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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File No. 0-17342
LIVE ENTERTAINMENT INC.
(Exact name of Registrant as specified in its charter)
Delaware 95-4178252
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
15400 Sherman Way, Van Nuys, California 91406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (818) 988-5060
Securities registered pursuant to Section 12(b) of the Act:
Name of exchange on
Title of each class which registered
Common Stock, $.01 par value 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. [X]
The aggregate market value of the voting common stock held by
non-affiliates of the Registrant as of February 29, 1996 was
approximately $4,541,556.
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 29, 1996, there were 2,418,417 shares of the
Registrant's Common Stock, 4,197,302 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.
Documents Incorporated by Reference
Portions of the proxy statement for the 1996 Annual Meeting of
Stockholders, currently scheduled to be held on May 2, 1996, are
incorporated by reference into Part III.
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction
LIVE Entertainment Inc., a Delaware corporation (the "Company"
or "LIVE") was formed in 1988. Its largest ongoing businesses are
LIVE Film and Mediaworks Inc. (formerly LIVE Home Video Inc.)
("LFM") and LIVE International ("LI"), which primarily acquire
rights to produce and distribute 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's operations
are primarily in a single business segment, the worldwide
distribution and sale of a broad variety of film related
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, 1995. All except LFM are
unincorporated divisions of the Company's subsidiaries. As used
herein the "Company" or "LIVE" includes LFM, LI, or any of the
operating entities listed below.
<TABLE> LIVE Entertainment Inc.
<S> <C> <C> <C> <C> <C> <C>
LIVE Productions LIVE Entertainment LIVE Home Video LIVE International LIVE Television LIVE Interactive LIVE Film and
(production and (theatrical (home video (international (cable, pay, (interactive Mediaworks
acquisition distribution distribution) distribution) pay per view products (contracting
of motion of motion picture network including CD-ROM) entity for
picture product) television productions,
product) licensing) acquisitions
and
programming)
Family Home
Entertainment
(FHE)
(children's
programming)
</TABLE>
Recent Developments for the Company
Purchase of Series B Cumulative Convertible Preferred Stock (the
"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 Stock from time to time,
either through private purchases or through open market purchases.
Through March 15, 1996, LIVE acquired, and subsequently retired, a
total of 2,177,500 shares of the Series B Preferred Stock at an
average price of $4.27 per share.
Bankruptcy of Carolco Pictures Inc. ( Carolco )
On November 10, 1995, Carolco filed for bankruptcy under
Chapter 11 of the United States Bankruptcy Code. Carolco had been
a significant supplier of A+ motion picture product to the Company,
including the video rights to such hits as Terminator II, Basic
Instinct, Total Recall and the Rambo series. The last motion
picture provided to the Company by Carolco or its affiliates is
Cutthroat Island, which will be released on home video in April
1996. Because of the Carolco bankruptcy and the fact that the
output agreement between the Company and Carolco expired in 1995 in
any event, the Company does not expect to receive any additional
films from Carolco in the future.
Carolco has agreed to sell its film library and certain
related assets to Canal+ D.A. In connection with the sale, the
Company and Carolco have stipulated that certain contracts between
the Company and Carolco relating to the distribution by the Company
of the video rights to films produced by Carolco, and the
distribution by Carolco in foreign territories of films owned by
LIVE, would be assumed by Canal+ D.A. after the library sale is
completed. Portions of the distribution agreements between the
Company and Carolco pertaining to LIVE's right to remakes and
sequel rights to films in the Carolco library, however, were
severed from the distribution portions of the agreements and were
rejected by Carolco. This has left LIVE with a damage claim in the
Carolco bankruptcy, which cannot be reasonably estimated at this
point in time.
Disposal of VCL/Carolco Communications GmbH ("VCL")
As part of its international activities, the Company owned an
81% interest in VCL, a home video distribution and marketing
company headquartered in Munich, Germany. VCL's year end is
November 30.
In March 1994, primarily as a result of a desire of the
Company to focus its efforts on its core entertainment business,
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, would be transferred to Ruth and Apricot. The total
consideration received by the Company and its affiliates in
connection with such transaction was approximately $7,444,000, of
which approximately $3,100,000 was received in February 1995. The
remaining $4,344,000 was received in November 1995, and a gain of
approximately $2,913,000 was reflected in the quarter ended
September 30, 1995, resulting from the completion of this
transaction.
New Distribution Agreements
On February 8, 1996, the Company and Pioneer LDC, Inc.
("PLDC") entered into an Output Deal Agreement (the "Pioneer Output
Agreement") for the distribution of the Company's theatrical
productions in Japan. The three year agreement includes all
theatrical films that LIVE produces and acquires over the period,
excluding LIVE's two features currently in post-production, The
Substitute and The Arrival. PLDC has agreed to pay a specified
percentage of the applicable film's production or acquisition cost
to obtain such Japanese distribution rights. PLDC is an affiliate
of the Company's controlling shareholder, Pioneer Electronic
Corporation.
In addition, on February 14, 1996, the Company and Orion
Pictures Corporation ("Orion") entered into a Multiple Picture Deal
Output Agreement (the "Orion Agreement") for the theatrical
distribution by Orion in the United States and Canada of the
Company's theatrical productions. The Orion Agreement provides for
Orion to theatrically release, for certain distribution fees, five
motion pictures acquired or produced by LIVE. See Entertainment
Production, Marketing and Distribution Operations - General, for a
further description of titles included in this agreement.
Simplification of Corporate Structure
In the fourth quarter of 1995, in order to simplify the
corporate reporting and tax structure, several non-operating
corporate subsidiary companies were merged into LIVE Home Video
Inc., including its then subsidiary LIVE Film and Mediaworks Inc.
LIVE Home Video Inc. subsequently changed its name to LIVE Film and
Mediaworks Inc.
Retention of Carreden Group
In March 1996, the Company retained the Carreden Group,
Incorporated ("Carreden") to act as its exclusive financial advisor
in connection with a rationalization of the Company's current
capitalization. Carreden was retained to advise the Company's
Board of Directors in a review of the Company's business operations
and capital structure and to develop alternatives that will
accomplish the strategic and financial objectives of the Company by
securing for the Company a more stable and appropriate capital base
on which to operate in the future. Through the date hereof, no
structures or proposals have been suggested, and there is no
assurance that any such structures or proposals will be forthcoming
in the future.
Management Changes
Since the beginning of 1995, Michael J. White and R. Timothy
O'Donnell have resigned from the Board of Directors, and Makoto
Koshiba has been appointed as a Director. There is currently one
vacancy on the Board of Directors. The departures of Mr. White
and Mr. O'Donnell from the Board of Directors were not the result
of any dispute with the Company.
Entertainment Production, Marketing and Distribution Operations
General
Historically, the operations of LIVE and VCL focused on the
acquisition and distribution of home video programming in the
United States and Canada (through LFM) and in German-speaking
Europe (through VCL), by marketing and distributing videocassettes
to wholesalers, retailers and consumers directly. LIVE 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, and the
rights to exploit all sequels to Dirty Dancing.) Vestron is now a
label owned and distributed by LIVE.
During the past few years the Company has found it
increasingly difficult to acquire just the domestic home video
rights to quality motion picture productions on terms the Company
believed to be commercially attractive. This trend was exacerbated
by the financial troubles encountered by Carolco, its most
reliable source of A+ motion picture product, and by the
acquisition by major studios of a number of independent production
and distribution companies from whom the Company had acquired video
rights in the past, such as New Line Cinema Corporation and Miramax
Pictures. Thus, 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
its core video business 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 was released theatrically in early 1995. International and
television rights were among the rights acquired in both these
productions. In addition, in 1995 the Company entered into
agreements to acquire, upon completion, two major theatrical motion
pictures, The Substitute, an action thriller directed by Robert
Mandel and starring Tom Berenger, Ernie Hudson, Glenn Plummber, and
Diane Venora, and The Arrival, writer/director David Twohy's sci-fi
thriller, with Charlie Sheen, Ron Silver, Terri Polo, and Lindsay
Crouse. The two pictures will be released in the United States
theatrical market in early 1996 through Orion, who will be
responsible for the United States and Canadian theatrical
distribution of a package of five pictures produced by the Company
under the Orion Agreement discussed above. Other motion pictures
to be produced by LIVE and released theatrically by Orion through
this package deal include the hit German Comedy Maybe...Maybe Not
("Der Bewegte Mann"), which has garnered acclaim in festivals
worldwide and stars Til Schweiger, Trees Lounge, written and
directed and starring indie film favorite Steve Buscemi, with an
ensemble cast including Anthony LaPaglia, Chloe Sevigny and cameos
by Mimi Rogers, Daniel Baldwin, and Carol Kane, among others with
a special appearance by Samuel Jackson, and Phat Beach, a black hip
hop comedy.
As an independent distribution company, the Company acquires
distribution rights to programming from a variety of sources,
including production companies and independent producers.
Distribution rights which the Company may acquire include (a)
domestic: theatrical, home video, free television, pay television
(including cable and pay-per-view), and electronic publishing, and
(b) international: all media. 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. In such cases, 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 may
have input over all key production elements. As the Company
becomes more involved with production activities, its role has
shifted from distributor to producer/distributor.
With the Company's involvement in the early production stages
of a film's development, it will continue to be difficult to
predict the theatrical acceptance of any particular motion picture
the Company may acquire or produce. The theatrical results of a
motion picture is a significant factor in generating revenues in
all media, including home video.
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 The Walt Disney Company, which historically
have produced and distributed the majority of theatrical motion
pictures released annually in the United States. There are also a
large number of smaller production companies that produce
theatrical motion pictures and have played an important role in the
production of motion pictures for the worldwide feature film
market.
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 $100,000,000 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. LIVE is now an independent production and distribution
company.
Motion Picture Financing and Production
As with the major studios, the Company is involved in the
production and financing of a variety of motion pictures. The
typical cost of a motion picture produced by a major studio for
wide release averages more than $36,000,000. The Company intends
to keep its average production budget to less than $20,000,000,
although it may spend more for titles it believes to have
significant commercial potential. 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.
Independent production companies generally avoid incurring the
substantial overhead costs of the majors 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 rather than out of cash
flow. Such sources include bank loans, "pre-sales," equity
offerings and joint ventures. Independents generally attempt to
complete their financing of a motion picture production prior to
commencement of principal photography, at which point substantial
production costs begin to be incurred and require payment.
"Pre-sales" are often used by independent film companies to
finance all or a portion of the direct production costs of a motion
picture. Pre-sales consist of fees paid to the producer by third
parties in return for the right to exhibit the completed motion
picture in theaters or to distribute it in home video, television,
foreign or other ancillary markets. Producers with distribution
capabilities, such as the Company, may retain some or all of the
rights to distribute the completed motion picture either
domestically or in one or more foreign markets. The Company
typically will license a motion picture's foreign rights among
several international licensees under such pre-sale agreements.
Both major studios and independent film companies often
acquire motion pictures for distribution through an 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. Examples of
Films the Company has recently acquired through negative pickup
arrangements include Top Dog and The Substitute.
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 exploitation of
motion pictures in theaters and in ancillary markets such as home
video, pay-per-view, pay television, broadcast television, foreign
and other markets. 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
The distributor typically acquires rights from the producer to
distribute a motion picture in one or more of the markets described
above. The distributor typically agrees to advance the producer a
non-refundable minimum royalty or guarantee, which is to be
recouped by the distributor out of revenues generated from the
distribution of the motion picture in whatever markets it has
acquired. 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 once the advance is recouped. As noted, LIVE in
the past generally acquired only domestic home video rights, but
now seeks to control or acquire all rights to films it produces or
licenses from third parties.
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, the actual cost and
scope of the media advertising expenditures and campaign 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.
When the Company acquires all rights to a motion picture having
theatrical potential, it currently engages the services of a
theatrical distribution company to handle the theatrical exhibition
of the film in the United States. In the past, the Company has
used the services of MGM Pictures. The Company now has a
theatrical distribution arrangement with Orion as described above.
The Company views theatrical distribution of films to be a source
of advertising and promotion to enhance the home video and other
distribution revenues to be received from the film. The Company
does not believe that theatrical distribution of its motion picture
products will be a source of material profits.
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, new
technologies which regional telephone companies and others are
developing could make competing delivery systems economically
viable and could alter the home video marketplace.
See a more complete description of the Company's home video
distribution operations under "Acquisition of Motion Picture
Distribution Rights by the Company - Domestic Home Video
Distribution Rights."
<PAGE>
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 operators 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.
New Technologies
New means of delivery of entertainment product are constantly
being developed and offered to the consumer. The exact impact of
emerging technologies such as digital video discs ("DVD"), direct
broadcast satellites, the Internet, etc. on the Company's
operations cannot be determined at this time. However, in its role
as a producer and holder of entertainment copyrights, the Company
is positioning itself to take advantage of whatever delivery
options are available to it, and is constantly monitoring these new
media possibilities.
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). 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. Now, where
possible, the Company focuses on the acquisition of worldwide
distribution rights to a motion picture in all media, or, where
feasible, distribution rights in all media for either the North
American or international market places.
The Company's decision process in acquiring a finished or an
unfinished movie is similar. The Company collects information
concerning new motion pictures being contemplated or entering the
production cycle. This information is obtained from trade sources
and from personal relationships and contacts. The acquisition
process focuses on productions which seem most likely to fit the
Company's requirements for worldwide marketability and profit
potential. Before the Company acquires distribution rights for any
motion picture, the Company analyzes not only the picture's
projected costs, revenues and scheduling, but also the effect of
these assumptions on overall Company performance. Management bases
its acquisition decisions on the results of this evaluation process
and will not make offers on any one project with risks that, in
management's opinion, could materially adversely affect the
Company's profitability. The Company's credit facility imposes
limitations on the size of minimum guarantees the Company can incur
without the lender's approval.
When the Company acquires distribution rights to a motion
picture prior to its production, it controls its development
expenditures by making only limited commitments to advance funds
before completion. After acquisition of the rights of a motion
picture prior to its production, the Company typically has approval
rights over key product elements and maintains a production
supervisory staff to monitor the production process. Overhead and
general expenditures are kept at a minimum level, as the Company
does not own any production facilities or significant production
staff.
Domestic Theatrical Distribution Rights
Historically, LIVE 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 - LIVE 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 now intends to acquire theatrical distribution rights as
part of the overall acquisition where possible, even if a film
ultimately will not be released theatrically. The Company
anticipates releasing theatrically approximately 4-6 films during
fiscal 1996. The Company generally targets motion pictures for
distribution on a national basis which can result in substantial
amounts being expended for the costs of national advertising and
the manufacturing of initial release prints. The exception to this
national focus would be certain motion pictures that would be
targeted to various demographic audiences, as opposed to the
mainstream public, and such pictures would be distributed on a more
regional, less expensive, basis. While LIVE does not believe that
theatrical distribution of its motion pictures will be a source of
material profits 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 heavily advertised films with
theatrical losses to have increased performance in video and other
ancillary media that partially or totally offset such losses.
Of those films to which LIVE holds domestic theatrical
distribution rights, LIVE intends to release some through its own
distribution channels or distribute them through third parties such
as Orion. LIVE exploited 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 post production, production,
development and pre-production on a number of projects, including
The Arrival, 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), and
intends to have all of these films distributed theatrically in the
United States.
Domestic Home Video Distribution Rights
LIVE 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, LIVE also acquires non-
theatrical programming such as sports and fitness programming,
children's programming, special interest products and interactive
programs.
In March 1993, LIVE entered into a distribution agreement with
Miramax for the video release by LIVE 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. LIVE 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 was released in 1995.
Pursuant to various agreements with independent motion picture
producers, LIVE released on home video 24 feature film titles
during 1995. This included the successful video rental and sell
through release of the major motion picture Stargate. LIVE
anticipates releasing on home video a total of between 50 to 75
feature films in 1996 through 1997. 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. LIVE also intends
to continue to aggressively 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 LIVE'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 LIVE pays
a substantial portion of the royalty advance prior to completion,
a completion bond in favor of LIVE 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 LIVE's assessment
of the projected demand for the program.
LIVE, under its children's programming label, Family Home
Entertainment ("FHE"), has over the years built a substantial
library of children's titles. FHE has secured worldwide rights to
release videocassettes of the Teenage Mutant Ninja Turtles animated
television series. LIVE 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, Phantom 2040, Papa Beaver, The
Highlander (animation), Enchanted Camelot, Skysurfer Strike Force,
The Bears Who Saved Christmas, Santa's Christmas Crash, Santa's
Christmas Snooze, Princess Gwenevere, Flash Gordon, The Littlest
Pet Shop and Baryshnikov Stories From Childhood. Management of LIVE
intends to continue LIVE's emphasis on building and exploiting its
FHE library.
LIVE also distributes non-theatrical products such as the
Smithsonian Series and the Audubon Series. LIVE 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.
LIVE 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 Warner-Elektra-Atlantic
Corporation ("WEA"), works closely with wholesale distributors,
rackjobbers and key retailers in the United States. Pursuant to an
agreement expiring in May 1998, WEA handles all physical aspects of
United States sales, distribution, billing and collections for
LIVE. The Company has a similar arrangement with MCA Canada Ltd.,
with respect to LIVE'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 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 direct-to-video or direct-to-
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 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 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.
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.
Television Distribution Rights
Television distribution rights will be acquired by LIVE 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. LIVE
distributes the television rights to films it acquires through its
own sales staff.
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 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.
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 certain
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.
Factors Which May Affect Results
In connection with the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995, the Company wishes to
caution readers that the following important factors, among others,
in some cases have affected and in the future could affect the
Company's actual results and could cause such results to differ
materially from those expressed in forward-looking statements made
by or on behalf of the Company.
Nature of the Entertainment Industry. The motion picture and
home video industries are highly speculative and historically have
involved a substantial degree of risk. The success of a motion
picture or video production depends upon unpredictable and changing
factors such as competition and audience acceptance, which may bear
little or no correlation to the Company's production and other
costs. Audience acceptance of the Company's products represents a
response not only to the artistic components of the products, but
also to the level of advertising and promotion by the distributor,
the availability of alternative forms of entertainment and leisure
time activities, general economic conditions and public taste, and
other intangible factors, all of which change rapidly and cannot be
predicted with certainty. In addition, as a result of the Company
increasing its resources to film product earlier in its production
and acquisition stages, the possibility always exists that the
finished product may be different from that which was initially
envisioned. Therefore, there is a substantial risk that some or
all of the Company's products may not be commercially successful,
resulting in costs not being recouped or anticipated profits not
being realized.
Competition. Competition is intense in the motion picture and
video distribution industry. The Company is in competition with
major entertainment companies which have far greater financial
resources and distribution capabilities than the Company. The
Company also competes with numerous smaller companies in the
entertainment industry and with other leisure time industries for
the consumer dollar. There can be no assurance that the Company
will continue to produce and market its products successfully or
that its motion picture and other projects will generate any
profits.
Availability of Financing. The entertainment industry is very
capital intensive. Average motion picture budgets rise each year
as the cost of talent continues to increase. The Company's ability
to continue to produce or acquire motion pictures for distribution
is dependent on its ability to finance its activities. In the past
the Company has experienced difficulties in arranging for adequate
financing. There is no assurance that the Company will continue to
have adequate financing available to it in the future.
Shift in Strategy. Although members of management of the
Company have prior experience in film production and acquisition of
multiple rights film properties, the Company's decision to increase
its involvement in film production and the acquisition of film
product with multiple rights, to counteract the difficulty in
acquiring only video rights to feature films on attractive terms,
will lead the Company into a business segment where it has a
limited track record. This shift in strategy toward an increased
emphasis on motion picture production and acquisition may increase
the rewards available to the Company, but may increase the risks as
well.
Dependence on Key Personnel. The Company is dependent on the
efforts and abilities of its senior management, particularly Roger
Burlage, the Company's Chief Executive Officer. The loss of any of
the Company's key executives could have an adverse effect on the
business and prospects of the Company.
Major Customers
During the year ended December 31, 1993, no one customer
accounted for more than 10% of the net sales of LIVE. During the
year ended December 31, 1994 two customers accounted for 23.3% of
net sales of LIVE and during the year ended December 31, 1995 two
customers accounted for 34.0% of net sales of LIVE.
Employees
As of February 29, 1996, LIVE had 119 full-time regular
employees and 6 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 are leased in Van Nuys,
California. The Company believes that its office facilities 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 Entertainment
(USA) L.P. (formerly Pioneer LDCA, Inc.) ("Pioneer"), as well as a
lender to LIVE 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.
The plaintiffs have taken no actions in either of these cases
for over one year, and the Company has asked the Court to dismiss
both cases for non-prosecution. There is no assurance that the
Company's motions will be granted.
In May 1994, a breach of contract claim was filed against a
subsidiary of the Company, claiming non-payment of royalties from
licensing of films in foreign territories and deprivation of
royalty payments as a result of misallocation of certain values
asserted with licensed film properties. Films subject to the
complaint were contained in the assets of Vestron, Inc. purchased
by the Company in July 1991, and the period covered includes the
license periods both prior to, and subsequent to, the acquisition
date by the Company. The Company filed a reply brief (including a
Motion to Dismiss) on October 5, 1994, and such Motion to Dismiss
was granted on the grounds of forum non conviens. Plaintiff filed
a complaint in New York on March 22, 1995. The Company filed its
answer, affirmative defenses and counterclaim on April 20, 1995.
Plaintiff filed a motion for class certification on September 8,
1995 to which the Company filed its opposition to the motion on
November 6, 1995.
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.
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
No matters were submitted to a vote of the Company's security
holders during the fourth quarter of the Company's fiscal year
ended December 31, 1995.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Prices
The Company's Common Stock is listed on the Nasdaq Stock
Market's SmallCap Market (the "SmallCap Market") under the symbol
"LIVE". As of February 29, 1996, there were 1,133 holders of
record of the Company's Common Stock. As of the same date,
2,418,417 shares of the Company's Common Stock were outstanding out
of 24,000,000 shares authorized.
The following table sets forth for the periods indicated the
high and low sales prices for the Company's Common Stock.
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
Year Ended December 31, 1995
Quarter Ended High Low
March 31, 1995 . . . . . . . . . . $4.000 $3.000
June 30, 1995. . . . . . . . . . . 5.000 3.500
September 30, 1995 . . . . . . . . 4.375 3.500
December 31, 1995. . . . . . . . . 4.625 2.375
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
Company's Series C Convertible Preferred Stock ("Series C Preferred
Stock.") As of March 15, 1996, the Company will have accrued (but
not paid) approximately $2,207,000 of dividends on its 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 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 1991 through 1994 to conform to the 1995
presentations.
<TABLE>
<CAPTION> Year Ended December 31,
1991 1992 1993 1994(3) 1995(3)
(Amounts in Thousands, Except Per Share Data)
<S> <C> <C> <C> <C> <C>
Summary of Operations
Net sales (1). . . . . . . . . . . . . . . . . $237,705 $160,953 $143,735 $117,205 $140,112
Operating (loss) profit. . . . . . . . . . . . (586) (4,854) (21,177) (6,174) 10,826
Interest expense, net. . . . . . . . . . . . . (15,834) (14,424) (6,264) (3,300) 565
(Loss) income from continuing operations . . . (17,737) (17,460) (28,209) (9,674) 10,791
(Loss) income from discontinued operations . . (89,315) 1,090 (22,083) (100) --
Extraordinary item . . . . . . . . . . . . . . -- 3,967 -- -- --
Net (loss) income . . . . . . . . . . . . . . (107,052) (12,403) (50,292) (9,774) 10,791
Primary
(Loss) income per common share:
Continuing operations. . . . . . . . . . . . (7.75)(2) (8.20)(2) (13.15)(2) (8.05)(2) 1.34
Discontinued operations. . . . . . . . . . . (37.00) .45 (9.15) (0.04) --
Extraordinary item . . . . . . . . . . . . . -- 1.65 -- -- --
$ (44.75)(2) $ (6.10)(2) $ (22.30)(2) $ (8.09)(2) $ 1.34
Fully Diluted
Continuing operations. . . . . . . . . . . . (7.75)(2) (8.20)(2) (13.15)(2) (8.05)(2) .53
Discontinued operations. . . . . . . . . . . (37.00) .45 (9.15) (0.04) --
Extraordinary item . . . . . . . . . . . . . -- 1.65 -- -- --
$ (44.75)(2) $ (6.10)(2) $ (22.30)(2) $ (8.09)(2) $ .53
</TABLE>
<TABLE>
<CAPTION>
December 31,
1991 1992 1993 1994(3) 1995(3)
(Amounts in Thousands)
<S> <C> <C> <C> <C> <C>
Selected Financial Data
Cash and receivables . . . . . . . . . . . . . $ 97,597 $ 33,183 $ 44,790 $ 26,214 $ 49,487
Inventories. . . . . . . . . . . . . . . . . . 49,205 48,961 10,124 7,842 4,813
Total assets . . . . . . . . . . . . . . . . . 413,977 297,048 253,549 156,794 149,445
Total obligations. . . . . . . . . . . . . . . 352,380 207,989 242,807 121,077 111,425
Total stockholders' equity . . . . . . . . . . 61,597 89,059 10,742 35,717 38,020
<FN>
(1) Net sales do not include sales of VCL of $26,713,000,
$31,560,000, $28,511,000, $22,712,000 and $32,527,000 for the
years ended December 31, 1991, 1992, 1993, 1994 and 1995,
respectively.
(2) Income (loss) per common share in 1991, 1992, 1993, 1994 and
1995 is net of preferred dividends of $966,000, $2,397,000,
$3,589,000, $3,791,000 and $3,027,000, respectively, and, for
1994 and 1995, is also net of accretion in the redemption
value of the Series B Preferred Stock of $6,000,000 and
$4,509,000, respectively.
(3) The table does not include financial data of the Company's
Specialty Retail Division, which consisted of its formerly
wholly owned subsidiary, Strawberries Inc. ("Strawberries")
and Strawberries' wholly owned subsidiary, Waxie Maxie Quality
Music Co. ("Waxie Maxie"), subsequent to their sale in August
1994.
</FN>
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Year Ended December 31, 1995 Compared to Year Ended
December 31, 1994
Continuing Operations
Net sales of LIVE increased to $140,112,000 during 1995
compared to $117,205,000 during 1994. The increase of $22,907,000,
or 19.5%, is primarily attributable to a stronger video rental
release schedule and increased sell-through sales in 1995. This
included increased sales on such sell-through promotions as a
Terminator package and the seasonal Christmas product, and also the
successful rental and sell-through release of Stargate (which accounted
for approximately 25% of the Company's net sales for the year), for which
there was no comparable title released in 1994. The Company's home
video division released 24 rental titles during 1995 compared to 23
rental titles in 1994. The increase in revenue is also
attributable to increased theatrical, television and international
revenues in 1995.
Gross profits of LIVE increased $11,663,000, or 75.6%, to
$27,087,000 during 1995 compared to $15,424,000 during 1994. The
increase in gross profit dollars was primarily related to the
increase in rental and sell-through sales noted above. As a
percentage of sales, gross profit increased to 19.3% during 1995
from 13.2% during 1994, primarily due to higher sales and margins
generated in 1995 primarily from the release of Stargate and
certain sell-through promotions.
Selling, general and administrative expenses of LIVE decreased
$2,424,000, or 13.7%, to $15,249,000 during 1995 compared to
$17,673,000 during 1994. As a percentage of sales, the amount
decreased to 10.9% during 1995 from 15.1% during 1994. The dollar
and percentage decrease is primarily a result of LIVE recording a
reserve in 1994 of approximately $1,560,000 against a receivable
owed to LIVE by Carolco Pictures, Inc. ( Carolco ) and the recovery
of a previously written off bad debt from a former distributor of
approximately $1,000,000 in 1995.
Interest and other income decreased $268,000 or 10.0% to
$2,424,000 during 1995 compared to $2,692,000 during 1994, which
was primarily the result of a decrease in interest earned on cash
on hand and letters of credit issued to secure film acquisitions in
1994.
Interest expense of LIVE decreased $4,133,000, or 69.0%, to
$1,859,000 during 1995 compared to $5,992,000 during 1994.
Interest expense decreased as a result of the repayment of
$37,000,000 of 12% Subordinated Secured Notes due 1994 (the "12%
Notes") during September and October of 1994 and a decrease in the
amortization of loan costs in 1995.
Preferred dividends of $3,027,000 in 1995 and $3,791,000 in
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 rate for 1995 was 5.3% compared to an
effective tax rate of 2.1% for 1994, primarily due to the Company having
income from continuing operations of $11,391,000 (1995) as compared to
a loss from continuing operations of $9,474,000 (1994).
Discontinued Operations
As a result of the Board of Directors' decision to dispose of
the Company's interests in VCL, the results of operations for VCL
have been restated to account for the sale of VCL as a disposal of
a portion of a line of business. Accordingly, a provision for
losses during the phase-out period totaling $3,885,000 for VCL had
been accrued and accounted for at December 31, 1993 and was not
included in the results of operations for 1994 and 1995. In
November 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, consummated a transaction
whereby the Company s 81% interest in VCL, as well as all
receivables owed by VCL to the Company or its affiliates, was
transferred to Ruth and Apricot. The total consideration received
by the Company and its affiliates in connection with such
transaction was approximately $7,444,000, of which approximately
$3,100,000 was received in February 1995. The remaining $4,344,000
was received in November 1995. The Company reflected a gain of
approximately $2,913,000 in the quarter ended September 30, 1995,
resulting from the completion of this transaction.
Net sales of VCL increased to $32,257,000 during 1995 compared
to $22,712,000 during 1994. The increase of $9,545,000, or 42.0%,
was due primarily to a stronger release schedule in 1995. 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, 1994 the assets of VCL have been included in "Assets Held For
Sale." For the years ended December 31, 1995, net revenues and
operating profits relating to foreign operations were $32,257,000
and $8,775,000 respectively.
Year Ended December 31, 1994 Compared to Year Ended December 31, 1993
Continuing Operations
Net sales of LIVE decreased to $117,205,000 during 1994
compared to $143,735,000 during 1993. The decrease of $26,530,000,
or 18.5%, is primarily attributable to a weaker release schedule in
1994 compared to 1993, as fewer titles were purchased for release
in 1994 due to the Company's liquidity problems and the lack of
commercially attractive titles. LIVE 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.
Gross profits of LIVE decreased $3,975,000, or 20.5%, to
$15,424,000 during 1994 compared to $19,399,000 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
13.5% during 1993 to 13.2% 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.
Selling, general and administrative expenses of LIVE increased
$425,000, or 2.5%, to $17,673,000 during 1994 compared to
$17,248,000 during 1993. As a percentage of sales, the amount
increased from 12.0% during 1993 to 15.1% 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 a proposed merger between Carolco
and LIVE, offset by reduced overhead expenses. The percentage
increase is primarily due to the decrease in sales.
Interest income of LIVE increased $1,258,000, or 87.7%, to
$2,692,000 during 1994 compared to $1,434,000 during 1993. The
increase is primarily due to increased cash on hand throughout
1994.
Interest expense of LIVE decreased $1,706,000, or 22.2%, to
$5,992,000 during 1994 compared to $7,698,000 during 1993.
Interest to maturity on $36,872,000 of the Company's $40,000,000 of
Increasing Rate Senior Subordinated Notes due 1999 (the "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.
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 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
had been restated and accounted for as a discontinued operation.
VCL's operating results for 1993 and 1994 had 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 had 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.
Liquidity and Capital Resources
Historically, the Company has funded its operations through a
combination of cash generated from operations, bank borrowings,
advances from distributors under distribution agreements and the
proceeds from the issuance of debt instruments. For the year ended
December 31, 1995, the Company generated positive cash flow from
continuing operations of $32,682,000.
On May 27, 1995, LIVE entered into a three year extension of
its distribution agreement with Warner-Elektra-Atlantic Corporation
("WEA"). Under the terms of the agreement, WEA advanced
$10,000,000 to LIVE, recoupable from distribution revenues during
the three year term of the agreement at $277,778 per month, plus
interest at LIBOR, plus 0.2%. In order to obtain the advance, LIVE
granted WEA a second priority security interest in substantially
all of LIVE's assets. As of December 31, 1995, there was
$8,333,000 outstanding under the advance, and the interest rate on
the advance at December 31, 1995 was 6.075%.
Investing activities generated a negative cash flow of
$460,000, primarily as a result of the acquisition of property and
equipment at LIVE.
LIVE and its affiliates are a party to 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 $27,500,000 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
affiliates. 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 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, 1995 the Company
was in compliance with all such financial ratios. There were no
amounts outstanding under the Foothill Credit Facility as of
December 31, 1995.
The Company has not borrowed any funds under the Foothill
Credit Facility since it was obtained in November 1994, and, as
noted above, the Company has had substantial cash balances
throughout the 1995 fiscal year. As a result of the Company's
upcoming cash expenditures relating to planned theatrical release
and production/acquisition schedules for 1996, it is anticipated
that the cash balances on hand will be utilized and the Company
will have to draw funds against its credit facility to meet its
anticipated 1996 cash expenditures. This will reduce the liquidity
of the Company in 1996 when compared to the 1995 cash and borrowing
positions.
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 of 1993, 1994 and 1995 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 cumulative 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, 1994 and
1995 cash dividends on the Series C Preferred Stock which, together
with accrued and unpaid dividends thereon, totaled $2,207,000 as of
December 31, 1995.
The unpaid Series C Preferred Stock dividend itself bears a
dividend of 5% per annum, and is due on the next regularly
scheduled dividend payment date for the Series C Preferred Stock.
LIVE intends to pay the June 30 and December 31, 1993, 1994 and
1995 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 Series B Preferred Stock 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 $6,999,000 during the year ended December 31, 1995 primarily due
to the repurchase of 1,400,000 shares of the Company's Series B
Cumulative Preferred Stock, interest and principal payments on
long term obligations and payment of dividends on the Series B
Cumulative Preferred Stock.
As of December 31, 1995, the aggregate redemption price for
the Series B Preferred Stock was $41,970,000 ($10.00 per share).
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, 1996, LIVE acquired, and subsequently retired, a
total of 2,177,500 shares of the Series B Preferred Stock at an
average price of $4.27 per share.
Impact of Inflation and Other Matters
The inflation rate in recent years has been negligible. Where
manufacturers have increased prices, the Company generally has been
able to pass on such price increases within 90 to 180 days. As a
result, inflation has not had a material impact on the results of
operations.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The index to Consolidated Financial Statements of the Company
is included in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors and executive officers of the
Company appearing under the caption "Information Concerning Current
Directors, Nominees for Directors and Executive Officers" in the
Company's proxy statement for the 1996 Annual Meeting of
Stockholders (the "1996 Proxy Statement") is hereby incorporated by
reference.
Information regarding the Company's directors' and executive
officers' compliance with Section 16(a) of the Securities Exchange
Act of 1934 under the caption "Compliance with Section 16(a) of the
Securities Exchange Act of 1934" in the 1996 Proxy Statement is
hereby incorporated by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information appearing under the captions "Executive
Compensation and Other Remuneration," "Board Fees," "Compensation
Committee Interlocks and Insider Participation" and "Employment and
Committee Agreements" in the 1996 Proxy Statement is hereby
incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information setting forth the security ownership of certain
beneficial owners and management appearing under the caption
"Security Ownership of Certain Beneficial Owners and Management" in
the 1996 Proxy Statement is hereby incorporated by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain related transaction appearing
under the caption "Certain Relationships and Related Transactions"
in the 1996 Proxy Statement is hereby incorporated by reference.
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, 1994 and
1995
Consolidated Statements of Operations for the Years Ended
December 31, 1993, 1994 and 1995
Consolidated Statements of Stockholders' Equity for the
Years Ended December 31, 1993, 1994 and 1995
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1993, 1994 and 1995
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) No reports on Form 8-K were filed by the Company for the
quarter ended December 31, 1995.
<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 18, 1996
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 18, 1996
Anthony J. Scotti
/s/ ROGER A. BURLAGE Chief Executive Officer March 18, 1996
Roger A. Burlage (principal executive officer);
Director
/s/ RONALD B. CUSHEY Chief Financial Officer March 18, 1996
Ronald B. Cushey (principal financial officer);
Director
/s/ ROBERT L. DENTON Vice President and March 18, 1996
Robert L. Denton Chief Accounting Officer
(principal accounting officer)
FRANS J. AFMAN* Director March 18, 1996
Frans J. Afman
JAY BURNHAM* Director March 18, 1996
Jay Burnham
MAKOTO KOSHIBA* Director March 18, 1996
Makoto Koshiba
<PAGE>
Signature Title Date
JONATHAN D. LLOYD* Director March 18, 1996
Jonathan D. Lloyd
RYUICHI NODA* Director March 18, 1996
Ryuichi Noda
MASAO NOMURA* Director March 18, 1996
Masao Nomura
ROGER R. SMITH* Director March 18, 1996
Roger R. Smith
GREGORY R. PIERSON* Director March 18, 1996
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 18, 1996
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 18, 1996
Anthony J. Scotti
Chief Executive Officer March 18, 1996
Roger A. Burlage (principal executive officer);
Director
Chief Financial Officer March 18, 1996
Ronald B. Cushey (principal financial officer);
Director
Vice President and March 18, 1996
Robert L. Denton Chief Accounting Officer
(principal accounting officer)
FRANS J. AFMAN* Director March 18, 1996
Frans J. Afman
JAY BURNHAM* Director March 18, 1996
Jay Burnham
MAKOTO KOSHIBA* Director March 18, 1996
Makoto Koshiba
<PAGE>
Signature Title Date
JONATHAN D. LLOYD* Director March 18, 1996
Jonathan D. Lloyd
RYUICHI NODA* Director March 18, 1996
Ryuichi Noda
MASAO NOMURA* Director March 18, 1996
Masao Nomura
ROGER R. SMITH* Director March 18, 1996
Roger R. Smith
GREGORY R. PIERSON* Director March 18, 1996
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, 1994
and 1995, and the related consolidated statements of operations,
stockholders' equity, and cash flows for each of the three years in
the period ended December 31, 1995. 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, 1994 and 1995, and the consolidated results of their
operations and their cash flows for each of the three years in the
period ended December 31, 1995, 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 11, 1996
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in Thousands)
December 31,
1994 1995
ASSETS
ASSETS:
Cash and cash equivalents, including restricted cash
of $4,663 and $1,352 . . . . . . . . . . . . . . . . . $ 24,264 $ 49,487
Accounts receivable, less allowances of $19,469
in 1994. . . . . . . . . . . . . . . . . . . . . . . . 1,950 --
Inventories . . . . . . . . . . . . . . . . . . . . . . 7,842 4,813
Receivable related to assets held for sale. . . . . . . 17,916 --
Property and equipment, net. . . . . . . . . . . . . . . . 1,400 1,145
Film rights, net of accumulated amortization of $466,260
and $519,604 . . . . . . . . . . . . . . . . . . . . . . 71,108 66,700
Other assets . . . . . . . . . . . . . . . . . . . . . . . 2,443 1,353
Goodwill, net of accumulated amortization of $36,118
and $40,042 . . . . . . . . . . . . . . . . . . . . . . . 29,871 25,947
$156,794 $149,445
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
Accounts payable. . . . . . . . . . . . . . . . . . . . 7,305 6,675
Accrual for returns and advertising net of accounts
receivable of $15,447 in 1995 . . . . . . . . . . . . . -- 3,430
Accrued expenses. . . . . . . . . . . . . . . . . . . . 11,483 12,451
Notes payable . . . . . . . . . . . . . . . . . . . . . 3,333 8,333
Increasing Rate Senior Subordinated Notes due 1999,
including capitalized interest of $16,871 and $13,184. 56,871 53,184
Film rights obligations . . . . . . . . . . . . . . . . 19,776 18,559
Liabilities related to assets held for sale . . . . . . 13,542 --
Dividends payable . . . . . . . . . . . . . . . . . . . 2,131 2,309
Income taxes payable and deferred income taxes. . . . . 6,636 6,484
Total liabilities . . . . . . . . . . . . . . . . . . 121,077 111,425
STOCKHOLDERS' EQUITY:
Series B Cumulative Convertible Preferred Stock--
authorized 9,000,000 shares; $1.00 par value;
$56,000,000 liquidation preference (1994); $41,970,000
liquidation preference (1995); 5,600,000 (1994)
and 4,197,000 (1995) shares outstanding. . . . . . . . 5,600 4,197
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 24,000,000 shares (1994 and
1995); $0.01 par value; 2,418,720 (1994) and
2,418,424 (1995) shares outstanding . . . . . . . . . 24 24
Additional paid-in capital. . . . . . . . . . . . . . . 136,753 129,668
Retained deficit. . . . . . . . . . . . . . . . . . . . (106,675) (95,884)
35,717 38,020
$156,794 $149,445
See notes to consolidated financial statements.
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in Thousands, Except Per Share Data)
<CAPTION>
Year Ended
December 31,
1993 1994 1995
<S> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . $ 143,735 $ 117,205 $ 140,112
Cost of goods sold . . . . . . . . . . . . . . . 124,336 101,781 113,025
GROSS PROFIT. . . . . . . . . . . . . . . . 19,399 15,424 27,087
Operating expenses:
Selling, general and administrative expenses. 17,248 17,673 15,249
Amortization of goodwill. . . . . . . . . . . 3,924 3,925 3,925
21,172 21,598 19,174
(1,773) (6,174) 7,913
Disposal of VCL/Carolco Communications GmbH (VCL):
Net Sales . . . . . . . . . . . . . . . . . . 28,511 22,712 32,257
Costs and Expenses. . . . . . . . . . . . . . 32,174 22,712 32,257
(3,663) -- --
(Loss) Gain on disposal of VCL. . . . . . . . (15,741) -- 2,913
(19,404) -- 2,913
OPERATING (LOSS) PROFIT . . . . . . . . . . (21,177) (6,174) 10,826
Interest and other income . . . . . . . . . . 1,434 2,692 2,424
Interest expense. . . . . . . . . . . . . . . (7,698) (5,992) (1,859)
(LOSS) INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES. . . . . . . . . . . . (27,441) (9,474) 11,391
Income tax expense. . . . . . . . . . . . . . 768 200 600
(LOSS) INCOME FROM CONTINUING OPERATIONS. . (28,209) (9,674) 10,791
Discontinued Operations:
Income (loss) from discontinued operations
net of income taxes. . . . . . . . . . . . . 1,690 (100) --
Loss on disposal and operating losses during
phase-out period, net of income tax benefit. (23,773) -- --
(LOSS) FROM DISCONTINUED OPERATIONS . . . . (22,083) (100) --
NET (LOSS) INCOME . . . . . . . . . . . . . $ (50,292) $ (9,774) $ 10,791
Net (loss) income per common share:
Primary:
Continuing operations . . . . . . . . . . . . $ (13.15) $ (8.05) $ 1.34
Discontinued operations . . . . . . . . . . . (9.15) (0.04) --
Net (loss) income . . . . . . . . . . . . . . (22.30) (8.09) 1.34
Weighted average number of shares outstanding. . 2,417,801 2,418,003 2,436,309
Net (loss) income attributable to common stock . $ (53,881) $ (19,565) $ 3,255
Fully Diluted:
Continuing operations . . . . . . . . . . . . $ (13.15) $ (8.05) $ .53
Discontinued operations . . . . . . . . . . . (9.15) (0.04) --
Net (loss) income . . . . . . . . . . . . . . (22.30) (8.09) .53
Weighted average number of shares outstanding. . 2,417,801 2,418,003 20,541,896
Net (loss) income attributable to common stock . $ (53,881) $ (19,565) $ 10,791
</TABLE>
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,
1993 1994 1995
Shares Amounts Shares Amounts Shares Amounts
<S> <C> <C> <C> <C> <C> <C>
Series B Cumulative Convertible
Preferred Stock
Beginning balance . . . . . . . . 6,000,000 $ 6,000 1,000,000 $ 1,000 5,600,000 $ 5,600
Series B Cumulative Convertible
Preferred Stock issued
Repurchase of Series B Cumulative
Convertible Preferred Stock . . (400,000) (400) (1,400,000) (1,403)
Other . . . . . . . . . . . . . . (3,000)
Transferred (to) from current
liabilities . . . . . . . . . . (5,000,000) (5,000) 5,000,000 5,000
Ending balance. . . . . . . . . . 1,000,000 1,000 5,600,000 5,600 4,197,000 4,197
Series C Convertible Preferred
Stock
Beginning balance . . . . . . . . 15,000 15 15,000 15
Series C Convertible Preferred
Stock issued. . . . . . . . . . 15,000 15
Ending balance. . . . . . . . . . 15,000 15 15,000 15 15,000 15
Common Stock
Beginning balance . . . . . . . . 2,417,306 24 2,418,003 24 2,418,720 24
Common Stock issued (repurchased) 697 717 (296)
Ending balance. . . . . . . . . . 2,418,003 24 2,418,720 24 2,418,424 24
</TABLE>
(Continued)
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Continued)
(Dollar Amounts in Thousands)
<CAPTION>
Year Ended December 31,
1993 1994 1995
<S> <C> <C> <C>
Additional Paid-in Capital
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . $ 126,405 $ 106,604 $ 136,753
Series B Cumulative Convertible Preferred Stock dividend accrual. . . (3,000) (2,198)
Series C Convertible Preferred Stock dividend accrual . . . . . . . . (791) (829)
Adjustment related to five for one reverse stock split. . . . . . . . 97
Common Stock issued (Repurchased) . . . . . . . . . . . . . . . . . . 7 (1)
Series B Cumulative Convertible Preferred Stock repurchase. . . . . . (1,060) (4,057)
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. . . . . . . . . . . . . . . . . . . . . . . . . . . . 106,604 136,753 129,668
Retained Earnings (Deficit)
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . (46,609) (96,901) (106,675)
Net (loss) income . . . . . . . . . . . . . . . . . . . . . . . . . . (50,292) (9,774) 10,791
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . (96,901) (106,675) (95,884)
Other
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . (447) -- --
Translation adjustment. . . . . . . . . . . . . . . . . . . . . . . . 447 -- --
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . -- -- --
Total Stockholders' Equity . . . . . . . . . . . . . . . . . . . . . . . $ 10,742 $ 35,717 $ 38,020
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE> LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in Thousands)
<CAPTION>
Year Ended
December 31,
1993 1994 1995
<S> <C> <C> <C>
OPERATING ACTIVITIES:
(Loss) income from continuing operations. . . . . . . . . . . . . . . . $ (28,209) $ (9,674) $ 10,791
Adjustments to reconcile net (loss) income to net cash provided by
(used for) continuing operating activities:
Depreciation and amortization of property and equipment. . . . . . . . 880 745 715
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . 3,924 3,925 3,925
Loss on disposal of VCL. . . . . . . . . . . . . . . . . . . . . . . . 15,741 -- --
Amortization of and adjustments to film rights . . . . . . . . . . . . 53,091 49,056 60,330
Income taxes payable and deferred income taxes . . . . . . . . . . . . (478) 624 (152)
(Increase) decrease in operating assets, net of acquisitions:
Accounts receivable. . . . . . . . . . . . . . . . . . . . . . . . . . 6,515 482 1,950
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,802 2,282 3,029
Receivable related to assets held for sale . . . . . . . . . . . . . . (12,637) 68,084 17,916
Receivable from stockholder. . . . . . . . . . . . . . . . . . . . . . (2,683) 8,047 --
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 427 420 1,090
Increase (decrease) in operating liabilities, net of acquisitions:
Accounts payable and accrued expenses. . . . . . . . . . . . . . . . . (13,888) (1,707) 4,338
Accrual for returns and advertising. . . . . . . . . . . . . . . . . . -- -- 3,430
Liabilities related to assets held for sale. . . . . . . . . . . . . . 6,436 (33,059) (13,542)
Acquisition of film rights . . . . . . . . . . . . . . . . . . . . . . (31,907) (58,096) (59,921)
Film rights obligations incurred . . . . . . . . . . . . . . . . . . . 31,907 58,096 59,921
Payments on film rights obligations. . . . . . . . . . . . . . . . . . (43,631) (54,170) (61,138)
Cash provided by (used for) continuing operating activities. . . . . (8,710) 35,055 32,682
Cash (used for) provided by discontinued operations. . . . . . . . . 1,150 (100) --
Cash provided by (used for) operating activities . . . . . . . . . . (7,560) 34,955 32,682
INVESTING ACTIVITIES:
Acquisition of property and equipment . . . . . . . . . . . . . . . . . (3,676) (459) (460)
Cash used for investing activities . . . . . . . . . . . . . . . . . (3,676) (459) (460)
FINANCING ACTIVITIES:
Issuance of long-term obligations . . . . . . . . . . . . . . . . . . . 211,260 2,500 10,000
Payments on long-term obligations . . . . . . . . . . . . . . . . . . . (189,381) (50,631) (8,689)
Repurchase of Series B Cumulative Preferred Stock . . . . . . . . . . . -- (1,460) (5,460)
Dividends paid on Preferred Stock (Series B and Series C) . . . . . . . (2,249) (2,999) (2,850)
Issuance of Series C Preferred Stock. . . . . . . . . . . . . . . . . . 15,117 -- --
Cash provided by (used for) financing activities . . . . . . . . . . 34,747 (52,590) (6,999)
Increase (decrease) in cash and cash equivalents . . . . . . . . . . 23,511 (18,094) 25,223
Cash and cash equivalents at beginning of period . . . . . . . . . . 18,847 42,358 24,264
Cash and cash equivalents at end of period . . . . . . . . . . . . . $ 42,358 $ 24,264 $ 49,487
</TABLE>
See notes to consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1995
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 Film & Mediaworks ("LFM") (formerly LIVE Home
Video Inc.) and LIVE International ("LI"), which primarily acquires
rights to produce and distribute 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 (LFM) and
internationally (LI). As part of its international activities, the
Company also owned 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 February 1995, LIVE executed a preliminary agreement providing
for the disposal of its interest in VCL. In November 1995, LIVE
completed this sales transaction. The Company's continuing
operations are principally in a single business segment, the
production, distribution and retail sale of a broad variety of film
related entertainment software products.
Principles of Consolidation: The financial statements include
the accounts of the Company and its subsidiaries LFM, LI and VCL.
The financial statements reflect the Company's interests in VCL as
"Assets Held For Sale" and "Liabilities Related To Assets Held For
Sale" (1994) and account for VCL as a disposal of a portion of a
line of business. 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, subject to certain foreign restrictions, and
collateral for domestic letters of credit relating to film rights
obligations (1994) and reserves for film production contingencies
(1995). 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 (1994). The accrual for returns and advertising costs are
net of accounts receivable (1995).
Inventory Valuation: LFM's inventory of duplicated
videocassettes and boxes is stated at the lower of actual cost or
market. All other inventories, which consist of 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.
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. Based on
this review, if estimated future gross revenues from a film are not
sufficient to recover the unamortized film costs, other direct
distribution expenses, and participations, the unamortized film
cost shall be written down to net realizable value. In unusual
cases, such as a change in public acceptance of certain types of
films or actual costs substantially in excess of budgeted costs, a
write-down to net realizable value may be required before the film
is released.
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 LFM 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 VCL (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. 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, free television
and pay television license agreements are recognized in accordance
with Financial Accounting Standards Board No. 53, when the license
period begins for each motion picture, the license fee and cost of
each picture are known, such motion pictures have been accepted and
are available pursuant to the terms of the noncancelable license
agreements and the collectability of the full license fee is
reasonably assured. Revenues from theatrical exhibition in excess
of minimum guaranteed amounts are recognized 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 ---- 1-6 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) Income Per Common Share: (Loss) income 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 in 1993
and 1994 calculations as they are antidilutive. Primary per share
information has been determined on the basis of 2,417,801,
2,418,003 and 2,436,309 weighted average shares outstanding for the
years ended December 31, 1993, 1994 and 1995, respectively. The
net (loss) income per common share for the year ended December 31,
1994 and 1995 gives effect to the accretion of the redemption value
of the Series B Cumulative Convertible Preferred Stock (the "Series
B Preferred Stock") of $6,000,000 and $4,509,000 respectively. The
net (loss) income per common share for the years ended December 31,
1993, 1994 and 1995 gives effect to total dividends on both the
Series B Preferred Stock and the Series C Convertible Preferred
Stock (the "Series C Preferred Stock") of $3,589,000, $3,791,000
and $3,027,000, respectively. Fully diluted per share information
for the year ended December 31, 1995 has been determined on the
basis of 20,541,896 weighted average number of shares outstanding,
assuming conversion of the Series B Preferred Stock and the Series
C Preferred Stock.
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 1993,
1994 and 1995.
Concentration of Credit Risk: The Company sells film
properties and videocassettes to wholesalers, retailers and
consumers worldwide. Sales by LFM are made to customers
nationwide. Sales by LI 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 Warner-Elektra-Atlantic
Corporation ("WEA") to LFM's customers has been assumed by WEA
under the terms of a three-year distribution agreement (see Note
7).
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 to 90 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, 1995,
the carrying value of the Company's financial instruments, which
consist primarily of debt, approximates the fair value thereof.
Fair value of publicly held debt has been determined based on
quoted market prices.
Use of Estimates: The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the
amounts reported in the financial statements and accompanying
notes. Actual results could differ from those estimates.
Stock Based Compensation: The Company accounts for its stock
compensation arrangements under the provision of APB 25,
"Accounting for Stock Issued to Employees," and intends to continue
this method of accounting.
Re-classification: Certain re-classifications were made to
the 1993 and 1994 financial statements to conform to the 1995
presentation.
Note 2 - Series C Preferred Stock
On March 23, 1993, Pioneer Entertainment (USA) L.P., formerly
Pioneer LDCA, Inc., ("Pioneer") received 15,000 shares of the
Company's Series C Preferred Stock, par value $1.00 per share and
in 1995 transferred these shares to its parent company, Pioneer
Electronic Corporation ("PEC").
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, 1994, and 1995, the June 30 and December 31,
1993, 1994, and 1995 dividends totaling approximately $2,207,000
($147.13 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 cumulative
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, 1994, and 1995 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
1,130,170 shares of common equity of the Company (either Common
Stock or Series A Common Stock). The number of shares into which
the Series C Preferred Stock is convertible was determined by
dividing the $15,000,000 liquidation preference plus accrued
dividends of approximately 2,207,000 of the Series C Preferred
Stock by $15.225, which was 140% of the average closing price of
the Company's Common Stock for the ten trading days ending March
18, 1993, the date that was three business days prior to the
completion of the Company's financial restructuring on March 23,
1993 ("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 PEC, represents approximately 49.8% of the voting equity of
the Company (see Note 12). 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 3 - Discontinued Operations
On August 31, 1994, LIVE sold its entire interest in its
Specialty Retail Division, which consisted of its formerly wholly
owned subsidiary, Strawberries Inc. ("Strawberries") and
Strawberries' wholly owned subsidiary, Waxie Maxie Music Co.
("Waxie Maxie") 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 March 1994, primarily as a result of the Company's desire
to focus its efforts on its core entertainment business, the Board
of Directors of the Company decided to dispose of the Company'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, would be transferred to Ruth and Apricot. The total
consideration to be received by the Company and its affiliates in
connection with such transactions was approximately $7,444,000, of
which approximately $3,100,000 was received in February 1995. The
remaining $4,344,000 was received in November 1995, and a gain of
approximately $2,913,000 was reflected in the quarter ended
September 30, 1995, resulting from the completion of this
transaction.
Accordingly, the Company's interest 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
operating statements presented, separately disclose the results of
operations of VCL and 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 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 year ending
December 31, 1993 and the seven months ended August 31, 1994 were,
$106,124,000 and $57,846,000, respectively. Income/(losses) from
operations for the same periods were, $1,690,000 and ($3,339,000)
which was accrued in 1993, respectively, net of provision for
income taxes of $632,000 and $100,000, respectively.
Note 4 - Foreign Operations
For the year ended December 31, 1993, net revenues, operating
losses and identifiable assets relating to foreign operations were
$34,009,000, ($3,289,000) and $28,871,000, respectively. 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, 1995, net revenues
and operating profits relating to foreign operations were
$32,257,000 and $8,775,000.
Note 5 - Film Rights
The components of film rights are as follows:
December 31,
1994 1995
(In Thousands)
Titles released. . . . . . . . . . . . . . $491,576 $535,145
Less amortization. . . . . . . . . . . . . (466,260) (514,669)
25,316 20,476
Titles not released, masters received. . . 36,960 19,819
Advances paid, masters not received. . . . 8,832 26,405
TOTAL FILM RIGHTS . . . . . . . . . . . $ 71,108 $ 66,700
The Company estimates that 79% of its film rights will be amortized during
the three years ending December 31, 1998.
Note 6 - Property and Equipment
The components of property and equipment are as follows:
December 31,
1994 1995
(In Thousands)
Building and improvements. . . . . . . . . $ 447 $ 456
Equipment and furniture. . . . . . . . . . 6,128 6,578
6,575 7,034
Less accumulated depreciation and amortization (5,175) (5,889)
$ 1,400 $ 1,145
Note 7 - Debt and Other Financing
Debt and other financing consist of the following:
December 31,
1994 1995
(In Thousands)
Distribution agreements. . . . . . . . . . $ 3,333 $ 8,333
Increasing Rate Senior Subordinated Notes
due 1999 (see Note 10), including
capitalized interest of $16,871 (1994)
and $13,184 (1995). . . . . . . . . . . . 56,871 53,184
$60,204 $61,517
<PAGE>
LIVE and its affiliates are a party to a three-year $30,000,000
revolving credit facility with Foothill Capital Corporation (the
"Foothill Credit Facility") expiring November 16, 1997. Borrowings
available under the Foothill Credit Facility are limited to
$27,500,000 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, payable monthly. In no event will interest
under the Foothill Credit Facility 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, 1995,
the Company was in compliance with all such financial ratios.
There were no amounts outstanding under the Foothill Credit
Facility as of December 31, 1995.
On May 27, 1995, LFM entered into a three year extension of its
distribution agreement originally signed in May 1992 with WEA.
Under the terms of the extension, WEA advanced $10,000,000 to LFM
($20,000,000 had been advanced under the original agreement and
repaid entirely prior to the 1995 extension), recoupable from
distribution revenues during the three year term of the agreement
at $277,778 per month, including interest at LIBOR, plus 0.2%. In
order to obtain the advance, LFM granted WEA a second priority
security interest in substantially all the LFM's assets. At
December 31, 1994 and 1995 there was $3,333,000 and $8,333,000,
respectively, outstanding related to the WEA advances. The interest rate
on the advance at December 31, 1995 was 6.075%.
The future maturities of long-term obligations are as follows:
Year Ending December 31, (In Thousands)
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12,341
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,425
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,503
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,247
$ 61,516
Interest paid for the years ended December 31 1993, 1994 and
1995 was $9,190,000, $8,621,000, and $5,131,021 respectively,
including $964,000, $787,000, and $28,482 related to the Company's
discontinued operations.
<PAGE>
Note 8 - 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
four 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, 1995 are:
(In Thousands)
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 909
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . 911
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . 909
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . 478
Total net minimum lease payments . . . . . . . . . . . . . $3,207
For the years ended December 31, 1993, 1994 and 1995, rent
expense under all operating leases aggregated $7,953,000,
$6,685,000, and $1,812,000 respectively, including $6,992,000,
$5,760,000, and $878,000 related to the Company's discontinued
operations.
Note 9 - Film Rights Obligations
At December 31, 1995, the unrecorded future obligation for
undelivered film product approximates $20,851,417. 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, 1995, $15,585,104 of royalties payable are included
in film rights obligations.
Note 10 - Increasing Rate Senior Subordinated Notes Due 1999
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"). 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 "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 LFM, 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 (as defined) 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.
Interest to maturity on $30,055,000 of the LIVE Increasing
Rate Notes of $16,871,000 and $13,184,000 at December 31, 1994 and
1995, 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.
Note 11 - Income Taxes
As discussed in Note 1, the Company records its income tax
provision in accordance with SFAS No. 109.
(Loss) Income From Continuing Operations Before Income Taxes is as
Follows:
December 31,
1993 1994 1995
(In Thousands)
Domestic . . . . . . . . . . . . . . . . . $ (8,037) $ (7,945) $ 11,391
Foreign. . . . . . . . . . . . . . . . . . (19,404) (1,529) --
$(27,441) $ (9,474) $ 11,391
Income Tax Expense (Benefit) From Continuing Operations
December 31,
1993 1994 1995
(In Thousands)
Currently payable:
Federal. . . . . . . . . . . . . . . . . $ 453 $ -- $ 108
State. . . . . . . . . . . . . . . . . . 332 (494) 172
Foreign. . . . . . . . . . . . . . . . . 54 70 --
839 (424) 280
Deferred:
Federal. . . . . . . . . . . . . . . . . 411 624 48
State. . . . . . . . . . . . . . . . . . (482) -- 272
(71) 624 320
$ 768 $ 200 $ 600
<PAGE>
Components of Deferred Income Taxes
December 31,
1993 1994 1995
(In Thousands)
Film rights. . . . . . . . . . . . . . . . $ (71) $ 368 $ 13
Sales returns and other allowances 1 35 290
Accelerated depreciation and basis reduction 2 3 (2)
Accruals not currently deductible for tax
purposes (8) 218 19
Other. . . . . . . . . . . . . . . . . . . 5 -- --
$ (71) $ 624 $ 320
Reconciliation of Effective Rate of Income Taxes
Percentage of Income (Loss)
December 31,
1993 1994 1995
Restated tax provision . . . . . . . . . . $ 768 $ 200 $ 600
Book (loss) income . . . . . . . . . . . . (27,441) (9,474) 11,391
Effective tax rate . . . . . . . . . . . (2.8)% (2.1)% 5.3%
Federal statutory rate . . . . . . . . . . 35.0% 35.0% 35.0%
State income taxes . . . . . . . . . . . . (0.4) (3.0) 3.9
Alternative minimum tax effect, other (4.4) (1.2) (1.2)
Utilized net operating loss. . . . . . . . (26.9) (17.6) (4.5)
(Loss) income related to foreign operations (0.2) (0.7) (49.2)
Foreign deemed dividend. . . . . . . . . . (0.9) (0.1) 9.2
Goodwill amortization. . . . . . . . . . . (5.0) (14.5) 12.1
Effective tax rate . . . . . . . . . . . (2.8)% (2.1)% 5.3%
Components of Deferred Tax Liabilities and Assets
1995
Deferred tax liabilities:
Amortization of film rights and other. . $ (8,451)
Total deferred tax liabilities. . . . . (8,451)
Deferred tax assets:
Sales returns and other allowances . . . 726
Accelerated depreciation . . . . . . . . 139
Accruals not currently deductible. . . . 322
Other. . . . . . . . . . . . . . . . . . 79
Tax basis difference - debt. . . . . . . 4,614
5,880
Less valuation allowance . . . . . . . . (4,013)
Net deferred tax assets. . . . . . . . . 1,867
Total deferred tax assets/(liabilities) $ (6,584)
Income taxes paid for the years ended December 31, 1993, 1994
and 1995 were $1,766,000, $1,456,000, and $421,936 respectively,
including $230,000 and $580,000, related to the Company's
discontinued operations in 1993 and 1994. The valuation allowance
has decreased $14,750,000, from $18,763,000 at December 31, 1994 to
$4,013,000 at December 31, 1995 primarily due to fluctuations in
temporary differences.
At December 31, 1993, the cumulative undistributed earnings
of the Company's foreign subsidiaries of approximately $4,400,000
were deemed remitted as a dividend in accordance with certain
provisions of the U.S. Internal Revenue Code ("I.R.C."). During
1994 and 1995, $3,874,000 and $3,000,000 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 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
did 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.
At December 31, 1995, approximately $36,000,000 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 $36,000,000
for regular income tax purposes, of which $31,000,000 are subject to
annual limitations as described above, will expire between the
years 2006 and 2009. 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,
$7,000,000 of net operating loss carryforwards are available after
the reduction in "tax attributes." AMT net operating loss
carryforwards will expire between 2006 and 2009. AMT credits of
$2,000,000 and foreign tax credits of $600,000 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 $30,000,000 for regular tax purposes
and $31,600,000 for AMT purposes, which may be carried forward, but
expire in 1999. State capital loss carryforwards are $20,000,000
which 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.
Note 12 - 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").
<PAGE>
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.
The 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 1993 and 1994, and $2,198,000 ($0.52 per share)
in 1995 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 at 100% of the
liquidation value
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. In addition, in March 1996 the Company
purchased 377,500 shares of the Series B Preferred Stock at an
average price of approximately $6.00 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 approximately 7,600,000
shares of the Company's Common Stock based upon the number of Series B
Preferred Stock shares outstanding as of March 15, 1996.
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, and the Company's stockholders subsequently
approved, 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 February 7, 1996, the Stock Option Committee of the Board
of Directors granted to certain current employees of LIVE and LFM
a total of 92,400 options at the exercise price of $3.50, the
closing price of the Common Stock on The Nasdaq Stock Market's
Small Cap Market on that day. The options vest ratably over
periods ranging from two to three years.
<PAGE>
On March 6, 1995, the Stock Option Committee of the Board of
Directors granted to all current employees and Directors of LIVE
and LFM (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
$3.50, the closing price of the Common Stock on the SmallCap Market
on March 6, 1995, (ii) fifty percent (50%) of the New Options would
vest on March 6, 1996; the remainder would vest on March 6, 1997,
provided that no New Options would vest earlier than the scheduled
vesting date for the corresponding Canceled Options, and (iv) all
New Options would expire on the expiration date of the
corresponding Canceled Options.
A summary of stock option transactions during the three years
ended December 31, 1995 follows:
Number of Option Price
Shares Per Share
($)
Stock options outstanding:
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 . . . . . . . . . . . . . (86,380) 8.75-70.00
Granted. . . . . . . . . . . . . . 86,570 2.75-15.63
December 31, 1994. . . . . . . . . . 298,400 8.75-70.00
Canceled . . . . . . . . . . . . . (297,720) 3.50-15.63
Granted. . . . . . . . . . . . . . 275,140 2.75- 4.25
December 31, 1995. . . . . . . . . . 275,820 2.75-14.38
At December 31, 1995, 23,300 options were exercisable, at an
average exercise price of $6.55 per share, and no stock
appreciation rights were outstanding. Options to purchase 77,590
(1993), 76,860 (1994), and 99,860 (1995) shares of the Company's
Common Stock were available for grant under the Plan.
Warrants to purchase 9,900 shares of the Company's Common
Stock were issued during 1990 and were outstanding as of December
31, 1995. 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.
<PAGE>
Note 13 - 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 14 - Related Party Transactions
Revenues generated by LFM from Carolco titles amounted to
15.6%, 5.5%, and 7.2% of net sales for the years ended December 31,
1993, 1994 and 1995, 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 LFM or LI 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 LFM and LI. In connection with this Reconciliation
Agreement in 1994, 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).
Pursuant to an agreement dated October 1995, which amended and
extended an original agreement dated October 1991, LFM granted
Pioneer a license for United States laser videodisc rights to LFM's
library of motion pictures (subject to certain reserved rights) for
a term ending in September 1998. Pioneer will pay LFM a total of
$4,600,000 ($2,300,000 upon signing and $2,300,000 on January 1,
1997) under this agreement as a non-returnable advance recoupable
on a cross-collateralized basis from all royalties payable to LFM
under the agreement.
In July 1994, a subsidiary of LFM 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.
In July 1994, LFM and an affiliate of Le Studio executed a
definitive agreement whereby LFM licensed the United States and
Canadian video rights to the motion picture Stargate.
In January 1993, Jefferson Capital, an affiliate of a director
of the Company, received $500,000 for investment banking services
that were provided in connection with the Company's consideration
of a potential business combination of the Company and Carolco.
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 LFM 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 August 1995, Jefferson Capital assisted the Company in
obtaining film project financing from a bank and received a total
fee of $50,000 for such services.
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.
Any and all agreements with Jefferson Capital were terminated
by the Company in May 1995.
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 LFM. 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.
<PAGE>
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.
Note 15 - 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 and LFM 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 LIVE Incentive Savings Plan were $55,000,
$46,000, and $95,000 for the years ended December 31, 1993, 1994
and 1995, respectively.
Note 16 - Major Customers
During the year ended December 31, 1993, no one customer
accounted for more than 10% of the net sales of LIVE. During the
year ended December 31, 1994, two customers accounted for 23.3% of
net sales of LIVE and during the year ended December 31, 1995, two
customers accounted for 34.0% of net sales of LIVE.
Note 17 - Commitments and Contingencies
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 $2,413,000,
$1,812,000, and $93,000 for the years ending December 31, 1996,
1997 and 1998.
<PAGE>
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, as well as a
lender to LFM 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.
The plaintiffs have taken no actions in either of these cases
for over one year and the Company has asked the Court to dismiss
both cases for non prosecution. There is no assurance that the
Company's motion will be granted.
In May 1994, a breach of contract claim was filed against a
subsidiary of the Company, claiming nonpayment of royalties from
licensing of films in foreign territories and deprivation of
royalty payments as a result of misallocation of certain values
asserted with licensed film properties. Films subject to the
complaint were contained in the assets of Vestron, Inc. purchased
by the Company in July 1991, and the period covered included the
license periods both prior to, and subsequent to , the acquisition
date by the Company. The Company filed a reply brief (including a
Motion to Dismiss) on October 5, 1994, and such Motion to Dismiss
was granted on the grounds of forum non conviens. Plaintiff filed
a complaint in New York on March 22, 1995. The Company filed its
answer, affirmative defenses and counterclaim on April 20, 1995.
Plaintiff filed a motion for class certification on September 8,
1995 to which the Company filed its opposition to the motion on
November 6, 1995.
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.
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 17 - 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>
1994
Net sales (1). . . . . . . . . . . . . . $ 18,265 $ 29,151 $ 33,845 $ 35,944 $117,205
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) income. . . . . . . . . . . . (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:
Continued 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)
1995
Net sales (2). . . . . . . . . . . . . . $ 44,505 $ 22,456 $ 40,060 $ 33,091 $140,112
Gross profit . . . . . . . . . . . . . . 9,949 5,077 3,246 8,815 27,087
Operating profit . . . . . . . . . . . . 5,359 936 1,400 3,131 10,826
Income before income taxes . . . . . . . 5,404 1,159 1,595 3,233 11,391
Net income . . . . . . . . . . . . . . . 4,904 1,059 1,595 3,233 10,791
Accretion in redemption value of
Series B Preferred Stock. . . . . . . . 1,571 1,259 1,259 420 4,509
Preferred dividends. . . . . . . . . . . 859 716 696 756 3,027
Net income (loss) attributable to Common Stock 2,474 (916) (360) 2,057 3,255
Net income (loss) per common share:
Primary . . . . . . . . . . . . . . . . 1.02 (0.38) (0.15) 0.84 1.34
Fully Diluted . . . . . . . . . . . . . 0.29 (0.38) (0.15) 0.21 0.53
<FN>
(1) Excludes net sales of VCL for each of the fiscal quarters of 1994 of
$5,341, $5,541, $3,828 and $8,002, respectively.
(2) Excludes net sales of VCL for each of the fiscal quarters of 1995 of
$9,779, $8,446, $5,261 and $8,771, 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, 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
Year ended December 31, 1995 Deducted from
Asset Accounts:
Allowance for future sales returns. . $10,847 $17,926 (a) -- $14,322 (b) $14,451
Allowance for doubtful accounts . . . 1,742 103 12 850 (c) 1,007
Allowance for advertising . . . . . . 6,881 7,499 (2,000) 8,961 (d) 3,419
Allowance for overstock inventory . . 2,688 637 -- 884 (e) 2,441
Allowance for film rights in excess of net
realizable value. . . . . . . . . . 1,323 -- 1,368 294 2,397
<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, 1995
<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 (incorporated
herein by reference to Exhibit 4.5 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994) . . . . . . . . . . . . . . . . . . . . .
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.(incorporated
herein by reference to Exhibit 10.12 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994) . . . . . . . . . . . . . . . . . . . . .
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 (incorporated herein by reference to
Exhibit 10.14 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994) . . . . . . . .
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 (incorporated herein by reference to
Exhibit 10.21 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994)^. . . . . . . .
10.22 Employment Agreement, dated as of December 31, 1994, for the
services of Ronald B. Cushey (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, 1994)^
10.23 Employment Agreement, dated as of April 29, 1994, for the
services of Steve Mangel (incorporated herein by reference
to Exhibit 10.23 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1994)^ . . . . .
10.24 Employment Agreement, dated as of January 20, 1994, for the
services of Paul S. Almond (incorporated herein by reference
to Exhibit 10.24 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1994)^ . . . . .
10.25 First Amendment to Employment Agreement, dated as of
February 2, 1994, for the services of Paul S. Almond
(incorporated herein by reference to Exhibit 10.25 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994)^. . . . . . . . . . . . . . . . . .
10.26 Employment Agreement, dated as of January 31, 1994, for the
services of Elliot Slutzky (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, 1994)^ . . . . .
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 (incorporated
herein by reference to Exhibit 10.47 to the Registrant's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994)^. . . . . . . . . . . . . . . . . . . . .
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. (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, 1994) . . . . . . . . . . . .
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 (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, 1994)^
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 (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,
1994)^ . . . . . . . . . . . . . . . . . . . . . . . . . . .
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. (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, 1994)^. . . . . . . . . . . .
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) (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, 1994) . . . . . . . . . . . . . . . . . . . . .
10.67 Continuing Guaranty dated as of November 14, 1994 from the
Registrant in favor of Foothill Capital Corporation
(incorporated herein by reference to Exhibit 10.67 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994) . . . . . . . . . . . . . . . . . .
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. (incorporated herein by reference to
Exhibit 10.68 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994) . . . . . . . .
10.69 Notice of Assignment, dated November 14, 1994, from Chemical
Bank to WEA Corp. (incorporated herein by reference to
Exhibit 10.69 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994) . . . . . . . .
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. (incorporated herein by reference to Exhibit 10.70
to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994) . . . . . . . . . . . .
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.
(incorporated herein by reference to Exhibit 10.71 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994) . . . . . . . . . . . . . . . . . .
10.72 Intercreditor Agreement, dated as of November 16, 1994, by
and between Foothill Capital Corporation and WEA Corp.
(incorporated herein by reference to Exhibit 10.72 to the
Registrant's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994) . . . . . . . . . . . . . . . . . .
10.73 Trustee Intercreditor Agreement, dated as of November 16,
1994, by and between Foothill Capital Corporation and
American Stock Transfer & Trust Company (incorporated herein
by reference to Exhibit 10.73 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended December 31,
1994). . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.74 Agreement dated April 8, 1992 between the Registrant and
Carolco Pictures Inc. with respect to the division of legal
fees and costs (incorporated herein by reference to Exhibit
10.74 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994) . . . . . . . . . . . .
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 (incorporated herein by reference to
Exhibit 10.76 to the Registrant's Annual Report on Form 10-K
for the fiscal year ended December 31, 1994) . . . . . . . .
10.77 Short Form Deal Memo dated as of June 21, 1994 between
International Video Productions Inc. and Le Studio
Canal+(U.S.) (incorporated herein by reference to Exhibit
10.77 to the Registrant's Annual Report on Form 10-K for the
fiscal year ended December 31, 1994) . . . . . . . . . . . .
10.78 First Amendment to Employment Agreement, dated as of April
1, 1995, for the services of Michael J. White (incorporated
herein by reference to Exhibit 10.1 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1995)^ . . . . . . . . . . . . . . . . . . . . . . . . .
10.79 Amendment No. One to Amended and Restated Loan and Security
Agreement, dated as of February 28, 1995 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. (incorporated
herein by reference to Exhibit 10.2 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March
31, 1995). . . . . . . . . . . . . . . . . . . . . . . . . .
10.80 Fourth Amendment to License and Distribution Agreement dated
as of May 27, 1995 between LIVE Home Video Inc., LIVE
America Inc., Vestron Inc., and LIVE Film and Mediaworks
Inc. and Warner-Electra-Atlantic Corporation (incorporated
herein by reference to Exhibit 10.80 to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended June 30,
1995). . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.81 Amended and Restated Intercreditor Agreement dated as of May
27, 1995 between Foothill Capital Corporation and Warner-
Elektra-Atlantic Corporation (incorporated herein by
reference to Exhibit 10.81 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1995) . .
10.82 New Security Agreement dated as of May 27, 1995 between LIVE
Home Video Inc., LIVE America Inc., Vestron Inc., LIVE Film
and Mediaworks Inc., and Warner-Elektra-Atlantic Corporation
(incorporated herein by reference to Exhibit 10.82 to the
Registrant's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1995) . . . . . . . . . . . . . . . . . . . .
10.83 Amendment to Employment Agreement, dated as of December 31,
1995 for the services of Ronald B. Cushey*^. . . . . . . . .
10.84 Termination of Engagement Letter, dated May 31, 1995 between
Jefferson Capital Group, Ltd. and Daniels & Associates and
the Registrant^. . . . . . . . . . . . . . . . . . . . . . .
10.85 1988 Stock Option and Stock Appreciation Rights Plan of the
Registrant as amended through February 7, 1996 (incorporated
by reference to Appendix B to the Registrant's proxy
statement for the 1996 Annual Meeting of Stockholders)^. . .
10.86 Fiscal 1996 Incentive Cash Compensation Program for the
Registrant, dated February 7, 1996*^ . . . . . . . . . . . .
10.87 Multiple Picture Deal Agreement, dated as of February 14,
1996, between Orion Pictures Corporation and the Registrant*
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10.88 Laser Videodisc Sublicense Deal Memorandum, dated as of
October 1, 1995, by and between Pioneer Entertainment (USA)
L.P. and LIVE Film and Mediaworks Inc.*. . . . . . . . . . .
10.89 Sale and Purchase Agreement, dated November 6, 1995, among
LIVE Entertainment International Inc., VCL/Carolco
Communications B.V., VCL/Carolco Communications GmbH,
Apricot Computer GmbH and Gunther Detlef Ruth* . . . . . . .
10.90 Supplement to the Sale and Purchase Agreement, dated
November 6, 1995, between LIVE Entertainment International
Inc. and Apricot Computer GmbH*. . . . . . . . . . . . . . .
10.91 Output Deal Memo, dated as of February 8, 1996 between LIVE
International and Pioneer LDC, Inc.* . . . . . . . . . . . .
10.92 Amendment No. Two to Amended and Restated Loan and Security
Agreement, dated as of July 18, 1995 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.* . . . . . . . . . . . . . . .
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*. . . . . . . . . . . . . . . . . . . .
27 Financial Data Schedule (Electronic Filing Only) . . . . . .
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
AMENDMENT TO EMPLOYMENT AGREEMENT
This is an Amendment to an Employment Agreement between
LIVE Entertainment Inc. (the "Company") and Ronald B. Cushey
("Employee"), dated as of December 31, 1994 (the "Original
Agreement"). This Amendment is dated as of December 31, 1995.
The Original Agreement is amended in the following respects:
The Agreement, as amended, shall be between
Employee, the Company and LIVE Home Video Inc.
("LHV").
1. Section 1.4.1 of the Original Agreement is amended
to add the following:
The term of the Agreement is extended through
December 31, 1997.
2. New Section 1.4.4 is added to the Original
Agreement as follows:
(i) A Change of Control will occur if, in a
transaction or related series of transactions,
another person or a group of persons acting
together, other than Pioneer Electronic
Corporation and its affiliates, acquire more than
50% of the voting securities of the Company or if
substantially all of the assets of the Company are
sold in one or a related series of transactions.
(ii) In the event of a Change of Control followed
within 180 days by a without cause termination of
employment or a without cause material reduction
of Employee's duties and responsibilities,
Employee will receive, in lieu of the benefit
provided in Section 3.2.2(i), in one lump sum, the
greater of the remainder of Employee's Fixed
Annual Compensation for the term of the Agreement
or $50,000, less withholding as required. In
addition, the mitigation provisions of Section 3.4
shall not apply in such event.
(iii) In the event of a Change of Control followed
within 180 days by the termination or resignation
of Roger A. Burlage as Chief Executive Officer or
President of Company and of LHV, Employee may
resign his position within 30 days after such
termination and, in such event, Employee will
receive the same benefits and payments as are set
forth in the immediately preceding paragraph as if
Employee was terminated without cause.
3. Section 2.1 of the Original Agreement is amended
to add the following:
Fixed Annual Compensation for calendar year 1996
will be no less than $210,000 per annum and for
calendar year 1997 will be no less than $220,000
per annum.
4. Section 2.2 of the Original Agreement is replaced
with the following:
Employee shall be eligible to participate in
Company's discretionary corporate bonus program,
as determined, modified and published by Company
from time to time. In addition, Employee's
eligibility for a discretionary bonus and salary
increases in excess of the Fixed Annual
Compensation set forth above shall be based, in
part, upon the following criteria: (i) overall
profitability of the Company; (ii) effectiveness
of the Company's accounting functions; (iii)
Employee's active involvement and participation in
the management of the Company, including setting
financial goals and performance evaluations,
proactive involvement in restructuring the
Company's capital structure, and aggressive
involvement in all other financial aspects of the
Company's business including budgeting, monitoring
the financial performance of the Company's other
divisions and related items ("Incentive
Compensation").
5. Section 2.7 of the Original Agreement is amended
to replace "1996" wherever it appears with "1997."
6. New Section 2.8 is added as follows:
2.8 Stock Options. Upon Employee's execution of a
Stock Option Agreement, Company grants to Employee
options to acquire 20,000 shares of the Company's
common stock at a price per share equal to the
closing price of the Company's common stock on the
NASD Small Cap Market on December 7, 1995 with
such option to vest as follows: (i) 7,000 options
on December 31, 1996, (ii) 7,000 options on
December 31, 1997 and (iii) 6,000 options on
December 31, 1998. In the event of a Change of
Control (as defined above), all unvested options
will immediately vest.
<PAGE>
The Options will be subject to such additional
terms and conditions as may be set forth in the
Company's Option Plan as well as the form of Stock
Option Agreement.
In all other respects, the Original Agreement shall
continue in full force and effect.
LIVE ENTERTAINMENT INC.
By:_______________________
Roger Burlage
LIVE HOME VIDEO INC.
By:_______________________
Roger Burlage
__________________________
Ronald B. Cushey
LIVE ENTERTAINMENT INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
May 31, 1995
Jefferson Capital Group, Ltd. Daniels & Associates
1 James Center 299 Park Avenue
901 East Cary Street Twentieth Floor
Richmond, Virginia 23219 New York, New York
Attention: R. Timothy O'Donnell Attention: Michael Garstin
Re: Termination Engagement Letter dated July 7, 1993 (the "Engagement
Letter")
Gentlemen:
Pursuant to the Section 7 of the Engagement Letter, LIVE
Entertainment Inc. (together with its affiliates, "LIVE") hereby
notifies Jefferson Capital Group, Ltd. and Daniels & Associates
that LIVE is terminating the Engagement Letter, effective
immediately. LIVE hereby acknowledges that the obligations
contained in the last three sentences of Section 7 of the
Engagement Letter shall survive the termination of the Engagement
Letter, pursuant to the express terms thereof.
Very truly yours,
LIVE ENTERTAINMENT INC.
By:
-------------------------
Michael J. White
Executive Vice President
1988 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN, AS AMENDED,
OF LIVE ENTERTAINMENT INC.
(As Amended through February 7, 1996 [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, as amended (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") 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 580,000 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 700,000
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 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 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 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
increase the number of options available was approved on May 9,
1995 by the holders of the outstanding voting stock of the
Company. The next most recent amendment and restatement of the
Plan to comply with certain provisions of the Code was adopted by
the Board on June 30, 1993.
LIVE ENTERTAINMENT INC.
FISCAL 1996
CORPORATE INCENTIVE CASH COMPENSATION PROGRAM
As Approved By The Board Of Directors On
February 7, 1996
<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 discretionary program be adopted for 1996. This Report is
organized in the following manner:
1. Goals of Fiscal 1996 LIVE Corporate Discretionary
Incentive Cash Compensation Program (the "1996 LIVE
Program").
2. Suggested 1996 LIVE Program.
3. Expected Costs of the 1996 LIVE Program.
4. Miscellaneous Provisions of the 1996 LIVE Program.
A discussion of the various elements of the 1996 LIVE Program
follows.
II. Goals of 1996 LIVE Program
We believe that the goals of the 1996 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 encourage 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 1996 LIVE Program supports the above-stated
goals.
III. Suggested 1996 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 1996 (as opposed to base salary at
the beginning of the year or actual salary paid over the course of
the year).
No bonus grants will be made unless 80% of the 1996 Plan Adjusted
Operating Profit target is obtained. Attached on Exhibit A is the
calculation of Plan Adjusted Operating Profit.
We suggest that the bonus amounts be determined based upon a
percentage of the Company's Adjusted Operating Profit (as defined).
This bonus pool will be allocated to management levels as follows:
Proposed percentage: 5% of Company Adjusted Operating Profits.
Management Suggested Allocation of
Level Bonus Pool 1996 Program
CEO Not Eligible
EXECUTIVE VICE PRESIDENT 35%
SENIOR VICE PRESIDENT 22%
VICE PRESIDENT 20%
DIRECTOR 10%
MANAGER 10%
NON-EXEMPT EMPLOYEES 3%
B. Allocation of Bonus Pool Within Management Levels
i. Calculation
The initial allocation of bonuses by individual will be based upon
that individual's year end salary as a percentage of the respective
total management level salaries, times the allocation of the bonus
pool to that particular management level group.
As the 1996 LIVE program is discretionary, the individual
allocation may then be adjusted upward or downward at the
discretion of the Chief Executive Officer.
The allocation of the bonus pool to the management levels may be
adjusted by the Chief Executive Officer based upon additions or
deletions to the respective management level throughout the year.
The total bonus grant to any individual employee will be capped
based upon the following percentage of individual salary within the
management level:
Cap as a
% of Salary
Executive Vice President 75%
Senior Vice President 60%
Vice President 50%
Director 35%
Manager 20%
Non-Exempt 5%
ii. 1995 LIVE Program Parameters
Using the 1996 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 B. That Exhibit shows both current base
salaries and year end base salaries as projected by the 1996
Business Plan.
IV. Costs
The most important element of the 1996 LIVE Program is its cost to
LIVE. Under the 1996 LIVE Program as suggested in Section III
above, using the information contained in Exhibits A and B, and
assuming that LIVE meets its 1996 profit goal, a total of
approximately $900,000 would be paid in bonuses in early 1997. "At
Plan" bonuses would be 5.00% of operating profits, and incremental
bonuses would remain at 5.00% of incremental operating profits. We
believe that it is appropriate to allocate the above percentages of
Company profits to bonuses under the 1996 LIVE Program.
LIVE's 1996 Business Plan includes $550,000 for corporate bonuses.
This is approximately one half of the bonuses that would be awarded
under the 1996 LIVE Program if LIVE's performance in 1996 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 1996 LIVE Program may be
equal to or less than budgeted amounts, unless, of course, 1996
operating profit exceeds planned levels, in which event bonuses
under the 1996 LIVE Program also will exceed planned levels.
V. Miscellaneous Provisions
A. Basic Rules
In addition to the other provisions of the 1996 LIVE Program
discussed in this Report, the following basic rules should apply to
the 1996 LIVE Program:
1. Subject to the provisions of Section V(A)(6) below, and
notwithstanding any other provision of the 1996 LIVE
Program, if LIVE does not achieve 80% of its profit plan,
no bonuses would be payable pursuant to the 1996 LIVE
Program.
2. When a person moves from one Management Level to another,
bonus potential should be prorated based upon the portion
of year the person was in each job. The pro ration
should be calculated as of the month ending closest to
the effective date of the promotion/transfer.
3. For all except non-exempt employees, when a person enters
a bonus eligible position in the middle of the year,
bonus potential should be prorated based upon the portion
of the year the person was in the bonus eligible job.
The pro ration should be calculated as of the month
ending closest to the effective date of the
hiring/promotion/transfer. No pro ration will be made
for the bonuses of non-exempt employees, provided they
have met the minimum service requirement identified in
paragraph 4 below.
4. Except for individuals transferring from one bonus
eligible position into another, an individual hired or
promoted into a bonus eligible position should hold such
position for three (3) months prior to the fiscal year
end to be eligible for a bonus for the new position.
5. Individuals who (a) are no longer employed by LIVE at the
end of the fiscal year, (b) who have given notice of
their resignation before the fiscal year end, (c) who are
transferred out of a bonus eligible position prior to the
end of the fiscal year, (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 the actual 1996 bonus payment
date in 1997, or (e) are not employed by LIVE on the 1996
bonus payment date in 1997, will not be eligible for a
bonus under the 1996 LIVE Program.
6. Notwithstanding any other provision of the 1996 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 1996 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.
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 1996 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.
ORION
PICTURES CORPORATION
as of February 14, 1996
LIVE Film and Mediaworks Inc.
15400 Sherman Way
Van Nuys, CA 91410
Re: Multiple Picture Deal
Gentlemen:
This will confirm the agreement between Orion Pictures Corporation
("Orion") and LIVE Film and Mediaworks Inc. ("LIVE") with respect to the
following multiple picture domestic theatrical distribution arrangement.
1. The Films: The films which are proposed to be the subject of this
Agreement are the feature length theatrical motion pictures entitled as
follows:
THE SUBSTITUTE - Starring Tom Berenger and Ernie Hudson, directed by
Robert Mandell.
ARRIVAL - Starring Charlie Sheen and Ron Silver, directed by David
Twohy.
TREE'S LOUNGE - Starring an ensemble cast, including Steve Buscemi,
directed by Steve Buscemi.
DER BEWEGTE MAN (aka Maybe, Maybe Not).
PHAT BEACH - Starring Brian Hooks and Germaine "Huggy" Hopkins,
directed by Doug Ellin.
(individually "the Film," collectively "the Films"). LIVE will fully finance
the production cost of each Film.
2. Rights Granted:
(a) LIVE hereby grants to Orion the sole and exclusive theatrical
distribution rights to each Film throughout the Territory (as defined in
Paragraph 3 below) during the Term (as defined in Paragraph 4 below).
(b) LIVE reserves for itself any additional rights owned or
controlled by LIVE in any Film, including but not limited to, non-theatrical,
pay-per-view, pay-tv, free-tv, hotel, airlines, ships, home video, video on
demand, merchandising, music publishing, soundtrack, print publishing, live
stage, interactive multimedia, remakes, sequels and spinoffs; provided,
however, that if during the Term for a Film LIVE desires to license interactive
rights to any Film to a non-affiliated third party (other than on "ARRIVAL"
which is already subject to an existing deal), Orion shall have a 10-day right
of first negotiation/last refusal to acquire such rights; provided, further,
that where LIVE controls soundtrack album rights to any Film in the Territory
and where LIVE does not reasonably expect to release or cause to be released a
soundtrack album for such Film in the Territory, then LIVE shall notify Orion
as soon as possible and shall negotiate with Orion with respect to the
acquisition of such rights.
(c) LIVE agrees to use good faith efforts to release or cause to be
released novelizations, soundtrack albums and other items of merchandising in
conjunction with and to aid the initial theatrical release of any Film
hereunder, provided any failure to do so shall not constitute a breach under
this Agreement.
3. Territory: The grant of rights to Orion shall include the United States
and Canada (including French-speaking Canada), their respective territories and
possessions, including, without limitation, Puerto Rico, Guam, the U.S.Virgin
Islands and the Panama Canal Zone (the "Territory").
4. Term: The term for each Film shall be for a period (the "Term") of
three (3) years commencing on the date of initial theatrical release of the
respective Film hereunder, but in no event later than four (4) years from
LIVE's delivery of the prints of such Film to Orion.
5. Distribution Fee: Orion shall deduct and retain, as a distribution fee,
fifteen percent (15%) of the gross receipts (as defined in Exhibit A attached
hereto and incorporated herein by this reference) derived from the exploitation
of each Film hereunder in the United States and twenty percent (20%) of the
gross receipts derived from the exploitation of each Film hereunder in Canada
and Puerto Rico. All distribution fees shall be inclusive of any
subdistributor's fees that may be incurred or paid by Orion.
6. Print, Advertising and Other Distribution Expenses: LIVE will directly
pay on a "cash flow" basis all print, advertising and other customary
distribution expenses (as defined in Exhibit A attached hereto and incorporated
herein by this reference). Every two weeks Orion will give LIVE an estimate of
the expenses Orion will spend or incur during the next two weeks and LIVE will
pre-pay Orion for that period, subject to any payments that may be made
directly by LIVE as set forth below. Adjustments for over and underpayments
will be made as promptly as is reasonably possible. LIVE agrees and represents
that it will cause not less than the following amounts relating to each Film
to be paid or incurred (a) prior to a date which is one (1) week after the
initial theatrical release of the Film:
THE SUBSTITUTE: $9,000,000
ARRIVAL: $11,000,000
LIVE shall thereafter provide additional print and advertising support in its
discretion commensurate with the performance of the applicable Film; and
(b) pursuant to a disbursement schedule mutually agreed upon by Orion and LIVE:
TREE'S LOUNGE: $750,000
DER BEWEGTE MAN: $750,000
PHAT BEACH: $750,000; provided,
however, that if LIVE desires to spend less than $750,000 on this Film, Orion
may choose not to release the Film, in which event LIVE will be free to submit
the Film to other distributors.
After good faith in person consultations with Orion and after taking into
account Orion's comments and suggestions, LIVE may develop and will pay
directly for all creative advertising (including without limitation all
posters, television spots, trailers, standees, EPK's, ad slicks, press kits,
black and white photos and transparencies, clips and duplication); and LIVE
may choose a first-class laboratory for the manufacture of prints and LIVE
shall pay such facility directly. LIVE may also hire a public relations firm,
a media buying firm, and a coop advertising firm and LIVE shall directly pay
all fees and costs associated with said public relations firm, media buying
firm and coop advertising firm. A11 vendors selected by LIVE, including the
lab facility, media buying firm and coop advertising firm, will be selected
after consultation with Orion, and good faith consideration will be given by
LIVE to using Orion's vendors if such pricing is competitive. Any other
distribution expenses that may be required shall either be "cash-flowed" by
LIVE as set forth above, or advanced by Orion for the account of LIVE, and will
be promptly reimbursed to Orion by LIVE. Orion shall have no obligation to
advance any funds hereunder and shall not be liable for any obligations entered
into with third parties directly by LIVE.
7. Distribution and Marketing:
(a) Advertising and Publicity: LIVE and Orion will meaningfully
consult with each other in good faith and will mutually develop an advertising
and publicity strategy for each Film; in the event of any disagreement, LIVE's
decision will prevail so long as LIVE's decision does not result in the
expending of money by Orion beyond the expenses reimbursed by LIVE and so long
as LIVE's decision is reasonable taking into account the nature of the Film and
the business relationships of both Orion and LIVE. The advertising and
publicity strategy for each Film includes the design of advertising and
publicity materials, the determination of monies to be spent on electronic
versus print media and coordination of publicity tours and interviews.
(b) Theatrical Release: Subject to good faith meaningful
consultation with LIVE regarding the material aspects of the theatrical
release of the Film, Orion will have discretion over all other aspects of said
theatrical release; however,
(i) After good faith consultation with Orion, LIVE may set
reasonable parameters (within parameters customarily entered into by Orion)
relating to theater contracts and settlements. Orion will endeavor to enter
into theater contracts and settlements within those parameters and shall
meaningfully consult with LIVE where Orion enters into theater contracts and
settlements outside of the pre-set parameters.
(ii) LIVE and Orion will mutually agree on theaters in
Chicago, Boston, San Francisco, Philadelphia, NYC and LA (with Orion's
decision prevailing in the event that, after good faith in person discussions
on both sides, no agreement is reached in a timely basis); Orion will have
sole discretion over the choice of theaters outside of those cities.
(c) The proposed domestic theatrical release pattern for each Film
and the proposed initial theatrical release date for such Film shall be subject
to the general market conditions, exhibitor requirements and booking
possibilities prevailing at the time of the proposed theatrical release of such
Film, and shall also be subject to Orion's then existing plans for the orderly
theatrical release of all other Orion films in the domestic theatrical market,
but in no event shall Orion have the right to release any Film on a date which
is not approved by LIVE, nor shall LIVE have the right to cause Orion to
release any Film on a date not approved by Orion. It is presently intended that
the release dates for the Films shall be as follows: THE SUBSTITUTE -
April 19,1996; ARRIVAL - May 31,1996; TREE'S LOUNGE - September 1996;
DER BEWEGTE MAN - May 1996; PHAT BEACH - Summer 1996.
(d) Foreign Language Versions: LIVE and Orion will discuss in good
faith the number of French and Spanish language prints LIVE must deliver
hereunder; however, the parties must agree on a number which will meet the
requirements of law and the requirements of the release plan.
8. Application of Gross Receipts: After the payment of Orion's
distribution fees, one hundred percent of the remainder of gross receipts of
each Film shall be payable as follows:
(a) Recoupment of Print, Advertising and other Distribution Costs:
First, for the recoupment, on a continuing basis, of any and all print,
advertising and other distribution costs and expenses that may have been
advanced by Orion and not reimbursed by LIVE with respect to a Film pursuant
to Paragraph 6 above.
(b) Remainder of Gross Receipts: After the payment of Orion's
distribution fee and recoupment of all costs and expenses as set forth above,
the remainder of gross receipts shall be remitted to LIVE.
9. Chain of Title: LIVE acknowledges and understands that all of Orion's
obligations under this agreement shall be conditioned upon LIVE obtaining and
delivering to Orion all chain-of-title documents and other documents and/or
agreements which are reasonably necessary or appropriate in order to vest in
Orion the rights granted to it hereunder.
10. Delivery: LIVE shall make timely delivery of each Film to Orion to
enable Orion to perform in accordance with the agreed marketing strategy. Each
Film as delivered shall materially conform to the version approved by Orion,
and shall qualify for an MPAA rating no more restrictive than an "R" rating.
LIVE shall also arrange for screening of work prints of each Film in order for
Orion to exercise its rights pursuant to Paragraph 7 above. Delivery of each
Film shall consist of LIVE's delivery to Orion of the items set forth in
Exhibit "B" hereto.
11. Credits:
(a) Orion shall have the right, in its sole discretion, to use its
customary logo on the main titles of each Film, and to use the words "Released
By (or Distributed By) Orion Pictures Corporation" on all end titles of such
Films and on all paid advertising relating to such Films. LIVE acknowledges
that Orion has various labels under which it releases films (e.g. Orion
Pictures Corporation or Orion Classics) and that the specific release label on
any Film shall be in Orion's sole discretion; provided, however, that the
parties shall mutually agree on the release label for a Film other than Orion
Pictures Corporation or Orion Classics, and if no such agreement is reached,
either party shall have the right to exclude that Film from this Agreement.
"THE SUBSTITUTE" and "ARRIVAL" shall be an Orion Pictures Corporation release.
(b) LIVE shall deliver a paid advertising statement in accordance
with Paragraph 3 of Exhibit "B". Orion shall comply with said credit statement
which is solely for the benefit of LIVE and not for the benefit of any third
party. No casual or inadvertent failure by Orion or any third parties to comply
with the contractual obligations relative to advertising and publicity shall
constitute a breach of this agreement. Orion will, at its cost, prospectively
cure any failure to comply with Producer's credit statement if accurate and if
delivered in a timely manner.
12. Final Cut: LIVE will have theatrical final cut of each Film subject to
DGA requirements, if any, and the requirements of any third party contracts,
if any; provided, however, that Orion may require that LIVE change any Film to
avoid legal claims, which Orion in its sound business judgement deems to have
merit.
13. Title: LIVE represents and warrants that the title of each Film does
not infringe upon any trademarks or service marks of any third party, and that
the title has been cleared or will clear through the MPAA process. Should the
title not clear, LIVE will substitute a title that has cleared the MPAA
process.
14. Holdbacks: LIVE may not release or authorize the release of any Film
in the following media in the Territory until the end of the following
holdback periods agreed to by Orion:
(a) Airlines, ships-at-sea and other non-theatrical: 3 months after
initial theatrical release.
(b) Hotel/motel: 3 months after initial theatrical release.
(c) Video: 4 months after initial theatrical release.
(d) All other media: 4 months after initial theatrical release.
Further, LIVE may not advertise the release of any Film in the Territory in any
media prior to one month (to the public) or two months (to the trade) before
the expiration of the applicable holdback. Further, after the initial
theatrical release of any Film, at LIVE's request, Orion will give good faith
consideration to shortening any or all of the above mentioned holdback periods.
15. Insurance: LIVE shall maintain errors and omissions insurance for the
period of the current policy for each Film (with minimum policy limits of
$1,000,000/$3,000,000). Orion shall be an additional insured on the errors and
omissions insurance policy, and such policy shall be primary to any insurance
obtained by Orion.
16. LIVE's Representation and Warranties: Indemnity: LIVE represents and
warrants that it has the right to enter into this agreement, to grant all of
the rights herein granted to Orion, there are not and will not be outstanding
any claims, liens, encumbrances or rights of any nature in or to the film, or
any part thereof, or any of the literary, cinematic or musical material
contained therein or upon which the film is or is to be based, which can or
will impair or interfere with any of the rights herein granted to Orion, that
the exercise of the rights granted Orion will not violate the rights of any
third party nor require Orion to make any payment of any kind to a third
party, including for any print, advertising or other distribution costs for any
Film hereunder, and that it will spend the amount for print, advertising and
other distribution costs for each Film set forth in Paragraph 6 above. LIVE
shall defend and indemnify Orion, its shareholders and employees, from any
claim inconsistent with this Paragraph 16.
17. Copyright Notice: LIVE shall protect the film by copyright and shall
place properly on the title cards of the film the proper copyright notice
required under the United States copyright laws, under the Universal Copyright
Convention, in order to accord the film the maximum copyright protection. LIVE
agrees to execute the Exclusive License Agreement, attached hereto as Exhibit
"A", concurrently with the execution of this agreement, and LIVE acknowledges
that Orion may file such Exclusive License Agreement in the United States
Copyright Office to record Orion's distribution rights in the film.
18. Accountings: Orion shall furnish monthly accounting statements for each
Film for the first six (6) months beginning with the first calendar month
during which gross receipts are collected by or credited to Orion, sixty (60)
days following the close of each month, together with any payments to LIVE
reflected therein. Thereafter, accountings shall be furnished quarterly.
Notwithstanding the foregoing, no accountings shall be required for any period
during which no gross receipts are reported for the Film, unless LIVE shall
request a statement, which it may do not more frequently than twice annually.
Each Film shall be separately accounted for and neither the gross receipts and/
or distribution expenses attributable to any Film will be cross-collateralized
with any other Film.
19. Finality of Statements: Any statement or report submitted to LIVE by
Orion hereunder shall be deemed conclusively true and accurate as to all of the
items and information contained therein if not disputed in writing by LIVE
within twenty four (24) months after such statement or report shall have been
delivered to LIVE, provided, however, that if LIVE delivers to Orion a written
notice objecting to such statement within said twenty four (24) month period,
and if such notice specifies in reasonable detail the particular transactions
to which LIVE objects and the nature of LIVE's objections thereto, then only
insofar as such particular objections to such transactions are concerned, such
statement shall not be deemed correct or conclusive and binding upon LIVE. A
general objection shall not be deemed adequate and sufficient for this purpose.
Any objection to any statement shall be deemed to have been waived unless a
legal proceeding based thereon is instituted by LIVE against Orion within
twelve (12) months following the expiration of such twenty four (24) month
period. If any statement should include any transactions or accountings which
were reflected in any prior statement, then with respect to such accountings
and transactions, such statement shall be deemed correct and conclusive and
binding upon LIVE in all respects within twelve (12) months after the date of
the statement on which any such accountings or transactions were first
reflected, even though it may be included in a later statement or statements.
20. Keeping of Records: Orion agrees to maintain books of account and
records of the distribution of the film. A reputable firm of certified public
accountants or other professionals experienced in auditing distribution
agreements (which may include LIVE's employees) acting on behalf of LIVE at
LIVE's sole cost may, during reasonable business hours and in such manner as
to not interfere unreasonably with Orion's normal business activities, examine
Orion's books and records at Orion's principal place of business, but only
insofar as they pertain to the film, and may make copies and take excerpts
from such books and records. In no event, however, shall Orion have any
obligation to make its books and records available to LIVE's accountants
pursuant to this paragraph prior to execution by LIVE and LIVE's accountants
of a customary confidentiality agreement in a form acceptable to Orion. Such
firm of certified public accountants or other professionals shall be subject
to Orion's reasonable approval and shall have the right to make such
examinations no more frequently than once in any twelve (12) month period per
Film. No audit may continue for longer than twenty-five (25) consecutive
business days.
21. LIVE and Orion shall have joint approval of the initial press release
announcement dealing with this Agreement.
22. If LIVE shall prepare a prospectus, offering memorandum or similar
document in connection with the raising of monies for the production and/or
distribution of the Films hereunder, Orion shall have the right to approve all
references to itself and to the arrangements between the producer and Orion
prior to the circulation and/or effectiveness of such prospectus, offering
memorandum or similar document.
23. This Agreement is subject to the approval of the following foreign
distributors approving Orion as U.S. distributor of certain of the Films:
Gaga Communications (Japan) ("ARRIVAL"); Nippon Herald (Japan) ("THE
SUBSTITUTE"); Telepool (Germany) ("THE SUBSTITUTE"); and Dong-a (Korea)
("ARRIVAL" and "THE SUBSTITUTE"). LIVE and Orion shall use best efforts to
obtain such approvals as soon as possible; provided, however, that if all such
approvals are not received within two (2) weeks of execution of this Agreement,
either party may terminate this Agreement.
24. The remainder of the deal shall be on Orion's current standard terms
and conditions which will be subject to good faith negotiation between the
parties.
The parties hereto have caused this agreement to be executed this
14th day of February, 1996.
Very truly yours,
Orion Pictures Corporation
By:
Its:
AGREED TO AND ACCEPTED:
LIVE Film and Mediaworks Inc.
By:
Steven E. Mangel
Its: Executive Vice President
EXHIBIT "A"
DEFINITIONS
This constitutes Exhibit "A" to the Multiple Picture Deal dated as of
February 14, 1996 by and between Orion and LIVE Film and Mediaworks Inc. (the
"Agreement").
1. Orion: "Orion" means Orion Pictures Corporation, a Delaware
corporation, and its subsidiaries engaged in the business of distributing
motion pictures for exhibition in theaters and for broadcasting over television
stations, but shall not include book or music publishers, phonograph record
producers or distributors, distributors or retailers of video discs, cassettes
or similar devices, merchandisers etc., whether or not any of the foregoing is
a subsidiary of Orion.
2. Gross Receipts: The term "gross receipts" of the Picture as used herein
shall be deemed to mean the aggregate of all monies actually received by or
credited to Orion and Orion's theatrical subdistributors, if any, as film
rentals from parties exhibiting the Picture in the theatrical field, after
giving effect to any adjustments with exhibitors for rebates, credits,
allowances or refunds, plus any other monies or consideration received by or
credited to Orion and Orion's subdistributors with respect to the Picture
(e.g. net recoveries from infringement actions). All costs, including without
limitation collection costs, incurred in connection with any of the foregoing
shall be deemed and treated as recoupable distribution expenses.
3. Print. Advertising and other Customary Distribution Expenses: All of
Orion's usual and customary distributdon costs and expenses expended or
incurred by Orion and Orion's subdistributors in connection with the Picture,
including but not limited to, the following, all of which are subject to
LIVE's approvals as contained in the Agreement, and net of any rebates,
refunds, credits, reimbursements, adjustments and settlements received by Orion
and Orion's subdistributor(s) in connection therewith.
(a) Laboratory Work: The costs of release prints, replacements,
dupe negatives, and all sums actually expended or incurred by Orion in
processing said material.
(b) Advertising: All sums expended or incurred by Orion for
advertising, publicity and exploitation purposes, including without
limitation, the salaries of field exploitation men, allocated on the basis of
the time spent on the Picture, and their expenses; all costs and expenses
incurred by Orion in connection with the preparation of bill posters,
lithographs, and other advertising accessories relating to the Picture.
(c) Other Advances: All sums expended or incurred by Orion in
connection with any of the following: screening expenses; convention expenses;
censorship boards or costs and expenses in connection with securing censorship
approvals; all sums expended or incurred by Orion in connection with cutting,
editing, re-assembling, re-editing or re-cutting the Picture for the purpose
of meeting censorship requirements or for the purposes permitted under the
agreement to which this Exhibit "A" is attached; costs and expenses in
connection with obtaining and tracking information with regard to box office
gross receipts of the Picture; costs of search of copyright or title records;
costs and expenses of obtaining clearance with respect to or changing the
title of the Picture; all charges paid or incurred by Orion to cover the risk
of loss or damage to any prints or negatives of the Picture; transportation,
freight, shipping and storing charges on all negatives, prints and all other
material in connection with the Picture; all costs and expenses incurred by
Orion in connection with the junking or destruction of prints or other
physical properties of the Picture, subject to LIVE s prior written approval;
all sums whether paid, payable or incurred by Orion or any of its subsidiary,
affiliated, allied, associated or related distributors as (i) state, county,
city or other taxes based upon the value of the Picture, and (ii) imposts,
taxes, and like charges, however denominated, imposted, assessed or levied,
by any government or any duly constituted taxing authority, based upon or
relating to the gross monies derived on account of or from the distribution
or exhibition of the Picture in any country, subdivisions thereof, or
territory, or upon the portion thereof payable to Orion, whether such taxes
are denominated as turnover taxes, sales taxes, gross business taxes or by
any other denomination (nothing contained in this Paragraph 2(c), however,
shall permit Orion to charge or deduct from the gross receipts of the Picture
any net income, franchise, excess profits, corporation or any other similar
tax, if such tax is computed upon the actual net profits realized by Orion,
its subsidiary, affiliated, allied, associated or related distributors or
Orion's or their licensees, and may be charged against them), and (iii) all
other taxes, duties, imposts and like charges, however denominated, imposted,
assessed or levied by any government or any duly constituted taxing authority,
relating directly or indirectly to the Picture, assessed against or for which
Orion, its subsidiary, affiliated, allied, associated or related companies or
their licensees or sublicensees may be held liable, provided however that in
no event shall the deductible amount of any such tax (however denominated)
imposed upon Orion be decreased (nor gross receipts increased ) because of
the manner in which such taxes are elected to be treated by Orion in filing
net income, corporate franchise, excess profits or similar tax returns; all
costs incurred in connection with the collection of gross receipts, the cost
of checking percentage engagements of the Picture, and if checking is
undertaken to ascertain the accuracy of the box office reports submitted
generally by a theater or theaters without reference to particular pictures,
then the cost of such checking in any territory in any year shall be allocated
against the gross receipts of the Picture in the ratio of the Picture's United
States theatrical gross receipts during the year concerned to the United
States theatrical gross receipts of all motion pictures distributed by Orion
during that year; copyright protection fees; all costs and expenses incurred
by Orion in connection with the preparation or making of trailers for the
Picture; any payments which Orion may be required to make to unions, guilds,
or federations, or any members thereof, in connection with the distribution of
the Picture in television or any other medium or market, and in this
connection Producer represents and warrants that any union, guild or federation
agreements to which the Picture may be subject will be no less favorable or
more restrictive to the Picture, to Producer or to Orion, than the agreements
which are applicable generally to M.P.A.A. and A.M.P.T.P. member companies
as of the date of commencement of principal photography of the Picture; the
costs of import fees and licenses and other similar requirements to secure
the right to import and distribute the Picture in any foreign country; import,
export, tariff, customs and other similar duties; all costs and expenses
incurred by Orion in preparing any foreign or other language version of the
Picture for any country including, but not limited to, the cost of dubbing,
cutting, editing and subtitling; all legal fees and related expenses expended
or incurred by Orion for services of outside counsel in connection with the
preparation and/or review of any documents or other instruments whatsoever
relating to the acquisition, development, production, financing, distribution
and/or sale of the Picture or the literary material upon which it is based
other than the Agreement; any and all expenses of transmitting to the United
States any funds accruing to Orion from the Picture in foreign territories,
such as cable expenses and any discounts from such funds taken to convert
such funds directly or indirectly into U.S. Dollars; any and all legal
expenses including attorneys' fees and court costs incurred by Orion, its
subsidiary, affiliated, allied, associated or related companies or their
licensees or sublicensees in contesting the imposition of any tax on the gross
receipts, adjusted gross receipts, net receipts or the assertion or
maintenance of claims for the infringement of the Picture or any part thereof
or other interference by third persons of or with the Picture or any part
thereof or any rights granted or sold to Orion hereunder as well as any and
all sums, including legal expenses and attorneys' fees and court costs,
expended or incurred by Orion, its subsidiary, affiliated, allied, associated
or related companies or their licensees or sublicensees with respect to any
legal action involving the Picture, including any action they may take against
any third parties because of the failure of such third parties to pay any
monies due on account of the Picture or in connection with any agreements
relating thereto or in connection with the performance of such agreements.
(d) No Double Deduction: No item deducted as a distribution cost
or expense hereunder shall be deducted and recouped more than once pursuant to
this Exhibit "A".
3. Film Rentals and Other Revenue: Until earned, forfeited or applied to
the Picture, neither advance payments nor security deposits shall be included
in gross receipts, except as specifically provided herein. No cost of
cooperative and/or theater advertising shall be deducted in determining film
rentals. Where allowances are granted and paid on account of cooperative,
theater or joint advertising, such payments shall not be deducted in
determining film rentals, and where deducted by the exhibitor shall be added
back into film rental received from such exhibitor, and all such costs,
payments, discounts and allowances shall be treated as distribution expenses.
Where rebates, refunds, credits, reimbursements, adjustments or settlements are
granted with respect to any distribution expense, then all such payments shall
not be included in gross receipts but shall be treated as a reduction to
distribution expenses hereunder.
4. Allocations: Unless specifically stated otherwise, an allocations
made hereunder with respect to gross receipts or distribution costs and
expenses shall be made by Orion in good faith, reasonably and consistent with
its sound business judgment.
EXHIBIT "B"
DELIVERY SCHEDULE
This constitutes Exhibit "B" to the Multiple Picture Deal (the
"Agreement") dated as of February 14, 1996 by and between Orion and Live
Film and Mediaworks, Inc.
Producer agrees as a material obligation hereunder to make full and
complete delivery of each and every item listed below to Distributor in the
Los Angeles area to the persons and places designated by Distributor. Such
delivery by Producer will consist of making physical delivery to Distributor
or its designee at Producer's sole cost and expense (transportation costs
prepaid).
1. Release Prints: In numbers established pursuant to the Agreement,
first class composite 35mm positive prints of the Picture made directly from
the internegative, fully color corrected to release print standards in the
color process in which the Picture was photographed, fully cut, main and end
titled, edited, scored and assembled with the soundtrack printed thereon in
perfect synchronization with the photographic action and fit and ready for
exhibition and distribution.
2. M.P.A.A: A paid rating certificate from the Code and Rating
Administration of America, Inc., and production code number.
3. Producer's Statement Re Credits: A complete statement setting forth the
names of all persons to whom Producer is contractually obligated to accord
credit on the screen or in any paid advertising, publicity or exploitation of
the Picture, hereinafter referred to as "credit", and to include in such
statement excerpts from any such agreements defining or describing the form
and nature of such required paid advertising credits, in accordance with the
Agreement to which this exhibit is attached. Producer agrees that such
statement shall be delivered to Distributor as early as possible and in no
event shall such statement contain inconsistent requirements for credit.
Producer shall also deliver a list identifying all cast members of the Picture.
4. Errors and Omissions Insurance: Certificate of Producer's Errors and
Omissions insurance policy covering the Picture and required endorsements
thereto adding Distributor as an additional named insured.
5. Exclusive License: An Exclusive License in the form of Exhibit "C" to
the Agreement.
6. Sexually Explicit Scenes: If the Picture contains any sexually explicit
scenes, then Producer shall deliver to Orion a statement, in the form of
Exhibit "E" to the Agreement, which identifies the scenes and sets forth the
names and ages of all performers appearing in said scenes; said statement shall
be delivered in accordance with the Child Protection and Obscenity Enforcement
Act of 1988.
Acceptance by Orion of less than all of the foregoing items with
respect to the Picture and/or release of the Picture, prior to delivery of all
of the aforesaid items, shall in no event be construed as a waiver by
Distributor of Producer's obligation to deliver any such item not so delivered.
No waiver of delivery of any such item shall be valid or binding unless in
writing and signed by Distributor.
LASER VIDEODISC SUBLICENSE
DEAL MEMORANDUM
as of October 1, 1995
PIONEER ENTERTAINMENT (USA) L.P.
2265 East 220th Street
Long Beach, California 90801-5782
Ladies and Gentlemen:
This Memorandum sets forth the principal terms and conditions of
the agreement between LIVE Film and Mediaworks Inc. ("LIVE") and
Pioneer Entertainment (USA) L.P. ("PIONEER") regarding a license
from LIVE to PIONEER to manufacture during the Term, and to
distribute and sell, during the Term and Sell-Off Period, Laser
Videodiscs embodying Programs in the Territory (as such
capitalized terms are hereinbelow defined), subject to and in
accordance with the following terms and conditions:
A. PARTIES: LIVE and PIONEER.
B. DATE OF AGREEMENT: As of October 1, 1995.
C. PROGRAMS: For purposes of this Agreement, "Programs" shall
be defined as and shall consist of the following:
(1) Catalog Programs, which refers to any and all motion
pictures or other programs which LIVE or its affiliates first
made available for sale or rental in the Territory prior to the
date of this Agreement in the one-half inch (1/2") NTSC
videocassette format or in any of the Reserved Disc Formats (as
defined in Paragraph D. below) with English soundtrack (or
original foreign language soundtrack with English subtitles)
under any of the tradenames, trademarks or label identifications
designated in subparagraph C(3) below, and with respect to which
LIVE owns or controls all the rights being granted by LIVE to
PIONEER hereunder; and,
(2) New Release Programs, which refers to any and all
motion pictures or other programs which LIVE or its affiliates
shall first make available for sale or rental to the general
public in the Territory during the Term of this Agreement in the
one-half inch (1/2") NTSC videocassette format or in any of the
Reserved Disc Formats (as defined in Paragraph D. below) with
English soundtrack (or original foreign language soundtrack with
English subtitles) under any of the tradenames, trademarks or
label identifications designated in subparagraph C(3) below, and
with respect to which LIVE owns or controls, or shall, during the
Term hereof, own or control all the rights being granted by LIVE
to PIONEER hereunder, except as provided in Paragraph C. (4)
below.
(3) Designated Labels: Notwithstanding anything to the
contrary contained herein, but subject to all other restrictions
and limitations on or to the rights herein granted to PIONEER,
LIVE is only licensing to PIONEER hereunder the right to embody
in Laser Videodiscs those Programs embodied in English language
(or original foreign language soundtrack with English subtitles)
videocassettes which LIVE either released and distributed in the
Territory prior to the date of this Agreement or will release and
distribute during the Term hereof under any of the following
tradenames, trademarks or label identifications: LIVE Home Video,
Carolco Home Video, Family Home Entertainment, Avid Home
Entertainment, Vestron Video. Vestron Video International,
Vestron Pictures, Vestron Music, Lightning Video, Lightning Video
International, and Children's Video Library, or any successor
tradenames, trademarks or label identifications under which LIVE
shall release all or substantially all of the motion pictures
which LIVE previously released under any of the above designated
tradenames, trademarks or label identifications. As of the date
of this Agreement, the above designated tradenames, trademarks,
and label identifications constitute all the tradenames,
trademarks and label identifications currently being used by LIVE
and its affiliates. Upon PIONEER'S request, LIVE shall undertake
to inform PIONEER of the Catalog Programs currently available
under each of the above designated tradenames, trademarks or
label identifications, together with the date of the expiration
of LIVE'S rights with respect thereto. Not withstanding anything
to the contrary contained herein, PIONEER's rights hereunder with
respect to any Catalog Programs previously released by LIVE under
the Vestron Video or associated labels are expressly subject to
the rights, if any, of Image Entertainment, Inc. ("Image")
pursuant to that certain agreement between LIVE, as successor-in-interest
to Vestron, Inc. and Image dated November 30, 1987, as
amended and supplemented (the "Image Agreement"). LIVE has
furnished to PIONEER a copy of the Image Agreement. Upon
PIONEER's request, LIVE shall undertake to inform PIONEER of the
rights, if any, Image has with respect to any particular Catalog
Program previously released by LIVE under the Vestron Video or
associated labels pursuant to the Image Agreement.
(4) Excluded Programs. Notwithstanding anything to the
contrary contained herein, in the event LIVE obtains Laser
Videodiscs rights to a substantial number of motion pictures or
other programs from a third party (either by acquisition of,
merger or consolidation with the third party by LIVE, or by way
of any licensing or distribution arrangement between LIVE and the
third party, or otherwise), then such motion pictures and other
programs shall not be deemed Programs hereunder. However, if the
Laser Video disc distribution rights for the Territory to any or
all of such Programs shall become available during the Term for
licensing to any third party (other than pursuant to any
licensing or distribution arrangement(s) which were contractually
committed as at the time of LIVE'S acquisition of such Programs),
then PIONEER shall have the right of first negotiation and
"matching" last refusal (each for a period of ten days unless the
party shall mutually agree otherwise) before LIVE shall have the
right to license the Laser Video disc distribution rights to any
or all such Programs to any non-affiliated, independent third
party during the Term of this Agreement. Not withstanding
anything to the contrary contained herein, Excluded Programs
shall not be deemed to include the acquisition by LIVE of
individual Programs during the ordinary course of LIVE'S
business.
D. AUTHORIZED LANGUAGES:
1. English (either the original English soundtrack
version, or, if applicable, the original foreign language version
with either dubbed English soundtrack or English subtitles); and
2. Spanish (either the original English or non-Spanish
soundtrack version with Spanish sub-titles or, if applicable, the original
Spanish soundtrack version); and
3. French (either the original English or non-French
version with French dubbed soundtrack or, if applicable, the
original French soundtrack version).
In no event however shall the language version of the Program
which PIONEER shall release hereunder differ from the language
version of such Program as released by LIVE.
E. AUTHORIZED FORMATS: Laser Videodiscs only. As used herein,
"Laser Videodiscs" shall refer only to eight-inch (8") or twelve-inch (12")
NTSC videodiscs in the analog (non-digital) video laser optical format used by
PIONEER as of July 12, 1988 together with any improvements and enhancements to
such formats which have been made since July 12, 1988 through the date of this
Agreement (e.g., AC-3 and digital sound) or, subject to LIVE'S approval
which LIVE will not unreasonably withhold, which may be
promulgated in the future provided such formats, notwithstanding
any such future improvements or enhancements shall, in LIVE'S
reasonable determination, remain separate and distinct formats
from the Reserved Disc Formats (as hereinafter defined). For the
avoidance of doubt, Laser Videodiscs shall not include the MPEG-1
(Video CD), MPEG-2 (Digital Video Disc) or CD-Rom formats or any
other similar or dissimilar disc formats as such formats are
promulgated as of the date of this Agreement or as such formats
may be promulgated in the future ("Reserved Disc Formats"); it
being understood and agreed that LIVE reserves the unfettered
right to manufacture, distribute, sell and otherwise exploit, and
to authorize others to manufacture, distribute, sell and
otherwise exploit, any or all of the Programs embodied in any or
all of the Reserved Disc Formats at any time and anywhere in the
universe.
F. TERRITORY: United States, provided, that (1) Puerto Rico
and other territories, possessions or commonwealths of the United
States, (2) any military bases of the United States wherever
located throughout the world, and (3) Canada, shall be included
in the Territory with respect to each Program only if and to the
extent LIVE owns or controls the right to distribute and sell
Laser Videodiscs of such Program in such territories,
possessions, commonwealths, military bases or countries: provided
further, that LIVE shall notify PIONEER if it does not own or
control such rights before its delivery of such Program to
PIONEER. At no time will PIONEER exploit or authorize the
exploitation of Laser Videodiscs embodying the Programs outside
of the Territory except as may be authorized by the appropriate
rights holder pursuant to a separate agreement. PIONEER shall
undertake and perform any and all actions (short of commencing
any lawsuit) which are reasonably necessary or desirable
(including any such actions as may be reasonably required or
desired by LIVE) to prevent the transhipment of Laser Videodiscs
embodying the Programs outside of the Territory and PIONEER shall
refrain from any and all actions which do or may likely cause or
result in the transhipment of Laser Videodiscs outside of the
Territory. Without limiting the generality of the foregoing,
PIONEER shall not transact any business with any person or entity
that PIONEER knows or has reason to know is engaged in the
transhipment of Laser Videodiscs outside of the Territory. LIVE
shall undertake and perform any and all actions (short of
commencing any lawsuit) which are reasonably necessary or
desirable (including any such actions as may be reasonably
required or desired by PIONEER) to prevent the transhipment of
Laser Videodiscs into the Territory.
G. TERM: Starting on October 1, 1995 and ending on the earlier
of (i) the last day of the calendar quarter during which all
advances paid to LIVE pursuant to Paragraph K. below are recouped
in full, or (ii) the latter of (x) the date which is ninety (90)
days following the "release date of the 54th New Release Program"
as hereinafter defined, and (y) September 30, 1998. As used
herein, the "release date of the 54th New Release Program" shall
refer to the date upon which LIVE shall first make the fifty-fourth (54th)
New Release Program hereunder available for sale or
rental to the general public in the Territory by means of 1/2"
NTSC videocassettes or any of the Reserved Disc Formats.
Notwithstanding anything to the contrary contained herein,
Pioneer shall have no rights hereunder with regards to any New
Release Program which LIVE shall make available for sale or
rental in the Territory concurrently or after the release date of
the 54th New Release Program; provided, however, if one or more
New Release Programs are released concurrently with the release
of the 54th New Release Program, whichever of such New Release
Programs is determined by PIONEER to be the "lead" title, will be
considered to be the 54th New Release Program.
(1) Right to Terminate Particular Programs. LIVE may at
any time terminate the rights granted to PIONEER hereunder with
respect to any Program if either: (a) LIVE's right to
manufacture, distribute or sell Laser Videodiscs embodying such
Program expire or are terminated; (b) if in LIVE's judgment such
termination is prudent to minimize the possible damage from any
pending or threatened claim, demand, action or proceeding; or (c)
for any other reason, including marketing reasons, causing LIVE
to cut-out or place on moratorium the distribution in the
Territory, or any part thereof, of 1/2 " NTSC videocassettes of
the English language version of such Program from LIVE's
distribution at the Wholesale Level; provided, however, LIVE
represents that it has no intention to cause Programs to be cut-out or
place on moratorium strictly for marketing reasons on a
regular or frequent basis or as part of a strategy common to its
marketing of all Programs. LIVE's termination of any Program
pursuant to the foregoing provisions shall not constitute a
breach of LIVE's obligations hereunder and shall not affect any
Laser Videodiscs embodying such Program sold by PIONEER prior to
the date of such termination. At LIVE's written request, PIONEER
will as soon as practicable cease advertising, promoting or
offering for sale Laser Videodiscs embodying such Program and
shall return to LIVE or its designee any and all Laser Videodiscs
embodying such Program and all advertising, labels and
promotional materials relating to such Program which are then in
the possession, custody or control of PIONEER. At LIVE's written
request, PIONEER will also revise its advertising and promotional
materials to indicate that Laser Videodiscs embodying such
Program are no longer available, provided LIVE shall reimburse
PIONEER for all direct, out-of-pocket, reasonable costs actually
paid by PIONEER in connection therewith. Upon LIVE's written
request, PIONEER will discontinue fulfilling existing orders or
orders which may be in the process of transmittal to PIONEER for
Laser Videodiscs embodying such Program. Upon return to LIVE of
all Laser Videodiscs embodying such Program, LIVE will reimburse
PIONEER for its actual cost of manufacturing (i.e., pressing and
packaging) the Laser Videodiscs so returned plus the cost of
shipping and handling. If during the Term hereof, LIVE shall
elect to reactivate a Program which LIVE previously cut-out or
placed on moratorium, then PIONEER shall again have the right to
distribute or re-distribute, as the case may be, Laser Video
discs embodying such Program. Notwithstanding anything to the
contrary herein contained, LIVE shall not be responsible to
reimburse PIONEER's costs in respect to any Program with respect
to which LIVE exercises its right of termination as a result of
the expiration, during the Term of this Agreement, of the term of
LIVE's home video distribution rights in and to and with respect
to that Program. After PIONEER notifies LIVE in writing of its
desire to schedule the Laser Videodisc release of a particular
Program, LIVE will, in a timely fashion, inform PIONEER of the
date upon which the term of LIVE's home video rights to that
Program will expire.
H. SELL-OFF PERIOD: PIONEER shall not manufacture any quantity
of Laser Videodiscs in excess of the amount reasonably required
by PIONEER to fill orders actually received by PIONEER during the
Term or reasonably anticipated to be received by PIONEER during
the Term. At the end of the Term, PIONEER shall give LIVE or its
designee the opportunity to purchase any or all of PIONEER's
then-existing inventory of Laser Videodiscs and any or all
packaging, labels, advertising, promotional and publicity
materials related thereto at PIONEER's actual cost of
manufacturing (i.e., pressing and packaging) thereof plus the
cost of shipping and handling such Laser Videodiscs and/or
materials to LIVE or its designee. During the twelve (12) month
period immediately following the end of the Term, PIONEER will
have the non-exclusive right to sell-off any inventory of Laser
Videodiscs which LIVE chooses not to purchase pursuant to the
foregoing provisions. At the end of said twelve (12) month sell-off period,
PIONEER will erase or destroy any and all remaining
copies of Laser Videodiscs and shall furnish to LIVE with an
affidavit from an officer of PIONEER confirming that all Laser
Videodiscs have been erased or destroyed.
I. RIGHTS LICENSED: Subject to the condition precedent that
PIONEER has satisfied and performed each and every one of
PIONEER's material duties and obligations pursuant to the terms
of this Agreement, LIVE grants to PIONEER the exclusive right,
license and privilege to manufacture Laser Videodiscs embodying
the Programs during the Term and in the Territory, and the right
to advertise, sell, lease, rent, distribute and otherwise market
and exploit such Laser Videodiscs at the "Wholesale Level" and
"Direct Consumer Level" in the Territory on an exclusive basis
during the Term and on a non-exclusive basis during the Sell-off
Period, subject to and in accordance with all the terms and
conditions of this Agreement. Subject to the rights of use and
to the extent of such rights owned or controlled by LIVE, PIONEER
will have the non-exclusive right during the Term and Sell-off
Period and in the Territory, to use in any medium, LIVE's
tradenames, trademarks and label identifications designated in
subparagraph C(4) above, and the names, likenesses and voices of
the principal performers and other persons who have rendered
services in connection with the works and performances embodied
in the Programs, and biographical material concerning them, for
advertising purposes solely in connection with the distribution
of Laser Videodiscs embodying the Programs pursuant to this
Agreement.
(1) "Wholesale Level" means the level of distribution at
which Laser Videodiscs are initially distributed by PIONEER to
wholesalers, retailers, rack jobbers or other customers through
traditional channels of distribution for ultimate sale or rental
to the retail consumer. The Wholesale Level excludes the Direct
Consumer Level.
(2) "Direct Consumer Level" means the level of distribution
at which Laser Videodiscs are distributed directly by PIONEER to
the retail consumer, including, but not limited to, sales through
any direct response distribution method such as any direct mail
or mail order distribution, telephone order, any "Club Plan" (as
hereinafter defined), home shopping networks, "800" and "900"
numbers, infomercials and similar methods of "order"
distribution. A "Club Plan" shall refer to the distribution at
the Direct Consumer Level of Laser Videodiscs (a) under a plan or
arrangement through which a subscriber thereto is obligated to
purchase a number of Laser Videodiscs within a specific period of
time or a plan under which Laser Videodiscs are shipped
automatically to customers at specific intervals, or a
combination thereof, (b) under a plan or arrangement through
which a subscriber (who may or may not have any obligation to
purchase a specific number of Laser Videodiscs within a specific
period of time) shall purchase Laser Videodiscs on a positive
option basis (i.e., no automatic shipments), and (c) through
PIONEER's direct mail club presently referred to as "PIONEER's
Laserdisc Fan Club". PIONEER is currently party to an agreement
with Columbia House dated April 7, 1993 ("Columbia House
Agreement") pursuant to which PIONEER has granted to Columbia
House a non-exclusive license to sell Laser Videodiscs embodying
the Programs during the Term throughout the Territory at the
Direct Consumer Level only through Club Plans. The term of the
Columbia House Agreement shall expire on September 30, 1995.
PIONEER will not renew, extend or replace the Columbia House
Agreement without LIVE's prior written consent, which consent
LIVE shall not unreasonably withhold, if and to the extent any
such renewal, extension or replacement agreement will cover any
or all of the Programs licensed hereunder. Even if LIVE shall
consent to PIONEER's renewal, extension or replacement of the
Columbia House Agreement, the term of such agreement shall expire
no later than upon the expiration or termination of the Term of
this Agreement. If PIONEER shall renew, extend or replace the
Columbia House Agreement with LIVE's prior consent, then PIONEER
agrees that fifty percent (50%) of any and all monies, including
advance payments (which if received by PIONEER in consideration
of a grant of rights in and to the Programs together with other
motion pictures shall be fairly and reasonably allocated by
PIONEER amongst the Programs and such other motion pictures), and
royalties which are received by or credited to the account of
PIONEER from Columbia House pursuant to the any approved
extension, renewal or replacement of the Columbia House Agreement
(excluding any monies which Columbia House pays to PIONEER in
reimbursement for the pressing and packaging cost customarily
charged by PIONEER for Laser Videodiscs plus shipping and
handling) will be credited to LIVE's account hereunder and paid
to LIVE as and when due hereunder.
(3) Limitation and Reservation of Rights. The rights
hereby granted to PIONEER shall be limited solely and exclusively
to the home use, non-public exhibition of Laser Videodiscs in
private homes and residences where no admission fee is charged.
Without limiting the specificity of the preceding sentence, the
rights hereby granted to PIONEER shall not include any rights
with respect to, inter alia, any form of theatrical exhibition,
nontheatrical exhibition, public performance and/or any form of
exhibition of any kind or character whatsoever, whether public or
private, which is delivered, in whole or in part, by means of any
broadcast transmission, microwave transmission, cable
transmission, satellite transmission or any other remote signal
transmission, whether now known or hereafter devised, including,
but not limited to, any form or method or manner of free
television, pay television, cable television and/or high
definition television, transmission over the Internet, on-line
services, telecommunications, coaxial or fiber optic cable or any
similar means of delivery of any kind or character whatsoever.
Notwithstanding anything to the contrary contained herein,
PIONEER shall not without obtaining the express written approval
of LIVE in each and every instance, have the right to secure
arrangements pursuant to which Laser Videodiscs embodying the
Programs may be sold (a) where a commercial sponsor pays a
royalty, fee or other remuneration to receive the benefit of
being identified as a sponsor by logo or otherwise on the outer
packaging of such Laser Videodiscs or by being so identified
within the motion picture or program embodied therein, or before
or after the main titles or end credits therein ("Sponsorships")
or (b) to a purchaser (including PIONEER and its affiliates) for
the purpose of selling or giving away, or offering to sell or
give away, such Laser Videodiscs as an inducement or incentive to
buy or use that purchaser's other goods or services, whether or
not such Laser Videodiscs are packaged together with such
purchaser's other goods or services ("Commercial tie-ins" or
"Premiums"); it being expressly understood and agreed that LIVE
shall reserve the right to make, or to authorize others,
including, but not limited to PIONEER and its affiliates, to
solicit and secure the type of arrangements described in (a) and
(b) above. Except to the extent otherwise expressly provided to
the contrary herein, all rights, title, licenses, privileges and
interests of each and every kind and character whatsoever, in and
to and with respect to any and all Programs and each and every
element therein and thereof, and in and to and with respect to
all trademark interests and copyright interests and other rights
therein and thereto, and in and to and with respect to any and
all materials of any kind whatsoever furnished by or under the
authority of LIVE to PIONEER pursuant to this Agreement, whether
tangible or intangible, whether now in existence or hereafter
created or discovered, whether or not competitive with the
rights, licenses and privileges granted to PIONEER pursuant to
this Agreement, are and shall be and shall remain, as between
PIONEER and LIVE, entirely reserved to and owned and controlled
by LIVE and are and shall be deemed the sole and exclusive
property of LIVE, in all respects and in all languages formats,
uses and media throughout the universe, for the sole and
exclusive use or other exploitation or disposition by LIVE, its
successors, licensees and assigns, and each and every of such
rights, title, licenses, privileges and interests may be
exercised and utilized and conveyed and exploited by LIVE, its
successors, licensees and assigns, concurrently herewith or at
any time hereafter, without any limitation or restriction of any
kind whatsoever, without obligation to PIONEER, and without
regard to the extent to which any such rights may be competitive
with PIONEER and the rights, licenses and privileges granted to
PIONEER pursuant to this Agreement.
(4) Label Designation, The Laser Videodiscs of each Program
will be released by PIONEER on the same label as LIVE releases
the English language version 1/2" NTSC videocassettes of such
Program unless LIVE shall designate otherwise. PIONEER will have
the right to use its name and trademark (always following the
words: "Exclusively distributed by..." or a designation similar
thereto approved by LIVE) in advertising, publicity, promotional
materials and packaging relating to the Laser Videodiscs in such
size, manner, position and type as LIVE shall approve, which such
approval LIVE will not unreasonably withhold so long as the
proposed usage is within customary trade practices, but in no
event shall PIONEER's name and trademark be more prominently
displayed than LIVE's name and trademark thereon.
(5) Catalog Availability. All Programs released by PIONEER
pursuant to this Agreement period will remain active in PIONEER's
catalog throughout the Term and Sell-Off Period unless LIVE
terminates PIONEER's rights with respect to any particular
Program pursuant to G(1) above. In this connection, PIONEER
agrees that during the Term it will at all times maintain an
inventory of finished goods of each title it releases as is
reasonably necessary to fulfill all orders which PIONEER will
likely receive for such title during the next ninety (90) days.
Additionally, PIONEER agrees that it will not at any time, during
the Term and Sell-Off Period, sell or otherwise dispose of any
inventory of Laser Videodiscs as distress goods, at close-out
prices, or for salvage value at less than PIONEER's then
prevailing wholesale prices for comparable titles, without the
express written consent of LIVE in each and every instance. The
foregoing restrictions on the disposition of the Programs shall
not be applicable during the Sell-Off Period. Upon the
expiration or termination of the Term, all reproduction materials
previously furnished by LIVE or made by or under the authority of
PIONEER relating to the Programs (e.g., masters, artwork, etc.)
which are in the possession, custody or control of PIONEER will
be returned to LIVE at PIONEER's expense.
J. PIONEER'S RELEASE OBLIGATIONS:
(1) Catalog Programs. Upon's PIONEER's request, LIVE will
undertake to inform PIONEER of all Catalog Programs then-currently available
for distribution by means of Laser Videodiscs
by PIONEER pursuant to this Agreement. LIVE shall have the
right, at any time during the term, to request PIONEER to release
Laser Videodiscs of any specific Catalog Program not theretofore
released by PIONEER. In the event that PIONEER shall fail to
release any Catalog Program which LIVE has specifically requested
to be released within one hundred twenty (120) days following
PIONEER's receipt of the elements (e.g., technically acceptable
master) essential to PIONEER's ability to manufacture Laser
Videodiscs of such Catalog Program, then such Catalog Program
shall be excluded from this Agreement and PIONEER shall have no
rights in such Catalog Program whatsoever, and LIVE shall have
the absolute right to license such Catalog Program to any person
or entity and/or otherwise to exploit Laser Videodiscs embodying
such Catalog Title without any notice or compensation due
PIONEER. In no event, however, shall LIVE request PIONEER to
release more than one (1) Catalog Program during any calendar
month .
(2) New Release Programs. Unless LIVE shall request
otherwise, PIONEER shall release Laser Videodiscs of each and
every New Release Program upon the earliest date (but in no event
sooner) on which LIVE shall initially release the same new
release Program in the Territory with English soundtrack (or with
its original foreign language soundtrack with English sub-titles)
in either the 1/2" NTSC videocassette format or in any of the
Reserved Disc Formats ("first release date"). If PIONEER fails,
refuses or is unable to release Laser Videodiscs of any New
Release Program on the First Release Date (except pursuant to
LIVE'S request), and such failure continues for a period of
ninety (90) days or more after PIONEER's receipt of written
notice of such failure, then PIONEER shall not be deemed to be in
breach of this Agreement but such New Release Program shall be
automatically excluded from this Agreement, PIONEER shall have no
rights in such New Release Program whatsoever, and LIVE shall
have the absolute right to exploit or authorize others to exploit
Laser Videodiscs embodying such New Release Program without
further notice or compensation due PIONEER.
K. ADVANCE: $4,600,000 which PIONEER shall pay to LIVE in two
(2) equal installments payable as indicated below, which LIVE
shall accept as a non-returnable advance chargeable against and
recoupable, on a cross-collateralized basis, from all royalties
earned by LIVE hereunder with respect to sales of Laser
Videodiscs embodying the Programs. The first installment of
$2,300,000 shall be due on execution of this Agreement and the
second installment of $2,300,000 shall be due on or before
January 1, 1997; provided, however, the due date for the second
installment shall be accelerated one day for each day between
October 1, 1995 and the date of LIVE's actual receipt of the
first installment. Notwithstanding the foregoing, the amount of
the second installment shall be reduced if and to the extent of
the amount of royalties, if any, earned and received by LIVE
under this Agreement in excess of $2,300,000 during the time
between payment of the first and second installments. The
Advance is a minimum net sum due LIVE and may not be set-off for
any reason nor may any taxes or charges of any kind be deducted
from it.
L. ROYALTIES:
(1) Royalty Rates/Minimum Royalty Amounts. Subject to the
most favored nations provisions in Paragraph N below, with
respect to each Program, PIONEER shall pay to LIVE the greater of
either (a) the royalty calculated by applying the applicable
percentage royalty rate to the Gross Receipts attributable to
each Program; it being understood and agreed that the applicable
royalty rate increases shall only apply prospectively, or (b) the
minimum royalty calculated by applying the applicable minimum
royalty amount to the number of Laser Videodiscs embodying each
Program sold and not returned, pursuant to either (A), (B) or (C)
below, as applicable. Set forth on Exhibit "A" annexed hereto
and by its reference made a part hereof, is a listing of all
Laser Videodiscs embodying Catalog Programs with respect to which
PIONEER or its affiliates have combined sales of more than ten
thousand (10,000) but less than or equal to twenty five thousand
(25,000) units (net of returns) as of the date of this Agreement.
Set forth on Exhibit "B" annexed hereto and by its reference made
a part hereof, is a listing of all Laser Videodiscs embodying
Catalog Programs with respect to which PIONEER or its affiliates
have combined sales twenty five thousand (25,000) units or more
(net of returns) as of the date of this Agreement.
(A) Catalog Programs Not Listed on Exhibits "A" or "B"
and New Release Programs:
1. Royalty:
Cumulative Sales Level Royalty Rate Level of Distribution
(units sold per Program
during the Term and not
returned)
1 - 5,000 25% Wholesale and Direct Consumer Level
5,001 - 20,000 30% Wholesale and Direct Consumer Level
20,001 - 35,000 35% Wholesale and Direct Consumer Level
35,001 - 50,000 37.5% Wholesale and Direct Consumer Level
50,001+ 40% Wholesale and Direct Consumer Level
2. Minimum Royalty Amount:
Amount No. of Sides
$3.75 1 sided Laser Videodisc
$4.50 2 sided Laser Videodisc
$5.25 3 sided Laser Videodisc
$6.00 4 (or more) sided Laser Videodisc
(B) Catalog Programs Listed on Exhibit "A":
1. Royalty:
Cumulative Sales Level Royalty Rate Level of Distribution
(units sold per Program
during the Term and not
returned)
1 - 20,000 30% Wholesale and Direct Consumer Level
20,001 - 35,000 35% Wholesale and Direct Consumer Level
35,001 - 50,000 37.5% Wholesale and Direct Consumer Level
50,001+ 40% Wholesale and Direct Consumer Level
<PAGE>
2. Minimum Royalty Amount:
Amount No. of Sides
$3.75 1 sided Laser Videodisc
$4.50 2 sided Laser Videodisc
$5.25 3 sided Laser Videodisc
$6.00 4 (or more) sided Laser Videodisc
(C) Catalog Programs Listed on Exhibit "B":
1. Royalty:
Cumulative Sales Level Royalty Rate Level of Distribution
(units sold per Program
during the Term and not
returned)
1 - 35,000 35% Wholesale and Direct Consumer Level
35,001 - 50,000 37.5% Wholesale and Direct Consumer Level
50,001+ 40% Wholesale and Direct Consumer Level
2. Minimum Royalty Amount:
Amount No. of Sides
$3.75 1 sided Laser Videodisc
$4.50 2 sided Laser Videodisc
$5.25 3 sided Laser Videodisc
$6.00 4 (or more) sided Laser Videodisc
(2) "Gross Receipts" shall refer to and shall consist of
any and all monies and other consideration received or earned by
or credited to PIONEER and its affiliate and any sublicensees
approved by LIVE with respect to each Program, from the exercise
of PIONEER's rights pursuant to the terms of this Agreement
without deductions of any kind whatsoever except for the
deduction of any Laser Videodiscs of such Program physically
returned to PIONEER by its customers for which PIONEER has issued
credits to such customers; provided, however, the deduction for
the number of actual returned Laser Videodiscs (excluding
defectives) of each Program shall in no event exceed twenty
percent (20%) of the Gross Sales attributable to that Program.
For purposes hereof, the term "affiliate" as used in the
preceding sentence shall not be deemed to include any affiliate
of PIONEER which duplicates, manufactures, packages or renders
related laboratory services in respect of Laser Videodiscs, it
being understood and agreed that the payments made by PIONEER to
any such related company in consideration for their duplication,
manufacturing, packaging and related laboratory services shall
not be included in Gross Receipts hereunder, nor PIONEER's
Laserdisc Fan Club so long as it purchases Laser Videodiscs
embodying Programs from PIONEER at the same prices which PIONEER
charges to other customers in a similar class of trade, it being
understood and agreed that the monies which PIONEER's Laserdisc
Fan Club receives from its resale of such Laser Videodiscs to
its customers shall not be included in Gross Receipts hereunder.
Notwithstanding anything to the contrary contained herein, only
sales, use and other taxes collected by PIONEER from its
customers and paid by PIONEER to the relevant taxing authorities
may be deducted from the Gross Receipts in calculating the
royalty payable to LIVE hereunder.
(3) Promotional Free Goods. Solely for promotional
purposes, LIVE will permit PIONEER to furnish Laser Videodiscs on
a no-charge basis to critics, reviewers, publishers, motion
picture companies, radio and television stations and other
customary recipients of promotional "free goods" for which LIVE
will not receive any royalty; provided, however, PIONEER agrees
that, with respect to each and every Program, the number of Laser
Videodiscs given away as "free" promotional goods, excluding any
promotional copies which PIONEER furnishes to LIVE, during each
accounting period will not exceed two percent (2%) of the Gross
Receipts during that accounting period attributable to such
Program. For purposes of computing any amounts due LIVE, any
shipments of Laser Videodiscs in excess of said limitation will
be considered as if sold at not less than the average gross
wholesale price for the Laser Videodiscs of such Program during
the accounting period in which such excess shipments are made.
All promotional free goods shipped by PIONEER will be clearly and
prominently marked: "Promotional Goods. Not for Sale or Rental."
M. ACCOUNTING/RECOUPMENT OF ADVANCE: PIONEER will mail to LIVE
a detailed statement as of March 31, June 30, September 30 and
December 31 in each year within forty-five (45) days after each
such date, and all royalties earned by LIVE as of the close of
such quarter-annual accounting period shall be paid to LIVE upon
rendition of each statement after deducting any and all
unrecouped advances having been paid to LIVE prior to the close
of the applicable quarter-annual accounting period.
(1) Books and Records. PIONEER will keep and maintain at
its principal offices complete and accurate records of all
financial transactions regarding each and every Program released
by PIONEER pursuant to this Agreement in accordance with
generally accepted accounting principles on a consistent, uniform
and non-discriminatory basis throughout the Term. PIONEER will
also keep and maintain complete and accurate copies of every
statement from third parties, and all contracts, vouchers,
receipts, computer records, audit reports, correspondence and
other writings received from its customers and all other parties
pertaining to each and every Program released by PIONEER pursuant
to this Agreement.
(2) Reserve For Returns. During each accounting period and
with respect to each Program, PIONEER may withhold a reasonable
reserve against subsequent returns which PIONEER shall establish
in its sound business judgment based on its historical rate of
returns but which in no event shall exceed twenty percent (20%)
percent of the Gross Receipts of such Program during the
applicable accounting period. All such reserves shall be
liquidated no later than with the rendition of the statement
rendered one (1) year following the statement on which such
reserve was first maintained. LIVE'S account balance, including
all reserves which are being held by PIONEER against LIVE's
account, as of the date of this Agreement pursuant to the Laser
Videodisc Sublicense Deal Memorandum as of October 1, 1991
between them (or their respective affiliates or predecessors-in-interest)
will be carried forward under this Agreement (and such
previously held reserves shall be liquidated in accordance with
the immediately preceding sentence); provided, however, any
royalties earned by LIVE in respect of Laser Video disc sales
made by PIONEER before October 1, 1995 shall be fully paid to
LIVE as and when due in accordance with the aforesaid prior
Agreement and shall not be credited against any advances made by
PIONEER to LIVE under this Agreement.
(3) Audit Rights. Continuing until two (2) years after the
latter of the end of either the Term or the Sell-Off Period, if
any, LIVE may examine and copy on its own or through its
representatives PIONEER's financial records regarding any or all
of the Programs on at least thirty (30) days' advance written
notice but no more frequently than once a year. The examination
will be at LIVE's expense unless an underpayment of more than ten
percent (10%) is uncovered, in which case PIONEER will pay the
costs of examination on demand and receipt of documentation of
costs.
N. MOST FAVORED NATIONS: In the event PIONEER shall enter
during the Term hereof any licensing agreement or arrangement
(whether written or oral) with any non-affiliated third party
pursuant to which PIONEER is granted exclusive Laser Videodisc
distribution rights in the Territory (or at least the United
States) in and to fifty (50) or more motion pictures, and in the
event any such agreement or arrangement contains any financial
provisions (other than in respect of the amount of any recoupable
advances being paid by PIONEER thereunder) including, without
limitation, the royalty rates, minimum royalty amounts payable
thereunder, any limitations or restrictions on any cross-collateralization
between motion pictures licensed thereunder
and/or the frequency of the rendition of accounting statements or
royalty payments thereunder, which are more favorable to such
non-affiliated third party than those contained in this
Agreement, then PIONEER shall immediately notify LIVE of such
more favorable financial provisions and LIVE shall have the
right, but not the obligation, to modify this Agreement to
include any of such more favorable provisions retroactively to
the date upon which such more favorable provisions first become
effective in any such third party agreement. PIONEER shall and
does hereby agree to be bound by any such modifications which
LIVE elects to make. No further document or written instrument
between PIONEER and LIVE shall be necessary or required to
effectuate such modifications. PIONEER shall provide LIVE or its
designee with access to such third party agreements for the
purpose of verifying the matters set forth in this Paragraph N
except if and to the extent PIONEER is precluded from doing so by
reason of any third party contractual restrictions placed upon
PIONEER requiring PIONEER to keep the terms of such agreements
confidential. At LIVE's request, PIONEER will provide LIVE with
copies of any such third party contractual restrictions requiring
such confidentiality.
O. BEST EFFORTS: PIONEER will use its best efforts and skill
in the manufacture, advertising, promotion, distribution and
exploitation of Laser Videodiscs embodying the Programs. Any and
all costs paid or incurred by PIONEER or its authorized
subdistributors relating to the mastering, manufacturing,
packaging, selling, distributing, advertising, promoting or
publicizing Laser Videodiscs hereunder shall be borne solely and
exclusively by PIONEER on a non-recoupable basis.
P. DELIVERY:
(1) Delivery of Masters. LIVE shall use its best efforts
to inform PIONEER of its release schedule (to the best of LIVE's
knowledge) at least six (6) months in advance of the release of
each New Release Program in order to enable PIONEER to determine
whether it will release Laser Videodiscs embodying each such New
Release Program pursuant to the terms of this Agreement; provided
LIVE's failure to do so shall not constitute a breach hereunder.
Within thirty (30) days of its receipt of each such release
schedule, PIONEER shall use its best efforts to notify LIVE in
writing of its election not to release Laser Videodiscs of any
New Release Program first shown thereon, if applicable; provided
PIONEER's failure to do so shall not constitute a breach
hereunder nor PIONEER's election to release Laser Videodiscs of
such New Program pursuant to the terms of this Agreement. Not
less than two (2) months prior to LIVE's scheduled First Release
Date of any New Release Program which PIONEER has elected to
release hereunder, LIVE shall deliver to PIONEER in the manner
hereinafter provided either (a) a one inch (1") D2 digital
videotape master if readily available (the "pan and scan"
version, if readily available), or, if not readily available, (b)
a one inch (1") analog videotape master or submaster of the best
quality readily available (the "pan and scan" version, if readily
available) and a three-quarter inch PCM audio tape (if readily
available), in each case technically suitable for the
reproduction of Laser Videodiscs, and (c) a reasonable quantity
of color stills or transparencies (if readily available, and if
not available, then in black and white) suitable for the
preparation of packaging, advertising and promotional materials
for such Program. With respect to each Catalog Program which
PIONEER elects to release hereunder, LIVE shall deliver to
PIONEER the materials described above in the manner hereinafter
provided not less than three (3) months prior to the date PIONEER
has scheduled to release Laser Videodiscs of such Catalog Program
hereunder; provided PIONEER shall have given LIVE not less than
four (4) months advance written notice of such release date. If
PIONEER requests to be delivered hereunder materials for a
Program which are not readily available to LIVE and LIVE must
create or locate access to any additional film, videotape or
sound elements of that Program for delivery to PIONEER hereunder,
then PIONEER shall reimburse LIVE for its actual cost of creating
such materials (plus five percent), or a reasonable charge for
locating access to such materials, as applicable, on a non-recoupable
basis; provided, however, that if LIVE shall elect to
use any such additional film, videotape or sound elements in
connection with its release or re-release of such Program in the
one-half inch (1/2") NTSC videocassette format or in any of the
Reserve Disc Formats, then LIVE shall reimburse PIONEER for
seventy five percent (75%) of its payment to LIVE for such
materials. The cost of creating the color separations for the
laser videodisc jackets shall be borne solely by PIONEER on a
non-recoupable basis. The cost of remastering any of the
Programs, or adding enhancements to the masters of any of the
Programs (e.g., THX Sound) shall be borne solely by PIONEER on a
non-recoupable basis and LIVE shall have the free and
unrestricted right to use or authorize other to use such
materials in connection with its exploitation of the Programs,
provided that LIVE hereby agrees to enter into any appropriate
licenses or agreements with any Third Party rights holder which
are generally required as a precondition to any person's use of
any such enhancements and will pay any additional license fee or
costs required thereunder.
(2) Method of Delivery. Unless PIONEER and LIVE agree
otherwise in writing, the delivery of each videotape master or
submaster and audio tape shall at LIVE's election be accomplished
either by providing PIONEER with laboratory access thereto or by
loan of materials. If the latter, PIONEER will return each such
master or submaster to LIVE or its designee within a reasonable
time not to exceed thirty (30) days without LIVE's written
permission following PIONEER's receipt thereof. PIONEER will
reimburse LIVE for all shipping costs incurred by LIVE in the
delivery of any materials provided to PIONEER on loan.
(3) Requisite Approvals. If PIONEER does not use items as
supplied by LIVE in connection with the duplication of Laser
Videodiscs, or the promotional, advertising and packaging and
labeling materials relating thereto, then PIONEER will submit to
LIVE samples of the items it desires to use and shall obtain
LIVE's prior written consent before using any such other items.
(4) Duplication of Laser Videodiscs. The duplication of
Laser Videodiscs embodying the Programs shall be performed by one
or more laboratories designated by PIONEER (each individually
referred to as a "Laboratory"). The costs of duplicating,
manufacturing, storing, insuring, and shipping any an all Laser
Videodiscs hereunder, shall be borne solely and exclusively by
PIONEER on a non-recoupable basis. Each videotape master,
submaster and any other film, sound, audio or video element or
other materials relating to the Programs, including any
enhancements thereto, created or used by or under the authority
of PIONEER pursuant to this Agreement shall be held by each
Laboratory in the name of LIVE, and shall be made available for
use by LIVE or its designees provided LIVE or its designees, as
applicable, shall be responsible for their laboratory charges,
subject, however, to reasonable notice on the part of LIVE, and
subject further, however, to the immediate duplication needs of
PIONEER. On the first day of each month during the Term of this
Agreement, PIONEER shall furnish to LIVE a written statement
setting forth with respect to each Program released or to be
released by PIONEER pursuant to this Agreement, among other
things, the number of Laser Videodiscs ordered by PIONEER, the
number of Laser Videodiscs produced by each Laboratory and the
number of Laser Videodiscs delivered to PIONEER or to any other
persons or entities at the request or direction of PIONEER. LIVE
shall have the right to inspect each Laboratory and duplicating
facility and to cause each Laboratory to adhere to LIVE's
instructions with respect to matters of security involving the
Laser Videodiscs, and/or with respect to matters of security
involving the videotape masters, submasters or other materials
used for the creation of the Laser Videodiscs, and/or with
respect to the technical quality of the Laser Videodiscs produced
by each Laboratory. In the event that LIVE, in its sole
discretion, uses an anti-copying device (such as, for example,
Macrovision), in connection with LIVE's distribution of 1/2"
NTSC videocassettes or Reserved Disc Formats of any or all of the
Programs, and provided further that an anti-copying device or
anti-copying protection technology is then currently available
for Laser Videodisc application, then PIONEER shall, upon LIVE's
written notice to PIONEER, and at PIONEER's sole cost and expense
on a non-recoupable basis, use an anti-copying device or anti-copying
protection technology in connection with PIONEER's
distribution of Laser Videodiscs of such Programs. Prior to the
distribution of any Laser Videodiscs embodying any Program,
PIONEER shall furnish to LIVE, for the review and approval of
LIVE, a one-half inch (1/2") viewing cassette duplicated from the
master or submaster from which PIONEER intends to manufacture
such Laser Videodiscs, as well as a descriptive listing of all
locations in the Program where "chapter stops" have been placed.
PIONEER will also send to LIVE a sample Laser Videodisc
duplicated from said master or submaster (the "check disc") if
PIONEER has elected, in its sole discretion, to make a check disc
for a particular Program. If PIONEER has elected not to make a
check disc for a particular Program, PIONEER will nevertheless
make a check disc of a particular Program for LIVE if LIVE shall
request such in writing and agree to reimburse PIONEER for its
actual cost therefor. LIVE shall notify PIONEER in writing of
LIVE's approval (or disapproval, in which event LIVE's objections
shall be stated with reasonable specificity) of such cassette or,
if applicable, check disc, within ten (10) business days after
LIVE's receipt thereof, or it shall be deemed approved.
(5) Cutting and Editing. Each and every Program shall be
reproduced by PIONEER and embodied by PIONEER in Laser Videodiscs
in their entirety and in the form delivered by LIVE. PIONEER
shall not have the right to cut, edit, dub, time compress, time
expand, compliment, supplement or in any way modify any Program
without the express written consent of LIVE in each and every
instance, except PIONEER shall have the right to add "chapter
stops" provided LIVE has pre-approved the location of their
placement within the particular Laser Videodisc. Unless PIONEER
has obtained the prior written consent of LIVE, PIONEER shall not
(a) embody in Laser Videodiscs more than one Program and/or (b)
embody in any Laser Videodiscs any other motion pictures,
programs or programming, or trailers, commercials, advertising or
any other materials unless either included in the videotape
master or submaster furnished by LIVE to PIONEER or expressly
approved by LIVE in writing, and/or (c) physically package
together Laser Videodiscs of more than one Program, and/or (d)
physically package together Laser Videodiscs of any Program
together with Laser Videodiscs of other motion pictures, programs
or programming or other products and/or (e) create or distribute
Laser Videodiscs composed of trailers or excerpts of Programs for
promotional purposes or otherwise. PIONEER shall not delete or
alter the credits from the main credits or end titles of any
Programs. Without limiting the foregoing, PIONEER's right to
create, manufacture, sell and distribute during the Term, Laser
Videodiscs embodying any version of a Program which has not
theretofore been released by LIVE in English language 1/2" NTSC
videocassettes including, without limitation, so-called "Special
Edition Laser Videodiscs" shall be subject to LIVE's prior
written consent in each such instance, which consent LIVE may
withhold in its sole discretion. In each instance where LIVE
shall consent to PIONEER's release of a Special Edition Laser
Videodisc of any Program during the Term, it is the intention of
the parties hereto to supplement this Agreement by a separate
writing or document covering such Special Edition Laser
Videodisc; it being understood and agreed that only if and to the
extent the terms and conditions of any such separate writing or
document shall expressly or by necessary implication conflict
with the terms and conditions in this Agreement, then the terms
and conditions of such separate writing or document shall prevail
but in all other respects, the terms and conditions in this
Agreement applicable to the Programs shall also govern the
respective rights, title, interests and obligations of the
parties hereto with respect to each such Special Edition Laser
Videodisc.
(6) Preexisting Special Edition Laserdiscs. Nothing in
this Agreement shall be deemed to alter or otherwise affect the
respective rights and obligations of the parties hereto or their
affiliates or predecessors-in-interest pursuant to any separate
arrangements or agreements between them covering the Special
Edition Laser Videodiscs of the following six (6) Programs which
were initially released by PIONEER prior to the date of this
Agreement: "Terminator 2: Judgment Day Collector's Special
Edition (Director's Cut)", "Basic Instinct", "Rambling Rose",
"Platoon", "Glengarry Glen Ross", and "Bob Roberts"
(collectively, the "Preexisting Special Edition Laser Videodiscs
Agreements"). The parties hereby acknowledge that each of the
aforesaid six (6) preexisting Special Edition Laser Videodiscs
(collectively, the "Preexisting Special Edition Laser
Videodiscs") incorporated various materials pertinent to the
applicable Program contained in such Preexisting Special Edition
Laser Videodisc including, without limitation, interview footage
with members of the cast and crew, storyboards, textual
information and other elements which were not included in the
Programs when they were initially produced for theatrical release
in the U.S. (collectively, the "Supplemental Materials"). For
purposes of clarification, the following materials shall not be
deemed to be part of the Supplemental Materials: (i) any
material which was first photographed on film or recorded in
magnetic videotape or other material which was generated in
connection with the original production of the applicable Program
which is the subject of the Preexisting Special Edition Laser
Videodiscs, whether or not such material was included in the
originally released version or any other preexisting version of
such Program (e.g., cuts, outtakes, etc.); and (ii) any material
to which LIVE has been granted free access and use pursuant to
its license with the applicable rights holder.
To the extent that the Supplemental Materials include
materials and compilations of materials which were created
exclusively by or for PIONEER and which are owned or controlled
by PIONEER (collectively, the "PIONEER Supplemental Materials")
and notwithstanding anything to the contrary contained in the
Preexisting Special Edition Laser Videodiscs Agreements, PIONEER
hereby licenses to LIVE the right to use, adapt and otherwise
exploit and authorize others to use, adapt and otherwise exploit
any or all of the PIONEER Supplemental Materials solely in
connection with the manufacture, distribution, sale, advertising,
marketing, publicity, promotion and other disposition of the
Programs on any or all Reserved Disc Formats. PIONEER further
confirms that it has no objection to LIVE's exploitation of the
Supplemental Materials in any or all Reserved Disc Formats,
subject to the following terms and conditions:
(A) This license is granted without any
representations or warranties of any kind, whether express or
implied.
(B) LIVE acknowledges that various third parties may
also have certain rights in and to the Supplemental Materials.
Promptly following the execution of this Agreement, PIONEER will
furnish LIVE with copies of all applicable contracts between
PIONEER and independent third parties concerning the Supplemental
Materials to the extent any such contracts would directly affect
the use or exploitation by LIVE of the Supplemental Materials in
any of the Reserved Disc Formats, or the relevant excerpts
therefrom which specify restrictions or limitations (including,
but not limited to, third party rights of approval or
consultation) on the use or exploitation of the Supplemental
Materials, or any portion therefrom, in any of the Reserved Disc
Formats. LIVE agrees to adhere to all such third party
restrictions or limitations of which PIONEER informs LIVE.
(C) Without limiting the generality of the foregoing,
the parties further agree that LIVE shall be solely responsible
for obtaining any and all further clearances, releases, consents
and authorizations that are or may prove to be required from all
persons or entities (other than PIONEER or its affiliates) in
connection with the exploitation of the Supplemental Materials as
set forth herein. LIVE shall also pay any fees and other
payments required including, without limitation, any so-called
union or guild re-use fees or music synchronization license fees
in connection with the exploitation of the Supplemental
Materials.
(D) The foregoing license for the PIONEER Supplemental
Materials and waiver of objection shall continue for a term to be
co-extensive and co-terminus with LIVE's exclusive distribution
rights to the Programs which are the subject of the Preexisting
Special Edition Laser Videodiscs pursuant to LIVE's license
agreement with the appropriate rights holder (as the term of any
such license may be from time to time renewed or extended);
provided LIVE agrees it will not, either directly or through
third parties, publicly release any Supplemental Materials sooner
than January 1, 1997. Any videodisc in any Reserved Disc Format
which incorporates all or a portion of the Supplemental Materials
shall hereafter be referred to as a "LIVE Special Edition Disc."
(E) The foregoing license shall be deemed exclusive to
LIVE for those territories and countries for which LIVE holds
exclusive distribution rights as of the effective date of this
Agreement.
(F) With respect to all sales of LIVE Special Edition
Discs by or under the authority of LIVE, LIVE shall pay to
PIONEER a royalty equal to thirty cents (U.S. $0.30) per LIVE
Special Edition Disc sold or otherwise distributed for sale by or
under authority of LIVE. No royalty shall be due on any
videodisc returned or shipped as replacements for lost or
defective discs or distributed for promotional purposes. Any
royalty payable to PIONEER hereunder will be in addition to any
royalty or other remuneration which LIVE is obligated to pay to
any third party in order to exploit the Supplemental Materials
described herein. Commencing with the first full calendar
quarter following the initial sale of any copies of the
applicable LIVE Special Edition Disc, LIVE will send to PIONEER a
statement of account setting forth (a) the number of LIVE Special
Edition Discs manufactured by or under the authority of LIVE
during such quarter-annual accounting period, (b) the number of
LIVE Special Edition Discs sold or otherwise distributed for sale
by or under the authority of LIVE, and (c) the royalties earned
by PIONEER as of the close of such quarter-annual accounting
period. Such statement of account shall be sent to PIONEER,
together with payment of such royalties, within forty five (45)
days following the end of such quarter-annual accounting period.
During each accounting period and with respect to each LIVE
Special Edition Disc, LIVE may withhold a reasonable reserve
against subsequent returns which LIVE shall establish in its
sound business judgment based on its historical rate of returns
but which in no event shall exceed twenty percent (20%) of the
gross sales of such LIVE Special Edition Discs during the
applicable accounting period. All such reserves shall be
liquidated no later than with the rendition of the statement
rendered one (1) year following the statement on which such
reserve was first maintained.
(G) Within two (2) years from the rendition of each
accounting statement, PIONEER may examine and copy on its own or
through its representatives LIVE's financial records regarding
any or all of the LIVE Special Edition Discs on at least thirty
(30) days' advance written notice but no more frequently than
once a year. The examination will be at PIONEER's expense unless
an underpayment of more than ten percent (10%) is uncovered, in
which case LIVE will pay the costs of examination on demand and
receipt of documentation of costs.
(H) In consideration of the payment of the aforesaid
royalty, PIONEER agrees to give LIVE free and unrestricted access
to all masters, advertising and promotional accessories, artwork
and other materials created or used by PIONEER in connection with
LIVE's production, manufacture, duplication, distribution or
other exploitation of each of the LIVE Special Edition Discs;
provided LIVE will pay all costs arising in any way by reason of
the license granted hereunder including processing, laboratory,
transfer and shipping charges and the costs involved in replacing
any lost or damaged materials delivered to LIVE. No later than
thirty (30) days following the initial release of the applicable
LIVE Special Edition Disc for which any Supplemental Materials
were requested by LIVE, LIVE shall, at LIVE's sole expense,
return all such Supplemental Materials to such location as
PIONEER may designate.
(I) Following the expiration or termination, if ever,
of LIVE's license to use PIONEER's Supplemental Materials
relating to a particular Program as hereinabove provided, LIVE
shall have no further right to use or exploit any part or parts
of the PIONEER Supplemental Materials relating to such Program in
any of the Reserved Disc Formats.
(J) Except as authorized or permitted hereunder or
under the Preexisting Special Edition Laser Videodiscs
Agreements, (a) the Supplemental Materials will not be used by
LIVE for any other purposes whatsoever, and (b) LIVE will not
make any reproduction of or from the Supplemental Materials
whatsoever, in whole or in part, except for use in and as part of
the LIVE Special Edition Discs.
(K) Except as otherwise provided herein, PIONEER
reserves all of its rights in and to the PIONEER Supplemental
Materials. As between PIONEER and LIVE, legal title to the
PIONEER Supplemental Materials shall remain with PIONEER. LIVE
represents and warrants that the incorporation of the PIONEER
Supplemental Materials, in whole or in part, shall in no way
affect PIONEER's continued, separate and (as between PIONEER and
LIVE) exclusive copyright ownership in the PIONEER Supplemental
Materials and that the copyright ownership of PIONEER will not
merge with the applicable LIVE Special Edition Disc nor deprive
PIONEER or any part of its copyright ownership.
(7) Copyright Notices. PIONEER shall not delete or alter,
and PIONEER shall not authorize the deletion or alteration of,
any copyright and/or trademark notice which is affixed on or in
any Programs or on the packaging or labels for any Laser
Videodiscs furnished by LIVE to PIONEER pursuant to Paragraph O.
PIONEER shall not release any Laser Videodiscs and PIONEER shall
not exploit any Programs, unless such Laser Videodiscs and
Programs contain each and all of the copyright notices, trademark
notices, and other notices which are or may be required by LIVE.
(8) Credits. PIONEER shall embody and shall incorporate,
in such manner as shall be determined by LIVE, any and all
credits and credit lists as may be designated by LIVE, on to each
and all of the Laser Videodiscs and any and all publicity,
advertising, promotional, packaging and labeling materials
therefor.
(9) Quality of Laser Videodiscs. The Laser Videodiscs
manufactured and distributed by PIONEER shall be of first-class
quality, and shall conform to the visual and audio quality of the
master or submaster and other audio/video materials supplied by
LIVE. PIONEER shall establish and maintain quality control
procedures and inspection procedures to ensure that defective or
substandard Laser Videodiscs are not distributed or otherwise
used or exploited by PIONEER, and shall consult on an ongoing,
meaningful basis with LIVE with respect thereto. In the event
PIONEER is advised or otherwise becomes aware that such defective
or substandard Laser Videodiscs are being distributed, then, at
the sole expense of PIONEER on a non-recoupable basis, PIONEER
shall cause all such Laser Videodiscs to be returned and replaced
in a timely fashion. PIONEER shall erase or destroy all such
defective or substandard Laser Videodiscs, and PIONEER shall
furnish to LIVE an affidavit from an officer of PIONEER
confirming such return and replacement and erasure or
destruction.
(10) Wide Screen Versions. If LIVE delivers a "pan and
scan" version for each New Release Program, then subject to any
contractual limitations or requirements imposed on LIVE, LIVE
will also deliver to PIONEER in the manner hereinabove provided a
master or submaster of the best quality readily available of the
"wide screen" version for each New Release Program provided a
master or submaster embodying such "wide screen" version is
readily available. If LIVE has to create a videotape master or
submaster of a "wide screen" version of a New Release Program to
enable its delivery to PIONEER in the manner hereinabove
provided, then, at LIVE's request, PIONEER will reimburse LIVE
for its actual cost of such master or submaster (plus five
percent) on a non-recoupable basis. If PIONEER does not
reimburse LIVE for such costs pursuant to the immediately
preceding sentence, the cumulative units sold and not returned of
the "pan and scan" and "wide screen" versions of the same Program
shall be added and counted together for purposes of determining
the number of cumulative units sold and not returned of such
Program. If PIONEER does reimburse LIVE for such costs at LIVE's
request, then the units sold and not returned of the "pan and
scan" version shall be counted separately and apart from the
units sold and not returned of the "wide screen" version of the
same Program.
(11) Ownership of Materials. As between LIVE and PIONEER,
legal title to all masters, submasters and other materials
furnished by LIVE to PIONEER hereunder shall at all times remain
in LIVE and legal title in and to any materials, including
masters, submasters, film, sound, audio and video elements and
other materials created or used by or under the authority of
PIONEER pursuant to this Agreement and all rights (including
copyrights) therein and thereto shall vest in LIVE upon the
creation thereof, subject only to possession and control thereof
by PIONEER during the Term solely for the purpose of PIONEER's
exercise of the rights licensed to PIONEER herein. PIONEER shall
execute, acknowledge and deliver to LIVE any instruments of
transfer, conveyance or assignment to any such materials deemed
by LIVE necessary or desirable to evidence or effectuate LIVE's
or its designee's ownership thereof and in the event that PIONEER
fails or refuses to execute, acknowledge or deliver any such
instruments or documents within ten (10) days following LIVE's
written request therefor, then LIVE shall be and PIONEER hereby
irrevocably nominates, constitutes and appoints LIVE as its true
and lawful attorney-in-fact, to execute and deliver all such
instruments and documents in LIVE's name or otherwise; it being
acknowledged that such power is a power coupled with an interest.
At LIVE's request, but not more frequently than once per calendar
quarter, PIONEER will promptly notify LIVE in writing of the
location of all such masters, submasters and other materials
created or used by or under the authority of PIONEER pursuant to
this Agreement. LIVE will at all times have unrestricted free
access to any and all materials, including masters, submasters,
film, sound, audio and video elements and other materials created
or used by or under the authority of PIONEER pursuant to this
Agreement and LIVE shall have the right to use any or all such
materials in connection with its exercise of any rights reserved
to LIVE hereunder, including, but without limitation, the
Reserved Disc Formats.
(12) Final Disposition of Materials. Upon the expiration or
sooner termination of the Term of this Agreement, and at the
election of LIVE, PIONEER shall either (a) ship to LIVE all
videotape masters, submasters, film, sound, audio and video
elements and other materials and other materials which were
either furnished to PIONEER by LIVE pursuant to this Agreement or
created or used by or under the authority of PIONEER pursuant to
this Agreement and the costs of such shipment shall be borne by
LIVE, or (b) immediately erase or destroy all such videotape
masters, submasters and all such other materials (the costs of
which shall be borne by PIONEER) and furnish to LIVE an affidavit
from an officer of PIONEER confirming that all such materials
have been erased or destroyed.
Q. PACKAGING, ADVERTISING, MARKETING:
(1) Packaging and Labeling Materials. All Laser Videodiscs
distributed by PIONEER pursuant to the Agreement shall be
packaged and labeled by PIONEER at the sole cost and expense of
PIONEER on a non-recoupable basis, using packaging and labeling
materials in such form as shall be approved in writing by LIVE in
each and every instance. Upon request by PIONEER, LIVE shall
furnish PIONEER with any readily available color transparencies
of artwork which transparencies may be adapted by PIONEER (at
PIONEER's cost on a non-recoupable basis) for packaging,
provided, however, that any and all out-of-pocket costs incurred
by LIVE (plus five percent) with respect to such transparencies
shall be reimbursed by PIONEER to LIVE. Any packaging materials
furnished by LIVE to PIONEER will be deemed pre-approved provided
PIONEER uses much materials only for the packaging or purposes
that LIVE intended. No change or deletion or addition, of any
kind whatsoever, shall be made by PIONEER with respect to such
materials. Without limiting the generality of the foregoing,
there shall be no such change or deletion or addition in
connection with any copyright notice, trademark notice, or
similar notices, and/or in connection with any credits or
billings, including, but not limited to, the size or prominence
or position or color of any such credits or billings. PIONEER
shall submit to LIVE, for the approval of LIVE, samples of all
packaging and labeling materials created by or under the
authority of PIONEER pursuant to this Agreement. LIVE's approval
of any such materials will be considered given if within five (5)
business days of LIVE's receipt of such sample, LIVE neither (a)
notifies PIONEER in writing of its disapproval or (b) notifies
PIONEER in writing that LIVE need to obtain the approval of one
or more third parties, in which event, LIVE will use its
reasonable efforts to obtain such third party approvals as soon
as is practicable.
(2) Packaging and Labeling Design Services. Subject to
separate agreement between the parties, in lieu of furnishing
certain pre-approved materials to PIONEER in order for PIONEER to
design artwork and create jacket film from which the Laser
Videodisc jacket and label can be manufactured pursuant to (1)
above, LIVE may, but only at PIONEER's request, design the
artwork for the jacket and label for each Laser Videodisc for
each Program designated by PIONEER and to create color
transparencies for such artwork (collectively, "Design
Services"). LIVE will receive compensation for providing any
Design Services for any Program in an amount to be mutually
agreed upon by the parties, which compensation shall be non-recoupable
and in addition to any other advances or royalties due LIVE hereunder.
(3) Advertising and Promotional Materials. At LIVE's
request, PIONEER shall furnish to LIVE copies of any and all
advertising and promotional materials which have been or are
intended to be published or distributed or otherwise used by
PIONEER, including, but not limited to, any and all catalogs,
guides, brochures, circulars, and any and all other items, of any
kind or character whatsoever, relating or referring to any or all
of the Programs. In the event that any advertising or
promotional materials for any or all Programs also refer or
relate to any other motion pictures or programs, then, all
Programs shall be specifically referenced and identified on all
such advertising and promotional materials as a product owned and
controlled by and licensed with the permission of LIVE, in such
form as shall be determined by LIVE. Upon request by PIONEER,
LIVE shall furnish PIONEER with reasonable quantities of readily
available point-of-purchase promotional materials and other
advertising and promotional materials relating to the Programs,
provided, however, that any and all out-of-pocket costs incurred
by LIVE (plus five percent) with respect to such promotional
materials shall be reimbursed by PIONEER to LIVE.
(3) Marketing and Promotion Plans. PIONEER shall consult
with LIVE on a regular and frequent, meaningful basis, during the
Term of this Agreement, and if applicable during the Sell-Off
Period, regarding PIONEER's proposed marketing and promotional
and exploitation strategy for any and all Programs and for the
exercise of PIONEER's rights pursuant to this Agreement. PIONEER
shall give due consideration to selling to third party
distributors where such distributors provide sales coverage and
other marketing opportunities supplementary to those of PIONEER.
Notwithstanding anything herein to the contrary, PIONEER shall
not (a) advertise or promote any Laser Videodiscs embodying any
particular Program, prior to the commencement by LIVE of
advertising or promotion with respect to the English language
1/2" NTSC videocassettes of such Program in the Territory, (b)
engage in any sales solicitations of Laser Videodiscs embodying
any particular Program, prior to the date such solicitations are
commenced by LIVE with respect to the English language 1/2" NTSC
videocassettes embodying such Program in the Territory, or (c)
release Laser Videodiscs embodying any particular Program, prior
to the date of release of the English language 1/2" NTSC
videocassettes by LIVE of such title in the Territory. LIVE will
inform PIONEER on a regular basis of its 1/2" NTSC videocassette
release schedule for the Programs in the Territory.
R. FREE COPIES: PIONEER will provide LIVE with ten (10) Laser
Videodiscs of each Program free of charge and, at LIVE's request,
as many as an additional two hundred fifty (250) Laser Videodiscs
of each Program at PIONEER's cost of manufacturing (i.e.,
pressing and duplication) plus the cost of shipping and handling.
The Laser Videodiscs of each Program which PIONEER furnishes to
LIVE free of charge will be free of royalties and will not be
counted in the limitation of promotional free goods as provided
in Paragraph L(3). Additionally, PIONEER will provide LIVE for
its lending library to its employees, with one (1) copy of each
Laser Videodisc of each motion picture or program (other than the
Programs) which PIONEER shall initially release during the Term.
S. FORCE MAJEURE: PIONEER shall have the right, at its
election, to suspend the Term of this Agreement if due to any
labor controversy or adjustment thereof affecting the Laser
Videodisc industry as a whole (and not merely PIONEER) or to any
other cause not within PIONEER's control or which PIONEER cannot
by reasonable diligence have avoided, PIONEER is materially and
adversely hampered in the manufacture, distribution or sale of
Laser Videodiscs in the Territory (an "Event of Force Majeure").
In no event shall inclement weather ever be considered in an
Event of Force Majeure. Such suspension shall commence upon
written notice to LIVE of, and last for the duration of, any such
Event of Force Majeure. Throughout the duration of any such
suspension, PIONEER will continue to perform its obligations
hereunder, including its accounting and payment obligations
hereunder, except if and to the extent PIONEER is unable to do so
as a direct result of the Event of Force Majeure. At PIONEER's
election, a period of time equal to the duration of such
suspension(s) shall be added at the end of the then current Term,
and such Term shall be accordingly extended, but in no event
shall the Term hereof be extended for a period greater than six
(6) months in the aggregate.
T. DEFAULT AND TERMINATION:
(1) PIONEER's Default. PIONEER will default if (a) PIONEER
becomes insolvent or fails to pay its debts when due; (b) PIONEER
makes any assignment for the benefit of creditors, or seeks
relief under any bankruptcy law or similar law for the protection
of debtors, or suffers a petition of bankruptcy to be filed
against it or a receiver or trustee appointed for substantially
all of its assets; (c) PIONEER breaches any material term,
covenant, or condition under this Agreement; (d) PIONEER makes or
attempts to make any assignment or transfer of this Agreement or
engages or attempts to engage any sublicensee to exploit any of
the rights granted to PIONEER without first obtaining LIVE's
prior consent in writing; (e) PIONEER suspends or discontinues
its sales, marketing or other operations as a wholesale
distributor of Laser Videodiscs in the Territory in any material
way. LIVE will give PIONEER written notice of any claimed
default. If the default is incapable of cure, then PIONEER will
be in default immediately upon receipt of LIVE's notice. If the
default is capable of cure, then PIONEER will have ten (10) days
after its receipt to cure any monetary default and thirty (30)
days after its receipt to cure any non-monetary default. If the
default is incapable of cure, or if PIONEER fails to cure within
the times provided, if any, then LIVE in addition to any other
rights or remedies may terminate or rescind this Agreement as to
any or all Programs. LIVE may then proceed against PIONEER for
legal and equitable relief, including suspending delivery of any
or all Programs, enjoining any further exercise by PIONEER of the
rights granted herein, and declaring all unpaid amounts owing to
LIVE immediately due and payable.
(2) LIVE's Default. LIVE will default if it fails to abide
by any material requirement of this Agreement imposed on LIVE or
breaches any covenant, condition, representation or warranty made
by LIVE under this Agreement. PIONEER will promptly give LIVE
written notice of any claimed default. If the default is
incapable of cure, then LIVE will be in default immediately upon
receipt of PIONEER's notice. If the default is capable of cure,
then LIVE will have thirty (30) days after its receipt to cure
such default. If the default is incapable of cure or if LIVE
fails to cure any default capable of cure within said thirty (30)
day period, then PIONEER may proceed against LIVE for available
relief, including PIONEER's right to suspend the Term hereof
pursuant to Paragraph S hereof.
U. REPRESENTATIONS AND WARRANTIES:
(1) PIONEER's Warranties. PIONEER hereby represents,
warrants and agrees, as follows:
(a) PIONEER has the full right, power, capacity and
authority to enter into this Agreement and to satisfy and perform
each and all of the terms and conditions hereof. The consent of
no other person and/or entity is necessary for PIONEER to enter
into this Agreement. PIONEER has undertaken and performed any
and all corporate actions and other actions necessary and
appropriate to authorize the execution of this Agreement and the
performance of each and all of the provisions hereof.
(b) PIONEER shall distribute and exploit Laser
Videodiscs embodying the Programs strictly in accordance with the
terms of this Agreement, and PIONEER shall not master, duplicate,
manufacture, sell, advertise, market, promote, publicize, copy,
use, distribute or otherwise exploit or dispose of the Programs
or any Laser Videodiscs embodying the Programs or any videotape
masters, submasters, film, sound, audio, video, advertising or
packaging elements or materials relating to the Programs except
as specifically provided pursuant to this Agreement.
(c) PIONEER is not, and PIONEER shall not be, subject
to any contracts, agreements, obligations, or disability, of any
kind or character whatsoever, which will prevent or interfere
with PIONEER fully keeping and performing any and all the
representations, warranties, agreements, covenants and conditions
to be kept or performed by PIONEER pursuant to this Agreement.
(d) PIONEER shall undertake and perform any and all
actions (short of commencing litigation) which are or may be
reasonably necessary or appropriate for the protection of any and
all of LIVE's interest in and to each and every of the Programs
and any and all materials provided by LIVE to PIONEER or created
by, or under the authority granted to, PIONEER pursuant to this
Agreement in connection with the Programs including, but not
limited to, each and all of LIVE's rights and interest in and to
any and all trademarks and copyrights in respect of each and all
of the Programs. Without limiting the generality of the
preceding sentence, PIONEER has not permitted and shall not
permit any lien, charge, pledge, mortgage or other encumbrance to
attach to any or all of the Programs or said elements or
materials, and PIONEER has not granted and shall not grant any
such lien, charge, pledge, mortgage or other encumbrance to any
person or entity.
(e) Without limiting the generality of the preceding
provisions of this paragraph, there are and shall be no liens,
claims, encumbrances, legal proceedings, restrictions or
agreements of any kind whatsoever, which will conflict or
interfere with, limit, derogate from, be inconsistent with, or
otherwise affect any of the provisions of this
Agreement or the enjoyment by LIVE of any of the rights or
benefits granted to LIVE pursuant to this Agreement.
(f) PIONEER shall undertake and perform any and all
actions (short of commencing litigation) which are or may be
reasonably necessary or appropriate to prevent the unauthorized
use, duplication and/or exhibition of Laser Videodiscs embodying
the Programs, and PIONEER shall cooperate with LIVE, and LIVE
shall cooperate with PIONEER in any and all actions or
proceedings with LIVE deems necessary or appropriate to protect
against such unauthorized use or duplication or exhibition and/or
to protect the copyright or interest in the Programs.
(g) PIONEER's warranties, representations and
agreements shall survive the expiration of the Term of this
Agreement. None of PIONEER's warranties, representations and
agreements shall in any way be limited by reason of any
investigation made by LIVE or by reason of any documents or
agreements or instruments or information heretofore or hereafter
submitted by PIONEER to LIVE.
(2) LIVE's Warranties. LIVE hereby represents, warrants
and agrees, as follows:
(a) LIVE has the full right, power, capacity and
authority to enter into this Agreement and to satisfy and perform
each and all of the terms and conditions hereof. The consent of
no other person and/or entity is necessary for LIVE to enter into
this Agreement. LIVE has undertaken and performed any and all
corporate actions and other actions necessary and appropriate to
authorize the execution of this Agreement and the performance of
each and all of the provisions hereof.
(b) LIVE is not, and LIVE shall not be, subject to any
contracts, agreements, obligations, or disability, of any kind or
character whatsoever, which will prevent or interfere with LIVE
fully keeping and performing any and all the representations,
warranties, agreements, covenants and conditions to be kept or
performed by LIVE pursuant to this Agreement.
(c) Without limiting the generality of the preceding
provisions of this paragraph, there are and shall be no liens,
claims, encumbrances, legal proceedings, restrictions or
agreements of any kind whatsoever, which will conflict or
interfere with, limit, derogate from, be inconsistent with, or
otherwise affect any of the provisions of this
Agreement or the enjoyment by PIONEER of any of the rights or
benefits granted to PIONEER pursuant to this Agreement.
(d) LIVE owns or controls without any limitations,
restrictions or encumbrances whatsoever, all other rights granted
to PIONEER hereunder and LIVE has obtained all necessary licenses
and permissions required for the manufacture, sale, distribution,
advertising and exploitation of Laser Videodiscs embodying the
Programs throughout the Territory pursuant to and consistent with
the terms and conditions of this Agreement, as may be required
for the full and unlimited exercise and enjoyment by PIONEER of
all the rights herein granted to it.
(e) LIVE has made all the necessary or required
approvals in connection with the artwork provided by LIVE to
PIONEER hereunder.
(f) All obligations with respect to each and all of
the Programs, and the distribution and exploitation thereof,
including, but limited to, all salaries, royalties, license fees,
service charges, laboratory charges, fees for artwork and the
like, have heretofore been or will be fully paid and PIONEER
shall have no obligations for such future salaries, royalties,
residuals, deferments, license fees, service charges, fees for
artwork or similar payments except as provided in this Agreement.
All synchronization and mechanical fees and costs associated with
the use of the music and all fees and charges incurred or
committed to by LIVE, including, but not limited to, payments by
reason of the manufacture, sale, rental or exploitation of Laser
Videodiscs embodying the Programs, have been paid or will be paid
by LIVE except as provided in this Agreement.
(g) Each Program is not and will not be in the public
domain and will be validly copyrighted within the Territory. No
Program will be allowed to fall into the public domain anywhere
in the Territory during the Term. Each Program as delivered to
PIONEER will contain all proper copyright and, if applicable,
trademark notices.
(h) Neither any Programs nor anything contained
therein (including, but limited to, any music and sound
synchronized therewith and the titles thereof) or the
manufacture, distribution and exploitation of Laser Videodiscs or
the exercise by PIONEER of any of the rights granted it
hereunder, does or will violate or infringe upon any rights of
any kind or nature whatsoever, of any person or entity or
constitute a libel or slander.
(i) The credit lists and other materials delivered by
LIVE to PIONEER will be complete and accurate and PIONEER will
incur no liabilities to any third parties arising out of its
compliance with such lists and use of such materials for their
intended purpose.
(j) LIVE's warranties, representations and agreements
shall survive the expiration of the Term of this Agreement. None
of LIVE's warranties, representations and agreements shall in any
way be limited by reason of any investigation made by PIONEER or
by reason of any documents or agreements or instruments or
information heretofore or hereafter submitted by LIVE to PIONEER.
V. INDEMNITY: Each party hereby undertakes and agrees to
indemnify, save and hold the other party free and harmless from
and against any and all liability, loss, damage, cost or expense
(including reasonable attorneys' fees and costs), in connection
with any claims and demands made or actions, suits or proceedings
brought by third parties arising out of, in connection with or
related to any failure by the indemnifying party to fulfill its
obligations under this Agreement, or any claim by any person or
entity which is inconsistent with any of the covenants,
warranties or representations made by the indemnifying party in
this Agreement. The indemnifying party will reimburse the other
party promptly upon written demand at any time after the date
hereof in respect of any liability, loss, damage, cost or expense
(including reasonable attorneys' fees) which such party has paid,
incurred or suffered to which the foregoing indemnity relates.
The indemnifying party shall be duly notified of any claim or
demand hereunder and shall have the option to participate and/or
defend, at its own expense, in connection with the settlement or
litigation thereof. No settlement shall be made by either party
hereunder without the prior written consent of the indemnifying
party, which consent shall not be unreasonably withheld.
W. GOVERNING LAW. This Agreement shall be governed and
constructed in accordance with the laws of the State of
California applicable to agreements entered into and fully
performed therein. Any controversy or claim arising out of or
relating to this Agreement and/or any alleged breach thereof
shall be brought and shall be resolved exclusively in the
appropriate state or federal court located in the County of Los
Angeles, State of California, and LIVE and PIONEER each hereby
consent and submit to the exclusive jurisdiction and venue of
said court located in the County of Los Angeles, State of
California.
X. ASSIGNMENT AND SUBLICENSING: LIVE may freely assign,
transfer or sublicense any of its rights under this Agreement,
but no such assignment, transfer or sublicense shall relieve LIVE
of its obligations, representations, warranties and indemnities
under this Agreement. This Agreement is personal to PIONEER.
PIONEER may not assign or transfer this Agreement, or engage any
subdistributor, sublicensee or agent to exploit any of the rights
granted to PIONEER, whether voluntarily or involuntarily, without
the prior written consent of LIVE which consent LIVE may withhold
in LIVE's sole discretion, other than to its parent, any
affiliated company or any entity into or with which it may merge
or be consolidated or any company which acquires all or
substantially all of PIONEER's stock or assets.
(1) Restrictions and Sublicensing. If PIONEER proposes to
assign or transfer this Agreement or to engage any sublicensee to
exploit any of the rights granted to PIONEER hereunder, then, in
each such instance, PIONEER shall notify LIVE in writing of all
material terms and conditions thereof, including the identity of
the intended assignee, transferee or sublicensee, the Programs
intended to be covered thereby and the part or parts in the
Territory to be included therein. PIONEER shall have neither the
right nor power to make such assignment or transfer or to engage
any such sublicensee until PIONEER has received the prior written
consent of LIVE which LIVE may withhold in its sole discretion
unless such assignment is to its parent, any affiliated company
or any entity into or with which it shall have merged or been
consolidated or any company which acquires all or substantially
all of PIONEER's stock or assets, in which event, LIVE's written
consent shall not be required. Until LIVE shall notify PIONEER
to the contrary in writing, LIVE approves the engagement or
appointment of Columbia House as a sublicensee of PIONEER to
distribute Laser Videodiscs of the Programs through Mail Clubs in
the Territory during the Term on a non-exclusive basis; provided,
the terms of any agreement affecting the Programs which PIONEER
shall desire to enter into with Columbia House during the Term
(including any modifications, amendments, renewals or extensions
of the currently-existing agreement between them) shall be
subject to the prior written consent of LIVE.
(3) No Release. If LIVE does consent to any assignment or
transfer of this Agreement or the engagement of any sublicensee,
then this Agreement will be binding on such authorized assignee,
transferee or sublicensee but will not relieve PIONEER of any of
PIONEER's obligations under this Agreement.
Y. INITIAL PRESS RELEASE: LIVE shall, in consultation with
PIONEER, prepare the first press announcement or other publicity
publicizing the nature of this Agreement, the contents of which
shall be subject to PIONEER's prior approval, which PIONEER shall
not unreasonably withhold. LIVE and PIONEER shall have the right
to jointly and/or concurrently release such mutually-approved
initial press announcement to the trade and/or public on a date
or on date(s) designated by LIVE. If PIONEER shall thereafter
decide to release a press announcement or other publicity
relative to the nature of this Agreement it shall have the right
to do so, subject to LIVE's prior approval of the contents
thereof, which LIVE shall not unreasonably withhold.
Z. CONFIDENTIALITY: The parties hereto shall receive all
information relating to their respective operations as
confidential information and shall use its reasonable efforts to
keep and maintain such information confidential by not readily
disclosing, revealing, publishing, reporting or transferring such
confidential information to others, except as reasonably
necessary in the conduct of each party's business, Without
limiting the generality of the foregoing, each party may disclose
such confidential information to the following persons which are
set forth herein solely for purposes of example and not by way of
limitation: (a) to such employees of each party, in the
performance of their capacity as such, such information as may be
required for the performance of their responsibilities hereunder,
(b) to the extent necessary to comply with the law, including
federal and/or state securities laws, or the valid order of a
court of competent jurisdiction, in which event the party making
such disclosure shall so notify the other and shall seek
confidential treatment of such information, (c) as part of each
party's normal reporting or review procedure to its parent
company auditors, attorneys and principle banks, if such parties
agree to be bound by the provisions of this Paragraph Z, (d) as
part of any audit of any parties books and records and (e) in
order to enforce the rights of each party pursuant to this
Agreement.
AA. MISCELLANEOUS PROVISIONS:
(1) Separability. In the case of any conflicts between any
term of this Agreement and any material law, ordinance, rule or
regulation, the latter will prevail.
(2) Relationship. Nothing herein contained shall be
construed to create a partnership, joint venture, agency,
fiduciary or employment relationship between the parties.
(3) No Waiver. No waiver of any breach will be a waiver of
any other breach of the same or any other provision. No waiver
is effective unless in writing. The exercise of any right will
not be deemed a waiver of any other right or of any default of
the other party.
(4) Remedies Cumulative. All remedies are cumulative, and
resort to one will not preclude resort to any other at any time.
(5) Notices. Except as otherwise provided herein, all
notices and payments will be sent to the parties at the addresses
specified on page 1 hereof, either by telex, telegram, telefax,
courier or first class mail, postage pre-paid. Either party may
change its place for notice by like notice. All payments and
statements which PIONEER is required or desires to send to LIVE
will be sent to the attention of LIVE's Vice President Royalties.
All legal notices which PIONEER is required or desires to send to
LIVE will be sent to the attention of LIVE's Executive Vice
President of Legal and Business Affairs. A courtesy copy of all
legal notices which LIVE is required or desires to send to
PIONEER will be sent to Pioneer North America, Legal Dept., at
PIONEER's address specified on page 1 hereof.
(6) Modification. No modification or amendment of this
Agreement, including this paragraph, shall be effective unless in
writing, signed by both parties.
(7) Captions. Captions and paragraph headings are for
convenience only.
(8) Entire Agreement. This Deal Memorandum contains the
principal terms and conditions of the agreement and understanding
by and between the parties regarding its subject matter, and
supersedes all previous written or oral understandings and
representations between the parties regarding its subject matter,
if any. Each party expressly waives in favor of the other any
right to rely on such prior written or oral understandings or
representations, if any there may be.
(9) Full Execution Required. This Agreement shall not
become effective until signed by a duly authorized officer of
PIONEER and counter signed by a duly authorized officer of LIVE.
IN WITNESS WHEREOF, the parties hereto have executed this
Deal Memorandum to be effective as of October 1, 1995.
PIONEER ENTERTAINMENT (USA) L.P. LIVE FILM AND MEDIAWORKS INC.
By: By:
Steven E. Mangel
Its: Its: Executive Vice President
EXHIBIT "A"
TITLE EDPNO DLR. SIDES LIVE EXP. TERRITORY
PR.
Basic Instinct pse 33014 48.99 4 April 12, 2005 A
Crying Game ws 33349 24.49 2 June 30, 2008 C
Madonna: Truth
or Dare 25820 24.49 2 January 11, 2006 B
Paul McCartney:
Get Back 33262 24.49 2 December 18, 2006 A
The Piano ws 33725 27.99 3 May 25, 2009 C
Platoon 34384 34.99 3 January 15, 1998 A
Reservoir Dogs ws 33269 24.49 2 Perpetuity A
Stargate 34400 31.49 3 February 22, 2020 A
Terminator 2 -
Judgment Day sp 33433 34.99 3 June 11, 2006 A
Total Recall 34019 27.99 2 October 30, 2005 A
Territory:
A= United States, English-speaking Canada and French-speaking Canada
B= United States and English-speaking Canada
C= United States
EXHIBIT "B"
TITLE EDPNO DLR. SIDES LIVE EXP. TERRITORY
PR.
Basic Instinct 26905 27.99 3 April 12, 2005 A
Basic Instinct ws 26906 27.99 3 April 12, 2005 A
Stargate ws 34399 31.49 3 February 22, 2020 A
Terminator 2 -
Judgment Day sp ws 33434 34.99 3 June 11, 2006 A
Terminator 2 -
Judgment Day sp
collectors edition 33435 83.99 6 June 11, 2006 A
Universal Soldier 33068 24.49 2 April 12, 2005 A
Territory:
A= United States, English-speaking Canada and French-speaking Canada
B= United States and English-speaking Canada
C= United States
SALE AND PURCHASE AGREEMENT
among
1. LIVE Entertainment International Inc. (formerly organized and
existing under the laws of the Country of the Netherlands
Antilles as LEI-IVE Entertainment N.V.), a private company
incorporated and existing under the laws of the State of
Delaware, with registered seat in 1209 Orange Street,
Wilmington, County of New Castle, Delaware, and having its
principal place of business in Van Nuys, California
91406,15400 Sherman Way, Suite 500
duly represented by its Senior Vice President
- hereinafter referred to as "Seller" -
2. Apricot Computer Gesellschaft mbH, a private company with limited
liability, incorporated and existing under the laws of
Germany, with registered seat in Heusenstamm and having its
principal place of business in 63150 Heusenstamm, Berliner
Str. 2-6, registered with the Commercial Register of the
Local Court Offenbach/Main under HRB 5512.
duly represented by its Managing Director
- hereinafter referred to as "Purchaser" -
3. VCL/Carolco Communications B.V., a private company with limited
liability, incorporated and existing under the laws of The
Netherlands, with registered seat in Rotterdam and having
its place of business in 3055 AE Rotterdam, Chabotlaan 165,
registered in the Commercial Register of the Chamber of
Commerce and Industries in Rotterdam under No. 183 242,
duly represented by its Managing Director
- hereinafter referred to as "LIVE B.V." -
4. VCL/Carolco Communications GmbH, a private company with limited
liability, incorporated and existing under the laws of
Germany, with registered seat in Munchen and having its
principal place of business in 81829 Munich,
Martin-Kollar-Str. 1, registered with the Commercial
Register of the Local Court Munich under HRB 71394
duly represented by its Managing Director Gunther Detlef Ruth
- hereinafter referred to as "VCL" -
5. Gunther Detlef Ruth, 2, Rue Honore Labande, Monte Carlo, Monaco
- hereinafter referred to as "Ruth" -
RECITALS
WHEREAS the parties to this Agreement and LIVE Entertainment Inc.
and LIVE Home Video Inc. have executed that certain Heads of
Agreement dated February 15/16, 1995, setting out the general
terms and conditions of, among other things, the sale and
purchase of the shares held by Seller in LIVE B.V. to Purchaser
and WHEREAS pursuant to the general terms and conditions set
forth in said Heads of Agreement, the parties hereto desire to
enter into this Agreement to govern certain of their rights,
duties and obligations with respect to the sale and purchase of
the shares of LIVE B.V. THEREFORE, the parties hereto enter into
the following Agreement:
Section 1
Object of the Sale and Purchase Agreement
The Seller is the sole shareholder of LIVE B.V., a private
company with limited liability, incorporated and existing under
the laws of The Netherlands, with registered seat in Rotterdam
and having its place of business in 3055 AE Rotterdam, Chabotlaan
165, registered in the Commercial Register of the Chamber of
Commerce and Industries in Rotterdam under No. 183 242. LIVE B.V.
has an authorized share capital of 500,000. -- NLG (in words:
Five Hundred Thousand Dutch Guilders. The entire issued share
capital of LIVE B.V. amounts to 100,000.-- NLG (in words: One
Hundred Thousand Dutch Guilders) divided into 1000 shares, each
with a par value of 100.-- NLG (in words: One Hundred Dutch
Guilders) and numbered one to 1000 inclusive. The share capital
of LIVE B.V. is fully paid up.
Section 2
Sale of Shares
(1) The Seller hereby agrees to sell all the issued shares held
by it in LIVE B.V. that are listed in Section 1 above to the
Purchaser, such sale to be effective as of the Closing Date
as defined in Section 4 below, subject to the satisfaction
of the conditions set forth in such Section.
(2) The Purchaser hereby accepts the offer to purchase contained
in Section 2 para (1).
(3) The transfer of the shares shall be effected at the Closing
Date by the signing of a transfer agreement to be signed and
notarized before a Dutch notary public which shall be
governed by the laws of The Netherlands in the form set out in
Exhibit 1
which forms an integral part of this Agreement.
(4) The sale and transfer of the shares shall be subject to the
conditions precedent of (a) the payment of the Purchase Price by
the Purchaser pursuant to Section 3 of this Agreement and (b) the
receipt by Seller of the Initial Purchase Price in the amount of
US $ 4,344,066.-- (in words: US Dollar Four Million Three Hundred
Forty-Four Thousand Sixty-Six) as set out in Section 3 para 2 lit
(a) of the Sale and Assignment of Accounts Receivable Agreement between
Seller, Ruth and LIVE B.V. of even date herewith, and (c) the compliance
by VCL in all respects with all of VCL's obligations arising prior to the
Closing Date, including payment obligations, under those three (3)
certain Deal Memos, each dated February 16, 1995 between LIVE Film and
Mediaworks Inc. ("LFM") and VCL, relating to the motion pictures titled
"Wagons East!", "The Beans of Egypt, Maine" and "Goldy III: The Magic of
the Golden Bear", as each of the same shall have been restated, amended,
replaced or superseded from time to time, including VCL's unconditional
payment to LFM on or before the Closing Date of a portion of the minimum
guarantee due under each of (i) the aforesaid license of "Wagons East!"
in an aggregate amount not less than US $ 466.666,-- (in words: US Dollar
Four Hundred Sixty-Six Thousand Six Hundred Sixty-Six), (ii) the aforesaid
license of "The Beans of Egypt, Maine" in the amount of US $53,333.-- (in
words: US Dollar Fifty-Three Thousand Three Hundred Thirty-Three), (iii)
the aforesaid license of "Goldy III: The Magic of the Golden Bear" in the
amount of US $ 46,666.-- (in words: US Dollar Forty-Six Thousand Six
Hundred Sixty-Six), and (d) the compliance by VCL in all respects with all
of VCL's obligations arising prior to the Closing Date, including payment
obligations under the LIVE International Video Distribution Agreement
dated as of November 1, 1995, effective retroactively to January 1, 1995
between LFM and VCL, and (e) the compliance by VCL, Purchaser and Ruth
in all respects with all of their obligations under that certain Agreement
Related to Stock and Receivables Sale of even date herewith, among VCL,
Purchaser, Ruth, Seller, LIVE B.V., LIVE Entertainment Inc. ("LIVE US")
and LIVE Home Video Inc. ("LHV") (all agreements referred to in lit. (b)
through lit. (e) above being hereinafter referred to as the "Related
Agreements").
(5) The Seller shall be entitled to the profits of the current business year
of LIVE B.V., if any, until the Closing Date and to undistributed
profits, if any, of preceding business years. The Purchaser shall be
entitled to the profits of LIVE B.V., if any, from the Closing Date
until the end of the current business year.
Section 3
Purchase Price
(1) In consideration for the sale and transfer of the shares,
the Purchaser shall pay the sum of US $1 (in words: US
Dollar One), payable on the Closing Date, to Seller ("the
Purchase Price"),:
(2) With respect to the Purchase Price, the Purchaser shall not
have any right of set-off, cross-collateralization or any
right of retention under this Agreement, under the Related
Agreements, or under any other Agreements between Seller and
Purchaser.
Section 4
Closing Date
Subject to the satisfaction of all of the conditions precedent
described in Section 2, para (4) above, the sale and purchase
shall be effective as of November 6, 1995, 12.00 hours, Central
European Time.
Section 5
Representations and Warranties
(1) The Seller represents and warrants that at the Closing Date
(a) LIVE B.V. is a duly incorporated and existing private
company with limited liability under the laws of The
Netherlands;
(b) The share capital of LIVE B.V. is fully paid up;
(c) The Articles of Association of LIVE B.V. which are
attached hereto as
Exhibit 2
are in their presently valid and binding form and no
shareholders' resolutions have been made which would
amend the Articles of Association.
(d) The shares in LIVE B.V. are not pledged, encumbered or
otherwise disposed of and - for the time prior to the
acquisition of the shares in LIVE B.V. by Seller, to
the best of the Seller's knowledge - no third parties
have any rights whatsoever regarding the shares in LIVE
B.V.
(e) The balance sheet of LIVE B.V. as of June 30, 1995,
which is attached hereto as
Exhibit 3,
has been established in accordance with U.S. generally
accepted accounting principles (GAAP) and that no
claims of and liabilities vis-a-vis third parties or
Seller or Seller's subsidiaries or associated companies
exist that are not reflected in such balance sheet.
Seller gives no other representations and warranties
with respect to the balance sheet of LIVE B.V. as of
June 30, 1995. It is specifically understood and agreed
between the parties to this Agreement that Seller in no
event shall be liable for the collectability of the
receivable shown in the balance sheet of LIVE B.V. as
of June 30, 1995, as "Intercompany Receivable - VCL"
and the valuation of LIVE B.V.'s shareholding in VCL
shown in the balance sheet as "Investment in
VCL/Carolco GmbH". Purchaser acknowledges and confirms
that he has positive knowledge of the fact that
pursuant to the Sale and Assignment of Accounts
Receivable Agreement between Seller, Ruth and LIVE B.V.
of even date herewith, the receivable shown in the
balance sheet of LIVE B.V. as of June 30, 1995 as
"Intercompany Payable - LIVE" has been sold and
assigned to Ruth.
(f) Subject to the full execution of the Supplementary Deed
referred to in Section 5 para 1 lit (g) below, LIVE
B.V. holds the following shares in VCL, domiciled in
Munich and registered with the Commercial Register of
the Local Court Munich under HRB 71394:
One share in the nominal amount of DM 102,000.-- (in
words: Deutsch Marks One Hundred Two Thousand);
One share in the nominal amount of DM 60,000.-- (in
words: Deutsch Marks Sixty Thousand);
One share in the nominal amount of DM 50,000.-- (in
words: Deutsch Marks Fifty Thousand);
One share in the nominal amount of DM 30,000.-- (in
words: Deutsch Marks Thirty Thousand); and
One share in the nominal amount of DM 1,000.-- (in
words: Deutsch Marks One Thousand).
(g) As of even date herewith, LIVE Entertainment Inc.,
Purchaser, LIVE B.V., Ruth and Ms. Sibylle Kurz have signed
before a notary public that certain Supplementary Deed, to inter
alia, clarify the shareholding of Seller and Purchaser in VCL.
Purchaser is aware that such Supplementary Deed requires the
consent of VCL International Leisure B.V. to be in full force and
effect. Seller does not give any representation or warranty
whatsoever as to the willingness of VCL International Leisure
B.V. to consent to Supplementary Deed to clarify the shareholding
in VCL as aforesaid.
(h) No lawsuits or administrative proceedings are pending or - to the
best of the Seller's knowledge - threatened in which LIVE B.V. is a
party.
(i) The present directors of LIVE B.V. will be removed without undue
delay after the signing of this Agreement.
(2) The representations and warranties given in para (1) lit (a) - (i) of
this Section 5 are final and conclusive; Seller does not give any further
representations and warranties.
Section 6
Liability of Seller
(1) In the event that any representation and/or warranty given
in Section 5 of this Agreement is wholly or partly incorrect,
if the Purchaser was not aware of such incorrectness upon
conclusion of this Agreement or if Purchaser's ignorance of
such incorrectness was not the result of gross negligence,
and if Purchaser has incurred any losses through the
incorrectness of such representations and warranties, then
Purchaser, by sending a registered letter setting a deadline of
not less than four weeks upon receipt of such registered
letter by Seller, shall be entitled to demand Seller to comply
with its representations and warranties. In the event that
after the expiration of such deadline, Seller has not complied
with its representations or warranties, Purchaser shall be
entitled solely to demand damages in cash pursuant to the
provisions of the German Civil Code ("Burgerliches Gesetzbuch").
(2) The liability of Seller under this Agreement shall be
limited to the amounts received by Seller from Purchaser
pursuant to Section 3 of this Agreement and to the amounts
received by Seller under Section 3 of the Sale and Assignment of
Accounts Receivable Agreement among Seller, Ruth and LIVE B.V.
of even date herewith, provided, however, that in no event
the liability of Seller under this Agreement shall exceed the
Purchase Price actually received under this Agreement and under
the Sale and Assignment of Accounts Receivable Agreement minus
any amount actually paid or to be paid by Seller under
Section 6 of the Sale and Assignment of Accounts Receivable
Agreement, i.e. the liability of Seller under both Agreements
shall be limited to the amount received by Seller from the sales
under both Agreements.
(3) In respect of all matters regulated in paras (1) and (2) of
this Section 6, all other statutory and contractual rights,
claims and remedies, including, but not limited to rescission, reduction
of the purchase price, revocation, damages for default, non-performance,
breach of contract ("Positive Vertragsverletzung"), culpa in
contrahendo, or any other legal ground whatsoever, as well as any claims
arising out of the doctrine clausula rebus sic stantibus shall be excluded
to the extent such exclusion is permitted by mandatory law.
(4) In respect of any mutual obligations arising out of this
Agreement and which are not regulated in paras (1) - (2) of
this Section 6, the respective claimant has a right to claim
specific performance or damages for default, non-performance or
for defective performance in accordance with statutory law,
provided this Agreement does not provide otherwise. However,
any rights to rescind or terminate this Agreement under
statutory law shall be excluded.
Section 7
Conditions
(1) Seller, but not Purchaser, shall have the right to waive any
of the conditions precedent to the Closing Date set forth
in Section 2, para (4) above.
(2) In the event that the Closing Date does not occur because of
the failure of any of the conditions precedent to the
Closing Date set forth in Section 2, para (4) above, and in
the event that such failure occurs as a result of the default by
any of Purchaser, VCL, or Ruth or Apricel: hereunder or under any
of the Related Agreements, then Purchaser shall be deemed to have
defaulted in its obligations hereunder.
(3) In the event that the Closing Date does not occur because of
the failure of any of the conditions precedent to the Closing Date
set forth in Section 2, para (4) above, and in the event that such
failure occurs as a result of the default by any of Seller, LIVE US,
LHV, LFM or LIVE B.V. hereunder or under any of the Related Agreements,
then Seller shall be deemed to have defaulted in its obligation
hereunder.
Section 8
Consultation Rights/
Participation of Seller in In- and Out-of-Court Disputes
(1) 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 hereafter be brought by any third party against
any of the parties hereto. None of the parties hereto shall be obligated
to pay or incur any out-of-pocket costs in connection with their
consultation and cooperation obligations pursuant to this Section
8, para (1). Further, the parties hereto agree to provide
each other with all information and to cooperate in the
transaction of all business and legal acts necessary for the
implementation of this Agreement.
(2) Seller shall at its own cost be entitled to participate in
all disputes between Purchaser and third parties, to the
extent that these disputes pertain to the rights of third
parties in the issued shares listed in Section 1 of this Agreement,
or where the dispute could result in any claim for
damages by Purchaser vis-a-vis Seller.
Section 9
Change of Company Name
(1) Purchaser hereby obligates itself to change the company name
of LIVE B.V. after the Closing Date to remove the term
"Carolco" therefrom as soon as is reasonable practical, but
in any event effective and registered on or before March 31, 1996
and to cause the then managing director of LIVE B.V. to register such
name change with the Commercial Register of the Chamber of Commerce
and Industries.
(2) Purchaser shall exercise its corporate powers to cause LIVE B.V.,
and LIVE B.V. and Ruth hereby obligate themselves, to vote in a
shareholder's meeting to change the company name of VCL to remove
the term "Carolco" therefrom as soon as is reasonable practical, but
in any event effective and registered on or before March 31, 1996 and
to cause the then managing director of VCL to register such name
change with the Commercial Register of the Local Court.
(3) Purchaser, LIVE B.V. and Ruth herewith acknowledge
explicitly that they are jointly and severally obligated
to indemnify Seller and/or the shareholders of Seller, as the
case may be, from and against any losses, including, but not
limited to the payment of damages, resulting from any
violation of the obligations contained in the foregoing paras
(1) and (2) of this Section 9.
Section 10
Statutory Limitation
(1) All rights of Purchaser vis-a-vis Seller arising from breach
of a representation or warranty given in Section 5 of this
Agreement shall be time-barred 1 year after the Closing
Date. All other rights of Purchaser vis-a-vis Seller arising out
of this Agreement shall be time-barred in accordance with the
relevant statutory provisions of the German Civil Code, but
not earlier than one year after the Closing Date.
(2) All rights of Seller vis-a-vis Purchaser arising out of this
Agreement shall be time-barred in accordance with the relevant
statutory provisions of the German Civil Code, but not earlier
than one year after the Closing Date.
(3) The provisions of the German Civil Code shall apply with
respect to the suspension and interruption of the period of
limitation ("Hemmung oder Unterbrechung der Verjahrung").
Section 11
Costs
Each party shall bear its own costs as well as the cost of its
advisors incurred in connection with the signing and execution of
this Agreement, except for the costs of the notarization of the
transfer of the shares in LIVE B.V, which shall be borne by
Purchaser.
Section 12
Notices
Save as provided otherwise herein, all notices, requests, demands
and other communication required or permitted hereunder shall be
in writing (including facsimile transmissions) and delivered to
the following addressees:
(a) If to Seller:
LIVE Entertainment International Inc.
15400 Sherman Way, Suite 500,
Van Nuys, California 91406, USA
Attention: General Counsel
with copy to
Beiten Burkhardt Mittl & Wegener
Attn: Mr. Gerhard Schmidt/Mr. Stephan Grauke
Arndtstr. 28
60325 Frankfurt/Main, Germany
(b) If to Purchaser:
Apricot Computer Gesellschaft mbH
Berliner Str. 2-6,
63150 Heusenstamm, Germany
Attn: Managing Director
(c) VCL/Carolco Communications B.V.,
Chabotlaan 165
3055 AE Rotterdam, The Netherlands
Attn: Managing Director
with copy to
Schutte & Jorna
Parklaan 46
3016 BC Rotterdam, The Netherlands
Attn: Mr. Hans Schutte
(d) VCL/Carolco Communications GmbH
Martin-Kollar-Str. 1
81829 Munich, Germany
Attn: Managing Director
(e) Gunther Detlef Ruth
2, Rue Honore Labande
Monte Carlo, Monaco
with copy to
Heiss & Partner
Attn: Dr. Christoph Keim
Brienner Str. 1
80333 Munchen, Germany
or at such other place or places or to such other person or
persons as such party shall designate by 7 (in words: seven)
days' prior written notice to the other parties hereto.
Section 13
Assignment
This Sale and Purchase 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
assignees, and the provisions hereof that are required and/or
permitted to be performed following the Closing Date shall
specifically survive the Closing Date.
Section 14
Form/Counterparts
(1) Amendments and supplements to this Agreement shall be made
in writing, unless there is a statutory requirement for the
legal form of notarization. This shall also apply to the waiver
of this written form requirement.
(2) This Sale and Purchase Agreement may be executed in two or
more counterparts, all of which taken together shall constitute
an original document.
Section 15
Governing Law Clause/Jurisdiction
(1) This Sale and Purchase Agreement shall be governed by and
construed in accordance with the laws of the Federal
Republic of Germany, except for the transfer of the shares in
LIVE B.V. which shall be governed by and construed in accordance
with the laws of The Netherlands. For the avoidance of doubt, the
parties to this Agreement herewith agree that the question
as to whether the balance sheet of LIVE B.V. as of June 30, 1995
has been established in accordance with U.S. generally
accepted accounting principles (GAAP) shall be governed by and
construed in accordance with California law.
(2) To the extent permitted by mandatory law, exclusive place of
jurisdiction for all disputes arising out of or in connection
with this Agreement shall be Munich.
Section 16
Severability Clause
Should any provision of this Agreement or an application thereof
be or become invalid, illegal or unenforceable, in whole or in
part, or if there is an omission in this Agreement, then the
validity of the remaining provisions shall not in any way be
affected or impaired thereby. The invalid, illegal or
unenforceable provision or the omission shall be replaced by such
valid and enforceable provision that comes - to the extent legally
permissible - as close as possible to what the parties would have
intended if they had considered the matter.
IN WITNESS WHEREOF, the parties hereto have executed this Sale
and Purchase Agreement as of the dates set forth opposite their
respective signatures.
Munich, November 6, 1995 Munich, November 6, 1995
LIVE Entertainment Apricot Computer GmbH
International Inc.
By: ______________________ By: _____________________
Steven E. Mangel Managing Director
Senior Vice President
Rotterdam, November 6, 1995 Munich, November 6, 1995
VCL/Carolco Communications B.V. VCL/Carolco Communications
GmbH
By: _____________________ By:______________________
Arie Mout Gunther D. Ruth
Managing Director Managing Director
Munich, November 6, 1995
Gunther Detlef Ruth
_________________________
<PAGE>
TRANSFER OF SHARES WvE/KB
Draft
This _ day of _ nineteen hundred and ninety-five, appeared
before me, "Meester" Theodorus Sijbrand Othmar Maria van Eijck,
civil law notary, practising at Rotterdam:
Mr. _ , according to his statement hereby acting as proxy,
authorized in writing of :
1. LIVE Entertainment International Inc., a company organized
and existing under the laws of the state of Delaware (United
States of America), with registered office in Wilmington,
County of New Castle, Delaware (United States of America),
having its principal place of business in Van Nuys, California
91406 (United States of America), 15400 Sherman Way, Suite
500, and as such hereby representing this company; hereinafter
also to be referred to as: "the Transferor";
2. Apricot Computer Gesellschaft mbH, a company organized and
existing under the laws of Germany, with registered office
in Heusenstamm (Germany), having its principal place of
business in 63150 Heusenstamm (Germany), Berliner Strasse 2-
6, and as such hereby representing this company; hereinafter
also to be referred to as: "the Transferee";
3. VCL/Carolco Communications B.V., a private company with
limited liability, organized and existing under the laws of the
Netherlands, with registered office in Rotterdam (The
Netherlands), having its place of business in 3055 AE Rotterdam
(The Netherlands), Chabotlaan 165, and as such hereby
representing this company; hereinafter also to be referred to
as: "the Company".
The person appearing as aforesaid made the following statements:
I PURCHASE, SALE AND TRANSFER
The Transferor has sold and hereby transfers to the
Transferee, and the Transferee has bought and hereby accepts
from the Transferor: one thousand (1,000) shares, numbers 1 up
to and including 1,000, of a nominal value of ONE HUNDRED DUTCH
GUILDERS (NLG 100.--) each -hereinafter jointly to be referred to
as: "the Shares"- in the capital of the Company. The
Shares are fully paid up and constitute the entire issued share
capital of the Company.
The aforesaid agreement of sale and purchase has been laid
down in a private instrument, dated _ nineteen hundred and
ninety-five. Any and all provisions therein which may still
have effect shall remain in force.
II PURCHASE PRICE
The Shares have been purchased for the aggregate price of
ONE UNITED STATES DOLLAR (US$. 1.--), which purchase price has
been received by the Transferor and for which payment
acquittance is hereby given and accepted.
III ACQUISITION BY TRANSFEROR
The Shares were acquired by the Transferor (formerly a
limited company organised and existing under the laws of the
Netherlands Antilles, named: LEI-IVE Entertainment N.V.) on
the twenty-fifth day of April nineteen hundred and ninety, by
means of a private instrument of which a photostatic copy has
been attached to the original of this deed. As appears from
the last mentioned private instrument, the Company
acknowledged that transfer on the same date.
IV COSTS
All notarial costs incidental to this transfer of the Shares
shall be for the account of the Transferee.
V WAIVER
The Transferor and the Transferee hereby waive the right to
seek and/or obtain rescission or avoidance of this transfer of
shares.
VI RESTRICTIONS ON SHARE TRANSFERS
The restrictions on share transfers contained in the
articles of association of the Company are of no effect since
the Transferor is the sole shareholder of the Company and the
aforesaid restrictions do not contain a prior approval requirement.
ACKNOWLEDGEMENT
Thereupon, the appearer, acting herein in his capacity of proxy
of the Company, stated that the Company hereby acknowledges this
transfer of shares in its capital as recorded in this deed and
that the Company shall ensure that the transfer of the Shares and
the acknowledgment of this transfer shall forthwith be entered in
the register of shareholders.
POWERS OF ATTORNEY
I, civil-law notary, have been shown sufficient evidence to prove
the existence of the aforesaid powers of attorney. Said powers
of attorney have been issued in writing and will be appended to
the original of this deed.
The appearer is known to me, civil-law notary. Whereof this deed
has been passed in original at Rotterdam on the date figuring in
the beginning of this deed.
After the substance of this deed had been made known to the
appearer, the latter has declared to have taken notice of the
contents of this deed and not to wish the deed to be read out in
full.
Thereupon this deed, after having been read out partly, was
signed by the appearer and by me, the notary.<PAGE>
I, Andrew Michael MELLOR, a sworn English translator, of 133 De
Lairessestraat, 1075 HJ Amsterdam The Netherlands, CERTIFY that
the document in English attached hereto is a full, true and
faithful translation of the continuous text of the Articles of
Association of VCL/Carolco Communications B.V., a copy of the
Dutch original of which is attached to the translation.
WITNESS my hand and seal, this 21st day of November 1991.
A.M. Mellon
216.23.7006/rjfb
Full and continuous text of the Articles of Association of
VCL/Carolco Communications B.V., whose registered office is in
Amterdam,
as altered by instrument of 17 January 1991 executed before
R.J.F. Blokhuis, LL.M., Civil Law Notary in the city of
Amsterdam.
no. B.V. 84.967
Name and registered office
Article 1
The name of the Company is:
VCL/Carolco Communications B.V.
It has its registered office in Rotterdam.
Objects
1. The objects for which the Company has been established are:
a. to participate in, cooperate with, acquire, to hold and
dispose of, and to conduct the management of or otherwise take
an interest in and to finance companies and enterprises, to act
as holding company, to grant and contract loans, to perform all
types of financial transactions, and to grant securities for debts
of other companies and enterprises, irrespective of whether or not
they are affiliated with the Company in a group;
b. to purchase and sell, hold, manage and commercially exploit, to
acquire and grant licenses and sub-licenses relating to films,
video films and video-cassettes and other picture and sound carriers
and the attendant rights, and to rent and lease films, video-films
and video-cassettes and other picture and sound carriers
and programmes for showings in cinemas and on video
screens, both indoors and outdoors, broadcasting on
television or commercial exploitation through other
means of communication.
2. The objects described in the preceding paragraph shall include any other
activity or business which may in the widest sense pertain or relate
to or serve to further any of these objects.
3. In pursuing its objects, the Company shall also take into account the
interests of the group of companies and enterprises with which it is
affiliated.
Duration
Article 3
The Company has been established for an indefinite period of time.
Capital
Article 4
The authorized capital of the Company is five hundred thousand
Dutch Guilders (NLG 500,000), divided into five thousand (5,000)
shares of one hundred Dutch Guilders (NLG 100) each, one thousand
shares of which have been issued.
Shares; Register of Shareholders
Article 5
1. The shares shall be registered shares and shall be numbered
consecutively from 1 upwards.
2. No share certificates shall be issued.
3. The Board of Directors shall keep a register of shareholders
as referred to in Section 194 of Book 2 of the Netherlands Civil Code.
Issue of shares
Article 6
1. Shares held by the Company in its own capital shall be issued and
transferred by resolution of the General Meeting of Shareholders,
which shall also determine the conditions.
2. The preceding paragraph shall mutatis mutandis apply to the
granting of rights to take shares, but shall not apply to the issue of
shares to persons exercising a previously acquired right to take shares.
3. Upon the taking of shares the nominal amount must be paid in respect
thereof. It may be stipulated that part, three-quarters maximum, of the
nominal amount does not need be paid until the Company so demands; the
resolution thereto shall be taken by the General Meeting of Shareholders.
4. The General Meeting of Shareholders may determine that payment on shares
may be made in kind.
Pre-emptive right
Article 7
Upon the issue of shares and upon the transfer of shares held by
the Company in its own capital, the shareholders shall have a
pre-emptive right pro rata to the number of shares held by each
shareholder. The shareholders shall not have a pre-emptive right
in those cases in which they are denied this right by provisions
of peremptory law.
Acquisition and withdrawal of shares
Article 8
1. The acquisition by the Company of partly-paid shares in its own capital
is null and void.
2. The Company may acquire fully paid shares in its own capital, but either
for no consideration or if:
a. its shareholders' equity, reduced by the acquisition price, is not
less than the paid-up share capital together with the amount of
such reserves as it is required to maintain by law or by these
Articles of Association; and
b. the nominal value of the shares to be acquired and the shares in its
capital already held by the Company and its subsidiaries does not
exceed one half of the issued capital of the Company.
The validity of an acquisition shall be decided on the basis
of the shareholders' equity of the Company as shown in its most recently
adopted balance sheet, less the aggregate of the acquisition price
of shares in the capital of the Company and distributions of
profits or reserves to third parties which became due by the
Company and its subsidiaries after the balance sheet date.
In the event that more than six months of a financial year
have passed without the annual accounts having been
adopted, the Company shall not be allowed to acquire its own
shares in accordance with this Article. In this Article the
term shares shall also include receipts thereof.
3. The preceding paragraphs of this Article 8 shall not apply
to shares which the Company shall acquire by universal
succession of title.
4. Loans with a view to the taking or acquiring of shares in
its capital may be granted by the Company up to the amount
of its distributable reserves.
5. The General Meeting of Shareholders may decide to reduce the
issued capital by withdrawing shares or by reducing the
amount of shares by alteration of the Articles of
Association. This resolution should designate the shares to
which the resolution relates and it should regulate the
implementation of the shares. The sum of the paid and
called-up part of the capital may not be less than the
minimum capital prescribed at the time of the resolution.
Undivided rights to a share
Article 9
If several persons have undivided rights to a share, such persons
may only exercise those rights by having themselves represented
vis-a-vis the Company by one person.
Delivery of title to shares
Article 10
Delivery of title to shares shall require a deed of transfer
which must either be served on the Company, or acknowledged by
the Company in writing on the submission of such deed to the
Company. The transfer of partly-paid shares may only be
acknowledged if there is a deed of transfer with an officially
recorded or otherwise fixed date.
Transfer of shares
Article 11
1. A shareholder who wishes to transfer shares shall offer
these for sale to the other shareholders, all of whom have a
pre-emptive right.
2. If more shares are applied for than the number of shares
offered the Board of Directors shall allot the shares in
proportion to the existing shareholding of each prospective
purchaser, to the extent possible.
3. The transferor and the shareholder(s) to whom shares were
allotted shall consult about the price to be paid for all
shares offered. If within six weeks this consultation has
not resulted in full agreement on all shares, the price for
all those shares shall be determined by three experts, one of
which shall be a chartered accountant or another expert as
referred to in Section 393 of Book 2 of the Netherlands
Civil Code or accountant-consultant, to be appointed, at the
request of the initiating party, by the County Court in
whose district the Company has its registered office, save
for the appointment of one or more experts by the parties by
mutual agreement.
4. The transferor shall at all times have the right to withdraw
his offer, provided he shall do so no later than one month
after he has been notified of the prospective purchasers to
whom he can sell all shares to which the offer relates and
at which price.
5. As soon as it has been established that not all shares
offered will be purchased against payment in cash by the
person(s) to whom these shares were offered under the
provisions of this Article 11, the transferor shall be free
to dispose of the shares to one or more third parties,
provided that it concerns all shares and that they are
transferred within three months after this has been
established and provided that the transferor has not
withdrawn his offer prior thereto.
6. If:
a. a shareholder dies;
b. a shareholder is wound up or is declared bankrupt or is
granted a moratorium of payments, is placed under
compulsory guardianship or in any other way loses the
free control of his property;
c. the community of property into which a shareholder was
married and which includes his shares is dissolved and
the shares are not within twenty-four months thereafter
allotted and delivered to the original shareholder;
d. upon the division of any other community of property
which includes the shares, the shares are allotted to
another person than in whose name the shares were
wholly or partially registered;
e. a legal person, general partnership, limited
partnership or any other company which owns one or
several shares is wound up, ceases to exist or is
dissolved by court order;
the shares must be offered for sale to the other shareholders.
The provisions of the preceding paragraphs of this Article
shall mutatis mutandis apply to the extent possible,
however, it being understood that the transferor shall never
have the right to withdraw his offer and that, if the event
occurs mentioned in the preceding paragraph, the transferor
shall only be free to transfer the shares offered as
determined in that paragraph, if upon offering the shares he
stated that he did not wish to retain the shares; failing
such statement the transferor shall only have the right to
retain the shares.
7. If a shareholder who is obliged to offer shares for sale
fails to comply with any obligation under this Article,
despite being demanded thereto by the Company, including
that to transfer shares, the Company shall be irrevocably
authorized to fulfill these obligation(s) for and on behalf
of the person concerned. From the moment that and as long
as a shareholder is in default, the right to vote and the
right to attend meetings attached to his shares may not be
exercised and the attached right to dividend shall be
suspended; if the Company uses the authorization granted to
it, the shareholder can again exercise the said rights.
8. The preceding paragraphs of this Article shall apply to all
cases of transfer and devolution of shares, except the
devolution of shares as a result of the joining of estates
by virtue of the law of matrimonial property.
Management
Article 12
1. The Company is managed by a Board of Directors consisting of
one or several Directors.
2. The Directors shall be appointed by the General Meeting of
Shareholders.
3. Directors may be suspended or removed from office by that
Meeting at any time.
Resolutions concerning the suspension or removal from office
of Directors shall be passed by the General Meeting of
Shareholders by a majority of at least two-thirds of the
votes cast, representing more that one half of the issued
capital.
Article 13
1. Each Director shall be authorised to represent the Company.
However, in the event that a Director has a conflict of
interest with the Company, a person to be designated by the
General Meeting shall be authorized to represent the
Company.
2. In the event that one or more Directors shall cease to hold
office from any cause or be unable to act, the remaining
Directors or Director shall be temporarily entrusted with
the entire management. In the event that all Directors or
the only Director shall cease to hold office from any cause
or be unable to act, the management shall temporarily be
entrusted to the person designated for an indefinite period
of time for that purpose by the General Meeting of
Shareholders.
3. The General Meeting of Shareholders has the power to
determine that certain executive decisions shall require its
prior approval. The executive decisions concerned shall be
carefully described in the resolution by the General Meeting
of Shareholders.
4. The General Meeting of Shareholders shall decide on the
performance of legal acts as referred to in Section 204,
subsection 2 of Book 2 of the Netherlands Civil Code.
General Meeting of Shareholders
1. The General Meetings of Shareholders shall be held in the
municipality where the Company has its registered office.
2. Each year at least one Annual General Meeting of
Shareholders shall be held within six months after the end
of the financial year.
Article 15
1. Each share carries the right to cast one vote.
2. Votes on business matters shall be taken by voice, but votes
concerning persons shall be taken by secret ballot,
unless the Chairman adopts another manner of voting and none of
the persons present at the Meeting objects thereto.
3. Unless depositary receipts for shares have been issued with
the cooperation of the Company or unless there are persons
who have the same rights as the law confers upon holders of
such receipts, resolutions may also be passed outside
Meetings. A resolution passed outside a Meeting may be
passed only by unanimous vote of all shareholders. The
votes may only be cast in writing - by telegram or telex
included.
Financial year, annual accounts and distribution of profit
Article 16
1. The financial year of the Company shall coincide with the
calendar year.
2. Each year within five months after the end of the financial
year, save where this period is extended by a maximum of six
months by the General Meeting of Shareholders on account of
special circumstances, the Board of Directors shall draw up
annual accounts, and shall submit these to the General
Meeting of Shareholders. Unless Section 403 of Book 2 of
the Netherlands Civil Code applies to the Company, the Board
of Directors shall also draw up the annual report within
this period.
3. The annual accounts shall be adopted by the General Meeting
of Shareholders. The adoption by the General Meeting
without reservation shall constitute a discharge from
liability of the Directors, without prejudice to the
provisions of Section 248 of Book 2 of the Netherlands Civil
Code.
4. The profit shall be at the disposal of the General Meeting
of Shareholders.
5. The Company may make distributions to its shareholders only
if and to the extent that the Company's equity capital
exceeds its paid and called-up capital increased by the
amount of the reserves which it is required to maintain by
law or by these Articles of Association.
6. Profit may be distributed only after adoption of the annual
accounts evidencing that such distribution is allowed.
7. The Company may decide to pay an interim dividend, provided
always that paragraph 5 of this Article 16 is complied with.
Resolutions to pay an interim-dividend shall be passed by
the Board of Directors.
Alteration of Articles of Association; Winding-up and Liquidation
1. Motions to alter these Articles of Association or to wind up
the Company must be passed by a majority of at least two-thirds of
the votes cast, representing more than one half of the issued capital.
2. If the Company is wound up its liquidation shall be carried
out by the Board of Directors, unless determined otherwise
by the General Meeting of Shareholders pro rata to the
amount paid up on each one's shares.
(signed by R.J.F. Blokhuis)
Amsterdam, February 1991
<PAGE>
Exhibit 3
13-Jul-95
VCL/CAROLCO COMMUNICATIONS B.V.
AMOUNTS DENOMINATED IN NETHERLAND GUILDER'S
ASSETS BALANCE AT BALANCE AT
DECEMBER 31,1994 1995 ACTIVITY JUNE 30, 1995
CASH 97,295 (97,295) 0
INVESTMENT IN VCL/CAROLCO Gmbh (13,595,979) 8,527,788 (5,068,191)
INTERCOMPANY RECEIVABLE - VCL 31,424,480 131,361 31,555,841
TOTAL ASSETS 17,925,796 8,561,854 26,487,650
LIABLITIES AND EQUITY
INTERCOMPANY PAYABLE - LIVE 35,294,598 246,002 35,540,600
COMMON STOCK 100,000 100,000
RETAINED EARNINGS (17,468,802) 8,315,851 (9,152,951)
TOTAL EQUITY (17,368,802) 8,315,851 (9,052,951)
TOTAL LIABLITIES AND EQUITY 17,925,796 8,561,853 26,487,649
0 (0) (0)
INVESTMENT INCOME/(LOSS) - VCL 8,527,788
INTEREST INCOME
MANAGEMENT FEES
MISC./OTHER 211,937
INCOME/(LOSS) 8,315,851
us dollars
ASSETS BALANCE AT BALANCE AT
DECEMBER 31, 1994 1995 ACTIVITY JUNE, 30 1995
CASH 58,183 ($58,183) $0
INVESTMENT IN VCL/CAROLCO Gmbh (7,124,436) 5,501,799 (1,622,637)
INTERCOMPANY RECEIVABLE - VCL 17,798,247 84,749 17,882,996
TOTAL ASSETS $10,731,994 $5,528,365 $16,260,359
LIABLITIES AND EQUITY
INTERCOMPANY PAYABLE - LIVE $20,089,068 163,237 $20,252,305
COMMON STOCK 59,200 59,200
RETAINED EARNINGS (9,416,274) 5,365,128 (4,051,146)
TOTAL EQUITY (9,357,074) 5,365,128 (3,991,946)
TOTAL LIABLITIES AND EQUITY $10,731,994 $5,528,365 $16,260,359
0 (0) (0)
INVESTMENT INCOME/(LOSS) - VCL $5,501,799
INTEREST INCOME
MANAGEMENT FEES
MISC./OTHER 136,671
INCOME/(LOSS) $5,365,128
NOTES
The income statement includes VCL/CAROLCO Communication GmbH
activity for the seven months ended JUNE 30, 1995.
The receivable balance from VCL GmbH represents the JUNE 30, 1995
balance.
Supplement to the Sale and Purchase Agreement
among
1. LIVE Entertainment International Inc. (formerly organized and
existing under the laws of the Country of the Netherlands Antilles
as LEI-IVE Entertainment N.V.), a private company incorporated and
existing under the laws of the State of Delaware, with registered
seat in 1209 Orange Street, Wilmington, County of New Castle,
Delaware, and having its principal place of business in Van Nuys,
California 91406,15400 Sherman Way, Suite 500
duly represented by its Senior Vice President
- hereinafter referred to as "Seller" -
2. Apricot Computer Gesellschaft mbH, a private company with limited
liability, incorporated and existing under the laws of Germany, with
registered seat in Heusenstamm and having its principal place of
business in 63150 Heusenstamm, Berliner Str. 2-6, registered with the
Commercial Register of the Local Court Offenbach/Main under HRB
5512.
duly represented by its Managing Director
- hereinafter referred to as "Purchaser" -
Recitals
WHEREAS the parties to this Supplement and VCL/Carolco
Communications B.V, VCL/Carolco Communications GmbH and Gunther
Detlef Ruth have signed on even date herewith a Sale and Purchase
Agreement concerning the shares in LIVE B.V., Seller and Purchaser
wish to supplement such Agreement as follows:
Seller and Purchaser herewith agree that Seller shall not be liable
for any tax liabilities of LIVE B.V., as referred to under item 6.
caption "Tax liabilities" of the letter of the attorneys Schutte &
Jorna dated November 3, 1995, and addressed to Dr. Christoph Keim,
arising for the period June 30,1995 through the Closing Date up to
an amount of US$ 25,000.- (in words: US Dollar Twenty-five
Thousand). Any relating settlement with the tax authorities
exceeding the amount of US$25,000.-- (in words: US Dollar
Twenty-Five Thousand) requires the prior written approval of Seller.
This Supplement shall form an integral part of the Sale and Purchase
Agreement of even date herewith.
Munich, November 6, 1995 Munich, November 6, 1995
LIVE Entertainment Apricot Computer GmbH
International Inc.
By: By:
---------------------- ---------------------
Steven E. Mangel Managing Director
Senior Vice President
OUTPUT DEAL MEMO
This Output Deal Memo is made as of February 8, 1996, between
LIVE International of 15400 Sherman Way, Van Nuys, California
91410 U.S.A, Telephone: 1-818-778-3203, Fax: 1-818-778-3188 or
its designated offshore company or other designee ("Licensor"),
and Pioneer LDC, Inc. ("Distributor") of 20-6, Ebisuminami
l-Chome, Shibuya-ku, Tokyo 150 Japan, Telephone: 81-3-5721-6991,
Fax: 81-3-5721-9881.
A. Pictures
All feature-length motion pictures which Licensor or its
Affiliate shall cause to be released theatrically in the
U.S.A. and for which Licensor or its affiliate owns or
controls the Rights in the Territory during the License
Period.
1. Where Licensor or any Affiliate (any company 25% or
more controlled by either LIVE Entertainment or a 50%
or more subsidiary of LIVE Entertainment) owns or
controls the Rights in the Territory.
2. Produced, co-produced, financed, co-financed, or
acquired before or during the Output Term.
3. Provided that principal photography commences prior to
the end of the Output Term.
4. Not to include Pictures licensed in the Territory prior
to the effective date of the Agreement, including
Pictures licensed to Distributor or its affiliates.
5. In addition, Licensor shall have the right, but not the
obligation, to include Pictures having a Final
Production Budget of less than S3 million, provided
that Distributor will not be required to accept more
than three (3) such Pictures during each year of the
Output Term. The process of selecting the three (3)
Pictures will be subject to good faith mutual
agreement.
Licensor will use good faith efforts to acquire the Rights
in the Territory, where they are available.
B. Output Term
The Output Term shall commence on the date of the execution
of the Output Deal Memo and end on December 31, 1998.
C. Territory
The Territory shall mean Japan, and its presently existing
territories and possessions.
D. Authorized Language
Dubbed and Subtitled in Japanese.
E. License Period
The License Period for each Licensed Right for each Picture
subject to the Agreement starts on the date of the execution
of the long form Agreement and ends ten (10) years after
Licensor's Delivery to Distributor. If Distributor has not
recouped the Guarantee of a particular Picture in full on or
before the end of the License Period with respect to such
Picture, then the License Period of such Picture shall
automatically, and without any further notice required, be
extended for an additional period of two (2) years ("License
Period Extension") starting immediately following the
expiration of the original ten (10) year License Period.
F. Rights
Licensors shall grant to Distributor the following Rights in
and to each Picture:
1. Cinematic Rights: Theatrical, NonTheatrical, Public Video
2. Ancillary Rights: Hotel
3. Video Rights Home Video Rental, Home Video
SellThru, Commercial Video in Cassette, Disc,
and Cornpact Disc formats
4. Pay TV Rights: Terrestrial Pay TV, Cable Pay TV,
Satellite Pay TV
5. Free TV Rights: Terrestrial Free TV, Cable Free TV,
Satellite Free TV
G. Guarantee
The "Applicable Percentage" calculated on the lessor of
either (i) the actual negative cost of each Picture, or (ii) the
Final Production Budget of each Picture, plus an amount not to
exceed ten percent (10%) thereof if and to the extent of any
enhancements to the Final Production Budget. The "Applicable
Percentage" shall be ten percent (10%).
The "Final Production Budget" means the sum of all items of
Negative Cost included in the final production budget
approved by Licensor or its Affiliate and The "Negative Cost"
means the sum aggregate of all costs, charges and expenses
accepted by Licensor or its Affiliate as part of the costs of
production of the Picture including each of the following:
1. All direct costs of production (preparation,
development, pre-production, principal
photography, post-production, completion and delivery)
of the Picture, including all budget
items customarily categorized as "above-the-line" and
"below-the-line," costs, including the
acquisition of literary, dramatic and/or musical
material;
2. Included in item 1. above will also be charges
established pursuant to Licensor or its
Affiliate's then-current price schedule for materials,
equipment, facilities, personnel or services
of Licensor or its Affiliate furnished in connection
with the Picture;
3. Costs of completion, daily takes, all risks to the
negative and other insurance including errors
and omissions, production package insurance and
completion guarantee (including the
premium which would have been paid therefore if and to
the extent Licensor or its Affiliate
elects to self-insure any items of risk in connection
with the Picture};
4. All deferments, bonuses, "puts" and participations
(howsoever defined) measured by or due
upon the attainment of Gross Receipts realized prior to
"Break-even" shall be included when
fixed;
5. All financing charges payable to a bank, financial
institution or other lender providing
production financing, including points, interest, legal
fees and costs (including the cost which
would have been paid therefore if and to the extent
Licensor or its Affiliate elects to self-
finance the production of the Picture);
6. Legal, accounting and production auditing costs in
connection with the Picture;
7. The costs of making all Delivery Materials and their
Delivery to Licensor or its Affiliate in the
manner specified in the underlying rights agreement
between Licensor or its Affiliate and the
producer or licensor of the Picture;
8. A contingency of ten percent {10%) of direct costs but
such amount shall be included in the
actual negative cost of the Picture only if and to the
extent expended in connection with the
production of the Picture,
9. An overhead charge of seven and five-tenths percent
(7.5%) of direct costs accruing as and
when each item of direct negative costs is charged.
The Guarantee is a minimum net amount from which there may
be no offsets or deductions of any sort,
except for any applicable withholding taxes required by Law;
provided, if there should be any such deductions therefrom
Distributor shall promptly furnish to Licensor or its Affiliate
all relevant documents evidencing Distributor's payment of such
taxes and as necessary for Licensor or its Affiliate to claim the
proper deduction therefor from its U.S. income taxes.
H. Payment Terms of the Guarantee (all by wire transfer)
Distributor will pay the Guarantee of each Picture due to
Licensor as follows:
1. 20% on Licensor's written Notification to Distributor
of the Start of Principal Photography of each Picture.
2. 80% on Licensor's Delivery to Distributor of each Picture.
I. Cross-Collateralization
There will be no cross-collaterization amongst Pictures. The
Recoupable Distribution Costs and Gross Receipts applicable
to any particular Picture will be cross-collateralized only as
permitted under Section J.
J. Disposition of Gross Receipts
1. Cinematic and Ancillary Costs-Off Deal
Distributor will make continuing payments and
recoupments in the following order of priority
from the Gross Receipts for all Cinematic Licensed
Rights and all Ancillary Licensed Rights
of each Picture.
a. Recoupment of Recoupable Distribution Costs
100% of Cinematic and Ancillary Gross Receipts to
Distributor to recoup Recoupable Cinematic and Ancillary
Distribution Costs, including fees paid by
Distributor to Non-Affiliated Theatrical
Subdistributors, not to exceed 20% thereof.
(First, Distributor may use all of Cinematic and
Ancillary Gross Receipts to recoup
the Recoupable Cinematic and Ancillary
Distribution Costs which for purposes of
this paragraph and all it subclauses shall be
deemed to include all fees paid by
Distributor to Non-Affiliated Theatrical
Subdistributors, not to exceed 20%.)
b. Recoupment of the Guarantee
100% of the remaining Cinematic and Ancillary
Gross Receipts to Distributor to
recoup the Guarantee. (Next, Distributor may use all of
the remaining Cinematic and Ancillary Gross
Receipts to recoup the Guarantee.)
c. Sharing After Recoupment of the Guarantee
60% of remaining Cinematic and Ancillary Gross
Receipts to Licensor. 40% of remaining Cinematic and
Ancillary Gross Receipts to Distributor.
(Next, Distributor will pay to Licensor, and may
retain for itself, the indicated
percentages of its Cinematic and Ancillary Gross
Receipts left after recoupment of the Guarantee.)
d. If and to the extent the Recoupable Cinematic and
Ancillary Distribution Costs and/or the Guarantee are not
recouped as indicated above, then the amount of the
deficit shall be referred to hereinbelow as the
"Shortfall" which shall be recoupable
from Licensor's share of the Home Video Gross
Receipts, Commercial Video Gross Receipts, Pay TV Gross
Receipts and/or Free TV Gross Receipts in the manner
provided below. No interest shall accrue on the Shortfall.
2. Video Royalty Deal
Distributor will make the following continuing payments and
recoupments in the following order of priority from the Gross Receipts
derived for the Video Licensed Rights designated below.
a. Licensor's Royalty
30% of Home Video Rental Gross Receipts and Commercial
Video Gross Receipts to Licensor until Distributor has achieved net
rental sales of 35,000 units. Thereafter, 35% of Home Video Rental
Gross Receipts and Commercial Video Gross Receipts to Licensor.
20% of Home Video SellThru Gross Receipts to Licensor.
(Distributor will pay to Licensor as a royalty the indicated
percentage of 100% of the Gross Receipts from exploitation
of the indicated Video Licensed Right. All remaining Gross Receipts
for such Video Licensed Right will be for the account of
Distributor, subject to the provisions below. All Video Distribution
Costs will be recouped by Distributor solely from Distributor's share
of Video Gross Receipts.)
b. Recoupment of Shortfall (if any)
100% of Shortfall recouped by Distributor;
(First Distributor may recoup from Licensor's royalties the
Shortfall, if any.)
c. Licensor's Royalty After Recoupment of the Shortfall (if any)
30% of Home Video Rental Gross Receipts and Commercial Video Gross
Receipts to Licensor until Distributor has achieved net rental sales
of 35,000 units. Thereafter, 35% of Home Video Rental Gross Receipts
and Commercial Video Gross Receipts to Licensor. 20% of remaining
Home Video SellThru Gross Receipts to Licensor. (Next Distributor
will pay the aforesaid royalties to Licensor after recoupment of the
Shortfall, if any.)
d. Additional Video Deal Terms
Distributor and Licensor agree to negotiate and mutually agree upon
the minimum and maximum pricing terms for Video Rental and Sell-Thru
prior to the Video Release(s). Distributor and Licensor agree to a
Free Goods Limit of not more than three percent (3%) for Rental Units
and three percent (3%) for SellThru Units. Distabutor and Licensor
agree to a six (6) month Sell-Off Period.
3. Pay TV & Free TV Deal
Distributor will make continuing payments and recoupments in
the following order of priority from the Gross Receipts for all Pay TV
Licensed Rights and all Free TV Licensed Rights.
a. Sharing Until Recoupment of the Shortfall (if any)
75% of remaining Pay TV and Free TV Gross Receipts to Licensor until
100% of applicable Shortfall, if any, is recouped.
25% of remaining Pay TV and Free TV Gross Receipts to Distributor
until 100% of applicable Shortfall, if any, is recouped.
(First Distributor will credit to Licensor, and retain for itself,
the indicated percentage of the Pay TV and Free TV Gross Receipts
until the Shortfall, if any, is recouped. The Shortfall will be
recouped from payments otherwise due Licensor for the Pay TV
and Free TV Licensed Rights.)
b. Sharing After Recoupment of the Shortfall (if any)
75% of remaining Pay TV and Free TV Gross Receipts to Licensor.
25% of remaining Pay TV and Free TV Gross Receipts to Distributor.
(Next Distributor will pay to Licensor, and may retain for itself,
the indicated percentages of its Pay TV and Free TV Gross Receipts
left after recoupment of the Shortfall, if any.)
K Delivery
The following items will be available for delivery per Paragraph 11 of
the Standard Terms.
1. Feature Internegative - 35 mm
2. Feature Optical Sound - 35 mm
3. Feature M&E Track - 35 mm
4. Feature Textless Titles - 35 mm
5. Trailer Internegative - 35 mm
6. Trailer Optical Sound - 35 mm
7. Trailer M&E Track - 35 mm
8. Trailer Textless Titles - 35 mm
9. D-2 NTSC Tape Master
10. Black & White Still Photo Negative of the International Billing Block
L. Gross Receipts (as excerpted from the "Wagons East" Agreement)
1. Gross Receipts: Gross Receipts shall be calculated on a cash
basis as received by Distributor.
2. Gross Receipts - Defined: Gross Receipts means the sum on a
continuous basis of the following amounts derived with respect to
each and every Licensed Right:
a. All monies or other consideration of any kind (including all
amounts from advances, guarantees, security deposits, awards,
subsidies, and other allowances) received by, used by or
credited to Distributor or any Distributor Affiliates or any
approved subdistributors or agents from the license, sale,
lease, rental, lending, barter, distribution, diffusion,
exhibition, performance, exercise or other exploitation of each
Licensed Right in the Picture, all without any deductions; and
b. All monies or other consideration of any kind received by, used
by or credited to Distributor or any Distributor Affiliates or
any approved subdistributors or agents as recoveries for the
infringement of any Licensed Right in the Picture; and
c. All monies or other consideration of any kind received by, used
by or credited to Distributor or any Distributor Affiliates or
any approved subdistributors or agents from any authorized
dealing in trailers, posters, copies, stills, excerpts,
advertising accessories or other materials used in connection
with the exploitation of any Licensed Right in the Picture or
contained on Videograms embodying the Picture.
3. Gross Receipts Calculated at Source: No Distributor Affiliates or
any subdistributors or agents may deduct any fee from Gross Receipts
in calculating all amounts due Licensor. For the purpose of
determining Licensor's share of Gross Receipts, all Gross Receipts
must be calculated at "source". This means that Gross Receipts
derived from the exploitation of any the following Licensed Rights
must be calculated at the following levels: (i) for any Theatrical
Licensed Right, at the level at which payments are remitted by
theaters; (ii) for any NonTheatrical or Ancillary Licensed Right, at
the level at which payments are remitted by hotels or other entities
that exhibit or make the Picture available directly to their patrons
or customers, (iii) for any Home Video Licensed Right, at Wholesale
Level or Direct Consumer Level as applicable calculated on 100% of
gross sales net of actual returns and rebates; (iv) for any
Commercial Video or Public Video Licensed Right at the level at
which payments are remitted by local exhibitors of the Picture;
and (vi) for any Television Licensed Right, at the level at which
payments are remitted by terrestrial stations, cable systems,
satellite telecasters or telephone systems that broadcast,
cablecast or transmit the Picture.
4 Wholesale Level: The Wholesale Level means the level of Videogram
distribution from which Videograms are shipped directly to retailers
for ultimate sale or rental to the paying public. The Wholesale
Level may include intermediate distribution levels between the
manufacturer and the retailer, such as rack jobbers and the like,
if such distribution is performed by a Distributor Affiliate, or if
Distributor participates in the profits from such intermediate
distribution, but then only to the extent of such participation.
5. Direct Consumer Level: The Direct Consumer Level means the level of
Videogram distribution at which Videograms are sold or rented
directly to the paying public. The "Direct Consumer Level" includes
the sale or rental of Videograms by means of retail outlets, mail
order, video clubs, and similar methods. Where Commercial Video or
Public Video rights are licensed, the Direct Consumer Level also
includes the authorized public performance, exhibition, or diffusion
of Videograms in accordance with the such Licensed Right. Distributor
will not be deemed to be engaged in distribution at the Direct
Consumer Level unless such distribution is performed by a Distributor
Affiliate, or unless Distributor participates in the profits from such
distribution, and then only to the extent of such participation.
6. Royalty Income: All amounts collected by any collecting society,
authors' rights organization, performing rights society or
governmental agency that are payable to authors, producers,
performers or other Persons and that arise from royalties, compulsory
licenses, cable retransmission income, music performance royalties,
tax rebates, exhibition surcharges, levies on blank Videograms or
hardware, rental or lending royalties, or the like, will as between
Licensor and Distributor be the sole property of Licensor and will not
be included in or credited to any Gross Receipts. Licensor has the
sole right to apply for and collect all these amounts. If any of them
are paid to Distributor then Distributor will receive them as
Licensor's agent and will immediately remit them to Licensor with an
appropriate statement identifying the payment.
7. Rebates and Subsidies: The following amounts, if received by used by
or credited to Distributor, any Distributor Affiliate or any
approved subdistributor or agent with respect to any exploitation of
the Cinematic & Ancillary Rights to a Picture, will not be included
in Cinematic & Ancillary Gross Receipts for that Picture but will be
used to reduce Cinematic & Ancillary Recoupable Distribution Costs:
(i) print, publicity and similar subsidies for the cost of releasing,
advertising or publicizing the Picture; (ii) income from publicity
tie-ins; or (iii) freight, print, trailer, advertising and other cost
recoveries, rebates, refunds or discounts from exhibitors, approved
subdistributors or other Persons.
M. Statements - When Rendered (as excerpted from the "Wagons East"
Agreement) During the Agreement Term and as long thereafter as Gross
Receipts are derived by distributor from the Picture, Distributor will
render statements with respect to each calendar quarter, or other
quarterly accounting periods as Licensor may designate in writing,
provided that Distributor shall provide Licensor with monthly
statements regarding estimated box office receipts during the period
of the Theatrical Release of the Picture. Each statement must be
delivered to Licensor within three (3) months after the end of the
period for which it is rendered, provided that the monthly statements
regarding estimated box office receipts must be delivered to Licensor
within two (2) weeks after the end of the period for which it is
rendered. Each statement must be accompanied by payment or' all monies
then due Licensor. The timely and complete rendition of accounting
statements together with al} monies due Licensor thereunder is the
essence of this Agreement.
N. Additional Deal Term (as excerpted from the "Wagons East' Agreement)
With respect to exploitation of Satellite Pay and Free TV Rights,
Distributor will only make a down link broadcast of a copy of the
Picture to satellite reception dishes in the Territory if such signal
is encoded and capable of viewing only through use of a decoding device.
O. Other Terms
All defined terms not defined in this Summary, as well as the other
standard terms and conditions of the Agreement, will be subject to good
faith negotiation between the parties. The parties will use their
best efforts to incorporate the terms previously negotiated in the
"Wagons East" agreement if and to the extent such terms do not expressly
or by necessary implication conflict with the terms and conditions
contained in this Output Deal Memo.
IN WITNESS WHEREOF, Licensor and Distributor have executed this
Output Deal Memo as of the date first written above to constitute
a binding contract between them.
Licensor Distributor
LIVE INTERNATIONAL or its Designee PIONEER LDC, IN
By: ___________________________ By:__________________________
An Authorized Signatory An Authorized Signatory
AMENDMENT NUMBER TWO TO AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
LIVE HOME VIDEO, INC.
This Amendment Number Two To Amended And Restated Loan And
Security Agreement (this "Amendment") is entered into as of July
18, 1995, between 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 "Borrowers," and
collectively as the Borrowers"), in light of the following facts:
FACTS
FACT ONE: Borrowers and Foothill have previously entered
into that certain Amended And Restated Loan And Security
Agreement dated November 14, 1994 (the "Agreement").
FACT TWO: Borrowers and Foothill desire to amend the
Agreement as provided herein. Terms defined in the Agreement
which are used herein shall have the same meanings as set forth
in the Agreement, unless otherwise specified.
NOW, THEREFORE, Borrowers and Foothill hereby modify and amend
the Agreement as follows:
1. Section 1.1 of the Agreement is hereby amended to revise
Subsection (iii) of the Definition of "Permitted Payments" in its
entirety to read as follows: "(iii) redeem or repurchase of up to
Eleven Million Five Hundred Thousand Dollars ($11,500,000) in
liquidation value (1,150,000 shares) of LIVE's Series B Preferred
Stock so long as after giving effect to any such redemption or
repurchase, Borrowers will not have less than Five Million
Dollars ($5,000,000) of borrowing availability under this
Agreement,"
2. Borrowers shall pay to Foothill a fee of $2,250. Said fee
shall be fully-earned, non-refundable, and due and payable on the
date of signing and delivery of this Amendment by Borrowers to
Foothill.
3. In the event of a conflict between the terms and provisions
of this Amendment and the terms and provisions of the Agreement,
the terms and provisions of this Amendment shall govern. In all
other respects, the Agreement, as supplemented, amended and
modified, shall remain in full force and effect.
This Amendment No. Two to Loan And Security Agreement amends,
supercedes and replaces in its entirety that certain Amendment
No. Two to Amended and Restated Loan And Security Agreement dated
as of July 11, 1995.
IN WITNESS WHEREOF, Borrowers and Foothill have executed this
Amendment as of the day and year first written above.<PAGE>
FOOTHILL CAPITAL, CORPORATION LIVE HOME VIDEO, INC.
By By
------------------------- -------------------------
Lisa M. Gonzales
Its Assistant Vice President Its
-------------------------
LIVE FILM AND MEDIAWORKS INC. LIVE ENTERTAINMENT
(formerly known as INTERNATIONAL INTERNATIONAL INC.
VIDEO PRODUCTIONS INC.)
By By
------------------------- -------------------------
Its Its
------------------------ ------------------------
LIVE AMERICA INC. VESTRON INC.
By By
------------------------- -------------------------
Its Its
------------------------- ------------------------
By its acceptance below as of this 11th day of July, 1995, the
undersigned guarantor hereby reaffirms its Continuing Guaranty
dated November 16, 1994, and consents to the above-stated terms.
LIVE ENTERTAINMENT INC.
By
-------------------------
Its
------------------------
- --------------------------------------------------------------------
By its acceptance below as of this 11th day of July, 1995, the
undersigned guarantor hereby reaffirms its Continuing Guaranty
dated November 16, 1994 and consents to the above-stated terms.
LIVE VENTURES INC.
By
-------------------------
Its
-------------------------
EXHIBIT 11
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
Year Ended
December 31,
1993 1994 1995
(Amounts in thousands,
except per share data)
PRIMARY:
Weighted average shares outstanding . . . . 2,418 2,418 2,419
Net effect of dilutive stock options -
based on the treasury stock method
using average market price . . . . . . . . -- -- 17
Total. . . . . . . . . . . . . . . . . 2,418 2,418 2,436
Income (loss) from continuing operations. . $(28,209) $ (9,674) $10,791
Less preferred dividends. . . . . . . . . . 3,589 3,791 3,027
Less Accretion for the increase in the
redemption value of the preferred
stock . . . . . . . . . . . . . . . . . . -- 6,000 4,509
Income (loss) from continuing operations
attributable to Common Stock . . . . . . (31,798) (19,465) 3,255
Income (loss) from discontinued operations (22,083) (100) --
Net income (loss) attributable to
common stock. . . . . . . . . . . . . . . . $(53,881) $(19,565) $ 3,255
Income (loss) per common share:
Continuing operations . . . . . . . . . . $ (13.15) $ (8.05) $ 1.34
Discontinued operations . . . . . . . . . (9.15) (0.04) --
Net income. . . . . . . . . . . . . . . . $ (22.30) $ (8.09) $ 1.34
FULLY DILUTED:
Weighted average shares outstanding . . . . 2,418 2,418 2,419
Net effect of dilutive stock options -
based on the treasury stock method
using the year-end market price,
if higher than average market price . . . -- -- 26
Assumed conversion of Series B
and Series C Preferred Stock. . . . . . . -- -- 18,096
Total. . . . . . . . . . . . . . . . . 2,418 2,418 20,541
Income (loss) from continuing operations. . $(28,209) $ (9,674) $10,791
Less preferred dividends. . . . . . . . . . 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 . . . . . . . (31,798) (19,465) 10,791
Income (loss) from discontinued operations (22,083) (100) --
Net income (loss) attributable to
Common Stock. . . . . . . . . . . . . . . . $(53,881) $(19,565) $10,791
Income per common share:
Continuing operations . . . . . . . . . . $ (13.15) $ (8.05) $ .53
Discontinued operations . . . . . . . . . (9.15) (0.04) --
Net income. . . . . . . . . . . . . . . . $ (22.30) $ (8.09) $ .53
EXHIBIT 21
List of Subsidiaries of the Registrant
As of March 15, 1996
Subsidiary Jurisdicition of
Incorporation
LIVE America Inc. Delaware
Vestron Inc. Delaware
LIVE Film and Mediaworks Inc. Delaware
Lieberman Enterprises Incorporated Delaware
LIVE Ventures Inc. Delaware
Tongue-Tied Inc. Delaware
Silent Development Corp. Delaware
Chatter Inc. Delaware
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 11, 1996, 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, 1995.
Century City
Los Angeles, California
March 18, 1996
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
FRANS J. AFMAN
Frans J. Afman
Director
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
RYUICHI NODA
Ryuichi Noda
Director
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
MAKOTO KOSHIBA
Makota Koshiba
Director
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
ANTHONY J. SCOTTI
Anthony J. Scotti
Director
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
ROGER R. SMITH
Roger R. Smith
Director
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
GREGORY R. PIERSON
Gregory R. Pierson
Director
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
MASAO NOMURA
Masao Nomura
Director
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
I WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
JAY BURNHAM
Jay Burnham
Director
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 and
Ronald B. Cushey, 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, 1995, and any amendments thereto.
IN WITNESS WHEREOF, the undersigned has subscribed these presents this
12th day of March, 1996.
JONATHAN D. LLOYD
Jonathan D. Lloyd
Director
LIVE ENTERTAINMENT INC.
Certificate of Secretary
I, Ronald B. Cushey, 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 7, 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 12th day of
March, 1996.
RONALD B. CUSHEY
Ronald B. Cushey
Secretary
I, Roger A. Burlage, President and Chief Executive Officer of the Company,
do hereby certify that Ronald B. Cushey 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 12th day of
March, 1996.
ROGER A. BURLAGE
Roger A. Burlage
President and Chief Executive Officer
EXHIBIT A
. . .
RESOLVED, that 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, 1995 ("Fiscal 1995") 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 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 1995
and amendments thereto.
. . .
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 49,487
<SECURITIES> 0
<RECEIVABLES> 15,446
<ALLOWANCES> (18,876)
<INVENTORY> 4,813
<CURRENT-ASSETS> 0
<PP&E> 7,034
<DEPRECIATION> (5,889)
<TOTAL-ASSETS> 149,445
<CURRENT-LIABILITIES> 0
<BONDS> 53,184
0
4,212
<COMMON> 24
<OTHER-SE> 33,784
<TOTAL-LIABILITY-AND-EQUITY> 149,445
<SALES> 140,112
<TOTAL-REVENUES> 142,536
<CGS> 113,025
<TOTAL-COSTS> 19,174
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,859
<INCOME-PRETAX> 11,391
<INCOME-TAX> 600
<INCOME-CONTINUING> 10,791
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,791
<EPS-PRIMARY> 1.34
<EPS-DILUTED> .53
</TABLE>
