
LIVE Entertainment Inc., LIVE Home Video Inc., LIVE America
Inc., LEI-IVE Entertainment N.V., International Video
Productions Inc., Vestron Inc., LIVE Ventures Inc. and
Chemical Bank
76. Seventeenth Amendment to Third Amended and Restated Loan and
Security Agreement dated as of November 14, 1994 by and
among LIVE Entertainment Inc., LIVE Home Video Inc., LIVE
America Inc., LEI-IVE Entertainment N.V., International
Video Productions Inc., Vestron Inc., LIVE Ventures Inc. and
Chemical Bank
November 14, 1994
WEA Corp.
111 North Hollywood Way
Burbank, California 91505
Attn: John T. O'Connell
Re: Assignment of Receipts under WEA Distribution Agreement
Gentlemen:
Reference is made to that certain Notice of Assignment
and Irrevocable Authority, a copy of which is attached hereto
(the "Notice").
Please be advised as follows:
1. The Third Amended and Restated Loan and Security
Agreement dated as of July 26, 1990, as amended (the "Credit
Agreement"), has been amended so that Chemical Bank is the sole
remaining Bank, Administrative Agent and Collateral Agent.
2. Chemical Bank has assigned to Foothill Capital
Corporation, a California corporation ("Foothill"), all of the
right, title and interest of the Banks, the Administrative Agent
and the Collateral Agent in and to the Credit Agreement, as
amended, and all other loan documents and security interests
securing the loans and other obligations under the Credit
Agreement as amended (all such documents together with the Credit
Agreement as amended being referred to herein collectively as the
"Loan Documents").
3. As the assignee of Chemical Bank, Foothill is
vested with and entitled to exercise all rights and benefits of
the Banks, the Administrative Agent and the Collateral Agent
under the Loan Documents.
4. You are hereby irrevocably authorized and directed
to take instructions from Foothill as assignee of Chemical Bank
on all matters relating to the Loan Documents.
WEA Corp.
November 14, 1994
Page 2
5. The Notice attached hereto is hereby terminated.
Please confirm your receipt of this letter and your
agreements to the foregoing by signing the enclosed copy of this
letter in the space provided below and returning it to Foothill
Capital Corporation, 11111 Santa Monica Blvd, Suite 1500, Los
Angeles, California 90025-3333, Attention: Business Finance
Division Manager (Telefacsimile No. (310) 479- 2690).
Dated as of November 14, 1994
Very truly yours,
CHEMICAL BANK, a New York
banking corporation, as the
sole remaining Bank, the
Administrative Agent and the
Collateral Agent under the
Credit Agreement
By:
Its:
Acknowledged and agreed to:
WEA Corp.,
a New York corporation
By:
Its:
Date: November , 1994
NOTICE OF ASSIGNMENT AND IRREVOCABLE AUTHORITY
TO: WEA Corp.
FROM: LIVE Home Video Inc., LIVE America Inc., LIVE Film and
Mediaworks Inc. (formerly known as International Video
Productions Inc.) and Vestron Inc.
DATE: November 16, 1994
RE: Notice of Assignment of Receipts under WEA
Distribution Agreement
Gentlemen:
Reference is made to that certain License and
Distribution Agreement, dated as of May 11, 1992 (the "WEA
Distribution Agreement"), between WEA Corp. ("WEA") and LIVE Home
Video Inc. ("LHV"), LIVE America Inc. ("LAI"), LIVE Distributing
Inc. and Vestron Inc. ("Vestron"), as amended by that certain
Amendment to License and Distribution Agreement, dated as of
June 8, 1992, between such parties and LIVE Film and Mediaworks
Inc. (formerly known as International Video Productions, Inc.)
("LFM"), and as amended by that certain Amendment dated as of
September 1, 1994.
Pursuant to that certain Amended and Restated Loan and
Security Agreement, dated as of November 14, 1994, by and among
LHV, LFM, LAI, Vestron and certain affiliates of such companies
(collectively, the "LIVE Companies") and Foothill Capital
Corporation ("Foothill"), the LIVE Companies have assigned the
benefit and proceeds of the WEA Distribution Agreement, as
amended, and any other agreement between WEA and any of the LIVE
Companies to Foothill.
This will constitute the irrevocable authority and
instruction of the LIVE Companies to WEA to pay to Foothill, all
monies (the "Assigned Receipts") from time to time now or
hereafter owing or to become due from WEA to the LIVE Companies
pursuant to the WEA Distribution Agreement, as amended, and any
other agreement between WEA and any of the LIVE Companies.
All monies are to be sent by wire transfer to:
Imperial Bank
9777 Wilshire Boulevard
Beverly Hills, California
Credit: Foothill Capital Corporation Account No.:
60-063-508
ABA #: 122201444
Reference: LIVE Home Video Inc.
Foothill has taken an assignment only of the Assigned
Receipts and has not assumed any obligations or liabilities of
the LIVE Companies under the WEA Distribution Agreement, as
amended, or any other agreement between WEA and any of the LIVE
Companies. Accordingly, WEA shall look solely to the undersigned
for the performance and discharge of such obligations and
liabilities.
Any payment to Foothill by WEA of the Assigned Receipts
shall discharge WEA in full of its obligation to pay such
Assigned Receipts to the undersigned, and the undersigned hereby
agree to indemnify WEA with respect to any claims asserted
against WEA relating to WEA's compliance herewith,
notwithstanding WEA's receipt of any conflicting claim or notice
from any third party that it is entitled to receive any portion
of the Assigned Receipts.
WEA shall promptly provide Foothill with duplicates of
all statements relating to the payment of all Assigned Receipts.
The undersigned shall have not authority whatsoever,
without the prior written consent of Foothill to amend, alter,
modify or waive, or consent to any amendment, alteration,
modification or waiver of, any provision of the WEA Distribution
Agreement, as amended, or any other agreement with WEA which
would materially and adversely affect the amount, time of
payment, conditions to payment or the collectibility of the
Assigned Receipts.
This authority and instruction is coupled with an
interest and may not be revoked or altered without the prior
consent in writing of Foothill.
Please acknowledge your agreement to the foregoing by
signing the enclosed duplicate copy of this Notice of Assignment
and Irrevocable Authority and returning it as soon as possible to
Foothill Capital Corporation, 11111 Santa Monica Blvd, Suite
1500, Los Angeles, California 90025-3333, Attention: Business
Finance Division Manager (Telefacsimile No. (310) 479-2690).
LIVE HOME VIDEO INC.
By_________________________________
Title:______________________________
LIVE AMERICA INC.
By_________________________________
Title:______________________________
LIVE FILM AND MEDIAWORKS INC.
By_________________________________
Title:______________________________
VESTRON INC.
By_________________________________
Title:______________________________
Acknowledged and agreed to:
WEA Corp.,
a New York corporation
By:_________________________
Its:________________________
Date: November ___, 1994
NOTICE OF INVENTORY ACCESS RIGHTS
TO: WEA Corp.
FROM: LIVE Home Video Inc., LIVE Film and Mediaworks Inc.
(formerly known as International Video Productions
Inc.), LIVE Entertainment International Inc., LIVE
America Inc. and Vestron Inc.
DATE: November 16, 1994
RE: Grant of Security Interest in Inventory and
Inventory Access Rights
Gentlemen:
Pursuant to that certain Amended and Restated Loan and
Security Agreement, dated as of November 14, 1994 (the "Loan
Agreement"), by and among Foothill Capital Corporation
("Foothill") and LIVE Home Video Inc., LIVE Film and Mediaworks
Inc. (formerly known as International Video Productions Inc.),
LIVE Entertainment International Inc., LIVE America Inc. and
Vestron Inc. (collectively, the "LIVE Companies"), the LIVE
Companies have granted to Foothill a security interest in and to
all of the Inventory of the LIVE Companies (as defined on
Exhibit A attached hereto).
As required by the terms of the Loan Agreement, you are
hereby requested to agree as follows:
1. You acknowledge receipt of notice that Foothill
has a security interest in all of the Inventory of the LIVE
Companies including all such Inventory now or hereafter located
at your facilities and/or in your possession or control.
2. However, notwithstanding the security interest of
Foothill in the Inventory of the LIVE Companies, until receipt by
you of written instructions from Foothill to the contrary, you
may sell and deliver all or any part of such Inventory in the
ordinary course of business.
3. Upon receipt of a written notice from Foothill,
you shall no longer sell or deliver any of such Inventory (other
than to fulfill committed orders). After receipt of such notice
from Foothill, such Inventory may only be delivered by you
pursuant to instructions from Foothill.
4. You shall, upon Foothill's request, deliver to
Foothill any and all of the Inventory of the LIVE Companies
(other than Inventory to fulfill committed orders).
5. You will not look to Foothill nor assert any claim
or lien against Foothill or any of the Inventory of the LIVE
Companies by reason of any labor, services or materials which you
have in the past or may in the future perform for or furnish to
the LIVE Companies.
6. Foothill shall not be responsible for any charges,
except for labor, services and materials ordered by Foothill on
behalf of Foothill.
7. You will not refuse to honor any of Foothill's
orders or instructions by reason of any unpaid amounts owed by
the LIVE Companies.
8. If all or any of the Inventory of the LIVE
Companies at your facilities and/or in your possession or control
is protected by insurance carried by you, any proceeds received
from such insurance as a result of any loss to any such
Inventory, shall be paid directly to Foothill.
This authority and instruction is coupled with an
interest and may not be revoked or altered without the prior
consent in writing of Foothill.
Please acknowledge your agreement to the foregoing by
signing the enclosed duplicate copy of this Notice of Inventory
Access Rights and returning it as soon as possible to Foothill
Capital Corporation, 11111 Santa Monica Blvd, Suite 1500, Los
Angeles, California 90025-3333, Attention: Business Finance
Division Manager (Telefacsimile No. (310) 479-2690).
LIVE HOME VIDEO INC.
By_________________________________
Title:______________________________
LIVE FILM AND MEDIAWORKS INC.
By_________________________________
Title:______________________________
LIVE ENTERTAINMENT INTERNATIONAL INC.
By_________________________________
Title:______________________________
LIVE AMERICA INC.
By_________________________________
Title:______________________________
VESTRON INC.
By_________________________________
Title:______________________________
Acknowledged and agreed to:
WEA Corp.,
a New York corporation
By:_________________________
Its:________________________
Date: November 16, 1994<PAGE>
Exhibit A
"Inventory" means all present and future inventory in
which a LIVE Company has any interest, including goods held for
sale or lease or to be furnished under a contract of service and
all of such company's present and future raw materials, work in
process, finished goods, videocassettes, and packing and shipping
materials, wherever located, and any documents of title
representing any of the above, Inventory constituting "WEA
Collateral" as defined in that certain Intercreditor Agreement of
even date herewith between WEA and Foothill.
INTERCREDITOR AGREEMENT
THIS INTERCREDITOR AGREEMENT ("Agreement") is entered
into effective as of the 16th day of November, 1994 by FOOTHILL
CAPITAL CORPORATION, a California corporation ("Foothill"), and
WEA Corp., a New York corporation ("WEA"), with reference to the
following facts:
R E C I T A L S
A. Pursuant to that certain Amended and Restated Loan
and Security Agreement, dated as of November 14, 1994, (the "Loan
Agreement"), among LIVE HOME VIDEO INC., LIVE FILM AND MEDIAWORKS
INC. (formerly known as INTERNATIONAL VIDEO PRODUCTIONS INC.),
LIVE ENTERTAINMENT INTERNATIONAL INC., LIVE AMERICA INC., and
VESTRON INC. (collectively referred to hereinafter as the
"Borrowers") and Foothill, Foothill has extended certain credit
to the Borrowers and their affiliates which extensions of credit
are secured by a first priority security interest in and to all
of the assets and property of the Borrowers and their affiliates
(the "Foothill Collateral").
B. WEA and LIVE Home Video Inc., LIVE America Inc.,
LIVE Distributing Inc., Vestron Inc. and LIVE Film and Mediaworks
Inc. (formerly known as International Video Productions, Inc.)
(collectively, "LIVE") have entered into that certain License and
Distribution Agreement dated as of May 11, 1992, as amended (the
"Distribution Agreement"), pursuant to which, among other things,
WEA has advanced $20,000,000 (the "Advance") to LIVE, the
outstanding balance of which was $4,444,445 as of October 31,
1994, which such Advance is chargeable against and being recouped
by deduction in computing the "Net Proceeds" in determining
royalty payments due LIVE, arising from WEA's sale of
Videocassettes for Home Use embodying Company Product throughout
the Territory and during the Term (as each is defined in the
Distribution Agreement) and pursuant to a Security Agreement
dated the same date between LIVE and WEA (the "Security
Agreement"), WEA has been granted a security interest in certain
of LIVE's rights to manufacture, distribute and exploit in the
Territory Videocassettes for Home Use relating to the titles
listed on Schedule A to the Security Agreement and certain
related rights, all as more specifically described in the
Security Agreement (the "WEA Collateral"). Capitalized terms not
defined herein shall have the same meanings as in the Security
Agreement.
C. The Foothill Collateral includes all of the WEA
Collateral and the parties recognize and agree that they will
benefit from the transactions contemplated in the Distribution
Agreement and in the Loan Agreement, and to that end, desire
pursuant to this Agreement to agree on various matters relating
to their respective security interests in the Foothill Collateral
and the WEA Collateral.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the
following is hereby agreed to by the parties:
1. Acknowledgment and Consent. Foothill acknowledges
that, pursuant to the Security Agreement, LIVE has granted to
WEA, as security for repayment of the Advance (as defined in the
Distribution Agreement), interest thereon and certain other
amounts payable under the Security Agreement, a security interest
in and to the WEA Collateral. Foothill hereby acknowledges and
consents to LIVE entering into the Distribution Agreement and the
Security Agreement and the foregoing grant by LIVE to WEA of a
security interest in and to the WEA Collateral. WEA acknowledges
that, pursuant to the Loan Agreement, the Borrowers and their
affiliates have granted to Foothill, as security for payment of
the Obligations (as defined in the Loan Agreement), a security
interest in and to the Foothill Collateral. WEA hereby
acknowledges and consents to the Borrowers entering into the Loan
Agreement and the foregoing grant by the Borrowers and their
affiliates to Foothill of a security interest in and to the
Foothill Collateral.
2. Priority of Security Interest.
(a) Notwithstanding (i) any contrary provision of
the Loan Agreement, (ii) any priority in time of creation,
attachment or perfection of a security interest on, pledge of, or
mortgage, lien or other encumbrance on the WEA Collateral by
either WEA or Foothill, or (iii) any provision of, or filing or
recording under, the Uniform Commercial Code of any state (the
"UCC"), Title 15 or Title 17 of the United States Code or any
applicable statute, rule or regulation of the United States, the
states thereof, their counties, municipalities or other
subdivisions, or any other applicable jurisdiction, Foothill
hereby agrees, that any security interest, pledge, mortgage,
lien, charge or other encumbrance granted to WEA in and to the
WEA Collateral in order to secure the repayment of the Advance is
and shall be superior and prior in right to any security
interest, pledge, mortgage, lien, charge or other encumbrance of
Foothill, whether now existing or hereafter created, in and to
any or all of the WEA Collateral, regardless of the time WEA,
Foothill or LIVE shall acquire rights to any of the WEA
Collateral, in accordance with this Agreement. Notwithstanding
the foregoing, Foothill is not subordinating any security
interest it may acquire at any time in LIVE's rights under the
Distribution Agreement (including, without limitation, to any
contract rights and accounts receivable thereunder and proceeds
in respect thereof) to the extent such rights are not a part of
the WEA Collateral (or any Foothill Collateral other than the WEA
Collateral). WEA hereby acknowledges, subject only to the terms
and provisions of this Agreement, that Foothill has a first
priority security interest in and to the Foothill Collateral and
that WEA has no security interest in the Foothill Collateral
other than the WEA Collateral.
(b) Foothill absolutely, unconditionally and
irrevocably agrees that the subordination of Foothill's security
interest or other encumbrances, in and to the WEA Collateral
shall continue without termination until the full, irrevocable
and complete satisfaction of the Secured Obligations (as defined
in the Security Agreement), and said subordination shall apply
without limitation with respect to any security interest, charge,
pledge, mortgage, lien or other encumbrance, heretofore or
hereafter granted to Foothill in all or any part of the WEA
Collateral, whether now owned or hereafter acquired.
3. Foreclosure by WEA. WEA agrees to give Foothill
ten (10) business days' written notice prior to exercising any
right of foreclosure under the Security Agreement. Within said
ten (10) business day period, Foothill will have the right to pay
WEA the full amount of the then owing Secured Obligations and
thereby become subrogated to WEA's security interest and rights
in the WEA Collateral. In the event Foothill determines not to
take such action and WEA institutes a foreclosure sale of the WEA
Collateral, the high bidder at such sale (including WEA) shall
take the WEA Collateral free and clear of any and all claims and
interests of Foothill; provided, however, if WEA acquires the WEA
Collateral at such sale it shall be bound by the provisions of
subsection 7(b)(2) of the Security Agreement. Any amount
received by WEA at the foreclosure sale in excess of the amount
of the then owing Secured Obligations shall be remitted to
Foothill. WEA further agrees that in the event Foothill is no
longer a party to this Agreement, the rights of Foothill under
this Section 3 shall inure to LIVE.
4. Action by Foothill.
(a) Notwithstanding any foreclosure by Foothill
or any other enforcement action taken by Foothill against the
Foothill Collateral, including the WEA Collateral (including,
without limitation, the exercise by Foothill of any right, power
or remedy with respect to the WEA Collateral under Title 15 or
Title 17 of the United States Code or the Uniform Commercial Code
of any jurisdiction), Foothill shall permit WEA, to exercise its
distribution and recoupment right in respect of the WEA
Collateral under the Distribution Agreement (provided that WEA is
not in Default thereunder) and Foothill shall, in such event, to
the extent possible under existing law, cause any purchaser of
the WEA Collateral to acknowledge the foregoing (and the
continuing security interests of WEA in and to the WEA Collateral
to secure such distribution and recoupment rights under the
Distribution Agreement) in writing. Foothill further agrees that
so long as WEA is not in Default under the Distribution
Agreement, Foothill will not interfere with or invoke or utilize
any law that might prevent, cause a delay in, or impede the
performance or enforcement of, any right of WEA under the
Distribution Agreement. Nothing herein shall be deemed to
preclude the exercise by Foothill of its rights as secured party
at any time.
(b) In the event of a bankruptcy of LIVE,
provided the Secured Obligations are not satisfied in full and
WEA has not terminated the Distribution Agreement nor is in
continuing Default (as defined thereunder), Foothill agrees that
it will: (i) not seek or support the rejection of the
Distribution Agreement; (ii) not vote in favor of a Chapter 11
plan which does not provide for the continuation of the
Distribution Agreement for its term; and (iii) in the event the
Distribution Agreement is rejected over WEA's objection and
Foothill succeeds to all or any portion of the rights licensed to
WEA under the Distribution Agreement, license all such rights to
WEA on substantially the same terms provided in the Distribution
Agreement for the remaining term specified therein.
5. Release of the Collateral.
(a) Upon LIVE's full and complete satisfaction of
the Secured Obligations, WEA's security interest in the WEA
Collateral shall terminate and WEA will execute promptly
following its receipt from LIVE UCC termination statement(s)
and/or a termination of mortgage of copyright with respect
thereto. Pursuant to the Security Agreement, LIVE will pay all
reasonable costs and expenses incident to the preparation,
recordation and/or filing of any such termination instrument(s).
In the event of a foreclosure sale by WEA under Paragraph 3
above, Foothill agrees to execute any and all documents necessary
to evidence the termination of Foothill's security interest in
that part of the Foothill Collateral comprising the WEA
Collateral.
(b) In the event WEA exercises its right to
purchase the Inventory of LIVE pursuant to Section 8 of the
Security Agreement, Foothill hereby agrees to release and
terminate its security interest in such Inventory, upon receipt
by Foothill of the applicable purchase price as determined under
Section 8 of the Security Agreement.
6. Representations and Warranties. Foothill and WEA
each represent and warrant as to itself that it has all necessary
power and has taken all action necessary to make this Agreement,
upon its execution, the valid, binding and enforceable obligation
of each party.
7. Modifications. No modification, amendment or
waiver of any provisions of this Agreement shall in any way be
effective unless the same shall be in writing and signed by all
of the parties hereto.
8. Further Assurances. Each of the parties hereto
agrees to execute and deliver such further instruments and
agreements and to take such further actions as the other party
hereto may at any time or times reasonably request, including
such documents as may be necessary under the UCC of any state, in
order to carry out the provisions and intent of this Agreement.
9. Notices. All notices, requests, demands or other
communications hereunder shall be in writing and shall be deemed
to have been duly given if telecopied and acknowledged by
telecopy or delivered by messenger or courier delivery, or sent
by U.S. mail postage prepaid, by certified or registered U.S.
mail as set forth below or at such other address as may be
furnished in writing. WEA agrees to send Foothill and its
counsel courtesy copies of all notices sent pursuant to the
Security Agreement.
If to WEA Corp. WEA Corp.
111 North Hollywood Way
Burbank, California 91505
Attn: John T. O'Connell
With a copy to: Warner Music Group, Inc.
75 Rockefeller Plaza
New York, New York 10019
Attn: Fred Wistow, Esq.
If to Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Business Finance Division
Manager
10. Transferees, Successors and Assignees. All terms
and provisions of this Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective
transferees, successors and assignees.
11. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall constitute an
original and all of which when taken together shall constitute
one and the same instrument.
12. Severability. Each provision of this Agreement
shall be interpreted in such manner as to make such provision
valid and enforceable under applicable law, but if any provisions
hereof shall be or become prohibited or invalid under any
applicable law, such provisions shall be ineffective to the
extent of such prohibition or invalidity only, without thereby
invalidating the remainder of such provision or any of the
remaining provisions hereof.
13. Headings; Interpretation. Paragraph or other
headings contained in this Agreement are for reference purposes
only and should not affect in any way the meaning or
interpretation of this Agreement.
14. Integration. This Agreement sets forth the entire
agreement and understanding of the parties concerning the subject
matter of this Agreement and supersedes all prior agreements,
arrangements and understandings regarding such subject matter
between the parties hereto and may not be modified except by
written instrument signed by the parties hereto.
15. Governing Law and Attorneys' Fees. This Agreement
shall be governed by and construed in accordance with the laws of
the State of California. The parties agree that any matter
arising under this Agreement may be adjudicated in any court or
courts of the State of California or of the United States of
America, in California, and the parties hereby submit themselves
generally and unconditionally to the jurisdiction of such courts
in respect to any such matter and consent to service of process
by any means authorized by California law. The prevailing part
in any dispute, action or proceeding arising out of this
Agreement shall be entitled to recover its reasonable attorneys'
fees and costs and expenses incurred in such dispute, action or
proceeding.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the date first set forth above.
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By_________________________________
Title:______________________________
"WEA"
WEA Corp.
a New York corporation
a California corporation
By_________________________________
Title:______________________________
Acknowledged:
LIVE HOME VIDEO INC.,
a Delaware corporation
By_________________________________
Title:______________________________
LIVE FILM AND MEDIAWORKS INC.,
a California corporation
By_________________________________
Title:______________________________
LIVE ENTERTAINMENT
INTERNATIONAL INC.,
a Delaware corporation
By_________________________________
Title:______________________________
LIVE AMERICA INC.,
a Delaware corporation
By_________________________________
Title:______________________________
VESTRON INC.,
a Delaware corporation
By_________________________________
Title:______________________________
TRUSTEE INTERCREDITOR AGREEMENT
THIS TRUSTEE INTERCREDITOR AGREEMENT ("Intercreditor
Agreement") is entered into as of November 16, 1994, by and between
FOOTHILL CAPITAL CORPORATION, a California corporation
("Foothill"), and AMERICAN STOCK TRANSFER & TRUST COMPANY, in its
capacity as Trustee and Collateral Trustee under the below-defined
Indenture (the "Trustee"), with reference to the following facts:
A. LIVE Home Video Inc., a Delaware corporation
("LHV"), certain other Borrowers and LIVE Entertainment Inc., a
Delaware corporation ("LIVE"), are indebted to Foothill pursuant to
the Foothill Documents.
B. LIVE has issued $40,000,000 of Increasing Rate
Secured Senior Subordinated Notes due 1999 pursuant to the
Indenture. The obligations of LIVE under the Indenture are secured
by a second priority Lien on the Stock Collateral pursuant to the
Trustee Pledge Agreement, subject to the first priority Lien
thereon of Foothill.
C. The parties hereto desire to enter into this
Intercreditor Agreement in order to clarify the relative priorities
of the Liens on the Stock Collateral which have been or will be
granted on such Stock Collateral pursuant to the Foothill Documents
and the Indenture Documents, and to provide for the exercise or
non-exercise of certain rights, remedies and options with respect
to the Stock Collateral by the parties hereto.
NOW, THEREFORE, in consideration of the foregoing and the
mutual covenants and agreements hereinafter set forth, the parties
hereto hereby agree as follows:
1. Definitions. As used herein, the following terms
shall have the meanings set forth below:
"Affiliate" shall mean, when applied to any Person,
(a) any director or officer of that Person and any shareholder
owning 10% (or more) of any class of equity securities of that
Person; (b) any other Person directly or indirectly controlling,
controlled by or under common control with that Person; (c) any
director or officer of such other Person and any shareholder owning
10% (or more) of any class of equity securities of such other
Person, and (d) any family member of any of the foregoing; and
under no circumstance shall Foothill or any Affiliate of Foothill
be deemed an Affiliate of any Obligor solely because of such
relationship. For the purposes of this definition, the term
"control" (and, with corresponding meanings, the terms
"controlling", "controlled by" and "under common control with"), as
applied to any Person, shall mean ownership of ten percent (10%)
(or more) of any class of equity securities of that Person or the
possession, directly or indirectly, of the power to direct or cause
the direction of the management and policies of that Person,
whether through the ownership of voting Securities, by contract or
otherwise. A general partner of a partnership shall be deemed to
have "control" of that partnership.
"Applicable Law" shall mean, with respect to any Person
or its properties or operations, the applicable provisions of all
(a) constitutions, statutes, rules, regulations, orders, guidelines
and requests of governmental authorities; (b) governmental permits
and approvals; (c) orders, decisions, judgments and decrees of
courts and arbitrators, and (d) deed restrictions and restrictive
covenants affecting real property.
"Borrowers" shall mean LHV, LIVE Film and Mediaworks Inc.
(formerly known as International Video Productions Inc.), a
California corporation, LIVE Entertainment International Inc., a
Delaware corporation, LIVE America Inc., a Delaware corporation,
and Vestron Inc., a Delaware corporation and such other Persons as
become parties to Foothill Documents.
"Collateral" shall mean all collateral now or hereafter
pledged as security for the Foothill Obligations pursuant to the
Foothill Documents, which includes, without limitation, the Stock
Collateral.
"Collection, Enforcement or Credit Enhancement
Activities" shall mean, with respect to any Person, any litigation,
self help, judicial or non-judicial foreclosure, pre- or
post-judgment remedy or any other activity, whether judicial or
nonjudicial, undertaken by or on behalf of that Person with or
without the consent of any of the Obligors, for the enforcement of
that Person's rights or the improvement of that Person's collateral
position or its prospects of being repaid in full the obligations
owing or alleged to be owing by any of the Obligors to such Person
when any such payments are otherwise due, including, without
limitation, the commencement of litigation to enforce and/or
collect the Foothill Obligations or the Indenture Obligations, the
commencement of any involuntary case against any of the Obligors
under the Bankruptcy Code, the taking of any guaranty, keep well or
other similar arrangement not now in effect, the exercise of any
right of set off, the taking of any additional collateral, the
acceptance of any property, real or personal, in cancellation of
all or part of any obligation, the requiring of an unscheduled
partial payment on an obligation, the exercise of any right of
subrogation or contribution, and the giving of any Payment Stoppage
Notice (as defined in the Indenture) under the Indenture.
"Foothill" shall mean Foothill Capital Corporation, a
California corporation, and its successors and assigns.
"Foothill Documents" shall mean the Foothill Loan
Agreement and all other "Loan Documents" (as defined in the
Foothill Loan Agreement) heretofore or hereafter executed in
connection with the Foothill Loan Agreement, in each case as
originally executed and as the same may be amended, modified,
supplemented and/or restated from time to time.
"Foothill Loan Agreement" shall mean that certain Amended
and Restated Loan and Security Agreement, dated as of November 14,
1994, as amended, among the Borrowers and Foothill, as the same may
be amended, modified, supplemented and/or restated from time to
time.
"Foothill Obligations" shall mean (a) all Obligations (as
defined in the Foothill Loan Agreement) arising under the Foothill
Loan Agreement and the other Foothill Documents, whether such
Obligations include principal, interest, costs, expenses, fees,
charges, indemnities or otherwise and whether such amounts are due
or not due, direct or indirect, absolute or contingent, and shall
include, without limitation, all amounts which would become due but
for the operation of the automatic stay under Section 362(a) of the
Bankruptcy Code, 11 U.S.C. Section 362(a) and including all interest
accrued or accruing on any Foothill Obligation or under any
Foothill Document after the commencement of any Reorganization, in
accordance with and at the rate (including, without limitation, any
rate applicable upon or default or any "overdue rate") specified in
the agreement or instrument creating, governing or evidencing any
of Foothill Obligations, whether or not pursuant to Applicable Law
or otherwise the claim for such interest is allowed as a claim in
such Reorganization, and (b) all obligations arising from any
refinancing or refunding of any of the foregoing Obligations by any
Person(s) regardless of the terms and conditions thereof.
"Guarantors" shall mean LIVE and LIVE Ventures Inc., a
Delaware corporation.
"Indenture" shall mean that certain Indenture, dated as
of September 1, 1992, as amended as of November 14, 1994, between
LIVE and the Trustee with respect to $40,000,000 of Increasing Rate
Secured Senior Subordinated Notes due 1999, as the same may be
amended, modified, supplemented and/or restated from time to time
with the prior written consent of Foothill.
"Indenture Documents" shall mean the Indenture and the
Trustee Pledge Agreement, and such amendments, modifications and/or
restatements thereto which are consented to in writing by Foothill.
"Indenture Obligations" shall mean the "Obligations"
which are secured by, and as defined in, the Trustee Pledge
Agreement.
"Lien" shall mean any mortgage, deed of trust, pledge,
security interest, encumbrance, lien, charge of any kind or any
other preferential arrangement in the nature of an encumbrance or
security interest, including, without limitation any agreement to
give any of the foregoing, any conditional sale or title retention
agreement and any lease in the nature thereof (including without
limitation, sale-leaseback transactions).
"Obligors" shall mean the Borrowers and the Guarantors.
"Person" shall mean any entity, corporation, company,
association, joint venture, joint stock company, partnership,
trust, organization, individual (including personal
representatives, executors and heirs of a deceased individual),
nation, state, government (including agencies, departments,
bureaus, boards, divisions and instrumentalities thereof), trustee,
receiver or liquidator.
"Reorganization" shall mean, with respect to any Person,
(a) any distribution of the assets of that Person or entity upon
any voluntary or involuntary dissolution, winding up, total or
partial liquidation or reorganization, (b) any bankruptcy or other
action pursuant to the United States Bankruptcy Code, insolvency,
receivership or other statutory or common law proceeding or
arrangement involving that Person, its properties or its
operations, (c) any readjustment of the material obligations,
individually or in the aggregate, of that Person, (d) any
assignment for the benefit of creditors of that person or entity,
or (e) any marshalling of the assets or obligations of that Person.
"Stock Collateral" shall mean all of the issued and
outstanding capital stock of LHV, together with all proceeds,
dividends and products thereof, additions thereto and substitutions
therefor, including, without limitation, all Common Stock Payments
(as defined in the Trustee Pledge Agreement).
"Termination Date" shall mean the date on which (a) all
Foothill Obligations are indefeasibly paid in full in cash (or such
other form of consideration as may be acceptable to Foothill) and
(b) the commitments under the Foothill Documents are terminated.
"Trustee" shall mean American Stock Transfer & Trust
Company, in its capacity as Trustee and Collateral Trustee under
the Indenture, and any successor thereto.
"Trustee Pledge Agreement" shall mean that certain Pledge
and Security Agreement, dated as of March 26, 1993, by and between
LIVE, as pledgor, and the Trustee, as pledgee, as the same may be
amended, modified and/or restated from time to time with the prior
written consent of Foothill.
All other terms not otherwise defined herein or in the Foothill
Loan Agreement relating to any Collateral or Lien shall have the
meanings accorded to them under the Uniform Commercial Code in
effect in the State of New York or other applicable jurisdiction.
2. Priority of Liens.
2.1 Notwithstanding (a) any contrary provision of
any Foothill Document or Indenture Document; (b) the loss of
priority by Foothill to any other creditors or claimants of any of
the Obligors; (c) the invalidity of any Lien of Foothill on any of
the Collateral, including, without limitation, the Stock
Collateral; (d) any priority in time of creation, attachment or
perfection of any Lien on the Collateral, including, without
limitation, the Stock Collateral, in favor of Foothill, 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 of 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 Foothill that any Liens
heretofore or hereafter granted to Foothill on the Stock Collateral
shall be senior, superior and prior in operation and effect to any
Liens heretofore or hereafter granted to the Trustee on the Stock
Collateral regardless of the time LIVE, any of the other Obligors
or Foothill acquired or shall acquire any rights to the Stock
Collateral, and that any Liens heretofore or hereafter granted to
the Trustee on the Stock Collateral shall be subordinate, junior
and inferior to any Liens of Foothill on the Stock Collateral. The
Trustee acknowledges and agrees that the Trustee has no security
interest in the Collateral other than that portion of the
Collateral which consists of the Stock Collateral. The Trustee
agrees that if the Trustee is hereafter granted a security
interest, pledge, Lien or other encumbrance in all or any part of
the Collateral whether now owned or hereafter acquired by LIVE
(with the prior written consent of Foothill), then any such
security interest, pledge, Lien or other encumbrance shall be
subordinate, junior and inferior to any Liens of Foothill on such
additional collateral. Further, the Trustee represents and
warrants to Foothill that the Liens of Foothill on the Stock
Collateral do not violate any term or provision of any of the
Indenture Documents. The Trustee shall not, whether in a
Reorganization proceeding, any Collection, Enforcement or Credit
Enhancement Activity or otherwise, challenge the validity,
perfection or priority of the Liens of Foothill on the Collateral,
including without limitation, the Stock Collateral, or challenge
the relative priority thereof established by this Section 2.1.
2.2 The Trustee hereby agrees that the Trustee's
subordination of its Liens on the Stock Collateral to the Liens of
Foothill thereon shall be effective as of the date any such Lien of
the Trustee attached or attaches and shall continue without
termination until the Termination Date.
3. Priority of Payments.
The Trustee further hereby agrees that the Indenture
Obligations are expressly junior and subordinate in right of
payment to the prior indefeasible payment and performance in full
in cash of the Foothill Obligations, in accordance with the
provisions of Article Ten of the Indenture. The Trustee hereby
agrees that the terms of such Article Ten are hereby incorporated
herein by this reference as though set forth herein in full, in
each case in favor of Foothill with respect to the Foothill
Obligations.
The foregoing provisions shall not constitute a
waiver by Foothill of the performance or observance by the
Borrowers of any agreement of the Borrowers contained in any of the
Foothill Documents.
4. Amendments to Underlying Documents.
4.1 The Trustee hereby agrees that, with or without
notice to the Trustee or any holder of any of the securities of
LIVE issued under the Indenture, Foothill may in any manner
supplement, amend, modify, compromise, accelerate, extend or
otherwise change the time or manner of payment of the Foothill
Obligations; increase or otherwise change the principal amount of
the Foothill Obligations, provided that the principal amount of the
Foothill Obligations does not exceed $100,000,000; increase or
reduce the rate of interest thereon or fees with respect thereto;
amend or otherwise modify any Foothill Document, respectively;
enter into any agreement, approval or consent to any action on the
part of any Obligor or any Affiliate or Subsidiary thereof
(including, without limitation, the sale of the Stock Collateral or
any portion thereof by any Obligor or any Affiliate or Subsidiary
thereof); grant any waiver or forbearance of any provision of or
any default under any Foothill Document, any Foothill Obligation or
any security or guaranty now or hereafter held therefor; release or
exchange any security held therefor; receive and hold additional
security or guaranties for any Foothill Obligation; add or release
any one or more obligors with respect to any Foothill Obligation;
or consent to any amendment or modification or change to any of the
Foothill Documents or, except as provided in the Indenture, the
Indenture Documents; provided that any such supplement, amendment,
modification, compromise, acceleration, extension or change does
not alter the status of the Foothill Obligations as Senior Debt (as
defined in the Indenture) under the Indenture. No such supplement,
amendment, modification, compromise, acceleration, extension of or
change to, any Foothill Obligation or any Foothill Document; no
increase or other change in the principal amount of the Foothill
Obligations (except as provided above) or the rate of interest
thereon or fees with respect thereto; no exercise or non-exercise
by Foothill of any right thereby given to it; no dealing by
Foothill with the Obligors or any of their Affiliates or
Subsidiaries; no consent by Foothill to any action on the part of
any Obligor or any Affiliate or Subsidiary thereof (including,
without limitation, the sale of the Stock Collateral, or any
portion thereof by any Obligor or any Affiliate or Subsidiary
thereof); no waiver or forbearance of any provision of or any
default under any Foothill Document; no change, impairment or
suspension of any right or remedy of Foothill; and no consent to
any amendment, modification or change to any of the Foothill
Documents or the Indenture Documents shall in any way affect the
seniority, superiority and priority of the Liens of Foothill on the
Stock Collateral, and the Trustee waives any rights to the
contrary.
4.2 The Trustee hereby agrees that, without the
prior written consent of Foothill, which Foothill may grant or
withhold in its sole and absolute discretion, the Trustee shall not
(a) amend the Indenture, the Trustee Pledge Agreement, or any other
Indenture Document after the date hereof in any manner that would
adversely affect the Foothill Obligations or the rights of
Foothill, or (b) demand, accept, receive or retain (i) any direct
or indirect additional collateral or security whatsoever for the
Indenture Obligations except for the Stock Collateral, or (ii) any
guarantee or other credit support.
5. Exercise of Rights. Until the Termination Date:
5.1 Foothill shall be permitted and is hereby
authorized to take any and all actions and to exercise any and all
rights, remedies and options which it may have under the Foothill
Documents or Applicable Law and to sell or otherwise realize upon
the Collateral, including, without limitation, the Stock
Collateral, or any portion thereof. The Trustee shall promptly
execute any and all release documents as may be requested by
Foothill in connection with any sale of the Stock Collateral or any
portion thereof and hereby agrees that, except as provided in
Section 6 hereof, Foothill shall have no obligation, liability or
responsibility to the Trustee in exercising any of its rights,
remedies or options or otherwise in dealing in or with all or any
part of the Foothill Obligations or the Collateral, including,
without limitation, the Stock Collateral or any portion thereof.
Without limiting the generality of the foregoing, upon the
occurrence and during the continuance of any event of default under
the Foothill Documents, Foothill shall not be required to proceed
against any of the Obligors, the Collateral or any other property
which may be pledged and assigned to Foothill under the Foothill
Documents or to pursue any other remedy before proceeding against
the Stock Collateral.
5.2 Except as provided in Section 5.3(a) hereof,
the Trustee shall not commence, join in or participate in any way
or cause any other Person to commence, join in or participate in
any way in any Collection, Enforcement or Credit Enhancement
Activity against the Stock Collateral or the exercise of any of the
rights, remedies or options which may be granted to it under any
Indenture Document with respect to the Stock Collateral including,
without limitation, exercise any voting rights or the right to
receive any Common Stock Payments (as defined in the Trustee Pledge
Agreement), as provided in Section 3 of the Trustee Pledge
Agreement. The Trustee shall notify Foothill of the occurrence of
any Default or Event of Default (as defined in the Indenture) in
writing within ninety (90) days of the Trustee's knowledge thereof,
but in any event, no later than notice thereof is delivered to the
Holders (as defined in the Indenture) under the Indenture.
Foothill shall have no obligation to cure any such Event or Event
of Default (as defined in the Indenture), and except as provided in
Section 5.3(a) hereof, no such acceleration shall permit the
Trustee to commence, join in or participate in any way in any
Collection, Enforcement or Credit Enhancement Activity against the
Stock Collateral or exercise any of the rights, remedies or options
which may be granted to it under any Indenture Document with
respect to the Stock Collateral, including, without limitation, the
exercise of any voting rights or the right to receive any Common
Stock Payments (as defined in the Trustee Pledge Agreement), as
provided in Section 3 of the Trustee Pledge Agreement.
5.3 Without limiting the generality of the
foregoing, Foothill may conduct any and all Collection, Enforcement
or Credit Enhancement Activities against any of the Obligors and
any of their Affiliates or Subsidiaries or with respect to the
Collateral, including, without limitation the Stock Collateral, as
it deems advisable, in its sole and absolute discretion, and the
Trustee shall not (a) commence, join in or participate in any way,
or cause any other Person to commence, join in or participate in
any way in any Collection, Enforcement or Credit Enhancement
Activity against any of the Obligors or any of their Affiliates or
Subsidiaries (except any claim against LIVE for nonpayment of the
Indenture Obligations commenced after expiration of the applicable
Payment Stoppage Period (as defined in the Indenture), provided
that the Trustee shall not be permitted to accept or receive
payment of any judgment with respect thereto except in accordance
with the terms of Section 3 hereof) or with respect to any of the
Stock Collateral available to the Trustee, including, without
limitation, exercise any rights under the Uniform Commercial Code
of any jurisdiction, or (b) vote, in its capacity as secured
creditor, in any Reorganization of LIVE or any Affiliate or
Subsidiary thereof, in any manner which Foothill in its discretion,
determines to be contrary to the interests of Foothill in the Stock
Collateral, unless approved by Foothill in writing.
5.4 Except as provided in Section 5.3(a) hereof,
the Trustee shall not interfere with, or invoke or utilize any
Applicable Law that might prevent, cause a delay in or impede the
performance or enforcement of, any right of Foothill under the
Foothill Documents or the Indenture Documents. Moreover, the
Trustee hereby agrees that it will not at any time take any action
or exercise any right, at law, in equity or otherwise, so as to
disturb, prevent or impede or otherwise interfere with the Stock
Collateral.
5.5 All demands of performance, advertisements,
notices of default, sale or retention, as well as the presence of
the Stock Collateral or any portion thereof at any sale and the
constructive possession of the Stock Collateral or any portion
thereof by Foothill conducting any sale thereof are hereby
specifically waived by the Trustee to the extent permitted by law,
except only that Foothill shall give the Trustee ten (10) days'
prior notice of the time and place of any public sale of the Stock
Collateral, or the time after which a private sale of the Stock
Collateral may be made, which notice the Trustee hereby agrees to
be reasonable.
Furthermore, the Trustee agrees that the following
shall be deemed commercially reasonable in compliance with
Section 9504(3) of the Uniform Commercial Code of any applicable
jurisdiction: After the occurrence and during the continuance of
an event of default under the Foothill Documents, Foothill may
apply, set off, collect or sell in one or more sales the whole or
any part of the Stock Collateral or any portion thereof in such
order as Foothill elects; any such sale may be public or private
and conducted at Foothill's place of business or at any other place
deemed in good faith by Foothill to be commercially reasonable; any
such sale may be either for cash, notes or property upon credit for
future delivery, and at such price or prices as Foothill in good
faith considers fair; any such sale may be conducted by an officer
or agent of Foothill who may deliver possession of the Stock
Collateral or any portion thereof so sold to the purchaser or
purchasers thereof; Foothill, in its own right and free from any
claim of LIVE or the Trustee or the holders of any of the
securities of LIVE issued under the Indenture (other than as to the
application of proceeds as set forth in Section 6 hereof) and from
any right of redemption, may purchase and hold any of the Stock
Collateral or any portion thereof at any such sale; and Foothill
shall be authorized at any such sale, should it deem it advisable
to do so, to restrict the prospective bidders or purchasers to
Persons who shall have obtained all necessary authorizations and
approvals of any applicable federal, state or local regulatory
agency, authority or instrumentality necessary to purchase the
Stock Collateral, or any portion thereof, or to conduct the
business activities for which the Stock Collateral, or any portion
thereof, is intended, as the successor-in-interest of LIVE or any
other Obligors, or, alternatively, to condition the closing of the
sale to the successful bidder or prospective purchaser upon the
subsequent obtaining of all such authorizations and approvals.
Foothill shall not be obligated to make any sale of the Stock
Collateral or any portion thereof if it shall determine not to do
so, regardless that a notice of sale of such Stock Collateral or
any portion thereof may have been given. Foothill may adjourn any
public or private sale or cause the same to be adjourned from time
to time by announcement at the time and place fixed for sale, and
such sale may, without further notice be made at the time and place
to which the same was so adjourned. If a sale of any of the Stock
Collateral or any portion thereof is made on credit or for future
delivery, the Stock Collateral or any portion thereof so sold may
be retained by Foothill until the selling price is paid in full by
the purchaser thereof, but Foothill shall have no liability in the
event the purchaser thereof fails to take up and pay for the Stock
Collateral or any portion thereof so sold. In case of any such
failure, such Stock Collateral or portion thereof may be resold in
such manner as Foothill deems appropriate. The Trustee hereby
waives to the extent permitted by Applicable Law any claims against
Foothill arising by reason of the fact that the price at which the
Stock Collateral or any portion thereof may be sold at such a
private sale is less than the price which might be obtained at a
public sale or less than the aggregate amount of the Foothill
Obligations even if Foothill accepts the first offer received and
does not offer such Stock Collateral or any portion thereof to more
than one offeree.
6. Application of Proceeds of Stock Collateral. The
proceeds of any sale, distribution or other realization by
(a) Foothill, or (b) the Obligors (if consented to in writing by
Foothill in its sole and absolute discretion) upon the Stock
Collateral shall be applied in the following order of priority:
(a) First, to Foothill in an amount equal to the
unpaid amount of all Foothill Obligations;
(b) Second, to the Trustee in an amount equal to
the unpaid amount of all Indenture Obligations which are then due
and payable; and
(c) Third, any surplus then remaining shall be paid
to LIVE or otherwise as any court of competent jurisdiction may
direct.
7. Disclaimers, Etc.
7.1 Foothill shall have no duties or
responsibilities to the Trustee or any holder of any of the
securities of LIVE issued under the Indenture except those
expressly set forth in this Intercreditor Agreement, and Foothill
shall not by reason of this Intercreditor Agreement or for any
other reason be an agent or trustee for any of such Persons or any
successor-in-interest thereto or have any fiduciary obligation to
any of such Persons or any successor-in-interest thereto (including
any obligation under the Trust Indenture Act of 1939, as amended).
Foothill shall not be responsible to the Trustee or any holder of
any of the securities of LIVE issued under the Indenture or any
successor-in-interest thereto for any recitals, statements,
representations or warranties contained in this Intercreditor
Agreement, any of the Foothill Documents, the Indenture Documents
or any other agreements or instruments executed and delivered by
LIVE or any of the other Obligors, or for the authenticity,
accuracy, completeness, value, validity, effectiveness,
genuineness, enforceability or sufficiency of any of the foregoing
or any other document referred to or provided for therein or any
Lien under any Indenture Document or the perfection or priority of
any such Lien or for any failure by LIVE or any other Obligor to
perform any of the Indenture Obligations.
7.2 Anything contained in this Intercreditor
Agreement to the contrary notwithstanding, Foothill shall not be
required to take any action that is in its opinion contrary to
Applicable Law or any of the terms of this Intercreditor Agreement
or any of the Foothill Documents, or which would in its opinion
subject it or any of its directors, officers, employees, agents or
counsel to liability, and Foothill shall not be required to take
any action under this Intercreditor Agreement unless and until
Foothill shall be indemnified to its satisfaction by the Obligors
against any and all losses, costs, expenses or liabilities in
connection therewith.
8. Waiver of Disclosures. The Trustee hereby waives
any duty on the part of Foothill, as agent, lender, or secured
party under the Foothill Documents or this Intercreditor Agreement,
to disclose to it any facts Foothill may now know or may hereafter
know about any of the Obligors or their respective Affiliates or
Subsidiaries or the Collateral, including, without limitation, the
Stock Collateral regardless of whether Foothill (a) has reason to
believe that any such facts materially increase the risk which the
Trustee intends to assume by executing this Intercreditor
Agreement, (b) has reason to believe that these facts are unknown
to the Trustee, or (c) has a reasonable opportunity to communicate
such facts to the Trustee, it being understood and agreed that the
Trustee is fully responsible for being and keeping informed of the
financial condition of the Obligors and their respective
Subsidiaries and Affiliates and of all circumstances bearing on the
risk of nonpayment or nonperformance of the Foothill Obligations.
9. No Third Party Beneficiaries. Nothing in this
Intercreditor Agreement, express or implied, is intended or shall
be construed to confer upon any Person (including, without
limitation, the holders of the securities of LIVE issued under the
Indenture), other than the parties hereto, and their respective
successors and assigns any right, remedy or claim by reason of this
Intercreditor Agreement or any covenant, condition or stipulation
hereof, all of which shall be for the sole and exclusive benefit of
the parties hereto, and their respective successors and assigns.
The Trustee shall have the sole authority to exercise any rights,
remedies or claims by reason of this Intercreditor Agreement on
behalf of the holders of the securities of LIVE issued under the
Indenture.
10. No Warranties. Other than the representations and
warranties of the Trustee set forth in Section 2 hereof, neither
Foothill nor the Trustee have made to each other, nor do they
hereby or otherwise make to each other, any warranties, express or
implied, nor do they assume any liabilities to each other with
respect to the enforceability, validity, value or collectibility of
the Stock Collateral or any portion thereof or the Obligors' title
or right to transfer the Stock Collateral or any portion thereof;
and, as between Foothill on the one hand, and the Trustee on the
other hand, neither of them shall be liable to each other for any
action, failure to act or omission, error of judgment, negligence,
mistake, oversight or misconduct whatsoever by it or any of its
directors, officers, employees, agents or attorneys with respect to
any transaction relating to the Foothill Obligations or the
Indenture Obligations or any security therefor, or for any action
taken or omitted to be taken by it or them hereunder or in
connection herewith, except to the extent such liability arises
from the gross negligence or willful misconduct of such Person.
11. Foothill. Foothill shall have no obligations of any
kind whatsoever to the Trustee or any of the holders of the
securities of LIVE issued under the Indenture other than to make
the payments contemplated by Section 6(b) hereof.
12. Severability. In case any one or more of the
provisions of this Intercreditor Agreement shall be invalid,
illegal or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions contained herein shall
not in any way be affected or impaired thereby.
13. Notices. All notices and other communications
provided for under this Intercreditor Agreement shall be in writing
and personally delivered or mailed first class, postage prepaid,
return receipt requested, and addressed as follows:
To Foothill: FOOTHILL CAPITAL CORPORATION
11111 Santa Monica Boulevard
Suite 1500
Los Angeles, California 90025-3333
Attn.: Business Finance Division Manager
Telefacsimile No. (310) 479-2690
To the Trustee: American Stock Transfer & Trust Company
40 Wall Street
New York, New York 10005
Attention: Corporate Trust Administration
Telefacsimile No. (718) 331-1852
with a copy to: American Stock Transfer & Trust Company
6201 Fifteenth Avenue, Third Floor
Brooklyn, New York 11219
Attention: Herbert J. Lemmer, Esq.
Telefacsimile No. (718) 331-1852
with a copy to: LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
Attention: General Counsel
Telefacsimile No. (818) 908-9539
with a copy to: Sidley & Austin
555 West Fifth Street
40th Floor
Los Angeles, California 90013
Attention: Gary J. Cohen, Esq.
Telefacsimile No. (213) 896-6600
or, as to each party, at such other address as shall be designated
by such parties in a written notice to the other party complying as
to delivery with the terms of this Section. All such notices and
communications shall be effective upon personal delivery or, if
mailed, on the earlier of three business days after deposit into
the United States mail, postage prepaid, return receipt requested
or the actual date of delivery as shown on the return receipt.
14. Successors and Assigns. All covenants, promises and
agreements in this Intercreditor Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective
successors and assigns.
15. Counterparts. This Intercreditor Agreement may be
executed in any number of counterparts, each executed counterpart
constituting an original but all counterparts together constituting
one and the same instrument.
16. No Impairment of Other Rights. Nothing in this
Intercreditor Agreement is intended or shall be construed to
impair, diminish or otherwise adversely affect any other rights
which Foothill or the Trustee may have or may obtain against any of
the Obligors or any of their respective Subsidiaries and
Affiliates.
17. Amendments; Waiver, etc. No amendment or waiver of
any provision of this Intercreditor Agreement shall be effective
unless the same shall be in writing and signed by the parties
hereto, and any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. No
delay on the part of any party hereto in the exercise of any right,
power or remedy shall operate as a waiver thereof, nor shall any
single or partial exercise by such party of any right, power or
remedy preclude any other or further exercise thereof, or the
exercise of any other right, power or remedy.
18. Headings. Headings herein are for convenience only
and shall not be relied upon in interpreting or enforcing this
Intercreditor Agreement.
19. Termination. This Intercreditor Agreement shall
remain in full force and effect until the Termination Date.
20. Entire Agreement. This Intercreditor Agreement
embodies the entire agreement and understanding of Foothill and the
Trustee 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.
21. Governing Law. This Intercreditor Agreement shall
be governed by and construed in accordance with the laws of the
State of New York.
22. Reinstatement. The provisions of this Intercreditor
Agreement shall continue to be effective or shall be reinstated, as
the case may be, if at any time any payment in respect of the
Foothill Obligations is rescinded or must otherwise be returned by
the holder thereof in connection with any Reorganization of any
Person that in any way affects the exercise by Foothill of its
rights under the Foothill Documents, or otherwise, all to the end
that Foothill and the Trustee shall be restored to the same
position each would have occupied had the rescinded or returned
payment not been made to Foothill initially. Without limiting the
generality of the foregoing, to the extent that the Trustee is
required by the provisions of the immediately preceding sentence to
pay over to Foothill any monies which the Trustee has previously
received on account of the Indenture Obligations or the Stock
Collateral, the Trustee shall pay over such amounts promptly upon
written demand from Foothill.
23. Specific Performance. Foothill is hereby authorized
to demand specific performance of this Intercreditor Agreement or
to obtain injunctive relief without bond, at any time when the
Trustee shall have failed to comply with any provisions of this
Intercreditor Agreement applicable to it. The Trustee hereby
irrevocably waives any defense based upon the adequacy of a remedy
at law which may be asserted as a bar to the remedy of specific
performance of injunctive relief in any action brought therefor by
Foothill.
IN WITNESS WHEREOF, the parties hereto have executed this
Intercreditor Agreement as of the date first set forth above.
"Foothill"
FOOTHILL CAPITAL CORPORATION,
a California corporation
By
Its
"Trustee"
American Stock Transfer & Trust
Company, as Trustee and Collateral
Trustee under the Indenture
By
Its
ACKNOWLEDGED AND AGREED TO THIS 16th DAY OF NOVEMBER, 1994:
LIVE Entertainment Inc.,
a Delaware corporation
By______________________________
Its_____________________________
LIVE Home Video Inc.,
a Delaware corporation
By______________________________
Its_____________________________
LIVE Film and Mediaworks Inc.,
a California corporation
By______________________________
Its_____________________________
LIVE Entertainment International Inc.,
a Delaware corporation
By______________________________
Its_____________________________
LIVE America Inc.,
a Delaware corporation
By______________________________
Its_____________________________
Vestron Inc.,
a Delaware corporation
By______________________________
Its_____________________________
LIVE Ventures Inc.,
a Delaware corporation
By______________________________
Its_____________________________
April 8, 1992
Robert W. Goldsmith, Esq.
Senior Vice President and General Counsel
Carolco Pictures Inc
880 Sunset Boulevard
Los Angeles, California 90069
Re: Behrens, et al. v. LIVE Entertainment Inc., Carolco Pictures
Inc., et al.;
Rosen v. LIVE Entertainment Inc., Carolco Pictures Inc., et
al.; and
Glancy v. LIVE Entertainment Inc., Carolco Pictures Inc., et
al. (all USDC; CD Cal.)
Lisse v. Carolco Pictures Inc., LIVE Entertainment Inc., et
al. (USDC, Del.)
Dear Mr. Goldsmith:
As you know, LIVE Entertainment Inc. ("LIVE") and Carolco Pictures
Inc. ("Carolco") are among the defendants in the above-referenced
securities class actions now pending in the United States District
Court, Central District of California, and in the United States
District Court, District of Delaware. LIVE and Carolco jointly
agreed to retain the firm of Sidley & Austin on behalf of all
defendants. Although LIVE and Carolco remain jointly and severally
liable for all of Sidley & Austin's fees and disbursements, LIVE
and Carolco have agreed, inter se, to allocate those fees and
disbursements not covered by insurance as follows:
1. LIVE will be responsible for paying sixty-five per cent
(65%) of such fees and disbursements not covered by insurance and
Carolco thirty-five per cent (35%). Sidley & Austin may bill each
of us directly for such amounts but each of us remains jointly and
severally liable for all unpaid amounts.
2. Either party hereto can request at any time a change in
the amount of allocation of such fees and disbursements if it
believes that the allocation is disproportionate to its alleged
culpability, and will so notify Sidley & Austin.
3. In the event that the parties hereto cannot agree on an
allocation amount, the matter will be resolved by binding, non-
appealable arbitration in accordance with the rules and procedures
of Judicial Arbitration and Mediation Services, Inc.
4. The allocation specified herein shall not apply to any
amounts paid or to be paid in settlement or satisfaction of any
judgment. In the event that the parties hereto cannot agree to an
allocation of such amounts, the matter will be resolved in
accordance with paragraph 3 above.
If the foregoing accurately reflects your understanding of our
agreement, please sign the enclosed copy of this letter in the
space provided below, indicating Carolco's assent to the terms
specified herein.
Very truly yours,
LIVE ENTERTAINMENT INC.
By: MICHAEL J. WHITE
Michael J. White
Senior Vice President and
General Counsel
AGREED TO AND ACCEPTED this
day of April, 1992
CAROLCO PICTURES INC.
By: ROBERT W. GOLDSMITH
Robert W. Goldsmith
Senior Vice President and
General Counsel
Among
LIVE Entertainment Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
USA
- - hereinafter referred to as "LIVE" -
LIVE Home Video Inc.
15400 Sherman Way, Suite 500
Van Nuys, California 91406
USA
- - hereinafter referred to as "LHV" -
LIVE Entertainment International Inc.
(formerly known as LEI-IVE
Entertainment N.V.)
15400 Sherman Way, Suite 500
Van Nuys, California 91406
USA
- - hereinafter referred to as "LEII" -
VCL/Carolco Communications B.V.
(formerly known as Beleggingsmaatschappij
Groter B.V.)
Chabotlaan 165
3055 AE Rotterdam
The Netherlands
- - hereinafter referred to as "LIVE BV" -
VCL/Carolco Communications GmbH
Martin-Kollar-Str. 1
81829 Munchen
Germany
- - hereinafter referred to as "VCL" -
and
Apricot Computer GmbH
Berliner Strasse 2 - 6
63150 Heusenstamm
Germany
- - hereinafter referred to as "Apricot" -
and
Gunther Detlef Ruth
2, Rue Honore Labande
Monte Carlo
Monaco
- - hereinafter referred to as "Ruth" -
the following
HEADS OF AGREEMENT
is concluded
WHEREAS, LIVE BV owns 81% of the issued and outstanding
capital stock of VCL; and
WHEREAS, Ruth owns the remaining 19% of the issued and
outstanding capital stock of VCL; and
WHEREAS, LEII owns 100% of the issued and outstanding capital
stock of LIVE BV; and
WHEREAS, as of December 31, 1994, LIVE BV owed US$ 16,730,351
to LEII for, among other matters, films licensed by LIVE BV from
LEII (the "LIVE BV Receivable"); and
WHEREAS, LIVE BV currently licenses from LEII certain
completed films produced and/or acquired by LIVE and/or affiliates
of Carolco Pictures Inc. (the "LIVE/Carolco Films"); and
WHEREAS, LIVE BV licenses the LIVE/Carolco Films to VCL; and
WHEREAS, in the past VCL assigned to an affiliate of LIVE
certain rights to a number of films (the "VCL Films"); and
WHEREAS, pursuant to a Services Agreement dated August 13,
1992, between Rank Video Services GmbH ("Rank Germany") and VCL, as
amended by Letter Agreement dated March 26, 1993 (collectively, the
"Services Agreement"), and a Rights Agreement dated August 13,
1992, between Rank Germany and VCL (the "Rights Agreement"), Rank
Germany claims that VCL currently owes Rank Germany approximately
DM 3,000,000 (the "Rank Obligation"); and
WHEREAS, pursuant to an Agreement dated as of August 13, 1992
between LHV and Rank Video Services America, Inc. ("Rank US"), LHV
has guaranteed VCL's payment of the Rank Obligation, if, as and
when the same may be due (the "Rank Guarantee"); and
WHEREAS, a dispute currently exists between VCL and Rank
Germany regarding whether VCL is obligated to pay to Rank Germany
any or all of the Rank Obligation; and
WHEREAS, LEII desires to sell to Apricot 100% of the issued
and outstanding capital stock of LIVE BV (the "LIVE BV Shares");
and
WHEREAS, LEII desires to sell the LIVE BV Receivable to Ruth;
and
WHEREAS, the parties desire to reflect their agreement in this
Heads of Agreement while the various documents reflecting the
transactions described herein are completed.
Therefore, the parties enter into the following agreement:
Section 1
Sale of Shares
1. On June 30, 1995 (the "Closing Date"), LEII shall sell
and convey the LIVE BV Shares to Apricot. In
consideration of such payment, Apricot shall pay the
following to LEII:
a. The sum of US$ 1, payable on the Closing Date; plus
b. A "Profit Participation Payment" as follows: if
within a period ending on December 31, 1996, LIVE
BV, VCL, Apricot and/or Ruth enters into an
agreement to sell any interest in VCL to any third
party (other than asset sales in the ordinary
course of business) such that the purchaser or
purchasers shall, in the aggregate, acquire more
than a 19% interest in VCL, either directly or
indirectly, then, then, within ten (10) days after
the closing of each such sale, the seller(s) shall
pay to LEII 50% of the pre-tax profits from such
sale [i.e., the difference between the purchase
price, however denominated, and the amounts of the
First Payment and the Second Payment (as such terms
are defined in Section 2 below) and the Performance
Payments (as defined in subsection (c)(i) of this
paragraph 1) actually paid]; plus
c. "Performance Payments" as follows:
i. To the extent that VCL's consolidated pre-tax
profits (before any payments, by salary or
otherwise, to Ruth, LIVE BV, Apricot, or the
affiliates or associates of any of Ruth, LIVE
BV or Apricot) in each of its fiscal years
ended November 30, 1996, 1997 and 1998 exceed
US$ 600,000, LEII shall be paid 25% of the
excess, up to a maximum of US$ 350,000 per
year, subject to adjustment as provided in the
next sentence. To the extent LEII does not
receive a total of US$ 350,000 by December 31,
1996, LEII will be eligible to receive up to a
total of US$ 700,000 by December 31, 1997; to
the extent LEII does not receive a total of
US$ 700,000 by December 31, 1997, LEII will be
eligible to receive up to a total of US$
1,050,000 by December 31, 1998.
ii. No interest will accrue on any Performance
Payment, unless the amount is not paid on or
before the later of (x) the date due, or (y)
the date that is ten (10) days after VCL's
Financial Statements are issued with respect
to the applicable Fiscal Year (but in no event
later than March 1 of the Fiscal Year
following the Fiscal Year for which the
Performance Payment is being calculated). If
all or any portion of the Performance Payments
accrue interest, the unpaid amounts will
accrue interest at the rate of 10% per annum
until the past due amounts are paid.
iii. The Performance Payment will be unsecured.
iv. Apricot shall have the right to prepay the
Performance Payment at any time by paying LEII
a sum equal to US$ 1,050,000, plus accrued
interest, if any, and minus all previously
paid Performance Payments.
v. LEII shall have customary audit rights to
determine the amount of VCL's consolidated
pre-tax profits.
2. For purposes of determining the consideration paid or to
be paid in order to calculate the Profit Participation
Payment, the total consideration from all sales to third
parties from and after the Closing Date through December
31, 1996 (other than sales in the ordinary course of
business) shall be added together to create a total
price, and that total price shall be divided by the total
percentage interest in VCL that has been sold or agreed
to be sold to third parties from and after the Closing
Date through December 31, 1996 in order to create an
"average sale price per percentage interest in VCL." For
purposes of calculating the Profit Participation Payment,
the consideration received shall be deemed to be the
percentage interest in VCL sold to third parties
multiplied by the "average sale price per percentage
interest in VCL," regardless of the actual price paid or
to be paid for such interest.
3. To ensure that LEII receives the Profit Participation
Payment and the Performance Payment, there will be
absolute prohibition on VCL from selling its assets
(except within the ordinary course of business) or
changing its fiscal year, and on Ruth, Apricot and LIVE
BV from merging VCL into Apricot or LIVE BV, and on each
of VCL, LIVE BV, Ruth or Apricot from taking any action
that has or may have a like effect, until LEII has
received its last Performance Payment.
Section 2
Sale of LIVE BV Receivable
1. On the Closing Date, LEII will sell and convey to Ruth
the LIVE BV Receivable, in return for the total payment
of US$ 4,794,066, to be paid by Ruth as follows:
a. A "First Payment" of US$ 4,344,066 shall be paid in
immediately available funds on the Closing Date.
b. A "Second Payment" of US$ 450,000 shall be payable
in installments of US$ 150,000 each on each of
December 31, 1996, 1997, and 1998. No interest
will accrue on any portion of the Second Payment,
unless the amount is not paid on or before the date
due. If all or any portion of the Second Payment
accrues interest, the unpaid amounts will accrue
interest at the rate of 10% per annum until the
past due amounts are paid.
2. Commencing in June 1995, Ruth shall have the right to
extend the Closing Date from and after June 30, 1995 on
a month basis to a date no later than December 31, 1995
by doing the following:
a. Delivering a written notice to LEII prior to the
end of any month informing LEII of Ruth's desire to
extend the Closing Date to a date no later than the
last business day of the following month; and
b. Making a non-refundable payment to LEII in
immediately available funds in an amount equal to
no less than (i) one-sixth of the First Payment,
plus (ii) interest on the unpaid portion of the
First Payment at the annual rate of ten percent
(10%);
c. Any amounts paid pursuant to paragraph 2(b)(i)
above shall reduce the amount of the First Payment
that is due on the Closing Date.
3. Ruth shall have the right to accelerate the Closing Date
to a date earlier than June 30, 1995 upon five (5) days
prior notice. In the event of such acceleration the First
Payment shall be discounted at the annual rate of ten
percent (10%).
Section 3
Film License Matters
1. From and after January 1, 1995, LIVE BV will not have any
contractual obligations to sell, and VCL will not have
any contractual rights to acquire, any future
LIVE/Carolco Films.
2. At the Closing Date, VCL and LIVE Film and Mediaworks
Inc. (also known as LIVE International), an affiliate of
LIVE ("LFM"), will execute a license agreement to be
effective as of January 1, 1995, providing, among other
matters, as follows:
a. VCL will retain the right to distribute all
LIVE/Carolco Films through December 31, 1996;
b. The royalty rates will be 35% for "rental" product
(i.e., product having a full wholesale selling
price of equal to or greater than DM 30 per unit)
and 20% for "sell-through" product (i.e., product
having a full wholesale selling price of less than
DM 30 per unit);
c. VCL will be deemed to be fully recouped on all
LIVE/Carolco Films in VCL's library;
d. There will be no "crossing" among any of the
LIVE/Carolco Films;
e. The royalty obligation will be a direct obligation
from VCL to LFM;
f. LFM will extend VCL's right to distribute the
LIVE/Carolco Films from December 31, 1996 through
December 31, 1998, provided that (1) LEII receives
all Performance Payments and all portions of the
Second Payment due on or prior to December 31, 1996
on a timely basis, and (2) LFM receives timely
accounting statements and royalty payments under
the licensing arrangement summarized in this
paragraph 2; and
g. Such additional terms and conditions as are
customary for license agreements of the type
described in this Section 3, paragraph 2, to be
negotiated in good faith between VCL and LFM.
3. VCL will license from LFM the German language theatrical,
television and videocassette rights in German speaking
territories in Europe to the films Wagons East, The Beans
of Egypt, Maine and Goldy III (collectively, the
"Licensed Films") on terms to be separately agreed upon
between VCL and LFM. Execution by VCL and LFM of the
licensing agreements for the Licensed Films shall be an
express condition to closing of the transactions
contemplated by this Heads of Agreement. For the
purposes of this Agreement, the Licensed Films shall not
be considered to be "LIVE/Carolco Films."
4. On the Closing Date, LIVE and its affiliates will
quitclaim to VCL all rights of LIVE and its affiliates in
and to the VCL Films without any additional payment.
Section 4
Other Agreements
1. a. On or before the Closing Date, VCL shall use its
best efforts to resolve VCL's dispute with Rank
Germany in such a manner that LHV is released from
the Rank Guarantee. If VCL is unsuccessful in
reaching a resolution despite such best efforts on
or before the Closing Date, then from and after the
Closing Date, VCL, LIVE BV and Apricot shall (a)
use their best efforts to resolve VCL's dispute
with Rank Germany in such a manner that LHV is
released from the Rank Guarantee, and (b)
indemnify, defend and hold LHV harmless from and
against any and all loss, cost, expense or damage
(including attorneys' fees and costs) that LHV may
suffer as a result of having to satisfy all or a
part of the Rank Obligation or the Rank Guarantee
or as a result of challenging the right of Rank US
to enforce the Rank Guarantee. If LHV is required
to satisfy all or any portion of the Rank
Guarantee, LIVE BV, VCL and Apricot shall be
jointly and severally liable to LHV in an amount
equal to that portion of the Rank Obligation that
is not paid to Rank Germany.
b. LHV agrees that it will not voluntarily acknowledge
all or any portion of the Rank Obligation without
either (i) the prior written consent of VCL, LIVE
BV and Apricot, (ii) a signed agreement between
Rank Germany and VCL settling the Rank Obligation,
or (iii) a final, non-appealable judgment resolving
the Rank Obligation (in which case LHV may only
acknowledge the amount of the judgment). The sole
remedy of VCL, LIVE BV and/or Apricot for LHV's
failure to comply with this Section 4, paragraph
1(b) shall be the release of the obligation of VCL,
LIVE BV and Apricot from any obligation to LHV
pursuant to Section 4, paragraph 1(a) above. If
LHV is sued by either Rank Germany or Rank US in
the United States regarding satisfaction of the
Rank Obligation or the Rank Guarantee, LHV will
notify VCL of such suit within five (5) days after
receiving notice thereof and, at the request of LHV
to accompany such notice, VCL will bring an action
in Germany against Rank Germany to determine the
validity of the Rank Obligation.
c. To ensure that LHV receives the benefit of the
agreements set forth in Section 4, paragraph 1(a),
from and after the date that either (i) an
agreement is signed between Rank Germany and VCL
settling the Rank Obligation, or (ii) a final, non-
appealable judgment or a binding award in any other
proceeding is issued resolving the Rank Obligation,
and if such settlement or resolution results in VCL
owing to Rank Germany all or any portion of the
Rank Obligation, then there will be absolute
prohibition on VCL from selling its assets or
changing its fiscal year, on Apricot and LIVE BV
from merging VCL into Apricot or LIVE BV, on LIVE
BV, VCL and Apricot from selling any shares of or
interest in VCL, and on each of VCL, LIVE BV or
Apricot from taking any action that has or may have
a like effect, until (y) LHV has been fully and
completely released from the Rank Guarantee, and
(z) VCL, Apricot and LIVE BV have fulfilled in all
respects their obligations under Section 4,
paragraph 1(a).
2. On the Closing Date, all parties hereto shall use their
best efforts to cause the execution of that certain
Supplementary Deed, the form of which has been previously
agreed to by the parties, for the purpose of confirming
the ownership of Ruth and LIVE BV of the capital stock of
VCL. The cost of notarization shall be shared equally by
LEII and VCL. If the Supplementary Deed is not
completely executed by all parties thereto on the Closing
Date, LIVE BV will make no representations or warranties
regarding ownership of shares in VCL.
3. The deletion of any erroneous claim of VCL against Ruth
shall be completed on the Closing Date by a shareholder's
resolution of Ruth and LIVE BV (signed after ownership of
the shares of LIVE BV has been transferred from LEII to
Apricot).
4. As soon as is reasonably practical, but in any event on
or before December 31, 1995, both VCL and LIVE BV shall
change their respective names to remove the term
"Carolco" therefrom.
5. From and after the Closing Date, all of the parties
hereto agree to remain reasonably available to consult
with the other parties hereto and to cooperate fully with
any reasonable requests for information from the other
parties with respect to, without limitation, any
inquiries, investigations, claims, demands, suits,
actions or other proceedings which have been brought or
which may hereinafter be brought by any third party
against any of the parties hereto.
6. This Heads of Agreement, including specifically the
provisions of this Section 4, paragraph 6, may not be
altered, modified or amended except by an instrument in
writing signed by all of the parties hereto.
7. This Heads of Agreement shall be binding upon, and inure
to the benefit of, all of the parties hereto and their
respective heirs, executors, personal administrators,
successors and assigns, and the provisions hereof that
are required and/or permitted to be performed following
the Closing Date shall specifically survive the Closing
Date.
8. Notwithstanding any provision of any other document,
including but not limited to any employment agreement
between VCL and Ruth or the Articles of Association of
VCL, from the date hereof until the Closing Date, all
contracts for acquisition of any distribution rights to
films or other programs by VCL shall require the approval
not only of Ruth, but also of one of the two Managing
Directors of VCL appointed by LIVE, currently Michael J.
White and Steven Mangel. Such approvals by the Managing
Directors appointed by LIVE shall not be unreasonably
withheld.
9. Notwithstanding any contrary provision contained in any
other agreement, including but not limited to any
employment agreement between VCL and Ruth or the Articles
of Association of VCL, Ruth and Apricot hereby agree that
if LIVE has not received the entire First Payment on or
before the Closing Date (as such date may be extended
pursuant to paragraph 2 of Section 2 above), then LIVE
BV, as the majority shareholder of VCL, shall have the
right, at its election, to control either an orderly wind
down of the operations of VCL, or the formal liquidation
of VCL. The formal documents to be executed pursuant to
Section 6 below shall include documents formally amending
any agreements in conflict with the provisions of this
paragraph 9 of Section 4 as necessary to effectuate the
intent and purpose of this paragraph 9.
Section 5
Agreements as Conditions and Vice Versa
1. All agreements contained in this Agreement that are
required to be performed at or prior to the Closing Date
and that are in favor of any of LIVE, LHV, LEII and/or
LIVE BV shall also be deemed to be conditions to the
performance by LIVE, LHV, LEII and/or LIVE BV of any of
their obligations hereunder. Likewise, all conditions
that are required to be performed at or prior to the
Closing Date and that are in favor of any of LIVE, LHV,
LEII and/or LIVE BV shall also be deemed to be agreements
in favor of such parties, enforceable in accordance with
their terms to the fullest extent permitted by law.
2. All agreements contained in this Agreement that are
required to be performed at or prior to the Closing Date
and that are in favor of any of Ruth, Apricot or VCL
shall also be deemed to be conditions to the performance
by Ruth, Apricot and/or VCL of any of their obligations
hereunder. Likewise, all conditions that are required to
be performed at or prior to the Closing Date and that are
in favor of any of Ruth, Apricot or VCL shall also be
deemed to be agreements in favor of such parties,
enforceable in accordance with their terms to the fullest
extent permitted by law.
Section 6
Long Form Agreements
1. The parties hereto intend to enter into long form
agreements on or before March 30, 1995 which shall
incorporate the principal terms set forth in this Heads
of Agreement, together with such other terms and
provisions customarily contained therein, including,
without limitation, warranties and representations,
accounting provisions, governing law, etc. Unless and
until such time as the parties execute such long form
agreements, this Heads of Agreement shall be fully
binding on the parties hereto. The long form agreements
shall be subject to such modifications as the parties may
negotiate in good faith within parameters customarily
acceptable to LIVE, Apricot and Ruth for agreements of
this nature.
2. This Heads of Agreement may be executed in two or more
counterparts, all of which taken together shall
constitute an original document.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Heads of
Agreement as of the dates set forth opposite their respective
signatures.
Munich, February ______, 1995 Munich, February _____, 1995
LIVE ENTERTAINMENT
INTERNATIONAL INC. VCL/CAROLCO COMMUNICATIONS GMBH
By: _______________________ ____________________________
Michael J. White Gunther D. Ruth
Secretary Managing Director
Munich, February _____, 1995
By: ___________________________
Steve Mangel
Managing Director
Munich, February _____, 1995 Rotterdam, February ___,1995
LIVE ENTERTAINMENT INC. VCL/CAROLCO COMMUNICATIONS B.V.
By: _______________________ By: _______________________
Michael J. White Arie Mout
Executive Vice President Managing Director
Munich, February _____, 1995 Munich, February ____, 1995
GUNTHER DETLEF RUTH LIVE HOME VIDEO INC.
_________________________ By: _______________________
Steve Mangel
Executive Vice President
Munich, February _____, 1995
APRICOT COMPUTER GMBH
By: _______________________
Managing Director
LIVE HOME VIDEO INC.
SHORT FORM DEAL MEMO
Principal Terms & Conditions
Date of Agreement: As of June 21, 1994
Licensor: Le Studio Canal +(U.S.)
Distributor: International Video Productions Inc., a wholly-
owned subsidiary of LIVE Home Video Inc.
Picture: "Stargate" starring Kurt Russell and James Spader,
directed by Roland Emmerich based on an original
screenplay co-written by Roland Emmerich and Dean
Devlin.
Picture
Specifications: 35mm film, aspect ratio of 1:2.35, color, Dolby or
DTS stereo, primarily in English language per the
script (not post-synched or dubbed except as
required by the exigencies of production or
creatively), between 90 and approximately 120
minutes excluding main titles and end credits, MPAA
rating of "PG-13" or less restrictive, and produced
at a direct cost budget of $50 million or more.
License Term: An initial period of 25 years from the date of
Distributor's first video release of the Picture.
The License Term shall be extended an additional 5
years if Licensor's account is unrecouped at the
end of the initial period. Following expiration of
the License Term, Distributor shall have a one year
non-exclusive sell-off period plus a right to first
negotiation/matching last refusal (as against
Distributor's last best offer) to renew and extend
the License Term.
Territory: US and Canada, their territories and possessions
and their embassies, military bases and
governmental installations wherever located
throughout the world, but not including non-
theatrical or public performance rights.
Authorized
Languages: All
Rights Granted: Exclusive Video through all existing or emerging
channels of distribution (including, without
limitation, retail sales; direct mail, video clubs,
telemarketing and other direct response sales;
door-to-door sales, pay-per-transaction sales;
supermarket sales; drug store sales; school and
library sales (but not including non-theatrical or
public performance rights); sponsorship, premium
and commercial tie-ins sales, all by means of
cassettes, video discs and any or all other
electronic or information storage devices in all
sizes, formats and configurations, now or hereafter
known, plus all incidental rights customarily
associated therewith. With respect to sponsorship,
premium and commercial tie- in sales, Distributor
shall consult and coordinate with Licensor,
provided, however, Distributor shall have final
decision-making authority with regard thereto.
Licensor shall also grant Distributor certain
rights of first negotiation and certain last
refusal rights as set forth immediately hereafter
with respect to the possible acquisition of the
aforesaid video rights to any theatrical Remake or
Sequel based on, derived from, or inspired by the
Picture which is produced during the License Term.
In the event the parties cannot come to terms
during the first negotiation period, Licensor shall
be free to accept an offer from any third party
with respect to any such Remake or Sequel, provided
however, that the offer is greater than
Distributor's last best offer.
Distributor's
Edit,
Dubbing/Subtitling,
Closed-Caption
& Other Alteration
Rights: Distributor shall have the right to make or
exploit, or to authorize others to make or exploit,
Videos embodying dubbed and subtitled versions of
the Picture, closed-captioned and descriptive video
versions of the Picture intended primarily for the
physically impaired, supplemented video versions
(e.g., "director's cut", unrated versions, special
editions, etc) and the like. Except in connection
with Distributor's exercise of such rights, and
subject to third party cutting rights (of which
Licensor shall inform Distributor in writing within
seven (7) days of execution of this agreement),
Distributor shall not cut the Picture nor alter or
delete any screen credit, logo, trademark or
copyright notices appearing in the Picture;
provided Distributor may integrate into Videos
embodying the Picture before the main titles and/or
after the end credits the name and trademarks of
Distributor and its sublicensees, anti-piracy
warnings in Distributor's customary form, and
commercial and promotional advertisements or
announcements (e.g., trailers).
Rights Reserved: All rights not granted to Distributor are reserved
to Licensor ("Reserved Rights"). The Reserved
Rights include, without limitation, the following
distribution rights: Non-Theatrical, Non-
Residential Pay-Per-View (Hotel/Motel), Commercial
(Public) Video, Airlines and Ships, Residential
Pay-Per-View, Pay TV, Free TV and Video On Demand.
Additionally, the Reserved Rights include all
Interactive Multimedia rights, including the right
to exploit video games derived from the Picture in
all platforms, provided, however, Distributor may
exploit the Picture in its linear version on
interactive-capable platforms such as CD-I, CD Rom,
Video CD, etc. Licensor may exercise the Reserved
Rights without further obligation or notice to
Distributor, subject to the holdback provisions and
minimum theatrical requirements set forth herein.
Holdbacks on
Licensor: Licensor shall not exploit or authorize any person
or entity to exploit the Picture in the Territory
in the following media sooner than the date set
forth below corresponding to such media:
(a) Residential Pay-Per-View: Not sooner than
three (3) months following the date of Video
Availability. "Video Availability" shall mean the
earlier of either:
(i) Six (6) months following the initial
theatrical release of the Picture in the Territory;
or
(ii) The initial video release of the
Picture in the Territory.
(b) Pay-TV and Free-TV: Not sooner than the
earlier of either (i) 6 months following the date
of Video Availability of the Picture in the
Territory or (ii) 12 months following the date of
the first theatrical release of the Picture in the
Territory.
(c) Video On Demand: Not sooner than the earlier
of either (i) 36 months following the date of Video
Availability of the Picture in the Territory or
(ii) 42 months following the date of the first
theatrical release of the Picture in the Territory.
Licensor shall use its best efforts to receive the
holdbacks set forth in this subparagraph (c) from
MGM. Licensor shall notify and consult with
Distributor in order to accommodate Distributor's
concerns in Licensor's ongoing negotiations with
MGM with regard to this holdback. Failure to
obtain this holdback shall not be deemed to be a
breach of this Agreement.
Holdback on
Distributor Except as provided in the next sentence,
Distributor shall not make Videos embodying the
Picture available for sale or rental to the general
public in the Territory sooner than the 6 months
following the date of the first theatrical release
of the Picture in the Territory. Notwithstanding
the foregoing, subject to the agreement of MGM,
Distributor and Licensor agree that Distributor may
elect to reduce this holdback period to as early as
three (3) months following the first theatrical
release of the Picture in the Territory in the
event the Picture fails to achieve certain levels
of commercial success (upon which the parties and
MGM must agree) during its theatrical release in
the Territory. To that end, representatives of
each party shall promptly following the execution
hereof meet and consult with representatives of MGM
to determine the criteria acceptable to each of
them which would permit Distributor to accelerate
this holdback period. Failure to reach agreement
shall not be deemed to be a breach of this
Agreement.
Minimum Recoupable
Guarantee: Conditioned upon Licensor's due performance of its
obligations hereunder, Distributor shall pay to
Licensor a minimum guarantee ("MG") of XXXXXXXXXXX
fully recoupable in the manner indicated below.
MG Payment
Schedule: XXX on execution of this Deal Memo ("First
Payment"); XXX on Distributor's acceptance of
delivery ("Second Payment"); XXXXX on or before
December 31, 1994 ("Third Payment"); and XXXXX on
the date of Video Availability ("Fourth Payment").
Making the Second Payment is subject to
satisfaction of each of the Conditions Precedent
specified below. Making each Payment other than
the First Payment is conditioned on all prior
Payments having become due and payable.
Letter(s) of
Credit: In order to secure Distributor's obligation to make
payment of the Third and Fourth Payments,
Distributor, at its election, shall either:
(a) issue to Licensor concurrently with making the
Second Payment an irrevocable Letter(s) of Credit
in form and substance satisfactory to Licensor and
its lead bank with a face amount of XXXXXXXXXX
which will remain open until XXXXXXXXXXXXXX; or
(b) furnish to Licensor concurrently with making
the Second Payment some other form of security
(e.g., escrow funds, bank guarantee, etc.)
satisfactory to Licensor; or
(c) make the Third and Fourth Payments discounted
to present value concurrently with the Second
Payment. The amount of the discount will be
computed using an annual discount rate based on
LIBOR plus .125%.
Division of Gross: Distributor will make the following continuing
payments and recoupments from the gross receipts
actually received by or credited to Distributor (or
its "Primary Subdistributor(s)" in the Territory
unless otherwise set forth below) from the
exploitation of the Rights, net of any returns and
discounts ("Gross Receipts"), determined on a
rolling basis in the order of priority set forth
below. "Primary Subdistributor(s)" is hereby and
hereafter defined to mean WEA Corp. or any
successor company which performs similar services
on behalf of Distributor in acting as its primary
subdistributor in the U.S. for video rental and
sell through, and MCA Canada or any successor
company which performs similar services on behalf
of Distributor in acting as its primary
subdistributor in Canada for video rental and sell
through. All other subdistributors engaged by
Distributor to exploit the Rights including,
without limitation, Rentrak and Pioneer, shall not
be deemed to be Primary Subdistributors.
(a) First, Distributor shall at all times during
the Term retain:
(i) XXXX of Gross Receipts which Distributor
receives directly in instances where Distributor is
not using a subdistributor; and
(ii) XXXXX of Gross Receipts which a Primary
Subdistributor receives with Distributor being
responsible to absorb the distribution fees of such
Primary Subdistributor; and
(iii) XXXXX of the Gross Receipts which
Distributor receives from Pioneer LDCA or Rentrak
with Distributor not being responsible to absorb
the distribution fees of such subdistributor; and
(iv) the greater of either:
(A) XXX of Gross Receipts which
Distributor receives from any subdistributor (other
than a Primary Subdistributor, Pioneer LDCA or
Rentrak) with Distributor not being responsible to
absorb the distribution fees of such
subdistributor; or
(B) XXXXX of Gross Receipts which any
such subdistributor receives with Distributor being
responsible to absorb the distribution fees of such
subdistributor.
The fees set forth in this paragraph (a) inclusive
of all subparagraphs above shall collectively
hereafter be referred to as the "Distribution Fee".
(b) Next, all costs and expenses paid, incurred or
accrued by Distributor or any subdistributor
[provided, however, that if Distributor is not
responsible to absorb the distribution fees of such
subdistributor pursuant to subparagraphs (a) (iii)
or (a)(iv)(A) above, then the costs of such
subdistributor shall not be recoupable under this
paragraph (b)] for the exploitation of the Rights
("Distribution Expenses") shall be recouped from
100% of any Gross Receipts remaining.
(c) Next, 100% of any Gross Receipts remaining
will be credited to Licensor's account until the MG
plus interest having accrued thereon at the per
annum rate of PRIME plus 2% has been fully recouped
therefrom. Notwithstanding the foregoing, in the
event Distributor shall receive a better interest
rate for the cost of money, it shall apply such
better rate to the benefit of Licensor.
(d) Last, Distributor will pay Licensor XXX, and
shall retain for its own account XXX, of any Gross
Receipts remaining.
(e) Reserves for rental priced Video returns shall
be as follows:
(i) For months 1 through 12 from the first
video release date of the Picture, reserves for returns
shall not exceed XXX of gross sales net of
discounts;
(ii) For months 13 through 15 from the first
video release date of the Picture, reserves for
returns shall not exceed XX of gross sales net of
discounts;
(iii) Thereafter, no other reserves for
rental priced Videos shall be used;
(iv) The reserves set forth above shall be
fully liquidated within 15 months of the first
video release date of the Picture.
(f) Reserves for sell through priced Video returns
shall not exceed XXX of gross sales net of
discounts and shall be liquidated no later than
with the rendition of the accounting statement
rendered 1 year following the statement on which
such reserve was first maintained.
Accounting
Statements: Statements shall be rendered quarterly within 60
days after the end of each calendar quarter during
the first 2 years following the date of the first
video release of the Picture in the Territory.
Thereafter, accounting statements shall be rendered
semi-annually within 60 days following the end of
each calendar half-year.
Licensor's
Delivery
Requirements: (a) Licensor shall, at Licensor's cost, deliver
to Distributor both "pan and scan" and "letterbox"
versions of the original linear version of the
Picture which is theatrically released by MGM in
the U.S. including digital masters, trailers, radio
and television spots, and advertising and
promotional materials (including, the key-art
prepared under MGM's authority for the theatrical
release in the Territory and, if produced, any
"making of" documentary) relating thereto and such
other items and documents, including certificates
of standard Producer's Errors and Omissions
insurance, which Distributor requires or desires
for exploitation of the Rights; all in accordance
with Distributor's customary delivery schedule.
(b) In addition, if available to Licensor,
Licensor shall, at Distributor's request and cost,
deliver or grant unrestricted and free access to
Distributor of "pan and scan" or "letterbox"
versions, as Distributor may elect, of all other
linear versions of the Picture hereafter created
during the License Term (such as foreign versions,
alternate language tracks and dubbed versions,
airline versions, television versions, unrated
versions, producer's cuts, director's cuts, special
or additional footage versions, etc.) including all
digital masters, trailers, radio and television
spots, and advertising and promotional materials
relating thereto.
(c) All delivery materials must be of first-
class quality and meet the Picture Specifications
above.
Outside Delivery
Date: The later of (a) the date of the first theatrical
release of the Picture in the Territory or
(b) September 30, 1994. Time is of the essence.
Licensor hereby guarantees full, complete and
satisfactory delivery of the Picture to
Distributor. In the event it should fail to so
deliver, it shall reimburse Distributor all monies
paid by Distributor as set forth immediately
hereafter. Distributor shall have fifteen (15)
business days within which to accept delivery after
materials have been made available to Distributor
pursuant to the deadlines set forth above. The
parties hereto agree to set forth by July 25, 1994
mutually satisfactory provisions regarding cure
periods with respect to Delivery materials.
Minimum Theatrical
Release
Requirements: In undertaking the Theatrical release of the
Picture:
(a) Licensor will cause MGM ("MGM") to place the
Picture in general theatrical release throughout
the Territory in November, 1994 provided, however,
any delay of the theatrical release by MGM will not
be deemed a breach of this Agreement until January
1, 1995 (the "Outside Theatrical Release Date").
Time is of the essence.
(b) Licensor will cause MGM to spend no less than
XXXXXXXXXXX (with media buys of no less than
XXXXXXXXXX dollars) on pre-opening and opening week
Prints and Ads (as defined in the MGM agreement)
calculated from the date of the MGM Agreement to a
date seven (7) days after the initial theatrical
release of the Picture in the Territory.
(c) Licensor will cause MGM to give Distributor
reasonable advance notice of all premieres of the
Picture in the Territory and to furnish Distributor
with a reasonable number of invitations thereto for
Licensor, its employees and customers.
(d) Liquidated damages in the amount of one dollar
for each dollar of P&A which is not spent as
required shall be payable to distributor if the
aforesaid minimum theatrical release requirements
are not satisfied in full. Without limiting its
rights, Distributor shall have the right to set-off
and deduct the amount of any such liquidated
damages from any monies due Licensor.
(e) Licensor shall permit Distributor to have
access to all information it obtains from any audit
of MGM's books and records relating to the P&A
expenses and Distributor shall have full audit
rights of the books and records of Licensor with
respect thereto.
Residuals,
Participations,
Music and Other
Clearances: Participations, music and other clearances shall be
Licensor's sole responsibility. With respect to
certain residuals, Distributor shall pay any
residual payments due to the DGA, SAG and WGA.
Licensor shall immediately reimburse Distributor in
full the amount of such residuals plus third party
payroll service costs and interest at the rate of
prime +2% per annum if Licensor fails to reimburse
Distributor within five (5) days following
Distributor's notice to Licensor of each said
residual payment.
Licensor's
Representations: Licensor hereby makes all standard representations
and warranties contained in Distributor's Standard
Agreement including, without limitation: that
Licensor has full authority to execute this
Agreement, to carry out the terms hereof and to
grant to Distributor all the Rights to the Picture;
that no liens or encumbrances on the Picture or its
Underlying Material affecting Distributor's Rights
do now or will any time hereafter exist other than
the liens previously disclosed by Licensor to
Distributor for which Licensor will furnish non-
disturbance letters as hereinbelow provided; that
the Picture is entitled to full copyright
protection throughout the Territory and Term; that
nothing in the Picture or its Underlying Material
infringes any right of any third party; and that
Licensor, at Licensor's sole cost, has or will
obtain and maintain in effect throughout the Term
all music licenses regarding the music embodied in
the Picture, and has obtained all music performance
rights granted to Distributor in this Agreement.
Licensor agrees to defend, indemnify and hold
harmless Distributor against any breach or alleged
breach of any of Licensor's warranties and
representations.
Security
Agreement: In order to secure the Rights granted to
Distributor under this Agreement, Licensor shall
grant and assign to Distributor a continuing
security interest in and copyright mortgage on the
"Collateral" as defined in a customary Security
Agreement to be negotiated in good faith.
Distributor acknowledges that Licensor has
disclosed the existence of prior liens in the
Picture. Licensor shall obtain non-disturbance
agreements from each and every such lien holder as
part of the grant of the security interest to
Distributor as soon as reasonably possible but in
no event later than the Outside Delivery Date and
thereafter as required by Distributor should the
need arise, provided Distributor subordinates its
lien in the Picture as may be required. Licensor's
failure to timely deliver the aforementioned non-
disturbance letters shall be deemed to be a
material breach which will allow Distributor at its
option to terminate this agreement. If such an
event should occur, Distributor shall be
immediately reimbursed all sums previously paid to
Licensor plus interest at the rate of Prime +2% per
annum.
Distributor's
Subdistri-
bution/Assignment
Rights: Yes, in Distributor's discretion.
Conditions
Precedent: This Agreement is conditioned upon Licensor's
delivery and Distributor's acceptance of all
applicable chain of title documents, and
Distributor's receipt of additional customary
collateral documents to be negotiated in good faith
including, without limitation, an Exclusive
Assignment and Mortgage of Distribution Rights,
Security Agreement and related financing
statement(s) and Power of Attorney To Register and
Sue (the "Additional Documents") executed by
Licensor, and where applicable, notarized as soon
as reasonably possible but in no event later than
the Outside Delivery Date provided Distributor
shall concurrently execute appropriate
subordination agreements. Licensor's failure to
timely deliver the aforementioned Additional
Documents shall be deemed to be a material breach
which will allow Distributor at its option to
terminate this agreement. If such an event should
occur, Distributor shall be immediately reimbursed
all sums previously paid to Licensor plus interest
at the rate of Prime +2% per annum.
Miscellaneous: (a) Nothing herein contained shall be construed to
create any partnership, joint venture, agency,
fiduciary or employment relationship between the
parties.
(b) This Agreement shall inure to the benefit of
and bind Licensor's and Distributor's successors
and assigns
(c) In the event of Distributor's breach of this
Agreement, subject to Distributor's full payment of
the MG or its posting Letter(s) of Credit or other
security satisfactory to Licensor therefor,
Licensor's remedies shall be limited to an action
at law for money damages and/or for an accounting.
(d) Licensor shall have customary audit rights of
Distributor's books and records regarding its
distribution of the Picture.
(e) No modification or amendment of this
Agreement, including this subparagraph, will be
effective unless in writing, signed by both
parties.
(f) Each party expressly waives in favor of the
other any right to rely on any oral understandings
or representations, if any there may be.
(g) Licensor agrees to authorize, execute,
acknowledge and deliver such other and further
documentation as may reasonably be required by
Distributor to perfect and protect the Rights
granted hereunder including the appropriate
documents referred to under the paragraph set forth
herein entitled "Conditions Precedent".
(h) This Agreement incorporates by reference the
terms and conditions contained in Distributor's
standard distribution agreement applicable to
agreements of this kind, all of which remain
subject to the parties good faith negotiation. This
Agreement constitutes an enforceable and binding
agreement between the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement to be
effective as of the date herein first written.
Agreed to and Accepted By:
INTERNATIONAL VIDEO PRODUCTIONS INC.
BY:
TITLE:
DATE:
LE STUDIO CANAL + (U.S.)
BY:
TITLE:
DATE:
<TABLE>
EXHIBIT 11
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
<CAPTION>
Year Ended
December 31,
1992 1993 1994
(Amounts in thousands,
except per share data)
<S> <C> <C> <C>
PRIMARY:
Weighted average shares outstanding . . . 2,416 2,418 2,418
Net effect of dilutive stock options -
based on the treasury stock method
using average market price . . . . . . . -- -- --
Total . . . . . . . . . . . . . . . . . 2,416 2,418 2,418
Income (loss) from continuing operations. $ (17,460) $ (28,209) $ (9,674)
Less preferred dividends. . . . . . . . . 2,397 3,589 3,791
Less Accretion for the increase in the
redemption value of the preferred
stock . . . . . . . . . . . . . . . . . -- -- 6,000
Income (loss) from continuing operations
attributable to Common Stock . . . . . . (19,857) (31,798) (19,465)
Income (loss) from discontinued operations 1,090 (22,083) (100)
Extraordinary item. . . . . . . . . . . . 3,967 -- --
Net income (loss) attributable to
common stock . . . . . . . . . . . . . . $ (14,800) $ (53,881) $ (19,565)
Income (loss) per common share:
Continuing operations . . . . . . . . . $ (8.20) $ (13.15) $ (8.05)
Discontinued operations . . . . . . . . 0.45 (9.15) (0.04)
Extraordinary item. . . . . . . . . . . 1.65 -- --
Net income. . . . . . . . . . . . . . . $ (6.10) $ (22.30) $ (8.09)
FULLY DILUTED:
Weighted average shares outstanding . . . 2,416 2,418 2,418
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 . . . . . . . . . . . . . . . . . 2,416 2,418 2,418
Income (loss) from continuing operations. $ (17,460) $ (28,209) $ (9,674)
Less preferred dividends. . . . . . . . . 2,397 3,589 3,791
Less Accretion for the increase in the
redemption value of the preferred
stock . . . . . . . . . . . . . . . . . -- -- 6,000
Income (loss) from continuing operations,
attributable to Common Stock . . . . . . (19,857) (31,798) (19,465)
Income (loss) from discontinued operations 1,090 (22,083) (100)
Extraordinary item. . . . . . . . . . . . 3,967 -- --
Net income (loss) attributable to
Common Stock . . . . . . . . . . . . . . $ (14,800) $ (53,881) $ (19,565)
Income per common share:
Continuing operations . . . . . . . . . $ (8.20) $ (13.15) $ (8.05)
Discontinued operations . . . . . . . . 0.45 (9.15) (0.04)
Extraordinary items . . . . . . . . . . 1.65 -- --
Net income. . . . . . . . . . . . . . . $ (6.10) $ (22.30) $ (8.09)
</TABLE>
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
LIVE Film and Mediaworks Inc. California
Silent Films Inc. Delaware
Lieberman Enterprises Incorporated Delaware
Loud Films Inc. Delaware
Carolco Acquisition Corp. Delaware
LIVE Ventures Inc. Delaware
LIVE Entertainment International 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 of 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 March 15, 1995, with respect
to the consolidated financial statements and schedule of LIVE Entertainment
Inc. included in the Annual Report (Form 10-K) for the year ended
December 31, 1994.
Ernst & Young LLP
Century City
Los Angeles, California
March 15, 1995
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 6th day of March, 1995.
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 7th day of March, 1995.
RYUICHI NODA
Ryuichi Noda
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 6th day of March, 1995.
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 6th day of March, 1995.
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 6th day of March, 1995.
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 6th day of March, 1995.
GREGORY R. PIERSON
Gregory R. Pierson
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 6th day of March, 1995.
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 6th day of March, 1995.
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, Ronald B. Cushey 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, 1994, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these
presents this 6th day of March, 1995.
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
February 10, 1995, 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 9th
day of March, 1995.
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 9th
day of March, 1995.
ROGER A. BURLAGE
Roger A. Burlage
President and Chief Executive
Officer
<PAGE>
EXHIBIT A
. . .
RESOLVED, that Michael J. White, Ronald B.
Cushey 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,
1994 ("Fiscal 1994") and amendments thereto 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,
Ronald B. Cushey 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 1994 and amendments
thereto.
. . .
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 24,264
<SECURITIES> 0
<RECEIVABLES> 21,419
<ALLOWANCES> (19,469)
<INVENTORY> 7,842
<CURRENT-ASSETS> 103,631
<PP&E> 6,575
<DEPRECIATION> (5,175)
<TOTAL-ASSETS> 156,794
<CURRENT-LIABILITIES> 62,753
<BONDS> 53,184
<COMMON> 121
0
5,615
<OTHER-SE> 29,981
<TOTAL-LIABILITY-AND-EQUITY> 156,794
<SALES> 139,917
<TOTAL-REVENUES> 142,518
<CGS> 124,493
<TOTAL-COSTS> 21,598
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,901
<INCOME-PRETAX> (9,474)
<INCOME-TAX> 200
<INCOME-CONTINUING> (9,674)
<DISCONTINUED> (100)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (9,774)
<EPS-PRIMARY> (8.09)
<EPS-DILUTED> (8.09)
</TABLE>
