SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter ended September 30, 1996
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
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 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 October 11, 1996, there were 2,448,267 shares of the
Registrant's Common Stock, 3,819,802 shares of the Registrant's Series
B Cumulative Convertible Preferred Stock and 15,000 shares of the
Registrant's Series C Convertible Preferred Stock outstanding.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
INDEX
PART I - FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED):
Condensed Consolidated Balance Sheets at
September 30, 1996 and December 31, 1995 . . . . 1
Condensed Consolidated Statements of
Operations for the three and nine months ended
September 30, 1996 and 1995. . . . . . . . . . . 2
Condensed Consolidated Statements of
Cash Flows for the nine months ended
September 30, 1996 and 1995. . . . . . . . . . . 3
Notes to Condensed Consolidated Financial
Statements . . . . . . . . . . . . . . . . . . . 4-7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS. . . . . . . . . . . . . . . . . . 8-13
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . 14-15
ITEM 3(b).DEFAULTS UPON SENIOR SECURITIES - DIVIDEND
ARREARAGE ON PREFERRED STOCK . . . . . . . . . . 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. . . . . . . . . 15-16
<PAGE>
PART I - FINANCIAL INFORMATION
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in Thousands)
September 30, December 31,
1996 1995
ASSETS
Cash and cash equivalents, including restricted
cash of $284 and $1,352 . . . . . . . . . . . . . . . $ 13,012 $ 49,487
Accounts receivable, less allowances of $16,171
in 1996 . . . . . . . . . . . . . . . . . . . . . . 15,940 --
Inventories. . . . . . . . . . . . . . . . . . . . . . 6,582 4,813
Property and Equipment, net. . . . . . . . . . . . . . 972 1,145
Film Costs, net of accumulated amortization
of $546,380 and $519,604. . . . . . . . . . . . . . . 73,680 66,700
Other Assets . . . . . . . . . . . . . . . . . . . . . 1,993 1,353
Goodwill, net of accumulated amortization of
$42,985 and $40,042 . . . . . . . . . . . . . . . . . 23,004 25,947
$135,183 $ 149,445
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable . . . . . . . . . . . . . . . . . . . $6,733 $ 6,675
Accrual for returns and advertising net of accounts
receivable of $15,447 in 1995 . . . . . . . . . . . . -- 3,430
Accrued expenses . . . . . . . . . . . . . . . . . . . 15,191 12,451
Notes payable. . . . . . . . . . . . . . . . . . . . . 5,866 8,333
Increasing Rate Senior Subordinated Notes due
1999, including capitalized interest of
$9,175 and $13,184. . . . . . . . . . . . . . . . . . 49,175 53,184
Film obligations . . . . . . . . . . . . . . . . . . . 10,261 18,559
Dividends payable. . . . . . . . . . . . . . . . . . . 3,780 2,309
Income taxes payable and deferred income taxes . . . . 7,146 6,484
Total liabilities . . . . . . . . . . . . . . . . . . 98,152 111,425
Stockholders' Equity:
Series B Cumulative Convertible Preferred Stock--
authorized 9,000,000 shares; $1.00 par value;
$38,198,000 and $41,970,000 liquidation preference;
3,819,000 and 4,197,000 shares outstanding . . . . . . 3,819 4,197
Series C Convertible Preferred Stock--15,000 shares
authorized and outstanding; $1.00 par value;
$17,637,000 liquidation preference. . . . . . . . . . 15 15
Common Stock -- authorized 24,000,000 shares; $0.01
par value; 2,448,267 and 2,418,424 shares outstanding 24 24
Additional paid-in capital . . . . . . . . . . . . . . 125,138 129,668
Retained deficit . . . . . . . . . . . . . . . . . . . (91,965) (95,884)
37,031 38,020
$135,183 $ 149,445
See notes to condensed consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
Net Sales . . . . . . . . . . . . . . . . . $36,440 $40,060 $109,262 $107,021
Cost of goods sold . . . . . . . . . . . . . 30,091 36,814 89,779 88,749
GROSS PROFIT. . . . . . . . . . . . . . . 6,349 3,246 19,483 18,272
Operating Expenses:
Selling, general and administrative expenses 4,087 3,778 12,145 10,546
Amortization of goodwill. . . . . . . . . . 981 981 2,943 2,943
5,068 4,759 15,088 13,489
1,281 (1,513) 4,395 4,783
Disposal of VCL/Carolco Communications GmbH:
Net Sales . . . . . . . . . . . . . . . . . -- 5,261 -- 16,143
Costs and Expenses. . . . . . . . . . . . . -- 5,261 -- 16,143
. . . . . . . . . . . . . . . . . . . . . -- -- -- --
Gain on disposal of VCL . . . . . . . . . . -- 2,913 -- 2,913
-- 2,913 -- 2,913
OPERATING PROFIT . . . . . . . . . . . . 1,281 1,400 4,395 7,696
Interest and other income . . . . . . . . . 229 723 1,541 1,816
Interest expense. . . . . . . . . . . . . . (301) (528) (1,113) (1,355)
INCOME BEFORE INCOME TAXES. . . . . . . . 1,209 1,595 4,823 8,157
Income tax expense. . . . . . . . . . . . . -- -- 904 600
NET INCOME . . . . . . . . . . . . . . . $1,209 $ 1,595 $ 3,919 $ 7,557
Net income (loss) per common share:
Primary . . . . . . . . . . . . . . . . . $ 0.08 $(0.15) $ 0.45 $ .49
Fully diluted . . . . . . . . . . . . . . $ 0.08 $(0.15) $ 0.29 $ .49
Weighted average number of shares outstanding:
Primary . . . . . . . . . . . . . . . . . 2,570 2,442 2,598 2,435
Fully diluted . . . . . . . . . . . . . . 2,570 2,442 13,482 2,435
See notes to condensed consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in Thousands)
Nine Months Ended
September 30,
1996 1995
OPERATING ACTIVITIES:
Net income. . . . . . . . . . . . . . . . . . . . . . $ 3,919 $ 7,557
Adjustments to reconcile net income to net cash
(used for) provided by operating activities:
Depreciation and amortization of property
and equipment. . . . . . . . . . . . . . . . . . . . 467 532
Amortization of goodwill. . . . . . . . . . . . . . . 2,943 2,943
Amortization of and adjustments to film costs . . . . 59,669 48,098
Income taxes payable and deferred income taxes. . . . 662 (352)
(Increase) decrease in operating assets:
Accounts receivable . . . . . . . . . . . . . . . . (19,370) (5,199)
Inventories . . . . . . . . . . . . . . . . . . . . (1,769) (118)
Assets held for sale. . . . . . . . . . . . . . . . -- 13,572
Other assets. . . . . . . . . . . . . . . . . . . . (640) 348
Increase (decrease) in operating liabilities:
Accounts payable and accrued expenses . . . . . . . 2,798 2,366
Liabilities related to assets held for sale . . . . -- (13,542)
Film cost additions . . . . . . . . . . . . . . . . (66,649) (27,051)
Payments on film obligations. . . . . . . . . . . . (8,298) (2,924)
Cash (used for) provided by operating activities (26,268) 26,230
INVESTING ACTIVITIES:
Acquisition of property and equipment . . . . . . . . (294) (399)
Cash (used for) investing activities. . . . . . . (294) (399)
FINANCING ACTIVITIES:
Issuance of long-term obligations . . . . . . . . . . -- 10,000
Payments on long-term obligations . . . . . . . . . . (6,476) (7,850)
Repurchase of Series B Cumulative Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . (2,332) (5,460)
Dividends paid on Series B Cumulative Convertible
Preferred Stock . . . . . . . . . . . . . . . . . . (1,273) (2,325)
Issuance of Common Stock. . . . . . . . . . . . . . 168 --
Cash (used for) financing activities . . . . . . . (9,913) (5,635)
(Decrease) increase in cash and cash equivalents (36,475) 20,196
Cash and cash equivalents at beginning
of period . . . . . . . . . . . . . . . . . . . . 49,487 24,264
Cash and cash equivalents at end of period . . . . $ 13,012 $ 44,460
See notes to condensed consolidated financial statements.
<PAGE>
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
September 30, 1996
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 Inc. ("LFM") (formerly LIVE
Home Video Inc.) and LIVE International ("LI"), which primarily
acquire 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 November 1995, LIVE completed a sales
transaction providing for the disposal of its interest in VCL. 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.
Basis of Presentation: The accompanying consolidated financial
statements and footnotes are unaudited and are condensed, as
contemplated by the Securities and Exchange Commission under Rule
10-01 of Regulation S-X. Accordingly, they do not contain all
disclosures required by generally accepted accounting principles,
but in the opinion of management of LIVE, include all adjustments
(consisting only of normal recurring accruals) necessary to fairly
state the financial position and results of operations of LIVE.
The financial statements include the accounts of LIVE and its
subsidiaries - LFM, LI and VCL (1995) and have been restated to
account for VCL as a disposal of a portion of a line of business.
All significant intercompany balances and transactions have been
eliminated.
LIVE suggests that these condensed consolidated financial
statements be read in conjunction with its consolidated financial
statements for the year ended December 31, 1995 and related notes
thereto included on Form 10-K filed with the Securities and
Exchange Commission.
Certain reclassifications of 1995 amounts have been made in
order to conform with the 1996 financial statement presentation.
<PAGE>
Net Income Per Common Share:
Primary:
Per share information has been determined on the basis of
2,570,177 and 2,598,017 weighted average number of shares
outstanding for the three and nine months ended September 30, 1996
and 2,441,584 and 2,435,054 weighted average number of shares
outstanding for the three and nine months ended September 30, 1995,
respectively. The net income per common share for the three and
nine months ended September 30, 1996 and 1995 gives effect to
dividends of $1,006,000 and $2,744,000, and $696,000 and
$2,271,000, respectively, on both the Series B Cumulative
Convertible Preferred Stock ("Series B Preferred Stock") and the
Series C Convertible Preferred Stock ("Series C Preferred Stock").
The net income for the three and nine months ended September 30,
1995 gives effect to the accretion of the redemption value of the
Series B Preferred Stock of $1,259,000 and $4,089,000,
respectively.
Fully Diluted:
Per share information has been determined on the basis of
13,481,331 weighted average number of shares outstanding for the
nine months ended September 30, 1996, assuming conversion of the
Series B Preferred Stock and the Series C Preferred Stock. Such
conversion was not assumed for the three months ended September 30,
1996 and the three and nine months ended September 30, 1995,
because the effect thereof would have been antidilutive.
Note 2 - Equity Rationalization
On August 21, 1996 the Company filed a Schedule 13E-4 with the
Securities and Exchange Commission which outlined a proposed
exchange offer and equity recapitalization plan (the "Equity
Rationalization"). The Company expects to offer to exchange a
combination of cash and common stock, or all common stock, for the
Company's existing outstanding Series B Preferred Stock and Series
C Preferred Stock. In addition, the Company is seeking to replace
its existing $30 million working capital facility with a larger
working capital facility, and to refinance its current outstanding
$40 million Increasing Rate Senior Subordinated Notes due 1999 (the
"Increasing Rate Notes"). The Company believes that the Equity
Rationalization, if completed, will simplify its existing complex
capital structure, provide additional liquidity for growth and
expansion, and reduce the cash dividend cost of its existing equity
securities.
<PAGE>
Failure of the Company to consummate the Equity Rationalization
at this time would require the Company to begin accumulating cash
to retire the Increasing Rate Notes, of which $20 million are due
in 1998 and the remaining $20 million in 1999, and would therefore
reduce the funds available for the Company's operations.
The completion of the Equity Rationalization is subject to
obtaining satisfactory commitments for refinancing sources of
senior and subordinated debt, approval by the Company's
shareholders and regulatory agencies, completion of legal
documentation, and acceptance of the tender offer if and when made.
As such, no assurances can be given that the Company's efforts will
be successful.
Note 3 - Series B Preferred Stock
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, of 10% ($1.00 per share) if
paid in cash and 12% if paid in kind. Dividends of $818,000 ($0.21
per share) were accrued on the Series B Preferred Stock for the
quarter ending September 30, 1996. 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 Stock from time to time, either through
private purchases or through open market purchases. 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.
Note 4 - Commitments
The Company has certain existing and potential commitments for
film acquisitions, theatrical prints, advertising and release costs
which will require the use of a substantial portion of the existing
cash balances on-hand over the next fiscal quarter of 1996.
Note 5 - Litigation
LIVE had been the defendant in two purported class action law
suits that were filed in 1992. The Company had requested the U.S.
District Court to dismiss both cases for non-prosecution due to the
fact that the plaintiffs had taken no action in either of these
cases for over one year. On April 8, 1996, the U.S. District Court
granted LIVE's request and dismissed both cases.
<PAGE>
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. After limited pre-trial discovery, a motion for
class certification was argued on December 6, 1995. By order dated
June 21, 1996 and filed on June 25, 1996, the Court in this action
determined that the action should be maintained as a class action
under the provisions of Section 901(a) of the New York Civil Practice Law
and Rules.
The Company filed an appeal from the Order granting class
certification on July 19, 1996 and filed a Motion for
Decertification of the class on July 24, 1996. A hearing on the
motion was heard on September 4, 1996 and is currently under
submission before the Court.
Management and counsel to LIVE are unable to predict the
ultimate outcome of the above-described action at this time.
However, LIVE and the other defendants believe that this lawsuit is
without merit and intend to defend it vigorously. Accordingly, no
provision for any liability which may result has been made in
LIVE's consolidated financial statements. In the opinion of
management, this action, 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>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three Months Ended September 30, 1996 Compared to Three Months
Ended September 30, 1995
Continuing Operations
Net sales of LIVE decreased to $36,440,000 during 1996 compared
to $40,060,000 during 1995. The decrease of $3,620,000, or 9.0%,
is primarily attributable to the successful sell-through release of
Stargate in the third quarter of 1995, for which there was no
comparable sell-through title released in 1996. The decrease in
revenue was partially offset by increases in international and
theatrical sales including sales of The Arrival and The Substitute
and increases in video rental and sublicense revenue.
Gross profits of LIVE increased $3,103,000, or 95.6%, to
$6,349,000 during 1996 compared to $3,246,000 during 1995. As a
percentage of sales, gross profit increased to 17.4% during 1996
from 8.1% during 1995. The increase in gross profit dollars and as
a percentage of sales is primarily due to increased video rental
sales and lower costs associated with international royalty
overages, television sales and sublicense revenue received in 1996.
Selling, general and administrative expenses of LIVE increased
$309,000, or 8.2%, to $4,087,000 during 1996 compared to $3,778,000
during 1995. As a percentage of sales, the amount increased to
11.2% during 1996 from 9.4% during 1995. The dollar increase is
primarily a result of increased overhead costs associated with
expansion of the Company's business into theatrical, international
and television operations. The percentage increase is primarily
due to the decrease in sales.
Interest and other income decreased $494,000 or 68.3% to
$229,000 during 1996 compared to $723,000 during 1995. This
decrease was primarily the result of interest earned on lower cash
balances on-hand during the third quarter of 1996 compared to the
third quarter of 1995.
Interest expense of LIVE decreased $227,000, or 43.0%, to
$301,000 during 1996 compared to $528,000 during 1995. Included in
interest expense for the three months ended September 30, 1995 is
$186,000 related to the increase in the interest rate on the
Increasing Rate Senior Subordinated Notes due 1999 (the "Increasing
Rate Notes") from 10% to 12% per annum, which was provided for in
an amendment to the Indenture governing the Increasing Rate Notes.
<PAGE>
The interest rate increase on the Increasing Rate Notes was to
occur in March, 1996, and such interest from and after that date is
included in the carrying value of the Increasing Rate Notes in
accordance with Financial Accounting Standards Board Statement No.
15, Accounting for Debtors and Creditors for Troubled Debt
Restructuring and therefore not included in interest expense.
Preferred dividends of $1,006,000 in 1996 and $696,000 in 1995
represent the 5% cash dividend accrued on the Series B Preferred
Stock through May 1996, with 10% being accrued thereafter, and the
5% cash dividend accrued on 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.
Nine Months Ended September 30, 1996 Compared to Nine Months
Ended September 30, 1995
Continuing Operations
Net sales of LIVE increased to $109,262,000 during 1996 compared
to $107,021,000 during 1995. The increase of $2,241,000, or 2.1%,
is primarily attributable to theatrical and international sales
including sales of The Substitute and The Arrival and increased
sublicense revenue in 1996. The increase in revenue was offset by
decreased rental and sell-through video sales in 1996 which is
attributable to the successful video rental and sell-through
release of Stargate in 1995, for which there was no comparable
video title released in 1996.
Gross profits of LIVE increased $1,211,000, or 6.6%, to
$19,483,000 during 1996 compared to $18,272,000 during 1995. As a
percentage of sales, gross profit increased to 17.8% during 1996
from 17.1% during 1995. The increase in gross profit dollars and
as a percentage of sales is primarily due to lower costs associated
with international royalty overages, television sales and
sublicense revenue received in 1996.
Selling, general and administrative expenses of LIVE increased
$1,599,000, or 15.2%, to $12,145,000 during 1996 compared to
$10,546,000 during 1995. As a percentage of sales, the amount
increased to 11.1% during 1996 from 9.9% during 1995. The dollar
increase and percentage increase is primarily a result of increased
overhead costs associated with expansion of the Company's business
into theatrical, international and television operations.
Interest and other income decreased $275,000 or 15.1% to
$1,541,000 during 1996 compared to $1,816,000 during 1995, which
was primarily the result of interest earned on lower cash balances
on-hand during 1996.
<PAGE>
Interest expense of LIVE decreased $242,000, or 17.9%, to
$1,113,000 during 1996 compared to $1,355,000 during 1995.
Included in interest expense for the nine months ended September
30, 1995 is $383,059 related to the increase in the interest rate
on the Increasing Rate Senior Subordinated Notes due 1999
("Increasing Rate Notes") from 10% to 12% per annum, which was
provided for in an amendment to the Indenture governing the
Increasing Rate Notes. The interest rate increase on the
Increasing Rate Notes was to occur in March, 1996, and such
interest from and after that date is included in the carrying value
of the Increasing Rate Notes in accordance with Financial
Accounting Standards Board Statement No. 15, Accounting for Debtors
and Creditors for Troubled Debt Restructuring and therefore not
included in interest expense.
Preferred dividends of $2,744,000 in 1996 and $2,271,000 in 1995
represents the 5% cash dividend accrued on the Series B Preferred
Stock through May of 1996, with 10% being accrued thereafter, and
the 5% cash dividend accrued on 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.
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 nine
months ending September 30, 1996, the Company generated negative
cash flow from operations of $26,268,000 primarily due to increases
in accounts receivable and film costs associated with the releases
of The Substitute and The Arrival.
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%. On October 21, 1996 LIVE amended the
distribution agreement, to be effective May 7, 1996, whereby LIVE
assumed responsibility of all sales and sales solicitation services
which were previously the responsibility of WEA. The amendment
also included a reduction in certain distribution fees charged by
WEA, as a result of the shift in sales and sales solicitation
responsibility, and an additional advance to LIVE of $10,000,000.
The additional advance is recoupable from distribution revenues
during the remaining term of the agreement at $476,190 per month
plus interest at LIBOR + 0.2%. In order to obtain the advances,
LIVE granted WEA a second priority security interest in
substantially all of LIVE's assets. As of September 30, 1996,
there was $5,833,000 outstanding under the advance, and the
interest rate on the advance at September 30, 1996 was 5.7%.
Investing activities generated a negative cash flow of $294,000
during the nine months ended September 30, 1996, 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") that expires in November 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 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 September 30, 1996 the Company
was in compliance with all such financial ratios. There were no
amounts outstanding under the Foothill Credit Facility as of
September 30, 1996.
The Company has not borrowed any funds under the Foothill Credit
Facility since it was obtained in November 1994, and, as noted, the
Company has had substantial cash balances throughout the 1995
fiscal year and through September of 1996. As a result of the
Company's upcoming cash expenditures relating to theatrical
releases and production/acquisition schedules for the remainder of
1996 and 1997, 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 future cash
expenditures. This will reduce the liquidity of the Company in
1996 and 1997 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, 1995 and June 30, 1996 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,
1995 and June 30, 1996 cash dividends on the Series C Preferred
Stock which, together with accrued and unpaid dividends thereon,
totaled $2,637,000 as of September 30, 1996.
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, 1995
and June 30, 1996 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 $9,913,000 during the nine months ended September 30, 1996
primarily due to the repurchase of 377,500 shares of the Company's
Series B Preferred Stock, interest and principal payments on long
term obligations and payment of dividends on the Series B Preferred
Stock.
As of September 30, 1996, the aggregate redemption price for the
Series B Preferred Stock was $38,198,000 ($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 Stock from time to time, either through
private purchases or through open market purchases. Through
September 30, 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.
On August 21, 1996 the Company filed a Schedule 13E-4 with the
Securities and Exchange Commission which outlined a proposed
exchange offer and equity recapitalization plan (the "Equity
Rationalization"). The Company expects to offer to exchange a
combination of cash and common stock, or all common stock, for the
Company's existing outstanding Series B Preferred Stock and Series
C Preferred Stock. In addition, the Company is seeking to replace
its existing $30 million working capital facility with a larger
working capital facility, and to refinance its current outstanding
$40 million Increasing Rate Notes. The Company believes that the
Equity Rationalization, if completed, will simplify its existing
complex capital structure, provide additional liquidity for growth
and expansion, and reduce the cash dividend cost of its existing
equity securities.
<PAGE>
Failure of the Company to consummate the Equity Rationalization
at this time would require the Company to begin accumulating cash
to retire the Increasing Rate Notes, of which $20 million are due
in 1998 and the remaining $20 million in 1999, and would therefore
reduce the funds available for the Company's operations.
The completion of the Equity Rationalization is subject to
obtaining satisfactory commitments for refinancing sources of
senior and subordinated debt, approval by the Company's
shareholders and regulatory agencies, completion of legal
documentation, and acceptance of the tender offer if and when made.
As such, no assurances can be given that the Company's efforts will
be successful.
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
LIVE had been the defendant in two purported class action law
suits that were filed in 1992. The Company had requested the U.S.
District Court to dismiss both cases for non-prosecution due to the
fact that the plaintiffs had taken no action in either of these
cases for over one year. On April 8, 1996, the U.S. District Court
granted LIVE's request and dismissed both cases.
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. After limited pre-trial discovery, a motion for
class certification was argued on December 6, 1995. By order dated
June 21, 1996 and filed on June 25, 1996, the Court in this action
determined that the action should be maintained as a class action
under the provisions of Section 901(a) of the New York Civil Practice
Law and Rules.
The Company filed an appeal from the Order granting class
certification on July 19, 1996 and filed a Motion for
Decertification of the class on July 24, 1996. A hearing on the
motion was heard on September 4, 1996 and is currently under
submission before the Court.
Management and counsel to LIVE are unable to predict the ultimate
outcome of the above-described action at this time. However, LIVE
and the other defendants believe that this lawsuit is without merit
and intends to defend it vigorously. Accordingly, no provision for
any liability which may result has been made in LIVE's consolidated
financial statements. In the opinion of management, this action,
when finally concluded and determined, will not have a material
adverse effect upon LIVE's financial position or results of
operations.
<PAGE>
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 3(b).DEFAULTS UPON SENIOR SECURITIES - DIVIDEND ARREARAGE ON
PREFERRED STOCK
Dividends on the Series C Preferred Stock, at the rate of 5% per
annum on the unreturned $15,000,000 liquidation value of the Series
C Preferred Stock, are due on June 30 and December 31 of each year.
Although the dividends scheduled to be paid on June 30 and December
31, 1993, 1994, 1995 and June 30, 1996 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,
1995 and June 30, 1996 cash dividends on the Series C Preferred
Stock which, together with accrued and unpaid dividends thereon,
totaled $2,637,000 as of September 30, 1996.
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, 1995
and June 30, 1996 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 DGCL.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibits:
10.93 Employment Agreement, dated as of August 15, 1996, for the
services of Ronald B. Cushey.
10.94 Employment Agreement, dated as of August 15, 1996, for the
services of Paul S. Almond.
10.95 Employment Agreement, dated as of August 15, 1996, for the
services of Elliot Slutzky.
10.96 Fifth Amendment to License and Distribution Agreement dated
as of May 7, 1996 between LIVE Film and Mediaworks Inc.
(formerly LIVE Home Video Inc. and successor in interest to
LIVE Film and Mediaworks Inc., a California corporation),
LIVE America Inc. and Vestron Inc. and Warner-Elektra-Atlantic
Corporation.
10.97 Agreement dated March 14, 1996 between Carreden Group Inc.
and LIVE Entertainment Inc. (Incorporated herein by
reference to Exhibit 13 to the Registrant's Schedule 13E-4
filed on August 21, 1996).
10.98 Employment Agreement Deal Memo, dated as of September 12,
1996, for the services of Ann Dubinet.
11 Computation of Income (Loss) Per Common Share (Unaudited).
27 Financial Data Schedule (Electronic Filing Only).
Reports on Form 8-K: None.
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.
Dated: October 30, 1996 By: /s/ RONALD B. CUSHEY
Ronald B. Cushey
Chief Financial Officer
<PAGE>
EXHIBIT INDEX
10.93 Employment Agreement, dated as of August 15, 1996, for the
services of Ronald B. Cushey.
10.94 Employment Agreement, dated as of August 15, 1996, for the
services of Paul S. Almond.
10.95 Employment Agreement, dated as of August 15, 1996, for the
services of Elliot Slutzky.
10.96 Fifth Amendment to License and Distribution Agreement dated
as of May 7, 1996 between LIVE Film and Mediaworks Inc.
(formerly LIVE Home Video Inc. and successor in interest to
LIVE Film and Mediaworks Inc., a California corporation),
LIVE America Inc. and Vestron Inc. and Warner-Elektra-Atlantic
Corporation.
10.97 Agreement dated March 14, 1996 between Carreden Group Inc.
and LIVE Entertainment Inc. (Incorporated herein by
reference to Exhibit 13 to the Registrant's Schedule 13E-4
filed on August 21, 1996).
10.98 Employment Agreement Deal Memo, dated as of September 12,
1996, for the services of Ann Dubinet.
11 Computation of Income (Loss) Per Common Share (Unaudited).
27 Financial Data Schedule (Electronic Filing Only).
LIVE ENTERTAINMENT INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
DATE: As of August 15, 1996
Mr. Ronald B. Cushey
c/o LIVE Entertainment Inc.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
Re: Employment Agreement
Dear Mr. Cushey:
When executed by you ("Employee") and by a duly authorized
representative of LIVE Entertainment Inc. and LIVE Film and
Mediaworks Inc., a Delaware corporation (together, the "Company"),
this letter will set forth the terms and conditions of Employee's
employment. This Employment Agreement supersedes and fully
replaces any prior Employment Agreement between Company and
Employee.
1. Services
1.1 Employment. Company employs Employee during the Term (as
hereinafter defined) to serve as Executive Vice President/Chief
Financial Officer and Corporate Secretary of Company, and to render
such other services ("Services") as Company or corporations
controlled by, under common control with or controlling, directly
or indirectly, Company ("Company's Affiliates"), may from time to
time reasonably request which are consistent with the duties
Employee is to perform. Employee shall comply with all of the
reasonable and customary employment policies of Company and its
Affiliates. The Services shall be generally performed at the
principal offices of Company, currently in Van Nuys, California.
In addition, the Services may be performed by Employee from time to
time on a temporary travel basis at such other locations as Company
shall reasonably request consistent with its reasonable business
needs. Employee agrees to perform such Services in a competent and
professional manner, consistent with the skills to be possessed by
a senior officer in Company's business.
1.2 Reporting Requirements. Employee shall report to Roger
A. Burlage the Chief Executive Officer and Chairman of Company.
1.3 Ownership of Properties. Company, as employer, shall
own, and Employee hereby transfers and assigns to Company, all
rights in and to any material and/or ideas written, suggested or
submitted by Employee during the Term and all other results and
proceeds of the Services ("Properties"). Company and its licensees
and assigns shall have the right to adapt, change, revise, delete
from, add to and/or rearrange the Properties or any part thereof
written or submitted by Employee and to combine the same with other
works to any extent, and to change or substitute the title thereof
and in this connection Employee hereby waives any so-called "moral
rights" of authors. Employee agrees to execute and deliver to
Company such assignments or other instruments as Company may
require from time to time to evidence its ownership of the results
and proceeds of Employee's services; provided, however, that
nothing in this Section 1.3 shall be deemed in any manner to
restrict or qualify Employee's ownership or right to exploit
Employee's personal memoirs.
1.4 Term/Exclusivity
1.4.1 The Term of this Agreement shall commence on
the date hereof and shall end on December 31, 1999 unless extended
or sooner terminated in accordance with the provisions of this
Agreement (the "Term").
1.4.2 The Services shall be rendered on a full time
basis during normal working hours and all services of Employee
shall be exclusive to Company. Employee acknowledges that
Employee's performances and services hereunder are of a special,
unique, unusual, extraordinary and intellectual character which
gives them peculiar value, the loss of which cannot be reasonably
or adequately compensated in an action at law for damages and that
a breach by Employee of the terms hereof (including without
limitation this Section 1.4 and Section 1.5) will cause Company
irreparable injury. Employee agrees that Company is entitled to
injunctive and other equitable relief to prevent a breach or
threatened breach of this Agreement, which shall be in addition to
any other rights or remedies to which Company may be entitled.
1.4.3 During the term of this Agreement and of
Employee's employment by Company (the "Restricted Period"),
Employee shall not, directly or indirectly, (i) engage in any
business for his own account which is competitive with the
businesses of Company or Company's Affiliates (collectively,
"Competitive Business") so long as Company or Company's Affiliates
(as the case may be) continue to engage in such business; (ii)
enter the employ of, or render any services to, any person engaged
in a Competitive Business; (iii) become interested in a Competitive
Business in any capacity, including, without limitation, as an
individual, partner, shareholder, officer, director, principal,
agent, trustee or consultant; or (iv) induce any customer or
supplier of Company or Company's Affiliates to terminate its
relationship with Company or Company's Affiliates (as the case may
be). Notwithstanding anything to the contrary, Employee may
acquire and/or retain, solely as an investment, and take customary
actions to maintain and preserve Employee's ownership of:
A. securities of any corporation which are
registered under Sections 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and which are publicly traded, as long as
Employee is not part of any control group of such corporation; and
B. any securities of a partnership, trust,
corporation or other person so long as Employee remains a passive
investor in that entity and does not become part of any control
group thereof (except in a passive capacity) and so long as such
entity is not, directly or indirectly, in competition with Company
or its Affiliates.
1.4.4. (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
theCompany 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 and Chairman of Company,
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.
1.5 Confidentiality. Employee acknowledges that his Services
will, throughout the Term, bring Employee into close contact with
many confidential affairs of Company and its Affiliates, including
information about costs, profits, markets, sales, products, key
personnel, pricing policies, operational methods, technical
processes and other business affairs and methods and other
information not readily available to the public, and plans for
future development. Employee further acknowledges that the
businesses of Company and its Affiliates are international in
scope, that their products are marketed throughout the world, that
Company and its Affiliates compete in nearly all of their business
activities with other organizations which are or could be located
in nearly any part of the world and that the nature of Employee's
Services, position and expertise are such that he is capable of
competing with Company and its Affiliates from nearly any location
in the world. In recognition of the foregoing, Employee covenants
and agrees:
1.5.1 that Employee will keep secret all material
confidential matters of Company and its Affiliates which are not
otherwise in the public domain and will not intentionally disclose
them to anyone outside of Company or its Affiliates, either during
or after the Term, except with Company's written consent and except
for such disclosure as is necessary in the performance of
Employee's duties during the Term; and
1.5.2 that Employee will deliver promptly to Company
on termination of the Term or at any other time Company may so
request, at Company's expense, all confidential memoranda, notes,
records, reports and other documents (and all copies thereof)
relating to Company's and its Affiliates' business, which Employee
obtained while employed by, or otherwise serving or acting on
behalf of, Company, or which Employee may then possess or have
under his control.
2. Compensation
As compensation and consideration for all Services provided by
Employee during the Term pursuant to this Agreement, Company agrees
to pay to Employee the compensation set forth below.
2.1 Fixed Annual Compensation. Fixed Annual Compensation of
no less than the following amounts during the following periods
shall be payable in equal installments on Company's regular pay
dates:
January 1, 1996 through December 31, 1996 - $210,000
January 1, 1997 through December 31, 1997 - $220,000
January 1, 1998 through December 31, 1998 - $230,000
January 1, 1999 through December 31, 1999 - $240,000
2.2 Incentive Compensation. Employee shall be eligible to
participate in Company's discretionary Corporate Bonus Program, as
determined, modified and published by Company from time to time.
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").
2.3 Stock Options.
2.3.1 Employee hereby confirms that Company has granted
to Employee options to acquire 5,000 shares of Company's common
stock at the at the price per share equal to the average of the bid
and asked prices of Company's Common Stock on the OTC Bulletin
Board at the closing of the market on December 31, 1994 of this
Agreement (the "12/94 Options"), with such 12/94 Options to vest as
follows:
(i) 2,500 Options vested on December 31, 1995; and
(ii) 2,500 Options will vest on December 31, 1996;
Employee hereby also confirms that Company has granted 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
("12/95 Options") with such 12/95 Options to vest as follows:
(i) 7,000 options will vest on December 31, 1996; and
(ii) 7,000 options will vest on December 31, 1997; and
(iii) 6,000 options will vest on December 31, 1998.
In addition, upon (a) approval by the Stock Option Committee of the
Board of Directors of Company, (b) the occurrence of the Effective
Date, and (c) Employee's execution of the stock option agreement
referred to hereinafter in this Section 2.3, as a special
inducement to Employee, Company will grant to Employee options to
acquire 10,000 shares of Company's common stock on the Nasdaq
National Market at the closing price of the market on September 12,
1996 ("9/96 Options"), with such 9/96 Options to vest as follows:
(i) 3,334 options will vest on September 12, 1997
(ii) 3,333 options will vest on September 12, 1998
(iii) 3,333 options will vest on September 12, 1999
The Options will be subject to such additional terms and conditions
as may be set forth in Company's 1988 Stock Option and Stock
Appreciation Rights Plan, as amended (the "Option Plan"), as well
as the form of stock option agreement as may be adopted by
Company's Board of Directors or the Stock Option Committee thereof
from time to time pursuant to the Option Plan.
In the event of a Change of Control (as defined above), all
unvested options will immediately vest.
2.4 Vacation Benefits. During each year of the Term,
Employee shall be entitled to a vacation of three (3) weeks,
without deduction of salary. Such vacations shall be taken at such
time or times during the applicable year as may be determined by
Employee subject to Company's business needs. Employee shall be
entitled to take any unused portion of his paid vacation in any
subsequent year of the Term, subject to Company's business needs
and policy and consistent with applicable laws ("Vacation
Benefits"). Notwithstanding the foregoing, Employee shall at no
time have more than six (6) weeks of accrued vacation, and at such
time as six (6) weeks of vacation are accrued by Employee, no
additional vacation will accrue unless and until vacation time is
taken and the amount of Employee's accrued vacation time becomes
less than six (6) weeks. Any additional vacation period shall be
determined by Company consistent with the general customs and
practices of the Company applicable to its executives.
2.5 Intentionally Deleted.
2.6 Additional Benefits. Without limiting any other
provision hereof, Employee shall be entitled to participate in
any profit-sharing, pension, health, vacation, insurance or other
plans, benefits or policies available to the employees of Company
of similar stature and seniority on the terms generally applicable
to such employees and will be entitled to reimbursement of his
reasonable and customary business expenses incurred on behalf of
Company or Company's Affiliates ("Additional Benefits"). Employee
acknowledges that such benefits can change from time to time without
notice to Employee, and Employee shall retain no residual rights
in any superseded benefit plan.
2.7 Extension of Term. Unless earlier terminated in
accordance with the provisions hereof, the Term of this Agreement
shall automatically be extended from and after December 31, 1999
unless and until the date that is four (4) months following
Employee's receipt of written notice that Company desires to
terminate Employee's employment hereunder (the "Period of
Extension"), which notice may be given to Employee no sooner than
August 31, 1999; provided, however, that at any time during the
Period of Extension, Employee shall have the right, by giving
written notice to Company, to elect to terminate his employment
hereunder, without any obligation to Company, whereupon the Period
of Extension shall end. During the Period of Extension, and during
a period of three (3) months thereafter (i.e., the first three
months following the end of Employee's employment hereunder),
subject to the provisions of Section 3.4 below, Company shall
continue to pay Employee's Fixed Annual Compensation, as well as
provide Employee with health insurance benefits.
3. Termination
3.1 Termination by Company.
3.1.1 Employee Material Breach. Company shall have
the right, at its election, to terminate the Term, by written
notice to Employee to that effect, only for "good cause" defined
for this purpose to mean (i) material and repeated instances of
misconduct or habitual inability to perform the Services, or
violation of Company's published policies or procedures, (ii) a
single act so grievous as to constitute the equivalent of such
repeated instances (including, without limitation, theft,
misappropriation of Company's assets, or sexual harassment), (iii)
unauthorized disclosure of confidential information related to
customers, employees or general business strategies, or (iv) a
material breach of any covenant, condition, agreement or term of
this Agreement ("Employee's Material Breach") and only if Company
shall have given written notice to Employee specifying the claimed
cause or breach and, provided such breach is curable, Employee
fails to correct the claimed breach or fails to alter the
objectional pattern of conduct specified in the applicable written
notice as soon as practical thereafter but no later than thirty
(30) days after receipt of the applicable notice or such longer
time as may be reasonably required by the nature of the claimed
breach. However, in no event shall a material breach of the
provisions of Section 1.3, 1.5 or 3.1.1(i), (ii) or (iii) be
subject to cure.
3.1.2 Effect of Termination by Company. Should the
Term be terminated by Company by reason of Employee's Material
Breach, Employee shall have no right to any further Fixed Annual
Compensation from and after termination, or to any Incentive
Compensation or Additional Benefits accruing for the fiscal year of
termination or thereafter.
3.2 Termination by Employee.
3.2.1 Company's Material Breach. Employee shall have
the right, at his election, to terminate the Term by written notice
to Company to that effect if Company shall have failed to
substantially perform a material condition or covenant of this Agreement,
or if Company shall terminate Employee's employment or materially
reduce Employee's job duties or responsibilities in the absence of
Employee's Material Breach ("Company's Material Breach"); provided
that, if such breach is curable, termination for Company's Material
Breach will not be effective until Employee shall have given
written notice specifying the claimed breach and Company fails to
correct the claimed breach within thirty (30) days after the
receipt of the applicable notice or such longer time as may be
reasonably required by the nature of the claimed breach (but within
ten (10) days, if the failure to perform is a failure to pay monies
when due under the terms of this Agreement).
3.2.2 Effect of Termination by Employee. Subject to
the provisions of Section 3.4 below, should Employee terminate the
Term due to Company's Material Breach, Company shall pay to
Employee or provide Employee with:
(i) Employee's Fixed Annual Compensation for the
remainder of the Term, paid in equal installments
on Company's regular pay dates during the term of
such payments, and
(ii) Health insurance for the remainder of the Term.
In addition, all Options shall vest on the date of termination.
Employee shall also receive such Incentive Compensation as has been
accrued through the date of termination, and, to the extent that
the accrued vacation pay of Employee as of the date of termination
exceeds the amount of Employee's Fixed Annual Compensation for the
remainder of the Term, Employee shall also receive an amount equal
to such excess. All other benefits shall cease on the date of
termination of employment, except as otherwise required by law.
Except with regard to a termination of the Term by reason
of Employee's Death or Disability (as both terms are defined in
Section 3.3), should Employee terminate the Term other than for
Company's Material Breach, such termination shall be treated as a
termination by Company for Employee's Material Breach.
3.3 Employee's Death or Disability.
3.3.1 Death. The Term shall immediately terminate
upon Employee's death as certified in accordance with the
provisions of California law ("Death").
3.3.2 Disability. In the event that during the Term
Employee becomes unable to perform the Services as a result of his
permanent or temporary, total or partial, physical or mental
disability (as defined in Company's disability insurance policy, if
any) ("Disability"):
3.3.2.1 the Fixed Annual Compensation otherwise
payable during the Disability Period (as herein defined) shall
nevertheless be payable on the terms set forth herein to Employee
as a disability benefit ("Disability Benefit");
3.3.2.2 any disability insurance proceeds actually
received by Employee during the Disability Period with respect to
such Disability shall reduce on a dollar-for-dollar basis the
Disability Benefit otherwise payable by Company during the
Disability Period pursuant to this Section 3.3.2; and
3.3.2.3 Company shall not have the right
(notwithstanding any other provision of this Agreement to the
contrary) to terminate the Term due to such Disability prior to the
expiration of the Disability Period.
As used herein, the term "Disability Period" shall have such
meaning as shall be defined in Company's disability insurance
policy in effect as of the date hereof, and if no such policy is in
effect it shall mean the period commencing on the first day of the
calendar month following the month during which such Disability
occurs and ending on the first to occur of the following: (i) the
expiration of the Term; (ii) if the Disability is continuous
throughout the six (6) consecutive months following the month
during which the Disability occurs, then the last day of such sixth
consecutive calendar month; and (iii) if the Disability is
intermittent and shall exist throughout each of any twelve (12)
calendar months following the month during which the Disability
occurs, then the last day of such twelfth calendar month. Company
shall have the right to terminate the Term at the expiration of the
Disability Period if and only if the Disability of Employee is then
continuing.
3.3.3 Effect of Death or Disability.
(a) Fixed Annual Compensation and Additional
Benefits: Should the Term be terminated in accordance with the
provisions of Sections 3.3.1 or 3.3.2 by reason of Employee's Death
or Disability, Employee or his estate (as the case may be) shall
have no right to any further Fixed Annual Compensation, any
Incentive Compensation, any Additional Benefits or any other sums
or benefits accruing to Employee hereunder, except as otherwise
required by law; provided, however, that the sums identified in
Section 3.3.2 and Section 3.3.3(b) shall be paid to Employee on the
terms set forth therein.
(b) Incentive Compensation and Options: Should the
Term be terminated in accordance with the provisions of Sections
3.3.1 or 3.3.2 by reason of Employee's Death or Disability,
Employee or his estate (as the case may be) shall be entitled to
receive such Incentive Compensation that shall have accrued during
that portion of the fiscal year prior to such Death or Disability.
All Options shall vest on the date of termination by reason of
Employee's Death or Disability, and Employee's estate shall be
entitled to exercise all Options which have vested on or prior to
the date of termination by reason of Employee's Death.
3.4 Mitigation. Employee agrees that if Employee furnishes
his services for other engagements or employment after termination
hereunder, the total compensation actually earned by Employee
together with any welfare or other benefits earned by Employee
shall reduce any amounts and benefits which Company would otherwise
be required to pay or provide to Employee. Employee agrees that he
shall give written notice to Company (promptly after accepting
employment or furnishing his services after termination of his
employment with Company) of any amounts earned (or to be earned) by
Employee and any benefits provided (or to be provided) to Employee
pursuant to his new employment arrangement.
4. General
4.1 Applicable Law Controls. Nothing contained in this
Agreement shall be construed to require the commission of any act
contrary to law and wherever there is any conflict between any
provisions of this Agreement and any material statute, law,
ordinance or regulation contrary to which the parties have no legal
right to contract, then the latter shall prevail; provided,
however, that in any such event the provisions of this Agreement so
affected shall be curtailed and limited only to the extent
necessary to bring them within applicable legal requirements, and
provided further that if any obligation to pay the Fixed Annual
Compensation or any other amount due Employee hereunder is so
curtailed, then such compensation or amount shall be paid as soon
thereafter, either during or subsequent to the Term, as
permissible.
4.2 Waiver/Estoppel. Either party hereto may waive the
benefit of any term, condition or covenant in this Agreement or any
right or remedy at law or in equity to which either party may be
entitled but only by an instrument in writing signed by the party
to be charged. No estoppel may be raised against either party
except to the extent the other party relies on an instrument in
writing, signed by the party to be charged, specifically reciting
that the other party may rely thereon. The parties' rights and
remedies under and pursuant to this Agreement or at law or in
equity shall be cumulative and the exercise of any rights or
remedies under one provision hereof or rights or remedies at law or
in equity shall not be deemed an election of remedies; and any
waiver or forbearance of any breach of this Agreement or remedy
granted hereunder or at law or in equity shall not be deemed a
waiver of any preceding or succeeding breach of the same or any
other provision hereof or of the opportunity to exercise such right
or remedy or any other right or remedy, whether or not similar, at
any preceding or subsequent time.
4.3 Notices. Any notice which Company is required or may
desire to give to Employee hereunder shall be in writing and may be
served by delivering it personally to Employee, or by sending it to
Employee by certified mail, return receipt requested, or by
overnight courier service, at the address set forth on page 1
hereof, or such substitute address as Employee may from time to
time designate by notice to Company. Any notice which Employee is
required or may desire to serve upon Company hereunder shall be
served in writing and may be served by delivering it personally or
by sending it by certified mail, return receipt requested, or by
overnight courier service, to the address set forth on page 1
hereof, attention of the Chief Executive Officer, or such other
substitute address as Company may from time to time designate by
notice to Employee.
4.4 Governing Law. This Agreement shall be governed by,
construed and enforced and the legality and validity of each term
and condition shall be determined in accordance with the internal,
substantive laws of the State of California applicable to
agreements fully executed and performed entirely in California.
4.5 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement.
4.6 No Joint Venture. Nothing herein contained shall
constitute a partnership between or joint venture by the parties
hereto. Neither party shall hold itself out contrary to the terms
of this Section. This Agreement is not for the benefit of any
third party who is not referred to herein and shall not be deemed
to give any right or remedy to any such third party.
4.7 Modification/Entire Agreement. This Agreement may not be
altered, modified or amended except by an instrument in writing
signed by both of the parties hereto. No person, whether or not an
officer, agent, employee or representative of either party, has
made or has any authority to make for or on behalf of that party
any agreement, representation, warranty, statement, promise,
arrangement or understanding not expressly set forth in this
Agreement or in any other document executed by the parties
concurrently herewith ("Parol Agreements"). This Agreement and all
other documents executed by the parties concurrently herewith
constitute the entire agreement between the parties and supersede
all express or implied, prior or concurrent, Parol Agreements and
prior written agreements with respect to the subject matter hereof.
The parties acknowledge that in entering into this Agreement, they
have not relied and will not in any way rely upon any Parol
Agreements.
5. Resolution of Disputes by Binding Arbitration
Employee and the Company each acknowledge and agree that, any
controversy or claim arising out of or relating to this Employment
Agreement shall be settled by final and binding arbitration in
accordance with the National Rules for the Resolution of Employment
Disputes of The American Arbitration Association ("AAA") to the
extent that such Rules do not conflict with any provisions of this
Employment Agreement. Any arbitration proceeding hereunder must be
instituted within one year after the controversy claim arose.
Failure to institute an arbitration proceeding within such period
shall constitute an absolute bar to the institution of any
proceedings respecting such controversy or claim, and a waiver
thereof. The arbitrator shall interpret the Employment Agreement
in accordance with the laws of California. Any award, order of
judgment pursuant to such arbitration shall be deemed final and
binding and may be entered and enforced in any state or Federal
Court of competent jurisdiction. Each party agrees to submit to
the jurisdiction of any such court for purposes of the enforcement
of any such award, order of judgement. All costs of the
arbitration shall be borne equally by the parties.
Please confirm your agreement to the foregoing by signing
below where indicated.
Dated as of August 15, 1996 Very truly yours,
LIVE ENTERTAINMENT INC.
a Delaware corporation
By: _____________________________
Roger A. Burlage
Chief Executive Officer
and Chairman
AGREED AND ACCEPTED
_______________________________
RONALD B. CUSHEY
LIVE FILM AND MEDIAWORKS INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
DATE: As of August 15, 1996
Mr. Paul S. Almond
c/o LIVE FILM AND MEDIAWORKS INC.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
Re: Employment Agreement
Dear Mr. Almond:
When executed by you ("Employee") and by a duly authorized
representative of LIVE FILM AND MEDIAWORKS INC., a Delaware
corporation ("Company"), this letter will set forth the terms and
conditions of Employee's employment.
1. Services
1.1 Employment. Company employs Employee during the Term
(as hereinafter defined) to serve as Executive Vice
President/Production and Acquisitions of Company, and to render
such other services ("Services") as Company or corporations
controlled by, under common control with or controlling, directly
or indirectly, Company ("Company's Affiliates"), may from time to
time reasonably request which are consistent with the duties
Employee is to perform and Employee's stature and experience.
Employee shall comply with all of the reasonable and customary
employment policies of Company and its Affiliates. The Services
shall be generally performed at the principal offices of Company,
currently in Van Nuys, California. In addition, the Services may
be performed by Employee from time to time on a temporary travel
basis at such other locations as Company shall reasonably request
consistent with its reasonable business needs. Employee agrees
to perform such Services in a competent and professional manner,
consistent with the skills to be possessed by a senior executive
officer in Company's business.
1.2. Duties; Reporting Requirements. Among the duties that
Employee shall perform in connection with the Services is that
Employee shall do and perform all services, acts or things
reasonably necessary or advisable to manage and conduct the
programming business of Company and all of Company's employees in
such area of Company's business shall report to Employee or his
designates. For purposes of this Agreement, "programming" shall
be deemed to mean the include acquisition, development and
production of programs distributed by Company. The above
statement of Employee's duties shall not be deemed exclusive, and
Employee's duties hereunder shall be those which are identified
by Company from time to time, as modified by Company from time to
time. In performing his duties hereunder, Employee shall report
to the Chief Executive Officer of Company or his successor(s).
1.3 Ownership of Properties. Company, as employer, shall
own, and Employee hereby transfers and assigns to Company, all
rights in and to any material and/or ideas written, suggested or
submitted by Employee during the Term and all other results and
proceeds of the Services ("Properties"). Company and its licensees
and assigns shall have the right to adapt, change, revise,
delete from, add to and/or rearrange the Properties or any part
thereof written or submitted by Employee and to combine the same
with other works to any extent, and to change or substitute the
title thereof and in this connection Employee hereby waives any
so-called "moral rights" of authors. Employee agrees to execute
and deliver to Company such assignments or other instruments as
Company may require from time to time to evidence its ownership
of the results and proceeds of Employee's services; provided,
however, that nothing in this Section 1.3 shall be deemed in any
manner to restrict or qualify Employee's ownership or right to
exploit Employee's personal memoirs.
1.4 Term/Exclusivity
1.4.1 The Term of this Agreement shall commence and
this Agreement shall become effective on the above referenced
date through and including December 31, 1999 (the "Term"). If
neither party shall have given notice to the other, on or before
three months before December 31, 1999, of such party's intent not
to extend this Agreement, this Agreement shall automatically be
extended for an additional year to December 31, 2000.
1.4.2 The Services shall be rendered on a full time
basis during normal working hours and all services of Employee
shall be exclusive to Company; provided, however, that Employee
may engage in other business activities with Company's prior
written consent which consent shall not be unreasonably withheld
provided that such other business activities shall not constitute
a Competitive Business (as defined in Section 1.4.3 hereof), and
shall not adversely affect the performance of Employee's Services
hereunder. Employee acknowledges that Employee's performances
and services hereunder are of a special, unique, unusual,
extraordinary and intellectual character which gives them
peculiar value, the loss of which cannot be reasonably or
adequately compensated in an action at law for damages and that a
breach by Employee of the terms hereof (including without
limitation this Section 1.4 and Section 1.5) will cause Company
irreparable injury. Employee agrees that Company is entitled to
seek injunctive and other equitable relief to prevent a breach or
threatened breach of this Agreement, which shall be in addition
to any other rights or remedies to which Company may be entitled.
1.4.3 During the term of Employee's employment by
Company (the "Restricted Period"), Employee shall not, directly
or indirectly, (I) engage in any business for his own account
which is competitive with the businesses of Company or Company's
Affiliates (collectively, "Competitive Business") so long as
Company or Company's Affiliates (as the case may be) continue to
engage in such business; (ii) enter the employ of, or render any
services to, any person engaged in a Competitive Business; (iii)
become interested in a Competitive Business in any capacity,
including, without limitation, as an individual, partner,
shareholder, officer, director, principal, agent, trustee or
consultant; or (iv) induce any customer or supplier of Company or
Company's Affiliates to terminate its relationship with Company
or Company's Affiliates (as the case may be). Notwithstanding
anything to the contrary, Employee may acquire and/or retain,
solely as an investment, and take customary actions to maintain
and preserve Employee's ownership of:
A. securities of any corporation which are
registered under Sections 12(b) or 12(g) of the Securities
Exchange Act of 1934, as amended, and which are publicly traded,
as long as Employee is not part of any control group of such
corporation; and
B. any securities of a partnership, trust,
corporation or other person so long as Employee remains a passive
investor in that entity and does not become part of any control
group thereof (except in a passive capacity) and so long as such
entity is not, directly or indirectly, in competition with
Company or its Affiliates.
1.5 Confidentiality. Employee acknowledges that his
Services will, throughout the Term, bring Employee into close
contact with many confidential affairs of Company and its Affiliates,
including information about costs, profits, markets, sales,
products, key personnel, pricing policies, operational methods,
technical processes and other business affairs and methods and
other information not readily available to the public, and plans
for future development. Employee further acknowledges that the
businesses of Company and its Affiliates are international in
scope, that their products are marketed throughout the world,
that Company and its Affiliates compete in nearly all of their
business activities with other organizations which are or could
be located in nearly any part of the world and that the nature of
Employee's Services, position and expertise are such that he is
capable of competing with Company and its Affiliates from nearly
any location in the world. In recognition of the foregoing,
Employee covenants and agrees:
1.5.1 that Employee will keep secret all material
confidential matters of Company and its Affiliates which are not
otherwise in the public domain and will not intentionally dis-
close them to anyone outside of Company or its Affiliates, either
during or after the Term, except with Company's written consent
and except for such disclosure as is necessary in the performance
of Employee's duties during the Term; and
1.5.2 that Employee will deliver promptly to
Company on termination of the Term or at any other time Company
may so request, at Company's expense, all confidential memoranda,
notes, records, reports and other documents (and all copies
thereof) relating to Company's and its Affiliates' business,
which Employee obtained while employed by, or otherwise serving
or acting on behalf of, Company, or which Employee may then
possess or have under his control. Notwithstanding the
foregoing, Employee shall be entitled to retain a copy of his
rolodex (address and phone number) files.
1.6 Indemnification. Employee shall be entitled throughout
the Term to the benefit of the indemnification provisions
contained on the date hereof in the Bylaws of Company notwithstanding
any future changes therein, to the extent permitted by
applicable law at the time of the assertion of any liability
against Employee, and to the most favorable indemnification
provisions or agreements available to any other senior executive
of Company.
2. Compensation
As compensation and consideration for all Services provided
by Employee during the Term pursuant to this Agreement, Company
agrees to pay to Employee the compensation set forth below.
2.1 Fixed Annual Compensation. Employee's Fixed Annual
Compensation shall be payable in equal installments on Company's
regular pay dates following commencement of the Term and in
accordance with the following schedule.
August 15, 1996 through December 31, 1996 - $ 85,673
January 1, 1997 through December 31, 1997 - $280,000
January 1, 1998 through December 31, 1998 - $300,000
January 1, 1999 through December 31, 1999 - $325,000
2.2 Incentive Compensation. Employee shall be eligible to
participate in Company's discretionary Corporate Bonus Program,
as determined, modified and published by Company from time to
time ("Incentive Compensation").
2.3 LIVE Entertainment Inc. Stock Options. Employee hereby
confirms that Company has granted to Employee options to acquire
12,000 shares of Company's common stock at the closing price of
Company's Nasdaq Small Cap Market on March 6, 1995 ("Options"),
with such Options to vest as follows:
(i) 6,000 Options vested on March 6, 1996; and
(ii) 6,000 Options will vest on March 6, 1997
Employee hereby also confirms that Company has granted to
Employee options to acquire 8,000 shares of Company's common
stock at the closing price of Company's Nasdaq Small Cap Market
on February 7, 1996 (2/96 Options"), with such 2/96 Options to
vest as follows:
(i) 2,667 Options will vest on February 7, 1997
(ii) 2,667 Options will vest on February 7, 1998
(iii) 2,666 Options will vest on February 7, 1999
In addition, upon (a) approval by the Stock Option Committee of
the Board of Directors of Company, (b) the occurence of the
Effective Date, and (c) Employee's execution of the stock option
agreement referred to hereinafter in this Section 2.3, as a
special inducement to Employee, Company will grant to Employee
options to acquire 20,000 shares of Company's common stock on the
Nasdaq National Market at the closing price of the market on
September 12, 1996 ("9/96 Options"), with such Options to vest as
follows:
(i) 6,667 Options will vest on September 12, 1997
(ii) 6,667 Options will vest on September 12, 1998
(iii) 6,666 Options will vest on September 12, 1999
The Options will be subject to such additional terms and
conditions as may be set forth in LIVE's 1988 Stock Option and
Stock Appreciation Rights Plan, as amended (the "Option Plan"),
as well as the form of stock option agreement as may be adopted
by LIVE's Board of Directors from time to time pursuant to the
Plan.
2.4 Special Inducements. As a special inducement to
Employee to enter into this Agreement, during the Term, Company
agrees as follows:
2.4.1 During each year of the Term, Employee shall
be entitled to a vacation of three (3) weeks, without deduction
of salary. Such vacations shall be taken at such time or times
during the applicable year as may be determined by Employee
subject to Company's business needs. Employee shall be entitled
to take any unused portion of his paid vacation in any subsequent
year of the Term, subject to the Company's business needs and
policy and consistent with applicable laws ("Vacation Benefits").
Notwithstanding the foregoing, Employee shall at no time have
more than six (6) weeks of accrued vacation. Any additional
vacation period shall be determined by Company consistent with
the general customs and practices of the Company applicable to
its executives.
2.4.2 From and after the Effective Date and until
Employee becomes eligible for coverage under Company's group
health insurance plan, Company shall pay all COBRA payments
required to be made by Employee to his former employer to retain
health insurance coverage under such prior employer's group
health plan.
2.5 Additional Benefits. Without limiting any other
provision hereof, Employee shall be entitled to participate in
any profit-sharing, pension, health, vacation, insurance or other
plans, benefits or policies available to all executives of
Company of similar stature and seniority on the terms generally
applicable to such executives and will be entitled to
reimbursement of his reasonable and customary business expenses
incurred on behalf of Company or Company's Affiliates
("Additional Benefits"). Employee acknowledges that such
benefits can change from time to time without notice to Employee,
and Employee shall retain no residual rights in any superseded
benefit plan.
3. Termination
3.1 Termination by Company.
3.1.1 Employee Material Breach. Company shall have
the right, at its election, to terminate the Term, by written
notice to Employee to that effect, only for "good cause" defined
for this purpose to mean (I) material and repeated instances of
misconduct or habitual inability to perform the Services, or
violation of Company's published policies or procedures, (ii) a
single act so grievous as to constitute the equivalent of such
repeated instances (including, without limitation, theft,
misappropriation of Company's assets, or sexual harassment), (iii)
unauthorized disclosure of confidential information related to
customers, employees or general business strategies, or (iv) a
material breach of any covenant, condition, agreement or term of
this Agreement ("Employee's Material Breach") and only if Company
shall have given written notice to Employee specifying the
claimed cause or breach and, provided such breach is curable,
Employee fails to correct the claimed breach or fails to alter
the objectionable pattern of conduct specified in the applicable
written notice as soon as practical thereafter but no later than
thirty (30) days after receipt of the applicable notice or such
longer time as may be reasonably required by the nature of the
claimed breach. However, in no event shall a material breach of
the provisions of Section 1.3, 1.5 or 3.1.1(I), (ii) or (iii) be
subject to cure.
3.1.2 Effect of Termination by Company. Should the
Term be terminated by Company by reason of Employee's Material
Breach, Employee shall have no right to any further Fixed Annual
Compensation from and after termination, or to any Incentive
Compensation, Automobile Benefits, or Additional Benefits
accruing for the fiscal year of termination or thereafter.
3.2 Termination by Employee.
3.2.1 Company's Material Breach. Employee shall
have the right, at his election, to terminate the Term by written
notice to Company to that effect if Company shall have failed to
substantially perform a material condition or covenant of this
Agreement, or if Company shall terminate Employee's employment or
materially reduce Employee's job duties or responsibilities in
the absence of Employee's Material Breach ("Company's Material
Breach"); provided that, if such breach is curable, termination
for Company's Material Breach will not be effective until
Employee shall have given written notice specifying the claimed
breach and Company fails to correct the claimed breach within
thirty (30) days after the receipt of the applicable notice or
such longer time as may be reasonably required by the nature of
the claimed breach (but within ten (10) days, if the failure to
perform is a failure to pay monies when due under the terms of
this Agreement).
3.2.2 Effect of Termination by Employee. Subject
to the provisions of Section 3.4 below, should Employee terminate
the Term due to Company's Material Breach, Company shall pay to
Employee or provide Employee with:
(I) Employee's Fixed Annual Compensation for the
remainder of the Term, paid in equal installments
on Company's regular pay dates during the Term,
and
(ii) Health insurance for the remainder of the Term.
In addition, all Options shall vest on the date of termination.
Employee shall also receive such Incentive Compensation and
Vacation Benefits accrued through the date of termination. All
other benefits shall cease on the date of termination of
employment.
Except with regard to a termination of the Term by
reason of Employee's Death or Disability (as both terms are
defined in Section 3.3), should Employee terminate the Term other
than for Company's Material Breach, such termination shall be
treated as a termination by Company for Employee's Material
Breach.
3.3 Employee's Death or Disability.
3.3.1 Death. The Term shall immediately terminate
upon Employee's death as certified in accordance with the
provisions of California law ("Death").
3.3.2 Disability. In the event that during the
Term Employee becomes unable to perform the Services as a result
of his permanent or temporary, total or partial, physical or
mental disability (as defined in Company's disability insurance
policy, if any) ("Disability"):
3.3.2.1 the Fixed Annual Compensation otherwise
payable during the Disability Period (as herein defined) shall
nevertheless be payable on the terms set forth herein to Employee
as a disability benefit ("Disability Benefit");
3.3.2.2 any disability insurance proceeds
actually received by Employee during the Disability Period with
respect to such Disability shall reduce on a dollar-for-dollar
basis the Disability Benefit otherwise payable by Company during
the Disability Period pursuant to this Section 3; and
3.3.2.3 Company shall not have the right
(notwithstanding any other provision of this Agreement to the
contrary) to terminate the Term due to such Disability prior to
the expiration of the Disability Period.
As used herein, the term "Disability Period" shall have such
meaning as shall be defined in Company's disability insurance
policy in effect as of the date hereof, and if no such policy is
in effect it shall mean the period commencing on the first day of
the calendar month following the month during which such
Disability occurs and ending on the first to occur of the
following: (I) the expiration of the Term; (ii) if the Disability
is continuous throughout the six (6) consecutive months following
the month during which the Disability occurs, then the last day
of such sixth consecutive calendar month; and (iii) if the
Disability is intermittent and shall exist throughout each of any
twelve (12) calendar months following the month during which the
Disability occurs, then the last day of such twelfth calendar
month. Company shall have the right to terminate the Term at the
expiration of the Disability Period if and only if the Disability
of Employee is then continuing.
3.3.3 Effect of Death or Disability.
(a) Fixed Annual Compensation and Additional
Benefits: Should the Term be terminated in accordance with the
provisions of Sections 3.3.1 or 3.3.2 by reason of Employee's
Death or Disability, Employee or his estate (as the case may be)
shall have no right to any further Fixed Annual Compensation, any
Additional Benefits or any other sums or benefits accruing to
Employee hereunder; provided, however, that the sums identified
in Section 3.3.2 hereof shall be paid to Employee on the terms
set forth therein.
(b) Incentive Compensation and Options: Should
the Term be terminated in accordance with the provisions of
Sections 3.3.1 or 3.3.2 by reason of Employee's Death or
Disability, Employee or his estate (as the case may be) shall be
entitled to receive such Incentive Compensation that shall have
accrued during that portion of the fiscal year prior to such
Death or Disability. All Options shall vest on the date of
termination by reason of Employee's Death or Disability, and
Employee's estate shall be entitled to exercise all Options which
have vested on or prior to the date of termination by reason of
Employee's Death.
3.4 Mitigation. Employee agrees that if Employee furnishes
his services for other engagements or employment after
termination hereunder, the total compensation actually earned by
Employee together with any welfare or other benefits earned by
Employee shall reduce any amounts and benefits which Company
would otherwise be required to pay or provide to Employee.
Employee agrees that he shall give written notice to Company
(promptly after accepting employment or furnishing his services
after termination of his employment with Company) of any amounts
earned (or to be earned) by Employee and any benefits provided
(or to be provided) to Employee pursuant to his new employment
arrangement.
4. General
4.1 Applicable Law Controls. Nothing contained in this
Agreement shall be construed to require the commission of any act
contrary to law and wherever there is any conflict between any
provisions of this Agreement and any material statute, law,
ordinance or regulation contrary to which the parties have no
legal right to contract, then the latter shall prevail; provided,
however, that in any such event the provisions of this Agreement
so affected shall be curtailed and limited only to the extent
necessary to bring them within applicable legal requirements, and
provided further that if any obligation to pay the Fixed Annual
Compensation or any other amount due Employee hereunder is so
curtailed, then such compensation or amount shall be paid as soon
thereafter, either during or subsequent to the Term, as
permissible.
4.2 Waiver/Estoppel. Either party hereto may waive the
benefit of any term, condition or covenant in this Agreement or
any right or remedy at law or in equity to which either party may
be entitled but only by an instrument in writing signed by the
party to be charged. No estoppel may be raised against either
party except to the extent the other party relies on an
instrument in writing, signed by the party to be charged,
specifically reciting that the other party may rely thereon. The
parties' rights and remedies under and pursuant to this Agreement
or at law or in equity shall be cumulative and the exercise of
any rights or remedies under one provision hereof or rights or
remedies at law or in equity shall not be deemed an election of
remedies; and any waiver or forbearance of any breach of this
Agreement or remedy granted hereunder or at law or in equity
shall not be deemed a waiver of any preceding or succeeding
breach of the same or any other provision hereof or of the
opportunity to exercise such right or remedy or any other right
or remedy, whether or not similar, at any preceding or subsequent
time.
4.3 Notices. Any notice which Company is required or may
desire to give to Employee hereunder shall be in writing and may
be served by delivering it to Employee, or by sending it to
Employee by mail, telex or telegraph, at the address set forth on
page 1 hereof, or such substitute address as Employee may from
time to time designate by notice to Company. Any notice which
Employee is required or may desire to serve upon Company
hereunder shall be served in writing and may be served by
delivering it personally or by sending it by mail, telex or telegraph
to the address set forth on page 1 hereof, attention of the Chief
Executive Officer, or such other substitute address as Company
may from time to time designate by notice to Employee.
4.4 Governing Law. This Agreement shall be governed by,
construed and enforced and the legality and validity of each term
and condition shall be determined in accordance with the internal,
substantive laws of the State of California applicable to
agreements fully executed and performed entirely in California.
4.5 Captions. The section headings contained herein are
for reference purposes only and shall not in any way affect the
meaning or interpretation of this Agreement.
4.6 No Joint Venture. Nothing herein contained shall
constitute a partnership between or joint venture by the parties
hereto or appoint either party the agent of the other party.
Neither party shall hold itself out contrary to the terms of this
Section and, except as otherwise specifically provided herein,
neither party shall become liable for the representation, act or
omission of the other party. This Agreement is not for the
benefit of any third party who is not referred to herein and
shall not be deemed to give any right or remedy to any such third
party.
4.7 Modification/Entire Agreement. This Agreement may not
be altered, modified or amended except by an instrument in
writing signed by both of the parties hereto. No person, whether
or not an officer, agent, employee or representative of either
party, has made or has any authority to make for or on behalf of
that party any agreement, representation, warranty, statement,
promise, arrangement or understanding not expressly set forth in
this Agreement or in any other document executed by the parties
concurrently herewith ("Parol Agreements"). This Agreement and
all other documents executed by the parties concurrently herewith
constitute the entire agreement between the parties and supersede
all express or implied, prior or concurrent, Parol Agreements and
prior written agreements with respect to the subject matter
hereof. The parties acknowledge that in entering into this
Agreement, they have not relied and will not in any way rely upon
any Parol Agreements.
5. Arbitration Of All Disputes
Employee and the Company each acknowledge and agree that,
any controversy or claim arising out of or relating to this Employment
Agreement shall be settled by final and binding arbitration in accordance
with the National Rules for the Resolution of Employment Disputes of
The American Arbitration Association ( AAA ) to the extent that such
Rules do not conflict with any provisions of this Employment Agreement.
Any arbitration proceeding hereunder must be instituted within one year
after the controversy of claim arose. Failure to institute an arbitration
proceeding within such period shall constitute an absolute bar to the
institution of any proceedings respecting such controversy or claim, and
a waiver thereof. The arbitrator shall interpret the Employment Agreement
in accordance with the laws of California. Any award, order of judgment
pursuant to such arbitration shall be deemed final and binding and may be
entered and enforced in any state or federal court of competent jurisdiction.
Each party agrees to submit to the jurisdiction of any such court for purposes
of the enforcement of any such award, order of judgment. All costs of the
arbitration shall be borne equally by the parties.
* * * *
Please confirm your agreement to the foregoing by
signing below where indicated.
Dated as of August 15, 1996 Very truly yours,
LIVE FILM AND MEDIAWORKS INC.
a Delaware corporation
By: ____________________________
Roger A. Burlage
Chief Executive Officer
and Chairman
AGREED AND ACCEPTED
this ___ day of August 1996
PAUL S. ALMOND
LIVE FILM AND MEDIAWORKS INC.
15400 SHERMAN WAY
SUITE 500
VAN NUYS, CALIFORNIA 91406
DATE: As of August 15, 1996
Mr. Elliot Slutzky
c/o LIVE Film and Mediaworks Inc.
15400 Sherman Way
Suite 500
Van Nuys, California 91406
Re: Employment Agreement
Dear Mr. Slutzky:
When executed by you ("Employee") and by a duly authorized
representative of LIVE Film and Mediaworks Inc., a Delaware
corporation ("Company"), this letter will set forth the terms and
conditions of Employee's employment.
1. Services
1.1 Employment. Company employs Employee during the Term (as
hereinafter defined) to serve as Executive Vice President/Sales and
Marketing of Company, and to render such other services
("Services") as Company or corporations controlled by, under common
control with or controlling, directly or indirectly, Company
("Company's Affiliates"), may from time to time reasonably request
which are consistent with the duties Employee is to perform and
Employee's stature and experience. Employee shall comply with all
of the reasonable and customary employment policies of Company and
its Affiliates. The Services shall be generally performed at the
principal offices of Company, currently in Van Nuys, California.
In addition, the Services may be performed by Employee from time to
time on a temporary travel basis at such other locations as Company
shall reasonably request consistent with its reasonable business
needs. Employee agrees to perform such Services in a competent and
professional manner, consistent with the skills to be possessed by
a senior executive officer in Company's business.
1.2. Duties; Reporting Requirements. Among the duties that
Employee shall perform in connection with the Services is that
Employee shall do and perform all services, acts or things reasonably
necessary or advisable to manage and conduct the domestic
(United States and Canada) sales and marketing business of Company
(other than sales and marketing of television rights) and all of
Company's employees in such areas of Company's business shall report
to Employee or his designates. The above statement of Employee's
duties shall not be deemed exclusive, and Employee's duties hereunder
shall be those which are identified by Company from time to time,
as modified by Company from time to time. In performing his duties
hereunder, Employee shall report to the Chief Executive Officer of
Company or his successor(s).
1.3 Ownership of Properties. Company, as employer, shall
own, and Employee hereby transfers and assigns to Company, all
rights in and to any material and/or ideas written, suggested or
submitted by Employee during the Term and all other results and
proceeds of the Services ("Properties"). Company and its licensees
and assigns shall have the right to adapt, change, revise, delete
from, add to and/or rearrange the Properties or any part thereof
written or submitted by Employee and to combine the same with other
works to any extent, and to change or substitute the title thereof
and in this connection Employee hereby waives any so-called "moral
rights" of authors. Employee agrees to execute and deliver to
Company such assignments or other instruments as Company may
require from time to time to evidence its ownership of the results
and proceeds of Employee's services; provided, however, that
nothing in this Section 1.3 shall be deemed in any manner to
restrict or qualify Employee's ownership or right to exploit
Employee's personal memoirs.
1.4 Term/Exclusivity
1.4.1 The Term of this Agreement shall commence on
the date hereof and shall end on December 31, 1999 unless extended
or sooner terminated in accordance with the provisions of this
Agreement (the "Term").
1.4.2 The Services shall be rendered on a full time
basis during normal working hours and all services of Employee
shall be exclusive to Company; provided, however, that Employee may
engage in other business activities with Company's prior written
consent which consent shall not be unreasonably withheld provided
that such other business activities shall not constitute a
Competitive Business (as defined in Section 1.4.3 hereof), and
shall not adversely affect the performance of Employee's Services
hereunder. Employee acknowledges that Employee's performances and
services hereunder are of a special, unique, unusual, extraordinary
and intellectual character which gives them peculiar value, the
loss of which cannot be reasonably or adequately compensated in an
action at law for damages and that a breach by Employee of the
terms hereof (including without limitation this Section 1.4 and
Section 1.5) will cause Company irreparable injury. Employee agrees
that Company is entitled to injunctive and other equitable relief
to prevent a breach or threatened breach of this Agreement, which
shall be in addition to any other rights or remedies to which Company
may be entitled.
1.4.3 During the term of this Agreement and of
Employee's employment by Company (the "Restricted Period"),
Employee shall not, directly or indirectly, (i) engage in any
business for his own account which is competitive with the
businesses of Company or Company's Affiliates (collectively,
"Competitive Business") so long as Company or Company's Affiliates
(as the case may be) continue to engage in such business; (ii)
enter the employ of, or render any services to, any person engaged
in a Competitive Business; (iii) become interested in a Competitive
Business in any capacity, including, without limitation, as an
individual, partner, shareholder, officer, director, principal,
agent, trustee or consultant; or (iv) induce any customer or
supplier of Company or Company's Affiliates to terminate its
relationship with Company or Company's Affiliates (as the case may
be). Notwithstanding anything to the contrary, Employee may
acquire and/or retain, solely as an investment, and take customary
actions to maintain and preserve Employee's ownership of:
A. securities of any corporation which are
registered under Sections 12(b) or 12(g) of the Securities Exchange
Act of 1934, as amended, and which are publicly traded, as long as
Employee is not part of any control group of such corporation; and
B. any securities of a partnership, trust,
corporation or other person so long as Employee remains a passive
investor in that entity and does not become part of any control
group thereof (except in a passive capacity) and so long as such
entity is not, directly or indirectly, in competition with Company
or its Affiliates.
1.5 Confidentiality. Employee acknowledges that his Services
will, throughout the Term, bring Employee into close contact with
many confidential affairs of Company and its Affiliates, including
information about costs, profits, markets, sales, products, key
personnel, pricing policies, operational methods, technical
processes and other business affairs and methods and other
information not readily available to the public, and plans for
future development. Employee further acknowledges that the
businesses of Company and its Affiliates are international in
scope, that their products are marketed throughout the world, that
Company and its Affiliates compete in nearly all of their business
activities with other organizations which are or could be located
in nearly any part of the world and that the nature of Employee's
Services, position and expertise are such that he is capable of
competing with Company and its Affiliates from nearly any location
in the world. In recognition of the foregoing, Employee covenants
and agrees:
1.5.1 that Employee will keep secret all material
confidential matters of Company and its Affiliates which are not
otherwise in the public domain and will not intentionally disclose
them to anyone outside of Company or its Affiliates, either during
or after the Term, except with Company's written consent and except
for such disclosure as is necessary in the performance of
Employee's duties during the Term; and
1.5.2 that Employee will deliver promptly to Company
on termination of the Term or at any other time Company may so
request, at Company's expense, all confidential memoranda, notes,
records, reports and other documents (and all copies thereof)
relating to Company's and its Affiliates' business, which Employee
obtained while employed by, or otherwise serving or acting on
behalf of, Company, or which Employee may then possess or have
under his control.
1.6 Indemnification. Employee shall be entitled throughout
the Term to the benefit of the indemnification provisions contained
on the date hereof in the Bylaws of Company notwithstanding any
future changes therein, to the extent permitted by applicable law
at the time of the assertion of any liability against Employee, and
to the most favorable indemnification provisions or agreements
available to any other senior executive of Company.
2. Compensation
As compensation and consideration for all Services provided by
Employee during the Term pursuant to this Agreement, Company agrees
to pay to Employee the compensation set forth below.
2.1 Fixed Annual Compensation. Fixed Annual Compensation of
the following amounts during the following periods:
January 1, 1996 through December 31, 1996 - $300,000
January 1, 1997 through December 31, 1997 - $320,000
January 1, 1998 through December 31, 1998 - $340,000
January 1, 1999 through December 31, 1999 - $360,000
Employee's Fixed Annual Compensation shall be payable in equal
installments on Company's regular pay dates following commencement
of the Term.
2.2 Theatrical Performance Bonus. Employee will be eligible
to receive a Theatrical Performance Bonus based on the performance
determined on a film by film basis of theatrical films released by
the Company. All films released during the term of this Agreement
will qualify. The amount of the percentage of the bonus will be
determined based on net theatrical film rental as a percentage of
theatrical distribution expenses per the following schedule:
Net Rental Percent of Theatrical
Distribution Expenses Bonus Amount
0% - 60% 0
61% - 70% 6,000
71% - 80% 9,000
81% - 90% 12,000
91% + 16,000
Such distribution expenses are defined as those that are normally
customary per Company's current policy. Any disagreement regarding
what represents a distribution expense will be decided by the
Company's Chief Executive Officer at his/her sole and absolute
discretion.
2.3 Incentive Compensation. Employee shall be eligible to
participate in Company's discretionary Corporate Bonus Program, as
determined, modified and published by Company from time to time
("Incentive Compensation").
2.4 LIVE Entertainment Inc. Stock Options. Employee hereby
confirms that Company has granted to Employee options to acquire
15,000 shares of Company's common stock at the closing price of
Company's Nasdaq Small Cap Market on March 6, 1995 ("Options"),
with such Options to vest as follows:
(i) 5,700 Options vested on March 6, 1996
(ii) 5,700 Options will vest on March 6, 1997
(iii) 3,600 Options will vest on March 6, 1998
Employee hereby also confirms that Company has granted to Employee
options to acquire 8,000 shares of Company's common stock at the
closing price of Company's Nasdaq Small Cap Market on February 7,
1996 ("2/96 Options"), with such 2/96 Options to vest as follows:
(i) 2,667 Options will vest on February 7, 1997
(ii) 2,667 Options will vest on February 7, 1998
(iii) 2,666 Options will vest on February 7, 1999
In addition, upon (a) approval by the Stock Option Committee of the
Board of Directors of Company, (b) the occurrence of the Effective
Date, and (c) Employee's execution of the stock option agreement
referred to hereinafter in this Section 2.3, as a special
inducement to Employee, Company will grant to Employee options to
acquire 21,000 shares of Company's common stock on the Nasdaq
National Market at the closing price of the Market on September 12,
1996 ("9/96 Options"), with such 9/96 Options to vest as follows:
(i) 7,000 Options will vest on September 12, 1997
(ii) 7,000 Options will vest on September 12, 1998
(iii) 7,000 Options will vest on September 12, 1999
The Options will be subject to such additional terms and conditions
as may be set forth in LIVE's 1988 Stock Option and Stock
Appreciation Rights Plan, as amended (the "Option Plan"), as well
as the form of stock option agreement as may be adopted by LIVE's
Board of Directors from time to time pursuant to the Plan. Such
additional terms and conditions shall be implemented in a non-
discriminatory manner with respect to Employee as compared to other
employee holders of options under the Plan.
2.5 Special Inducements. As a special inducement to Employee
to enter into this Agreement, during the Term, Company agrees as
follows:
2.5.1 During each year of the Term, Employee shall be
entitled to a vacation of three (3) weeks, without deduction of
salary. Such vacations shall be taken at such time or times during
the applicable year as may be determined by Employee subject to
Company's business needs. Employee shall be entitled to take any
unused portion of his paid vacation in any subsequent year of the
Term, subject to the Company's business needs and policy and
consistent with applicable laws ("Vacation Benefits").
Notwithstanding the foregoing, Employee shall at no time have more
than six (6) weeks of accrued vacation, and at such time as six (6)
weeks of vacation are accrued by Employee, no additional vacation
will accrue unless and until vacation time is taken and the amount
of Employee's accrued vacation time becomes less than six (6)
weeks. Any additional vacation period shall be determined by
Company consistent with the general customs and practices of the
Company applicable to its executives.
2.6 Additional Benefits. Without limiting any other
provision hereof, Employee shall be entitled to participate in any
profit-sharing, pension, health, vacation, insurance or other
plans, benefits or policies available to all executives of Company
of similar stature and seniority on the terms generally applicable
to such executives and will be entitled to reimbursement of his
reasonable and customary business expenses incurred on behalf of
Company or Company's Affiliates ("Additional Benefits"). Employee
acknowledges that such benefits can change from time to time without
notice to Employee, and Employee shall retain no residual rights in
any superseded benefit plan.
3. Termination
3.1 Termination by Company.
3.1.1 Employee Material Breach. Company shall have
the right, at its election, to terminate the Term, by written
notice to Employee to that effect, only for "good cause" defined
for this purpose to mean (i) material and repeated instances of
misconduct or habitual inability to perform the Services, or
material violation of Company's published policies or procedures,
(ii) a single act so grievous as to constitute the equivalent of
such repeated instances (including, without limitation, theft,
misappropriation of Company's assets, or sexual harassment), (iii)
knowingly unauthorized disclosure of confidential information
related to customers, employees or general business strategies, or
(iv) a material breach of any covenant, condition, agreement or
term of this Agreement ("Employee's Material Breach") and only if
Company shall have given written notice to Employee specifying the
claimed cause or breach and, provided such breach is curable,
Employee fails to correct the claimed breach or fails to alter the
objectional pattern of conduct specified in the applicable written
notice as soon as practical thereafter but no later than thirty
(30) days after receipt of the applicable notice or such longer
time as may be reasonably required by the nature of the claimed
breach. However, in no event shall a material breach of the
provisions of Section 1.3, 1.5 or 3.1.1 (ii) or (iii) be subject to
cure.
3.1.2 Effect of Termination by Company. Should the
Term be terminated by Company by reason of Employee's Material
Breach, Employee shall have no right to any further Fixed Annual
Compensation from and after termination, or to any Incentive
Compensation, Automobile Benefits, or Additional Benefits accruing
for the fiscal year of termination or thereafter.
3.2 Termination by Employee.
3.2.1 Company's Material Breach. Employee shall have
the right, at his election, to terminate the Term by written notice
to Company to that effect if Company shall have failed to
substantially perform a material condition or covenant of this Agreement,
or if Company shall terminate Employee's employment or materially
reduce Employee's job duties or responsibilities in the absence of
Employee's Material Breach ("Company's Material Breach"); provided
that, if such breach is curable, termination for Company's Material
Breach will not be effective until Employee shall have given
written notice specifying the claimed breach and Company fails to
correct the claimed breach within thirty (30) days after the receipt
of the applicable notice or such longer time as may be reasonably
required by the nature of the claimed breach (but within ten (10)
days, if the failure to perform is a failure to pay monies when
due under the terms of this Agreement).
3.2.2 Effect of Termination by Employee. Subject to
the provisions of Section 3.4 below, should Employee terminate the
Term due to Company's Material Breach, Company shall pay to
Employee or provide Employee with:
(i) Employee's Fixed Annual Compensation for the
remainder of the Term, paid in equal installments
on Company's regular pay dates during the Term, and
(ii) Health insurance for the remainder of the Term.
In addition, all Options shall vest on the date of termination.
Employee shall also receive such Incentive Compensation and
Vacation Benefits accrued through the date of termination. All
other benefits shall cease on the date of termination of
employment.
Except with regard to a termination of the Term by reason
of Employee's Death or Disability (as both terms are defined in
Section 3.3), should Employee terminate the Term other than for
Company's Material Breach, such termination shall be treated as a
termination by Company for Employee's Material Breach.
3.3 Employee's Death or Disability.
3.3.1 Death. The Term shall immediately terminate
upon Employee's death as certified in accordance with the
provisions of California law ("Death").
3.3.2 Disability. In the event that during the Term
Employee becomes unable to perform the Services as a result of his
permanent or temporary, total or partial, physical or mental
disability (as defined in Company's disability insurance policy, if
any) ("Disability"):
3.3.2.1 the Fixed Annual Compensation otherwise
payable during the Disability Period (as herein defined) shall
nevertheless be payable on the terms set forth herein to Employee
as a disability benefit ("Disability Benefit");
3.3.2.2 any disability insurance proceeds actually
received by Employee during the Disability Period with respect to
such Disability shall reduce on a dollar-for-dollar basis the
Disability Benefit otherwise payable by Company during the Disability
Period pursuant to this Section 3; and
3.3.2.3 Company shall not have the right
(notwithstanding any other provision of this Agreement to the
contrary) to terminate the Term due to such Disability prior to the
expiration of the Disability Period.
As used herein, the term "Disability Period" shall have such
meaning as shall be defined in Company's disability insurance
policy in effect as of the date hereof, and if no such policy is in
effect it shall mean the period commencing on the first day of the
calendar month following the month during which such Disability
occurs and ending on the first to occur of the following: (i) the
expiration of the Term; (ii) if the Disability is continuous
throughout the six (6) consecutive months following the month
during which the Disability occurs, then the last day of such sixth
consecutive calendar month; and (iii) if the Disability is
intermittent and shall exist throughout each of any twelve (12)
calendar months following the month during which the Disability
occurs, then the last day of such twelfth calendar month. Company
shall have the right to terminate the Term at the expiration of the
Disability Period if and only if the Disability of Employee is then
continuing.
3.3.3 Effect of Death or Disability.
(a) Fixed Annual Compensation and Additional
Benefits: Should the Term be terminated in accordance with the
provisions of Sections 3.3.1 or 3.3.2 by reason of Employee's Death
or Disability, Employee or his estate (as the case may be) shall
have no right to any further Fixed Annual Compensation, any
Additional Benefits or any other sums or benefits accruing to
Employee hereunder; provided, however, that the sums identified in
Section 3.3.2 hereof shall be paid to Employee on the terms set
forth therein.
(b) Incentive Compensation and Options: Should the
Term be terminated in accordance with the provisions of Sections
3.3.1 or 3.3.2 by reason of Employee's Death or Disability,
Employee or his estate (as the case may be) shall be entitled to
receive such Incentive Compensation that shall have accrued during
that portion of the fiscal year prior to such Death or Disability.
All Options shall vest on the date of termination by reason of
Employee's Death or Disability, and Employee's estate shall be
entitled to exercise all Options which have vested on or prior to
the date of termination by reason of Employee's Death.
3.4 Mitigation. Employee agrees that if Employee furnishes
his services for other engagements or employment after termination
hereunder, the total compensation actually earned by Employee
together with any welfare or other benefits earned by Employee
shall reduce any amounts and benefits which Company would
otherwise be required to pay or provide to Employee. Employee
agrees that he shall give written notice to Company (promptly
after accepting employment or furnishing his services after
termination of his employment with Company) of any amounts
earned (or to be earned) by Employee and any benefits provided
(or to be provided) to Employee pursuant to his new employment
arrangement.
4. General
4.1 Applicable Law Controls. Nothing contained in this
Agreement shall be construed to require the commission of any act
contrary to law and wherever there is any conflict between any
provisions of this Agreement and any material statute, law,
ordinance or regulation contrary to which the parties have no legal
right to contract, then the latter shall prevail; provided,
however, that in any such event the provisions of this Agreement so
affected shall be curtailed and limited only to the extent
necessary to bring them within applicable legal requirements, and
provided further that if any obligation to pay the Fixed Annual
Compensation or any other amount due Employee hereunder is so
curtailed, then such compensation or amount shall be paid as soon
thereafter, either during or subsequent to the Term, as
permissible.
4.2 Waiver/Estoppel. Either party hereto may waive the
benefit of any term, condition or covenant in this Agreement or any
right or remedy at law or in equity to which either party may be
entitled but only by an instrument in writing signed by the party
to be charged. No estoppel may be raised against either party
except to the extent the other party relies on an instrument in
writing, signed by the party to be charged, specifically reciting
that the other party may rely thereon. The parties' rights and
remedies under and pursuant to this Agreement or at law or in
equity shall be cumulative and the exercise of any rights or
remedies under one provision hereof or rights or remedies at law or
in equity shall not be deemed an election of remedies; and any
waiver or forbearance of any breach of this Agreement or remedy
granted hereunder or at law or in equity shall not be deemed a
waiver of any preceding or succeeding breach of the same or any
other provision hereof or of the opportunity to exercise such right
or remedy or any other right or remedy, whether or not similar, at
any preceding or subsequent time.
4.3 Notices. Any notice which Company is required or may
desire to give to Employee hereunder shall be in writing and may be
served by delivering it personally to Employee, or by sending it to
Employee by certified mail, return receipt requested, or by
overnight courier service, at the address set forth on page 1
hereof, or such substitute address as Employee may from time to
time designate by notice to Company. Any notice which Employee is
required or may desire to serve upon Company hereunder shall be
served in writing and may be served by delivering it personally
or by sending it by certified mail, return receipt requested,
or by overnight courier service, to the address set forth on
page 1 hereof, attention of the Chief Executive Officer, or
such other substitute address as Company may from time to time
designate by notice to Employee.
4.4 Governing Law. This Agreement shall be governed by,
construed and enforced and the legality and validity of each term
and condition shall be determined in accordance with the internal,
substantive laws of the State of California applicable to
agreements fully executed and performed entirely in California.
4.5 Captions. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning
or interpretation of this Agreement.
4.6 No Joint Venture. Nothing herein contained shall
constitute a partnership between or joint venture by the parties
hereto or appoint either party the agent of the other party.
Neither party shall hold itself out contrary to the terms of this
Section and, except as otherwise specifically provided herein,
neither party shall become liable for the representation, act or
omission of the other party. This Agreement is not for the benefit
of any third party who is not referred to herein and shall not be
deemed to give any right or remedy to any such third party.
4.7 Modification/Entire Agreement. This Agreement may not be
altered, modified or amended except by an instrument in writing
signed by both of the parties hereto. No person, whether or not an
officer, agent, employee or representative of either party, has
made or has any authority to make for or on behalf of that party
any agreement, representation, warranty, statement, promise,
arrangement or understanding not expressly set forth in this
Agreement or in any other document executed by the parties
concurrently herewith ("Parol Agreements"). This Agreement and all
other documents executed by the parties concurrently herewith
constitute the entire agreement between the parties and supersede
all express or implied, prior or concurrent, Parol Agreements and
prior written agreements with respect to the subject matter hereof.
The parties acknowledge that in entering into this Agreement, they
have not relied and will not in any way rely upon any Parol
Agreements.
5. Resolution of Disputes by Binding Arbitration
5.1 Employee and the Company each acknowledge and agree that,
any controversy or claim arising out of or relating to this
Employment Agreement shall be settled by final and binding
arbitration in accordance with the National Rules for the
Resolution of Employment Disputes of The American Arbitration
Association ("AAA") to the extent that such Rules do not
conflict with any provisions of this Employment Agreement. Any
arbitration proceeding hereunder must be instituted within one year
after the controversy of claim arose. Failure to institute an
arbitration proceeding within such period shall constitute an
absolute bar to the institution of any proceedings respecting such
controversy or claim, and a waiver thereof. The arbitrator shall
interpret the Employment Agreement in accordance with the laws of
California. Any award, order of judgment pursuant to such
arbitration shall be deemed final and binding and may be entered
and enforced in any state or federal court of competent
jurisdiction. Each party agrees to submit to the jurisdiction of
any such court for purposes of the enforcement of any such award,
order of judgment. All costs of the arbitration shall borne
equally by the parties.
Please confirm your agreement to the foregoing by signing
below where indicated.
Dated as of August 15, 1996 Very truly yours,
LIVE FILM AND MEDIAWORKS INC.
a Delaware corporation
By:________________________________
Roger A. Burlage
Chief Executive Officer
and Chairman
AGREED AND ACCEPTED
this ____ day of September, 1996
_____________________________________
ELLIOT SLUTZKY
FIFTH AMENDMENT TO LICENSE AND DISTRIBUTION AGREEMENT
This Fifth Amendment to License and Distribution Agreement
("Fifth Amendment") is made and entered into as of May 7, 1996
between LIVE Film and Mediaworks Inc. (formerly LIVE Home Video
Inc. and successor in interest to LIVE Film and Mediaworks Inc.,
a California corporation), LIVE America Inc. and Vestron Inc.,
each a Delaware corporation (all such parties hereinafter
individually and collectively referred to as "Company"), on the
one hand, and Warner-Elektra-Atlantic Corporation, a New York
corporation (hereinafter referred to as "Distributor" and
previously referred to as "WEA Corp." in the Distribution
Agreement), on the other hand, with reference to the following
facts:
R E C I T A L S
A. Distributor and Company have entered into that certain
License and Distribution Agreement dated as of May 11, 1992, and
heretofore amended as of June 8, 1992, as of June 23, 1994, as of
September 1, 1994, and as of May 27, 1995 ("Distribution
Agreement").
B. Company and Distributor desire to amend, modify and
supplement the Distribution Agreement upon the terms and
conditions herein contained.
NOW, THEREFORE, for good and valuable consideration,
the receipt and sufficiency of which is hereby acknowledged, the
following is hereby agreed to by the parties:
1. Amendment to Distribution Agreement. The Distribution
Agreement is hereby modified and amended as follows:
a. Sales and Fulfillment Services. Notwithstanding
anything to the contrary contained in the Distribution
Agreement:
i. Pursuant to Paragraph 28 of the Distribution
Agreement, Company has exercised its option to
elect to assume full responsibility for all sales
and sales solicitation, including pre-order
tracking, of Videocassettes and Interactive CDs
embodying Company Product ('Revised Sales
Services') effective as of the Reversion Date,
which services were formerly the responsibility of
Distributor under the Distribution Agreement.
During the Third Contract Period, Distributor
shall continue to perform the Sales Services other
than the Revised Sales Services (i.e., all order
entry services consistent with the order entry
services performed by Distributor during the First
Contract Period); provided, however, Company
reserves the right at any time upon prior written
notice to Distributor to elect to assume full
responsibility of order entry services, using
Distributor's then-existing computer, computer
programming and management information systems,
effective at the beginning of Distributor's first
accounting month that is at least sixty (60) days
following its receipt of such notice.
ii. All notices required of Company pursuant to the
Distribution Agreement to effect the reversion of
Sales Services effective as of the Reversion Date
shall be deemed to have been timely and properly
received by Distributor.
iii. The Reversion Date shall be deemed to occur on
June 29, 1996.
b. Distribution Fee. Notwithstanding anything to the
contrary contained in the Distribution Agreement:
i. Notwithstanding the total net amounts invoiced by
Distributor under the Distribution Agreement
during the First Contract Period, the Fulfillment
Distribution Fee and the Additional Distribution
Fee, inclusive of any Applicable Volume Discounts,
each calculated on the net amounts invoiced under
the Distribution Agreement during the First
Contract Period, shall equal two and five-tenths
percent (2.5%) and five and seventy five-
hundredths percent (5.75%), respectively.
ii. Commencing June 29, 1996 and continuing through
and including November 29, 1996, the Additional
Distribution Fee shall equal four and seventy
five-hundredths percent (4.75%).
iii. Commencing November 30, 1996 and continuing
throughout the remainder of the Third Contract
Period, the Additional Distribution Fee shall
equal three and five-tenths percent (3.5%).
c. Payment Terms. Paragraph 4(a)(i)(F) of the
Distribution Agreement is hereby deleted in its
entirety and substituted in its place and stead shall
be the following:
"Except as provided in the next sentence of this
Paragraph 4(a)(i)(F), shipments of Videocassettes
or Interactive CDs embodying Company Product made
by Distributor to its customers during any
accounting month, Contract Year or Contract
Period, as the case may be, shall be deemed to
have been invoiced in such accounting month,
Contract Year or Contract Period, as the case may
be. An "Early Shipment" is the shipment of
Videocassettes embodying Company Product in one
accounting month when the street date for such
Videocassettes is in the next subsequent
accounting month. An Early Shipment shall, for
purposes of this Paragraph 4(a), be deemed to be a
shipment of such Videocassettes in the accounting
month in which such street date occurs if (1)
Distributor offers its customers payment terms
that consider such shipment as occurring in the
accounting month of the street date, and (2) for
purposes of payment to its Related Entities and
the majority of its other clients (i.e., other
than its Related Entities and Company) to whom
Distributor then-currently provides distribution
services for Videocassettes, such clients also
deem any similar shipment of Videocassettes
containing their product to have occurred in the
accounting month in which such street date occurs.
In the case of any shipment other than an Early
Shipment, Distributor shall send invoices to its
customers in respect of Videocassettes or
Interactive CDs embodying Company Product
immediately following the shipment thereof; in the
case of an Early Shipment, Distributor shall send
invoices to its customers in respect of such early
shipped Videocassettes immediately following the
street date for such Videocassettes.
Notwithstanding any other provision of this
Paragraph 4(a), with respect to Interactive CDs
embodying Company Product, Distributor shall be
under no obligation to render accountings to
Company with respect to sales of such Interactive
CDs, nor to remit any amounts to Company with
respect to such sales, until thirty (30) days
following Distributor's collection of payment for
such Interactive CDs from Distributor's customers;
provided Distributor will do all things reasonably
necessary to maximize such collections from its
customers as quickly as is possible consistent
with Distributor's collection efforts on behalf of
any Related Entities or other clients to whom
Distributor then-currently provides distribution
services of Interactive CDs containing their
product."
d. Discontinued Sales: In subparagraph (i) of Paragraph
4(f) of the Distribution Agreement, effective as of the
date of this Fifth Amendment, the phrase "ninety (90)"
shall be stricken and substituted in its place and
stead shall be the word "one hundred eighty (180)".
e. Advance(s). Paragraph 4(k) of the Distribution
Agreement is hereby deleted in its entirety and
substituted in its place and stead shall be the
following:
"So long as (i) Distributor shall have not
received a Notice of Termination, (ii) a Default by
Company shall not have occurred and be continuing under
this Distribution Agreement, and (iii) an Event of
Default (as defined in the Credit Agreement) by Company
shall not have occurred and be continuing under the
Credit Agreement, on or before five (5) business days
following the full execution of this Fifth Amendment by
Company and Distributor, Distributor shall advance to
Company the sum of Ten Million Dollars ($10,000,000) as
an additional advance chargeable against and to be
recouped by deduction in computing the Net Proceeds
becoming due and payable to Company hereunder in the
manner described below (the 'Fourth Advance'). The
Fourth Advance and interest thereon shall be recouped
in twenty one (21) consecutive Monthly Deductions from
Net Proceeds otherwise due Company hereunder, with the
first Monthly Deduction by Distributor to be made
against Net Proceeds which shall become due and payable
to Company on October 25, 1996, and the last Monthly
Deduction to be made against Net Proceeds which shall
become due and payable to Company on June 26, 1998.
All twenty one (21) Monthly Deductions shall consist of
equal payments of principal plus accrued interest at
the Interest Rate. The initial Interest Rate shall be
the applicable Interest Rate on the date Distributor
pays the Fourth Advance to Company hereunder which
shall thereafter be adjusted on the first day of each
calendar quarter during the Term commencing January 1,
1997, to take account of any changes in Libor or the
Prime Rate."
f. Credit Risk. Notwithstanding anything to the contrary
contained in the Distribution Agreement:
i. Pursuant to the Distribution Agreement,
Distributor is fully responsible for the billing
and collection of receivables (with all credit
risk being borne by Distributor). For purposes of
clarification, "credit risk" shall mean any
receivable which cannot be collected by
Distributor due to a particular customer's
inability to pay for any reason. However, "credit
risk" shall not include any receivable which
cannot be collected by Distributor from a customer
because of any bona fide disputes between Company
and such customer over marketing or sales issues
such as co-op advertising, returns or price
protection (a "bona fide disputed receivable"),
provided that, Distributor has sent to Company, to
the attention of Company's Chief Financial
Officer, a reasonably detailed written advice of
each such bona fide disputed receivable and,
provided also that, as of the date of Company's
Chief Financial Officer receipt of Distributor's
written advice of any such bona fide disputed
receivable, the particular customer is able to pay
all its outstanding balances due Distributor.
Furthermore, if and to the extent a bona fide
disputed receivable relates to any inventory of
Company Product in the possession or constructive
possession of a customer which such customer seeks
to return, "credit risk" shall not include such
receivable up to the amount of such inventory of
Company Product which such customer is able to
return to Distributor without any restriction or
limitation as of the date of Company's Chief
Financial Officer's receipt of Distributor's
written advice thereof. Distributor agrees to
give to Company, to the attention of its Chief
Financial Officer, prompt written advice of each
and every bona fide disputed receivable.
Following Company's Chief Financial Officer's
receipt of Distributor's written advice of any
such bona fide disputed receivable, Company shall
diligently pursue resolving the potential dispute
directly with the applicable customer (with
Distributor's cooperation if and to the extent
reasonably requested by Company). Notwithstanding
anything herein contained to the contrary, if,
within the ninety (90) days immediately following
Company's Chief Financial Officer's receipt of
such written advice of any such bona fide disputed
receivable from Distributor, the receivables,
including the bona fide disputed receivable, of
the applicable customer cannot be collected due to
such customer's inability to pay for any reason,
then such bona fide disputed receivable will be
deemed to be a receivable for which all credit
risk is being borne solely by Distributor
hereunder. Furthermore, if and to the extent a
bona fide disputed receivable relates to any
inventory of Company Product in the possession or
constructive possession of a customer which such
customer seeks to return, and if, within ninety
(90) days immediately following Company's Chief
Financial Officer's receipt of such written advice
of any such bona fide disputed receivable from
Distributor, there shall exist any restriction or
limitation upon such customer's ability to return
to Distributor any of such inventory, then the
amount of such bona fide disputed receivable in
excess of the amount of such inventory which is
returnable to Distributor without restriction or
limitation will be deemed to be a receivable for
which all credit risk is being borne solely by
Distributor hereunder. If Company fails or is
unable to resolve any such potential dispute with
the applicable customer within the ninety (90)
days immediately following Company's Chief
Financial Officer's receipt of Distributor's
written advice of any such bona fide disputed
receivable, then Company shall forever be
responsible for resolving any such potential
dispute with such particular customer and
Distributor shall not be responsible for any
inability to collect any or all of such bona fide
disputed receivable provided if and to the extent
Company's Chief Financial Officer was notified
thereof in writing as aforesaid, irrespective of
whether, at any time following said ninety (90)
day period, either (A) the receivables, including
any such bona fide disputed receivable set forth
in Distributor's advice, of the applicable
customer cannot be collected due to such
customer's inability to pay for any reason; or (B)
there are restrictions or limitations put on such
customer's ability to return to Distributor the
entire inventory of Company Product in the
possession or constructive possession of such
customer which is the subject matter of any such
bona fide disputed receivable, if applicable. In
such event, following the expiration of the
aforesaid ninety (90) day period, Distributor
shall unconditionally and irrevocably assign,
transfer and convey to Company all of
Distributor's right, title and interest in and to
that portion of such bona fide disputed receivable
for which Company has responsibility pursuant to
this subparagraph 1(f)(i) and Company shall have
the sole and exclusive right to collect and retain
one hundred percent (100%) of its portion of any
such bona fide disputed receivable from such
customer or to accept returns of Company Product
from such customer that relate to such bona fide
disputed receivable, if applicable. If there is
any such bona fide disputed receivable with any
customer existing as of the date of the execution
of this Fifth Amendment, then promptly following
the execution hereof Distributor shall send
written advice thereof to Company, to the
attention of Company's Chief Financial Officer,
and Company shall have ninety (90) days following
its receipt of such advice to resolve any such
dispute with the particular customer. Distributor
shall be responsible for directly resolving
disputes with its customers over errors by
Distributor in billing, pricing and/or shipments
or similar issues. Nothing contained in this
subparagraph 1(f)(i) shall limit Distributor's
right to accept returns from a customer in
financial distress pursuant to the fifth sentence
of Paragraph 6(a) of the Distribution Agreement
and to credit such returns against the receivable
owed by such customer.
ii. Company shall assume all credit risk for all sales
of Company Product to a particular customer if the
credit limit given by Distributor to such
particular customer is exceeded as the result of
any such sale, provided Company has approved the
sale of such Company Product notwithstanding the
fact that the customer's credit limit has been
exceeded. Distributor agrees to treat Company on
an equal basis with all other companies, including
its Related Entities, for whom Distributor
distributes phonograph record and/or videocassette
products (e.g., on a first ordered, first credit
issued or other equally fair and non-
discriminating basis) in determining which of
Company's such orders are or are not within a
particular customer's credit limit. Distributor
shall promptly advise Company's designated
representatives for this purpose, presently either
Roger Burlage, Ron Cushey, Robert Denton or Steven
Mangel, if any sale of Company Product to a
particular customer will cause such customer's
credit limit to be exceeded. Company shall always
have the right to elect not to make such sale
rather than assuming any bad debt risk therefor.
Distributor shall not ship Company Product
pursuant to any order which if fulfilled would
cause Company to bear any potential credit risk
therefor under this subparagraph 1(d)(ii) unless
and until Distributor receives written approval
therefor from one of Company's designated
representatives for this purpose.
2. Miscellaneous. Except as expressly or by necessary
implication modified hereby, the Distribution Agreement
shall remain in full force and effect. This Fifth Amendment
to License and Distribution Agreement may not be modified,
amended or terminated without the written consent of all
parties hereto. This Fifth Amendment to License and
Distribution Agreement may be executed in counterparts, each
of which when taken together shall constitute one and the
same agreement.
IN WITNESS WHEREOF, the parties hereto have executed this
Fifth Amendment to License and Distribution Agreement as of the
date hereinabove written.
Warner-Elektra-Atlantic Corporation, a New York corporation
By: _______________________________
Its: ______________________________
LIVE Film and Mediaworks Inc., a Delaware corporation
(formerly LIVE Home Video Inc. and
successor-in-interest to LIVE Film and Mediaworks Inc.,
a California corporation)
By: _______________________________
Its: ______________________________
LIVE America Inc., a Delaware corporation
By: _______________________________
Its: ______________________________
Vestron Inc, a Delaware corporation
By: _______________________________
Its: ______________________________
[SMANGEL\AGREEMENTS\WEA.11]
September 12, 1996
Ms. Ann Dubinet
c/o Stephen Scharf, Esq.
O'Melveny & Myers
1999 Avenue of the Stars
Los Angeles, California 90067
Re: Deal Memo Regarding Your Employment At LIVE Film and
Mediaworks, Inc.
Dear Ann:
We are pleased that we were able to reach agreement on the key
terms and conditions of your employment at LIVE Film and
Mediaworks, Inc. ("the Company"). The following summarizes the
principal deal points on which we agreed, and which will be further
documented in a more detailed employment agreement.
1. Title: Your title will be President of International
Distribution.
2. Term: Initial three (3) year term. The Company agrees
that it shall negotiate any extension of your employment agreement
by nine (9) months' before the expiration of the term.
3. Key Person Clause: Despite the foregoing term provision,
if Roger Burlage should leave the Company or cease to be its Chief
Executive Officer during the initial two (2) years of your
employment, you shall have the right to resign at the conclusion of
your initial two (2) years.
4. Compensation:
a. Base: You shall receive base compensation as
follows:
Year One: $350,000.00;
Year Two: $375,000.00; and
Year Three: $400,000.
b. Corporate Bonus: You will be eligible to
participate in the annual Corporate Bonus pool. Your participation
in the Corporate Bonus shall not be affected by the amounts you
have earned under any other bonus arrangements set forth herein.
c. Stock Options: The Compensation Committee of the
Board of Directors has approved granting you 50,000 common stock
options upon execution of this agreement, 15,000 at the first
anniversary of this agreement, and 10,000 at the second anniversary
of this agreement. The Stock Options shall be provided pursuant to
the Company's Stock Option Plan, and each grant shall vest in three
(3) years: one third (1/3) one (1) year from the date of grant,
one third (1/3) two (2) years from the date of grant, and one third
(1/3) three (3) years from the date of each grant. The date of the
grant of the stock options shall establish the price of the stock
options.
d. Performance Bonuses: The Company shall pay the
following bonuses, to the extent earned and otherwise payable, on
a quarterly basis, no later than sixty (60) days from the end of
each quarter. All performance bonuses with respect to a film that
you have Brought to the Company shall be deferred until the Company
has recouped its expenses and any financial commitments on the
film, as defined in each subparagraph below.
(1) Foreign Distribution On Films Where The Company
Has A Financial Interest: Your bonus on foreign sales shall vary
based on the Negative Cost of the film at issue, and whether the
film is one which you have Brought to the Company:
(a) The "Threshold Sales" for films with
budgets under $5 Million shall be foreign sales (including
averages) which equal seventy-five percent (75%) of the Negative
Cost and, for films with budgets over $5 Million, foreign sales,
including overages, by the Company which equal seventy percent
(70%) of the Negative Cost.
(b) Once the cash received from foreign sales
by the Company reach the Threshold Sales level on any particular
film, you shall earn a performance bonus in the following amount:
(i) two percent (2%) of all Eligible Contracts in excess of the
Threshold Sales for the Company's films; or (ii) three percent (3%)
of all Eligible Contracts in excess of the Threshold Sales on films
which you bring to the Company. The bonus shall be paid based on
cash received by the Company through the Cash Cut-Off Date.
(c) The following definitions shall apply:
i) "Negative Cost:"
a) if the Company produces the film,
in whole or in part, the Negative Cost definition shall be the same
as that set forth in the Output Deal Memo made as of February 8,
1996 between Live International and Pioneer LDC, Inc., the
definition of which is attached hereto as Exhibit A, except that it
shall not include the overhead charge set forth at paragraph G.9
therein. The Negative Cost shall be computed no later than one (1)
year after the film's initial release; or
b) if the Company acquires the film,
the Negative Cost shall be the Company's acquisition cost plus any
enhancement costs.
c) In addition, it is understood that
if the Company retains (under subparagraph a), above) or acquires
(under subparagraph b), above) less than all major media rights in
all foreign territories, the parties hereto shall, in good faith
either (I) agree on a fair allocation between the Negative Cost
attributable between Domestic and Foreign rights; or (II) ascertain
the value of any territories or media which are not retained or
acquired, and agree to a pro rata reduction of the Negative Cost.
ii) "Eligible Contracts" shall be those
foreign contracts entered into by the Company prior to the earliest
of the following dates: (a) commercial Domestic (Domestic is
defined as United States and Canada) release in any market or
media; or (b) one year after Domestic Delivery;
iii) "Cash Cut-Off Date" shall be the date
upon which cash received on a particular film shall no longer be
counted in calculating a performance bonus; the Cash Cut-Off Date
on each film shall be five (5) years following the film's first
foreign availability.
iv) "Brought:" In the event of a dispute
as to whether you have Brought a film to the Company, the
determination as to whether a film is one which you have "Brought"
to the Company shall be decided, in Roger Burlage's sole
discretion, based in part on whether or not the film appears on the
Company's acquisition reports dated prior to your submitting the
film to the Company as a potential acquisition.
(d) The above bonuses shall not be cross-
collateralized between films.
(2) Foreign Distribution Where The Company Has No
Financial Exposure Other Than With Respect To Distribution
Expenses: On films which you originate for the Company to handle
foreign distribution, and in which the Company has no financial
exposure with respect to Foreign rights other than with respect to
Distribution Expenses, you shall earn a performance bonus equal to
ten percent (10%) of the Company's net foreign sales commissions
(less all of the Company's expenses) based on cash received by the
Company. The Company's expenses shall be defined as the Company's
foreign distribution expenses, as that term is normally defined in
the film distribution industry, but specifically excluding any
overhead. All foreign sales through five (5) years from initial
foreign availability shall be eligible for this bonus.
(3) Domestic Sales On Projects Which You Have
Brought To The Company, And In Which The Company Has Foreign
Rights: You shall be eligible for a Performance Bonus under a
structure similar to item 4.d(1), except that the Threshold Sales
shall be sixty percent (60%) of the Negative Cost, plus recoupment
of out-of-pocket domestic distribution expenses. In this case,
Threshold Sales and Eligible Contracts shall be calculated from the
definition of Gross Receipts from the Domestic income stream, as
defined in the Company's distribution agreement with the Producer
of each applicable film. You shall earn a Performance Bonus of
three percent (3%) for Eligible Contracts in excess of the
Threshold Sales. The Cash Cut-Off date on each film shall be five
(5) years following the film's first commercial Domestic release.
5. Compensation For Existing Alchemy Deals: You shall be
entitled to retain any Executive Producer fees, other compensation
and credits which have already been negotiated. The following
allocations shall apply to all existing Alchemy deals which you are
able to bring with you to the Company:
a. As to all Existing Alchemy Films: All fees shall be
deferred until the Company has recouped its expenses and any
financial commitments on the films, on a film by film basis. The
rights assumed by the Company shall be identical to Alchemy's
rights in the subject films (i.e., sales agency or license of
rights). Alchemy shall provide appropriate documentation,
assignments, and other assurances to the Company that it is
acquiring Alchemy's rights without encumbrances, liens or clouds on
any title created by Alchemy.
b. WASHINGTON SQUARE: The Company will obtain a Letter
of Credit, or other guarantee as required by Disney for an amount
up to $ 5.25 Million, it being understood that you already have
contracts which require the issuance of acceptable letters of
credit by the applicable licensees in the amount of $ 1.5 million
(Italy and Spain).
The Company shall recoup its financing fee on
WASHINGTON SQUARE as follows:
(1) The Company's fee shall be five hundred
thousand dollars ($500,000.00) including all fees incurred to
secure financing.
(2) Following the Company's recoupment of its (a)
Letter of Credit or guarantee, (b) its financing fee, and (c) all
other expenses all sales fees shall be divided equally between you
and the Company.
c. SOMEBODY IS WAITING: You shall retain the
previously-received one hundred, fifty thousand dollar
($150,000.00) advance. All additional net sales fees shall be
divided, twenty-five percent (25%) to you, and seventy-five percent
(75%) to the Company.
d. RED MANSION: Net sales fees on any existing sales
shall be divided as follows: seventy-five percent (75%) to you,
twenty-five percent (25%) to the Company. Any new net sales fees
shall be divided pursuant to the same formula for the Remaining
Alchemy Films, set forth below at paragraph 5.e.
e. Remaining Alchemy Films: All new net sales fees
shall be divided, twenty-five percent (25%) to you, and seventy-
five percent (75%) to the Company.
f. It is understood between the parties hereto that the
terms and conditions in this paragraph 5 shall be documented in a
long-form Service Agreement between Alchemy and the Company (the
"Alchemy Service Agreement") consistent with the Company's standard
form, to the extent not inconsistent with the provisions herein,
and which contains the Company's standard Terms and Conditions,
subject to good faith negotiations in accordance with industry
practices. In addition, you agree to provide to the Company:
(1) A copy of the existing documentation regarding
Alchemy's rights in each of the films covered by the Alchemy
Service Agreement with the Company; and
(2) Documentation which provides the Company with
legally-sufficient assurances that the Alchemy has clear rights in
the films included in the Service Agreement, and that they are not
subject to any encumbrances, liens, reversion rights, or other
clouds on their titles created by Alchemy. If Company isn't
satisfied, only effect is that it does take over Alchemy's
obligations with respect to that project.
6. Alchemy And Personal, Ann Dubinet, Financial Obligations
On Behalf Of Alchemy: You have represented that you have incurred
loans and other financial obligations, directly and on behalf of
Alchemy, in an approximate amount of four hundred thousand dollars
($400,000.00). The Company agrees that it shall loan such amounts
to you, subject to recoupment from all corporate bonuses,
performance bonuses and your share of sales fees on the Alchemy
projects, plus interest on the amounts loaned at the same rate as
the published Internal Revenue Service minimum rate, and subject to
the Company's receipt of written assurances that none of the sums
advanced shall be used for legal or other costs associated with the
films which are the subject to your dispute with Banner films.
This advance shall be issued to Alchemy, and documented both in a
appropriate security agreement from Alchemy to the Company, and a
personal guarantee by you, on the loan, pursuant to which the
payment of the loan shall be guaranteed pursuant to the terms of
this agreement.
7. Future Executive Production Fees And Credits: Subject to
the provisions set forth in paragraph 6, above, the Company's
policy forbids individual employees from receiving Executive
Producer credit on any films. Any exceptions to this rule must
receive written approval from Roger Burlage. In addition, the
Company's policy requires that any Executive Producer fees be paid
directly to the Company; individual employees are not eligible to
receive Executive Producer fees.
8. Executive Perquisites: You shall be provided with all
benefits and perquisites pursuant to Company policy provided to
other senior executives. Any exceptions to the corporate travel
policy must be approved in writing by Roger Burlage.
9. Long-Form Employment Agreement: It is understood between
the parties hereto that the foregoing terms and conditions shall be
documented in a more formal long-form Employment Agreement, which,
except to the extent inconsistent with the provisions set forth in
this letter, shall include all other standard terms and conditions
in the Company's executive employment agreements, including, but
not limited to, the Company's standard arbitration clause, subject
to good faith negotiations, in accordance with industry practice.
The long-form agreement shall be prepared and executed as soon as
reasonably practicable.
10. Press Release: Upon the execution of this deal memo, the
Company shall prepare and issue a press release. You shall have
the right to review the press release, and a reasonable right of
approval. The only press release regarding this deal memo, and
your employment with the Company shall be the one issued by the
Company, and reviewed by you.
If this letter properly summarizes the terms and conditions of
our agreement, please sign and date this letter, as indicated
below, and return an original to my attention. This letter shall
constitute a binding agreement between the parties, but this shall
not abrogate the parties' understanding that they shall promptly
draft and execute more formal long form Employment and Servicing
Agreements, as described in paragraphs 5(f) and 9, above.
We look forward to your joining us at LIVE Film and
Mediaworks, Inc.
Very truly yours,
Roger Burlage
Chief Executive Officer and Chairman
LIVE Film and Mediaworks, Inc.
I have reviewed this letter and agree that it sets forth our
agreement concerning my employment at LIVE Film and Mediaworks,
Inc.
BY: ___________________________ DATED: September ___, 1996
Ann Dubinet
EXHIBIT 11
LIVE ENTERTAINMENT INC. AND SUBSIDIARIES
COMPUTATION OF INCOME (LOSS) PER COMMON SHARE
(Unaudited)
(Amounts in Thousands, Except Per Share Data)
Three Months Nine Months
Ended Sept. 30, Ended Sept.30,
1996 1995 1996 1995
PRIMARY
Earnings:
Net income. . . . . . . . . . . . . . . . . . . $1,209 $ 1,595 $ 3,919 $ 7,557
Less preferred dividends. . . . . . . . . . . . 1,006 696 2,744 2,271
Less accretion in redemption value of
LIVE Series B Cumulative Convertible
Preferred Stock. . . . . . . . . . . . . . . . -- 1,259 -- 4,089
Net income (loss) attributable to common stock. $ 203 $ (360)$ 1,175 $1,197
Shares:
Weighted average number of common
shares outstanding. . . . . . . . . . . . . . 2,448 2,418 2,439 2,419
Net effect of dilutive stock options-
based on the treasury stock method
using average market price. . . . . . . . . . 122 24 159 16
Total . . . . . . . . . . . . . . . . . . . . . 2,570 2,442 2,598 2,435
Net income (loss) per common share. . . . . . . $ 0.08 $ (0.15)$ 0.45 $ 0.49
FULLY DILUTED
Earnings:
Net income. . . . . . . . . . . . . . . . . . . $ -- $ -- $ 3,919 $ --
Shares:
Weighted average number of common
shares outstanding. . . . . . . . . . . . . . -- -- 2,439 --
Net effect of dilutive stock options -
based on the treasury stock method
using the period-end market price, if
higher than average market price. . . . . . . -- -- 104 --
Assuming conversion of Series B and Series C
Preferred Stock . . . . . . . . . . . . . . . -- -- 10,939 --
Total . . . . . . . . . . . . . . . . . . . . . -- -- 13,482 --
Net income per common share. . . . . . . . . . . $ -- $ -- $ 0.29 $ --
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<ARTICLE> 5
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 13,012
<SECURITIES> 0
<RECEIVABLES> 32,111
<ALLOWANCES> (16,171)
<INVENTORY> 6,582
<CURRENT-ASSETS> 0
<PP&E> 7,328
<DEPRECIATION> (6,356)
<TOTAL-ASSETS> 135,183
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<BONDS> 49,175
0
3,834
<COMMON> 24
<OTHER-SE> 33,173
<TOTAL-LIABILITY-AND-EQUITY> 135,183
<SALES> 109,262
<TOTAL-REVENUES> 110,803
<CGS> 89,779
<TOTAL-COSTS> 15,088
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,113
<INCOME-PRETAX> 4,823
<INCOME-TAX> 904
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